UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,
2023
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from [ ]
to [ ]
Commission file number 000-54756
PACIFIC GREEN TECHNOLOGIES INC. |
(Exact name of registrant as specified in its charter) |
Delaware | | 36-4966163 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
Suite 10212, 8 The Green Dover, DE | | 19901 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including
area code: (302) 601-4659
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock | | PGTK | | OTC |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒ YES ☐ NO
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). ☒ YES ☐ NO
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large
accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES ☒ NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed
by a court. ☐ YES ☐ NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date.
49,970,724 common shares issued and outstanding
as of August 14, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
PART I – FINANCIAL INF3ORMATION
Item 1. Financial Statements
Our unaudited condensed consolidated interim financial
statements for the three months ended June 30, 2023 form part of this quarterly report. They are stated in United States Dollars (US$)
and are prepared in accordance with United States generally accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 8 of Regulation S-X.
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Financial Statements
June 30, 2023
(Expressed in U.S. dollars)
(unaudited)
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Balance Sheets
(Expressed in U.S. dollars)
(unaudited)
| |
June 30, 2023 $ | | |
March 31, 2023 $ | |
| |
| | |
| |
ASSETS | |
| | |
| |
| |
| | |
| |
Cash and cash equivalents | |
| 8,268,995 | | |
| 1,160,358 | |
Short-term investments and amounts in escrow (Note 3) | |
| – | | |
| 56,483 | |
Accounts receivable, net of allowance for doubtful accounts of $28,733 and $97,640 at June 30, 2023 and March 31, 2023, respectively | |
| 1,327,538 | | |
| 886,663 | |
Other receivables, net of allowance for doubtful accounts of $nil and $3,951 at June 30, 2023 and March 31, 2023, respectively | |
| 27,356 | | |
| 359,461 | |
Accrued revenue (Note 11) | |
| 515,294 | | |
| 504,766 | |
Prepaid expenses and parts inventory | |
| 811,541 | | |
| 325,788 | |
Prepaid manufacturing costs (Note 11) | |
| 565,284 | | |
| 463,815 | |
Total Current Assets | |
| 11,516,008 | | |
| 3,757,334 | |
| |
| | | |
| | |
Asset held for sale (Note 4) | |
| – | | |
| 18,569,060 | |
Project under development (Note 4) | |
| 522,293 | | |
| 39,970 | |
Property and equipment (Note 5) | |
| 778,145 | | |
| 849,209 | |
Intangible assets (Note 6) | |
| 6,452,739 | | |
| 6,706,484 | |
Right of use asset | |
| 258,925 | | |
| 350,429 | |
Security deposits and other advances | |
| 218,958 | | |
| 293,680 | |
Total Assets | |
| 19,747,068 | | |
| 30,566,166 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
| |
| | | |
| | |
Liabilities held for sale (Note 4) | |
| 285,111 | | |
| – | |
Accounts payable and accrued liabilities (Note 12) | |
| 4,822,089 | | |
| 3,388,733 | |
Warranty provision (Note 15) | |
| 443,300 | | |
| 580,530 | |
Contract liabilities (Note 10) | |
| 9,935,889 | | |
| 8,751,125 | |
Loans payable (Note 14) | |
| – | | |
| 2,459,146 | |
Current portion of lease obligations | |
| 46,543 | | |
| 145,437 | |
Due to related parties (Note 16) | |
| 259,773 | | |
| 213,020 | |
Total Current Liabilities | |
| 15,792,705 | | |
| 15,537,991 | |
| |
| | | |
| | |
Other long-term obligation | |
| 65,906 | | |
| 127,974 | |
Long-term operating lease obligation | |
| 31,876 | | |
| 84,621 | |
Total Liabilities | |
| 15,890,487 | | |
| 15,750,586 | |
| |
| | | |
| | |
Stockholders’ Equity | |
| | | |
| | |
| |
| | | |
| | |
Preferred stock, 10,000,000 shares authorized, $0.001 par value nil and nil shares issued and outstanding at June 30, 2023 and March 31, 2023, respectively | |
| – | | |
| – | |
Common stock, 500,000,000 shares authorized, $0.001 par value 49,970,724 and 47,276,886 shares issued and outstanding at June 30, 2023 and March 31, 2023, respectively | |
| 49,971 | | |
| 47,277 | |
Additional paid-in capital | |
| 94,517,998 | | |
| 93,107,946 | |
Accumulated other comprehensive income | |
| 3,099,993 | | |
| 2,944,086 | |
Deficit | |
| (93,662,668 | ) | |
| (96,847,650 | ) |
| |
| | | |
| | |
Total stockholders’ equity before treasury stock | |
| 4,005,294 | | |
| (748,341 | ) |
| |
| | | |
| | |
Treasury stock, at cost, nil shares and 56,162 shares at June 30, 2023 and March 31, 2023, respectively | |
| – | | |
| (99,754 | ) |
| |
| | | |
| | |
Total Stockholders’ Equity | |
| 4,005,294 | | |
| (848,095 | ) |
| |
| | | |
| | |
Noncontrolling interest (Note 9) | |
| (148,713 | ) | |
| 15,663,675 | |
| |
| | | |
| | |
Total Equity | |
| 3,856,581 | | |
| 14,815,580 | |
| |
| | | |
| | |
Total Liabilities and Stockholders’ Equity | |
| 19,747,068 | | |
| 30,566,166 | |
Nature of Operations (Note 1)
Commitments (Note 19)
(The accompanying notes are an integral part of
these consolidated financial statements)
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Statements of Operations and Comprehensive
Income (Loss)
(Expressed in U.S. dollars)
(unaudited)
| |
Three Months Ended June 30, 2023 $ | | |
Three Months Ended June 30, 2022 $ | |
| |
| | |
| |
Sales (Note 10) | |
| | |
| |
Products | |
| – | | |
| 1,655,158 | |
Services | |
| 1,188,838 | | |
| 368,718 | |
Total Revenues | |
| 1,188,838 | | |
| 2,023,876 | |
Cost of goods sold (Note 10) | |
| | | |
| | |
Products | |
| 191,856 | | |
| 987,207 | |
Services | |
| 1,025,907 | | |
| 241,336 | |
Total Cost of goods sold | |
| 1,217,763 | | |
| 1,228,543 | |
Gross (loss) / profit | |
| (28,925 | ) | |
| 795,333 | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Advertising and promotion | |
| 104,150 | | |
| 143,267 | |
Amortization of intangible assets (Note 6) | |
| 679 | | |
| 688 | |
Bad Debts Expense (recovery) | |
| 11,477 | | |
| – | |
Depreciation (Note 5) | |
| 37,120 | | |
| 53,584 | |
Foreign exchange loss | |
| 812,372 | | |
| 497,696 | |
Management and technical consulting | |
| 5,231,250 | | |
| 989,084 | |
Operating lease expense (Note 19) | |
| 123,923 | | |
| 109,737 | |
Office and miscellaneous | |
| 433,494 | | |
| 462,769 | |
Professional fees | |
| 36,014 | | |
| 287,025 | |
Research and development | |
| 32,197 | | |
| 13,772 | |
Salaries and wage expenses | |
| 897,008 | | |
| 982,914 | |
Transfer agent and filing fees | |
| 15,734 | | |
| 13,754 | |
Travel and accommodation | |
| 119,358 | | |
| 190,767 | |
Warranty and related (income) / expense (Note 15) | |
| (35,320 | ) | |
| 181,600 | |
Total expenses | |
| 7,819,456 | | |
| 3,926,657 | |
(Loss) before other income (expense) | |
| (7,848,381 | ) | |
| (3,131,324 | ) |
Other income (expense) | |
| | | |
| | |
Financing interest income | |
| 1,039 | | |
| 46,269 | |
Gain on derecognition of a subsidiary | |
| 12,119,097 | | |
| – | |
Interest (expense) and other | |
| (1,308,970 | ) | |
| (38,351 | ) |
Total other income | |
| 10,811,166 | | |
| 7,918 | |
| |
| | | |
| | |
Net income /(loss) for the period before noncontrolling interest | |
| 2,962,785 | | |
| (3,123,406 | ) |
| |
| | | |
| | |
Net (loss) /income attributable to noncontrolling interest (Note 9) | |
| (325,454 | ) | |
| 135,824 | |
| |
| | | |
| | |
Net income /(loss) for the period | |
| 3,288,239 | | |
| (3,259,230 | ) |
| |
| | | |
| | |
Other comprehensive income | |
| | | |
| | |
| |
| | | |
| | |
Foreign currency translation gain /(loss) | |
| 155,907 | | |
| (384,835 | ) |
| |
| | | |
| | |
Comprehensive income/(loss) for the period | |
| 3,444,146 | | |
| (3,644,065 | ) |
Net earnings / (loss) per share, basic and diluted | |
| 0.06 | | |
| (0.07 | ) |
Net earnings / (loss) per share, diluted | |
| 0.06 | | |
| (0.07 | ) |
Weighted average number of shares outstanding, basic1 | |
| 47,654,627 | | |
| 47,339,386 | |
Weighted average number of shares outstanding, diluted | |
| 47,654,627 | | |
| 47,339,386 | |
(The accompanying notes are an integral part of
these consolidated financial statements)
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Statements of Stockholders Equity
(Expressed in U.S. dollars)
(unaudited)
| |
Common stock | | |
Additional Paid-in | | |
Accumulated Other Comprehensive | | |
Treasury | | |
Noncontrolling | | |
| | |
Stockholders’ | |
| |
Shares
# | | |
Amount
$ | | |
Capital
$ | | |
Income
$ | | |
Stock
$ | | |
Interest
$ | | |
Deficit
$ | | |
Equity
$ | |
Balance, March 31, 2022 | |
| 47,026,886 | | |
| 47,027 | | |
| 92,429,203 | | |
| 2,035,666 | | |
| (99,754 | ) | |
| 10,361,701 | | |
| (85,530,306 | ) | |
| 19,243,537 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Fair value of options granted | |
| – | | |
| – | | |
| 17,718 | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 17,718 | |
Noncontrolling interest | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 67,571 | | |
| – | | |
| 67,571 | |
Foreign exchange translation gain | |
| – | | |
| – | | |
| – | | |
| (384,835 | ) | |
| – | | |
| – | | |
| – | | |
| (384,835 | ) |
Net (loss) for the period | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (3,259,230 | ) | |
| (3,259,230 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance June 30, 2022 | |
| 47,026,886 | | |
| 47,027 | | |
| 92,446,921 | | |
| 1,650,831 | | |
| (99,754 | ) | |
| 10,429,272 | | |
| (88,789,536 | ) | |
| 15,684,761 | |
| |
Common stock | | |
Additional Paid-in | | |
Accumulated Other Comprehensive | | |
Treasury | | |
Noncontrolling | | |
| | |
Stockholders’ | |
| |
Shares
# | | |
Amount
$ | | |
Capital
$ | | |
Income
$ | | |
Stock
$ | | |
Interest
$ | | |
Deficit
$ | | |
Equity
$ | |
Balance, March 31, 2023 | |
| 47,276,886 | | |
| 47,277 | | |
| 93,107,946 | | |
| 2,944,086 | | |
| (99,754 | ) | |
| 15,663,675 | | |
| (96,847,650 | ) | |
| 14,815,580 | |
Shares issued for employee services | |
| 2,750,000 | | |
| 2750 | | |
| 1,509,750 | | |
| | | |
| | | |
| | | |
| | | |
| 1,512,500 | |
Cancellation of treasury stock | |
| (56,162 | ) | |
| (56 | ) | |
| (99,698 | ) | |
| – | | |
| 99,754 | | |
| – | | |
| – | | |
| – | |
Elimination of Noncontrolling interest | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (15,590,191 | ) | |
| – | | |
| (15,590,191 | ) |
Transfer | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 103,257 | | |
| (103,257 | ) | |
| – | |
Foreign exchange translation gain/ (loss) | |
| – | | |
| – | | |
| – | | |
| 155,907 | | |
| – | | |
| – | | |
| – | | |
| 155,907 | |
Net (loss) for the period | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (325,454 | ) | |
| 3,288,239 | | |
| 2,962,785 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance June 30, 2023 | |
| 49,970,724 | | |
| 49,971 | | |
| 94,517,998 | | |
| 3,099,993 | | |
| – | | |
| (148,713 | ) | |
| (93,662,668 | ) | |
| 3,856,581 | |
(The accompanying notes are an integral part of
these consolidated financial statements)
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in U.S. dollars)
(unaudited)
| |
Three Months Ended June 30, 2023 | | |
Three Months Ended June 30, 2022 | |
| |
$ | | |
$ | |
Operating Activities | |
| | |
| |
Net income / (loss) for the period | |
| 3,288,239 | | |
| (3,259,230 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Amortization of intangible assets (Note 6) | |
| 253,473 | | |
| 220,055 | |
Bad debt expense/ (recovery) | |
| 11,477 | | |
| – | |
Depreciation (Note 5) | |
| 37,120 | | |
| 53,584 | |
Fair value of stock options granted | |
| – | | |
| 17,718 | |
Financing interest | |
| 1,020,815 | | |
| (46,269 | ) |
(Gain)/ loss on unrealized foreign exchange | |
| (6,196 | ) | |
| 737,833 | |
Operating lease expense | |
| 70,971 | | |
| 109,737 | |
Other adjustments relating to disposal of subsidiary | |
| (682,917 | ) | |
| – | |
Gain on disposal of REP and BEP1 | |
| (12,119,097 | ) | |
| – | |
Share based payments | |
| 1,512,500 | | |
| – | |
| |
| | | |
| | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Short-term investments and amounts held in trust | |
| 56,483 | | |
| (450,152 | ) |
Accounts receivable and other receivables | |
| (1,195,285 | ) | |
| 12,406,327 | |
Accrued revenue | |
| (10,528 | ) | |
| 219,558 | |
Prepaid expenses and parts inventory | |
| (615,048 | ) | |
| (666,321 | ) |
Security deposit | |
| 60,602 | | |
| 35,851 | |
Lease payments | |
| (160,561 | ) | |
| (235,502 | ) |
Prepaid manufacturing costs | |
| (101,469 | ) | |
| (40,907 | ) |
Accounts payable and accrued liabilities | |
| 1,380,452 | | |
| (3,237,082 | ) |
Warranty provision | |
| (137,230 | ) | |
| 65,845 | |
Contract liabilities | |
| 1,184,764 | | |
| 302,036 | |
Due to related parties | |
| 46,753 | | |
| 78,946 | |
Net Cash (Used in) / Provided by Operating Activities | |
| (6,104,682 | ) | |
| 6,312,027 | |
| |
| | | |
| | |
Investing Activities | |
| | | |
| | |
Additions of property and equipment | |
| (3,215 | ) | |
| (9,052 | ) |
Projects under development | |
| (7,709,269 | ) | |
| (6,969,934 | ) |
Proceeds from disposal of subsidiaries | |
| 13,978,850 | | |
| – | |
| |
| | | |
| | |
Net Cash Provided by / (Used in) Investing Activities | |
| 6,266,366 | | |
| (6,978,986 | ) |
| |
| | | |
| | |
Financing Activities | |
| | | |
| | |
Loans Paid - Principal | |
| (2,359,654 | ) | |
| – | |
Loans Paid – Interest | |
| (479,919 | ) | |
| – | |
Long term obligations – Disposal of debt through sale of assets (Note 8) | |
| 9,517,372 | | |
| – | |
Net Cash Provided by Financing Activities | |
| 6,677,799 | | |
| – | |
| |
| | | |
| | |
Effect of Foreign Exchange Rate Changes on Cash | |
| 199,535 | | |
| (1,121,995 | ) |
Change in Cash and Cash Equivalents | |
| 7,039,018 | | |
| (1,788,954 | ) |
Cash and Cash Equivalents, Beginning of Period | |
| 1,273,738 | | |
| 6,286,468 | |
Cash and Cash Equivalents, End of Period | |
| 8,312,756 | | |
| 4,497,514 | |
| |
| | | |
| | |
Cash and Cash Equivalent comprises: | |
| | | |
| | |
Cash and Cash Equivalent | |
| 8,268,995 | | |
| 4,497,514 | |
Cash classified as available for sale | |
| 43,761 | | |
| – | |
| |
| 8,312,756 | | |
| 4,497,514 | |
(The accompanying notes are an integral part of
these consolidated financial statements)
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
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.
The condensed consolidated interim
financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed
with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31,
2023. In the opinion of management, the accompanying condensed consolidated interim financial statements reflect all adjustments of a
recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its
cash flows for the periods shown.
The preparation of these condensed
consolidated interim financial statements in accordance with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results
of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(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 (Canada) Inc. (“PGT Can”) (Formerly Pacific Green Marine Technologies Inc.) | | Wholly-owned subsidiary of PGMG |
Pacific Green Technologies (Middle East) Holdings Ltd. (“PGTME”) | | Wholly-owned subsidiary |
Pacific Green Technologies Arabia LLC (“PGTAL”) | | 70% owned subsidiary of PGTME |
Pacific Green Marine Technologies (USA) Inc. (inactive) | | Dissolved, December 21, 2022 |
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 Energy Parks (UK) Ltd. (“PGEPU”) | | Wholly-owned subsidiary of PGEP |
Pacific Green Battery Energy Parks 2 Ltd. (“PGBEP2”) | | Wholly-owned subsidiary of PGEPU |
Sheaf Energy Ltd. (“Sheaf”) | | Wholly-owned subsidiary of PGBEP2 |
Pacific Green Portland West Pty Ltd. (“PGPW”) | | Wholly-owned subsidiary of PGTAPL |
Pacific Green Portland East Pty Ltd. (“PGPE”) | | Wholly-owned subsidiary of PGTAPL |
Pacific Green Energy Park Portland Pty Ltd. (“PGEPP”) | | Wholly-owned subsidiary of PGTAPL |
Pacific Green Energy Parks Australia Pty Ltd. (“PGEPA”) | | Wholly-owned subsidiary of PGTAPL |
Pacific Green Energy Park Limestone Coast North Pty Ltd. (“PGEPLCN”) | | Wholly-owned subsidiary of PGTAPL |
Pacific Green Energy Park Limestone Coast West Pty Ltd. (“PGEPLCW”) | | Wholly-owned subsidiary of PGTAPL |
Pacific Green Limestone Coast Pty Ltd. (“PGLC”) | | Wholly-owned subsidiary of PGTAPL |
Pacific Green Battery Energy Parks 1 Ltd. (“PGBEP1”) | | Wholly-owned subsidiary until June 26, 2023. Operations were consolidated until disposal date |
Richborough Energy Park Ltd. (“Richborough”) | | Wholly-owned subsidiary until June 26, 2023. Operations were consolidated until disposal date |
All inter-company balances and transactions have been eliminated upon
consolidation.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
2. |
Significant Accounting Policies (continued) |
| (b) | 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 January 1, 2023, including interim periods within those fiscal
years. The Company calculated an effect of $28,000 upon adoption of this guidance on April 1, 2023. Given the immaterial nature of the
effect, the adoption was booked as an expense in the current period statement of income rather than a cumulative effect through retained
earnings.
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 June 30, 2023, the Company has $nil
(March 31, 2023 - $56,483) Guaranteed Investment Certificate (“GIC”) held as security against a corporate credit card. The
GIC bore interest at 0.5% per annum and matures on December 13, 2023. The account was closed on May 30, 2023.
At June 30, 2023, the Company’s
solicitor is holding $nil (March 31, 2023 – $nil) as all the proceeds under customer contracts has been released after satisfying
performance obligations.
At June 30 2023, the Company reallocated
$285,111 of liabilities related to the BESS projects for PGBEP2 and Sheaf, to Assets held for Sale as the result of the agreement with
JLL.
To clarify, the Assets held for Sale
fulfilled the requirements on March 17, 2023, when all the criteria were satisfied.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
4. |
Assets held for Sale (continued) |
As at June 30, 2023 the Company was
in an exclusive negotiation with a potential buyer of Sheaf Energy Limited.
| |
| |
June 30, 2023 | | |
March 31, 2023 | |
| |
| |
| | |
| |
Cash | |
| |
| 43,761 | | |
| 113,380 | |
Prepaid expenses, parts inventory, and advances | |
| |
| – | | |
| 4,454 | |
Other receivables | |
| |
| 66,835 | | |
| 61,576 | |
Projects under development | |
| |
| 10,258,377 | | |
| 46,674,258 | |
Security Deposits & Other Advances | |
| |
| 88,370 | | |
| 495,602 | |
Rights of use asset | |
| |
| – | | |
| 2,302,049 | |
Accounts payable and accrued liabilities | |
| |
| (111,740 | ) | |
| (638,156 | ) |
Loans payable | |
| |
| (10,630,714 | ) | |
| (10,312,906 | ) |
Long term loan payable | |
| |
| – | | |
| (17,771,173 | ) |
Long-term operating lease obligation | |
| |
| – | | |
| (2,360,024 | ) |
(Liabilities) /Assets held for Sale | |
Total | |
| (285,111 | ) | |
| 18,569,060 | |
After the amount has been reallocated to Assets
held for Sale the account “Projects under development” shows a total of $522,293 which is split between $53,648 related to
the capitalization of FOWE (Fuel Oil Water Emulsification) development and $468,645 related to capitalization of BESS project in Australia.
5. |
Property and Equipment |
| |
Cost $ | | |
Accumulated depreciation $ | | |
June 30, 2023 Net carrying value $ | | |
March 31, 2023 Net carrying value $ | |
| |
| | |
| | |
| | |
| |
Building | |
| 900,617 | | |
| (247,425 | ) | |
| 653,192 | | |
| 708,979 | |
Furniture and equipment | |
| 375,429 | | |
| (252,729 | ) | |
| 122,699 | | |
| 137,352 | |
Computer equipment | |
| 15,101 | | |
| (14,342 | ) | |
| 759 | | |
| 885 | |
Leasehold improvements | |
| 9,963 | | |
| (8,469 | ) | |
| 1,495 | | |
| 1,993 | |
| |
| | | |
| | | |
| | | |
| | |
Total | |
| 1,301,110 | | |
| (522,965 | ) | |
| 778,145 | | |
| 849,209 | |
The Company recorded $37,120 in depreciation
expense on property and equipment for the three months ended June 30, 2023 (2022 – $53,584).
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
| |
Cost $ | | |
Accumulated amortization $ | | |
Cumulative impairment $ | | |
June 30,
2023 Net carrying value $ | | |
March 31, 2023 Net carrying value $ | |
| |
| | |
| | |
| | |
| | |
| |
Patents and technical information | |
| 36,340,057 | | |
| (9,434,674 | ) | |
| (20,457,256 | ) | |
| 6,448,127 | | |
| 6,700,921 | |
Software licensing | |
| 11,216 | | |
| (6,604 | ) | |
| – | | |
| 4,612 | | |
| 5,563 | |
Total | |
| 36,351,273 | | |
| (9,441,278 | ) | |
| (20,457,256 | ) | |
| 6,452,739 | | |
| 6,706,484 | |
The Company recorded $253,473 of amortization
expense on intangible assets for the three months ended June 30, 2023 (2022 – $220,055).
The Company has allocated $252,794
(2022 - $219,367) of amortization of patents and technical information to cost of goods sold. The amount remaining in amortization
expense is $679 (2022 - $688).
Future amortization of intangible assets
is as follows based on fiscal year:
|
|
$ |
|
|
|
|
|
2024 |
|
|
694,953 |
|
2025 |
|
|
948,697 |
|
2026 |
|
|
946,220 |
|
2027 |
|
|
946,018 |
|
2028 |
|
|
946,018 |
|
Thereafter |
|
|
1,970,833 |
|
|
|
|
|
|
Total |
|
|
6,452,739 |
|
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
7. |
Acquisition of Sheaf Energy Ltd. |
| (a) | 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 $415,855 (£373,500) made on July 26, 2021 and $8,710,145 (£7,126,500)
made on December 15, 2022.
Total purchase consideration was therefore
$9,126,000 (£7,500,000). The value attributed to the identifiable assets acquired and liabilities assumed are net working capital
of $0, and project under development of $9,126,000 (£7,500,000).
| (b) | Potential sale of 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 249MW Battery Storage
Project within Sheaf Energy Limited.
As at June 30, 2023 the Company
was in an exclusive negotiation with a potential buyer of Sheaf Energy Limited.
8. |
Disposal of Subsidiaries (REP & PGBEP1) |
On June 9, 2023, PGES (UK), a subsidiary of the Company, entered into
a sale and purchase agreement (“SPA”), jointly with Green Power Reserves Ltd. (“GPR”) with Sosteneo Fund 1 Holdco
Sarl (“Buyer”) to sell the shares of PGBEP 1 to the Buyer. PGBEP 1 is 50% owned by PGES (UK) as a controlling interest subsidiary,
while GPR owns the remaining 50% nonredeemable noncontrolling interest. The disposal became unconditional on June 26, 2023.
The purchase price paid by the Buyer to PGES (UK) and GPR consisted
of £29.9 million ($37.4 million) in initial consideration and an additional £15.1 million ($18.9 million) in performance milestone
payments upon successful completion and operations of the BESS projects. The Company does not have a history of completing these types
of BESS projects and does not have the information needed to reasonably estimate whether or not performance milestones will be met, accordingly
any gain related to these milestone payments will be recorded in the period the consideration is determined to be realizable.
As a result of the sale, the Company recognized a net gain on disposal
of $12.1million during the quarter ended June 30, 2023. The sale of PGBEP 1 did not represent a strategic shift that would have a major
effect on the Company’s operations or financial results, therefore PGBEP 1 is not presented as a discontinued operation. The net
income of PGBEP 1 is included in the consolidated statement of operations through the June 26, 2023, disposal date. The assets, liabilities
and equity (including non-controlling interest) of PGBEP 1 were deconsolidated effective June 26, 2023.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
8. |
Disposal of Subsidiaries
(REP & PGBEP1) (continued) |
The Company also incurred £0.3 million ($0.4 million) of legal
fees and £0.4 million ($0.5 million) of broker fees related to the sale.
The gain on sale of PGBEP 1 shares is calculated as follows:
| |
GBP | | |
FX | | |
USD | |
Consideration received (A) | |
| 11,258,370 | | |
| 1.2519 | | |
| 14,094,907 | |
| |
| | | |
| | | |
| | |
Net assets: | |
| | | |
| | | |
| | |
Cash | |
| | | |
| | | |
| 116,057 | |
Projects under development | |
| | | |
| | | |
| 43,642,826 | |
Other assets | |
| | | |
| | | |
| 3,992,999 | |
Long term AP and accruals | |
| | | |
| | | |
| (24,830,942 | ) |
Other liabilities & Non-controlling interest | |
| | | |
| | | |
| (23,406,419 | ) |
Total (B) | |
| | | |
| | | |
| (485,479 | ) |
| |
| | | |
| | | |
| | |
Initial Investment in PGBEP (C) | |
| | | |
| | | |
| 2,461,289 | |
| |
| | | |
| | | |
| | |
Gain (A)-(B)-(C) | |
| | | |
| | | |
| 12,119,097 | |
In addition to the derecognition of the balances sold and recognition
of the gain on sale of subsidiary, as discussed above, the SPA also includes certain contingent assets and liabilities which have not
been recorded in the statement of financial position due to their remote nature. Contingent assets of £15.1 million ($18.9 million)
relate to performance milestone payments as discussed above. Contingent liabilities relate to potential liquidated damages for each day
that REP 1 and REP 2 are late in achieving energization target dates. The daily amounts are £12,500 ($15,650) and £ 7,500
($9,390) for REP 1 and REP 2 respectively, up to a maximum of £7.7 million ($9.6 million). Management have noted that liquidated
damages under the SPA have been invoked, effective from August 1, 2023 as disclosed in Note 21(b).
9. |
Noncontrolling Interest |
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 70% interest in
the joint venture.
Details of the carrying amount of the
noncontrolling interests are as follows:
| |
June 30, 2023 $ | | |
March 31, 2023 $ | |
| |
| | |
| |
Non-redeemable noncontrolling interest | |
| – | | |
| 16,140,339 | |
Net income attributable to noncontrolling interest (BESS) | |
| – | | |
| (354,987 | ) |
Net income attributable to noncontrolling interest (JV) | |
| (148,713 | ) | |
| (121,677 | ) |
Non-controlling interest | |
| (148,713 | ) | |
| 15,663,675 | |
During the period June 30, 2023, Net income attributable to noncontrolling
interest was ($325, 454) split as follows; Net income attributable to noncontrolling interest (BESS) was ($298,418) and ($27,036) was
attributable to non-controlling interest (JV).
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
10. |
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 three months ended June 30, 2023, and 2022 is as follows:
| |
Three Months Ended June 30, 2023 $ | | |
Three Months Ended June 30, 2022 $ | |
| |
| | |
| |
Products | |
| – | | |
| 1,655,158 | |
Services | |
| 1,188,838 | | |
| 368,718 | |
| |
| | | |
| | |
Total | |
| 1,188,838 | | |
| 2,023,876 | |
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.
Service revenue by type for the three
months ended June 30, 2023, and 2022 is as follows:
| |
Three Months Ended June 30, 2023 $ | | |
Three Months Ended June 30, 2022 $ | |
| |
| | |
| |
Specific services provided to marine scrubber systems | |
| 1,047,754 | | |
| 288,904 | |
Design and engineering services for Concentrated Solar Power | |
| 141,084 | | |
| 79,814 | |
| |
| | | |
| | |
Total | |
| 1,188,838 | | |
| 368,718 | |
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
billing terms with customers. As a result of the timing differences between customer sales invoices and percentage of completion of the
contract, contractual assets and contractual liabilities have been recognized.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
11. |
Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, and Contract Liabilities (continued) |
Changes in the Company’s contract assets and liabilities
for the periods are noted as below:
| |
Accrued Revenue $ | | |
Prepaid Manufacturing Costs $ | | |
Sales (Cost of
Goods Sold) $ | | |
Contract Liabilities $ | |
| |
| | |
| | |
| | |
| |
Balance, March 31, 2022 | |
| 531,947 | | |
| 38,010 | | |
| | | |
| (8,143,109 | ) |
| |
| | | |
| | | |
| | | |
| | |
Customer receipts and receivables | |
| – | | |
| – | | |
| – | | |
| (5,325,921 | ) |
Scrubber sales recognized in revenue | |
| | | |
| | | |
| 4,717,905 | | |
| 4,717,905 | |
Payments and accruals under contracts | |
| (27,181 | ) | |
| 4,202,264 | | |
| – | | |
| – | |
Cost of goods sold recognized in earnings | |
| – | | |
| (3,776,459 | ) | |
| (3,776,459 | ) | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Balance, March 31, 2023 | |
| 504,766 | | |
| 463,815 | | |
| | | |
| (8,751,125 | ) |
| |
| | | |
| | | |
| | | |
| | |
Customer receipts and receivables | |
| – | | |
| – | | |
| – | | |
| (1,184,764 | ) |
Payments and accruals under contracts | |
| 10,528 | | |
| 293,324 | | |
| – | | |
| – | |
Cost of goods sold recognized in earnings | |
| – | | |
| (191,855 | ) | |
| (191,855 | ) | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2023 | |
| 515,294 | | |
| 565,284 | | |
| | | |
| (9,935,889 | ) |
Cost of goods sold for the period ended
June 30, 2023 and 2022 is comprised as follows:
| |
Three Months Ended June 30, 2023 $ | | |
Three Months Ended June 30, 2022 $ | |
| |
| | |
| |
Scrubber (accrual reduction) /costs recognized | |
| (90,267 | ) | |
| 623,166 | |
Salaries and wages | |
| 121,049 | | |
| 62,379 | |
Amortization of intangibles | |
| 252,794 | | |
| 219,366 | |
Commission type costs | |
| 25,853 | | |
| 82,296 | |
Design and engineering services for CSP | |
| 58,764 | | |
| 98,968 | |
Specific services provided to marine scrubber systems | |
| 849,570 | | |
| 142,368 | |
| |
| | | |
| | |
Total | |
| 1,217,763 | | |
| 1,228,543 | |
As of June 30, 2023, Contract liabilities
included $8,038,674 (March 31, 2023 - $8,038,674) aggregate cash receipts from one customer relating to thirteen vessels.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
12. | Accounts payable and accrued liabilities |
| |
June 30, 2023 $ | | |
March 31, 2023 $ | |
| |
| | |
| |
Accounts payable | |
| 2,791,167 | | |
| 692,526 | |
Accrued liabilities | |
| 1,677,205 | | |
| 2,349,083 | |
Other liabilities | |
| 125,596 | | |
| 127,973 | |
Payroll liabilities | |
| 228,121 | | |
| 219,151 | |
Total short-term accounts payable and accrued liabilities | |
| 4,822,089 | | |
| 3,388,733 | |
| |
| | | |
| | |
Balance, end of period | |
| 4,822,089 | | |
| 3,388,733 | |
On June 16, 2022, the Company signed
a Facilities Agreement with Close Leasing Limited, for a total of £28.25 million ($34.90 million) for the Richborough project. The
Facilities Agreement, governed by English law, is secured by debentures containing fixed and floating charges entered into by one of the
Company’s subsidiaries, Richborough Energy Park Limited and its immediate parent Pacific Green Battery Energy Parks 1 Limited, as
well as a debt service reserve guarantee entered into by the Company. The Facilities Agreement comprises a development facility at 4.5%
above bank base rate until December 31, 2023 at which point it will be reclassified as a 5-year term loan on a 10-year amortization profile,
until maturity on December 31, 2028. The term loan will bear interest at 4.5% above bank base rate for 20% of the balance, and a fixed
rate of 7.173% for the 5-year period on the remaining 80% of the balance. There is also a revolving credit facility of up to £1.19
million ($1.47 million) available until March 31, 2024. The loan was disposed along with Richborough Energy Park Limited on June 26, 2023.
On November 5, 2022, the Company signed
an unsecured Loan Agreement with a related party, Alexander Group & Co. Pty Ltd, for a total of $123,690 (£100,000) to partially
fund the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment
date of February 4, 2023. On February 7, 2023, the original agreement was extended to August 31, 2023. Upon repayment of the loan, a minimum
repayment fee of 20% will be due and payable. At March 31, 2023, repayment fee accrued of $12,162 (£9,833). The loan principal and
repayment fee were paid in full on June 20, 2023.
On November 5, 2022, the Company signed
an unsecured Loan Agreement with Cherryoak Investments Pty Ltd, for a total of $123,690 (£100,000) to partially fund the acquisition
of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February 3, 2023,
after which point interest shall accrue at a rate 2% above the Bank of England base rate. Upon repayment of the loan, a minimum repayment
fee of 20% will be due and payable. The loan principal and repayment fee were paid in full on February 2, 2023.
On November 5, 2022, the Company signed
an unsecured Loan Agreement with a related party, D&L Milne Pty Ltd, for a total of $123,690 (£100,000) to partially fund the
acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February
4, 2023. On February 7, 2023, the original agreement was extended to August 31, 2023. Upon repayment of the loan, a minimum repayment
fee of 20% will be due and payable. At March 31, 2023, repayment fee accrued of $12,162 (£9,833). The loan principal and repayment
fee were paid in full on June 20, 2023.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
13. |
Loans Payable (continued) |
On November 5, 2022, the Company signed
an unsecured Loan Agreement with a related party, Gerstle Consulting Pty Ltd, for a total of $123,690 (£100,000) to partially fund
the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date
of February 4, 2023. On February 7, 2023, the original agreement was extended to August 31, 2023. Upon repayment of the loan, a minimum
repayment fee of 20% will be due and payable. At March 31, 2023, repayment fee accrued of $12,162 (£9,833). The loan principal and
repayment fee were paid in full on June 20, 2023.
On November 7, 2022, the Company signed
an unsecured Loan Agreement with a related party, Wahnarn 2 Pty Ltd, for a total of $123,690 (£100,000) to partially fund the
acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February
4, 2023. On February 7, 2023, the original agreement was extended to August 31, 2023. Upon repayment of the loan, a minimum repayment
fee of 20% will be due and payable. At March 31, 2023, repayment fee accrued of $12,077 (£9,764). The loan principal and repayment
fee were paid in full on June 20, 2023.
On November 8, 2022, the Company signed
an unsecured Loan Agreement with a related party, Distributed Generation LLC, for a total of $226,000 (£182,714) to partially fund
the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date
of February 7, 2023. On February 7, 2023, the original agreement was extended to August 31, 2023. Upon repayment of the loan, a minimum
repayment fee of 20% will be due and payable. At March 31, 2023, repayment fee accrued of $22,338 (£18,060). The loan principal
and repayment fee were paid in full on June 21, 2023.
On December 15, 2022, the Company signed
a Loan Agreement with Sheaf Storage Limited, for a total of $9,261,789 (£7,500,000) for the acquisition of Sheaf Energy Ltd. The
loan is secured on a share pledge over the entire share capital of Sheaf Energy Limited. This constitutes a loan facility bearing no interest
until the repayment date of September 15, 2023, at which point interest accrues at 22%. Upon repayment of the loan, a minimum repayment
fee of 20% will be due and payable. Upon the sale of Sheaf Energy Ltd, the lender (Sheaf Storage Limited) is entitled to 8% of the net
equity proceeds received by the Company.
The Company entered into five
separate loan agreements under English law with five independent third party lenders: $803,985 (£650,000), $309,225
(£250,000), $247,380 (£200,000) and $154,612 (£125,000) each dated March 9, 2023 and $123,690 (£100,000)
dated March 28, 2023. The loans are identical, except for the lenders’ names and date of Agreement. The loans do not
bear interest but instead have a “Repayment Fee” being 20% of the loan principal. The Repayment Fee is payable in full
at the point the loan principal is repaid. The “Longstop Date” is defined as October 31, 2023 though should the Company
enter into a Liquidity Event yielding at least $6.2 million (£5 million) before then, the loans are repayable in full at that
earlier date. Upon repayment of the loan(s) the lender(s) can elect to convert 50% of the amount repaid to the equivalent value of
ordinary shares in the Company at the Repayment Conversion Strike Price (defined as the Company’s average share price on the
10 business days before and after the Repayment Date). Should the Company default on the loan(s) the lender(s) can elect to convert
up to 100% of the amounts outstanding to the equivalent value of ordinary shares in the Company at the Default Conversion Strike
Price (defined as 0.7 x the Company’s average share price on the 10 business days before and after the Event of Default). The
loan principal and repayment fee for all five loans were paid in full on June 21, 2023.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
14. |
Loans Payable (continued) |
| |
June 30, 2023 $ | | |
March 31, 2023 $ | |
| |
| | |
| |
Loans payable (*) | |
| – | | |
| 1,667,484 | |
Related Party Loan | |
| – | | |
| 791,662 | |
Balance, end of period | |
| – | | |
| 2,459,146 | |
During the three months ended June
30, 2023, the Company recorded a non-cash warranty recovery of $35,320 comprising of $23,500 credited to warranty provision on the commission
of one vessel, offset by a recovery from a supplier of $58,820 debited to accounts payable and accrued liabilities, (March 31,2023 –
non-cash warranty recovery of $625,664). The Company provides warranties to customers for the design, materials, and installation of scrubber
units. Product warranty is recorded at the time of sale and will be revised based on new information as system performance data becomes
available.
A summary of the changes in the warranty costs is shown
below:
| |
June 30, 2023 $ | | |
March 31, 2023 $ | |
| |
| | |
| |
Balance, beginning of period | |
| 580,530 | | |
| 865,451 | |
Warranty expense / (recovery) | |
| 23,500 | | |
| (625,664 | ) |
Warranty (invoiced costs) / recovery | |
| (160,730 | ) | |
| 340,743 | |
| |
| | | |
| | |
Balance, end of period | |
| 443,300 | | |
| 580,530 | |
16. |
Related Party Transactions |
| (a) | As at June 30, 2023, the Company owed $259,773 to (March 31, 2023 – $213,020) companies controlled by a director and officer of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand. |
| (b) | During the three months ended June 30, 2023, the Company incurred $14,996 (2022 – $220,838) in commissions to companies controlled by a director of the Company. |
| (c) | During the three months ended June 30, 2023, the Company incurred $2,153,690 (2022 – $54,866) in consulting fees to a director, or companies controlled by a director of the Company. This includes $1,957,340 (2022 - $nil) bonus paid to a director, or companies controlled by a director of the
Company. |
| (d) | During the three months ended June 30, 2023, the Company incurred $311,385 (2022 – $250,368) in consulting fees to a director, or companies controlled by a director of a Subsidiary of the Company. |
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
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, 2022 | |
| 537,500 | | |
| 0.56 | | |
| 1.43 | | |
| 170,125 | |
| |
| | | |
| | | |
| | | |
| | |
Granted | |
| 285,000 | | |
| 0.66 | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Forfeited | |
| (337,500 | ) | |
| 0.18 | | |
| –– | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Balance, March 31, 2023 and June 30, 2023, vested and exercisable | |
| 485,000 | | |
| 0.89 | | |
| 1.41 | | |
| 84,900 | * |
Additional information regarding stock
options outstanding as at June 30, 2023 is as follows:
Issued and Outstanding | |
Number of shares | | |
Weighted average remaining contractual life (years) | | |
Exercise price $ | |
| | |
| | |
| |
| 25,000 | | |
| 0.55 | | |
| 1.03 | |
| 50,000 | | |
| 0.75 | | |
| 1.50 | |
| 25,000 | | |
| 1.55 | | |
| 0.90 | |
| 20,000 | | |
| 1.71 | | |
| 1.20 | |
| 40,000 | | |
| 1.71 | | |
| 1.20 | |
| 40,000 | | |
| 2.09 | | |
| 1.20 | |
| 10,000 | | |
| 1.25 | | |
| 0.01 | |
| 25,000 | | |
| 1.25 | | |
| 2.50 | |
| 25,000 | | |
| 1.25 | | |
| 3.75 | |
| 200,000 | | |
| 1.34 | | |
| 0.10 | |
| 25,000 | | |
| 2.64 | | |
| 0.50 | |
| 485,000 | | |
| | | |
| | |
Unless otherwise noted, the Company
estimates the fair value of its stock options using the Black-Scholes option pricing model, assuming no expected dividends.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(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, Asia and Australia.
| |
June 30, 2023 | |
| |
North America $ | | |
Europe $ | | |
Asia $ | | |
Total $ | |
| |
| | |
| | |
| | |
| |
Property and equipment | |
| 4,580 | | |
| 119,614 | | |
| 653,951 | | |
| 778,145 | |
Intangible Assets | |
| 6,448,127 | | |
| – | | |
| 4,612 | | |
| 6,452,739 | |
Right of use assets | |
| – | | |
| 155,397 | | |
| 103,528 | | |
| 258,925 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| 6,452,707 | | |
| 275,011 | | |
| 762,091 | | |
| 7,489,809 | |
| |
March 31, 2023 | |
| |
North America $ | | |
Europe $ | | |
Asia $ | | |
Total $ | |
| |
| | |
| | |
| | |
| |
Property and equipment | |
| 5,343 | | |
| 134,001 | | |
| 709,865 | | |
| 849,209 | |
Intangible Assets | |
| 6,700,921 | | |
| – | | |
| 5,563 | | |
| 6,706,484 | |
Right of use assets | |
| – | | |
| 226,860 | | |
| 123,569 | | |
| 350,429 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| 6,706,264 | | |
| 360,861 | | |
| 838,997 | | |
| 7,906,122 | |
| |
North America $ | | |
Europe $ | | |
Asia $ | | |
Total $ | |
| |
| | |
| | |
| | |
| |
Revenues by customer region | |
| 16,947 | | |
| 673,711 | | |
| 498,180 | | |
| 1,188,838 | |
COGS by customer region | |
| (16,272 | ) | |
| (613,038 | ) | |
| (588,452 | ) | |
| (1,217,762 | ) |
Gross Profit by customer region | |
| 675 | | |
| 60,673 | | |
| (90,272 | ) | |
| (28,924 | ) |
GP% by customer region | |
| 4 | % | |
| 9 | % | |
| (18 | %) | |
| (2 | %) |
For the three months ended June 30,
2023, 35% (2022 – 90%) of the Company’s revenues were derived from the largest customer.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
| (a) | The Company’s subsidiaries have entered into two long-term operating leases for office premises in London, United Kingdom and Shanghai, China. These lease assets are categorized as right of use assets under ASU No. 2016-02. |
Long-term premises lease | |
Lease commencement | |
Lease expiry | |
Term (years) | | |
Discount rate* | |
| |
| |
| |
| | |
| |
London, United Kingdom | |
April 1, 2019 | |
December 25, 2023 | |
| 3.75 | | |
| 4.50 | % |
Shanghai, China | |
March 1, 2020 | |
May 31, 2025 | |
| 5.25 | | |
| 4.65 | % |
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 three months are
summarized as follows:
| |
June 30, 2023 $ | | |
June 30 2022 $ | |
Operating lease expense * | |
| 123,923 | | |
| 109,737 | |
| The Company has entered into premises lease agreements with minimum annual lease payments expected over the next five fiscal years of the lease as follows: |
| |
$ | |
2024 | |
| 37,352 | |
2025 | |
| 45,577 | |
2026 | |
| – | |
2027 | |
| – | |
Thereafter | |
| – | |
Total future minimum lease payments | |
| 82,929 | |
Imputed interest | |
| (4,510 | ) |
Operating lease obligations | |
| 78,419 | |
| (b) | 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 70% interest in the joint venture. The Company incorporated Pacific Green Technologies Arabia LLC on November 23, 2021. 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 April 1, 2022 the Company has paid in share capital and intercompany loans and accrued interest amounting to $675,083 to fund operational expenses to June 30, 2023. |
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial
Statements
June 30, 2023
(unaudited)
(Expressed in U.S. Dollars)
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:
| |
June 30, 2023 $ | | |
June 30, 2022 $ | |
| |
| | |
| |
United States | |
| (5,539,280 | ) | |
| (2,113,373 | |
Foreign | |
| 8,502,065 | | |
| (1,010,033 | ) |
| |
| | | |
| | |
Net loss before taxes | |
| 2,962,785 | | |
| (3,123,406 | ) |
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.
| |
June 30, 2023 $ | | |
June 30 2022 $ | |
| |
| | |
| |
Net income (loss) before taxes | |
| 2,962,785 | | |
| (3,123,406 | ) |
Statutory tax rate | |
| 21 | % | |
| 21 | % |
| |
| | | |
| | |
Expected income tax expense (recovery) | |
| 622,185 | | |
| (655,915 | ) |
Permanent differences and other | |
| 213,650 | | |
| 121,545 | |
Foreign tax rate difference | |
| 318,709 | | |
| (861 | ) |
Change in valuation allowance | |
| (1,154,544 | ) | |
| 535,231 | |
| |
| | | |
| | |
Income tax provision | |
| – | | |
| – | |
| |
| | | |
| | |
Current | |
| – | | |
| – | |
Deferred | |
| – | | |
| – | |
| |
| | | |
| | |
Income tax provision | |
| – | | |
| – | |
At June 30, 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 50% likely of being realized upon the effective settlement with a taxing authority
that has full knowledge of all relevant information.
The Company estimates that it has accumulated estimated net operating
losses of approximately $18.9 million which were incurred mainly in the U.S, and which don’t begin to expire until 2033. In
addition, the Company estimates that it has approximately $7.5 million in losses available in the United Kingdom. Historical losses in
the U.S., are subject to limitations on use due to deemed changes in control for tax purposes. This impacts the timing and opportunity
to use certain losses.
| (a) | On
July 3, 2023, the board of directors approved a performance-related bonus for Scott Poulter, Chief Executive Officer, which comprises
2,250,000 shares in the Company which are issuable immediately and $2,567,200 (£2,000,000) in cash, of which $1,797,040 (£1,400,000)
is payable immediately and $770,160 (£600,000) payable pro rata with the remaining consideration of the Richborough sale. |
(b) | The Richborough Energy Park project did not achieve the Interim Operation Notification (“ION”) milestone on August 1, 2023 as originally planned, which results in liquidated damages being invoked on a daily basis at a daily rate of £7,500 (approximately $9,525) until the matter is resolved. The project engineering team are focused on resolving the technical delay by performing software simulation studies on the entire generation facility, and fully expect the ION to be issued and enacted by National Grid during August 2023. The sum of the resultant liquidated damages will be set off against future milestone receipts payable by the Buyer (Sosteneo Fund 1 HoldCo Sarl) to the Company. |
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
This quarterly report contains forward-looking
statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking
statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”,
“believes”, “estimates”, “predicts”, “potential” or “continue” or the negative
of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties
and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our financial statements are stated in United
States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly 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 quarterly report and unless
otherwise indicated, the terms “we”, “us”, “our”, 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 Marine Technologies (USA) Inc., a Delaware corporation
(inactive), (8) Pacific Green Technologies (Canada) Inc. (Formerly Pacific Green Marine Technologies Inc.), a Canadian corporation, (9)
Pacific Green Solar Technologies Inc., a Delaware corporation, (10) Pacific Green Corporate Development Inc. (formerly Pacific
Green Hydrogen Technologies Inc.), a Delaware corporation, (11) Pacific Green Wind Technologies Inc., a Delaware corporation, (12) Pacific
Green Technologies International Ltd., a British Virgin Islands company, (13) Pacific Green Technologies Asia Ltd., a Hong Kong company,
(14) Pacific Green Technologies Engineering Services Limited (Formally Pacific Green Technologies China Ltd.), a Hong Kong company, (15)
Pacific Green Technologies (Australia) Pty Ltd., an Australia company, (16) Pacific Green Technologies (Shanghai) Co. Ltd. (Formerly
Shanghai Engin Digital Technology Co. Ltd.), a Chinese company, (17) Guangdong Northeast Power Engineering Design Co. Ltd., a Chinese
company, (18) Pacific Green Energy Parks Inc., a Delaware corporation, (19) Pacific Green Energy Storage Technologies Inc., a Delaware
corporation, (20) Pacific Green Energy Storage (UK) Ltd. (Formerly Pacific Green Marine Technologies Trading Ltd.), a United Kingdom
company, (21) Pacific Green Portland West Pty Ltd., an Australian company, (22) Pacific Green Portland East Pty Ltd., an Australian company,
(23) Pacific Green Energy Park Portland Pty Ltd., an Australian company, (24) Pacific Green Energy Parks Australian Pty Ltd., an Australian
company, (25) Pacific Green Energy Park Limestone Coast North Pty Ltd., an Australian company, (26) Pacific Green Energy Park Limestone
Coast West Pty Ltd., an Australian company, (27) Pacific Green Energy Park Limestone Pty Ltd., an Australian company, (28) Pacific Green
Battery Energy Parks 2 Ltd., a United Kingdom company, (29) Sheaf Energy Ltd., a United Kingdom company, unless otherwise indicated.
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.
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 envisions a world of rapidly growing
demand for renewable energy technological solutions to address the challenges presented by a changing climate. Having achieved success
in marine emission control technologies we have now diversified our business to provide turnkey and scalable end-to-end environmental
and renewable technology solutions in the energy sector. Our technological platform now has 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, each is led by acquisitions
of technology capabilities and project investment opportunities, highlighted to date by the following events:
|
● |
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 and we are now in talks to provide CSP alongside future ammonia and hydrogen production facilities in Asia and South America; |
|
● |
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 and subsequently sold the entity under the terms of a Sale and Purchase Agreement on June 26, 2023 (see Note 8); and |
|
● |
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%. |
In support of this dual strategy, we have adopted
a Human Resource Strategy that seeks to hire the best talent in the core areas of our business. At June 30, 2023, the Company employed
approximately 45 staff excluding full time consultants and contractors across a network of offices around the world. Our hiring plan includes
the addition of sales and project execution specialists.
Strategic Partnerships
Pacific Green has forged global partnerships with
private and state-owned energy providers and owners. This strategic alignment with leading energy industry platforms empowers Pacific
Green to provide quickly scalable solutions in the core areas of our business, to gather unique insights on cutting-edge trends and leverage
recurring revenue opportunities that enable us to cross-sell products and services.
The Company has entered into several partnership
and framework agreements in the core areas of our business.
Concentrated Solar Power (“CSP”)
On December 23, 2019, the Company entered
into a 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.
The Strategic Alliance 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.
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 100MW in relation to the Richborough Energy Park project and 249MW in relation to the Sheaf Energy project. The framework agreement
was terminated after the completion of the Sheaf Energy acquisition in December 2022.
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.
On June 8, 2023, the
Company approved the cancellation of 56,162 shares of Treasury stock it had previously repurchased during the year ended March
31, 2022 under an authorized share buy-back program
On June 9, 2023 Pacific Green Technologies, Inc.
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 ($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 June 9, 2023, the board of directors approved a performance-related
bonus for Scott Poulter, Chief Executive Officer, which comprises 2,750,000 shares in the Company, $1,957,340 (£1,550,000)
in cash and a 10% increase in salary backdated to April 1, 2023. The shares are issuable and cash payable immediately. The cash bonus
was paid on June 15, 2023. The shares were issued on June 23, 2023.
On June 20 and 21, 2023 certain loans were repaid in full along with
the repayment fee. These are detailed in Note 13.
Results of Operations
The following summary of our results of operations
should be read in conjunction with our unaudited interim financial statements for the three months ended June 30, 2023, and 2022.
Revenue for the three months ended June 30, 2023,
was $1,188,838 versus $2,023,876 for the three months ended June 30, 2022. The Company’s revenues were mainly derived from the delivery
obligations under service agreements and ad hoc aftersales.
During the three months ended June 30, 2023, the
gross profit margin for products and services were negative nil (2022 – 40%) and 14% (2022 – 35%), respectively. The gross
profit margin for products decreased significantly as there were no sales of scrubbers in the period. Overall, the gross profit margin
for the quarter ended June 30, 2023, was approximately negative 2% (2022 – 39%).
Expenses for the three months ended June 30, 2023,
were $7,819,456 as compared to $3,926,657 for the three months ended June 30, 2022. Management and technical consulting fees increased
due to increased activity resulting from the sale of PGBEP 1 and REP in June 2023. Management and technical consulting fees were comprised
of fees paid to our directors, officers and advisors for business development efforts and advisory services. Office-based costs, travel
expenses, bonuses and professional fees also increased due to increased business activities. The impact of various international factors
on foreign exchange rates caused fluctuations which saw the Company’s foreign exchange losses increase significantly.
The three months ended June 30, 2023, our company
recorded a net profit of $3,288,239 ($0.06 per share) compared to net loss of $3,259,230 ($0.07 per share) for the three months ended
June 30, 2022.
Our financial results for the three months ended
June 30, 2023, and 2022 are summarized as follows:
| |
Three Months Ended | |
| |
June 30, | |
| |
2023
$ | | |
2022 $ | |
Revenues | |
| | |
| |
Products | |
| – | | |
| 1,655,158 | |
Services | |
| 1,188,838 | | |
| 368,718 | |
Total Revenues | |
| 1,188,838 | | |
| 2,023,876 | |
Cost of goods sold | |
| | | |
| | |
Products | |
| 191,856 | | |
| 987,207 | |
Services | |
| 1,025,907 | | |
| 241,336 | |
Total Cost of goods sold | |
| 1,217,763 | | |
| 1,228,543 | |
Gross (loss) / profit | |
| (28,925 | ) | |
| 795,333 | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Advertising and promotion | |
| 104,150 | | |
| 143,267 | |
Amortization of intangible assets | |
| 679 | | |
| 688 | |
Bad Debts Expense (recovery) | |
| 11,477 | | |
| – | |
Depreciation | |
| 37,120 | | |
| 53,584 | |
Foreign exchange loss | |
| 812,372 | | |
| 497,696 | |
Management and technical consulting | |
| 5,231,250 | | |
| 989,084 | |
Operating lease expense | |
| 123,923 | | |
| 109,737 | |
Office and miscellaneous expense | |
| 433,494 | | |
| 462,769 | |
Professional fees | |
| 36,014 | | |
| 287,025 | |
Research and development | |
| 32,197 | | |
| 13,772 | |
Salaries and wages | |
| 897,008 | | |
| 982,914 | |
Transfer agent and filing fees | |
| 15,734 | | |
| 13,754 | |
Travel and accommodation | |
| 119,358 | | |
| 190,767 | |
Warranty and related (income) / expense | |
| (35,320 | ) | |
| 181,600 | |
Total expenses | |
| 7,819,456 | | |
| 3,926,657 | |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Financing interest income | |
| 1,039 | | |
| 46,269 | |
Finance interest on loans | |
| – | | |
| – | |
Gain on derecognition of a subsidiary | |
| 12,119,097 | | |
| – | |
Interest (expense) and other | |
| (1,308,970 | ) | |
| (38,351 | ) |
Net income /(loss) for the period before noncontrolling interest | |
| 2,962,785 | | |
| (3,123,406 | ) |
Net (loss) /income attributable to noncontrolling interest | |
| (325,454 | ) | |
| 135,824 | |
Net income /(loss) for the period | |
| 3,288,239 | | |
| (3,259,230 | ) |
Liquidity and Capital Resources
Working Capital
| |
June 30, 2023 $ | | |
March 31, 2023 $ | |
Current Assets | |
| 11,516,008 | | |
| 3,757,334 | |
Current Liabilities | |
| 15,792,705 | | |
| 15,537,991 | |
| |
| | | |
| | |
Working Capital (Deficit) | |
| (4,276,697 | ) | |
| (11,780,657 | ) |
Cash Flows
| |
June 30, 2023 $ | | |
June 30, 2022 $ | |
Net Cash (Used in) / Provided by Operating Activities | |
| (6,104,682 | ) | |
| 6,312,027 | |
Net Cash Provided by/ (Used in) Investing Activities | |
| 6,266,366 | | |
| (6,978,986 | ) |
Net Cash Provided by Financing Activities | |
| 6,677,799 | | |
| – | |
Effect of Exchange Rate Changes on Cash | |
| 199,535 | | |
| (1,121,996 | ) |
| |
| | | |
| | |
Net Change in Cash and Cash Equivalents | |
| 7,039,018 | | |
| (5,012,730 | ) |
As of June 30, 2023, we had $8,268,995 in cash
and cash equivalents, $11,388,918 in total current assets, $15,665,615 in total current liabilities and a working capital deficit of $4,276,697
compared to working capital deficit of $11,780,657 as at March 31, 2023. The Company’s working capital deficit was reduced due to
increased cash resulting mainly from the sale of Pacific Green Battery Energy Parks 1 Ltd and its subsidiary Richborough Energy Park Ltd.
During the three months ended June 30, 2023, we used $6,104,682 in
operating activities in comparison to $6,312,027 generated from operating activities for the three months period ended June 30, 2022.
The operating cash flow for the three months ended June 30, 2023, was mainly resulted from increased receivables and other operating expenses
during the period.
During the three months ended June 30, 2023, we
generated $6,266,366 in investing activities, whereas we used $6,978,986 in investing activities during the three months ended June 30,
2022. Our investing activities for the three months ended June 30, 2023, were primarily related to sales proceeds from the disposal of
Pacific Green Battery Energy Parks 1 Ltd and its subsidiary Richborough Energy Park Ltd.
During the three months ended June 30, 2023, we generated $6,677,799
in financing activities, whereas we used $nil in financing activities during the three months ended June 30, 2022. Our financing activities
for the three months ended June 30, 2023, were primarily related to additional loans in the period, which then formed part of the net
liabilities used to derive the gain from the sale of the disposal of the subsidiary.
Anticipated Cash Requirements
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 250MW facility project. The acquisition was funded with a secured loan
from a third party investor, Sheaf Storage Limited. We anticipate reaching financial close during the second half of 2023. We are funding
our Sheaf project expenditure prior to financial close with cash proceeds from the sale in June 2023 of Pacific Green Battery Energy Parks
1 Ltd and its subsidiary Richborough Energy Park Ltd. These funds raised will also cover our normal operating expenditure over the next
12 months. We are currently negotiating with several parties to raise sufficient debt funding from third parties to cover development
expenditure on our Australia energy park projects and other renewable energy opportunities.
As of June 30, 2023, we had $8,268,995 cash on hand. After careful
consideration we believe current operations, anticipated deliveries and expected profit from such deliveries, sales of products in our
Batteries business and the raising of short-term funds to be sufficient to cover expected cash operating expenses over the next 12 months.
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 period 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 quarter ended June 30, 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.
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.
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.
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 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”,
we are not required to provide the information required by this Item.
Item 4. 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 June 30, 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 June
30, 2023.
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 Quarter Report on Form 10-Q 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
There has been no significant change in the Company’s internal
control over financial reporting during the quarter ended June 30, 2023, which were identified in connection with management’s evaluation
required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
PART II– OTHER INFORMATION
Item 1. 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 1A. Risk Factors
As a “smaller reporting company” we
are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
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: August 14, 2023 |
By: |
/s/ Scott Poulter |
|
|
Scott Poulter |
|
|
Chief Executive Officer and Director |
|
|
(Principal Executive Officer) |
|
|
|
Dated: August 14, 2023 |
By: |
/s/ Richard Fraser-Smith |
|
|
Richard Fraser-Smith |
|
|
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) |
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: August 14, 2023 |
By: |
/s/ Scott Poulter |
|
|
Scott Poulter |
|
|
Chief Executive Officer and Director |
|
|
(Principal Executive Officer) |
|
|
|
Dated: August 14, 2023 |
By: |
/s/ Richard Fraser-Smith |
|
|
Richard Fraser-Smith |
|
|
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) |
13
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I, Scott Poulter, hereby certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
A signed original of this written statement required
by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within
the electronic version of this written statement required by Section 906, has been provided to Pacific Green Technologies Inc. and will
be retained by Pacific Green Technologies Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
I, Richard Fraser-Smith, hereby certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
A signed original of this written statement required
by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within
the electronic version of this written statement required by Section 906, has been provided to Pacific Green Technologies Inc. and will
be retained by Pacific Green Technologies Inc. and furnished to the Securities and Exchange Commission or its staff upon request.