UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the fiscal year ended
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DOCUMENTS INCORPORATED BY REFERENCE
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Table of Contents
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PART I
Item 1. Business
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this annual report and unless otherwise indicated, the terms “we”, “us”, “our”, “Pacific Green”, the “Company”, and “our company” mean Pacific Green Technologies Inc., a Delaware corporation, and our wholly owned subsidiaries, (1) Pacific Green Innoergy Technologies Ltd., a United Kingdom company, (2) Pacific Green Marine Technologies Group Inc., a Delaware corporation, (3) Pacific Green Marine Technologies Inc., a Delaware corporation, (4) Pacific Green Technologies (UK) Ltd. (Formerly Pacific Green Marine Technologies Ltd.), a United Kingdom company, (5) Pacific Green Technologies (Middle East) Holdings Ltd., a United Arab Emirates company, (6) Pacific Green Technologies Arabia LLC, 70% owned, a Kingdom of Saudi Arabia company, (7) Pacific Green Technologies (Canada) Inc., a Canadian corporation, (8) Pacific Green Solar Technologies Inc., a Delaware corporation, (9) Pacific Green Technologies International Ltd., a British Virgin Islands company, (10) Pacific Green Technologies Asia Ltd., a Hong Kong company, (11) Pacific Green Technologies Engineering Services Limited (Formerly Pacific Green Technologies China Ltd.), a Hong Kong company, (12) Pacific Green Technologies (Australia) Pty Ltd., an Australia company, (13) Pacific Green Technologies (Shanghai) Co. Ltd. (Formerly Shanghai Engin Digital Technology Co. Ltd.), a Chinese company, (14) Guangdong Northeast Power Engineering Design Co. Ltd., a Chinese company, (15) Pacific Green Energy Parks Inc., a Delaware corporation, (16) Pacific Green Energy Storage Technologies Inc., a Delaware corporation, (17) Pacific Green Energy Storage (UK) Ltd. (Formerly Pacific Green Marine Technologies Trading Ltd.), a United Kingdom company, (18) Pacific Green Battery Energy Parks 1 Ltd., 50% owned, a United Kingdom company, (19) Pacific Green Battery Energy Parks 2 Ltd., a United Kingdom company, (20) Richborough Energy Park Ltd., 50% owned, a United Kingdom company, unless otherwise indicated, (21) Pacific Green Energy Parks (UK) Ltd., a United Kingdom company, (22) Sheaf Energy Ltd., a United Kingdom company.
Corporate History
Our company was incorporated in Delaware on March 10, 1994, under the name of Beta Acquisition Corp. In September 1995, we changed our name to In-Sports International, Inc. In August 2002, we changed our name from In-Sports International, Inc. to ECash, Inc. In 2007, due to limited financial resources, we discontinued our operations. Over the course of the ensuing five years, we sought out new business opportunities.
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On June 13, 2012, we changed our name to Pacific Green Technologies Inc. and effected a reverse split of our common stock following which we had 27,002 shares of common stock outstanding with $0.001 par value.
Effective December 4, 2012, we filed with the Delaware Secretary of State a Certificate of Amendment of Certificate of Incorporation, wherein we increased our authorized share capital to 510,000,000 shares of stock as follows:
| ● | 500,000,000 shares of common stock with a par value of $0.001; and | |
| ● | 10,000,000 shares of preferred stock with a par value of $0.001. |
The increase of authorized capital was approved by our board of directors on July 1, 2012 and by a majority of our stockholders by a resolution dated July 1, 2012.
Original Strategy and Recent Business
Since 2012, the Company has focused on marketing, developing and acquiring technologies designed to improve the environment by reducing pollution. The Company has acquired technologies, patents and intellectual property from EnviroTechnologies Inc. through share transfer, assignment and representation agreements entered into during 2012 and 2013. Following those acquisitions, management has expanded the registration of intellectual property rights around the world and pursued opportunities globally for the development and marketing of the emission control technologies.
Working with a worldwide network of agents to market the ENVI-Systems™ emission control technologies, the Company has focused on three applications of the technology:
ENVI-Marine TM
Diesel exhaust from ships, ferries and tankers includes ash and soot as particulate components and sulfur dioxide as an acid gas. Testing has been conducted on diesel shipping to confirm the application of seawater as a neutralizing agent for sulfur emissions as well as capturing particulate matter. In addition to marine applications, these tests also showed applicability of the system for large displacement engines such as stationary generators, compressors, container handling, heavy construction and mining equipment.
ENVI-Pure TM
Increasing legislation relating to landfill of municipal solid waste has led to the emergence of increasing numbers of waste to energy plants (“WtE”). A WtE plant obviates the need for landfill, burning municipal waste for conversion to electricity. A WtE plant is typically 45-100MW. The ENVI-Clean™ system is particularly suited to WtE as it cleans multiple pollutants in a single system.
ENVI-Clean TM
EnviroTechnologies Inc. has successfully conducted sulfur dioxide demonstration tests at the American Bituminous Coal Partners power plant in Grant Town, West Virginia. The testing achieved a three test average of 99.3% removal efficiency. The implementation of US Clean Air regulations in July 2010 has created additional demand for sulfur dioxide removal in all industries emitting sulfur pollution. Furthermore, China consumes approximately one half of the world’s coal, but introduced measures designed to reduce energy and carbon intensity in its 12th Five Year Plan. Applications include regional power facilities and heating for commercial buildings and greenhouses. Typical applications range in size from 1 to 20 megawatts (MW) with power generation occupying the larger end of the range. The ENVI-Clean™ system removes most of the sulfur dioxide, particulate matter, greenhouse gases and other hazardous air pollutants from the flue gases produced by the combustion of coal, biomass, municipal solid waste, diesel and other fuels.
Vision & Strategy
Pacific Green’s vision is to be a leader in delivering innovative and viable renewable energy technology solutions that help meet the worldwide urgency for renewables, in our rapidly changing climate. Following our proven success in Marine Emission Control technologies, we diversified our business to deliver turnkey scalable end-to-end environmental and renewable technology solutions for the energy sector.
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Our technological solutions comprise of three main divisions:
| ● | Emission Control Systems (“ECS”); |
| ● | Concentrated Solar Power (“CSP”); and |
| ● | Battery Energy Storage Systems (“BESS”); |
In all the above areas, Pacific Green plans to execute this vision by a dual strategy of equipment sales and proactive infrastructure development and ownership, led by acquisitions in technology capabilities and project investment opportunities. The following events highlight this:
| ● | on December 20, 2019, the Company closed the acquisition of Shanghai Engin Digital Technology Co. Ltd. (“Engin”) a solar design, development and engineering company. Engin is a design and engineering business focused primarily on CSP, desalination and waste to energy technologies. Engin’s CSP reference plants in China comprise over 150MW; |
| ● | on October 20, 2020, the Company closed the acquisition of Innoergy Limited (“Innoergy”), a UK based designer of BESS whose clients included Osaka Gas Co. Ltd, in Japan, and Limejump Limited in the UK, a subsidiary of Shell plc. The acquisition underpins our entry into the BESS market; |
| ● | on March 18, 2021, the Company acquired Richborough Energy Park Limited (“Richborough”), a BESS development project to deliver 99MW of energy in Kent, UK; |
| ● | on December 6, 2022, the Company acquired Sheaf Energy Limited (“Sheaf”), a BESS development project to deliver 249MW of energy in Kent, UK. |
To support this strategy, the Company actively seeks worldwide the best talent in our core business areas, including further sales and project execution specialists.
Strategic Partnerships
Pacific Green has forged global partnerships with private and state-owned energy providers and owners. This has empowered us to quickly provide scalable solutions in our core areas, understand and embrace cutting-edge trends and leverage recurring revenue opportunities to cross-sell products and services.
The key partnership and framework agreements include:
Concentrated Solar Power (“CSP”)
On December 23, 2019, the Company entered into an International Strategic Alliance Agreement with (1) Beijing Shouhang IHW Resources Saving Technology Company Ltd. (“Shouhang”), a company listed on the Shenzhen Stock Exchange in China, and (2) PowerChina. This Agreement provides for the development of CSP plants whereby (1) the Company provides the Intellectual Property, the technical know-how, design, and engineering, (2) Shouhang, with annual revenues of approximately USD$157 million, provides manufacturing of the solar field and molten salt tank services, and (3) PowerChina provides the EPC role worldwide.
Battery Energy Storage Systems (“BESS”)
On January 14, 2021, the Company signed a framework agreement with Shanghai Electric Gotion New Energy Technology Co., Ltd (“SEG”). The agreement provides for the supply of lithium-ion BESS. SEG is a joint-venture between Shanghai Electric Group Co., Ltd. (“Shanghai Electric”) and Guoxuan High-tech Co., Ltd. With multiple production facilities and a long-established history in technology manufacturing and supply-chain management, SEG is well-positioned to provide lithium-ion BESS technology around the world. Shanghai Electric has operating revenues in excess of USD$20bn.
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On March 18, 2021, the Company signed a framework agreement with TUPA Energy Limited (“TUPA”) to gain exclusive rights to 1.1GW of BESS projects in the UK. TUPA is a UK based company with expertise in planning, grid connections and land acquisition. The Company has to date executed 99MW in relation to the Richborough Energy Park project and 249MW in relation to the Sheaf Energy Park project.
On May 31, 2022, the Company entered into agreements with Instalcom Limited for Principal Contractor and the ensuing Operations and Maintenance contractor for the 99 MW battery energy park that the Company is developing at Richborough Energy Park in Kent, England.
On June 8, 2022, the Company announced that it has entered into an energy optimization agreement with Shell Energy Europe Limited for the 99 MW battery energy park that the Company is developing at Richborough Energy Park in Kent, UK.
In addition to supply agreements, on December 2, 2020, the Company signed a joint venture and marketing agreement with AMKEST to assist with the promotion of the Company’s core business platform in the Kingdom of Saudi Arabia and the wider Middle East. Amkest Group is overseen by its founder, Amr Khashoggi, who holds board positions in numerous influential companies and government bodies across the Kingdom and is currently serving as Strategic Advisor to the Kingdom’s prominent new development city, King Abdullah Economic City (KAEC). Amkest Group’s leadership team is led by Chief Executive Officer, Salman Alireza, whose background includes various founding, executive and director-level positions in the business development sector within the Kingdom of Saudi Arabia, in addition to an MBA from London Business School.
Significant Events
On January 16, 2023, a postponement agreement with a major client, in which 13 marine scrubber units had been deferred, was extended from the original expiration date of February 9, 2023, to December 31, 2023.
On January 26, 2023, the Company entered into an agreement with Jones Lang LaSalle Ltd for the sale of the 99MW Battery Storage Project within Richborough Energy Parks, and the 249MW Battery Storage Project within Sheaf Energy Limited.
On February 6, 2023, 250,000 ordinary shares in the Company were issued to McClelland Management Inc. at a price of $0.73 as part of the consideration for intellectual property transferred from McClelland Management Inc. to the Company under the terms of an IP transfer deed dated January 4, 2023. A further 250,000 shares will be issued in January 2024 and 250,000 shares in January 2025.
Intellectual Property & Technical Know-How
Pacific Green has built a unique horizontal intellectual property platform consisting of:
| ● | ECS; |
| ● | CSP; and |
| ● | BESS. |
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We do not own, either legally or beneficially, any registered patent or trademark, except for the following proprietary emission abatement systems and associated marks, currently known as:
| ● | ENVI-CleanTM; |
| ● | ENVI-PureTM, for removing acid gases, particulate matter, dioxins, VOCs and other regulated hazardous air pollutants from the flue gases produced by the combustion of coal, biomass, municipal solid waste, diesel and other fuels; and |
| ● | ENVI-MarineTM, a scrubber that can be applied to diesel exhaust emissions that require sulfur and particulate matter abatement (ENVI-CleanTM, ENVI-PureTM and ENVI-MarineTM together, the “Technologies”) |
The ENVI-Clean™ system has protected intellectual property rights throughout most of the world. Its technology is protected by Patent Cooperation Treaty (PCT) patent application no. PCT/CA210/000988 filed June 25, 2010 with a priority filing date of June 25, 2009. The International Preliminary Report on Patentability for this PCT application considered all patent claims of the application to be patentable. EnviroTechnologies has pending national or regional phase patent applications claiming priority from PCT/CA2010/000988 covering 127 countries. Once patents are issued, patent rights in this technology will generally endure until June 25, 2030.
Further, we own the rights to the US provisional patent application no. US 61/614696 for the integrated wet scrubbing system. Additionally, we own the rights to US provisional patent application no. US 61/645874 for the flooded wet scrubbing head patent.
We claim copyright in all our published corporate, promotional and sales materials.
Government Regulations
Some aspects of our intended operations will be subject to a variety of federal, provincial, state and local laws, rules and regulations in North America and worldwide relating to, among other things, worker safety and the use, storage, discharge and disposal of environmentally sensitive materials. For example, we are subject to the Resource Conservation Recovery Act (“RCRA”), the principal federal legislation regulating hazardous waste generation, management, and disposal.
Under some of the laws regulating the use, storage, discharge and disposal of environmentally sensitive materials, an owner or lessee of real estate may be liable for the costs of removing or remediating certain hazardous or toxic substances located on or in, or emanating from, such property, as well as related costs of investigation and property damage. Laws of this nature often impose liability without regard to whether the owner or lessee knew of, or was responsible for, the presence of the hazardous or toxic substances. These laws and regulations may require the removal or remediation of pollutants and may impose civil and criminal penalties for violations. Some of the laws and regulations authorize the recovery of natural resource damages by the government, injunctive relief and the imposition of stop, control, remediation, and abandonment orders. The costs arising from compliance with environmental and natural resource laws and regulations may increase operating costs for both us and our potential customers. We are also subject to safety policies of jurisdictional-specific Workers Compensation Boards and similar agencies regulating the health and safety of workers.
We are not aware of any material violations of environmental permits, licenses or approvals issued with respect to our operations. We expect to comply with all applicable laws, rules and regulations relating to our intended business. At this time, we do not anticipate any material capital expenditures to comply with environmental or various regulations and requirements.
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Subsidiaries
Our Company’s wholly owned subsidiaries are (1) Pacific Green Innoergy Technologies Ltd., a United Kingdom company, (2) Pacific Green Marine Technologies Group Inc., a Delaware corporation, (3) Pacific Green Marine Technologies Inc., a Delaware corporation, (4) Pacific Green Technologies (UK) Ltd. (Formerly Pacific Green Marine Technologies Ltd.), a United Kingdom company, (5) Pacific Green Technologies (Middle East) Holdings Ltd., a United Arab Emirates company, (6) Pacific Green Technologies Arabia LLC, 70% owned, a Kingdom of Saudi Arabia company, (7) Pacific Green Technologies (Canada) Inc., a Canadian corporation, (8) Pacific Green Solar Technologies Inc., a Delaware corporation, (9) Pacific Green Technologies International Ltd., a British Virgin Islands company, (10) Pacific Green Technologies Asia Ltd., a Hong Kong company, (11) Pacific Green Technologies Engineering Services Limited (Formerly Pacific Green Technologies China Ltd.), a Hong Kong company, (12) Pacific Green Technologies (Australia) Pty Ltd., an Australia company, (13) Pacific Green Technologies (Shanghai) Co. Ltd. (Formerly Shanghai Engin Digital Technology Co. Ltd.), a Chinese company, (14) Guangdong Northeast Power Engineering Design Co. Ltd., a Chinese company, (15) Pacific Green Energy Parks Inc., a Delaware corporation, (16) Pacific Green Energy Storage Technologies Inc., a Delaware corporation, (17) Pacific Green Energy Storage (UK) Ltd. (Formerly Pacific Green Marine Technologies Trading Ltd.), a United Kingdom company, (18) Pacific Green Battery Energy Parks 1 Ltd., 50% owned, a United Kingdom company, (19) Pacific Green Battery Energy Parks 2 Ltd., a United Kingdom company, (20) Richborough Energy Park Ltd., 50% owned, a United Kingdom company, unless otherwise indicated, (21) Pacific Green Energy Parks (UK) Ltd., a United Kingdom company, (22) Sheaf Energy Ltd., a United Kingdom company.
REPORTS TO SECURITY HOLDERS
We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.
Employees
As of March 31, 2023, the Company’s subsidiaries employed people in Canada, United Kingdom, Australia, Saudi Arabia and China. The Company also relies heavily upon the use of contractors and consultants. The Company employed 45 full-time employees as of March 31, 2023 (53 as of March 31, 2022) that serve in technical, commercial, and administrative roles.
The Company is committed to providing its employees with a safe and healthy work environment, free from harassment or discrimination (based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability, veteran status, caste, or other legally protected characteristic), intimidation, or personal behavior not conducive to a productive work climate. The Company is an equal opportunity employer committed to inclusion and diversity.
In order to attract and retain quality employees, the Company offers competitive remuneration. The Company invests in tools and resources that support employees’ individual growth and development.
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Item 1A. Risk Factors
Risks Related to Our Financial Position and Capital Requirements
We have a limited operating history with significant losses.
We have yet to establish a sustained history of profitable operations. We incurred a cumulative deficit of $96,847,650 for the period from April 5, 2011 (inception) to March 31, 2023. We generated our first revenues during the year ended March 31, 2018 of $1,995,000. Our profitability will depend on our ability to successfully market and sell the Technologies, which is not a given. The economic driver for the purchase by shipping companies for our marine scrubbers is primarily the spread between low-cost (high sulfur) bunker fuel and high-cost (low sulfur) bunker fuel. Over the last two years we have been exploring alternative strategies to complement our emission control Technologies and have identified opportunities for both concentrated solar power and battery energy storage systems technologies in various geographies around the world, to support a global transition away from the use of hydrocarbons. We are taking a medium- to long-term view of these opportunities and are at an early stage in pursuing and developing them, with no certainty of becoming profitable and cash-generative ventures.
We may not be able to secure additional financing to meet our future capital needs due to changes in general economic conditions.
We anticipate needing significant capital to develop our sales force and effectively market the Technologies and develop the BESS facilities. We may use capital more rapidly than currently anticipated and incur higher operating expenses than currently expected, and we may be required to depend on external financing to satisfy our operating and capital needs. We may need new or additional financing in the future to conduct our operations or expand our business. Any sustained weakness in the general economic conditions and/or financial markets in the United States or globally could adversely affect our ability to raise capital on favorable terms or at all. From time to time we have relied, and may also rely in the future, on access to financial markets as a source of liquidity to satisfy working capital requirements and for general corporate purposes. We may be unable to secure debt or equity financing on terms acceptable to us, or at all, at the time when we need such funding.
The COVID-19 pandemic significantly increased the volatility of financial markets and now, the ongoing Russian-Ukraine conflict has also contributed to this volatility and unpredictability and may continue to do so. This could eliminate our access to financing, and/or significantly increase its cost.
If we do raise funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders would be reduced, and the securities that we issue may have rights, preferences, or privileges senior to those of the holders of our common stock or may be issued at a discount to the market price of our common stock which would result in dilution to our existing stockholders. If we raise additional funds by issuing debt, we may be subject to debt covenants, which could place limitations on our operations including our ability to declare and pay dividends. Our inability to raise additional funds on a timely basis would make it difficult for us to achieve our business objectives and would have a negative impact on our business, financial condition, and results of operations.
Our prospects must be considered in light of the risks, expenses, delays and difficulties as well as the following factors:
| ● | our business model and strategy are still evolving, with continual reviews and revisions; | |
| ● | we may not be able to raise the capital required to develop our initial client base and reputation; and | |
| ● | we may not be able to successfully develop our planned products and services. |
We cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will not be successful and the value of your investment in us will decline.
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Risks Related to our Business and Operations
The development and expansion of our business through acquisitions, joint ventures, and other strategic transactions may create risks that may reduce the benefits we anticipate from these strategic alliances and may prevent us from achieving or sustaining profitability.
We intend to enter into technology acquisition and licensing agreements and strategic alliances such as joint ventures or partnerships in order to develop and commercialize our proposed technologies and services, and to increase our competitiveness. Our management is unable to predict whether or when we will secure any such commitments or agreements, or whether such commitments or agreements will be secured on favorable terms and conditions.
Our ability to continue or expand our operations through acquisitions, joint ventures or other strategic alliances depends on many factors, including our ability to identify acquisitions, joint ventures, or partnerships, or access capital markets on acceptable terms. Even if we are able to identify strategic alliance targets, we may be unable to obtain the necessary financing to complete these transactions and could financially overextend ourselves.
Acquisitions, joint ventures or other strategic transactions may present financial, managerial and operational challenges, including diversion of management attention from existing business and difficulties in integrating operations and personnel. Acquisitions or other strategic alliances also pose the risk that we may be exposed to successor liability relating to prior actions involving a predecessor company, or contingent liabilities incurred before a strategic transaction. Due diligence conducted in connection with an acquisition, and any contractual guarantees or indemnities that we receive from sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities. Liabilities associated with an acquisition, or a strategic transaction could adversely affect our business and financial performance and reduce the benefits of the acquisition or strategic transaction. Any failure to integrate new businesses or manage any new alliances successfully could adversely affect our business and financial performance and prevent us from achieving profitability.
We are dependent upon our officers for execution of our business plan.
Our future success depends heavily upon the continuing services of the members of our senior management team. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted, and our financial condition and results of operations may be materially and adversely affected. Competition for senior management and key personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel or attract and retain high-quality senior executives or key personnel in the future. We do not currently maintain key man insurance on our senior managers.
Adverse economic conditions.
Economic downturns and financial crises in the global markets could produce illiquidity in the capital markets, market volatility, increased exposure to interest rate and credit risks and reduced access to capital markets. If global financial markets and economic conditions significantly deteriorate in the future, we may face restricted access to the capital markets or bank lending, which may make it more difficult and costly to fund future growth. Decreased access to such resources could have a material adverse effect on our business.
Adverse conditions or developments impacting our customers may lead to their decline in the ability to pay for our services, which could reduce demand and result in customer defaulting on our current contracts and charters.
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We may not be successful in expanding our operations and any expansion may not be profitable. Our long-term strategy of growth through acquisitions involves business risks commonly encountered in acquisitions of companies, including:
| ● | interruption of, or loss of momentum in, the activities of one or more of an acquired company’s businesses and our businesses; |
| ● | additional demands on members of our senior management while integrating acquired businesses, which would decrease the time they have to manage our existing business, service existing customers and attract new customers; |
| ● | difficulties identifying suitable acquisition candidates; |
| ● | difficulties integrating the operations, personnel and business culture of acquired companies; |
| ● | difficulties coordinating and managing geographically separate organizations; |
| ● | adverse effects on relationships with our existing suppliers and customers, and those of the companies acquired; |
| ● | difficulties entering geographic markets or new market segments in which we have no or limited experience; and |
| ● | loss of key officers and employees of acquired companies. |
Acquisitions may not be profitable to us at the time of their completion and may not generate revenues sufficient to justify our investment. In addition, our acquisition growth strategy exposes us to risks that may harm our results of operations and financial condition, including risks that we may: fail to realize anticipated benefits, such as cost-savings, revenue and cash flow enhancements and earnings accretion; decrease our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions; incur additional indebtedness, which may result in significantly increased interest expense or financial leverage, or issue additional equity securities to finance acquisitions, which may result in significant shareholder dilution; incur or assume unanticipated liabilities, losses or costs associated with the business acquired; or incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.
Exposure to currency exchange rate fluctuations results in fluctuations in our cashflows and operating results.
Most of our revenue is earned in USD apart from a portion of our operating costs, which leads to fluctuations in net income due to FX, in particular the changing value of GBP to USD and our operating results which are reported in USD. Under U.S. accounting guidelines, all foreign currency-denominated monetary assets, and liabilities, such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable, accrued liabilities, advances from affiliates and long-term debt are revalued and reported based on the prevailing exchange rate at the end of the applicable period. This revaluation historically has caused us to report significant unrealized foreign currency exchange gains or losses each period.
We are at risk that the Technologies will not perform to expectations.
As at the date of this annual report, the Technologies have been tested to satisfactory requirements but there is no guarantee that the Technologies will continue to perform satisfactorily in the future which would damage our prospects.
The market for alternative energy products, technologies or services is emerging and rapidly evolving and its future success is uncertain. Insufficient demand for the Technologies would prevent us from achieving or sustaining profitability.
It is possible that we may spend large sums of money to bring the Technologies to market, but demand may not develop or may develop more slowly than we anticipate.
Our future success is currently dependent on our Technologies and:
| (a) | our ability to quickly react to technological innovations; | |
| (b) | the cost-effectiveness of our Technologies; |
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| (c) | the performance and reliability of alternative energy products and services that we develop; | |
| (d) | our ability to formalize marketing relationships or secure commitments for our Technologies, products and services; and | |
| (e) | realization of sufficient funding to support our marketing and business development plans. |
We may be unable to develop widespread commercial markets for our Technologies. We may be unable to achieve or sustain profitability.
Competition within the renewable energy industry may prevent us from becoming profitable.
The renewable energy industry is competitive and fragmented and includes numerous small companies capable of competing effectively in the market we target as well as several large companies that possess substantially greater financial and other resources than we do. Larger competitors’ greater resources could allow those competitors to compete more effectively than we can with our Technologies. A number of competitors have developed more mature businesses than us and have successfully built their names in the international alternative energy markets. These various competitors may be able to offer products, sustainability technologies or services more competitively priced and more widely available than our Technologies and may also have greater resources to create or develop new technologies and products than us. Failure to compete in the alternative energy industry may prevent us from becoming profitable, and thus you may lose your entire investment.
We are heavily dependent upon the supply of goods and services from suppliers and partners in China
The Company has a significant supply chain based in China, predominantly being the project management and production of marine scrubber units, and more recently the production of lithium-ion battery units and related equipment for the BESS facilities being developed by the Company in the UK and elsewhere. Whilst there is undoubtedly a concentration of political risk, there is mitigation to this from the fact that our battery supplier is in the process of building multiple facilities outside China which could be used in the event that US/China trading relationships are adversely affected.
Legal, Regulatory and Litigation Risks
Our business is subject to environmental and consumer protection legislation and any changes in such legislation could prevent us from becoming profitable.
The energy production and technology industries are subject to many laws and regulations which govern the protection of the environment, quality control standards, health and safety requirements, and the management, transportation and disposal of hazardous substances and other waste. Environmental laws and regulations may require removal or remediation of pollutants and may impose civil and criminal penalties for violations. Some environmental laws and regulations authorize the recovery of natural resource damages by the government, injunctive relief and the imposition of stop, control, remediation, and abandonment orders. Similarly, consumer protection laws impose quality control standards on products marketed to the public and prohibit the distribution and marketing of products not meeting those standards.
The costs arising from compliance with environmental and consumer protection laws and regulations may increase operating costs for both us and our potential customers. Any regulatory changes that impose additional environmental restrictions or quality control requirements on us or on our potential customers could adversely affect us through increased operating costs and potential decreased demand for our services, which could prevent us from becoming profitable.
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Risks Related to our Stockholders and Shares of Common Stock
The continued sale of our equity securities will dilute the ownership percentage of our existing stockholders and may decrease the market price for our common stock.
As of March 31, 2023, the Company’s cash reserves are approximately $1.16 million. We expect to continue our efforts to market, manufacture and deliver our Technologies to customers. Should the Company need additional resources, we may consider selling additional equity securities which will result in dilution to our existing stockholders. In short, our continued need to sell equity will result in reduced percentage ownership interests for all of our investors, which may decrease the market price for our common stock.
We do not intend to pay dividends and there will thus be fewer ways in which you are able to make a gain on your investment.
We have never paid dividends and do not intend to pay any dividends for the foreseeable future. To the extent that we may require additional funding currently not provided for in our financing plan, our funding sources may prohibit the declaration of dividends. Because we do not intend to pay dividends, any gain on your investment will need to result from an appreciation in the price of our common stock. There will therefore be fewer ways in which you are able to make a gain on your investment. In the future when we do intend to pay dividends, we will formalize a dividend policy.
Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline.
Our shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) which imposes additional sales practice requirements on brokers-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written agreement prior from you to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your shares and may cause the value of your investment to decline.
Financial Industry Regulatory Authority (FINRA) sales practice requirements may limit your ability to buy and sell our common stock, which could depress the price of our shares.
FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares, and thereby depress our share price.
General Risk Factors
We may have risks associated with the security of our information technology systems.
We make significant efforts to maintain the security of our information technology systems and protect our critical data. Despite our continuing efforts, cyber-attacks may occur that could significantly disrupt our business activities and financial performance, resulting in loss of revenues, reputation, and customer relationships.
Item 1B. Unresolved Staff Comments
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2. Properties
Our registered business address for correspondence is Suite #10212 8 The Green, Dover, DE 19901. Our telephone number is (302) 601-4659.
We have an operations headquarters, based at 4 Albemarle Street, London, W1S 4GA, United Kingdom.
Item 3. Legal Proceedings
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares are quoted on the OTCQB under the symbol “PGTK”, but trade infrequently. Our common shares are not currently listed on the NASDAQ.
The high and low bid prices of our common stock for the periods indicated below are as follows:
| OTCQB(1) | ||||||||
| Quarter Ended | High(*) | Low(*) | ||||||
| March 31, 2023 | $ | 0.74 | $ | 0.53 | ||||
| December 31, 2022 | $ | 0.98 | $ | 0.63 | ||||
| September 30, 2022 | $ | 1.09 | $ | 0.75 | ||||
| June 30, 2022 | $ | 1.00 | $ | 0.54 | ||||
| March 31, 2022 | $ | 1.49 | $ | 0.72 | ||||
| December 31, 2021 | $ | 1.99 | $ | 0.80 | ||||
| September 30, 2021 | $ | 2.00 | $ | 1.11 | ||||
| June 30, 2021 | $ | 2.82 | $ | 1.05 | ||||
| March 31, 2021 | $ | 3.76 | $ | 1.28 | ||||
| December 31, 2020 | $ | 4.65 | $ | 0.80 | ||||
| September 30, 2020 | $ | 1.50 | $ | 0.62 | ||||
| June 30, 2020 | $ | 2.50 | $ | 1.15 | ||||
| March 31, 2020 | $ | 3.35 | $ | 1.20 | ||||
| (*) | Data source: yahoo finance website. |
| 1. | Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. Our shares did not begin trading until June 14, 2012. Our transfer agent is American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, New York, 11219; telephone number (718) 921-8200; facsimile number (718) 765-8711. |
As of June 29, 2023, there were 285 holders of record of our common stock. As of such date, 49,970,724 shares of our common stock were issued and outstanding.
Dividends
We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
Securities Authorized for Issuance under Equity Compensation Plans
On January 15, 2021, the Company granted 25,000 stock options to Richard Fraser-Smith. These options are exercisable at a 25% discount to the average of the 30 trading days immediately prior to January 15, 2021. The options are exercisable on January 15, 2022 for a period of 3 years or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier.
On March 31, 2021, the Company granted 75,000 stock options to Riseley D’Souza. 25,000 options at the exercise price of $0.01 and 50,000 options at the exercise price of $1.50. The options are exercisable on March 31, 2021 for a period of three years.
On January 15, 2022, the Company granted 25,000 stock options to Richard Fraser-Smith. These options are exercisable at a 25% discount to the average of the 30 trading days immediately prior to January 15, 2022. The options are exercisable on January 15, 2023 for a period of 3 years or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier.
On March 15, 2022, the Company granted 100,000 stock options to Peter Rossbach at the exercise price of $1.20. 60,000 options are exercisable on March 15, 2022 for a period of 3 years. 40,000 options are exercisable on August 1, 2022 for a period of 3 years.
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On October 1, 2022, the Company granted 60,000 stock options to Eric Prouty. 10,000 options at the exercise price of $0.01, 25,000 options at the exercise price of $2.50 and 25,000 at the exercise price of $3.75. These options are exercisable on October 1, 2022 for a period of 2 years.
On November 1, 2022, the Company granted 200,000 stock options to McClelland Management. These options are exercisable at $0.10 on November 1, 2022 for a period of 2 years.
On March 01, 2023, the Company granted 25,000 stock options to Richard Fraser-Smith. These options are exercisable at a 25% discount to the average of the 30 trading days immediately prior to March 01, 2023. The options are exercisable on March 01, 2023 for a period of 3 years or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
Except where otherwise indicated, each of the below described issuances of common shares was made to a non - U.S. person, as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.
On July 17, 2020, the Company issued 50,000 shares of common stock with an aggregate value of $69,500 to a former officer of the Company as per the terms of an employment settlement agreement.
On August 6, 2020, the Company issued 50,000 shares of common stock with a fair value of $62,500 pursuant to a conversion of $20,000 in principal and $42,550 in derivative liability relating to the November 10, 2015 convertible debenture. The fair value of the common stock was determined based on the closing price of the Company’s common stock of $1.25 per share. This transaction resulted in a gain on extinguishment of debt of $50.
On August 31, 2020, 175,000 stock options were exercised by a director of the Company at the exercise price of $0.01 per share with an aggregate value of $1,750. The Company issued 175,000 shares of common stock from the treasury.
On September 28, 2020, the Company issued 95,238 shares of common stock with an aggregate value of $95,238 under the terms of a sales commission agreement.
On October 19, 2020, the Company issued 525,000 shares of common stock with an aggregate value of $577,500 as part of the acquisition of Innoergy.
On October 19, 2020, the Company issued 100,000 shares of common stock with an aggregate value of $100,000 to a former director in recognition and appreciation for his years of exemplary service and commitment to the Company as a bonus.
On January 11, 2021, the Company issued 228,980 shares of common stock with a fair value of $354,921 pursuant to a conversion of $10,000 in principal and $344,921 in derivative liability relating to the November 10, 2015 convertible debenture. The fair value of the common stock was determined based on the closing price of the Company’s common stock of $1.55 per share. This transaction resulted in a gain on extinguishment of debt of $3,077.
On March 30, 2021, the Company issued 106,375 shares of common stock with a fair value of $222,304 for investor relations.
On August 25, 2021, 25,000 stock options were exercised by an employee of the Company at the exercise price of $0.01 per share with an aggregate value of $250. The Company issued 25,000 shares of common stock from the treasury.
On August 31, 2021, 11,321 common shares of the Company were issued to an employee of the Company at $2.12 per share.
On February 6, 2023, the Company issued 250,000 shares of common stock with an aggregate value of $162,500 as part of the consideration for intellectual property.
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Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes for the years ended March 31, 2023, and 2022 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this annual report, particularly in section Item 1A “Risk Factors” of this annual report.
Our audited consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
Results of Operations
The following summary of our results of operations should be read in conjunction with our audited financial statements for the years ended March 31, 2023, and 2022.
Revenue for the year ended March 31, 2023, was $7,639,165 versus $15,439,199 for the year ended March 31, 2022. During the year ended March 31, 2023, the Company was in the process of commissioning 7 (2022 – 8) marine scrubber units which contributed to revenue of $4,717,905 (2022 – $12,680,104). The decrease in revenue was prompted by high day rates on tanker charters disincentivizing clients from taking ships out of operations and fitting scrubbers combined with the phasing of the delivery and the recognition of revenues of the 7 vessels. Revenue from services, including specific services performed in the marine business sector and design and engineering services in the solar business sector, was $2,921,260 (2022 – $2,759,096).
During the year ended March 31, 2023, the gross profit margins for products and services were 20% (2022 – 80%) and 30% (2022 – 26%), respectively. The gross profit margin for products decreased in 2023 because of a contraction of the market due to a reduction in the fuel price spread and a consequent reduction in orders for marine scrubbers in 2023. Overall, the gross profit margin for the year ended March 31, 2023, was approximately 24% (2022 – 70%).
Expenses for the year ended March 31, 2023 were $12,435,958 as compared to $22,111,094. This decrease was driven by the large one-off impairment expenses of goodwill and intangible assets recorded in FY22 for an amount of $7,060,954 and by a general reduction of expenses and salaries of $2,614,182. This year, the company recovered bad debt expenses of $52,232, after receiving amounts previously assumed to be unrecoverable. Management and technical consulting fees were comprised of fees paid to our directors, officers and advisors for business development efforts and advisory services. Advertising and professional fees decreased due to reduced business activities. For the year ended March 31, 2023, the Company recorded a warranty expense recovery of $625,664 (2022 - expense of $731,529) related to the estimated expectation of warranty costs. The impact of various international factors on FX rates caused fluctuations which saw the Company’s foreign exchange losses increase dramatically.
For the year ended March 31, 2023, our company had a net loss of $11,794,008 ($0.25 per share) compared to a net loss of $10,752,458 ($0.23 per share) for the year ended March 31, 2022.
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Our financial results for the years ended March 31, 2023 and 2022 are summarized as follows:
| Year Ended | ||||||||
| March 31, | ||||||||
| 2023 $ | 2022 $ | |||||||
| Revenues | ||||||||
| Products | 4,717,905 | 12,680,103 | ||||||
| Services | 2,921,260 | 2,759,096 | ||||||
| Total Revenues | 7,639,165 | 15,439,199 | ||||||
| Cost of goods sold | ||||||||
| Products | 3,776,459 | 2,505,579 | ||||||
| Services | 2,056,266 | 2,051,261 | ||||||
| Total Cost of goods sold | 5,832,725 | 4,556,840 | ||||||
| Gross profit | 1,806,440 | 10,882,359 | ||||||
| Expenses | ||||||||
| Advertising and promotion | 507,828 | 599,520 | ||||||
| Amortization of intangible assets | 2,622 | 697,126 | ||||||
| Bad debts (recovery) | (52,232 | ) | (36,526 | ) | ||||
| Depreciation | 191,404 | 210,292 | ||||||
| Foreign exchange loss | 966,368 | 1,005,418 | ||||||
| Impairment of tangible assets | 49,438 | – | ||||||
| Impairment of goodwill | – | 4,419,315 | ||||||
| Impairment of intangible assets | – | 2,641,639 | ||||||
| Operating lease expense | 566,762 | 485,087 | ||||||
| Office and miscellaneous expense | 1,626,921 | 1,770,341 | ||||||
| Management and technical consulting | 2,821,347 | 3,366,903 | ||||||
| Professional fees | 1,692,925 | 1,803,435 | ||||||
| Salaries and wages | 3,862,647 | 4,993,145 | ||||||
| Research and development | 13,772 | – | ||||||
| Transfer agent and filing fees | 58,666 | 232,365 | ||||||
| Travel and accommodation | 753,154 | 654,563 | ||||||
| Warranty (recovery) | (625,664 | ) | (731,529 | ) | ||||
| Total expenses | 12,435,958 | 22,111,094 | ||||||
| Other Income | ||||||||
| Financing interest income | 90,436 | 456,761 | ||||||
| (Loss) on acquisition of subsidiary | (255,947 | ) | – | |||||
| Interest income (expense) and other | (998,979 | ) | 19,516 | |||||
| Net (Loss) / Income | (11,794,008 | ) | (10,752,458 | ) | ||||
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Liquidity and Capital Resources
Working Capital
At $ | At $ | |||||||
| Current Assets | 3,757,334 | 24,854,658 | ||||||
| Current Liabilities | 15,537,991 | 19,079,665 | ||||||
| Working Capital | (11,780,657 | ) | 5,774,993 | |||||
Cash Flows
Year Ended March 31, 2023 $ | Year Ended March 31, 2022 $ | |||||||
Net Cash Provided by (Used in) Operating Activities | 7,998,269 | (15,955,899 | ) | |||||
| Net Cash (Used in) Investing Activities | (42,859,491 | ) | (1,965,172 | ) | ||||
Net Cash Provided by (Used in) Financing Activities | 28,912,392 | (99,504 | ) | |||||
| Effect of Exchange Rate Changes on Cash | 936,100 | 870,626 | ||||||
| Net Change in Cash and Cash Equivalents | (5,012,730 | ) | (17,149,949 | ) | ||||
As of March 31, 2023, we had $1,160,358 in cash, $3,757,334 in total current assets, $15,537,991 in total current liabilities, and a negative working capital of $11,780,657, compared to working capital of $5,774,993 as at March 31, 2022. The Company’s working capital decreased due to the contraction in turnover, the general slowdown in investment in the marine business and the substantial use of capital to finance BESS projects The Company’s prepaid manufacturing costs, contract liabilities and accruals changed significantly from period to period, depending on the status of equipment deliveries, customer receipts and payments to third party manufacturers.
During the year ended March 31, 2023, we generated $7,998,269 of cash in operating activities, whereas we used $15,955,899 in operating activities for the year ended March 31, 2022. Operating cash flows for the year ended March 31, 2023 primarily consist of deposits and installments received from customers and our corresponding manufacturing outlays. The negative operating cash flow for the year ended March 31, 2023 mainly resulted from a reduction in revenue.
During the year ended March 31, 2023, we used $42,859,491 in investing activities, whereas we used $1,965,172 in investing activities during the year ended March 31, 2022. Our investing activities for the year ended March 31, 2023 were primarily were driven by the development of the REP and Sheaf BESS projects.
During the year ended March 31, 2023, we generated $28,912,392 related to financing activities, whereas we used $99,504 in financing activities during the year ended March 31, 2022. Our financing activity for the year ended March 31, 2023 related to preferred shares issued by our subsidiary and loans payable.
Anticipated Cash Requirements
We have raised funds to construct our first BESS 99MW facility project at Richborough Energy Park in Kent, United Kingdom. On May 11, 2022 the Company announced it had entered into a Subscription and Shareholders Agreement with a third party investor, who has committed $16 million (£13 million) of equity funds to the project. On June 21, 2022 the Company announced it had reached financial close (“Financial Close”) for $34.90 million (£28.25 million) of senior debt for the Richborough project. The senior debt, in conjunction with the equity investment, will provide the Company with the funding to bring the battery park to commercial operations anticipated between June and September 2023. The senior debt facility agreement is entered into with Close Leasing Limited (“CLL”), pursuant to which CLL will provide a development loan to fund the construction, which will be utilized in stages following the expenditure of the equity investment. The development loan will then be refinanced into a 10-year amortized term loan upon the start of commercial operations.
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As at June 9, 2023 Pacific Green Technologies, Inc. has entered into a sale and purchase agreement to sell 100% of the shares in Pacific Green Battery Energy Parks 1 Limited (“PGBEP1”) to Sosteneo Fund 1 HoldCo S.à.r.l. for £74 million (US$93 million).
PGBEP1 is the holding company for 100% subsidiary, Richborough Energy Park Limited, Pacific Green’s 99MW battery energy storage system (“BESS”) at Richborough Energy Park (“REP”) which begins operations later this summer.
Under the terms of the Agreement entered into, the consideration is payable pursuant to operational milestones related to the battery park as it connects to the grid and becomes operational. The buyer paid an advance of £20m upon signing of the Agreement, of which £7.1m was received by Pacific Green (before fees), the balance being received by the Company’s equity partner. On June 26, 2023 the transaction was formally completed and the buyer paid a further £9.9m, of which £4.2m was received by Pacific Green (before fees), the balance being received by the Company’s equity partner.
On December 6, 2022 the Company acquired Sheaf Energy Limited for $9,126,000 (£7,500,000) which will be developed into our second BESS 249MW facility project. The acquisition was funded with a secured loan from a third-party investor, Sheaf Storage Limited, which is repayable in September 2023 (or earlier if Sheaf Energy Limited is sold earlier) along with a repayment fee of 20%.
We anticipate reaching financial close around the middle of 2023 and anticipate utilizing the net proceeds from the sale of REP to fund our Sheaf project expenditure prior to financial close, plus our normal operating expenditure over the next 12 months.
As of March 31, 2023, we had $1,160,358 in cash on hand. Our cash requirement estimates may change significantly depending on the nature of our business activities and our ability to raise capital from our shareholders or other sources.
We currently have office locations in the United States, Canada, United Kingdom, China, Hong Kong, Abu Dhabi, Kingdom of Saudi Arabia, and Australia. We have hired staff in various regions and rely heavily upon the use of contractors and consultants. Our general and administrative expenses for the year will consist primarily of technical consultants, management, salaries and wages, professional fees, transfer agent fees, bank and interest charges and general office expenses. The professional fees relate to matters such as contract review, business acquisitions, regulatory filings, patent maintenance, and general legal, accounting and auditing fees.
Going Concern
Our financial statements for the year ended March 31, 2023 have been prepared on a going concern basis.
The assessment of the liquidity and going concern requires the Company to make judgments about the existence of conditions or events that raise substantial doubt about the ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. This includes judgments about the Company’s future activities and the timing thereof and estimates of future cash flows. Significant assumptions used in the Company’s forecasted model of liquidity include forecasted sales, costs, and capital expenditures. Changes in the assumptions could have a material impact on the forecasted liquidity and going concern assessment.
On June 9, 2023 the Company entered into a sale and purchase agreement (“Agreement”) to sell 100% of the shares it holds in Pacific Green Battery Energy Parks 1 Limited (“PGBEP1”) to Sosteneo Fund 1 HoldCo S.à.r.l. for £74 million (US$93 million). PGBEP1 is the holding company for a 100% owned subsidiary, Richborough Energy Park Limited, Pacific Green’s 99MW battery energy storage system (“BESS”) at Richborough Energy Park (“REP”) which is scheduled to begin operations later this summer.
Under the terms of the Agreement entered into, the consideration is payable pursuant to operational milestones related to the battery park as it connects to the grid and becomes operational. The buyer paid an advance of £20m upon signing of the Agreement, of which £7.1m was received by Pacific Green (before fees), the balance being received by the Company’s equity partner. On June 26, 2023 the transaction was formally completed and the buyer paid a further £9.9m, of which £4.2m was received by Pacific Green (before fees), the balance being received by the Company’s equity partner.
In addition to the sale of REP, the Company is in the process of securing the sale of Sheaf Energy Ltd (the Company’s 249MW BESS development in the United Kingdom), which will further materially underpin the cash resources of the Company. The sale of Sheaf will trigger the repayment of the bridge loan for $9,261,789 (£7.5 million) drawn down in December 2022 to finance the acquisition of Sheaf Energy Ltd, and which has a longstop repayment date of September 15, 2023. Should the sale of Sheaf not have been completed before that date, the Company has the option to refinance the loan or otherwise forego the shares of Sheaf Energy Ltd as a pledge to the lender. This latter scenario is deemed by management to be highly unlikely. In any event, this will not affect the going concern.
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Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Estimates
The preparation of these consolidated financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.
Impairment of Long-lived Assets
We review long-lived assets such as property and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. The determination of whether impairment indicators exist requires significant judgment in evaluating underlying significant assumptions including expected sales contracts, operating costs, and current market value of assets. If an indication is identified, and the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset.
We recorded an impairment charge of $49,438 on tangible assets during the year ended March 31, 2023 (2022 - $nil) due to the closure and consequent decommission of the test scrubber site assets. No transactions have been recorded related to impairment of goodwill and intangible assets for the period ended March 31, 2023 (2022- $4,419,315 and $2,641,639 respectively).
Goodwill
We allocate the cost of acquired companies to the identifiable tangible and intangible assets and liabilities acquired, with the remaining amount being classified as goodwill. The allocation of the purchase price of acquired companies requires certain judgments and estimates. Goodwill is not amortized but is evaluated annually for impairment at the reporting unit level or when indicators of a potential impairment are present. The process of evaluating the potential impairment of goodwill requires significant judgment and are based upon existing contracts, historical experience, financial forecasts, and general economic conditions.
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During the year ended March 31, 2022 we fully impaired Engin goodwill and Innoergy goodwill (2022 - $3,870,223 on Engin goodwill and $549,092 on Innoergy) as management’s estimated fair value of the reporting unit was less than its carrying value determined during impairment testing. Therefore, there is no further impairment to book in the year ended March 31, 2023.
Revenue Recognition
We account for revenue under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the five step approach. The most significant estimates and assumptions within the five-step approach are related to identification of performance obligations in the contract and the calculations inherent in the revenue recognition as or when performance obligations are satisfied.
Our marine scrubber sales contracts contain a single performance obligation satisfied over time, based on percentage of completion of the contract. The conclusion for a single performance obligation is based on management’s assessment of these contracts, whereby customers purchase the entire marine scrubber system and do not benefit from the separate components on their own. Revenue is recognized over time based on the percentage of completion of the contract, using the input method.
According to ASC 606-10-25-27, if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date, revenue should be recognized over time. Our scrubber system is customized to each vessel at the detailed design level, so the performance under the contract does not create an asset with an alternative use. According to our contracts signed with customers under English law, the customers are contractually and legally obliged to pay for performance completed to date that covers cost plus a reasonable profit margin. Therefore, the revenue is recognized over time based on the input method and it is the change in cost of goods sold (using a percentage of costs to complete) that has driven the change in revenues. Significant estimates are involved in using the input method as it relates to estimation of total costs and overall gross margins, and any change in these factors could lead to a difference in timing or amount of revenue and profit.
Revenue from services includes specific services provided to marine scrubber systems as well as design and engineering services for Concentrated Solar Power. Contracts for specific services provided to marine scrubber systems represent maintenance services. Contracts for Concentrated Solar Power include design and engineering services provided to clients. Revenue for service contracts is recognized as the services are provided at a point in time.
Any changes to our conclusions around single or multiple performance obligations for either or products or services could result in a timing difference in our revenue recognition. For example, in 2022 we re-assessed our contracts for the sale of marine scrubbers and determined there was only one performance obligation, which had previously been recognized as three distinct performance obligations. As a result, we restated the March 31, 2021 financial statements, with adjustments to revenue, accrued revenue, and prepaid manufacturing costs. Additionally, we have one contract with a significant financing component, where assumptions and estimates are made to separate the financing from revenue and record interest. Any changes in the discount rate or payment schedules could impact the timing of revenue recognized.
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Warranty Provision
The Company reserves a 2% warranty provision on the completion of a contract following the commissioning of marine scrubbers. The specific terms and conditions of those warranties vary depending upon the product sold and geography of sale. The Company’s product warranties generally start from the commissioning date and continue for up to twelve to twenty-four months. The Company provides warranties to customers for the design, materials, and installation of scrubber units. The Company has a back-to-back manufacturing guarantee from its major supplier, which covers materials, production, and installation. Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures. These factors are estimates that may change based on new information that becomes available each period. Similarly, the Company also accrues the estimated costs to address reliability repairs on products no longer in warranty when, in the Company’s judgment, and in accordance with a specific plan developed by the Company, it is prudent to provide such repairs. The Company intends to assess the adequacy of recorded warranty liabilities quarterly and adjusts the liability as necessary.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
20
Item 8. Financial Statements and Supplementary Data
PACIFIC GREEN TECHNOLOGIES INC.
Consolidated Financial Statements
March 31, 2023
(Expressed in US dollars)
F-1
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Pacific Green Technologies Inc.
Opinion on the consolidated financial statements
We have audited the accompanying consolidated balance sheet of Pacific Green Technologies Inc. and subsidiaries (the “Company”) as of March 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, consolidated statement of stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Going Concern Assessment
As discussed in Note 1 to the consolidated financial statements, the consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. In making this assessment, the Company has evaluated whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the consolidated financial statements are issued. This includes assessment of liquidity, judgments about the Company’s future activities and the timing thereof and estimates of future cash flows. Significant assumptions used in the Company's forecasted model of liquidity include forecasted sales, costs, and capital expenditures. Changes in these assumptions could have a material impact on the forecasted liquidity and going concern assessment. The Company concluded that there are no known or currently foreseeable conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. We identified going concern as a critical audit matter as a result of the judgements involved in the estimation of headroom required to conclude there is no substantial doubt related to going concern.
The principal considerations for our determination that going concern assessment is a critical audit matter are that the evaluation of the Company’s estimate of cash flows used in its forecasted model of liquidity for at least twelve months beyond the date of issuance of the consolidated financial statements involved an especially high degree of auditor judgement due to uncertainty in the timing and quantum of estimated cash flows.
Our audit procedures related to the going concern assessment included the following, among others:
| ● | We obtained management's cash flow forecast for the period ending June 2024 i.e., 12 months from the date of statutory filing and compared the Company's historical forecast cash flows to actual results in the current year to assess the Company's ability to forecast accurately. |
| ● | We assessed the appropriateness of forecast assumptions by enquiring of management regarding the mitigating actions to reduce costs and manage cash flows and challenged the impact of each of those actions with reference to supporting evidence and assessed whether the mitigating actions were within the Company's control. |
| ● | We challenged management to perform downside sensitivity analyses to identify the scenarios that could lead to headroom being stretched and evaluated the likelihood of such scenarios materializing. We also challenged the level of further mitigations available to the Company beyond those included within the forecast and considered the results of reverse stress tests performed by management. |
| ● | We assessed the Company's going concern model in the context of other audit evidence obtained during the audit to determine whether it supported or contradicted the conclusions reached by the Company. |
| ● | We evaluated the adequacy of the disclosures relating to going concern. |
F-2
Revenue Recognition
As described in Note 2(g) and 11 to the consolidated financial statements, revenue recognition requires significant judgements from management in regard to the determination of accounting treatment for contracts with customers. Management is required to assess contracts with customers to identify whether performance obligations in the contract are distinct and to determine whether contract terms provide the Company with a basis to recognize revenue over time. We identified revenue recognition in the current year as a critical audit matter.
The principal considerations for our determination that revenue recognition is a critical audit matter are that there were items of revenue that were incorrectly accounted for during the prior year and a material weakness in internal control with respect to revenue recognition was identified in prior year. There is also judgement required in auditing the revenue recognition for multiple deliverable contracts and contracts where revenue is recognized over a period of time using percentage complete.
Our audit procedures related to the revenue recognition included the following, among others.
| ● | We evaluated the design and implementation of key controls related to revenue recognition. |
| ● | For a sample of contracts, we performed the following procedures: |
| o | We inspected signed contracts, invoices and payments for each sample. We also verified if the revenue recognition policy was applied consistently across samples. |
| o | We assessed the appropriateness of revenue recognition policy for the new maintenance service contracts in line with the requirements of ASC 606. |
| o | We evaluated Management's assessment and related support associated with the percentage completed for each vessel. We obtained direct confirmation of percentage completed on vessels from the key supplier. |
| o | We assessed the performance obligation achieved for maintenance service contracts. We obtained independent confirmation from the marine operations team for performance obligations satisfied on the maintenance service contracts. |
| o | We verified the existence and completeness of prepaid manufacturing costs and contract liabilities, respectively by agreeing back the key elements to confirmations received or underlying supporting documentation. |
Intangible Impairment
As described in Note 2(e) and 6 to the consolidated financial statements, the company reviews intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized for the excess of the carrying amount over the fair value of the asset. We identified indicators of a potential impairment of intangible assets related to patents and intellectual property relating to marine scrubber technology as a critical audit matter.
The principal considerations for our determination that intangible assets impairment is a critical audit matter are that the company has to use judgement surrounding the consideration of impairment indicators relating to long lived assets, including intangible assets. The identification of impairment indicators would require management to perform a quantitative assessment of the value of the identified intangibles, which would require complex judgements and estimates.
Our audit procedures related to the intangible assets impairment included the following, among others:
| ● | We obtained and evaluated management's assessment of Intangibles impairment indicators and the supporting information used to form their opinion and challenged the key assumptions in the management memo considering macro-economic conditions at year end. |
| ● | We tested the completeness and accuracy of underlying data used in undiscounted cash flow analysis based on probability-weighted approach in considering the likelihood of the possible outcomes in terms of the number of Marine scrubbers expected to be executed in future. |
| ● | We challenged the assumptions used by management in the impairment assessment model e.g., profit margin, historic trend of new scrubbers added each year, etc. |
| ● | We performed sensitivity analysis by changing those key assumptions to assess the impact. |
/s/
We have served as the Company’s auditor since 2022.
June 29, 2023
F-3
PACIFIC GREEN TECHNOLOGIES INC.
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
| March
31, 2023 $ | March
31, $ | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | ||||||||
| Short-term investments and amounts in escrow (Note 3) | ||||||||
| Accounts receivable, net of allowance for doubtful account of $ | ||||||||
| Other receivable, net of allowance for doubtful account of $ | ||||||||
| Accrued revenue (Note 11) | ||||||||
| Prepaid expenses, parts inventory, and advances | ||||||||
| Prepaid manufacturing costs (Note 11) | ||||||||
| Total Current Assets | ||||||||
| Assets held for Sale (Note 4) | ||||||||
| Project under development (Note 4) | ||||||||
| Property and equipment (Note 5) | ||||||||
| Intangible assets (Note 6) | ||||||||
| Right of use asset | ||||||||
| Security deposits and other advances | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities (Note 12) | ||||||||
| Warranty provision (Note 14) | ||||||||
| Contract liabilities (Note 11) | ||||||||
| Loans payable (Note 13) | ||||||||
| Current portion of lease obligations | ||||||||
| Due to related parties (Note 15) | ||||||||
| Total Current Liabilities | ||||||||
| Other long term obligation | ||||||||
| Long-term operating lease obligation | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity before treasury stock | ( | ) | ||||||
| Treasury stock, at cost, | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ( | ) | ||||||
| Noncontrolling interest (Note 10) | ||||||||
| Total Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | ||||||||
Nature of Operations (Note 1)
Commitments (Note 19)
(The accompanying notes are an integral part of these consolidated financial statements)
F-4
PACIFIC GREEN TECHNOLOGIES INC.
Consolidated Statements of Operations and Comprehensive Income
(Expressed in U.S. Dollars)
| Year Ended March 31, 2023 $ | Year Ended 2022 $ | |||||||
| Sales (Note 11) | ||||||||
| Products | ||||||||
| Services | ||||||||
| Total Revenues | ||||||||
| Cost of goods sold (Note 11) | ||||||||
| Products | ||||||||
| Services | ||||||||
| Total Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Expenses | ||||||||
| Advertising and promotion | ||||||||
| Amortization of intangible assets (Note 6) | ||||||||
| Bad debts (recovery) | ( | ) | ( | ) | ||||
| Depreciation (Note 5) | ||||||||
| Foreign exchange loss | ||||||||
| Impairment of tangible assets | ||||||||
| Impairment of goodwill | ||||||||
| Impairment of intangible assets | ||||||||
| Management and technical consulting | ||||||||
| Operating lease expense (Note 19) | ||||||||
| Office and miscellaneous | ||||||||
| Professional fees | ||||||||
| Research and development | ||||||||
| Salaries and wage expenses | ||||||||
| Transfer agent and filing fees | ||||||||
| Travel and accommodation | ||||||||
| Warranty (recovery) (Note 14) | ( | ) | ( | ) | ||||
| Total expenses | ||||||||
| (Loss) before other income (expense) | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Financing interest income | ||||||||
| (Loss) on acquisition of subsidiary | ( | ) | ||||||
| Interest income (expense) and other | ( | ) | ||||||
| Total other (expense) income | ( | ) | ||||||
| Net (loss) for the year | ( | ) | ( | ) | ||||
| Preference Coupon Distributions | ||||||||
| Share of (Loss)/Income attributable to NCI - BESS | ( | ) | ||||||
| Share of (Loss)/Income attributable to NCI - JV | ( | ) | ||||||
| Net (loss) attributable to PGTK | ( | ) | ( | ) | ||||
| Other comprehensive income | ||||||||
| Foreign currency translation gain | ||||||||
| Comprehensive (loss) for the year | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Net (loss) per share, diluted | ( | ) | ( | ) | ||||
| Weighted average number of shares outstanding, basic1 | ||||||||
| Weighted average number of shares outstanding, diluted | ||||||||
| (1) |
(The accompanying notes are an integral part of these consolidated financial statements)
F-5
PACIFIC GREEN TECHNOLOGIES INC.
Consolidated Statement of Stockholders’ Equity
(Expressed in U.S. Dollars)
Common Stock | Additional Paid in | Accumulated
Other | Treasury | Non Controlling | Shareholder’s | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Income | Stock | Interest | Deficit | Equity | |||||||||||||||||||||||||
| # | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ||||||||||||||||||||||||||||||
| Fair value of options granted | – | |||||||||||||||||||||||||||||||
| Shares issued for option exercise (Note 17) | ||||||||||||||||||||||||||||||||
| Shares issued for employee services (Note 17) | ||||||||||||||||||||||||||||||||
| Common stock repurchases (Note 16) | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Noncontrolling interest (Note 10) | – | |||||||||||||||||||||||||||||||
| Foreign exchange translation | – | |||||||||||||||||||||||||||||||
| Net loss for the year | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Fair value of options granted | ||||||||||||||||||||||||||||||||
| Share issued on IP acquisition (Note 16) | ||||||||||||||||||||||||||||||||
| Noncontrolling interest (Note 10) | ||||||||||||||||||||||||||||||||
| Foreign exchange translation loss | ||||||||||||||||||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
(The accompanying notes are an integral part of these consolidated financial statements)
F-6
PACIFIC GREEN TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
| Year Ended | Year Ended | |||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Operating Activities | ||||||||
| Net (loss) for the year | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of intangible assets -Expenses (Note 6) | ||||||||
| Amortization of intangible assets - COGS (Note 6) | ||||||||
| Bad debt expense | ( | ) | ||||||
| Depreciation (Note 5) | ||||||||
| Fair value of stock options granted | ||||||||
| Financing interest | ( | ) | ||||||
| Impairment of goodwill | ||||||||
| Impairment of intangible assets | ||||||||
| Impairment of property and equipment | ||||||||
| Loss on unrealized foreign exchange | ( | ) | ||||||
| Lease finance charge | ||||||||
| Loss on acquisition of subsidiary | ||||||||
| Operating lease expense | ||||||||
| Shares issued for services | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Short-term investments and amounts held in trust | ( | ) | ||||||
| Accounts receivable and other receivables | ||||||||
| Accrued Revenue | ||||||||
| Prepaid expenses and parts inventory | ||||||||
| Security deposits & Other Advances | ||||||||
| Lease payments | ( | ) | ( | ) | ||||
| Prepaid manufacturing costs | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Other liabilities | ||||||||
| Warranty provision | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ||||||
| Due to related parties | ( | ) | ||||||
| Net Cash Provided by (Used in) Operating Activities | ( | ) | ||||||
| Investing Activities: | ||||||||
| Additions of property and equipment | ( | ) | ( | ) | ||||
| Projects under development | ( | ) | ( | ) | ||||
| Short-term investments | ||||||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Financing Activities | ||||||||
| Proceeds of Preference shares issued by subsidiary, net of coupon payments | – | |||||||
| Loan proceeds | – | |||||||
| Proceeds from exercise of stock options | ||||||||
| Treasury stock | ( | ) | ||||||
| Net Cash Provided by (Used in) Financing Activities | ( | ) | ||||||
| Effect of Foreign Exchange Rate Changes on Cash | ||||||||
| Change in Cash and Cash Equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents, Beginning of Year | ||||||||
| Cash and Cash Equivalents, End of Year | ||||||||
| Non-Cash Investing and Financing Activities, excluded in above: | ||||||||
| Shares issued and issuable on IP acquisition | ||||||||
| Cash and Cash Equivalent comprises: | ||||||||
| Cash and Cash Equivalent | ||||||||
| Cash classified as available for sale | ||||||||
(The accompanying notes are an integral part of these consolidated financial statements)
F-7
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 1. | Nature of Operations and Basis of presentation |
Pacific Green Technologies Inc. (the “Company”) was incorporated in the state of Delaware, USA on March 10, 1994. The Company is in the business of acquiring, developing, and marketing environmental technologies, with a focus on emission control technologies.
In connection with preparing consolidated financial statements for each annual and interim reporting period, the Company is required to evaluate whether there are conditions or events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Substantial doubt exists when conditions and events, considered in aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans and actions that have not been fully implemented as of the date that the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both: (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued; and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
Management’s evaluation has concluded that there are no known or currently foreseeable conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these consolidated financial statements are issued. These consolidated financial statements have therefore been prepared on the basis that the Company will continue as a going concern.
The assessment of the liquidity and going concern requires the Company to make judgments about the existence of conditions or events that raise substantial doubt about the ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. This includes judgments about the Company’s future activities and the timing thereof and estimates of future cash flows. Significant assumptions used in the Company’s forecasted model of liquidity include forecasted sales, costs, and capital expenditures. Changes in the assumptions could have a material impact on the forecasted liquidity and going concern assessment.
F-8
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies |
| (a) | Basis of Presentation |
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America and are expressed in U.S. dollars. The following accounting policies are consistently applied in the preparation of the consolidated financial statements. These consolidated financial statements include the accounts of the Company and the following entities:
| Pacific Green Innoergy Technologies Ltd. (“Innoergy”) (Formerly Innoergy Ltd.) | Wholly-owned subsidiary | |
| Pacific Green Marine Technologies Group Inc. (“PGMG”) | Wholly-owned subsidiary | |
| Pacific Green Marine Technologies Inc. (PGMT US) | Wholly-owned subsidiary of PGMG | |
| Pacific Green Technologies (UK) Ltd. (Formerly Pacific Green Marine Technologies Ltd.) (“PGTU”) | Wholly-owned subsidiary of PGMG | |
| Pacific Green Technologies (Middle East) Holdings Ltd. (“PGTME”) | Wholly-owned subsidiary | |
| Pacific Green Technologies Arabia LLC (“PGTAL”) | ||
| Pacific Green Marine Technologies (USA) Inc. (inactive) | Dissolved, December 21, 2022 | |
| Pacific Green Technologies (Canada) Inc. (“PGT Can”) (Formerly Pacific Green Marine Technologies Inc. | Wholly-owned subsidiary | |
| Pacific Green Solar Technologies Inc. (“PGST”) | Wholly-owned subsidiary | |
| Pacific Green Corporate Development Inc. (“PGCD”) (Formerly Pacific Green Hydrogen Technologies Inc.) | Dissolved, December 21, 2022 | |
| Pacific Green Wind Technologies Inc (“PGWT”) | Dissolved, December 21, 2022 | |
| Pacific Green Technologies International Ltd. (“PGTIL”) | Wholly-owned subsidiary | |
| Pacific Green Technologies Asia Ltd.(“PGTA”) | Wholly-owned subsidiary of PGTIL | |
| Pacific Green Technologies Engineering Services Limited (Formerly Pacific Green Technologies China Ltd. (“PGTESL”) | Wholly-owned subsidiary of PGTA | |
| Pacific Green Technologies (Shanghai) Co. Ltd. (“Engin”) (Formerly Shanghai Engin Digital Technology Co. Ltd) | Wholly-owned subsidiary | |
| Guangdong Northeast Power Engineering Design Co. Ltd. (“GNPE”) | Wholly-owned subsidiary of ENGIN | |
| Pacific Green Energy Parks Inc. (“PGEP”) | Wholly-owned subsidiary | |
| Pacific Green Energy Storage Technologies Inc. (“PGEST”) | Wholly-owned subsidiary of PGEP | |
| Pacific Green Technologies (Australia) Pty Ltd. (“PGTAPL”) | Wholly-owned subsidiary of PGEP | |
| Pacific Green Energy Storage (UK) Ltd. (“PGESU”) (Formerly Pacific Green Marine Technologies Trading Ltd.) | Wholly-owned subsidiary of PGEP | |
| Pacific Green Battery Energy Parks 1 Ltd. (“PGBEP1”) | ||
| Pacific Green Battery Energy Parks 2 Ltd. (“PGBEP2”) | Wholly-owned subsidiary of PGEPU | |
| Richborough Energy Park Ltd. (“Richborough”) | Wholly-owned subsidiary of PGBEP1 | |
| Pacific Green Energy Parks (UK) Ltd (PGEPU) | Wholly-owned subsidiary of PGEP | |
| Sheaf Energy Ltd (Sheaf) | Wholly-owned subsidiary of PGBEP2 |
All inter-company balances and transactions have been eliminated upon consolidation.
F-9
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (b) | Use of Estimates |
The preparation of these consolidated financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of property and equipment and intangible assets, prepaid manufacturing costs, and contract liabilities associated with revenue contracts in progress, contingent consideration on asset acquisition, warranty accruals, going concern, and deferred income tax asset valuation allowances. Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
| (c) | Property and Equipment |
Property and equipment is recorded at cost. Depreciation is recorded at the following annual rates, net of any residual value determined.
| Furniture and equipment | ||
| Leasehold improvements | ||
| Test Scrubber system | ||
| Computer equipment | ||
| Building |
| (d) | Intangible Assets |
Intangible assets are stated at cost
less accumulated amortization and include patents, customer relationships, plant designs, and software licensing. The patents, which were
acquired in 2013, are being amortized on a straight-line over the estimated useful life of
The other intangible assets, which were acquired in December 2019, are being amortized according to the following table. Intangible assets are reviewed annually for impairment.
| Patents and technical information | ||
| Software licensing |
| (e) | Impairment of Long-lived Assets |
Our company reviews long-lived assets such as property and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset.
F-10
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (f) | Financial Instruments and Fair Value Measurements |
ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, short-term investments, accounts receivable, amounts due from and to related parties, accounts payable and accrued liabilities, and operating lease liability. The recorded values of all financial instruments are at amortized cost which approximate their current fair values because of their nature and respective maturity dates or durations.
The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash equivalents. As of March 31, 2023, and 2022, the Company
held $
We assess the collectability of accounts
receivable and long-term receivable on an ongoing basis and establish an allowance for doubtful accounts when collection is no longer
reasonably assured. In establishing the allowance, we consider factors such as known troubled accounts, historical experience, age,
financial information that is publicly accessible and other currently available evidence. A significant portion of our accounts receivable
is concentrated with a few major customers. For the year ended March 31, 2023,
F-11
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (g) | Revenue Recognition |
The Company derives revenue from the sale of products and delivery of services. Product revenue is generated from the sale of marine scrubbers. Service revenue includes specific services provided to marine scrubber systems as well as design and engineering services for Concentrated Solar Power (“CSP”).
Irrespective of the types of revenue described above, revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those promised products or services. The Company’s marine scrubber sales contracts contain a single performance obligation satisfied over time, based on percent completion of the contract.
The Company determines revenue recognition through the following five steps:
| ● | Identification of the contract, or contracts, with a customer |
| ● | Identification of the performance obligations in the contract |
| ● | Determination of the transaction price |
| ● | Allocation of the transaction price to the performance obligations in the contract |
| ● | Recognition of revenue when, or as, performance obligations are satisfied |
The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
Revenue recognition requires significant judgements from management in regard to the determination of accounting treatment for contracts with customers. Management is required to assess contracts with customers to identify whether performance obligations in the contract are distinct and to determine whether contract terms provide the Company with a basis to recognize revenue over time.
Contracts for the sale of products (marine scrubbers) include a single performance obligation for revenue recognition as the separate components identified in the revenue contracts are not considered distinct as the customer does not benefit from the separate components on their own. The single performance obligation is recognized over time, based on percentage completion of the contract, due to the unique nature of the assets and the Company’s ability to obtain payment for performance to date. The Company recognizes revenue based on the input method and records balances as accrued revenue to the extent that revenue has been recognized but the Company has not yet billed the customer.
In the case of settlement agreements with customers where no continued performance obligation is required, the Company recognizes revenue based on consideration settled according to the agreement.
A contract signed with one customer
has a significant financing component.
F-12
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (g) | Revenue Recognition (continued) |
As
Contracts for specific services provided to marine scrubber systems represent maintenance services.
In relation to service agreements, the
service plan for maintaining the ENVI-Marine™ Exhaust Gas Cleaning Systems is undertaken over a period of
| (h) | Cost of Goods Sold |
The cost of providing services to our customers is included in the cost of goods sold on the statement of operations and comprehensive income. Our cost of goods sold includes direct costs associated with creating products and services. In addition, we have included within cost of goods sold other related costs associated with obtaining or fulfilling our obligations in our revenue contracts, including sales commission, salaries and wages, technical consulting costs, and amortization. We have adopted the practical expedient whereby costs associated with obtaining a revenue contract can be expensed as incurred so long as the amortization period of the asset that the entity otherwise would have recognized is one year or less.
| (i) | Contract Liabilities, Prepaid Manufacturing Costs, and Accrued Revenue |
Contractual arrangements with customers for the sale of a scrubber unit generally provide for deposits and installments through the procurement and design phases of equipment manufacturing. Amounts received from customers, which are not yet recorded as revenues under the Company’s revenue recognition policy are presented as contract liabilities.
Similarly, contractual arrangements with suppliers and manufacturers normally involved with the manufacturing of scrubber units may require advances and deposits at various stages of the manufacturing process. Payments to our manufacturing partners, which are not yet recorded as costs of goods sold under the Company’s revenue recognition policy are presented as prepaid manufacturing costs.
The Company presents the contract liabilities and prepaid manufacturing costs on its balance sheet when one of the parties to the revenue contract and supply contract, respectively, has performed before the other.
Accrued revenue is revenue that has been earned by providing a good or service, but for which the Company has not yet billed the customer.
F-13
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (j) | Warranty Provision |
The Company reserves a
| (k) | Income Taxes |
The Company accounts for income taxes using the asset and liability method. The asset and liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.
The Company provides for interest and
potential administrative penalties where management has assessed that the probability of assessment is greater than
| (l) | Noncontrolling Interest |
The Company owns a
F-14
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (m) | Foreign Currency Translation |
The Company’s functional and reporting currency is the United States dollar. The functional currencies of PGCD, PGEP, PGEST, PGMG, PGMT US, PGTA, PGTESL, PGTME, PGST, PGTAL, PGT Can, PGTIL, PGTU, and PGWT are United States dollar. The functional currency of ENGIN and GNPE is Chinese Yuan. PGESU, PGBEP1, Innoergy, PGBEP2, PGEPU, Richborough and Sheaf use the United Kingdom Pound as their functional currency. The functional currency of PGTAPL is Australian dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
The accounts of ENGIN, GNPE, PGESU, PGBEP1, PGTAPL, Innoergy, PGBEP2, PGEPU, Richborough and Sheaf are translated to United States dollars using the current rate method. Accordingly, assets and liabilities are translated into United States dollars at the period end exchange rate while revenue and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income.
| (n) | Research and Development |
Research and development costs are charged as operating expenses as incurred.
| (o) | Stock-based compensation |
The Company records share-based payment transactions for acquiring goods and services from employees and nonemployees in accordance with ASC 718, Compensation – Stock Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are measured at grant-date fair value of the equity instruments issued.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period. The majority of the Company’s awards vest upon issuance. The Company accounts for forfeitures in share-based compensation expense as they occur.
Subsequent to the adoption of ASU 2018-07 - Improvements to Nonemployee Share-Based Payment Accounting, the accounting for employee and non-employee stock options is now aligned.
F-15
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (p) | Earnings (Loss) Per Share |
The Company computes net income (loss)
per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS)
on the face of the consolidated statement of operations. Basic EPS is computed by dividing net income (loss) (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential options and warrants
outstanding during the period using the treasury stock method and convertible debenture using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock
options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at March 31, 2023, the Company
had
| (q) | Comprehensive Income (Loss) |
Comprehensive income (loss) consists of net income (loss) and items in other comprehensive income (loss) that are excluded from net income or loss. As at March 31, 2023 and 2022, other comprehensive income (loss) includes cumulative translation adjustments for changes in foreign currency exchange rates during the period.
| (r) | Lease
Leases classified as operating leases, where the Company is the lessee, are recorded as lease liabilities based on the present value of minimum lease payments over the lease term, discounted using the lessor’s rate implicit in the lease for each individual lease arrangement or the Company’s incremental borrowing rate, if the lessor’s implicit rate is not readily determinable. Corresponding right-of-use assets are recognized consisting of the lease liabilities, initial direct costs and any lease incentive payments. Lease liabilities are drawn down as lease payments are made and right-of-use assets are depreciated over the term of the lease. Under an operating lease, we recognize lease payments as expenses on a straight-line basis over the lease term.
Under a finance lease, we recognize the leased asset as a Right of Use asset and record a corresponding lease liability on the balance sheet. Lease payments are apportioned between the interest expense (representing the interest on the lease liability) and the reduction of the lease liability. |
| (s) | Recent Accounting Pronouncements |
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. The ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. As a smaller reporting company, this ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this ASU on its Consolidated Financial Statements.
F-16
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 2. | Significant Accounting Policies (continued) |
| (s) | Recent Accounting Pronouncements (continued) |
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and management does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 3. | Short-term Investments and amounts in escrow |
At March 31, 2023, the Company has
a $
At March 31, 2023, the Company’s
solicitor is holding $ (March 31, 2022 – $
| 4. | Assets held for Sale |
At March 31, 2023, the Company has
reallocated $
To clarify, the Assets held for Sale fulfilled the requirements on March 17, 2023, when all the criteria were satisfied.
As at June 9, 2023 Pacific Green Technologies,
Inc. has entered into a sale and purchase agreement to sell
March
31, | March
31, | |||||||||||
| Cash | ||||||||||||
| Prepaid expenses, parts inventory, and advances | ||||||||||||
| Other receivables | ||||||||||||
| Projects under development | ||||||||||||
| Security Deposits & Other Advances | ||||||||||||
| Right of use asset | ||||||||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||||||
| Loans payable | ( | ) | ||||||||||
| Long term loan payable | ( | ) | ||||||||||
| Long-term operating lease obligation | ( | ) | ||||||||||
| Assets held for Sale | Total | |||||||||||
After the amount has been reallocated
to Assets held for Sale the account “Projects under development” shows a balance of $
F-17
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 5. | Property and Equipment |
| Cost $ | Accumulated amortization $ | March 31, 2023 Net carrying value $ | March 31, 2022 Net carrying value $ | |||||||||||||
| Building | ( | ) | ||||||||||||||
| Furniture and equipment | ( | ) | ||||||||||||||
| Computer equipment | ( | ) | ||||||||||||||
| Leasehold improvements | ( | ) | ||||||||||||||
| Test scrubber system | ||||||||||||||||
| Total | ( | ) | ||||||||||||||
The Company recorded $
| 6. | Intangible Assets |
| Cost $ | Accumulated amortization $ | Cumulative impairment $ | March 31, 2023 Net carrying value $ | March 31, 2022 Net carrying value $ | ||||||||||||||||
| Patents and technical information | ( | ) | ( | ) | ||||||||||||||||
| Software licensing | ( | ) | – | |||||||||||||||||
| Total | ( | ) | ( | ) | ||||||||||||||||
| March 31, 2022 Net carrying value | March 31, 2023 in-year additions | March 31, in-year amortization | March 31, in-year exchange difference | March 31, 2023 Net carrying value | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Patents and technical information | ( | ) | ||||||||||||||||||
| Software licensing | ( | ) | ( | ) | ||||||||||||||||
| Total | ( | ) | ( | ) | ||||||||||||||||
F-18
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 6. | Intangible Assets (continued) |
The Company recorded $
The Company has allocated
$
During the year ending March 31, 2023
the Company recognized an impairment of $ on intangible assets (2022 - $
Future amortization of intangible assets is as follows:
| Fiscal year | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | ||||
| 7. | Shanghai Engin Digital Technology Co. Ltd – impairment of goodwill and intangible assets |
Due to the Covid-19 situation in China
being both prolonged and severe, Engin was unable to pursue business development and selling opportunities throughout fiscal years 2021
and 2022 as it had originally envisaged. Despite downsizing its engineering team, Engin was unable to avoid making losses. The losses
provided an impairment trigger event, and Engin’s goodwill was assessed using a discounted cash forecast based on management’s
realistic projections of Engin’s revised sales opportunities. For the year ended March 31, 2022, the Company recorded a $
In March 2023, the Company reached
agreement with the Sellers of the
| 8. | Innoergy Limited – impairment of goodwill |
For the year ended March 31, 2022,
the Company took the decision to cease further sales and development activity in Innoergy and recorded an impairment charge on the full
amount of Innoergy goodwill of $
F-19
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 8. | Innoergy Limited – impairment of goodwill (continued) |
Despite management recognizing the specific impairments in Innoergy, as noted above, the Company continues to make significant progress in the BESS market, in the role of developer.
| 9. | Richborough Energy Park Ltd and Sheaf Energy Ltd. |
| (a) | Acquisition of Richborough Energy Park Ltd |
On March 18, 2021, the Company acquired all the issued and outstanding stock of Richborough Energy Park Ltd., a United Kingdom company in the business of battery energy storage systems.
The purchase consideration included cash
payments of $
Total purchase consideration was estimated
at $
| (b) | Acquisition of Sheaf Energy Ltd |
On December 6, 2022, the Company acquired
all the issued and outstanding stock of Sheaf Energy Ltd., a United Kingdom company in the business of battery energy storage systems.
The purchase consideration included cash payments of a deposit of $
Total purchase consideration was therefore
$
| (c) | Potential sale of Richborough Energy Park Ltd and Sheaf Energy Ltd. |
On January 26, 2023, the Company entered into an agreement with Jones Lang LaSalle Limited (“JLL”) for JLL to act as a broker for the sale of the 99MW Battery Storage Project within Richborough Energy Park Limited, and the 249MW Battery Storage Project within Sheaf Energy Limited.
As at June 9, 2023 Pacific Green Technologies, Inc. has entered into
a sale and purchase agreement to sell
As at June 29, 2023 the Company is in an exclusive negotiation with a potential buyer of Sheaf Energy Limited.
F-20
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 10. | Noncontrolling Interest |
On March 30, 2022, the Company entered
into an agreement with Green Power Reserves Limited (“GPR”), wherein GPR agreed to make an equity investment of $
On December 2, 2020, the Company signed a Joint-Venture Agreement with Amr Khashoggi Trading Company Limited (“Amkest Group”) to incorporate a company in the Kingdom of Saudi Arabia for the sale of Pacific Green’s environmental technologies within the region. The Company holds
Details of the carrying amount of the noncontrolling interests are as follows:
March 31, $ | March 31, 2022 $ | |||||||
| Non-redeemable noncontrolling interest, | ||||||||
| Net income attributable to noncontrolling interest (BESS) | ( | ) | ||||||
| Net income attributable to noncontrolling interest (JV) | ( | ) | ||||||
| Non-controlling interest | ||||||||
| 11. | Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, and Contract Liabilities |
The Company derives revenue from the sale of products and delivery of services. Revenue disaggregated by type for the year ended March 31, 2023 and March 31, 2022 is as follows:
| 2023 $ | 2022 $ | |||||||
| Products | ||||||||
| Services | ||||||||
| Total | ||||||||
Revenue from services includes specific services provided to marine scrubber systems as well as design and engineering services for CSP. Contracts for specific services provided to marine scrubber systems represent maintenance services. Contracts for CSP include design and engineering services provided to clients. Revenue for service contracts is recognized as the services are provided.
Service revenue by type for the year ended March 31, 2023 and 2022 is as follows:
| 2023 $ | 2022 $ | |||||||
| Specific services provided to marine scrubber systems | ||||||||
| Design and engineering services for CSP | ||||||||
| Total | ||||||||
F-21
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 11. |
Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, and Contract Liabilities (continued) |
The Company has analyzed its sales contracts under ASC 606 and has identified that the percentage of completion of the contract often is not directly correlated with contractual payment terms with customers. As a result of the timing differences between customer payments and percentage of completion of the contract, contractual assets and contractual liabilities have been recognized.
Changes in the Company’s accrued revenue, prepaid manufacturing costs, and contract liabilities for the year are noted as below:
Accrued | Prepaid | Sales (Cost of Goods Sold) $ | Contract | |||||||||||||
| Balance, March 31, 2021 | ( | ) | ||||||||||||||
| Customer receipts and receivables | ( | ) | ||||||||||||||
| Scrubber sales recognized in revenue | ||||||||||||||||
| Payments and accruals under contracts | ( | ) | ||||||||||||||
| Cost of goods sold recognized in earnings | ( | ) | ( | ) | ||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||
| Customer receipts and receivables | ( | ) | ||||||||||||||
| Scrubber sales recognized in revenue | ||||||||||||||||
| Payments and accruals under contracts | ( | ) | ||||||||||||||
| Cost of goods sold recognized in earnings | ( | ) | ( | ) | ||||||||||||
| Balance, March 31, 2023 | ( | ) | ||||||||||||||
F-22
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 11. | Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, and Contract Liabilities (continued) |
Cost of goods sold for the year ended March 31, 2023 and 2022 is comprised as follows:
| 2023 $ | 2022 $ | |||||||
| Scrubber costs recognized | ||||||||
| Salaries and wages | ||||||||
| Amortization of intangibles | ||||||||
| Commission type costs | ||||||||
| Design and engineering services for CSP | ||||||||
| Specific services provided to marine scrubber systems | ||||||||
| Total | ||||||||
As of March 31, 2023, Contract liabilities
included $
| 12. | Accounts payable and accrued liabilities |
| March 31, 2023 $ | March 31, 2022 $ | |||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Other liabilities (*) | ||||||||
| Bank loan payable | ||||||||
| Payroll liabilities | ||||||||
| Total short-term accounts payable and accrued liabilities | ||||||||
| Long term accrued liabilities | ||||||||
| Balance, end of year | ||||||||
| (*) |
F-23
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 13. | Loans Payable |
On June 16, 2022, the Company signed
a Facilities Agreement with Close Leasing Limited, for a total of £
On November 5, 2022, the Company signed an unsecured Loan Agreement
with a related party, Alexander Group & Co. Pty Ltd, for a total of $
On November 5, 2022, the Company signed an unsecured Loan Agreement with Cherryoak Investments Pty
Ltd, for a total of $
On November 5, 2022, the Company signed an unsecured Loan Agreement
with a related party, D&L Milne Pty Ltd, for a total of $
On November 5, 2022, the Company signed an unsecured Loan Agreement with a related party, Gerstle Consulting
Pty Ltd, for a total of $
F-24
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 13. | Loans Payable (continued) |
On November 7, 2022, the Company signed an unsecured Loan Agreement with a related party, Wahnarn 2 Pty Ltd, for a total of $
On November 8, 2022, the Company signed
an unsecured Loan Agreement with a related party, Distributed Generation LLC, for a total of $
On December 15, 2022, the Company signed
a Loan Agreement with Sheaf Storage Limited, for a total of $
The Company entered into five separate
loan agreements under English law with five independent third party lenders: $
As at March 31, 2023, a total of $
| March 31, 2023 $ | March 31, 2022 $ | |||||||
| Loans payable (*) | ||||||||
| Related Party Loan | ||||||||
| Balance, end of period | ||||||||
| (*) |
F-25
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 14. | Warranty provision |
During the year ended March 31, 2023,
the Company recorded a non-cash warranty recovery of $
| March 31, 2023 $ | March 31, 2022 $ | |||||||
| Balance, beginning of year | ||||||||
| Warranty expense/(recovery) | ( | ) | ( | ) | ||||
| Expenses (recoveries) / costs | ( | ) | ||||||
| Balance, end of year | ||||||||
| 15. | Related Party Transactions |
| (a) | As at March 31, 2023, the Company owed $ | |
| (b) | As at March 31, 2023, the Company incurred $
| |
| (c) | As at March 31, 2023, the Company incurred $ | |
| (d) | As at March 31, 2023, the Company incurred (2022 - $ |
| 16. | Common Stock |
Common stock issued during the year ended March 31, 2023
Common stock issued and repurchased during the year ended March 31, 2022:
| (a) | On August 25, 2021, |
| (b) | On August 31, 2021, |
| (c) | For the year ended March 31, 2022, the Company implemented a share repurchase program and repurchased |
F-26
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 17. | Stock Options |
The following table summarizes the continuity of stock options:
| Number of options | Weighted average exercise price $ | Weighted average remaining contractual life (years) | Aggregate intrinsic value $ | |||||||||||||
| Balance, March 31, 2021 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Balance, March 31, 2022 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Balance, March 31, 2023 | (*) | |||||||||||||||
| Balance, March 31, 2023, vested and Exercisable | ||||||||||||||||
| (*) |
Additional information regarding stock options outstanding as at March 31, 2023 is as follows:
| Issued and Outstanding | ||||||||||
| Number of shares | remaining contractual life (years) | Exercise price $ | ||||||||
Unless otherwise noted, the Company estimates the fair value of its stock options using the Black-Scholes option pricing model, assuming no expected dividends.
F-27
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 17. | Stock Options (continued) |
The Company agreed to an extension
of
On August 25, 2021,
On January 15, 2022, the Company granted
On March 15, 2022, the Company granted
On October 1, 2022, the Company granted
On November 1, 2022, the Company granted
On February 20, 2023, the Company granted
The options are exercisable on February 20, 2024 for a period of 3 years from the grant date or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier.
The following weighted average assumptions were used in the determination of fair value using the Black-Scholes option pricing model:
| 2023 | 2022 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected life (in years) | ||||||||
| Expected volatility | % | % | ||||||
The fair value of stock options vested
and recognized during the year ended March 31, 2023 was $
F-28
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 18. | Segmented Information |
The Company is located and operates in North America and its subsidiaries are primarily located and operating in Europe and Asia.
| Year Ended March 31, 2023 | ||||||||||||||||
North America | Europe $ | Asia $ | Total $ | |||||||||||||
| Property and equipment | ||||||||||||||||
| Intangible Assets | ||||||||||||||||
| Right of use assets (*) | ||||||||||||||||
(*) The amount related to right of use
assets is the balance after $
| Year Ended March 31, 2023 | ||||||||||||||||||||
| North
America $ | Europe $ | Asia
$ | South America $ | Total $ | ||||||||||||||||
| Revenues by customer region | ||||||||||||||||||||
| COGS by customer region | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross Profit by customer region | ||||||||||||||||||||
| GP% by customer region | % | % | % | % | % | |||||||||||||||
| March 31, 2022 | ||||||||||||||||
| North America $ | Europe $ | Asia $ | Total $ | |||||||||||||
| Property and equipment | ||||||||||||||||
| Intangible Assets | ||||||||||||||||
| Right of use assets | ||||||||||||||||
F-29
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 18. | Segmented Information (continued) |
| Year Ended March 31, 2022 | ||||||||||||||||||||||||
| North America $ | Europe $ | Asia
$ | South America $ | Other $ | Total $ | |||||||||||||||||||
| Revenues by customer region | ||||||||||||||||||||||||
| COGS by customer region | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Gross Profit by customer region | ||||||||||||||||||||||||
| GP% by customer region | % | % | % | % | % | % | ||||||||||||||||||
For the year ended March 31, 2023,
| 19. | Commitments |
| (a) | The Company’s subsidiaries have entered into three long-term operating leases for office premises in London, United Kingdom, Shanghai, China, and North Vancouver, Canada. These lease assets are categorized as right of use assets under ASC 842. | |
| (b) | Effective August 31, 2022, the Company terminated its operating lease in North Vancouver, Canada as the company has moved the headquarters of the Marine activities to London. |
| (c) | On June 16, 2022, Richborough Energy Park Ltd. entered into
a long-term operating lease for |
| Long-term premises lease | Lease commencement | Lease expiry | Term (years) | Discount rate* | ||||||||
| % | ||||||||||||
| % | ||||||||||||
| % | ||||||||||||
| * |
Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s operating lease does not provide an implicit rate, the discount rate used to determine the present value of the lease payments is the collateralized incremental borrowing rate based on the remaining lease term. The operating lease asset excludes lease incentives. The operating leases do not contain an option to extend or terminate the lease term at the Company’s discretion, therefore no probable renewal has been added to the expiry date when determining lease term. Operating lease expense is recognized on a straight-line basis over the lease term.
| Lease cost – for the year ended March 31, 2023: | ||||
| Operating lease expense * | $ | |||
| * |
F-30
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 19. | Commitments (continued) |
The Company has entered into premises lease agreements with minimum annual lease payments expected over the next five years of the lease as follows:
| Fiscal Year | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future minimum lease payments | ||||
| Imputed interest | ( | ) | ||
| Operating lease obligations (*) | ||||
| (*) | The amount includes the obligation of $ |
| (d) | On July 14, 2017, the Company entered into a new memorandum of understanding to establish a new joint venture company in China with a non-related party (the “Supplier”) wherein the Supplier would receive and process orders, manufacture, and install products for the Company’s customers. In return, the Company agreed to design the product, provide strategic pricing, sales and marketing direction, as well as provide technology licenses and technical support (the “Technology”) to the Supplier. During the term of the agreement, the Company will provide the Supplier with a non-transferrable right and license to use the Technology to manufacture and install the product within the Asia and Russia region.
The parties agreed to fund the venture proportionately, |
| (e) | On December 2, 2020, the Company signed a Joint-Venture Agreement with Amr Khashoggi Trading Company Limited (“Amkest Group”) to incorporate a company in the Kingdom of Saudi Arabia for the sale of Pacific Green’s environmental technologies within the region. The Company holds |
Neither party had funded the joint venture
at March 31, 2022 and there had been no revenue and expense associated with it for the year ending March 31, 2022. Since then, the Company
has paid in share capital and intercompany loans and accrued interest amounting to $
F-31
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 19. | Commitments (continued) |
| (f) | On May 11, 2022 the Company announced it had entered into a Subscription
and Shareholders Agreement with a third party investor, who has committed $ |
| 20. | Income Taxes |
The majority of our revenues from international sales are invoiced from and collected by our U.S. entity and recognized as a component of income before taxes in the United States as opposed to a foreign jurisdiction. The components of income before income taxes by U.S. and foreign jurisdictions were as follows:
| 2023 $ | 2022 $ | |||||||
| United States | ( | ) | ( | ) | ||||
| Foreign | ( | ) | ||||||
| Net income (loss) before taxes | ( | ) | ( | ) | ||||
The following table reconciles the income tax expense (benefit) at the statutory rates to the income tax (benefit) at the Company’s effective tax rate.
| 2023$ | 2022$ | |||||||
| Net income (loss) before taxes | ( | ) | ( | ) | ||||
| Statutory tax rate | % | % | ||||||
| Expected income tax expense (recovery) | ( | ) | ( | ) | ||||
| Permanent differences and other | ( | ) | ||||||
| Foreign tax rate difference | ( | ) | ||||||
| Change in valuation allowance | ||||||||
| Income tax provision | ||||||||
| Current | ||||||||
| Deferred | ||||||||
| Income tax provision |
F-32
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 20. | Income Taxes (continued) |
As at March 31, 2023, the Company is current with statutory corporate income tax filings. Certain of the amounts presented above are based on estimates and what management believes are prudent filing positions. The actual losses available could differ from these estimates upon assessment and review by taxation authorities. U.S. federal and state income tax returns filed by us remain subject to examination for income tax years 2013 and subsequent. Canadian federal and provincial income tax returns filed by us remain subject to examination for income tax years 2018 and subsequent. Income tax returns associated with our operations located in the United Kingdom and China are subject to examination for income tax years 2017 and subsequent.
Tax positions are evaluated for recognition
using a more-likely than-not recognition threshold, and those tax positions eligible for recognition are measured as the
largest amount of tax benefit that is greater than
| 2023$ | 2022$ | |||||||
| Net operating losses carried forward | ||||||||
| Tax basis of intangibles and depreciable assets in excess of book value | ( | ) | ( | ) | ||||
| Lease receivable without tax basis | ( | ) | ||||||
| Warranty and accruals timing differences | ||||||||
| Deferred tax asset | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset |
On December 22, 2017, the US federal
tax legislation commonly known as the Tax Cut and Jobs Act (TCJA) was signed into law. The TCJA made major changes to the Internal Revenue
Code, including reducing the US federal income corporate tax rate from
F-33
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2023 and 2022
(Expressed in U.S. Dollars)
| 20. | Income Taxes (continued) |
The Company estimates that is has accumulated
net operating losses of approximately $
| U.S. | UK and Other | Total | ||||||||||
| $ | $ | $ | ||||||||||
| 2036 | ||||||||||||
| 2038 | ||||||||||||
| No expiration | ||||||||||||
| Total estimated tax losses | ||||||||||||
We do not provide deferred taxes related to the United States Generally Accepted Accounting Principles basis in excess of the outside tax basis in the investment in our foreign subsidiaries to the extent such amounts relate to indefinitely reinvested earnings and profits of such foreign subsidiaries. Our indefinite reinvestment determination is based on the future operational and capital requirements of our domestic and foreign operations. We expect our international cash and cash equivalents will continue to be used for our foreign operations and therefore do not anticipate repatriating these funds. We have estimated deferred tax liabilities relating to the outside tax basis of $nil.
| 21. | Subsequent events |
| (a) | As at June 9, 2023 Pacific Green Technologies, Inc. has entered into a sale and purchase agreement to sell
PGBEP1 is the holding company for
Under the terms of the Agreement entered into, the consideration is
payable pursuant to operational milestones related to the battery park as it connects to the grid and becomes operational. | |
| (b) | On June 8, 2023, the Company approved the cancellation of | |
| (c) | On June 9, 2023, the board of directors approved a performance-related
bonus for Scott Poulter, Chief Executive Officer, which comprises | |
| (d) | On June 20 and 21, 2023 certain loans were repaid in full along with the repayment fee. These are detailed in Note 13. |
F-34
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act) of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act as of March 31, 2023.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, following remediation of the two material weaknesses, that had been previously disclosed, as described below.
Management’s Report on Internal Control over Financial Reporting
Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2023, based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework). Based on this evaluation our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2023, the Company has maintained effective internal control over financial reporting.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting pursuant to an exemption for non-accelerated filers from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.
Changes in Internal Control over Financial Reporting
The Company made significant improvements in our internal control over financial reporting in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Refer to “Remediation Activities” below.
21
Inherent Limitations on Effectiveness of Controls
Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Remediation Activities
In order to remediate the material weakness identified in internal control reported in the prior year audit we have added the following controls:
| ● | We have implemented preventive controls surrounding the recognition of revenue on our contracts. These consist of training protocols (comprising one-to-one coaching by CFO and Controller of less experienced members of our finance team involved in the calculation and booking of revenue, and online research of US GAAP documentation) to ensure personnel have the technical expertise to identify compliance with accounting standards, as well as cost forecasting and monitoring procedures to determine accurately the percentage complete of each of our scrubber contracts. |
| ● | We have implemented monitoring controls to validate the calculations of revenue to be recognized at each reporting period, and review of confirmations from our main subcontractor to verify stage of completion for revenue recognition. |
| ● | We have implemented a monitoring control to verify the allocation of amortization and overhead costs into cost of sales. |
Item 9B. Other Information
On February 1, 2020, Eric Prouty became an Independent non-executive director of the Company. Effective November 14, 2022, Eric Prouty resigned as a non-executive director from board of directors and Chair of the Audit Committee of the Company. Mr. Prouty’s resignation did not result from any disagreement with the Company regarding our policies, practices, or otherwise.
On February 4, 2021, Peter Rossbach became an Independent non-executive director of the Company.
On October 16, 2022, Alexander (Alex) Shead was appointed as an Independent Non-Executive Director of our Company. He previously served as an Executive Director for the Company from July 2016 to October 2020. Following the resignation of Eric Prouty, on November 14, 2022 Alex was appointed as Chair of the Audit Committee.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
22
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following individuals serve as the directors and executive officers of our company as of the date of this annual report. All directors of our company hold office until the next annual meeting of our shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.
| Name | Position Held with the Company | Age | Date First Elected or Appointed | |||
| Eric Prouty | Non-Executive Director | 53 | February 1, 2020 (*) | |||
| Alex Shead | Non-Executive Director | 62 | October 16, 2022 | |||
| Peter Rossbach | Non-Executive Director | 65 | February 4, 2021 | |||
| Neil Carmichael | Non-Executive Director | 70 | December 18, 2012 | |||
| Scott Poulter | Chief Executive Officer and Executive Director | 55 | May 8, 2017 | |||
| Richard Fraser-Smith | Chief Financial Officer | 59 | January 20, 2020 |
| (*) | Resigned on November 14, 2022 |
Business Experience
The following is a brief account of the education and business experience during at least the past five years of our directors and executive officer, indicating their principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Scott Poulter – Chief Executive Officer and Executive Director
Scott Poulter was appointed as executive director of Pacific Green Technologies Inc. on May 8, 2017. On August 23, 2019, Mr. Poulter was appointed Chief Executive Officer of our Company. Mr. Poulter was a former professional windsurfer in the United Kingdom, and subsequently became a sports marketing entrepreneur with various sport marketing businesses worldwide which controlled various commercial or licensing rights in Formula One auto racing from 1996 to 2003.
In 2009, he was asked to assist an emission control technology company, EnviroResolutions, in commercializing its proprietary technology and he became increasingly interested in technologies that could help improve the environment. In that vein, Mr. Poulter became a significant investor in our company, and has since endeavored to use his entrepreneurial skills and international business experience to drive forward the emission control technologies of Pacific Green Technologies, Inc. He has been integral in delivering our Company’s business relationships in China and Europe.
Neil Carmichael – Non-Executive Director
Dr. Neil Carmichael was appointed as a director of our company on December 18, 2012 and as our president, treasurer and secretary on August 31, 2013. On August 23, 2019, Dr. Carmichael resigned, and the Company entered into a non-executive directorship agreement with Neil Carmichael. Dr. Carmichael holds a Mathematics BSc from University of Edinburgh and a Mathematics PhD from University of Warwick. Dr. Carmichael has over 25 years’ energy sector management experience including international business development, strategy formulation and implementation and procurement accountabilities. From 1980-85 Dr. Carmichael worked in scientific and engineering consultancy, initially with Scicon (part of BP group) on non-linear optimization, then with Intercomp on mathematics for petroleum engineering and reservoir simulators. In 1985 he joined Shell in its reservoir engineering research unit. This was followed by positions in petroleum engineering, field development; followed by management roles in business development, personnel, information technology and procurement. This required working in a range of countries, from Peru to Bangladesh. In 2006 to 2010 he was Chief Executive Officer of Shell Business Development Central Asia, based in Astana, Kazakhstan and responsible for Shell’s new business activities in Kazakhstan, Turkmenistan and Azerbaijan. Dr. Carmichael was also the Shell representative in Turkmenistan and Azerbaijan. Since 2010 he has been working on two upstream, exploration focused, start-ups, one in Ukraine and the other in Pakistan. Dr. Carmichael has most recently held the position of general manager and country representative in Central Asia with Shell Exploration and Production. Dr. Carmichael has a wide range of technical, country and management experiences; mostly focused on oil and gas, much of it applicable in other domains.
23
Peter Rossbach – Non-Executive Director
Peter van Egmond Rossbach has worked in the renewable power sector since 1985 when he started at Standard & Poor’s rating utility bonds financing renewable projects in California.
In the late 1980s he worked with Catalyst Energy, a developer of hydro and cogeneration projects that was later sold to the Boone Pickens family. In the early 1990’s, Mr. Rossbach was a vice president of project finance for the Mitsui Bank, arranging loans for wind and cogeneration projects in the United States.
Since the mid-1990s, Mr. Rossbach worked in Europe and Asia making investments in hydro, wind and solar projects in over a dozen counties. Over this time frame he created renewable energy asset portfolios of over 1GW, first for a fund in Asia based in Singapore and then since 2003 for Impax Asset Management in Europe. While at Impax in London he assembled a team of industry-oriented specialists with expertise in project construction, operation, finance and asset management.
Currently Mr. Rossbach serves as Senior Advisor and is on the investment committee for Impax’s private equity funds #1-3 and is a non-executive board member with UGE International Ltd, a TSX-listed renewables developer in the USA. Mr. Rossbach has a degree in Government from Harvard College and a Masters’ degree in Public Policy from Harvard’s Kennedy School of Government.
Alex Shead – Non-Executive Director
Alex is Chairman of Lockton Pacific (2012-present), a subsidiary of Lockton Companies Inc., the world’s largest privately held, independent insurance brokerage firm, ranked 8th largest globally. Alex is also the Responsible Manager with the Australian Securities and Investments Commission (ASIC).
In 2008, Alex conceived the award-winning Non-governmental Organization (NGO), Food Ladder, and remains Chairman, today. Food Ladder was one of the first NGOs globally to use environmentally sustainable technologies to create food and economic security for communities affected by poverty. Alex was also the founder of Fair Repairs, a social enterprise that delivers training and job opportunities for people suffering from long term unemployment and disadvantage.
Alex is a British, Australian, and Swiss national, educated at Harrow School in England and La Sorbonne University in Paris, France. In 1993, Alex co-founded Stuart Alexander, leading the company to become one of the UK’s largest insurance and risk management advisory businesses, ultimately selling to AXA, UK.
In 2004, Alex relocated to Australia where he was a shareholder and Director of Milne Alexander, a boutique insurance broking and advisory firm. From 2008 to 2014, Alex was the Executive Chairman of the Mecon Winsure Insurance Group, one of Australia’s leading insurance underwriting agencies, acting as a Coverholder for Lloyd’s of London and local Australian insurers. Mecon Winsure Insurance Group was sold to the ASX-listed Steadfast Group Ltd in 2014.
Alex’s track record of creating shareholder value through Merger and acquisition activity has spanned over three decades. Alex has a wide range of entrepreneurial experience and an in-depth knowledge of large-scale enterprise acquisition and operational integrations, having successfully led over 40 business transactions.
24
Richard Fraser-Smith—Chief Financial Officer
Richard Fraser-Smith, Chartered Accountant, is a finance professional. He was previously Chief Financial Officer of Global Marine Systems Limited (“Global Marine”), a provider of engineering solutions and sub-sea fibre optic and power cable installation, maintenance and related services to the worldwide telecoms, offshore wind and oil and gas markets.
Mr. Fraser-Smith qualified as a Chartered Accountant with PricewaterhouseCoopers in 1991, where he worked on audits in a wide range of businesses. He later worked for Conoco Inc., ING Barings, PepsiCo, Halcrow Group Limited and CH2M Hill before joining Global Marine in 2015.
Within the finance function, Mr. Fraser-Smith has used his experience to transform reporting timeframes for management accounts as well as treasury and cash management procedures, along with M&A support. In addition to his financial expertise, he has been integrally involved in business planning and strategy, has developed full board reporting/KPI (key performance indicator) packages in support of this, and reviewed business processes, supply chains and logistics, reducing lead times, freeing up working capital and significantly reducing costs.
Mr. Fraser-Smith graduated in Chemical Engineering from Manchester University (UMIST) and is a Member of the Institute of Chartered Accountants in England and Wales.
Other Directorships
Other than as disclosed above, our directors and officers do not hold any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
Board of Directors and Director Nominees
Since our board of directors does not include a majority of independent directors, the decisions of the board regarding director nominees are made by persons who have an interest in the outcome of the determination. The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted. Unless otherwise determined, at any time not less than 90 days prior to the next annual board meeting at which the slate of director nominees is adopted, the board will accept written submissions from proposed nominees that include the name, address and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed nominee believes that the nomination would be in the best interests of our security holders. If the proposed nominee is not the same person as the security holder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé supporting the nominee’s qualifications to serve on the board, as well as a list of references.
The board identifies director nominees through a combination of referrals from different people, including management, existing board members and security holders. Once a candidate has been identified, the board reviews the individual’s experience and background and may discuss the proposed nominee with the source of the recommendation. If the board believes it to be appropriate, board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of the slate of director nominees submitted to security holders for election to the board.
Some of the factors which the board considers when evaluating proposed nominees include their knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions. The board may request additional information from each candidate prior to reaching a determination. The board is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.
25
Conflicts of Interest
Our directors are not obligated to commit their full time and attention to our business and, accordingly, they may encounter a conflict of interest in allocating time between our operations and those of other businesses. In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty. As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. They may also in the future become affiliated with entities, engaged in business activities similar to those we intend to conduct. In general, officers and directors of a corporation are required to present business opportunities to a corporation if:
| ● | the corporation could financially undertake the opportunity; |
| ● | the opportunity is within the corporation’s line of business; and |
| ● | it would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation. |
We adopted a code of ethics that obligates our directors, officers, and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.
Legal Proceedings
Except as noted below, to the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| 1. | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
| 2. | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; | |
| 3. | been subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; | |
| 4. | been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| 5. | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| 6. | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
26
Note: on or about May 1, 2019 an affiliated shareholder of the Company holding more than ten percent of our issued and outstanding securities, informed the Company that it has profited from the purchase and sale of our stock within a period of less than six months, in violation of Section 16(b) of the Securities Exchange Act of 1934 (the “Act”). Pursuant to a Settlement Agreement dated July 2, 2019, in exchange for the forbearance of legal action by the Company pursuant to Section 16(b), the shareholder has disgorged to our Company the full amount of the profit realized.
Audit Committee
In March 2021, the board created an Audit Committee, which held its inaugural meeting on March 25, 2021 in which it set out its charter to provide additional governance and oversight of the internal control over finance reporting. It will work alongside the board of directors as a whole which participates in the review of financial statements and disclosure. The audit committee members are Alex Shead (chair), Peter Rossbach, and Neil Carmichael. Alex Shead qualifies as an audit committee financial expert and is independent under applicable NYSE and SEC standards.
Family Relationships
There are no family relationships among our officers, directors, or persons nominated for such positions.
Compliance With Section 16(A) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our shares of common stock and other equity securities, on Forms 3, 4 and 5, respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file.
Based solely on our review of the copies of such forms received by our company, or written representations from certain reporting persons that no Form 5s were required for those persons, we believe that, during the fiscal year ended March 31, 2022, all filing requirements applicable to our officers, directors and greater than 10% beneficial owners as well as our officers, directors and greater than 10% beneficial owners of our subsidiaries were complied with.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to, among other persons, members of our board of directors, our company’s officers including our Chief Executive Officer and Chief Financial Officer, employees, consultants and advisors. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:
| 1. | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; | |
| 2. | full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us; | |
| 3. | compliance with applicable governmental laws, rules and regulations; |
| 4. | the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and | |
| 5. | accountability for adherence to the Code of Business Conduct and Ethics. |
Our Code of Business Conduct and Ethics requires, among other things, that all our company’s senior officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.
In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly senior officers, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal and state securities laws. Any senior officer who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to our company. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company’s Code of Business Conduct and Ethics by another.
Our Code of Business Conduct and Ethics is attached hereto as Exhibit 14. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Pacific Green Technologies Inc., Suite #10212 8 The Green, Dover, DE 19901 USA.
27
Item 11. Executive Compensation
The particulars of compensation paid by our company to the following persons:
| (a) | our principal executive officer; | |
| (b) | each of our most highly compensated executive officers who were serving as executive officers at the end of the period from inception to March 31, 2023; and | |
| (c) | individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as an executive officer at the end of the period to March 31, 2021, who we will collectively refer to as our named executive officers are set out in the following summary compensation table: |
| SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||
| Name | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
| Neil Carmichael | 2023 | 56,000 | nil | nil | nil | nil | nil | nil | 56,000 | |||||||||||||||||
| 2022 | 28,000 | nil | nil | nil | nil | nil | nil | 28,000 | ||||||||||||||||||
| Scott Poulter(3) | 2023 | 674,000 | 197,057 | (1) | nil | nil | nil | nil | nil | 871,057 | ||||||||||||||||
| 2022 | 679,000 | (5) | 324,197 | (2) | nil | nil | nil | nil | nil | 1,003,197 | ||||||||||||||||
| Eric Prouty | 2023 | 34,000 | nil | nil | 19,693 | nil | nil | nil | 53,693 | |||||||||||||||||
| 2022 | 51,000 | nil | nil | nil | nil | nil | nil | 51,000 | ||||||||||||||||||
| Peter Rossbach | 2023 | 61,000 | nil | nil | 17,154 | nil | nil | nil | 78,154 | |||||||||||||||||
| 2022 | 56,000 | nil | nil | 29,973 | nil | nil | nil | 85,973 | ||||||||||||||||||
| Alexander Shead(4) | 2023 | 25,468 | nil | nil | nil | nil | nil | nil | 25,468 | |||||||||||||||||
| 2022 | nil | nil | nil | nil | nil | nil | nil | nil | ||||||||||||||||||
| Richard Fraser-Smith | 2023 | 321,836 | 100,725 | nil | 16,624 | nil | nil | nil | 439,186 | |||||||||||||||||
| 2022 | 314,562 | 34,310 | nil | 48,039 | nil | nil | nil | 396,911 | ||||||||||||||||||
| (1) | Includes commission of $139,848 |
| (2) | Includes commission of 260,479 |
| (3) | Paid to Fresh Air Holdings Pte Limited |
| (4) | Paid to Alexander Group Pty Limited |
| (5) | Include 60,000 director fee assignment from Neil Carmichael to Fresh Air Holdings Pte Limited |
Stock Option Plan
Currently, we do not have a stock option plan in the Company.
Stock Options/SAR Grants
On July 20, 2015, the Company granted options to Neil Carmichael to purchase up to 312,500 shares of common stock at an exercise price of $0.01 per share of common stock on or before July 19, 2018. The options expiry date was extended to December 31, 2022 and they expired at that date.
On September 26, 2017, the Company granted 175,000 stock options to a Company controlled by Alexander Shead. The stock options are exercisable at $0.01 per share and expire September 25, 2019. The options expiry date was extended to September 28, 2020. On August 31, 2020, the options were exercised.
On November 30, 2018, the Company granted 2,865,000 stock options to employees, directors and consultants to the Company. These options were exercisable at $1.70 per share and expired on November 29, 2021.
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On January 15, 2020, the Company granted 25,000 stock options to Richard Fraser-Smith. These options are exercisable at a 25% discount to the average of the 30 trading days immediately prior to January 15, 2020. The options are exercisable on January 15, 2021 for a period of 3 years or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier. These options expired on January 14, 2023.
On January 15, 2021, the Company granted 25,000 stock options to Richard Fraser-Smith. These options are exercisable at a 25% discount to the average of the 30 trading days immediately prior to January 15, 2021. The options are exercisable on January 15, 2022 for a period of 3 years or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier.
On March 31, 2021, the Company granted 75,000 stock options to Riseley D’Souza. 25,000 options at the exercise price of $0.01 and 50,000 options at the exercise price of $1.50. The options are exercisable on March 31, 2021 for a period of three years.
On January 15, 2022, the Company granted 25,000 stock options to Richard Fraser-Smith. These options are exercisable at a 25% discount to the average of the 30 trading days immediately prior to January 15, 2022. The options are exercisable on January 15, 2023 for a period of 3 years or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier.
On March 15, 2022, the Company granted 100,000 stock options to Peter Rossbach at the exercise price of $1.20. 60,000 options are exercisable on March 15, 2022 for a period of 3 years. 40,000 options are exercisable on August 1, 2022 for a period of 3 years.
On February 20, 2023, the Company granted 25,000 stock options to Richard Fraser-Smith. These options are exercisable at a 25% discount to the average of the 30 trading days immediately prior to February 20, 2023. The options are exercisable on February 20, 2024 for a period of 3 years or 12 months following the termination of officer’s employment contract dated January 15, 2020, whichever is earlier.
Outstanding Equity Awards at Fiscal Year End
None
Option Exercises
During our fiscal year ended March 31, 2021, 175,000 stock purchase options were exercised by Alexander Shead, a director of the Company.
During our fiscal year ended March 31, 2022, 25,000 stock purchase options were exercised by Riseley D’Souza, an employee of the Company.
Compensation of Directors
On August 23, 2019, The Company entered into an agreement with Neil Carmichael to provide non-executive director service for compensation of $3,000 per month. The Company will also compensate Mr. Carmichael for $5,000 per annum per committee he sits on, and $10,000 per committee when he acts as Chairman.
On July 20, 2015, we entered into an agreement with Alexander Shead to provide director services to the Company for compensation of $1,000 per month. On October 16, 2020, Mr. Shead resigned as a director of our Company. As a bonus for his past service, Mr. Shead was issued 100,000 shares of common stock.
On February 1, 2020, we entered into an agreement with Eric Prouty to become an Independent non-executive director of our Company for compensation of $3,000 per month. The Company will also compensate Mr. Prouty for $5,000 per annum per committee he sits on, and $10,000 per committee when he acts as Chairman. Mr. Prouty resigned on November 14, 2022.
On February 4, 2021, The Company entered into an agreement with Peter Rossbach to provide non-executive director service for compensation of $3,000 per month. The Company will also compensate Mr. Rossbach for $5,000 per annum per committee he sits on, and $10,000 per committee when he acts as Chairman.
On October 16, 2022, we entered into an agreement with Alexander Shead to provide director services to the Company for compensation of $3,000 per month. The Company will also compensate Mr. Shead for $5,000 per annum per committee he sits on, and $10,000 per committee when he acts as Chairman.
Other than the above, we do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
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We have determined that two of our directors is an independent director (Alex Shead and Peter Rossbach), as that term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth the ownership, as of June 29, 2023, of our common stock by each of our directors and executive officers, by all of our executive officers and directors as a group, and by each person known to us who is the beneficial owner of more than 5% of any class of our securities. As of June 29, 2023, there were 47,970,724 shares of our common stock issued and outstanding. All persons named have sole voting and investment control with respect to the shares, except as otherwise noted. The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of the date of this registration statement.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Class(1) | ||||
| Scott Poulter Suite #10212, 8 The Green, Dover, DE 19901, USA | 10,784,160 Common Shares(2) | 21.6 | % | |||
| Alexander Shead (4) Suite #10212, 8 The Green, Dover, DE 19901, USA | 4,457,480 Common Shares(3) | 8.9 | % | |||
| Directors and Executive Officers as a Group | 15,241,640 Common Shares | 30.5 | % | |||
| Fresh Air Investments Canada Limited (2) Suite 409-221, West Esplanade - North Vancouver, BC, Canada, V7M 3J3 | 9,312,237 Common Shares | 18.6 | % | |||
| Twynam Investments Pty Ltd. 226 Liverpool Street - Darlinghurst, NSW 2010 - Australia | 3,884,000 Common Shares | 7.8 | % | |||
| Kensington Trust Singapore
Ltd ATF Intrawest Retirement Fund (3) 14 Robinson Road #12-01/02 Far East Finance Building 048545 Singapore | 3,043,628 Common Shares | 6.1 | % | |||
| Over 5% Shareholders | 17,711,788 Common Shares | 35.4 | % | |||
| (1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on June 29, 2023. As of June 29, 2023, there were 49,970,724 shares of our company’s common stock issued and outstanding. |
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| (2) | Includes 9,312,237 common shares held by Fresh Air Investments Canada Limited. Scott Poulter does not exercise direct voting or dispositive control over these shares. However, the Hookipa Trust is a shareholder of Fresh Air Investments Canada Limited. Also includes 1,471,923 common shares held by Climate Technica Investments Limited which is controlled by Scott Poulter. |
| (3) | Includes 977,177 common shares held by Alexander Group & Company PTY Ltd. Alexander Shead has voting and dispositive control over securities held by Alexander Group & Company PTY Ltd. Also includes 3,043,628 common shares held by Kensington Trust Singapore Ltd ATF Intrawest Retirement Fund. Securities held by Kensington Trust Singapore Ltd ATF Intrawest Retirement Fundare held for the financial benefit of Mr. Shead. Mr. Shead does not exercise direct voting or dispositive control over these securities. Also includes 386,675 common shares held by Shead Group Pty Ltd and 50,000 common shares held by Mr. Shead directly. |
| (4) | Alex Shead ceased being an executive director of PGT Inc. on October 16, 2020 and was appointed as independent non-executive director on October 16, 2022. |
Changes in Control
We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other than set forth below, there have been no other transactions since the beginning of our last fiscal year or any currently proposed transactions in which we are, or plan to be, a participant and the amount involved exceeds or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest.
During the years ended March 31, 2023 and 2022, respectively, we incurred $1,047,525 and $1,168,890 in consultancy fees paid to the officers, directors and companies controlled by them.
| Year Ended | ||||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Fresh Air Holdings Pte, Ltd (1) | 871,057 | 1,003,917 | ||||||
| Alexander Group & Company Pty Ltd, controlled by Alexander Shead | 25,468 | nil | ||||||
| Eric Prouty (Resigned November 14, 2022) | 34,000 | 51,000 | ||||||
| Distributed Generation LLC, controlled by Peter Rossbach | 61,000 | 85,973 | ||||||
| Neil Carmichael | 56,000 | 28,000 | ||||||
| Total | 1,047,525 | 1,168,890 | ||||||
As at March 31, 2022 and March 31, 2021, we had amounts due to/(from) related parties as follows:
| March 31, 2023 | March 31, 2022 | |||||||||||||
| Due from related parties | Due to related parties | Due from related parties | Due to related parties | |||||||||||
| Due to/(from) related parties | $ | $ | $ | $ | ||||||||||
| Fresh Air Holdings Pte, Ltd (1) | nil | 17,415 | nil | nil | ||||||||||
| Eric Prouty (resigned November 14, 2022) | nil | nil | nil | 4,250 | ||||||||||
| Distributed Generation | nil | 9,000 | nil | nil | ||||||||||
| Neil Carmichael | nil | 84,000 | nil | nil | ||||||||||
| Alex Shead | 2,532 | nil | nil | nil | ||||||||||
| Other directors | nil | 105,136 | nil | nil | ||||||||||
| Total | 2,532 | 215,551 | nil | 4,250 | ||||||||||
| (1) | Fresh Air Holdings Pte, Ltd (FAH) is a wholly owned subsidiary of the Hookipa Trust. FAH provides consulting services pursuant to a consulting agreement dated December 1, 2018. The sole director of FAH is Scott Poulter, a director of the Company effective May 8, 2017. |
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Related party transactions occurred in the normal course of operations on terms and conditions that are similar to those of transactions with unrelated parties and, therefore, are measured at the exchange amount.
Director Independence
We currently act with four directors, Neil Carmichael, Scott Poulter, Alex Shead, and Peter Rossbach. Alex Shead and Peter Rossbach both qualify as an “independent director” as defined by Nasdaq Marketplace Rule 4200(a) (15).
Item 14. Principal Accounting Fees and Services
The aggregate fees billed for the most recently completed fiscal year ended March 31, 2023 and for fiscal year ended March 31, 2022 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
| Year Ended | ||||||||
| March 31, 2023 $ | March 31, 2022 $ | |||||||
| Audit Fees | 480,733 | 387,445 | ||||||
| Tax Fees | nil | nil | ||||||
| Total | 505,869 | 387,445 | ||||||
Audit fees for the year ended March 31, 2023 relate to Grant Thornton UK LLP
Fees charged for tax services relate to assistance in U.S. tax compliance and general Canadian tax advisory.
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
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Item 15. Exhibits Financial Statement Schedules
| (a) | Financial Statements |
| 1. | Financial statements for our company are listed in the index under Item 8 of this document. | |
| 2. | All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto. |
| (b) | Exhibits |
| (31) | Rule 13a-14 (d)/15d-14d) Certifications | |
| 31.1* | Section 302 Certification by the Principal Executive Officer | |
| 31.2* | Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| (32) | Section 1350 Certifications | |
| 32.1* | Section 906 Certification by the Principal Executive Officer | |
| 32.2* | Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| 101* | Interactive Data Files | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
Item 16. Form 10-K Summary
Not Applicable.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PACIFIC GREEN TECHNOLOGIES INC. | ||
| (Registrant) | ||
| Dated: June 29, 2023 | By: | /s/ Scott Poulter |
| Scott Poulter | ||
| Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| Dated: June 29, 2023 | By: | /s/ Richard Fraser-Smith |
| Richard Fraser-Smith | ||
|
Chief Financial Officer (Principal Financial Officer and | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Dated: June 29, 2023 | By: | /s/ Scott Poulter |
| Scott Poulter | ||
| Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| Dated: June 29, 2023 | By: | /s/ Richard Fraser-Smith |
| Richard Fraser-Smith | ||
|
Chief Financial Officer (Principal Financial Officer and |
34