PACIFIC GREEN TECHNOLOGIES INC. 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
Our financial statements are stated in
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in
As used in this quarterly report and unless otherwise indicated, the terms "we",
"us", "our", the "Company", and "our company" mean
Corporate History
Our company was incorporated in
On
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Effective
? 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
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
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
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Vision & Strategy
? Emission Control Systems ("ECS");
? Concentrated Solar Power ("CSP"); and
? Battery Energy Storage Systems ("BESS");
In all the above areas,
? onDecember 20, 2019 , the Company closed the acquisition ofShanghai 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 inChina comprise over 150MW and we are now in talks to provide CSP alongside future ammonia and hydrogen production facilities inAsia andSouth America ; ? onOctober 20, 2020 , the Company closed the acquisition ofInnoergy Limited ("Innoergy"), aUK based designer of BESS whose clients included Osaka Gas Co. Ltd, inJapan , andLimejump Limited in theUK , a subsidiary of Shell plc. The acquisition underpins our entry into the BESS market; and ? onMarch 18, 2021 , the Company acquiredRichborough Energy Park Limited ("Richborough"), a BESS development project to deliver 100MW of energy inKent, UK .
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
Strategic Partnerships
The Company has entered into several partnership and framework agreements in the core areas of our business.
On
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
Battery Energy Storage Systems ("BESS")
On
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On
In addition to supply agreements, on
Significant Events
On
On
On
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
Revenue for the three months ended
During the three months ended
Expenses for the three months ended
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Additionally, the delivery of units resulted in warranty provision being
recorded for possible maintenance and claim issues within a prescribed period.
For the three months period, the Company recorded a warranty expense of
The three months ended
Our financial results for the three months endedJune 30, 2022 and 2021 are summarized as follows: Three Months Ended June 30, 2021 (As restated- 2022 Note 2) $ $ Revenues Products 1,655,158 742,290 Services 368,718 580,960 Total Revenues 2,023,876 1,323,250 Cost of goods sold Products 987,207 1,230,119 Services 241,336 290,890 Total Cost of goods sold 1,228,543 1,521,009 Gross profit 795,333 (197,759 ) Expenses Advertising and promotion 143,267 168,895 Amortization of intangible assets 688 171,124 Depreciation 53,584 49,766 Foreign exchange loss (gain) 497,696 11,873 Management and technical consulting 989,084 745,552 Operating lease expense 109,737 123,155 Office and miscellaneous expense 462,769 378,263 Professional fees 287,025 276,669 Research and development 13,772 - Salaries and wages 982,914 1,255,206 Transfer agent and filing fees 13,754 13,175 Travel and accommodation 190,767 66,113 Warranty and related 181,600 (39,807 ) Total expenses 3,926,657 3,219,984 Other Income Financing interest income 46,269 97,626 Interest income (expense) and other (38,351 ) 58,414
Net (Loss) / Income for the period before noncontrolling interest (3,123,406 ) (3,261,703 ) Share of (Loss)/Income attributable to noncontrolling interest
135,824 -
Net (loss)/ Income for the period (3,259,230 ) (3,261,703 )
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Liquidity and Capital Resources
Working Capital
June 30, March 31,
2022 2022
$ $
Current Assets 11,711,039 24,854,658
Current Liabilities 16,246,602 19,079,665
Working Capital (Deficit) (4,535,563 ) 5,774,993
Cash Flows
June 30, March 31,
2022 2022
$ $
(6,978,986 ) (24,005 )
Effect of Exchange Rate Changes on Cash (1,121,996 ) 43,056
Net Change in Cash and Cash Equivalents (1,788,955 ) (5,467,918 )
As of
During the three months ended
During the three months ended
Anticipated Cash Requirements
We do not anticipate requiring additional funds to fund our forecast normal
operating expenditure over the next 12 months. We do require funds to construct
our first BESS 99.98MW facility project at Richborough Energy Park in
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
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Should we require additional funding over the next twelve months, we would intend to raise new cash requirements from private placements, shareholder loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such efforts, we may review other financing possibilities such as bank loans. At this time, we do not have a commitment from any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us.
As of
Going Concern
Our financial statements for the quarter ended
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.
Useful lives of Intangible Assets
The carrying value of our intangible assets represents its original cost at the time of purchase, less accumulated amortization. We depreciate our intangible assets using the straight-line method over their estimated useful lives. The estimated useful life of our intangible assets are listed in the table below.
Patents 17 years straight-line
Software licensing 10 years straight-line
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Impairment of Long-lived Assets
We review long-lived assets such as property and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. The determination of whether impairment indicators exist requires significant judgment in evaluating underlying significant assumptions including expected sales contracts, operating costs, and current market value of assets. If an indication is identified, and the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset.
We recorded an impairment charge of
Goodwill
We allocate the cost of acquired companies to the identifiable tangible and
intangible assets and liabilities acquired, with the remaining amount being
classified as goodwill. The allocation of the purchase price of acquired
companies requires certain judgments and estimates.
We recorded an impairment charge of
Revenue Recognition
We derive revenue from the sale of products and delivery of services. Irrespective of the types of revenue described above, revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those promised products or services. The Company's marine scrubber sales contracts contain a single performance obligation satisfied over time.
Revenue recognition requires significant judgements from management in regard to the determination of accounting treatment for contracts with customers. Management is required to assess contracts with customers to identify whether performance obligations in the contract are distinct and to determine whether contract terms provide the Company with a basis to recognize revenue over time.
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. The Company's 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 the Company's 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 Company concluded that revenue should be recognized over time. The Company recognizes revenue based on the input method using a percentage of costs to complete.
In the case of settlement agreements with customers where no continued performance obligation is required, we recognize revenue based on consideration settled according to the agreement.
A contract signed with one customer has a significant financing component. 20% of the contract price is payable at least 6 calendar months prior to the dry dock date. The remaining 80% is payable in 24 equal monthly installments starting at the end of the calendar month following the installation date on a vessel-by-vessel basis. As 80% of the contract price is payable after the last performance obligation towards the scrubber, a significant financing component is separated from revenue and interest income at 5.4% is recorded when payments are received from the customer.
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Contract Liabilities, Prepaid Manufacturing Costs, and Accrued Revenue
We have analyzed our sales contracts under ASC 606 and identified performance conditions that are not directly correlated with contractual billing terms with customers. As a result of the timing differences between customer sales invoices and satisfaction of performance conditions, contractual assets and contractual liabilities have been recognized.
Contractual arrangements with customers for the sale of a scrubber unit generally provide for deposits and installments through the procurement and design phases of equipment manufacturing. Amounts invoiced to customers, which are not yet recorded as revenues under the Company's revenue recognition policy, are presented as contract liabilities.
Similarly, contractual arrangements with suppliers and manufacturers normally involved with the manufacturing of scrubber units may require advances and deposits at various stages of the manufacturing process. Payments to our manufacturing partners, which are not yet recorded as costs of goods sold under the Company's revenue recognition policy, are recorded as prepaid manufacturing costs.
The Company presents the contract liabilities and prepaid manufacturing costs on its balance sheet when one of the parties to the revenue contract and supply contract, respectively, has performed before the other.
Accrued revenue is revenue that has been earned by providing a good or service, but for which the Company has not yet billed the customer.
Accounts Receivable
We assess the collectability of accounts receivable and long-term receivable on an ongoing basis and establish an allowance for doubtful accounts when collection is no longer reasonably assured. In establishing the allowance, we consider factors such as known troubled accounts, historical experience, age, financial information that is publicly accessible and other currently available evidence.
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.
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