UNITED STATES
SECURITIES AND EXCHANGE COMMISSION,
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from [ ] to [ ]
Commission
file number
| (Exact name of registrant as specified in its charter) |
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Registrant’s
telephone number, including area code:
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Securities registered pursuant to Section 12(b) of the Act:
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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. ☒ ☐ 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). ☒ ☐ 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 | ☐ |
| ☐ | 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
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.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | 1 | |
| ITEM 1. | FINANCIAL STATEMENTS | 1 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 2 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 11 |
| ITEM 4. | CONTROLS AND PROCEDURES | 11 |
| PART II – OTHER INFORMATION | 13 | |
| ITEM 1. | LEGAL PROCEEDINGS | 13 |
| ITEM 1A. | RISK FACTORS | 13 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES | 13 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 13 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 13 |
| ITEM 5. | OTHER INFORMATION | 13 |
| ITEM 6. | EXHIBITS | 13 |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Our unaudited condensed consolidated interim financial statements for the three and nine months ended December 31, 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.
1
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
F-1
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Balance Sheets
(Unaudited)
(Expressed in U.S. dollars)
| December 31, 2023 $ | March 31, 2023 $ | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | ||||||||
| Short-term investments and amounts in escrow (Note 3) | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Other receivable, net of allowance for doubtful accounts of $ and $ | ||||||||
| Accrued revenue (Note 11) | ||||||||
| Prepaid expenses, parts inventory and advances (Note 4) | ||||||||
| Prepaid manufacturing costs (Note 11) | ||||||||
| Projects under development (Note 5) | ||||||||
| Total current assets | ||||||||
| Asset held for sale (Note 4) | ||||||||
| Project under development | ||||||||
| Property and equipment (Note 6) | ||||||||
| Intangible assets (Note 7) | ||||||||
| Right of use asset | ||||||||
| Security deposits and other advances (Note 4) | ||||||||
| Total assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities (Note 4), (Note 12) | ||||||||
| Warranty provision (Note 14) | ||||||||
| Contract liabilities (Note 11) | ||||||||
| Loans payable (Note 13) | ||||||||
| Loans of Projects Under Development (Note 13) | ||||||||
| Current portion of lease obligations | ||||||||
| Income taxes | ||||||||
| Due to related parties (Note 15) | ||||||||
| Total current liabilities | ||||||||
| Other long-term obligation | ||||||||
| Long-term operating lease obligation | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, | ||||||||
| Common stock, | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity before treasury stock | ( | ) | ||||||
| Treasury stock, at cost, shares and | ( | ) | ||||||
| Total stockholders’ equity | ( | ) | ||||||
| Noncontrolling interest (Note 10) | ||||||||
| Total equity | ||||||||
| Total liabilities and stockholders’ equity | ||||||||
Nature of Operations (Note 1)
Commitments (Note 18)
(The accompanying notes are an integral part of these consolidated financial statements)
F-2
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(Expressed in U.S. dollars)
| Three Months Ended December 31, 2023 $ | Three Months Ended December 31, 2022 $ | Nine Months Ended December 31, 2023 $ | Nine Months Ended December 31, 2022 $ | |||||||||||||
| Sales (Note 11) | ||||||||||||||||
| Products | ||||||||||||||||
| Services | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of goods sold (Note 11) | ||||||||||||||||
| Products | ||||||||||||||||
| Services | ||||||||||||||||
| Total cost of goods sold | ||||||||||||||||
| Gross profit / (loss) | ||||||||||||||||
| Expenses | ||||||||||||||||
| Advertising and promotion | ||||||||||||||||
| Amortization of intangible assets (Note 7) | ||||||||||||||||
| Bad debts expense / (recovery) | ( | ) | ||||||||||||||
| Depreciation (Note 6) | ||||||||||||||||
| Foreign exchange loss / (gain) | ( | ) | ||||||||||||||
| Management and technical consulting | ||||||||||||||||
| Office and miscellaneous | ||||||||||||||||
| Operating lease expense (Note 18) | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Research and development | ||||||||||||||||
| Salaries and wage expenses | ||||||||||||||||
| Transfer agent and filing fees | ||||||||||||||||
| Travel and accommodation | ||||||||||||||||
| Warranty and related expense / (recovery) (Note 14) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total expenses | ||||||||||||||||
| Income / (loss) before other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income / (expenses) | ||||||||||||||||
| Provision for loan or debt | ( | ) | – | ( | ) | – | ||||||||||
| Financing interest income | ( | ) | ||||||||||||||
| Gain on derecognition of a subsidiary | ||||||||||||||||
| Interest expense and other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other (expense) / income | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax provision | ( | ) | ( | ) | ||||||||||||
| Net income/(loss) for the period before noncontrolling interest | ( | ) | ( | ) | ||||||||||||
| Net income/(loss) attributable to noncontrolling interest (Note 10) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income/(loss)for the period | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation gain / (loss) | ( | ) | ||||||||||||||
| Comprehensive income/(loss) for the period | ( | ) | ( | ) | ||||||||||||
| ( | ) | ( | ) | |||||||||||||
| Weight average number of common shares outstanding, basic (1) | ||||||||||||||||
| Weight average number of dilutive shares outstanding, diluted | ||||||||||||||||
| (1) |
(The accompanying notes are an integral part of these consolidated financial statements)
F-3
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Statements of Stockholders Equity
(Unaudited)
(Expressed in U.S. dollars)
| Common stock | Additional Paid-in | Accumulated Other Comprehensive | Treasury | Noncontrolling | Stockholders’ | |||||||||||||||||||||||||||
| Shares # | Amount $ | Capital $ | Income $ | Stock $ | Interest $ | Deficit $ | Equity $ | |||||||||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Shares issued for employee services | ||||||||||||||||||||||||||||||||
| Cancellation of treasury stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Elimination of Noncontrolling interest | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Transfer | – | ( | ) | |||||||||||||||||||||||||||||
| Foreign exchange translation gain/ (loss) | – | |||||||||||||||||||||||||||||||
| Net Profit (loss) for the period | – | |||||||||||||||||||||||||||||||
| Balance June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Shares issued for employee services | ||||||||||||||||||||||||||||||||
| Fair value of options granted | ||||||||||||||||||||||||||||||||
| Noncontrolling interest | – | |||||||||||||||||||||||||||||||
| Foreign exchange translation gain | – | |||||||||||||||||||||||||||||||
| Net loss for the period | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance September 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued for employee services | ||||||||||||||||||||||||||||||||
| Fair value of options granted | ||||||||||||||||||||||||||||||||
| Noncontrolling interest | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign exchange translation gain | – | |||||||||||||||||||||||||||||||
| Net gain for the period | – | |||||||||||||||||||||||||||||||
| Balance December 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||
| Common stock | Additional Paid-in | Accumulated Other Comprehensive | Treasury | Noncontrolling | Stockholders’ | |||||||||||||||||||||||||||
| Shares # | Amount $ | Capital $ | Income $ | Stock $ | Interest $ | Deficit $ | Equity $ | |||||||||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Fair value of options granted | – | |||||||||||||||||||||||||||||||
| Noncontrolling interest | – | |||||||||||||||||||||||||||||||
| Foreign exchange translation loss | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net loss for the period | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Fair value of options granted | – | |||||||||||||||||||||||||||||||
| Noncontrolling interest | – | |||||||||||||||||||||||||||||||
| Foreign exchange translation gain | – | |||||||||||||||||||||||||||||||
| Net loss for the period | – | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Fair value of options granted | ||||||||||||||||||||||||||||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign exchange translation gain | ||||||||||||||||||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance December 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
(The accompanying notes are an integral part of these consolidated financial statements)
F-4
PACIFIC GREEN TECHNOLOGIES INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
(Expressed in U.S. dollars)
| Nine Months Ended December 31, 2023 | Nine Months Ended December 31, 2022 | |||||||
| $ | $ | |||||||
| Operating Activities | ||||||||
| Net profit /(loss) for the period | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of intangible assets (Note7) | ||||||||
| Bad debt expense/ (recovery) | ( | ) | ||||||
| Depreciation (Note 6) | ||||||||
| Fair value of share-based payments | ||||||||
| Financing interest | ||||||||
| Loss / (gain) on unrealized foreign exchange | ||||||||
| Lease finance charge | ||||||||
| Operating lease expense | ||||||||
| Share of Noncontrolling interest | ||||||||
| Other adjustments relating to disposal of subsidiary | ( | ) | ||||||
| Gain on disposal of REP and BEP1 | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Short-term investments and amounts held in trust | ||||||||
| Accounts receivable and other receivables | ( | ) | ||||||
| Accrued revenue | ( | ) | ||||||
| Prepaid expenses, parts inventory and advances | ( | ) | ( | ) | ||||
| Security deposit and other advances | ( | ) | ||||||
| Lease payments | ( | ) | ( | ) | ||||
| Prepaid manufacturing costs | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Income tax | ||||||||
| Warranty provision | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ||||||
| Due to related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities | ||||||||
| Additions of property and equipment | ( | ) | ( | ) | ||||
| Projects under development | ( | ) | ( | ) | ||||
| Proceeds from disposal of subsidiaries (Net Proceeds) | ||||||||
| Acquisition of BESS Italy SPV’s | ( | ) | ||||||
| Net cash provided by/(used in) investing activities | ( | ) | ( | ) | ||||
| Financing Activities | ||||||||
| Noncontrolling interest (Note 7(a) and (b)) | ||||||||
| Proceeds from loan facility (Note 13) | ||||||||
| Loans Paid – Principal | ( | ) | ||||||
| Loans Paid – Interest | ( | ) | ||||||
| Proceeds from project loan facilities (Note 13) | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of foreign exchange rate changes on cash | ( | ) | ||||||
| Change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | ||||||||
(The accompanying notes are an integral part of these consolidated financial statements)
F-5
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 1. | Nature of Operations |
Pacific
Green Technologies Inc. (the “Company”) was incorporated in the state of Delaware, USA on
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.
Following the sale of the REP project to Sosteneo, the Company has modified its BESS (“Battery Energy Storage Systems”) strategy of originating, developing and owning BESS projects, to a strategy of originating, developing and selling BESS projects. Under the new strategy, the Company expects income streams from BESS projects to include the following:
| ● | Sale of projects (Including Sales of Ownership Interests in Project Companies) |
| ● | Construction management agreement fees |
| ● | Asset management fees |
As discussed in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, the sale of BESS projects falls under the scope of ASC 606, and net proceeds from sale of projects are recognized as revenue on the transfer of control to the buyer.
Under the new strategy, project assets and liabilities are not being held as long-term assets of the company, and are expected to be sold within 12 months. As a result, balances in consolidated BESS project entities are included in the appropriate balance sheet line items, instead of assets held for sale. Project costs incurred prior to sale are capitalized as projects under development within current assets, and charged to cost of sales on sale. Project financing liabilities are capitalized as separately identified loans in liabilities of projects under development within current liabilities, and recorded as consideration where forgiven on sale.
F-6
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 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 (U.S. GAAP) and are expressed in U.S. dollars. The accounting policies are consistently applied in the preparation
of the consolidated financial statements.
| Pacific Green Innoergy Technologies Ltd. (“Innoergy”) (Formerly Innoergy Ltd.) | ||
| Pacific Green Marine Technologies Group Inc. (“PGMG”) | ||
| Pacific Green Marine Technologies Inc. (“PGMT US”) | ||
| Pacific Green Technologies (UK) Ltd. (Formerly Pacific Green Marine Technologies Ltd.) (“PGTU”) | ||
| Pacific Green Technologies (Canada) Inc. (“PGT Can”) (Formerly Pacific Green Marine Technologies Inc.) | ||
| Pacific Green Technologies (Middle East) Holdings Ltd. (“PGTME”) | ||
| Pacific Green Technologies Arabia LLC (“PGTAL”) | ||
| Pacific Green Marine Technologies (USA) Inc. (inactive) | ||
| Pacific Green Solar Technologies Inc. (“PGST”) | ||
| Pacific Green Corporate Development Inc. (“PGCD”) (Formerly Pacific Green Hydrogen Technologies Inc.) | ||
| Pacific Green Wind Technologies Inc (“PGWT”) | ||
| Pacific Green Technologies International Ltd. (“PGTIL”) | ||
| Pacific Green Technologies Asia Ltd.(“PGTA”) | ||
| Pacific Green Technologies Engineering Services Limited (Formerly Pacific Green Technologies China Ltd. (“PGTESL”) | ||
| Pacific Green Technologies (Shanghai) Co. Ltd. (“Engin”) (Formerly Shanghai Engin Digital Technology Co. Ltd) | ||
| Guangdong Northeast Power Engineering Design Co. Ltd. (“GNPE”) | ||
| Pacific Green Energy Parks Inc. (“PGEP”) | ||
| Pacific Green Energy Storage Technologies Inc. (“PGEST”) | ||
| Pacific Green Technologies (Australia) Pty Ltd. (“PGTAPL”) | ||
| Pacific Green Energy Storage (UK) Ltd. (“PGESU”) (Formerly Pacific Green Marine Technologies Trading Ltd.) | ||
| Pacific Green Energy Parks (UK) Ltd. (“PGEPU”) | ||
| Pacific Green Portland West Pty Ltd. (“PGPW”) | ||
| Pacific Green Portland East Pty Ltd. (“PGPE”) | ||
| Pacific Green Energy Park Portland Pty Ltd. (“PGEPP”) | ||
| Pacific Green Energy Parks Australia Pty Ltd. (“PGEPA”) | ||
| Pacific Green Energy Park Limestone Coast North Pty Ltd. (“PGEPLCN”) | ||
| Pacific Green Energy Park Limestone Coast West Pty Ltd. (“PGEPLCW”) | ||
| Pacific Green Limestone Coast Pty Ltd. (“PGLC”) | ||
| Pacific Green Energy Parks (Italia) srl (“PGEPI”) | ||
| Sphera Australe | ||
| Sphera Levante | ||
| Sphera Ponente | ||
| Sphera Boreale | ||
| Pacific Green Future Energy Inc (“PGFE”) | ||
| Pacific Green Portland North Pty Ltd (“PGPNP”) | ||
| Pacific Green Portland Northeast Pty Ltd (“PGPNEP”) |
All inter-company balances and transactions have been eliminated upon consolidation.
F-7
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 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 $
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
December 31, 2023, the Company has a $ (March 31, 2023 - $
At December 31, 2023, the Company’s solicitor is holding $ (March 31, 2023 – $) as all the proceeds under customer contracts have been released after satisfying performance obligations.
| 4. | Assets held for Sale |
| Pre- Reclassification | Reclassification | December 31, 2023 | March 31, 2023 | |||||||||||||||
| Cash | ( | ) | ||||||||||||||||
| Prepaid expenses, parts inventory, and advances | ( | ) | ||||||||||||||||
| Other receivables | ( | ) | ||||||||||||||||
| Projects under development | ( | ) | ||||||||||||||||
| Security Deposits & Other Advances | ( | ) | ||||||||||||||||
| Rights of use asset | ||||||||||||||||||
| Accounts payable and accrued liabilities (Note 12) | ( | ) | ( | ) | ||||||||||||||
| Loans payable (*) Note 13 | ( | ) | ( | ) | ||||||||||||||
| Long term loan payable | ( | ) | ||||||||||||||||
| Long-term operating lease obligation | ( | ) | ||||||||||||||||
| Reclassification | Total | ( | ) | |||||||||||||||
| (*) |
F-8
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 5. | Projects Under Development |
| BESS – SHEAF Project | BESS – Australian Projects | BESS – Italian Projects | FOWE (Fuel Oil Water Emulsification) Development | Total Projects Under Development (PUD) | ||||||||||||||||
| Balance at October 01, 2023 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
Capitalized costs for Sheaf Project in the current quarter comprise primarily initial payments under the battery supply agreement and balance of plant subcontract, as well as fees for establishment of lending facilities for the project: committed to on November 02, 2023. Capitalized projects under development costs for the BESS Sheaf Project were charged to cost of sales on December 22, 2023 on sale of the project to Sosteneo.
| 6. | Property and Equipment |
| Cost $ | Accumulated depreciation $ | December 31, 2023 Net carrying value $ | March 31, 2023 Net carrying value $ | |||||||||||||
| Building | ( | ) | ||||||||||||||
| Furniture and equipment | ( | ) | ||||||||||||||
| Computer equipment | ( | ) | ||||||||||||||
| Leasehold improvements | ( | ) | ||||||||||||||
| Total | ( | ) | ||||||||||||||
For
the three and nine months ended December 31, 2023, the Company recorded $
F-9
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 7. | Intangible Assets |
| Cost $ | Accumulated amortization $ | Cumulative impairment $ | December 31, 2023 Net carrying value $ | March 31, 2023 Net carrying value $ | ||||||||||||||||
| Patents and technical information | ( | ) | ( | ) | ||||||||||||||||
| Software licensing | ( | ) | ||||||||||||||||||
| Total | ( | ) | ( | ) | ||||||||||||||||
For
the three and nine months ended December 31, 2023, the Company recorded $
For
the three and nine months ended December 31, 2023, the Company has allocated $
| $ | ||||
| 2024 (remaining) | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | ||||
F-10
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 8. | Acquisitions |
| (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 $
Total
purchase consideration was therefore $
| (b) | Acquisition of BESS Italian Project Companies |
On
September 27 2023, the Company through its indirectly wholly owned subsidiary, Pacific Green Energy Parks (Italia) S.r.l. (“EPI”)
purchased
The
Company paid Sphera €
The
total consideration recognized of €
Under
the terms of the purchase agreement, the Company agreed to advance Sphera a further €
The
Company has also agreed to acquire the remaining
The Company has also signed development service agreements for the Italian Project Companies with Sphera.
F-11
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 9. | Disposal / Sale of Project Assets |
| (a) | Disposal of Subsidiaries (REP & PGBEP1) |
On
June 9, 2023, Pacific Green Energy Storage (UK) Ltd (“PGES”) and Green Power Reserves Ltd (“GPR”), a third party
investor entered into a sale and purchase agreement to sell their
The
purchase price paid by Sosteneo to PGES (UK) and GPR consisted of £
As a result of the sale, the
Company recognized a net gain on disposal of $
No gain was recorded in relation to the prospective milestone payments in the quarter ended June 30, 2023, as it was considered that the Company did not have the information needed to reasonably estimate whether or not performance milestones will be met.
In
the quarters ended September 30, 2023 and December 31, 2023, the Company has re-evaluated the performance milestones. Of the
£
In the quarter ended September 30, 2023, milestones with value of £
Backlog revenue for milestones that have
not yet been recorded as gain on disposal amounts to £
F-12
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 9. | Disposal / Sale of Project Assets (continued) |
| (a) | Disposal of Subsidiaries (REP & PGBEP1) (continued) |
The
Company also incurred £
| GBP | FX | USD | ||||||||||
| Consideration received (A) | ||||||||||||
| Net assets: | ||||||||||||
| Cash | ||||||||||||
| Projects under development | ||||||||||||
| Other assets | ||||||||||||
| Long term AP and accruals | ( | ) | ||||||||||
| Other liabilities & Non-controlling interest | ( | ) | ||||||||||
| Total (B) | ( | ) | ||||||||||
| Initial Investment in PGBEP (C) | ||||||||||||
| Gain (A)-(B)-(C) | ||||||||||||
In addition to the derecognition of the balances sold and recognition of the gain on sale of subsidiary, the SPA also includes certain contingent assets and liabilities which were not recorded in the statement of financial position as at June 30, 2023, due to their remote nature.
| (b) | Sale of project assets (Sheaf Energy Ltd and Pacific Green Battery Energy Parks 2 Limited). |
On
November 2, 2023, the Company entered into a transaction committing to sell
Upon
making the commitment to sale, the Company received a deposit of £
Prior to sale of the project on December
22, 2023, a total £
The
Company is also entitled to receive further deferred consideration upon achieving certain post sale construction milestones, being milestone
1: £
F-13
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 9. | Disposal / Sale of Project Assets (continued) |
| (b) | Sale of project assets (Sheaf Energy Ltd and Pacific Green Battery Energy Parks 2 Limited). (continued) |
Under
the construction management agreement, the Company is also entitled to receive a maximum £
Milestones 1,2, 3 and the CMA Contingency are assessed as having material risk of reversal. Accordingly no revenue
is recognized in relation to these constrained price components in the current quarter. Level of confidence of meeting remaining milestones
that have not yet been recorded as revenue will be re-assessed in future reporting periods.
| GBP | FX | USD | ||||||||||
| Cash payment on closing | ||||||||||||
| Debt of SHEAF | ||||||||||||
| Sheaf Storage Loan | ||||||||||||
| Capex Loan | ||||||||||||
| NatWest loan | ||||||||||||
| Leases | ||||||||||||
| Less: Cash | ( | ) | ( | ) | ||||||||
| Total revenue | ||||||||||||
On
October 16, 2023, the board of directors approved a performance-related bonus for Scott Poulter, Chief Executive Officer in relation
to the commitment to the Sheaf project, which comprises
| 10. | 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
Between
March 2022 and September 2022, Green Power Reserves Limited (“GPR”) made an equity investment of a total $
On
September 27, 2023, the Company purchased
| December 31, 2023 $ | March 31, 2023 $ | |||||||
| Non-redeemable noncontrolling interest | ||||||||
| Net (loss)/ income attributable to noncontrolling interest (BESS REP) | ( | ) | ||||||
| Net (loss)/ income attributable to noncontrolling interest (JV) | ( | ) | ( | ) | ||||
| Acquired noncontrolling interest (BESS Italy) | ||||||||
| Non-controlling interest | ||||||||
As
of December 31, 2023, net income attributable to noncontrolling interest was $
F-14
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 11. | Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, Contract Assets and Contract Liabilities |
| Three Months Ended December 31, 2023 $ | Three Months Ended December 31, 2022 $ | Nine Months Ended December 31, 2023 $ | Nine Months $ | |||||||||||||
| Products | ||||||||||||||||
| Services | ||||||||||||||||
| Total | ||||||||||||||||
Revenue from services include 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 Marine service contracts is recognized as the services are provided.
Revenue for BESS includes sale of project assets recognized on project sale, with deferred consideration constrained to amounts not at significant risk of future reversal. Revenue for BESS construction management fees is recognized on a cost to costs basis over the duration of the contract.
| Three Months Ended December 31, 2023 $ | Three Months Ended December 31, 2022 $ | Nine Months Ended December 31, 2023 $ | Nine Months $ | |||||||||||||
| Sale of marine scrubbers | ||||||||||||||||
| Sale of BESS projects | – | – | ||||||||||||||
| Total | ||||||||||||||||
| Three Months Ended December 31, 2023 $ | Three Months Ended December 31, 2022 $ | Nine Months Ended December 31, 2023 $ | Nine Months $ | |||||||||||||
| Specific services provided to marine scrubber systems | ||||||||||||||||
| BESS construction management agreement | ||||||||||||||||
| Design and engineering services for Concentrated Solar Power | ||||||||||||||||
| Total | ||||||||||||||||
F-15
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 11. | Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, Contract Assets and Contract Liabilities (continued) |
The Company has analyzed its sales contracts under ASC 606 and has identified that the percentage of completion of the contract often is not directly correlated with contractual 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.
As of December 31, 2023, contract liabilities
included $
| Accrued Revenue $ | Prepaid Manufacturing Costs $ | Sales (Cost of Goods Sold) $ | Contract Liabilities $ | |||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||
| Customer receipts and receivables | ( | ) | ||||||||||||||
| Scrubber sales recognized in revenue | ||||||||||||||||
| Payments and accruals under contracts | ( | ) | ||||||||||||||
| Cost of goods sold recognized in earnings | ( | ) | ( | ) | ||||||||||||
| Balance, March 31, 2023 | ( | ) | ||||||||||||||
| Customer receipts and receivables | ( | ) | ||||||||||||||
| Scrubber sales recognized in revenue | ||||||||||||||||
| Payments and accruals under contracts | ( | ) | ||||||||||||||
| Cost of goods sold recognized in earnings | ( | ) | ( | ) | ||||||||||||
| Balance, December 31, 2023 | ( | ) | ||||||||||||||
F-16
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 11. | Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, Contract Assets and Contract Liabilities (continued) |
| Three Months Ended December 31, 2023 $ | Three Months Ended December 31, 2022 $ | Nine Months Ended December 31, 2023 $ | Nine Months Ended December 31, 2022 $ | |||||||||||||
| Scrubber costs recognized | ||||||||||||||||
| BESS project costs recognized | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Amortization of intangibles | ||||||||||||||||
| Commission type costs | ||||||||||||||||
| Design and engineering services for CSP | ||||||||||||||||
| Specific services provided to marine scrubber systems | ||||||||||||||||
| BESS construction management services | ||||||||||||||||
| Total | ||||||||||||||||
| 12. |
December 31, $ | March 31, 2023 $ | |||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Other liabilities | ||||||||
| Payroll liabilities | ||||||||
| Total short-term accounts payable and accrued liabilities | ||||||||
| Balance, end of period | ||||||||
F-17
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 13. | Loans Payable |
On December 15, 2022, the Company signed a Loan
Agreement with Sheaf Storage Limited, for a total of $
On September 14, 2023, the Company signed
an addendum to the Loan Agreement, extending the term of the loan to be repayable on November 15, 2023, with revised repayment fee of
On September 20, 2023, the Company entered
into a number of separate loan agreements, six under English law and one under US Law with seven independent third party lenders for a
total of £
Each loan is split into
On November 02, 2023, the Company reached financial
close on a £
On November 02, 2023, PGBEP2 entered into a £
| December 31, 2023 $ | March 31, 2023 $ | |||||||
| Loans payable | ||||||||
| Long term loans payable | ||||||||
| Balance, end of period | ||||||||
F-18
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 14. | Warranty Costs |
During the nine months ended December
31, 2023, the Company recorded a net warranty recovery of $
| December 31, 2023 $ | March 31, 2023 $ | |||||||
| Balance, beginning of period | ||||||||
| Warranty expense / (recovery) | ( | ) | ( | ) | ||||
| Warranty (invoiced costs) / recovery | ( | ) | ||||||
| Balance, end of period | ||||||||
| 15. | Related Party Transactions |
| (a) | At December 31, 2023, the Company owed $ |
| (b) | During the three and nine months ended December 31, 2023, the Company incurred $ |
| (c) | During the three and nine months ended December 31, 2023, the Company incurred $ |
F-19
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 16. | Stock Options |
| Number of options | Weighted average exercise price $ | Weighted average remaining contractual life (years) | Aggregate intrinsic value $ | |||||||||||||
| Balance, March 31, 2022 | | |||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Balance, March 31, 2023 and June 30, 2023 | ||||||||||||||||
| Granted | ||||||||||||||||
| Balance, September 30, and December 31, 2023, vested and exercisable | * | |||||||||||||||
| (*) |
| Issued and Outstanding | ||||
| Number of shares | Weighted average remaining contractual life (years) | Exercise price $ | ||
Unless otherwise noted, the Company
estimates the fair value of its stock options using the Black-Scholes option pricing model, assuming no expected dividends, applying a
risk-free interest rate of
The estimated fair value of the stock
options is recorded over the requisite period to vesting. For the three and nine months ended December 31, 2023, the fair value of $
F-20
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 17. | Segmented Information |
| December 31, 2023 | ||||||||||||||||||||
| North America $ | Europe $ | Asia $ | Oceania $ | Total $ | ||||||||||||||||
| Property and equipment | ||||||||||||||||||||
| Intangible Assets | ||||||||||||||||||||
| Right of use assets | ||||||||||||||||||||
| Projects under development | ||||||||||||||||||||
| March 31, 2023 | ||||||||||||||||
| North America $ | Europe $ | Asia $ | Total $ | |||||||||||||
| Property and equipment | ||||||||||||||||
| Intangible Assets | ||||||||||||||||
| Right of use assets | ||||||||||||||||
| Three months ended December 31, 2023 | ||||||||||||||||||||
| North America $ | Europe $ | Asia $ | South America $ | Total $ | ||||||||||||||||
| Revenues by customer region | ||||||||||||||||||||
| COGS by customer region | ||||||||||||||||||||
| Gross Profit by customer region | ||||||||||||||||||||
| GP% by customer region | % | % | % | % | % | |||||||||||||||
F-21
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 17. | Segmented Information (continued) |
| Three Months Ended December 31, 2022 | ||||||||||||||||||||
| North America $ | Europe $ | Asia $ | South America $ | Total $ | ||||||||||||||||
| Revenues by customer region | ||||||||||||||||||||
| COGS by customer region | ||||||||||||||||||||
| Gross Profit by customer region | ||||||||||||||||||||
| GP% by customer region | % | % | % | % | % | |||||||||||||||
| Nine months ended December 31, 2023 | ||||||||||||||||||||
| North America $ | Europe $ | Asia $ | South America $ | Total $ | ||||||||||||||||
| Revenues by customer region | ||||||||||||||||||||
| COGS by customer region | ||||||||||||||||||||
| Gross Profit by customer region | ( | ) | ||||||||||||||||||
| GP% by customer region | % | % | ( | )% | % | % | ||||||||||||||
| Nine Months Ended December 31, 2022 | ||||||||||||||||||||
| North America $ | Europe $ | Asia $ | South America $ | Total $ | ||||||||||||||||
| Revenues by customer region | ||||||||||||||||||||
| COGS by customer region | ||||||||||||||||||||
| Gross Profit by customer region | ||||||||||||||||||||
| GP% by customer region | % | % | % | % | % | |||||||||||||||
For the three and nine months ended
December 31, 2023,
F-22
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 18. | Commitments |
| (a) |
| Long-term premises lease | Lease commencement | Lease expiry | Term (years) | Discount rate* | ||||||||
| London, United Kingdom | % | |||||||||||
| Shanghai, China | % | |||||||||||
| * |
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.
| Three Months Ended December 31, 2023 $ | Three Months Ended December 31, 2022 $ | Nine Months Ended December 31, 2023 $ | Nine Months Ended December 31, 2022 $ | |||||||||||||
| Operating lease expense * | ||||||||||||||||
| * |
| $ | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total future minimum lease payments | ||||
| Imputed interest | ( | ) | ||
| Operating lease obligations | ||||
| (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
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 $ |
F-23
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 19. | Income Taxes |
The majority of our revenues from international
Marine 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. BESS revenues are invoiced and collected by our U.K. entities.
| December 31, 2023 $ | December 31, 2022 $ | |||||||
| United States | ( | ) | ( | ) | ||||
| Foreign | ( | ) | ||||||
| Net profit / (loss) before taxes | ( | ) | ||||||
| December 31, 2023 $ | December 31 2022 $ | |||||||
| Net profit / (loss) before taxes | ( | ) | ||||||
| Statutory tax rate | % | % | ||||||
| Expected income tax expense / (recovery) | ( | ) | ||||||
| Tax exemption on share sale | ( | ) | ||||||
| Subpart F inclusion | ||||||||
| Permanent differences and other | ||||||||
| Foreign tax rate difference | ( | ) | ||||||
| Change in valuation allowance | ( | ) | ||||||
| Income tax provision | ||||||||
| Current | ||||||||
| Deferred | ||||||||
| Income tax provision | ||||||||
At December 31, 2023, the Company is current with statutory corporate income tax filings. Certain of the amounts presented above are based on estimates and what management believes are prudent filing positions. The actual losses available could differ from these estimates upon assessment and review by taxation authorities. U.S. federal and state income tax returns filed by us remain subject to examination for income tax years 2014 and subsequent. Canadian federal and provincial income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent. Income tax returns associated with our operations located in the United Kingdom and China are subject to examination for income tax years 2018 and subsequent.
F-24
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim Financial Statements
December 31, 2023
(Unaudited)
(Expressed in U.S. dollars)
| 19. | Income Taxes (continued) |
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
The Company estimates that it has brought forward accumulated estimated
net operating losses of approximately $
| 20. | Subsequent events |
On January 03, 2024, the Company repaid
a total $
F-25
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 Technologies (Canada) Inc. (Formerly Pacific Green Marine Technologies Inc.), a Canadian corporation, (8) Pacific Green Solar Technologies Inc., a Delaware corporation, (9) Pacific Green Technologies International Ltd., a British Virgin Islands company, (10) Pacific Green Technologies Asia Ltd., a Hong Kong company, (11) Pacific Green Technologies Engineering Services Limited (Formally Pacific Green Technologies China Ltd.), a Hong Kong company, (12) Pacific Green Technologies (Australia) Pty Ltd., an Australia company, (13) Pacific Green Technologies (Shanghai) Co. Ltd. (Formerly Shanghai Engin Digital Technology Co. Ltd.), a Chinese company, (14) Guangdong Northeast Power Engineering Design Co. Ltd., a Chinese company, (15) Pacific Green Energy Parks Inc., a Delaware corporation, (16) Pacific Green Energy Storage Technologies Inc., a Delaware corporation, (17) Pacific Green Energy Storage (UK) Ltd. (Formerly Pacific Green Marine Technologies Trading Ltd.), a United Kingdom company, (18) Pacific Green Portland West Pty Ltd., an Australian company, (19) Pacific Green Portland East Pty Ltd., an Australian company, (20) Pacific Green Energy Park Portland Pty Ltd., an Australian company, (21) Pacific Green Energy Parks Australian Pty Ltd., an Australian company, (22) Pacific Green Energy Park Limestone Coast North Pty Ltd., an Australian company, (23) Pacific Green Energy Park Limestone Coast West Pty Ltd., an Australian company, (24) Pacific Green Limestone Coast Pty Ltd., an Australian company, (25) Pacific Green Battery Energy Parks 2 Ltd., a United Kingdom company, (26) Sheaf Energy Ltd., a United Kingdom company, (27) Pacific Green Energy Parks (UK) Ltd., a United Kingdom company, (28) Pacific Green Energy Parks (Italia) srl, an Italian company, (29) Sphera Australe Srl, 51% owned, an Italian company, (30) Sphera Levante Srl, 51% owned, an Italian company, (31) Sphera Ponente Srl, 51% owned, an Italian company, (32) Sphera Boreale Srl, 51% owned, an Italian company, (33) Pacific Green Future Energy Inc, a Delaware corporation, (34) Pacific Green Portland North Pty Ltd., an Australian company, (35) Pacific Green Portland Northeast Pty Ltd., an Australian 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.
2
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 and registered its own technologies, patents and intellectual property from acquisitions and organic growth, and pursued opportunities globally for the development and marketing of the emission control technologies, including the ENVI-Systems™ emission control technologies: ENVI-Marine TM, ENVI-Pure TM and ENVI-Clean TM.
Since October 2020, the Company has developed Battery Energy Storage Systems (BESS) capabilities, initially through acquisition of Innoergy Limited. Since March 2021, the Company has acquired and developed two BESS projects of total 350MW in the United Kingdom, from early-stage origination and development through to financing, financial close of sale to an equity investor, and continued construction management towards commercial operation. In Q1 FY24 the Company closed the sale of REP project in the United Kingdom to Sosteneo, and on November 02, 2023, committed to the sale of Sheaf project to Sosteneo.
The Company has also added further origination stage projects to its portfolio, including a portfolio of 500MW of projects in Italy and 1GW of projects in Australia.
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. Our business provides turnkey and scalable end-to-end environmental and renewable technology solutions in the energy sector. Our technological platform has two main divisions:
| ● | Battery Energy Storage Systems (“BESS”); and |
| ● | Environmental Technologies (“ET”); |
Pacific Green plans to execute this vision by a 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 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 has enabled our entry into the BESS market; |
| ● | On March 18, 2021, the Company acquired Richborough Energy Park Limited (“REP”), 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; and |
| ● | On December 6, 2022 the Company acquired Sheaf Energy Limited which is being developed into our second BESS 249MW facility project. On November 02, 2023, the Company committed to sell the project to Sosteneo Fund 1 Holdco s.a.r.l. on November 02, 2023, and completed the sale on December 22, 2023. The Company will continue to participate and earn revenue from the project under the terms of a construction management agreement and milestone payments included in the sale agreement. |
| ● | On 27 September 27 2023, the Company purchased 51% of the equity capital in four Italian entities (the Italy Project Companies) with preliminary land agreements secured and preliminary grid interconnection offers accepted for five BESS projects in Italy, with total development potential of 500MW. The Company also paid an advance towards its future purchase of the remaining 49% of the Italy Project Companies. |
3
In support of this strategy, we have adopted a Human Resource approach that seeks to hire the best talent in the core areas of our business. At September 30, 2023, the Company employed approximately 42 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.
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”) with operating revenues in excess of USD$20 billion, 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, has supplied the batteries for the Richborough Energy Park and is contracted to supply the batteries for Sheaf project. |
| ● | On March 18, 2021, the Company signed a framework agreement with TUPA Energy Limited (“TUPA”) to gain exclusive rights BESS projects in the UK. TUPA is a UK-based company with expertise in planning, grid connections and land acquisition. The Company has to date executed 99MW in relation to the Richborough Energy Park project and 249MW in relation to the Sheaf Energy project. The framework agreement was terminated after the completion of the Sheaf Energy acquisition in December 2022. |
| ● | On June 13, 2023, the Company signed consulting agreements with GSMT consulting Pty Ltd to provide GPS studies and connection agreement support in the development of Limestone and Portland BESS sites in Australia. |
| ● | In addition to the agreement to purchase 51% of the Italy Project Companies from Sphera Energy S.r.l., on September 27, 2023 the Company signed a development services agreement with Sphera Energy S.r.l. to develop each of the five BESS projects owned by the Italy Project Companies, with the objective of issuance of a license to each Project Company that will allow the Italy Project Companies to build and operate the proposed BESS projects, and to reach ready to build status. |
| ● | On October 31, 2023, the Company signed a balance of plant subcontract with Keltbray Built Environment Limited, and a battery supply agreement with Hefei Gotion High-Tech Power Energy Co Ltd for the Sheaf project in the UK |
In addition to supply agreements, on December 2, 2020, the Company signed a joint venture and marketing agreement with AMKEST to assist with the promotion of the Company’s business activities 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. The postponement expired in December 2023 and $8.0 million revenue was recognized for this in the quarter-ended December 31, 2023 accordingly.
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 February 2024 and 250,000 shares in January 2025.
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On May 4, 2023, the Company entered into land option agreements with BZ Renewables Holdings PTY, in relation to sites with potential for BESS projects of 1GW capacity in Portland and Limestone Coast in Southern Australia.
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 26, 2023 the Company sold Richborough Energy Park (“REP”), a 99 MW BESS project in Kent, UK. The project is anticipated to begin operations in January 2024.
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 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.
On September 27, 2023, the Company purchased 51% of the capital in four Italy Project Companies from Sphera Energy S.r.l. (“Sphera”). Sphera established the Italy Project Companies for the development of five BESS projects in Italy of total 500 MW capacity.
On October 16, 2023, the board of directors approved a performance-related bonus for Scott Poulter, Chief Executive Officer in relation to the commitment to the Sheaf project, which comprises 4,500,000 shares in the Company which are issuable immediately upon the commitment being made, and $3,664,000 (£3,000,000) in cash, of which $3,053,000 (£2,500,000) is payable immediately upon the commitment being made, and $611,000 (£500,000) is payable in monthly instalments over 24 months.
On November 02, 2023, the company committed via a put and call option to the sale of Sheaf Energy Park, a 249 MW BESS project in Kent, England. The project is anticipated to begin commercial operations in mid-2025. On December 22, 2023 the Company exercised the option and sold the project to Sosteneo Fund 1 Holdco s.a.r.l..
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 and nine months ended December 31, 2023, and 2022.
Revenue for the three and nine months ended December 31, 2023 was $85,961,632 and $88,315,459 versus $3,639,992 and $6,859,221 for the three and nine months ended December 31, 2022. The Company’s revenues were derived from BESS project sales, BESS construction management services, scrubber sales, and scrubber services. During the three months ended December 31, 2023, revenue from BESS project sales was $75,704,255 (2022 - $nil), and the Company was in the process of commissioning 2 (2022 – 2) marine scrubber units which contributed to revenue of $314,255 (2022 – $699,289). During the three and nine months ended December 31, 2023, revenue from environmental technology services in the BESS, marine and solar businesses was $1,904,449 and $4,258,276 as compared to $1,386,771 and $2,251,553 for the three and nine months ended December 31, 2022.
During the nine months ended December 31, 2023, the gross profit margin for products and services were 28% (2022- 20%) and 8% (2022- 28%), respectively. Overall, the gross profit margin for the nine months ended December 31, 2023 was approximately 27% (2022 – 23%).
Expenses for the three and nine months ended December 31, 2023, were $12,322,409 and $27,267,740 as compared to $2,665,734 and $9,054,688 for the three and nine months ended December 31, 2022. Management and technical consulting fees increased due to increased activity in arising from the sale of REP/ BEP1 and SHEAF/BEP2 BESS Projects. 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, and professional fees also increased due to increased business activities and increased bonuses paid following the sale of REP/BEP1 and SHEAF/BEP2.
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During the three and nine months ended December 31, 2023, our company recorded a net income of $ 11,311,505 ($0.21 per share) and $12,445,507 ($0.22 per share) as compared to net loss of $2,052,361 ($0.05 per share) and $7,735,406 ($0.16 per share) for the three and nine months ended December 31, 2022.
Our financial results for the three months and nine months ended December 31, 2023 and 2022 are summarized as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 $ | 2022 $ | 2023 $ | 2022 $ | |||||||||||||
| Revenues | ||||||||||||||||
| Products | 84,057,183 | 2,253,221 | 84,057,183 | 4,607,668 | ||||||||||||
| Services | 1,904,449 | 1,386,771 | 4,258,276 | 2,251,553 | ||||||||||||
| Total revenues | 85,961,632 | 3,639,992 | 88,315,459 | 6,859,221 | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Products | 59,670,077 | 1,986,344 | 60,113,764 | 3,686,591 | ||||||||||||
| Services | 1,551,032 | 1,031,160 | 3,925,142 | 1,614,136 | ||||||||||||
| Total cost of goods sold | 61,221,109 | 3,017,504 | 64,038,906 | 5,300,727 | ||||||||||||
| Gross profit / (loss) | 24,740,523 | 622,488 | 24,276,553 | 1,558,494 | ||||||||||||
| Expenses | ||||||||||||||||
| Advertising and promotion | 131,303 | 120,230 | 334,286 | 421,903 | ||||||||||||
| Amortization of intangible assets | 629 | 639 | 1,934 | 1,989 | ||||||||||||
| Bad Debts Expense (recovery) | 3,766 | 36,341 | 59,990 | (10,193 | ) | |||||||||||
| Depreciation | 39,912 | 45,600 | 115,327 | 148,671 | ||||||||||||
| Foreign exchange (gain) / loss | 330,448 | (5,776 | ) | 1,394,647 | 98,545 | |||||||||||
| Management and technical consulting | 8,619,840 | 802,533 | 17,903,758 | 2,106,857 | ||||||||||||
| Office and miscellaneous expense | 701,906 | 509,864 | 1,656,308 | 1,499,940 | ||||||||||||
| Operating lease expense | 728,860 | 231,789 | 946,219 | 440,779 | ||||||||||||
| Professional fees | 563,098 | 547,538 | 826,255 | 1,295,198 | ||||||||||||
| Research and development | 112,323 | - | 256,664 | 13,772 | ||||||||||||
| Salaries and wages | 619,837 | 909,364 | 3,063,107 | 2,957,988 | ||||||||||||
| Transfer agent and filing fees | 111,213 | 15,278 | 147,539 | 46,075 | ||||||||||||
| Travel and accommodation | 342,732 | 197,252 | 580,484 | 596,482 | ||||||||||||
| Warranty and related (income) / expense | 16,542 | (744,918 | ) | (18,778 | ) | (563,318 | ) | |||||||||
| Total expenses | 12,322,409 | 2,665,734 | 27,267,740 | 9,054,688 | ||||||||||||
| Other income / (expense) | – | |||||||||||||||
| Provision for loan or debt | (951 | ) | – | (951 | ) | – | ||||||||||
| Financing interest income | (856 | ) | 32,790 | 188 | 89,090 | |||||||||||
| Gain on derecognition of a subsidiary | 944,938 | – | 18,567,829 | |||||||||||||
| Interest (expense) and other | (1,309,469 | ) | (220,300 | ) | (3,330,822 | ) | (298,011 | ) | ||||||||
| Income tax expense | (1,165,639 | ) | (1,165,639 | ) | ||||||||||||
| Net income/(loss) for the period before noncontrolling interest | 10,886,137 | (2,230,756 | ) | 11,079,418 | (7,705,115 | ) | ||||||||||
| Net (loss) /income attributable to noncontrolling interest | (34,063 | ) | (6,577 | ) | (392,903 | ) | 20,165 | |||||||||
| Net income/ (loss)for the period | 10,920,200 | (2,224,179 | ) | 11,472,321 | (7,725,280 | ) | ||||||||||
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Liquidity and Capital Resources
Working Capital
| December 31, 2023 $ | March 31, 2023 $ | |||||||
| Current assets | 25,804,927 | 3,757,334 | ||||||
| Current liabilities | 18,536,948 | 15,537,991 | ||||||
| Working capital (deficit) | 7,267,979 | (11,780,657 | ) | |||||
Cash Flows
| Nine Months Ended December 31, 2023 $ | Nine
Months | |||||||
| Net cash used in operating activities | (426,738 | ) | (6,094,070 | ) | ||||
| Net cash used in investing activities | (35,065,772 | ) | (31,902,457 | ) | ||||
| Net cash provided by financing activities | 46,272,906 | 34,947,926 | ||||||
| Effect of exchange rate changes on cash | 1,010,106 | (737,456 | ) | |||||
| Net change in cash and cash equivalents | 11,790,502 | (3,786,057 | ) | |||||
As of December 31, 2023, we had $13,064,240 in cash and cash equivalents, $25,804,927 in total current assets, $ 18,536,948 in total current liabilities and a working capital of $ 7,267,979. compared to a working capital deficit of $11,780,657 as at March 31, 2023. The Company’s working capital increased primarily due to generation of cash and receivables from sale of REP and Sheaf projects.
During the nine months ended December 31, 2023, we used $426,738 in operating activities, whereas we used $6,094,070 from operating activities for the nine months period ended December 31, 2022. The operating cash flow for the nine months ended December 31, 2023, resulted primarily from the sale of Sheaf project, offset by a rise in account receivables and other receivables.
During the nine months ended December 31, 2023, we used $35,065,772 in investing activities, whereas we used $31,902,457 in investing activities during the nine months ended December 31, 2022. Our investing activities for the nine months ended December 31, 2023, comprised primarily additions of projects under development for Sheaf and Australian projects, also investment in Italian Project Companies, offset by proceeds from disposal of REP project.
During the nine months ended December 31, 2023, we received $46,272,906 in financing activities, whereas we received $34,947,926 in financing activities for the nine months ended December 31, 2022. Our financing activities for the nine months ended December 31, 2023 were related to drawdown on debt facilities for REP and Sheaf projects prior to project sales, proceeds from short term loans, offset by repayment of short-term loans.
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Anticipated Cash Requirements
The Company expects to collect a further $6 million from milestone payments on REP project as the project achieves commercial operation and further testing results. The Company expects to raise development finance for Australia portfolio in early 2024, and also raise further corporate capital of more than $10 million, to support growth of the BESS projects in particular.
These sources of funds will enable the Company to meet budgeted development expenditure plans of the Australian and Italian project portfolios, support BESS related business development activity in Europe and provide working capital to cover all operating costs and overheads.
As of December 31, 2023, the Company had $13.1 million cash on hand. After careful consideration we believe current operations, anticipated deliveries and services expected profit from such deliveries, sales of products and services in our BESS and environmental technology businesses 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, Australia and Italy. 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 December 31, 2023 have been prepared on a going concern basis.
The assessment of the liquidity and going concern requires the Company to make judgments about the existence of conditions or events that raise substantial doubt about the ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. This includes judgments about the Company’s future activities and the timing thereof and estimates of future cash flows. Significant assumptions used in the Company’s forecasted model of liquidity include forecasted sales, costs, and capital expenditures. Changes in the assumptions could have a material impact on the forecasted liquidity and going concern assessment.
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Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Estimates
The preparation of these consolidated financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.
Impairment of Long-lived Assets
We review long-lived assets such as property and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. The determination of whether impairment indicators exist requires significant judgment in evaluating underlying significant assumptions including expected sales contracts, operating costs, and current market value of assets. If an indication is identified, and the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset.
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.
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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.
Following the sale of the REP project to Sosteneo in June 2023, the Company has implemented a new strategy of originating, developing and selling battery energy storage systems (BESS) projects, as opposed to the prior policy of developing and owning such projects. Under the new strategy, the Company has identified the following income streams from BESS projects:
For sale of BESS projects (Including Sales of Ownership Interests in Project Companies) developed by the Company through to Ready to Build (RtB) stage, where risks and rewards of ownership fully pass to the buyer of the projects on sale, projects are deconsolidated on sale in accordance with ASC 810. For BESS projects sold prior to becoming operational, that do not contain a workforce, and are non-financial assets, the sale is considered sale of an asset under ASC 610, rather than sale of a business. As a result of the change in strategy as discussed above, sale of BESS projects is considered to be the entity's normal operating activity and is recorded under revenue from operations using the 5-step approach under ASC 606 to identify performance obligations and allocate transaction price. Where risk and reward of ownership have fully passed to the buyer on sale, proceeds from sale of projects are recognized as revenue on the transfer of control to the buyer. Sale proceeds contingent on achieving future milestones that have a material risk of not being achieved are constrained and not recognized initially at the point of disposal. Such amounts will be reviewed in each reporting period to assess risk of reversal, and adjustments to constrained amounts and revenue made accordingly.
The Company has also evaluated the impact of sale of BESS projects with significant project financing components included within the assets and liabilities of the project entities disposed of. This includes debt and cash financial instruments remaining outstanding and payable in the project entities at disposal, and so taken on as financial instruments by the acquiring company. Under the terms of sale, where no net debt repayment prior to disposal has occurred, management have made the assessment that the debt less cash financial instruments included within the entities disposed of, forgiven by the acquiror, should be recorded as additional consideration on sale and hence included in revenue.
In the quarter ended December 31, 2023, this resulted in a gross up of revenues of $60.1 million in relation to the net debt at disposal of the Sheaf project, that would otherwise have been recorded as an offset to cost of sales, being the cost of the project assets financed by the financing arrangements.
Total revenue recognized for sale of BESS projects includes therefore:
| ● | Cash proceeds paid by purchaser; |
| ● | Net debt forgiven by purchaser; |
| ● | Deferred consideration receivable for future milestones post project sale, less constrained amounts where risk of revenue reversal due to partial / non achievement of milestone criteria is material. |
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Under the new strategy, project assets and liabilities are not being held as long-term assets of the company, and are expected to be sold within 12 months. As a result, balances in consolidated BESS project entities are included in the appropriate balance sheet line items, instead of assets held for sale. Project costs incurred prior to sale are capitalized as projects under development within current assets, and treated as cost of sales on disposal. Project financing liabilities are capitalized as separately identified loans, in liabilities of projects under development within current liabilities. Loan forgiveness on disposal is included as part of consideration within revenue as above.
Revenue from construction management fees is recognized as the services are performed over time, using a cost to cost method.
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 December 31, 2023.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023.
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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 United States Generally Accepted Accounting Principles. 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 United States Generally Accepted Accounting Principles , 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 December 31, 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.
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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
| (31) | Rule 13a-14 (d)/15d-14d) Certifications | |
| 31.1* | Section 302 Certification by the Principal Executive Officer | |
| 31.2* | Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| (32) | Section 1350 Certifications | |
| 32.1* | Section 906 Certification by the Principal Executive Officer | |
| 32.2* | Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| 101* | Interactive Data Files | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
13
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: February 20, 2024 | By: | /s/ Scott Poulter |
| Scott Poulter | ||
| Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| Dated: February 20, 2024 | By: | /s/ James Tindal Robertson |
| James Tindal-Robertson | ||
|
Chief Financial Officer (Principal Financial Officer and | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Dated: February 20, 2024 | By: | /s/ Scott Poulter |
| Scott Poulter | ||
| Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| Dated: February 20, 2024 | By: | /s/ James Tindal-Robertson |
| James Tindal-Robertson | ||
|
Chief Financial Officer (Principal Financial Officer and |
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