Item 1. Business
This annual report contains forward-looking
statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking
statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”,
“believes”, “estimates”, “predicts”, “potential” or “continue” or the
negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or
our industry’s actual results, levels of activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to
update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated
in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise
specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to
the common shares in our capital stock.
As used in this annual report and
unless otherwise indicated, the terms “we”, “us”, “our” and “our company” mean
Pacific Green Technologies Inc., a Delaware corporation, and our wholly owned subsidiaries, Pacific Green Technologies Limited,
a United Kingdom corporation, Pacific Green Energy Parks Limited, a British Virgin Islands corporation, and its wholly owned subsidiary,
Energy Park Sutton Bridge, a United Kingdom corporation, 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 last five years, we have sought out new business opportunities.
On June 13, 2012, we changed our
name to Pacific Green Technologies Inc. and effected a reverse split of our common stock following which we had 27,002 shares of
common stock outstanding with $0.001 par value.
Effective December 4, 2012, we filed
with the Delaware Secretary of State a Certificate of Amendment of Certificate of Incorporation, wherein we increased our authorized
share capital to 510,000,000 shares of stock as follows:
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500,000,000 shares of common stock with a par value of $0.001; and
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10,000,000 shares of preferred stock with a par value of $0.001.
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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.
Historical Business Overview
On May 1, 2010 we entered into a
consulting agreement with Sichel Limited. Sichel has investigated new opportunities for us and has subscribed for new shares of
our company’s common stock. The consulting agreement entitles Sichel to $20,000 per calendar month. With an effective date
of March 31, 2013, the consulting agreement, along with all amounts owed to Sichel, were assigned to Pacific Green Group Limited
(“
PGG
”). As at our year ended March 31, 2017, we owed Sichel $Nil and we owed PGG approximately $3,945,833 in
loans and unpaid management fees. Pursuant to the terms of the consulting agreement, if we are unable to pay the monthly consulting
fee, PGG may elect to be paid in shares of stock.
Details of other material contracts
and commitments follows the New Strategy and Current business section.
New Strategy and Current business
Since 2012, the Company has focused
on marketing, developing and acquiring technologies designed to improve the environment by reducing pollution. The Company has
acquired technologies, patents and intellectual property from EnviroTechnologies Inc. through share transfer, assignment and representation
agreements entered into during 2012 and 2013. Following those acquisitions, management has expanded the registration of intellectual
property rights around the world and pursued opportunities globally for the development and marketing of the emission control technologies.
Working with a worldwide network
of agents to market the ENVI-Systems™ emission control technologies, the Company has focused on three applications of the
technology:
ENVI-Marine
TM
Diesel exhaust from ships, ferries
and tankers includes ash and soot as particulate components and sulphur dioxide as an acid gas. Testing has been conducted on diesel
shipping to confirm the application of seawater as a neutralizing agent for sulphur 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.
The Company has manufactured the
components for an ENVI-Marine unit to be installed in Union Maritimes’ (Union) MV Westminster chemical ship during the summer
of 2017. Under the terms of an Energy Management Lease dated December 16, 2016, following acceptance of the unit by Union, they
will make quarterly payments to the Company determined on their savings realized by the ENVI-Marine units’ operation up to
an aggregate of $1,995,000.
The Company has been actively marketing
its ENVI-Marine™ units to ship brokers and ship owners through most of the year.
ENVI-Pure
TM
Increasing legislation relating
to landfill of municipal solid waste has led to the emergence of increasing numbers of waste to energy plants (“
WtE
”).
A WtE plant obviates the need for landfill, burning municipal waste for conversion to electricity. A WtE plant is typically 45-100MW.
The ENVI-Clean™ system is particularly suited to WtE as it cleans multiple pollutants in a single system.
ENVI-Clean
TM
EnviroTechnologies Inc. has successfully
conducted sulphur dioxide demonstration tests at the American Bituminous Coal Partners power plant in Grant Town, West Virginia.
The testing achieved a three test average of 99.3% removal efficiency. The implementation of US Clean Air regulations in July 2010
has created additional demand for sulphur dioxide removal in all industries emitting sulphur pollution. Furthermore, China consumes
approximately one half of the world’s coal, but introduced measures designed to reduce energy and carbon intensity in its
12th Five Year Plan. Applications include regional power facilities and heating for commercial buildings and greenhouses. Typical
applications range in size from 1 to 20 megawatts (MW) with power generation occupying the larger end of the range.
Following the signing of a joint
venture agreement with Power China SPEM, subsequent to year end an ENVI-Clean™ was sold to a steelworks company in Yancheng
to remove SO
2
from its 93MW gas combustion powerplant.
The ENVI-Clean™ system removes
most of the sulphur dioxide, particulate matter, greenhouse gases and other hazardous air pollutants from the flue gases produced
by the combustion of coal, biomass, municipal solid waste, diesel and other fuels.
The ENVI-Clean™ system is
comprised of five components:
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an induced draft fan (“ID fan”);
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a gas conditioning chamber;
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the ENVI-Clean™ unit;
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a demister; and
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settling tanks.
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The ID fan creates the pressure
differential required to force the gas through the scrubbing fluid suspended on each head and move it through the other components
in the system. The gas conditioning chamber cools the hot flue gas prior to entering the ENVI-Clean™ System. The ENVI-Clean™
System contains the heads and the demister pads at the exhaust exit. The neutralizing fluid is constantly circulated and cleaned
by mechanical means with the contaminated component of the separation going to a settling tank prior to dewatering. The settled
solids are disposed of with the bottom ash produced by the combustion process.
The ENVI-CES™ technology forces
100% of the polluted exhaust flue gas into the neutralizing fluid to produce a highly turbulent interaction between the target
pollutants and the fluid. The aggressive mixing produces small bubbles which create a very high surface contact area between the
exhaust gas and fluid to enhance the transfer of particulate and targeted gaseous and hazardous pollutants from the exhaust to
the fluid.
Schematic of the ENVI-Clean™
Emission’s System as installed for Biomass applications
Unique to the ENVI approach is the
introduction of the gas in the lower section of the ENVI-Clean™ unit which makes the greatest portion of its cross section
available for fluid–gas interaction. This permits a smaller and highly flexible footprint. Furthermore, the system design
allows for multiple heads each containing different neutralizing fluids to remove various pollutants from the flue gas. The ordered
removal of acid and greenhouse gases within a single unit makes the system highly desirable by industries whose fuels contain multiple
contaminants. The resulting ENVI-Clean™ unit has high efficiency and is very simple to operate.
The neutralizing solution is selected
to remove targeted pollutants: limestone and hydrated lime are used to neutralize the scrubbing solution for the removal of acid
gases such as sulphur dioxide, hydrogen chloride and hydrogen fluoride. The unique design of the ENVI system allows for the sequential
removal of pollutants by stacking heads and utilizing different neutralizing chemistry in each operating unit. This provides industry
with a system that fulfills multiple applications.
The ENVI-Clean™ system has
numerous new and retrofit applications:
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coal and coal waste fuelled CFBC boilers;
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pulverized coal and stoker-grate boilers;
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heavy oil fired boilers;
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biomass and waste to energy boilers;
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lime kilns, dryers, shredders and foundries;
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industrial exhaust scrubbing of particulates and acid gases;
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diesel engines, large marine and stationary engines; and
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sewage sludge, hazardous waste and MSW incinerators.
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Significant transactions
Management, assisted by PGG, identified
an opportunity to build a business focused on marketing, developing and acquiring technologies designed to improve the environment
by reducing pollution. To this end, we entered into and closed an assignment and share transfer agreement, on June 14, 2012, for
the assignment of a representation agreement and the acquisition of a company involved in the environmental technology industry.
The assignment and share transfer
agreement provided for the acquisition of 100% of the issued and outstanding shares of Pacific Green Technologies Limited, formerly
PGG’s subsidiary in the United Kingdom. Additionally, PGG has assigned to our company a ten year exclusive worldwide representation
agreement with EnviroTechnologies Inc., (formerly EnviroResolutions, Inc.), a Delaware corporation, to market and sell EnviroTechnologies’
current and future environmental technologies. The representation agreement entitles PGG to a commission of 20% of all sales (net
of taxes) generated by EnviroTechnologies. Pursuant to the terms of the assignment and share transfer agreement, all rights and
obligations under the representation agreement have been transferred to our company. We currently anticipate that sales under the
representation agreement will be our sole source of revenue for the foreseeable future. We had intended to complete an acquisition
of EnviroTechnologies, as this would have been a logical step in our development. However, as discussed herein, we have settled
with EnviroTechnologies as an alternative.
Both Sichel and PGG are wholly owned
subsidiaries of the Hookipa Trust. PGG’s wholly owned subsidiary was Pacific Green Technologies Limited. As a result, we
acquired Pacific Green Technologies Limited from PGG. Sichel is a significant shareholder of our company and also provides us with
consulting services. The sole director of Sichel is also the sole director of PGG. Further, PGG is a significant shareholder of
EnviroTechnologies.
The assignment and share transfer
agreement closed on June 14, 2012 via the issuance of 5,000,000 shares of our common stock as well as a $5,000,000 promissory note
to PGG. We have consequently undertaken the operations of Pacific Green Technologies Limited and PGG’s obligations under
the representation agreement.
Full consideration contemplated
by the assignment and share transfer agreement was $25,000,000 satisfied through the issue of 5,000,000 new shares of our common
stock at a price of $4 per share with the balance of $5,000,000 structured as a promissory note over the next five years as follows:
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June 12, 2013, $1,000,000 (which amount remains outstanding and has been rolled over to the following payment date);
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June 12, 2014, $1,000,000 (this amount remains unpaid);
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June 12, 2015, $1,000,000 (this amount remains unpaid);
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June 12, 2016, $1,000,000(this amount remains unpaid) and;
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June 12, 2017, $1,000,000. (this amount remains unpaid);
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Under the terms of the promissory
note, the loan repayments specified above shall not exceed the amount we earn under the terms of the representation agreement.
If we are unable to meet the repayment schedule set out above, PGG will have the option to either roll over any unpaid portion
to the following payment date or to convert the outstanding amount into new shares of our common stock. However, the entire amount
of the promissory note is due upon the maturity date on the fifth anniversary. The promissory note is unsecured.
The total consideration of $25,000,000
was a purchase price not determined under U.S. GAAP, and both the $25,000,000 total price and the deemed price of $4 per share
does not represent the fair value of the stock issued or a value used in accounting for the acquisition. The number of shares issued
and the terms of the promissory note were negotiated between the parties and are intended to represent full consideration for the
acquisition of Pacific Green Technologies Limited and the representation agreement.
Our management believes that the
ENVI-Clean™ system has significant competitive advantages in the market for emission control systems including:
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Efficiency
: tests performed at an 84MW coal power plant in West Virginia (USA) indicate that the ENVI-Clean™ system removed on average 99.3% of sulfur dioxide over a three day period from the plant’s emissions;
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Low Capital Cost
: the system has a compact and flexible footprint relative to competitive products. For electricity generation applications, EnviroTechnologies’ system is priced for market at approximately $90 per kilowatt of electricity generation. In comparison, industry consultants state that comparable systems in North America are typically priced at $300-500 per kilowatt (Source: High Energy Services/Babcock & Wilson-wet scrubber systems for S02 removal in North America);
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Low Ongoing Operating Cost
: the ENVI-Clean™ system is more affordable in the long term for customers compared to competitor products;
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New and Retrofit Applications
: for retrofit applications in particular (as required by the 2011 EPA Boiler MACT Requirements), the system is considered by management to be more compact and adaptable than rival systems;
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Scalability
: the ENVI-Clean™ system can be adapted for the largest power stations but also smaller applications such as diesel marine engines. It can also remove multiple pollutants in a single system, unlike much of the competition.
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On October 5, 2011, EnviroResolutions,
a British Columbia corporation, signed a contract to supply the ENVI-Clean™ system to a new waste to energy plant being built
in Peterborough, United Kingdom (the “Peterborough Contract”). The initial material term and condition of the contract
was that EnviroResolutions demonstrate testing of the system that achieved the performance levels represented in regards to emissions
by March 31, 2012. This condition was successfully satisfied and confirmed with Peterborough Renewable Energy Limited (“
PREL
”)
prior to the required date. The Peterborough Contract entitles us, as the holder of the representation agreement, to a commission
of approximately $4,600,000 before third party agency fees.
Effective March 5, 2013, we entered
into a supplemental agreement with EnviroTechnologies and EnviroResolutions. The supplemental agreement amends the representation
agreement between PGG and EnviroTechnologies dated June 7, 2010, which was later assigned to us from PGG in connection with an
assignment and share transfer agreement dated June 14, 2012. The supplemental agreement entitles our company to a commission of
equal to 50% (previously 20%) of any licensing revenue that may be generated by EnviroTechnologies Inc. in respect of its existing
and future technologies.
In addition, pursuant to the supplemental
agreement, we will receive from EnviroResolutions an amount equal to 50% of any assets or consideration received as compensation
from PREL for PREL’s failure to perform under a contingent sale agreement dated October 5, 2011 between EnviroResolutions
and PREL. We will receive the fee for our assistance to EnviroResolutions during their negotiations with PREL regarding PREL’s
failure to perform. The fee, if any, provided to us will not constitute any repayment of our loans that were made to EnviroResolutions.
The supplemental agreement supplements
the Peterborough Contract dated October 5, 2011 entered into among EnviroResolutions, PREL and GEPL. Pursuant to the Peterborough
Contract, EnviroResolutions was to supply PREL with a wet scrubbing emission control system to a proposed waste to energy plant
being built in Peterborough, United Kingdom.
Information on Pacific Green
Technologies Limited
Pacific Green Technologies Limited
is a limited liability company incorporated under the laws of England and Wales on April 5, 2011 (“
PGT
”). The
director of PGT was Mr. Joseph Grigor Kelly. On November 7, 2012, Mr. Joseph Grigor Kelly tendered his resignation to the board
of directors. PGT has no employees. Concurrently, Neil Carmichael consented to and was appointed as the sole director and chief
executive and financial officer of PGT.
The purpose of incorporating PGT
was to utilize local knowledge and contacts to build a platform for sales in the following regions: Western Europe, Eastern Europe,
Russian Federation, Turkey, Middle East, Azerbaijan, Kazakhstan and Africa. However, our company has found that the cost to have
physical presence in England far out weights the benefit. As a result, PGT is now in the process of being dissolved as of the date
of the filing of this annual report.
Information on Pacific Green
Energy Parks Limited
Pacific Green Energy Parks Limited
(“PGEP”) sees an opportunity to develop renewable power stations with capacities up to 50MW in the biomass and waste
to energy sectors. In addition to their positive impact on the world’s environment, these projects have the potential to
deliver a sustainable post-tax equity IRR and may provide our company with an opportunity to deploy its technologies. To this end
our company has been identifying and investigating appropriate projects worldwide.
On March 26, 2012, PGEP reached
an agreement with the shareholders of Energy Park Sutton Bridge Limited (“EPSB”), whereby PGEP would fund a planning
application for the development of a biomass energy plant in return for a 75% shareholding in EPSB. EPSB was incorporated in the
UK in 2009 to develop a 49 MW biomass energy plant in Sutton Bridge, Lincolnshire, UK. A planning application for EPSB was submitted
to South Holland District Council (“
SHDC
”) on September 4, 2012.
On March 5, 2013, PGEP acquired
the remaining 25% of EPSB. On May 8, 2013, EPSB secured planning permission for a 49MW biomass power plant at Sutton Bridge, Lincolnshire.
The facility will have an installed
energy capacity of 49MW. The export capacity of the facility will be circa 44MW. The electricity will be supplied to the National
Grid. Heat from the operation will be used within the facility and the ancillary buildings whilst off-take points will be provided
for future combined heat and power needs in the area. The location of the plant alongside an existing industrial estate and in
proximity of an area proposed for future industrial expansion makes the realization of the potential for combined heat and power
more likely than in other possible locations. EPSB has secured options to purchase the freehold of the Energy Park site from the
land owners.
Biomass is considered to be carbon
neutral because the quantity of CO
2
released during combustion is the same as that absorbed by plants as a result
of photosynthesis during their growth. This differs from fossil fuels in that, although both originating from organic matter, the
carbon in fossil fuels has been locked away for millions of years, and when released during combustion, results in a net increase
in CO
2
levels in the atmosphere.
Biomass is also considered environmentally
sustainable as in many cases it is derived from by-products of other industries such as agriculture and forestry management. This
contains a closed carbon cycle with no net increase in atmospheric CO
2
levels. As a result, EPSB will be entitled
to renewables obligation certificates (“
ROCs
”) under the UK’s Renewable Obligation regime. As of April
2016, pure biomass will be afforded 1.4 ROCs/MWh of electricity produced, for a 20 year tariff period. EPSB’s forecasts assume:
EPSB will recover energy from virgin
wood using steam turbine technology. The plant will require approximately 325,000 tonnes of virgin wood per annum (“
Feedstock
”).
Following discussions with industry
experts, engineers, consultants and financiers, our company estimates that EPSB should cost approximately £165,000,000 to
construct. Once the project is “spade ready”, construction should take 2 years. Previously, we anticipated that the
project would be “spade ready” by March 2014. However, our company’s application for planning consent was not
accepted by council and we resubmitted our application on June 20, 2014. The EPC contractor will provide a fixed cost turnkey completion
guarantee. Planning consent was again turned down April 2015.
A detailed carbon assessment has
been submitted within the EIA presenting the carbon savings offered by the operation of the facility.
The project will deliver combined
heat and power (“
CHP
”) infrastructure. Our company is investigating potential opportunities for supplying local
heat customers at both existing and potential new developments off site. EPSB will maintain an open dialogue with the local authority
and will ensure that an appropriate boiler and turbine design is selected to facilitate the distribution of heat.
Currently our company is identifying
and assessing further renewable power plant developments that are complimentary to the use of ENVI-Emissions Systems where possible.
Securing additional financial
and human capital
We have limited capital and four
directors. It is anticipated that we will expand our management team to fully exploit the representation agreement and it will
also therefore be necessary to raise financial capital. We will therefore proactively seek the raising of additional financial
capital.
Form of any subsequent acquisitions
The manner in which we participate
in an opportunity will depend upon the nature of the opportunity, our respective needs and desires and those of the promoters of
the opportunity, and our relative negotiating strength compared to that of such promoters.
It is likely that we will acquire
further participations in business opportunities through the issuance of our common stock, or other of our securities. Although
the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called “tax free” reorganization under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended, or the Code, depends upon whether the owners of the acquired business own 80% or more of the voting stock
of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other “tax free”
provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and
outstanding shares of the surviving entity. Under other circumstances, depending upon the relative negotiating strength of the
parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving
entity. This could result in substantial additional dilution to the equity of those who were our stockholders prior to such reorganization.
Our stockholders will likely not
have control of a majority of our voting securities following a reorganization transaction. As part of such a transaction, our
directors may resign and one or more new directors may be appointed without any vote by stockholders.
In the case of an acquisition, the
transaction may be accomplished upon the sole determination of management without any vote or approval by our stockholders. In
the case of a statutory merger or consolidation directly involving our company, it will likely be necessary to call a stockholders’
meeting and obtain the approval of the holders of a majority of our outstanding securities. The necessity to obtain such stockholder
approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to
certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as
not to require stockholder approval.
It is anticipated that the investigation
of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and
other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others.
If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation
might not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity,
the failure to consummate that transaction may result in the loss to us of the related costs incurred.
Other Business Matters
On April 3, 2013, we entered into
and closed a share exchange agreement with certain shareholders of EnviroTechnologies. Pursuant to the terms of the share exchange
agreement, we agreed to acquire 17,653,872 issued and outstanding common shares of EnviroTechnologies from the shareholders in
exchange for the issuance of 1,765,395 shares of the common stock of our company. We issued an aggregate of 1,765,395 common shares
to 47 shareholders.
On April 25, 2013, we entered into
and closed share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant to the terms of the share exchange
agreement, we agreed to acquire 6,682,357 issued and outstanding common shares of EnviroTechnologies from the shareholders in exchange
for the issuance of 668,238 shares of common stock of our company. We issued an aggregate of 668,238 common shares to 20 shareholders.
On May 15, 2013, we entered into
and closed a stock purchase agreement with all five of the shareholders of Pacific Green Energy Parks Limited (“PGEP”),
a company incorporated in the British Virgin Islands. PGEP is the sole shareholder of Energy Park Sutton Bridge Limited, a company
incorporated in the United Kingdom. PGEP is developing a biomass power plant facility and holds an option to purchase the real
property upon which the facility will be built.
Pursuant to the stock purchase agreement,
we agreed to acquire all of the 1,752 issued and outstanding common shares of PGEP from the shareholders in exchange for:
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a payment of $100 upon execution of the stock purchase agreement, which has been paid by us;
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$14,000,000 paid in common shares in our capital stock at a deemed price at the lower of $4 per share or the average closing price per share of our capital stock in the ten trading days immediately preceding the date of closing of the stock purchase agreement, which have been issued by us;
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$3,000,000 payable in common shares of our capital stock at a deemed price at the lower of $4 per share or the average closing price per share of our capital stock in the ten trading days immediately preceding the date upon which PGEP either purchases the property or secures a lease permitting PGEP to operate the facility on the property, which has not yet occurred; and
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subject to leasing or purchasing the property and PGEP securing sufficient financing for the construction of the facility, $33,000,000 payable in common shares of our capital stock at a deemed price at the lower of $4 per share or the average closing price per share of our capital stock in the ten trading days immediately preceding the date that PGEP secures sufficient financing for the construction of the facility, which has not yet occurred.
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All consideration from our company
to the shareholders has been and will be issued on a pro-rata, pari-passu basis in proportion to the respective number of shares
of PGEP sold by each respective shareholder. On May 15, 2013, pursuant to the stock purchase agreement, we issued an aggregate
of 3,500,000 common shares, at an agreed upon deemed price of $4 per share, to the five shareholders.
Pacific Green Energy Parks Limited
and its wholly owned subsidiary, Energy Park Sutton Bridge, are now subsidiaries of our company.
On May 17, 2013, we entered into
a debt settlement agreement with EnviroTechnologies and EnviroResolutions (collectively, the “
Debtors
”). Pursuant
to the terms of the debt settlement agreement, we agreed to release and waive all obligations of the Debtors to repay debts, in
the aggregate of $293,406 and CAD$38,079, to us and agreed to return an aggregate of 88,876,443 (as of March 31, 2015, 2,217,130
common shares of EnviroTechnologies remain to be returned) common shares of EnviroTechnologies to EnviroResolutions. As consideration
for this release and waiver and return of shares, the Debtors agreed to transfer all rights, interests and title to certain intellectual
property, the physical embodiments of such intellectual property, and to the supplemental agreement dated March 5, 2013 among EnviroResolutions,
PREL and Green Energy Parks Limited (“
GEPL
”) (collectively, the “
Debtors’ Assets
”).
The Debtors’ Assets include
the intellectual property rights throughout most of the world for the
ENVI-Clean™
system, the ENVI-Pure™ system and the ENVI-SEA™ scrubber.
The ENVI-Clean™ system removes most of
the sulphur dioxide, particulate matter, greenhouse gases and other hazardous air pollutants from the flue gases produced by the
combustion of coal, biomass, municipal solid waste, diesel and other fuels. The ENVI-Pure™ emission system combines the ENVI-Clean™
highly effective patent-pending wet scrubbing technology with an innovative wet electrostatic precipitator and a granular activated
carbon adsorber to remove particulate matter, acid gases, regulated metals, dioxins and VOCs from the flue gas to levels significantly
below those required by strictest international regulations. The ENVI-SEA™ scrubber can be applied to diesel exhaust emissions
that require sulphur and particulate matter abatement. Using seawater on a single-pass basis as the scrubbing fluid in combination
with its patent pending scrubbing head will provide a highly interactive zone of turbulent mixing for absorption of SO
2
,
particulate matter and other pollutants from the engine’s exhaust.
The following is a brief description
of further terms and conditions of the debt settlement agreement that are material to our company:
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we pay 25% of all funds, if any, received under the supplemental agreement to the Debtors within 14 days upon receipt of funds, if any, pursuant to the supplemental agreement;
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we enter into definitive agreements with the Debtors to:
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license the Debtors’ Assets back to the Debtors, under arm’s length commercial terms, for use in the USA and Canada, with the exception of NRG Energy, Inc. and Edison Mission and affiliates; and
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have the Debtors provide engineering services to us on terms to be agreed upon, acting reasonably;
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the Debtors pay pro-rata any third party broker fees and legal fees, if any, that are subsequent costs associated with the Supplemental Agreement; and
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the Debtors retain possession of, yet make a pilot-scale scrubber available for rental to our company at a nominal cost.
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On June 11, 2013, we submitted
24,336,229 common shares of EnviroTechnologies to EnviroTechnologies for cancellation pursuant to our debt settlement agreement
with EnviroTechnologies and EnviroResolutions dated May 17, 2013.
Pursuant to a debt settlement agreement
dated May 17, 2013 among our company, EnviroTechnologies and EnviroResolutions, on November 22, 2013, our company was transferred
a 40% shareholding in PREL by GEPL (who had, prior to this transfer, held all the issued and outstanding shares of PREL). PREL
is a limited liability company incorporated under the laws of the United Kingdom.
PREL was incorporated by GEPL to
develop a 79MWe waste to energy power station at Peterborough, United Kingdom (the “Peterborough Plant”). The Peterborough
Plant has full planning permission at 79MWe and environmental agency permits. It is understood that the Peterborough Plant will
be built in two stages at a total capital cost of approximately GBP£500 million (approximately US$824,534,442). As of May
17, 2013, PREL owns 20% of Energy Park Investments Limited, the holding company that is currently intended to finance the development
of the Peterborough Plant in turn through its wholly owned operating subsidiary Energy Park Peterborough Limited.
On June 17, 2013, we entered into
and closed share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant to the terms of the share exchange
agreements we agreed to acquire 8,061,286 issued and outstanding common shares of EnviroTechnologies from the shareholders in exchange
for the issuance of 806,132 shares of common stock of our company. We issued as aggregate of 806,132 shares of common stock to
19 shareholders.
On August 6, 2013, we entered into
two share exchange agreements with two shareholders of EnviroTechnologies. Pursuant to the terms of the agreements, we agreed to
acquire 440,000 issued and outstanding common shares of EnviroTechnologies from one shareholder in exchange for shares of common
stock of our company on a 1 for 10 basis. Pursuant to the terms of the other agreement, we agreed to acquire 600,000 issued and
outstanding common shares of EnviroTechnologies from one shareholder in exchange for shares of common stock of our company on a
1 for 15 basis.
On August 27, 2013, we entered into
share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant to the terms of the agreements, we have agreed
to acquire 32,463,489 issued and outstanding common shares of EnviroTechnologies from the shareholders in exchange for shares of
common stock of our company on a 1 for 10 basis.
On September 13, 2013, we submitted
41,564,775 common shares of EnviroTechnologies to EnviroTechnologies for cancellation pursuant to our debt settlement agreement
with EnviroTechnologies and EnviroResolutions dated May 17, 2013.
On September 26, 2013, we entered
into an agreement with Andrew Jolly, wherein Dr. Jolly agreed to serve as a director of our company. Pursuant to the agreement,
our company is to compensate Dr. Jolly for serving as a director of our company at GBP£2,000 (approximately $3,235) per calendar
month. Effective October 1, 2013, we appointed Dr. Jolly as a director of our company.
On October 11, 2013, we entered
into share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant to the terms of the agreements, we have
agreed to acquire 674,107 issued and outstanding common shares of EnviroTechnologies from the shareholders in exchange for shares
of common stock of our company on a 1 for 10 basis.
Effective October 31, 2013, we entered
into a private placement agreement. Pursuant to the agreement, we issued 18,750 common shares in our capital stock at a purchase
price of $4.00 per share, for total proceeds of $75,000.
Effective December 19, 2013, we
entered into private placement agreements with nine subscribers. Pursuant to the agreements, we issued an aggregate of 262,500
common shares in our capital stock at a purchase price of $3.20 per share, for total proceeds of $840,000.
On December 18, 2013, we announced
that our company has engaged BlueMount Capital to spearhead the development of its proprietary emission control technologies, ENVI-Clean™
and ENVI-Pure™, in the People's Republic of China (“PRC”). In addition to corporate finance advisory services
both within and outside China, BlueMount offers a tailored service to clients wishing to enter the PRC market with a particular
emphasis on companies that own proprietary technology, intellectual property and expertise. To that end, BlueMount provides a comprehensive
suite of services to enhance the effectiveness and long-term sustainability of foreign brands entering the PRC market via: Our
company's strategic objective is to establish an operating presence in China with established local partners and rapidly rollout
its technologies.
On December 27, 2013, we entered
into and closed share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant to the terms of the share exchange
agreements, we acquired 130,000 issued and outstanding common shares of EnviroTechnologies from the shareholders in exchange for
shares of common stock of our company on a 1 for 10 basis. On December 27, 2013, we issued an aggregate of 13,000 common shares
to the shareholders of EnviroTechnologies.
On January 27, 2014, we entered
into an agreement with Pöyry Management Consulting (UK) Limited. Pursuant to the agreement, Pöyry is to provide consulting
services to us. Our company has agreed to compensate Pöyry a minimum of £5,000 (approximately $8,293) as consulting
fees for the first year of the agreement and a variable hourly rate as set out in the agreement.
Effective March 10, 2014, we entered
into a private placement agreement with one subscriber. Pursuant to the agreement with the subscriber, we agreed to the issuance
of an aggregate of 125,000 common shares in our capital stock at a purchase price of $4.00 per share, for total proceeds of $500,000.
On May 27, 2014, we entered into
a $200,000 convertible debenture with Intrawest Overseas Limited. Under the terms of the debenture, the amount is unsecured, bears
interest at 10% per annum, and is due on May 27, 2015. Pursuant to the agreement, should any portion of loan remain outstanding
past maturity the interest will increase to 15% per annum. The note is convertible into shares of common stock 180 days after the
date of issuance (November 27, 2014) until maturity at a conversion rate of 75% of the average offer price of our company’s
common stock for the 45 days ending one trading day prior to the date the conversion notice is sent by the holder to our company.
Our company analyzed the conversion
option under ASC 815, “Accounting for Derivative Instruments and Hedging Activities”, and determined that the conversion
feature should be classified as a liability and recorded at fair value due to there being no explicit limit to the number of shares
to be delivered upon settlement of the conversion option. In accordance with ASC 815, our company recognized the intrinsic value
of the embedded beneficial conversion feature of $33,922. On November 27, 2014, the note became convertible resulting in our company
recording a derivative liability of $33,922 with a corresponding adjustment to loss on change in fair value of derivative liabilities.
On June 12, 2014, we entered into
a $100,000 convertible debenture with Gerstle Consulting Pty Limited. Under the terms of the debenture, the amount is unsecured,
bears interest at 10% per annum, and was due on June 12, 2015. Pursuant to the agreement, should any portion of loan remain outstanding
past maturity the interest would increase to 15% per annum. The note was convertible into shares of common stock 180 days after
the date of issuance (December 12, 2014) until maturity at a conversion rate of 75% of the average closing bid prices of our company’s
common stock for the 45 days ending one trading day prior to the date the conversion notice was sent by the holder to our company.
Our company analyzed the conversion
option under ASC 815, “Accounting for Derivative Instruments and Hedging Activities”, and determined that the conversion
feature should be classified as a liability and recorded at fair value due to there being no explicit limit to the number of shares
to be delivered upon settlement of the conversion option. In accordance with ASC 815, our company recognized the intrinsic value
of the embedded beneficial conversion feature of $9,793. On December 12, 2014, the note became convertible resulting in our company
recording a derivative liability of $9,793 with a corresponding adjustment to loss on change in fair value of derivative liabilities.
On June 30, 2015, through our wholly
owned subsidiary, Pacific Green Energy Parks Limited, we purchased all of the issued and outstanding shares in Pacific Green Technologies
Asia Limited for $1.00 from Alexander Shead.
We entered into an agreement dated
July 20, 2015 with Mr. Alexander Shead. Pursuant to this agreement, Mr. Shead agreed to serve as a director of our company. As
a director of our company, Mr. Shead was to be compensated $1,000 for every calendar month of the term of the agreement. The term
of the agreement was for 12 months. On July 20, 2015, we appointed Mr. Shead as a director of our company.
On September 22, 2015, our company
entered into a consulting agreement (the “
Agreement
”) with Midam Ventures, LLC (“
Midam
”)
wherein Midam would provide investor relations and business advisory services to us from September 23, 2015 to March 23, 2016.
Any compensation described in the Agreement would be deemed earned and vested by Midam even in the case of early termination of
the Agreement.
Pursuant to the terms of the Agreement,
we paid $30,000 in cash and 200,000 common restricted shares of our company to Midam. Effective October 20, 2015, we issued all
of the shares pursuant to an exemption from registration relying on the provisions of Rule 506 of Regulation D promulgated under
the
Securities Act of 1933
, as amended.
On October 24, 2015, our company
entered into a marketing and consulting agreement with Red Rock Marketing Media, Inc. (“
Red Rock
”) wherein Red
Rock would provide investor relations and business advisory services to us for a period of 40 business days starting on or before
the 10 business days after compensation was received from Red Rock. Pursuant to the terms of the Agreement, we were to pay $100,000
in cash by October 29, 2015.
On October 27, 2015, our company
entered into a loan agreement with a significant shareholder for proceeds of approximately $4,231. The loan is unsecured, bears
an interest rate of US Prime Rate plus 4%, and is due on demand.
On November 10, 2015,
we
issued a convertible note (the “
Note
”) to Tangiers Investment Group, LLC (“
Tangiers
”) in
exchange for an aggregate of $100,000 from Tangiers. The Note is for the aggregate sum of $110,000 with 10% interest as an original
issue discount and convertible into our common shares of (the “
Shares
”) at a price of equal to the lower of:
(a) $.40 per common share of our company or (b) 60% of the lowest trading price of our common stock during the 20 consecutive trading
days prior to the date on which the holder of the Note elects to convert all or part of the Note.
On November 17, 2015, Pacific Green
Technologies China Limited, a wholly-owned subsidiary of our company, entered into a commercial joint venture agreement with PowerChina
SPEM Company Limited (“
PowerChina
”) wherein PowerChina would receive and process orders from our company for
customers, and manufacture and install products as an engineering procurement construction process. In return, our company agreed
to design the product and provide a technology license and technical supports to PowerChina. During the Agreement, we will provide
PowerChina with a non-transferrable right and license to use Technology to manufacture and install our product within the Peoples’
Republic of China.
Upon receiving each order from us,
PowerChina and we shall submit to each other the respective estimated budgets. For each project, after receipt of the revenue from
the relevant customer, the budgets of our company and PowerChina shall be deducted and reimbursed from the revenue proportionally.
We have agreed to share the gross profit pursuant to an even split of 50% to PowerChina and 50% to our company.
Competition
We face competition from various
companies involved in the environmental technology industries and specifically companies involved in filtering of pollutants.
Many of our competitors have longer
operating histories, better brand recognition and greater financial resources than we do. In order for us to successfully compete
in our industry we will need to:
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establish our product’s competitive advantage with customers;
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develop a comprehensive marketing system; and
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increase our financial resources.
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However, there can be no assurance
that even if we do these things, we will be able to compete effectively with the other companies in our industry.
As we are a newly-established company,
we face the same problems as other new companies starting up in an industry, such as lack of available funds. Our competitors may
be substantially larger and better funded than us, and have significantly longer histories of research, operation and development
than us. In addition, they may be able to provide more competitive products than we can and generally be able to respond more quickly
to new or emerging technologies and changes in legislation and regulations relating to the industry. Additionally, our competitors
may devote greater resources to the development, promotion and sale of their products or services than we do. Increased competition
could also result in loss of key personnel, reduced margins or loss of market share, any of which could harm our business.
Research and Development Expenditures
We have not incurred any research
expenditures over the past two fiscal years.
Intellectual Property
We do not own, either legally or
beneficially, any patent or trademark, except for the following:
We
now own the proprietary emission abatement systems, currently known as ENVI-Clean™, ENVI-Pure™, for removing acid gases,
particulate matter, dioxins, VOCs and other regulated hazardous air pollutants from the flue gases produced by the combustion of
coal, biomass, municipal solid waste, diesel and other fuels, and ENVI-SEA™, scrubber that can be applied to diesel exhaust
emissions that require sulphur and particulate matter abatement, previously owned or controlled by the Debtors, and includes, without
limitation, all developments, improvements, and derivative works based upon or incorporating the Technology, all work product created
by the Debtors, and all intellectual property in the foregoing
.
The ENVI-Clean™ system has
protected intellectual property rights throughout most of the world. Its technology is protected by Patent Cooperation Treaty (PCT)
patent application no. PCT/CA210/000988 filed June 25, 2010 with a priority filing date of June 25, 2009. The International Preliminary
Report on Patentability for this PCT application considered all patent claims of the application to be patentable. EnviroTechnologies
has pending national or regional phase patent applications claiming priority from PCT/CA2010/000988 covering 127 countries. Once
patents issue, patent rights in this technology will generally endure until June 25, 2030.
Further, we own the rights to the
US provisional patent application no. US 61/614696 for the integrated wet scrubbing system. Additionally, we own the rights to
US provisional patent application no. US 61/645874 for the flooded wet scrubbing head patent.
Identification of Certain Significant
Employees
Currently, we do not have any employees.
Other than as set out below, we have not entered into any consulting or employment agreements with any of our other directors.
Effective December 18, 2012, we
entered into a non-executive director agreement with Dr. Neil Carmichael, wherein Dr. Carmichael received compensation of $1,000
for the term of the agreement and was granted options to purchase up to 62,500 shares of common stock at an exercise price of $0.01
per share of common stock. The options were to terminate the earlier of 24 months, or upon the termination of the agreement and
Dr. Carmichael's engagement with our company. Those options expired unexercised.
On September 26, 2013, we entered
into an agreement with Andrew Jolly, wherein Dr. Jolly agreed to serve as a director of our company. Pursuant to the agreement,
our company is to compensate Dr. Jolly for serving as a director of our company at GBP£2,000 (approximately $3,235) per calendar
month. Effective October 1, 2013, we appointed Dr. Jolly as a director of our company.
On October 22, 2013, we entered
into an agreement with Mr. Chris Williams, wherein Mr. Williams agreed to serve as business development director of our company
effective December 5, 2013. As business development director of our company, Mr. Williams was to focus on developing potential
new business opportunities and generating sales from our existing assets. Mr. Williams resigned effective April 23, 2014.
We entered into an agreement dated July 20,
2015 with Mr. Alexander Shead. Pursuant to this agreement, Mr. Shead agreed to serve as a director of our company for consideration
of $1,000 per month for a term of one year.
Our directors, executive officers
and certain contracted individuals play an important role in the running of our company. We do not expect any material changes
in the number of employees over the next 12 month period. We do and will continue to outsource contract employment as needed.
We engage contractors from time
to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our operations.
Government Regulations
Some aspects of our intended operations
will be subject to a variety of federal, provincial, state and local laws, rules and regulations in North America and worldwide
relating to, among other things, worker safety and the use, storage, discharge and disposal of environmentally sensitive materials.
For example, we are subject to the Resource Conservation Recovery Act (“RCRA”), the principal federal legislation regulating
hazardous waste generation, management and disposal.
Under some of the laws regulating
the use, storage, discharge and disposal of environmentally sensitive materials, an owner or lessee of real estate may be liable
for the costs of removing or remediating certain hazardous or toxic substances located on or in, or emanating from, such property,
as well as related costs of investigation and property damage. Laws of this nature often impose liability without regard to whether
the owner or lessee knew of, or was responsible for, the presence of the hazardous or toxic substances. These laws and regulations
may require the removal or remediation of pollutants and may impose civil and criminal penalties for violations. Some of the laws
and regulations authorize the recovery of natural resource damages by the government, injunctive relief and the imposition of stop,
control, remediation and abandonment orders. The costs arising from compliance with environmental and natural resource laws and
regulations may increase operating costs for both us and our potential customers. We are also subject to safety policies of jurisdictional-specific
Workers Compensation Boards and similar agencies regulating the health and safety of workers.
We are not aware of any material
violations of environmental permits, licenses or approvals issued with respect to our operations. We expect to comply with all
applicable laws, rules and regulations relating to our intended business. At this time, we do not anticipate any material capital
expenditures to comply with environmental or various regulations and requirements.
While our intended projects or
business activities have been designed to produce environmentally friendly green energy or other alternative products for which
no specific regulatory barriers exist, any regulatory changes that impose additional restrictions or requirements on us or on
our potential customers could adversely affect us by increasing our operating costs and decreasing potential demand for our technologies,
products or services, which could have a material adverse effect on our results of operations.
Subsidiaries
Both Sichel Limited and Pacific
Green Group Limited are wholly owned subsidiaries of the Hookipa Trust. Pacific Green Group Limited’s wholly owned subsidiary
was Pacific Green Technologies Limited. As a result, we acquired Pacific Green Technologies Limited from Pacific Green Group Limited.
Sichel is a significant shareholder of our company, and also provides us with consulting services pursuant to a consulting agreement.
The sole director of Sichel is also the sole director of Pacific Green Group Limited. Further, PGG is a significant shareholder
of EnviroTechnologies.
Our company’s wholly owned
subsidiaries are Pacific Green Technologies Marine Limited,(formerly Pacific Green Technologies Limited) a United Kingdom corporation,
Pacific Green Technologies International Limited, (Formerly Pacific Green Energy Parks Limited) a British Virgin Islands corporation,
and its wholly owned subsidiary, Energy Park Sutton Bridge, a United Kingdom corporation, as well as Pacific Green Technologies
Asia Ltd and Pacific Green Technologies China Ltd, both Hong Kong companies.
REPORTS TO SECURITY HOLDERS
We are required to file annual,
quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings
are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov.
The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange
Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet
site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with
the SEC, at http://www.sec.gov.
Employees
As of March 31, 2017, we did not
have any full-time or part-time employees. Our president, treasurer, secretary and director, Neil Carmichael, works as a part-time
consultant and devotes approximately 10 hours per week to our business. Our directors, Andrew Jolly, Alexander Shead, and Scott
Poulter each work as part-time consultants to our company and devote time to our business on an as needed basis. If our financial
position permits, as required by our business, we may enlist certain individuals on a full or part-time salaried basis to assist
with marketing, advertising, administration and data management for our business.
Item 1A. Risk Factors
Risks Related to our Business
We have a limited operating history
with significant losses and expect losses to continue for the foreseeable future.
We have yet to establish any history
of profitable operations. We incurred a net loss of $63,483,342 for the period from April 5, 2011 (inception) to March 31, 2017.
We had a net loss of $3,352,548 for the year ended March 31, 2017. We have not generated any revenues since our inception and do
not anticipate that we will generate revenues which will be sufficient to sustain our operations. We expect that our revenues will
not be sufficient to sustain our operations for the foreseeable future. Our profitability will depend on our ability to successfully
market and sell the ENVI-Clean™ system and there can be no assurance that we will be able to do so.
There is doubt about our ability
to continue as a going concern due to recurring losses from operations, accumulated deficit and insufficient cash resources to
meet our business objectives, all of which means that we may not be able to continue operations.
Our independent auditors have added
an explanatory paragraph to their audit opinion issued in connection with the consolidated financial statements for the years ended
March 31, 2017 and 2016, respectively, with respect to their doubt about our ability to continue as a going concern. As discussed
in Note 1 to our consolidated financial statements for the year ended March 31, 2017, we have incurred operating losses since inception,
and our cash resources are insufficient to meet our planned business objectives, which together raises substantial doubt about
our ability to continue as a going concern.
We may not be able to secure
additional financing to meet our future capital needs due to changes in general economic conditions.
We anticipate needing significant
capital to develop our sales force and effective market the ENVI-Clean™ system. We may use capital more rapidly than currently
anticipated and incur higher operating expenses than currently expected, and we may be required to depend on external financing
to satisfy our operating and capital needs. We may need new or additional financing in the future to conduct our operations or
expand our business. Any sustained weakness in the general economic conditions and/or financial markets in the United States or
globally could adversely affect our ability to raise capital on favorable terms or at all. From time to time we have relied, and
may also rely in the future, on access to financial markets as a source of liquidity to satisfy working capital requirements and
for general corporate purposes. We may be unable to secure debt or equity financing on terms acceptable to us, or at all, at the
time when we need such funding. If we do raise funds by issuing additional equity or convertible debt securities, the ownership
percentages of existing stockholders would be reduced, and the securities that we issue may have rights, preferences or privileges
senior to those of the holders of our common stock or may be issued at a discount to the market price of our common stock which
would result in dilution to our existing stockholders. If we raise additional funds by issuing debt, we may be subject to debt
covenants, which could place limitations on our operations including our ability to declare and pay dividends. Our inability to
raise additional funds on a timely basis would make it difficult for us to achieve our business objectives and would have a negative
impact on our business, financial condition and results of operations.
We are a development stage company
and we may not be successful in marketing the ENVI-Clean™ system and the value of your investment could decline.
We are a development stage company
with no substantial tangible assets in a highly competitive industry. We have little operating history, no customers, and no revenues.
This makes it difficult to evaluate our future performance and prospects. Our prospects must be considered in light of the risks,
expenses, delays and difficulties frequently encountered in establishing a new business in an emerging and evolving industry, including
the following factors:
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our business model and strategy are still evolving and are continually being reviewed and revised;
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we may not be able to raise the capital required to develop our initial client base and reputation; and
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we may not be able to successfully develop our planned products and services.
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We cannot be sure that we will be
successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will
not be successful and the value of your investment in us will decline.
Our business is subject to environmental
and consumer protection legislation and any changes in such legislation could prevent us from becoming profitable.
The energy production and technology
industries are subject to many laws and regulations which govern the protection of the environment, quality control standards,
health and safety requirements, and the management, transportation and disposal of hazardous substances and other waste. Environmental
laws and regulations may require removal or remediation of pollutants and may impose civil and criminal penalties for violations.
Some environmental laws and regulations authorize the recovery of natural resource damages by the government, injunctive relief
and the imposition of stop, control, remediation and abandonment orders. Similarly, consumer protection laws impose quality control
standards on products marketed to the public and prohibit the distribution and marketing of products not meeting those standards.
The costs arising from compliance
with environmental and consumer protection laws and regulations may increase operating costs for both us and our potential customers.
Any regulatory changes that impose additional environmental restrictions or quality control requirements on us or on our potential
customers could adversely affect us through increased operating costs and potential decreased demand for our services, which could
prevent us from becoming profitable.
The development and expansion
of our business through acquisitions, joint ventures, and other strategic transactions may create risks that may reduce the benefits
we anticipate from these strategic alliances and may prevent us from achieving or sustaining profitability.
We intend to enter into technology
acquisition and licensing agreements and strategic alliances such as joint ventures or partnerships in order to develop and commercialize
our proposed technologies and services, and to increase our competitiveness. We currently do not have any commitments or agreements
regarding acquisitions, joint ventures or other strategic alliances. Our management is unable to predict whether or when we will
secure any such commitments or agreements, or whether such commitments or agreements will be secured on favorable terms and conditions.
Our ability to continue or expand
our operations through acquisitions, joint ventures or other strategic alliances depends on many factors, including our ability
to identify acquisitions, joint ventures, or partnerships, or access capital markets on acceptable terms. Even if we are able to
identify strategic alliance targets, we may be unable to obtain the necessary financing to complete these transactions and could
financially overextend ourselves.
Acquisitions, joint ventures or
other strategic transactions may present financial, managerial and operational challenges, including diversion of management attention
from existing business and difficulties in integrating operations and personnel. Acquisitions or other strategic alliances also
pose the risk that we may be exposed to successor liability relating to prior actions involving a predecessor company, or contingent
liabilities incurred before a strategic transaction. Due diligence conducted in connection with an acquisition, and any contractual
guarantees or indemnities that we receive from sellers of acquired companies, may not be sufficient to protect us from, or compensate
us for, actual liabilities. Liabilities associated with an acquisition or a strategic transaction could adversely affect our business
and financial performance and reduce the benefits of the acquisition or strategic transaction. Any failure to integrate new businesses
or manage any new alliances successfully could adversely affect our business and financial performance and prevent us from achieving
profitability.
Our sole officer will only spend
a modest portion of his available time managing our company. As a result, our success depends on the continuing efforts of other
members of our senior management team and significant contractors and the loss of the services of such key personnel could result
in a disruption of operations which could result in reduced future revenues.
We are dependent upon our officer
for execution of our business plan. However, our sole officer, Neil Carmichael, will only spend a modest amount of his time in
managing our company. As a result, our future success depends heavily upon the continuing services of the other members of our
senior management team. If one or more of such other of our senior executives or other key personnel are unable or unwilling to
continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and
our financial condition and results of operations may be materially and adversely affected. Competition for senior management and
key personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our
senior executives or key personnel, or attract and retain high-quality senior executives or key personnel in the future. We do
not currently maintain key man insurance on our senior managers. The loss of the services of our senior management team and employees
could result in a disruption of operations which could result in reduced revenues.
We assumed debt as a result of
the assignment agreement that we may not be able to repay, resulting in possible default and/or substantial dilution to our shareholders.
The assignment agreement was partly
funded through a promissory note of $5 million as set out in this document. There is a risk that we may not be able to repay the
promissory note when it is due on maturity. In addition, any failure by us to repay the promissory note may result in PGG converting
the amount outstanding into new shares of our company’s common stock which would have the effect of diluting existing shareholders.
We are at risk that the ENVI-Clean™
system will not perform to expectations.
As at the date of this annual report,
the ENVI-Clean™ system has been tested to satisfactory requirements but there is no guarantee that the ENVI-Clean™
system will continue to perform satisfactorily in the future which would damage our prospects following the Assignment.
The market for alternative energy
products, technologies or services is emerging and rapidly evolving and its future success is uncertain. Insufficient demand for
the ENVI-Clean™ system would prevent us from achieving or sustaining profitability.
It is possible that we may spend
large sums of money to bring the ENVI-Clean™ system to the market, but demand may not develop or may develop more slowly
than we anticipate.
Our future success is dependent
on EnviroTechnologies and its technologies in regards to:
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(a)
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its ability to quickly react to technological innovations;
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(b)
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the cost-effectiveness of its technologies;
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(c)
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the performance and reliability of alternative energy products and services that it develops;
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(d)
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its ability to formalize marketing relationships or secure commitments for our technologies, products and services;
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(e)
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realization of sufficient funding to support our and EnviroTechnologies marketing and business development plans; and
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(f)
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availability of government incentives for the development or use of any products and services that we or EnviroTechnologies develop.
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We may be unable to develop widespread
commercial markets or obtain sufficient demand or broad acceptance for the EnviroTechnologies alternative energy products or technologies
or services. We may be unable to achieve or sustain profitability.
Competition within the environment
sustainability industry may prevent us from becoming profitable.
The alternative energies industry
is competitive and fragmented and includes numerous small companies capable of competing effectively in the market we target as
well as several large companies that possess substantially greater financial and other resources than we do. Larger competitors'
greater resources could allow those competitors to compete more effectively than we can with the EnviroTechnologies technology.
A number of competitors have developed more mature businesses than EnviroTechnologies has and have successfully built their names
in the international alternative energy markets. These various competitors may be able to offer products, sustainability technologies
or services more competitively priced and more widely available than EnviroTechnologies and also may have greater resources to
create or develop new technologies and products than EnviroTechnologies. Failure to compete either in the alternative energy industry
may prevent us from becoming profitable, and thus you may lose your entire investment.
We are at risk of EnviroTechnologies
not being able to manufacture the ENVI-Clean™ system in accordance with contractual terms.
All contracts which we secure for
the sale of ENVI-Clean™ system between EnviroTechnologies and a third party will require that EnviroTechnologies supplies
a functioning emission control system. There is a risk that EnviroTechnologies is unable to manufacture and supply such a system
in accordance with the terms of the contract. Any failure by EnviroTechnologies to perform its obligations under any such contract
may have a detrimental impact on our financial standing and reputation.
Risks Related to our Stockholders
and Shares of Common Stock
The continued sale of our equity
securities will dilute the ownership percentage of our existing stockholders and may decrease the market price for our common stock.
Given our lack of revenues and the
doubtful prospect that we will earn significant revenues in the next several years, we will require additional financing of at
least $770,000 for the next 12 months, which will require us to issue additional equity securities as we only had $382,167 cash
on hand as of March 31, 2017. We expect to continue our efforts to acquire financing to fund our planned development and expansion
activities, which will result in dilution to our existing stockholders. In short, our continued need to sell equity will result
in reduced percentage ownership interests for all of our investors, which may decrease the market price for our common stock.
We do not intend to pay dividends
and there will thus be fewer ways in which you are able to make a gain on your investment.
We have never paid dividends and
do not intend to pay any dividends for the foreseeable future. To the extent that we may require additional funding currently not
provided for in our financing plan, our funding sources may prohibit the declaration of dividends. Because we do not intend to
pay dividends, any gain on your investment will need to result from an appreciation in the price of our common stock. There will
therefore be fewer ways in which you are able to make a gain on your investment. In the future when we do intend to pay dividend,
we will formalize a dividend policy.
Because the SEC imposes additional
sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities.
This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline.
Our shares are classified as penny
stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) which imposes additional
sales practice requirements on brokers-dealers who sell our securities in this offering or in the aftermarket. For sales of our
securities, broker-dealers must make a special suitability determination and receive a written agreement prior from you to making
a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers
will not want to make a market in our common stock. This could prevent you from reselling your shares and may cause the value of
your investment to decline.
Financial Industry Regulatory
Authority (FINRA) sales practice requirements may limit your ability to buy and sell our common stock, which could depress the
price of our shares.
FINRA rules require broker-dealers
to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the
customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among
other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced
securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers
to recommend that their customers buy our common stock, which may limit your ability to buy and sell our shares, have an adverse
effect on the market for our shares, and thereby depress our share price.
We are an “emerging growth
company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging
growth companies will make our common stock less attractive to investors.
We are an “emerging growth
company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging
growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of
section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports
and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common
stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result,
there may be a less active trading market for our common stock and our stock price may be more volatile.
We will remain an “emerging
growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue
more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by
non-affiliates exceeds $700 million as of any May 30.
Our status as an “emerging
growth company” under the JOBS Act of 2012 may make it more difficult to raise capital as and when we need it.
Because of the exemptions from various
reporting requirements provided to us as an “emerging growth company” we may be less attractive to investors and it
may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with
other companies in our industry if they believe that our reporting is not as transparent as other companies in our industry. If
we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially
and adversely affected.