Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
Pacific
Green Technologies Inc. (the “Company”) was incorporated in the state of Delaware, USA on March 10, 1994. The Company
is in the business of acquiring, developing, and marketing environmental technologies, with a focus on emission control technologies.
On December 20, 2019, the Company acquired Shanghai Engin Digital Technology Co. Ltd., a company incorporated and registered in
China (“Engin”). Engin is a solar design, development, and engineering company (Note 7). On June 19, 2020, Engin was
changed to Pacific Green Technologies (Shanghai) Co. Ltd. On October 19, 2020, the Company acquired Innoergy Limited (“Innoergy”).
Innoergy is a designer of battery energy storage systems and registered in the United Kingdom (Note 8). In connection with the
acquisition, Innoergy adopted the name Pacific Green Innoergy Technologies Limited.
The
condensed consolidated interim financial statements of the Company should be read in conjunction with the consolidated financial
statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report
on Form 10-K for the fiscal year ended March 31, 2020. In the opinion of management, the accompanying condensed consolidated interim
financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s
financial position and the results of its operations and its cash flows for the periods shown.
The
preparation of these condensed consolidated interim financial statements in accordance with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could
differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative
of the results to be expected for the full year.
|
2.
|
Significant
Accounting Policies
|
|
(a)
|
Basis
of Presentation
|
These
unaudited interim condensed consolidated interim financial statements and related notes are presented in accordance with accounting
principles generally accepted in the United States of America and are expressed in U.S. dollars. The following accounting policies
are consistently applied in the preparation of the consolidated financial statements. These consolidated financial statements
include the accounts of the Company and the following entities:
Pacific Green Technologies
(UK) Ltd. (“PGTU”) (Formerly Pacific Green Marine Technologies Ltd.)
|
|
Wholly-owned subsidiary of PGMG
|
Pacific Green Technologies
Asia Ltd. (“PGTA”)
|
|
Wholly-owned subsidiary
|
Pacific Green Technologies China Ltd. (“PGTC”)
|
|
Wholly-owned subsidiary of PGTA
|
Pacific Green Marine
Technologies Inc. (PGMT Can)
|
|
Wholly-owned subsidiary
|
Pacific Green Marine Technologies Inc. (PGMT US)
|
|
Wholly-owned subsidiary of PGMG
|
Pacific Green Marine
Technologies (USA) Inc. (inactive)
|
|
Wholly-owned subsidiary of
PGMG
|
Pacific Green Marine Technologies Group Inc.
(“PGMG”)
|
|
Wholly-owned subsidiary
|
Pacific Green Energy
Storage (UK) Ltd. (“PGESU”) (Formerly Pacific Green Marine Technologies Trading Ltd.)
|
|
Wholly-owned subsidiary of
PGMG
|
Pacific Green Environmental Technologies (Asia)
Ltd. (“PGETA”)
|
|
50.1% owned subsidiary
|
Pacific Green Marine
Technologies (Norway) SA (“PGN”)
|
|
Wholly-owned subsidiary of
PGTU
|
Pacific Green Technologies (Shanghai) Co. Ltd.
(“Engin”) (Formerly Shanghai Engin Digital Technology Co. Ltd)
|
|
Wholly-owned subsidiary
|
Guangdong Northeast
Power Engineering Design Co. Ltd. (“GNPE”)
|
|
Wholly-owned subsidiary of ENGIN
|
Pacific Green Innoergy
Technologies Ltd. (“Innoergy”) (Formerly Innoergy Ltd.)
|
|
Wholly-owned subsidiary
|
During
the nine months ended December 31, 2020, the Company ceased operations of PGN (Note 18). PGN has been deconsolidated as it
has been run by the courts. On October 19, 2020, the Company acquired 100% interest in Innoergy, a designer of battery energy
storage systems and registered in the United Kingdom (Note 8). All inter-company balances and transactions have been eliminated
upon consolidation.
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
2.
|
Significant
Accounting Policies (continued)
|
|
(b)
|
Recent
Accounting Pronouncements
|
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. The ASU sets forth a “current expected
credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held
at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces
the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized
cost and applies to some off-balance sheet credit exposures. As a smaller reporting company, this ASU is effective for fiscal
years beginning after January 1, 2023, including interim periods within those fiscal years. The Company is currently assessing
the impact of the adoption of this ASU on its Consolidated Financial Statements.
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements
and management does not believe that there are any other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.
|
3.
|
Short-term
Investments and amounts in escrow
|
At
December 31, 2020, the Company has a $59,545 (CAD $75,938) (March 31, 2020 - $53,106 (CAD $75,000)) Guaranteed Investment Certificate
(“GIC”) held as security against a corporate credit card. The GIC bears interest at 1.00% per annum and matures
December 13, 2021.
At
December 31, 2020, the Company’s solicitor is holding $401,385 (March 31, 2020 - $664,994) relating to proceeds under customer
contracts.
On
December 12, 2017, the Company completed the sale of a constructed ENVI-Marine scrubber system under an energy management lease
arrangement. The Company’s lease receivable as at December 31, 2020 and March 31, 2020, consists of an amount due from the
customer under a long-term lease arrangement.
Previously,
the payments to the Company under the lease arrangement were calculated under a cost savings model. During March 2019, the Company
and lessee agreed to a revised payment schedule based on a quarterly payment of $118,000 per quarter through fiscal 2022 in place
of the cost saving model. The current portion presented below reflects the minimum expected payments per the lease arrangement
for the next twelve months.
At
the completion of the minimum required lease payments, the title of the asset transfers to the customer. No amount has been allocated
to the residual value. Moreover, there are no other variable amounts involved in this lease arrangement.
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
4.
|
Lease
Receivable (continued)
|
|
|
December
31,
2020
$
|
|
|
March
31,
2020
$
|
|
|
|
|
|
|
|
|
Current portion,
expected within twelve months
|
|
|
472,000
|
|
|
|
472,000
|
|
Amounts
expected thereafter
|
|
|
45,382
|
|
|
|
369,634
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
517,382
|
|
|
|
841,634
|
|
Future
lease payments forecasted in annual periods are as follows:
|
|
$
|
|
|
|
|
|
2021
|
|
|
472,000
|
|
2022
|
|
|
65,114
|
|
Interest
deemed hereunder
|
|
|
(19,732
|
)
|
|
|
|
|
|
Total
|
|
|
517,382
|
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
5.
|
Property
and Equipment
|
|
|
Cost
$
|
|
|
Accumulated
amortization
$
|
|
|
December
31,
2020
Net carrying
value
$
|
|
|
March
31,
2020
Net carrying
value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Building*
|
|
|
961,099
|
|
|
|
(33,604
|
)
|
|
|
927,495
|
|
|
|
869,791
|
|
Furniture and equipment
|
|
|
314,081
|
|
|
|
(97,979
|
)
|
|
|
216,102
|
|
|
|
274,338
|
|
Computer equipment*
|
|
|
16,674
|
|
|
|
(4,943
|
)
|
|
|
11,731
|
|
|
|
13,930
|
|
Leasehold improvements
|
|
|
110,815
|
|
|
|
(55,379
|
)
|
|
|
55,436
|
|
|
|
73,140
|
|
Testing
equipment- Scrubber system
|
|
|
101,294
|
|
|
|
(25,185
|
)
|
|
|
76,109
|
|
|
|
70,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,503,963
|
|
|
|
(217,090
|
)
|
|
|
1,286,873
|
|
|
|
1,301,905
|
|
|
*
|
Acquired
as part of a business combination - see Note 7. The building is rented out to a third
party for ¥18,500 per month (USD $2,690) from July 16, 2020 to August 15, 2022.
|
|
|
Cost
$
|
|
|
Accumulated
amortization
$
|
|
|
Cumulative
impairment
$
|
|
|
December 31,
2020
Net carrying
value
$
|
|
|
March 31,
2020
Net carrying
value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and technical information
|
|
|
35,852,556
|
|
|
|
(7,207,578
|
)
|
|
|
(20,457,255
|
)
|
|
|
8,187,723
|
|
|
|
8,845,823
|
|
Backlogs *
|
|
|
95,898
|
|
|
|
(46,396
|
)
|
|
|
-
|
|
|
|
49,502
|
|
|
|
81,193
|
|
Customer lists *
|
|
|
237,794
|
|
|
|
(37,538
|
)
|
|
|
-
|
|
|
|
200,256
|
|
|
|
215,844
|
|
Patents and certifications *
|
|
|
3,767,087
|
|
|
|
(594,674
|
)
|
|
|
-
|
|
|
|
3,172,413
|
|
|
|
3,419,375
|
|
Software licensing *
|
|
|
13,673
|
|
|
|
(1,582
|
)
|
|
|
-
|
|
|
|
12,091
|
|
|
|
13,068
|
|
Total
|
|
|
39,967,008
|
|
|
|
(7,887,768
|
)
|
|
|
(20,457,255
|
)
|
|
|
11,621,985
|
|
|
|
12,575,303
|
|
|
*
|
Acquired
as part of a business combination - see Note 7
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
7.
|
Acquisition
of Shanghai Engin Digital Technology Co. Ltd
|
On
December 20, 2019, the Company acquired all the issued and outstanding stock of Shanghai Engin Digital Technology Co. Ltd., a
solar design, development and engineering company and its subsidiary. Engin’s expertise in solar technologies provides the
Company another green technology to market and develop internationally alongside our manufacturing. The acquisition was concluded
concurrently with two groups. The first purchase of the 75% interest was acquired for consideration of $5,864,234 (¥41,000,000)
upon signing (paid), plus a further $2,145,002 (¥15,000,000) due by March 20, 2020 (partially paid) and a final conditional
payment of $2,860,002 (¥20,000,000) by June 30, 2020 (not paid). The Company has made a partial payment of $1,072,961 (¥7,500,000)
on the outstanding amount of $2,145,002 (¥15,000,000). The remaining 25% interest was acquired for consideration of 125,000
new shares of the Company (issued after year end), plus a further conditional $286,000 (¥2,000,000) payable by June 30, 2020
(not paid). The required conditions for the final payment were not met by the selling party. As a result, the company derecognized
the liability and recorded a gain of $3,240,250 (¥22,000,000). On June 19, 2020, Engin’s name was changed to Pacific
Green Technologies (Shanghai) Co. Ltd.
Total
purchase consideration is estimated at $11,052,307, inclusive of the fair value of the conditional payments, which were considered
probable at the acquisition date. The 125,000 shares in the Company have been estimated to have a fair value of $368,750 or $2.95
per share. This share price is determined on the basis of the closing market price of the Company’s common shares at the
date of acquisition.
The results of operations of
the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated
financial statements with effect from the date of the acquisition. The purchase consideration has been applied to cash of $2,063,358,
other net working capital of Engin of $1,024,461, property and equipment of $931,554, intangible assets of $4,112,462, and cumulative
translation adjustment of $470,847. The residual value of consideration after applying it to the carrying values of assets and
liabilities acquired and fair value adjustments, resulted in a goodwill allocation of $3,760,079. The goodwill paid as part of
the acquisition is expected to be tax deductible. The measurement period will not exceed one year from the acquisition date.
PACIFIC
GREEN TECHNOLOGIES INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
8.
|
Acquisition of Innoergy Limited
|
On October 19, 2020, the Company
entered into a Share Purchase Agreement for the acquisition of a 100% interest in Innoergy Limited and immediately changed its
name to Pacific Green Innoergy Technologies Limited (“Innoergy”). Innoergy is a designer of battery energy storage
systems registered in the United Kingdom. The acquisition marks the Company’s entry into the battery energy storage system
market in conjunction with its joint venture partner, PowerChina SPEM.
In consideration of all the issued and outstanding securities
of Innoergy, the Company has issued to the selling shareholders of Innoergy an aggregate of 525,000 common shares of the Company.
The Company paid £25,000 ($32,500) to a selling shareholder on completion of the transaction, and will pay an equal amount
when Innoergy achieves battery storage sales equivalent to 50 megawatts. The common shares of the Company issued to the sellers
are subject to a sales volume restriction of 65,625 shares per calendar quarter. As a further condition of the acquisition, Pacific
Green will make available to Innoergy a working capital credit facility of £350,000 (approximately $455,000) at an interest
rate of eight percent (8%) per annum, which will be due on demand and secured by a floating charge and debenture against the assets
of Innoergy.
Total
purchase consideration is estimated at $633,911, inclusive of the fair value of the conditional payments, which were
considered 75% probable at the acquisition date. Total purchase consideration also includes 525,000 shares with fair value of
$577,500 or $1.10 per share. This share price is determined on the basis of the closing market price of the Company’s
common shares at the date of acquisition. The results of operations of the acquired business and the fair value of the
acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect
from the date of the acquisition. The purchase consideration has been applied to cash of $146,503, other net working capital
of $ 2,758, property and equipment of $540, and loan payable of $64,981. The residual value of $549,091 has been allocated to
goodwill, which is expected to be partially or completely tax deductible. The resulting goodwill is based on preliminary
valuations and is subject to change based on information that may be made available in the measurement period. The
measurement period during which changes may be made to the provisional purchase price allocation will not exceed one year
from the acquisition date.
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
9.
|
Sales,
Contract Assets and Contract Liabilities
|
The
Company has analyzed its sales contracts under ASC 606 and has identified performance conditions that are not directly correlated
with contractual payment terms with customer. As a result of the timing differences between customer payments and satisfaction
of performance conditions, contractual assets and contractual liabilities have been recognized.
Contracts
are unique to customers’ requirements. However, the Company’s performance obligations can generally be identified
as:
|
●
|
Specified
service works
|
|
●
|
Certified design
and engineering works
|
|
●
|
Acceptance of delivered
equipment to customers
|
|
●
|
Acceptance of commissioned
equipment
|
For
the three and nine months ended December 31, 2020, and 2019, the Company’s recognized sales revenues in proportion to performance
obligations as noted below:
|
|
Three
months
Ended
December 31,
2020
$
|
|
|
Three
months
Ended
December 31,
2019
$
|
|
|
|
|
|
|
|
|
Specified
service works
|
|
|
397,572
|
|
|
|
-
|
|
Certified design and
engineering works
|
|
|
-
|
|
|
|
9,779,337
|
|
Acceptance of delivered
equipment to customers
|
|
|
1,994,601
|
|
|
|
19,273,700
|
|
Acceptance of commissioned
equipment
|
|
|
1,922,166
|
|
|
|
8,468,912
|
|
Concentrated solar
power contracts
|
|
|
344,127
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,658,466
|
|
|
|
37,521,949
|
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
9.
|
Sales, Contract Assets and Contract Liabilities (continued)
|
|
|
Nine
months
Ended
December 31,
2020
$
|
|
|
Nine
months
Ended
December 31,
2019
$
|
|
|
|
|
|
|
|
|
Specified
service works
|
|
|
817,618
|
|
|
|
381,338
|
|
Certified design and
engineering works
|
|
|
3,575,629
|
|
|
|
21,517,289
|
|
Acceptance of delivered
equipment to customers
|
|
|
21,498,217
|
|
|
|
69,697,153
|
|
Acceptance of commissioned
equipment
|
|
|
15,754,070
|
|
|
|
13,428,948
|
|
Concentrated
solar power contracts
|
|
|
483,358
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
42,128,892
|
|
|
|
105,024,728
|
|
Changes in the Company’s
contract assets and liabilities for the periods are noted as below:
|
|
Contract
Assets
$
|
|
|
Sales
(Cost of sales)
$
|
|
|
Contract
Liabilities
$
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2019
|
|
|
12,237,825
|
|
|
|
|
|
|
|
(18,850,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
receipts and receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
(134,841,354
|
)
|
Sales
recognized in earnings
|
|
|
-
|
|
|
|
130,138,574
|
|
|
|
130,138,574
|
|
Payments
under contracts
|
|
|
90,932,669
|
|
|
|
-
|
|
|
|
-
|
|
Costs
recognized in earnings
|
|
|
(78,566,155
|
)
|
|
|
(78,556,155
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31,
2020
|
|
|
24,604,339
|
|
|
|
|
|
|
|
(23,553,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
receipts and receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,018,290
|
)
|
Sales
recognized in earnings
|
|
|
-
|
|
|
|
42,128,892
|
|
|
|
42,128,892
|
|
Payments
and accruals under contracts*
|
|
|
18,700,600
|
|
|
|
-
|
|
|
|
-
|
|
Costs
recognized in earnings
|
|
|
(25,515,248
|
)
|
|
|
(25,515,248
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2020
|
|
|
17,789,691
|
|
|
|
|
|
|
|
(16,442,665
|
)
|
|
*
|
Payments
and accruals under contracts include $7,433,663 presented as receivables which is subject
to the fulfilment of future performance obligations.
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
10.
|
Convertible
Debenture and Derivative Liability
|
As
at December 31, 2020, the carrying value of the debenture was $10,000 (March 31, 2020 - $30,000) and interest expense on the debenture
for the three and nine months ended December 31, 2020 was recorded as $500 (December 31, 2019 - $1,500) and $2,833 (December 31,
2019 - $4,500). During the nine months ended December 31, 2020, $20,000 of the debenture was converted to 50,000 common shares
and a reduction of the derivative liability of $42,550 was recorded.
The
fair value of the derivative liability was calculated using a binomial option pricing model. The fair value of the derivative
liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of
operations. During the three and nine months ended December 31, 2020, the Company recorded a loss on the change in fair value
of derivative liability of $50,869 (December 31, 2019- gain of $57,520) and a loss of $1,306 (December 31, 2019 – loss of
$13,887), respectively. As at December 31, 2020, the Company recorded a derivative liability of $133,240 (March 31, 2020 - $174,484).
The
following inputs and assumptions were used to calculate the fair value of the conversion feature of the convertible debenture
outstanding as at December 31, 2020, assuming no expected dividends:
|
|
As
at
December 31,
2020
|
|
|
As
at
March 31,
2020
|
|
|
|
|
|
|
|
|
Estimated
common stock issuable upon conversion
|
|
|
135,430
|
|
|
|
178,343
|
|
Estimated exercise price per common share
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
Risk-free interest rate
|
|
|
0.09
|
%
|
|
|
0.11
|
%
|
Expected volatility
|
|
|
174.1
|
%
|
|
|
193.6
|
%
|
Expected life (in years)
|
|
|
0.25
|
|
|
|
0.25
|
|
A summary of the changes
in derivative liabilities for the three- and nine-month periods is shown below:
|
|
Three
Months
Ended
December 31,
2020
$
|
|
|
Three
Months
Ended
December 31,
2019
$
|
|
|
Nine months Ended December 31,
2020
$
|
|
|
Nine months Ended December 31,
2019
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
(82,371
|
)
|
|
|
(502,993
|
)
|
|
|
(174,484
|
)
|
|
|
(431,586
|
)
|
Conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
42,550
|
|
|
|
-
|
|
Mark to market adjustment
|
|
|
(50,869
|
)
|
|
|
57,520
|
|
|
|
(1,306
|
)
|
|
|
(13,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
|
(133,240
|
)
|
|
|
(445,473
|
)
|
|
|
(133,240
|
)
|
|
|
(445,473
|
)
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
11.
|
Accounts
payable and accruals
|
|
|
December
31,
2020
$
|
|
|
March
31,
2020
$
|
|
Accounts payable
|
|
|
1,386,296
|
|
|
|
9,610,748
|
|
Accrued liabilities
|
|
|
27,263,560
|
|
|
|
32,599,586
|
|
Payroll liabilities
|
|
|
49,988
|
|
|
|
65,951
|
|
Short term accounts payable and accrued liabilities
|
|
|
28,699,844
|
|
|
|
42,276,285
|
|
Long term accounts payable and accrued liabilities
|
|
|
1,748,238
|
|
|
|
1,622,284
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
|
30,448,082
|
|
|
|
43,898,569
|
|
During
the three and nine months ended December 31, 2020, the Company recorded a non-cash warranty provision of $160,125 (December 31,
2019 - $1,356,422) and $1,407,420 (December 31, 2019 - $2,711,213) respectively, as the Company provides warranties to customers
for the design, materials, and installation of scrubber units. Product warranty is recorded at the time of sale and will be revised
based on new information as system performance data becomes available.
A summary of the changes
in the warranty provision is shown below:
|
|
December
31,
2020
$
|
|
|
March
31,
2020
$
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
1,089,356
|
|
|
|
121,345
|
|
Provision for warranty
|
|
|
1,407,420
|
|
|
|
1,630,541
|
|
Expenses
incurred
|
|
|
(924,343
|
)
|
|
|
(662,530
|
)
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
|
1,572,433
|
|
|
|
1,089,356
|
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
13.
|
Related
Party Transactions
|
|
(a)
|
As at December 31,
2020, the Company was owed $42,346 (March 31, 2020 – owed to $2,154) from companies controlled by a director and officer
of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
|
|
(b)
|
As at December 31,
2020, the Company owed $4,250 (March 31, 2020 – $nil) to a director of the Company. The amounts owing are unsecured,
non-interest bearing, and due on demand.
|
|
(c)
|
During
the three and nine months ended December 31, 2020, the Company incurred $330,025 (December 31, 2019 – $489,766)
and $1,099,756 (December 31, 2019 – $1,347,652) in consulting fees, salaries, and commissions to companies controlled
by a director of the Company.
|
|
(d)
|
During
the three and nine months ended December 31, 2020, the Company incurred $12,750 (December
31, 2019 – $11,942) and $38,250 (December 31, 2019 – $21,479) in consulting
fees to a director of the Company.
|
|
(e)
|
During
the three and nine months ended December 31, 2020, the Company incurred $ nil (December
31, 2019 - $nil) and $nil (December 31, 2019 - $35,000) in consulting fees to a director
of the Company.
|
|
(a)
|
On
July 17, 2020, the Company issued 50,000 shares of common stock with an aggregate value
of $69,500 to a former officer of the Company as per the terms of an employment settlement
agreement.
|
|
(b)
|
On
August 6, 2020, the Company issued 50,000 shares of common stock with a fair value of
$62,500 pursuant to a conversion of $20,000 in principal and $ 42,550 in derivative liability
relating to the November 10, 2015 convertible debenture. The fair value of the common
stock was determined based on closing price of the Company’s common stock of $1.25
per share. This transaction resulted in a gain on extinguishment of debt of $50.
|
|
(c)
|
On
August 31, 2020, 175,000 stock options were exercised by a director of the Company at
the exercise price of $0.01 per share with an aggregate value of $1,750. The Company
issued 175,000 shares of common stock from the treasury.
|
|
(d)
|
On
September 28, 2020, the Company issued 95,238 shares of common stock with an aggregate
value of $95,238 under the terms of a sales commission agreement.
|
|
(e)
|
On
October 19, 2020, the Company issued 525,000 shares of common stock with an aggregate
value of $577,500 as part of the acquisition of Innoergy.
|
|
(f)
|
On
October 19, 2020, the Company issued 100,000 shares of common stock with an aggregate
value of $100,000 to a former director in recognition and appreciation for his years
of exemplary service and commitment to the Company as a bonus.
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
15.
|
Share
Purchase Warrants
|
|
|
Number
of
warrants
|
|
|
Weighted
average exercise price
$
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
|
|
4,300,000
|
|
|
|
2.15
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(1,000,000
|
)
|
|
|
2.50
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
|
|
3,300,000
|
|
|
|
2.50
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(3,300,000
|
)
|
|
|
2.50
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020
|
|
|
-
|
|
|
|
-
|
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
The following table
summarizes the continuity of stock options:
|
|
Number
of
options
|
|
|
Weighted
average exercise price
$
|
|
|
Weighted
average remaining contractual life (years)
|
|
|
Aggregate
intrinsic value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2019
|
|
|
3,452,500
|
|
|
|
1.41
|
|
|
|
2.3
|
|
|
|
5,481,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
75,000
|
|
|
|
1.99
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(150,000
|
)
|
|
|
0.63
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2020
|
|
|
3,377,500
|
|
|
|
1.46
|
|
|
|
1.49
|
|
|
|
6,045,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(175,000
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2020
|
|
|
3,202,500
|
|
|
|
1.54
|
|
|
|
0.89
|
|
|
|
-
|
|
Additional
information regarding stock options outstanding at December 31, 2020 is as follows:
Exercisable
|
|
Number
of shares
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Range
of
Exercise price
$
|
|
|
|
|
|
|
|
|
|
|
312,500
|
|
|
|
0.67
|
|
|
|
0.01
|
|
|
2,865,000
|
|
|
|
0.91
|
|
|
|
1.70
|
|
|
25,000
|
|
|
|
1.54
|
|
|
|
2.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,202,500
|
|
|
|
|
|
|
|
|
|
The
estimated fair value of the stock options was being recorded over the requisite service period to vesting. For the three and nine
months ended December 31, 2020, the fair value of $nil (December 31, 2019 - $30,421) and $60,822 (December 31, 2019 - $80,596)
was recorded as stock-based compensation.
The
fair values were estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the
following weighted average assumptions:
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
16.
|
Stock
Options (continued)
|
|
|
Three months ended
December 31,
2020
|
|
|
Three months ended
December 31,
2019
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
2.13
|
%
|
|
|
1.55
|
%
|
Expected life (in years)
|
|
|
3.0
|
|
|
|
0.8
|
|
Expected volatility
|
|
|
169
|
%
|
|
|
108
|
%
|
|
17.
|
Segmented
Information
|
The
Company is located and operates in North America and its subsidiaries are primarily located and operating in Europe and Asia.
Significant long-term assets are geographically located as follows:
|
|
December 31, 2020
|
|
|
|
North America
$
|
|
|
Europe
$
|
|
|
Asia
$
|
|
|
Total
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
134,666
|
|
|
|
212,982
|
|
|
|
939,225
|
|
|
|
1,286,873
|
|
Intangible assets
|
|
|
8,187,723
|
|
|
|
-
|
|
|
|
3,434,262
|
|
|
|
11,621,985
|
|
Right of use assets
|
|
|
58,864
|
|
|
|
913,673
|
|
|
|
245,034
|
|
|
|
1,217,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,381,253
|
|
|
|
1,126,655
|
|
|
|
4,618,521
|
|
|
|
14,126,429
|
|
Nine
months Ended December 31, 2020
|
|
Asia
$
|
|
|
Europe
$
|
|
|
Total
$
|
|
Revenues
by customer region
|
|
|
483,358
|
|
|
|
41,645,534
|
|
|
|
42,128,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended December 31, 2020
|
|
Asia
$
|
|
|
Europe
$
|
|
|
Total
$
|
|
Revenues
by customer region
|
|
|
344,127
|
|
|
|
4,314,339,
|
|
|
|
4,658,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
17.
|
Segmented
Information (continued)
|
|
|
December 31, 2019
|
|
|
|
North
America
$
|
|
|
Europe
$
|
|
|
Asia
$
|
|
|
Total
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
146,672
|
|
|
|
239,276
|
|
|
|
1,315,717
|
|
|
|
1,701,665
|
|
Intangible assets
|
|
|
9,065,190
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,065,190
|
|
Right of use assets
|
|
|
100,098
|
|
|
|
1,590,030
|
|
|
|
-
|
|
|
|
1,690,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,311,960
|
|
|
|
1,829,306
|
|
|
|
1,315,717
|
|
|
|
12,456,983
|
|
Nine
months ended December 31, 2019
|
|
Asia
$
|
|
|
Europe
$
|
|
|
Total
$
|
|
Revenues
by customer region
|
|
|
8,114,000
|
|
|
|
96,910,728
|
|
|
|
105,024,728
|
|
Three
months ended December 31, 2019
|
|
Asia
$
|
|
|
Europe
$
|
|
|
Total
$
|
|
Revenues
by customer region
|
|
|
1,050,884
|
|
|
|
36,471,065
|
|
|
|
37,521,949
|
|
For
the three and nine months ended December 31, 2020, 87% (December 31, 2019 – 81%) and 98% (December 31, 2019 – 75%)
of the Company’s revenues were derived from three customers, of which two customers are under the same common ownership
and control.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim
Financial Statements
December 31, 2020
(Unaudited)
(Expressed in U.S. Dollars)
|
18.
|
Deconsolidation
of PGMT Norway SA (PGN)
|
Effective July 1, 2020, the Company
ceased operations of the Norway subsidiary. This was due in part to the thinning spread of the current oil prices combined with
the current Covid-19 pandemic conditions. All the assets in PGN were liquidated through a court process. The Company has removed
the subsidiary’s assets and liabilities from the consolidated balance sheet and recorded a gain of $239,174. The intercompany
loan was due to PGMT US and it was written off due to the liquidation. The courts have now closed this case and the Company
has no further liability. At July 1, 2020, PGN’s assets and liabilities were as shown below:
|
|
$
|
|
Assets:
|
|
|
|
Cash
|
|
|
22,314
|
|
Prepaids
|
|
|
1,135
|
|
PPE
|
|
|
26,720
|
|
Right of use
|
|
|
241,825
|
|
Total Assets
|
|
|
291,994
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts
payable
|
|
|
289,301
|
|
Intercompany
loans
|
|
|
1,572,571
|
|
Operating
lease
|
|
|
244,274
|
|
Total liabilities
|
|
|
2,106,146
|
|
Net liability
|
|
|
(1,814,152
|
)
|
Intercompany loans write-off
|
|
|
1,572,571
|
|
Less: investment in subsidiary
|
|
|
2,407
|
|
Gain on disposition
|
|
|
239,174
|
|
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
(a)
|
The Company’s
subsidiaries have entered into three long-term operating leases for office premises in London, United Kingdom, Shanghai, China
and North Vancouver, Canada. These lease assets are categorized as right of use assets under ASU No. 2016-02.
|
|
|
|
|
(b)
|
Effective July 1,
2020, the Company terminated its operating lease in Lysaker, Norway as the company has ceased operations of its Norway subsidiary.
|
Long-term
premises lease
|
|
Lease
commencement
|
|
Lease
expiry
|
|
Term
(years)
|
|
|
Discount
rate*
|
|
|
|
|
|
|
|
|
|
|
|
|
London, United
Kingdom
|
|
April 1,
2019
|
|
December 25, 2023
|
|
|
4.75
|
|
|
|
4.50%
|
|
North Vancouver, Canada
|
|
December 1, 2019
|
|
August 31, 2022
|
|
|
2.75
|
|
|
|
4.50%
|
|
Shanghai, China
|
|
March 1, 2020
|
|
May 31, 2025
|
|
|
5.25
|
|
|
|
4.75%
|
|
|
*
|
The
Company determined the discount rate with reference to mortgages of similar tenure and
terms.
|
Operating
lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over
the lease term at the commencement date. As the Company’s operating lease does not provide an implicit rate, the discount
rate used to determine the present value of the lease payments is the collateralized incremental borrowing rate based on the remaining
lease term. The operating lease asset excludes lease incentives. The operating leases do not contain an option to extend or terminate
the lease term at the Company’s discretion, therefore no probable renewal has been added to the expiry date when determining
lease term. Operating lease expense is recognized on a straight-line basis over the lease term.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim
Financial Statements
December 31, 2020
(Unaudited)
(Expressed in U.S. Dollars)
19.
|
Commitment
(continued)
|
Lease
costs for the three and nine months are summarized as follows:
|
|
Three
Months Ended
December 31,
2020
$
|
|
|
Three
Months Ended
December 31,
2019
$
|
|
|
Nine
months Ended
December 31,
2020
$
|
|
|
Nine
months Ended
December 31
2019
$
|
|
Operating
lease expense *
|
|
|
93,910
|
|
|
|
96,340
|
|
|
|
342,077
|
|
|
|
302,131
|
|
|
*
|
Including
right of use amortization and imputed interest. Lease payments include maintenance, operating
expense, and tax.
|
The
Company has entered into premises lease agreements with minimum annual lease payments expected over the next five years of the
lease as follows:
Calendar
Year
|
|
$
|
|
|
|
|
|
2021
|
|
|
537,762
|
|
2022
|
|
|
524,269
|
|
2023
|
|
|
389,054
|
|
2024
|
|
|
64,366
|
|
2025
|
|
|
16,092
|
|
Total future minimum
lease payments
|
|
|
1,531,543
|
|
Imputed
interest
|
|
|
(99,573
|
)
|
|
|
|
|
|
Operating
lease obligations
|
|
|
1,431,970
|
|
|
(b)
|
On July 14, 2017,
the Company entered into a new memorandum of understanding to establish a new joint venture company in China with a non-related
party (the “Supplier”) wherein the Supplier would receive and process orders, manufacture, and install products
for the Company’s customers. In return, the Company agreed to design the product, provide strategic pricing, sales and
marketing direction, as well as provide technology licenses and technical support (the “Technology”) to the Supplier.
During the term of the agreement, the Company will provide the Supplier with a non-transferrable right and license to use
the Technology to manufacture and install the product within the Asia and Russia region.
|
The
parties will fund the venture proportionately, 50.1% by the Company and 49.9% by the Supplier, and excess operating cash flows
will be distributed on a quarterly basis. Neither party have funded the joint venture to date and there has been no revenue and
expense associated with it.
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
The
majority of the Company’s revenues from international sales are invoiced from and collected by our U.S. entity and
recognized as a component of income before taxes in the United States as opposed to a foreign jurisdiction. Net income (loss)
before taxes for the Nine months ended December 31, 2020 by U.S. and foreign jurisdictions was as follows:
|
|
December
31,
2020
$
|
|
|
December
31,
2019
$
|
|
|
|
|
|
|
|
|
United
States
|
|
|
1,831,428
|
|
|
|
15,116,552
|
|
Foreign
|
|
|
(2,203,385
|
)
|
|
|
(4,080,411
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
before taxes
|
|
|
(371,957
|
)
|
|
|
11,036,141
|
|
The
following table reconciles the income tax expense (benefit) at the statutory rates to the income tax (benefit) at the Company’s
effective tax rate.
|
|
December
31,
2020
$
|
|
|
December
31
2019
$
|
|
|
|
|
|
|
|
|
Net income
(loss) before taxes
|
|
|
(371,957
|
)
|
|
|
11,036,141
|
|
Statutory tax rate
|
|
|
21%
|
|
|
|
21%
|
|
|
|
|
|
|
|
|
|
|
Expected income tax
expense (recovery)
|
|
|
(78,111
|
)
|
|
|
2,317,590
|
|
Permanent differences
and other
|
|
|
502,105
|
|
|
|
300,596
|
|
Foreign tax rate difference
|
|
|
37,233
|
|
|
|
(41,777
|
)
|
Change in valuation
allowance
|
|
|
(461,227
|
)
|
|
|
(2,576,409
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
-
|
|
|
|
-
|
|
As
of the date of this filing, the Company has completed delinquent tax filings and management believes that the active entities
within the group are now current with statutory corporate income tax filings. Certain of the amounts presented above are based
on estimates and what management believes are prudent filing positions. The actual losses available could differ from these estimates
upon assessment and review by taxation authorities.
PACIFIC GREEN TECHNOLOGIES
INC.
Notes to
the Condensed Consolidated Interim Financial Statements
December
31, 2020
(Unaudited)
(Expressed
in U.S. Dollars)
|
20.
|
Income
Taxes (continued)
|
On
December 22, 2017, the US federal tax legislation commonly known as the Tax Cut and Jobs Act (TCJA) was signed into law. The
TCJA made major changes to the Internal Revenue Code, including reducing the US federal income corporate tax rate from 35% to
21% for tax years beginning after December 31, 2017. Under the TCJA, for net operating losses (“NOLs”) arising in
taxable years beginning after December 31, 2017, the TCJA limits a US corporate taxpayer’s ability to utilize NOL
carryforwards to 80% of the taxpayer’s taxable income (as modified by the CARES Act, as described below). In addition,
NOLs arising in taxable years beginning after December 31, 2017 can be carried forward indefinitely, with no carryback. NOLs
generated in tax years beginning before January 1, 2018 are not subject to the taxable income limitation and generally has a
20-year carryforward. On March 27, 2020 the President signed into law the Coronavirus Aid, Relief, and Economic Security Act
(the CARES Act). The CARES Act introduced various tax changes, including granting a five-year carry back period for NOLs
arising in taxable years beginning after December 31, 2017 and before January 1, 2021, temporary suspension of the 80%
taxable income limitation on the use of NOLs arising in tax years beginning after December 31, 2017 but before January 1,
2021.
The
Company estimates that is has accumulated estimated net operating losses of approximately US$17.7 million of which US$14.2 million arose from the US and
which does not begin to expire until 2033. In addition, the Company estimates that it has $1.9 million
in losses available in the United Kingdom. Historical losses in the U.S., are subject to limitations on use due to deemed changes
in control for tax purposes. This impacts the timing and opportunity to use certain losses.
PACIFIC GREEN TECHNOLOGIES INC.
Notes to the Condensed Consolidated Interim
Financial Statements
December 31, 2020
(Unaudited)
(Expressed in U.S. Dollars)
|
a)
|
On January 11, 2021, the Company received notice for the conversion of $10,000 of principle and
$81,592 of interest due under a convertible promissory note. Accordingly, the Company has issued 228,981 common shares in settlement
at the conversion rate of $0.40 per share (Note 10).
|
|
b)
|
On January 14, 2021, the Company entered into a Battery Energy
Storage System Strategic Manufacturing Framework Agreement (the “Framework Agreement”) with Shanghai Electric Gotion
New Energy Technology Co., Ltd. (“SEG”).
|
Under the terms of the Framework
Agreement, the parties will work together towards the development of various lithium-ion Battery Energy Storage System (BESS) projects
around the world. The Company, through its wholly owned subsidiary, Pacific Green Energy Storage Technologies, Inc., will manage
each project’s overall execution, including system design, integration and commercial optimization, while SEG will produce
the battery technology as the equipment manufacturer.
|
c)
|
On January 15, 2021, the Company granted 25,000 stock options to an officer of the Company. The stock options are exercisable
at a 25% discount to market and vest on January 15, 2021. These stock options are exercisable 12 months following the grant date.
|
|
d)
|
On February 1, 2021, the Company appointed Peter Rossbach to become an Independent Non-Executive Director of our Company.
|
|
e)
|
On February 2, 2021, the Company executed a settlement agreement and a postponement agreement with
Scorpio Bulkers Inc. (“SALT”) and Scorpio Tankers Inc. (STNG), respectively. Under the terms of the settlement
agreement, SALT has been released from its commitments and guarantees related to its previous purchase contracts in exchange for:
(1) $7,215,000 paid within 5 days of settlement, and (2) deposits and other monies already transferred to the Company with respect
to the contracts. Each party is thereinafter released from any further guarantees or claims related to these contracts. Under
the terms of the postponement agreement, STNG is released from its commitments under previous purchase contracts in exchange for:
(1) $5,276,500 paid within 5 days of settlement, (2) $2,683,250 paid at the 6-month anniversary of the settlement, and (3) deposits
and other monies already transferred to the Company with respect to the contracts. Under the postponement agreement, STNG retains
an option for nine months allowing it to pay $2,638,250 to “unfreeze” between eleven and nineteen of the remaining
STNG purchase agreements. If the option is exercised, the Company will be required to deliver under the current commitment
with a revised timeline for delivery at a pre-agreed purchase price. For all vessels not covered under such an exercised option,
each party is released from any further guarantees or claims related to these contracts.
|