Pacific Green Technologies Inc. - Quarter Report: 2022 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [ ] to [ ]

Commission file number 000-54756

PACIFIC GREEN TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Delaware		36-4966163
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Suite 10212, 8 The Green

Dover, DE

19901

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (302) 601-4659

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		PGTK		OTC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES ☐ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ YES ☐ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES ☒ NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ☐ YES ☐ NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

47,276,886 common shares issued and outstanding as of February 14, 2023.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		1
ITEM 1.	FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	11
ITEM 4.	CONTROLS AND PROCEDURES	11
PART II – OTHER INFORMATION		12
ITEM 1.	LEGAL PROCEEDINGS	12
ITEM 1A.	RISK FACTORS	12
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES	12
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	12
ITEM 4.	MINE SAFETY DISCLOSURES	12
ITEM 5.	OTHER INFORMATION	12
ITEM 6.	EXHIBITS	12

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Our unaudited condensed consolidated interim financial statements for the three and nine months ended December 31, 2022 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

PACIFIC GREEN TECHNOLOGIES INC.

Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

	Index

Condensed Consolidated Interim Balance Sheets	F–2

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss	F–3

Condensed Consolidated Interim Statements of Stockholders Equity	F–4

Condensed Consolidated Interim Statements of Cash Flows	F–5

Notes to the Condensed Consolidated Interim Financial Statements	F–6

F-1

PACIFIC GREEN TECHNOLOGIES INC.

Condensed Consolidated Interim Balance Sheets

(Unaudited)

(Expressed in U.S. dollars)

	December 31, 2022 $			March 31, 2022 $

Assets

Cash and cash equivalent		2,500,411			6,286,468
Short-term investments and amounts in escrow (Note 3)		101,357			1,932,323
Accounts receivable, net of allowance for doubtful accounts of $140,376 and $828,461 at December 31, 2022 and March 31, 2022, respectively		1,428,650			4,884,101
Other receivable, net of allowance for doubtful accounts of $3,552 and $1,512 at December 31, 2022 and March 31, 2022, respectively		510,233			10,599,746
Accrued revenue (Note 9)		946,028			531,947
Prepaid expenses, parts inventory and advances		1,098,180			582,063
Prepaid manufacturing costs (Note 9)		62,746			38,010
Total current assets		6,647,605			24,854,658

Project under development (Notes 6 & 7)		35,757,194			3,855,792
Property and equipment (Note 4)		945,728			1,166,241
Intangible assets (Note 5)		6,438,954			7,099,748
Right of use asset		2,680,731			739,091
Security deposits and other advances		615,279			949,644
Total assets		53,085,491			38,665,174

Liabilities and shareholders’ equity

Current liabilities

Accounts payable and accrued liabilities (Note 10)		4,519,033			9,594,787
Warranty provision (Note 12)		647,266			865,451
Contract liabilities (Note 9)		8,908,478			8,143,109
Loans payable (Note 11)		10,550,533			–
Current portion of lease obligations (Note 16)		319,602			472,068
Due to related parties (Note 13)		95,752			4,250
Total current liabilities		25,040,664			19,079,665

Long term loans payable (Note 11)		8,236,888			–
Non – current portion of lease obligation (Note 16)		2,311,527			341,972
Total liabilities		35,589,079			19,421,637

Stockholders’ equity

Preferred stock, 10,000,000 shares authorized, $0.001 par value nil and nil shares issued and outstanding at December 31, 2022 and March 31, 2022, respectively		–			–
Common stock, 500,000,000 shares authorized, $0.001 par value 47,026,886 and 47,026,886 shares issued and outstanding at December 31, 2022 and March 31, 2022, respectively		47,027			47,027
Additional paid-in capital		92,618,681			92,429,203
Accumulated other comprehensive income		2,025,540			2,035,666
Deficit		(93,255,586	)		(85,530,306	)

Total stockholders’ equity before treasury stock		1,435,662			8,981,590

Treasury stock, at cost, 56,162 shares and 56,162 shares at December 31, 2022 and March 31, 2022, respectively		(99,754	)		(99,754	)

Total stockholders’ equity		1,335,908			8,881,836

Noncontrolling interest (Note 8(a) and (b))		16,160,504			10,361,701

Total equity		17,496,412			19,243,537

Total liabilities and stockholders’ equity		53,085,491			38,665,174

Nature of Operations (Note 1)

Commitments (Note 16)

Subsequent events (Note 18)

(The accompanying notes are an integral part of these consolidated financial statements)

F-2

PACIFIC GREEN TECHNOLOGIES INC.

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(Expressed in U.S. dollars)

	Three Months Ended December 31, 2022 $			Three Months Ended December 31, 2021 (As restated- Note 2) $			Nine Months Ended December 31, 2022 $			Nine Months Ended December 31, 2021 (As restated- Note 2) $

Sales (Note 9)
Products		2,253,221			3,710,228			4,607,668			4,452,518
Services		1,386,771			1,542,580			2,251,553			2,262,076
Total revenues		3,639,992			5,252,808			6,859,221			6,714,594
Cost of goods sold (Note 9)
Products		1,986,344			766,756			3,686,591			2,471,657
Services		1,031,160			1,216,503			1,614,136			1,716,671
Total cost of goods sold		3,017,504			1,983,259			5,300,727			4,188,328
Gross profit / (loss)		622,488			3,269,549			1,558,494			2,526,266

Expenses
Advertising and promotion		120,230			170,870			421,903			488,088
Amortization of intangible assets (Note 5)		639			177,172			1,989			520,116
Bad debts expense/(recovery)		36,341			21,012			(10,193	)		21,012
Depreciation (Note 4)		45,600			52,519			148,671			152,062
Foreign exchange (gain) / loss		(5,776	)		34,791			98,545			86,369
Management and technical consulting		802,533			764,379			2,106,857			2,292,632
Office and miscellaneous		509,864			525,009			1,499,940			1,318,839
Operating lease expense (Note 16)		231,789			117,350			440,779			360,717
Professional fees		547,538			390,866			1,295,198			1,338,544
Research and development		-			-			13,772			-
Salaries and wage expenses		909,364			1,140,663			2,957,988			3,725,349
Transfer agent and filing fees		15,278			91,865			46,075			253,088
Travel and accommodation		197,252			249,338			596,482			473,953
Warranty and related expense / (recovery) (Note 12)		(744,918	)		16,795			(563,318	)		(4,853	)
Total expenses		2,665,734			3,752,629			9,054,688			11,025,916
(Loss) before other income (expense)		(2,043,246	)		(483,080	)		(7,496,194	)		(8,499,650	)
Other income / (expenses)
Financing interest income		32,790			85,889			89,090			378,840
Interest (expense) / income and other		(220,300	)		(53,199	)		(298,011	)		47,534
Total other (expense) / income		(187,510	)		32,690			(208,921	)		426,374

Net loss for the period before noncontrolling interest		(2,230,756	)		(450,390	)		(7,705,115	)		(8,073,276	)

Net income/(loss) attributable to noncontrolling interest (Note 8(a) and (b))		(6,577	)		–			20,165			–

Net loss for the period		(2,224,179	)		(450,390	)		(7,725,280	)		(8,073,276	)

Other comprehensive income

Foreign currency translation gain / (loss)		171,818			132,503			(10,126	)		349,828

Comprehensive loss for the period		(2,052,361	)		(317,887	)		(7,735,406	)		(7,723,448	)
Net income per share, basic and diluted		(0.05	)		(0.01	)		(0.16	)		(0.17	)
Weight average number of common shares outstanding, basic ⁽¹⁾		47,339,386			47,316,539			47,339,386			47,321,207
Weight average number of dilutive shares outstanding, diluted		47,339,386			47,316,539			47,339,386			47,321,207

(1)

The period ended December 31, 2022, includes 312,500 (2021 – 312,500) stock options as they are exercisable at any time and for nominal cash consideration.

(The accompanying notes are an integral part of these consolidated financial statements)

F-3

PACIFIC GREEN TECHNOLOGIES INC.

Condensed Consolidated Interim Statements of Stockholders Equity

(Unaudited)

(Expressed in U.S. dollars)

	Common stock				Additional Paid-in		Accumulated Other Comprehensive			Treasury			Noncontrolling						Stockholders’
	Shares #		Amount $		Capital $		Income $			Stock $			Interest $			Deficit $			Equity $
Balance, March 31, 2022		47,026,886		47,027		92,429,203		2,035,666			(99,754	)		10,361,701			(85,530,306	)		19,243,537

Fair value of options granted (Note 13)		–		–		17,718		–			–			–			–			17,718
Noncontrolling interest ((Note 8(a) and (b))		–		–		–		–			–			67,571			–			67,571
Foreign exchange translation loss		–		–		–		(384,835	)		–			–			–			(384,835	)
Net loss for the period		–		–		–		–			–			–			(3,259,230	)		(3,259,230	)

Balance June 30, 2022		47,026,886		47,027		92,446,921		1,650,831			(99,754	)		10,429,272			(88,789,536	)		15,684,761

Fair value of options granted (Note 14)		–		–		9,194		–			–			–			–			9,194
Noncontrolling interest ((Note 8(a) and (b))		–		–		–		–			–			5,737,809			–			5,737,809
Foreign exchange translation gain		–		–		–		202,891			–			–			–			202,891
Net loss for the period		–		–		–		–			–			–			(2,241,871	)		(2,241,871	)

Balance September 30, 2022		47,026,886		47,027		92,456,115		1,853,722			(99,754	)		16,167,081			(91,031,407	)		19,392,784

Fair value of options granted (Note 14)						162,566														162,566
Noncontrolling interest ((Note 8(a) and (b))														(6,577	)					(6,577	)
Foreign exchange translation gain								171,818												171,818
Net loss for the period																	(2,224,179	)		(2,224,179	)

Balance December 31, 2022		47,026,886		47,027		92,618,681		2,025,540			(99,754	)		16,160,504			(93,255,586	)		17,496,412

	Common stock				Additional Paid-in		Accumulated Other Comprehensive		Treasury					Stockholders’
	Shares #		Amount $		Capital $		Income $		Stock $		Deficit $			Equity $
Balance, March 31, 2021		46,990,565		46,991		92,327,092		892,732				(74,777,848	)		18,488,967

Fair value of options granted (Note 14)		–		–		13,788		–				–			13,788
Foreign exchange translation gain		–		–		–		176,116				–			176,116
Net loss for the period, as restated		–		–		–		–				(3,261,703	)		(3,261,703	)

Balance June 30, 2021, as restated		46,990,565		46,991		92,340,880		1,068,848				(78,039,551	)		15,417,168

Fair value of options granted (Note 14)		–		–		13,941		–				–			13,941
Shares issued for service		11,321		11		23,989		–				–			24,000
Shares issued on the exercise of stock options		25,000		25		225		–				–			250
Foreign exchange translation gain		–		–		–		41,209				–			41,209
Net loss for the period, as restated		–		–		–		–		–		(4,361,185	)		(4,361,185	)

Balance September 30, 2021, as restated		47,026,886		47,027		92,379,035		1,110,057				(82,400,736	)		11,135,383

Fair value of options granted (Note 14)						13,789									13,789
Common stock repurchases										(99,754)					(99,754)
Shares issued on the exercise of stock options															0
Foreign exchange translation gain								132,503							132,503
Net loss for the period, as restated												(450,390)			(450,390)

Balance December 31, 2021, as restated		47,026,886		47,027		92,392,824		1,242,560		(99,754)		(82,851,126)			10,731,533

(The accompanying notes are an integral part of these consolidated financial statements)

F-4

PACIFIC GREEN TECHNOLOGIES INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

(Expressed in U.S. dollars)

	Nine Months Ended December 31, 2022			Nine Months Ended December 31, 2021 (As restated- Note 2)
	$			$
Operating activities
Net loss for the period		(7,725,280	)		(8,073,276	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets (Note 5)		660,090			1,178,217
Depreciation (Note 4)		148,671			152,062
Fair value of stock options granted		189,478			41,519
Gain / (loss) on unrealized foreign exchange		772,985			(71,970	)
Lease finance charge		-			11,881
Operating lease expense (Note 16)		440,779			360,717
Shares issued for services		–			23,999
Changes in operating assets and liabilities:
Short-term investments and amounts held in trust		1,830,966			37,449
Accounts receivable and other receivables		3,183,262			6,000,253
Accrued revenue		(414,081	)		1,574,584
Prepaid expenses, parts inventory and advances		(516,117	)		(213,635	)
Security deposit		334,365			–
Lease payments		(537,384	)		(406,870	)
Prepaid manufacturing costs		(24,736	)		762,635
Accounts payable and accrued liabilities		(5,075,754	)		(15,691,868	)
Warranty provision		(218,185	)		(593,553	)
Contract liabilities		765,369			1,820,663
Due to related parties		91,502			(174,837	)
Net cash used in operating activities		(6,094,070	)		(13,262,030	)

Investing activities
Additions of property and equipment		(1,055	)		(49,540	)
Projects under development		(31,901,402	)		(348,967	)
Net cash used in investing activities		(31,902,457	)		(398,507	)

Financing activities
Noncontrolling interest (Note 8(a) and (b))		16,160,505			–
Treasury stock		–			(99,754	)
Proceeds from loan facility (Note 11)		18,787,421			–
Proceeds on option exercise		–			250
Net cash provided by investing activities		34,947,926			(99,504	)

Effect of foreign exchange rate changes on cash		(737,456	)		121,392
Change in cash and cash equivalents		(3,786,057	)		(13,638,649	)
Cash and cash equivalents, beginning of period		6,286,468			23,436,417
Cash and cash equivalents, end of period		2,500,411			9,797,768

(The accompanying notes are an integral part of these consolidated financial statements)

F-5

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

1.	Nature of Operations

Pacific Green Technologies Inc. (the “Company”) was incorporated in the state of Delaware, USA on March 10, 1994. The Company is in the business of acquiring, developing, and marketing environmental technologies, with a focus on emission control technologies.

The condensed consolidated interim financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022. 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.

F-6

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

2.	Significant Accounting Policies

(a)

Basis of Presentation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America and are expressed in U.S. dollars. The following accounting policies are consistently applied in the preparation of the consolidated financial statements. These consolidated financial statements include the accounts of the Company and the following entities:

Pacific Green Innoergy Technologies Ltd. (“Innoergy”) (Formerly Innoergy Ltd.)		Wholly-owned subsidiary
Pacific Green Marine Technologies Group Inc. (“PGMG”)		Wholly-owned subsidiary
Pacific Green Marine Technologies Inc. (PGMT US)		Wholly-owned subsidiary of PGMG
Pacific Green Technologies (UK) Ltd. (Formerly Pacific Green Marine Technologies Ltd.) (“PGTU”)		Wholly-owned subsidiary of PGMG
Pacific Green Technologies (Middle East) Holdings Ltd. (“PGTME”)		Wholly-owned subsidiary
Pacific Green Technologies Arabia LLC (“PGTAL”)		70% owned subsidiary of PGTME
Pacific Green Marine Technologies (USA) Inc. (inactive)		Dissolved, December 21, 2022
Pacific Green Technologies (Canada) Inc. (“PGT Can”) (Formerly Pacific Green Marine Technologies Inc.		Wholly-owned subsidiary
Pacific Green Solar Technologies Inc. (“PGST”)		Wholly-owned subsidiary
Pacific Green Corporate Development Inc. (“PGCD”) (formerly Pacific Green Hydrogen Technologies Inc.)		Dissolved, December 21, 2022
Pacific Green Wind Technologies Inc (“PGWT”)		Dissolved, December 21, 2022
Pacific Green Technologies International Ltd. (“PGTIL”)		Wholly-owned subsidiary
Pacific Green Technologies Asia Ltd.(“PGTA”)		Wholly-owned subsidiary of PGTIL
Pacific Green Technologies Engineering Services Limited (Formally Pacific Green Technologies China Ltd. (“PGTESL”)		Wholly-owned subsidiary of PGTA
Pacific Green Technologies (Shanghai) Co. Ltd. (“Engin”) (Formerly Shanghai Engin Digital Technology Co. Ltd)		Wholly-owned subsidiary
Guangdong Northeast Power Engineering Design Co. Ltd. (“GNPE”)		Wholly-owned subsidiary of ENGIN
Pacific Green Energy Parks Inc. (“PGEP”)		Wholly-owned subsidiary
Pacific Green Energy Storage Technologies Inc. (“PGEST”)		Wholly-owned subsidiary of PGEP
Pacific Green Technologies (Australia) Pty Ltd. (“PGTAPL”)		Wholly-owned subsidiary of PGEP
Pacific Green Energy Storage (UK) Ltd. (“PGESU”) (Formerly Pacific Green Marine Technologies Trading Ltd.)		Wholly-owned subsidiary of PGEP
Pacific Green Battery Energy Parks 1 Ltd. (“PGBEP1”)		50% owned subsidiary of PGESU
Pacific Green Battery Energy Parks 2 Ltd. (“PGBEP2”)		Wholly-owned subsidiary of PGEPU
Richborough Energy Park Ltd. (“Richborough”)		Wholly-owned subsidiary of PGBEP1
Pacific Green Energy Parks (UK) Ltd (PGEPU)		Wholly-owned subsidiary of PGEP
Sheaf Energy Ltd (Sheaf)		Wholly-owned subsidiary of PGBEP2

All inter-company balances and transactions have been eliminated upon consolidation.

F-7

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Significant Accounting Policies (continued)

(b)

Restatement of Financial Statements

In June 2022, while preparing the financial statements for the year-ending March 31, 2022, the Company identified errors in previously issued unaudited quarterly financial statements. Refer to Note 2 and Note 22 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended March 31, 2022, for additional information regarding the impact of the restatement on the Company’s unaudited condensed consolidated statement of operations and certain note presentation.

Revenue and cost of sales has been adjusted to record revenue on marine scrubber contracts as a single performance obligation recognized over time.

Cost of sales has been adjusted to include amortization of certain intangible assets, commission amounts, salaries and wages, and technical consulting costs that had previously been included within other expense captions in the financial statements.

The impact on the interim consolidated statement of cash flows has been reclassified within the operating activities for all periods presented.

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

	Three months ended December 31, 2021									Nine months ended December 31, 2021
	As Previously Reported			Adjustments			As Restated			As Previously Reported			Adjustments			As Restated
	$			$			$			$			$			$

Revenue		2,642,184			2,610,624			5,252,808			5,535,004			1,179,590			6,714,594
Cost of goods sold		1,328,338			654,921			1,983,259			3,137,247			1,051,081			4,188,328
Gross profit / (loss)		1,313,846			1,955,703			3,269,549			2,397,757			128,509			2,526,266

Amortization of intangible assets		396,539			(219,367	)		177,172			1,178,217			(658,101	)		520,116
Consulting fees, technical support, and commissions		1,026,808			(262,429	)		764,379			3,072,262			(779,630	)		2,292,632
Salaries and wage expenses		1,234,243			(93,580	)		1,140,663			4,029,737			(304,388	)		3,725,349
Operating expenses		4,328,005			(575,376	)		3,752,629			12,768,035			(1,742,118	)		11,025,917
Net loss for the period		(2,981,468	)		2,531,078			(450,390	)		(9,943,904	)		1,870,627			(8,073,277	)
Comprehensive loss for the period		(2,848,965	)		2,531,078			(317,887	)		(9,594,076	)		1,870,627			(7,723,449	)

Basic and diluted income / (loss) per share		(0.06	)					(0.01	)		(0.21	)					(0.17	)

(c)

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.

F-8

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Significant Accounting Policies (continued)

(d)

Correction of Immaterial Error of Lease Accounting

In February 2023, during the preparation of the financial statements for the quarter ended December 31, 2022, the Company identified an error in its accounting for a lease for land. The Company executed a 15-year lease on June 16, 2022 and the Company accounted for this incorrectly in Q1 and Q2 by expensing the rental cash payments. The Company should have applied the provisions of ASC 842 – Accounting for Leases. The Company has also considered the qualitative effects this error may have had. It has concluded that the error is deemed to be not material to the Q1 and Q2 financial statements. The net effects on the income statement, balance sheet and cashflow statement for the two interim quarters ending June 30, 2022 and September 30, 2022 are shown in the table below.

	Three months ended June 30, 2022
	As Previously Reported			Adjustments			As Restated
	$			$			$
Balance Sheet
Cash and cash equivalent		4,497,514						4,497,514
Prepaid expenses and parts inventory		1,248,385			(29,417	)		1,218,968

ROU Assets		628,353			2,342,134			2,970,487
Current Lease Obligations		(429,259	)		(24,825	)		(454,084	)
Non-Current Lease Obligations		(99,209	)		(2,290,497	)		(2,389,706	)

Total Assets		32,030,572			2,312,717			34,343,289
					7.2	%
Total Liabilities		(16,345,811	)		(2,315,322	)		(18,661,133	)
					14.2	%
Income Statement
Operating lease expense		(109,737	)		(2,691	)		(112,428	)
Interest (expense)/income and other cost		(38,351	)		-			(38,351	)
Net income attributable to NCI		(135,824	)		1,303			(134,521	)
Other comprehensive income		(384,835	)		86			(384,749	)

Comprehensive Loss for the Period		(3,644,065	)		(1,303	)		(3,645,368	)
					0	%

Cash Flow Statement
Cash used for Operating Activities
Net Income (Loss)		(3,259,230	)		(1,389	)		(3,260,619	)
Operating lease expense		109,737			2,691			112,428
Unrealized foreign exchange difference gain (loss)		737,833			(87	)		737,746
Accounts receivable		12,406,327			(1,303	)		12,405,024
Prepaid expenses and parts inventory		(666,321	)		29,417			(636,904	)
Lease payments		(235,502	)		(29,417	)		(264,919	)
Net cash used for operating activities		6,312,027			(87	)		6,311,940

Cash flows from investing activities
Net cash used in investing activities		(6,978,986	)		-			(6,978,986	)

Cash flows from financing activities:
Net cash provided by financing activities		-			-			-

Effect of foreign exchange on cash		(1,121,995	)		87			(1,121,908	)

F-9

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Significant Accounting Policies (continued)

	Three months ended September 30, 2022									Six months ended September 30, 2022
	As Previously Reported			Adjustments			As Restated			As Previously Reported			Adjustments			As Restated
	$			$			$			$			$			$
Balance Sheet
Cash and cash equivalent											3,025,506			-			3,025,506
Prepaid expenses and parts inventory											1,600,563			(26,930	)		1,573,633

ROU Assets											527,528			2,108,388			2,635,916
Current Lease Obligations											(429,259	)		(49,970	)		(479,229	)
Non-Current Lease Obligations											(48,585	)		(2,071,895	)		(2,120,480	)

Total Assets											37,618,511			2,081,457			39,699,968
														5.5	%
Total Liabilities											(18,225,727	)		(2,121,865	)		(20,347,592	)
														11.6	%

Income Statement
Operating lease expense		(99,253	)		(70,865	)		(170,118	)		(208,990	)		(73,556	)		(282,546	)
Interest (expense)/income and other cost		(39,360	)		29,417			(9,943	)		(77,711	)		29,417			(48,294	)
Net income attributable to NCI		109,082			18,901			127,983			(26,742	)		20,204			(6,538	)
Other comprehensive income		202,891			3,645			206,536			(181,944	)		3,731			(178,213	)

Comprehensive Loss for the Period		(2,038,980	)		(18,901	)		(2,057,881	)		(5,683,045	)		(20,204	)		(5,703,249	)
					0.9	%								0.4	%

Cash used for Operating Activities
Net Income (Loss)											(5,501,101	)		(23,935	)		(5,525,036	)
Operating lease expense											208,990			73,556			282,546
Unrealized foreign exchange difference gain (loss)											741,527			(1,245	)		740,282
Prepaid expenses and parts inventory											(1,018,499	)		26,930			(991,569	)
Lease payments											(249,024	)		(58,834	)		(307,858	)
Net cash used for operating activities											(4,870,482	)		16,472			(4,854,010	)

Cash flows from investing activities
Net cash used in investing activities											(15,325,769	)		-			(15,325,769	)

Cash flows from financing activities:
Preference shares and NCI											16,167,081			(20,204	)		16,146,877
Net cash provided by financing activities											17,834,507			(20,204	)		17,814,303

Effect of foreign exchange on cash											(899,218	)		3,731			(895,487	)

Short-term Investments and Amounts in Escrow

At December 31, 2022, the Company has a $56,454 (March 31, 2022 - $60,837) Guaranteed Investment Certificate (“GIC”) held as security against a corporate credit card. The GIC bears interest at 0.5% per annum and matures on December 13, 2023.

At December 31, 2022, the Company’s solicitor is holding $44,903 (March 31, 2022 - $1,871,486) relating to proceeds under customer contracts to be released upon satisfying performance obligations.

F-10

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Property and Equipment

	Cost $		Accumulated depreciation $			December 31, 2022 Net carrying value $		March 31, 2022 Net carrying value $

Building		946,853		(215,518	)		731,335		857,922
Furniture and equipment		371,425		(215,416	)		156,009		202,764
Computer equipment		15,875		(14,729	)		1,146		4,368
Leasehold improvements		9,963		(7,472	)		2,491		19,401
Testing equipment- scrubber system		132,513		(77,766	)		54,747		81,786

Total		1,476,630		(530,901	)		945,728		1,166,241

For the three and nine months ended December 31, 2022, the Company recorded $45,600 (2021 – $52,519) and $148,671 (2021 – $152,062) in depreciation expense on property and equipment.

Intangible Assets

	Cost $		Accumulated amortization $			Cumulative impairment $			December 31, 2022 Net carrying value $		March 31, 2022 Net carrying value $

Patents and technical information		35,852,556		(8,962,514	)		(20,457,255	)		6,432,787		7,090,887
Software licensing		11,792		(5,625	)		-			6,167		8,861

Total		35,864,386		(8,968,139	)		(20,457,255	)		6,438,954		7,099,748

For the three and nine months ended December 31, 2022, the Company recorded $220,006 (2021 – $396,539) and $660,090 (2021 – $1,178,217) in amortization expense on intangible assets.

For the three and nine months ended December 31, 2022, the Company has allocated $219,367 (2021 - $219,367) and $658,101 (2021 - $658,101) of amortization of patents and technical information to cost of goods sold. The amount remaining in amortization expense is $639 (2021 - $177,172) and $1,989 (2021 - $520,116) for the three and nine months ended December 31, 2022.

Future amortization of intangible assets is as follows based on fiscal year:

	$

2023		220,170
2024		880,132
2025		880,132
2026		877,452
2027		877,452
Thereafter		2,703,616

Total		6,438,954

F-11

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Acquisition of Richborough Energy Park Ltd.

On March 18, 2021, the Company acquired all the issued and outstanding stock of Richborough Energy Park Ltd., a United Kingdom company in the business of battery energy storage systems.

The purchase consideration included cash payments of $681,957 (£494,351) made on March 18, 2021 and three conditional payments of $515,622 (£374,500) each on specified dates according to the share purchase agreement. The first conditional payment was made in May 2021. The second conditional payment was made in June 2022. The third and final payment is planned to be made in March 2023.

Total purchase consideration was estimated at $2,166,452, inclusive of the fair value of the conditional payments, which were considered probable at the acquisition date. The value attributed to the identifiable assets acquired and liabilities assumed are cash of $1, other net working capital of $535, security deposit of $164,799, and project under development of $2,001,116. The consideration was allocated on a relative fair value basis to the assets acquired and liabilities assumed. For the year ended March 31, 2022, additions of $1,854,676 to project under development were recorded. For the nine months ended December 31, 2022, additions of $21,930,967 to project under development were recorded.

Acquisition of Sheaf Energy Ltd.

On December 6, 2022, the Company acquired all the issued and outstanding stock of Sheaf Energy Ltd., a United Kingdom company in the business of battery energy storage systems. The purchase consideration included cash payments of a deposit of $415,855 (£373,500) made on July 26, 2021 and $8,710,145 (£7,126,500) made on December 15, 2022.

Total purchase consideration was therefore $9,126,000 (£7,500,000). The value attributed to the identifiable assets acquired and liabilities assumed are net working capital of $0, and project under development of $9,126,000 (£7,500,000).

F-12

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Noncontrolling Interest

(a)

On March 30, 2022, the Company entered into an agreement with Green Power Reserves Limited (“GPR”), wherein GPR agreed to make an equity investment of $16.3 million (£13.0 million) for a fifty percent shareholding in Pacific Green Battery Energy Parks 1 Limited (“PGBEP”). The Company retains control over PGBEP by virtue of holding 65% of the voting rights and appointing two of the three directors. The Company received $9.4 million (£7.2 million) for the three months ended June 30, 2022 and a further $6.7 million (£5.6 million) for the three months ended September 30, 2022. It will receive the remaining $0.2 million (£0.2 million) as project cash requirements demand.

Details of the carrying amount of the noncontrolling interests are as follows:

	$

Non-redeemable noncontrolling interest, March 31, 2022		10,361,701

Noncontrolling interest coupon distribution		115,240
Net income attributable to noncontrolling interest, June 30, 2022		24,464

Non-redeemable noncontrolling interest, June 30, 2022		10,501,405

Non-redeemable noncontrolling interest contribution		5,778,638
Noncontrolling interest coupon distribution		-
Net loss attributable to noncontrolling interest, September 30, 2022		(52,921	)

Non-redeemable noncontrolling interest, September 30, 2022		16,227,122

Non-redeemable noncontrolling interest contribution		-
Noncontrolling interest coupon distribution		-
Net income attributable to noncontrolling interest, December 31, 2022		27,102

Non-redeemable noncontrolling interest, December 31, 2022		16,254,224

(b)

On December 2, 2020, the Company signed an agreement with Amr Khashoggi Trading Company Limited (“Amkest Group”) to incorporate a company in the Kingdom of Saudi Arabia for the sale of Pacific Green’s environmental technologies within the region. The Company holds 70% interest. The Company incorporated Pacific Green Technologies Arabia LLC on November 23, 2021. The Company has paid in share capital and loans amounting to $504,849 to fund operational expenses from April 1, 2022.

Details of the carrying amount of the noncontrolling interests are as follows:

	$

Redeemable noncontrolling interest, March 31, 2022		–

Redeemable noncontrolling interest receivable from Amkest Group		(68,253	)
Net loss attributable to noncontrolling interest, June 30, 2022		(3,880	)

Redeemable noncontrolling interest, June 30, 2022		(72,133	)

Written - off redeemable noncontrolling interest receivable from Amkest Group		68,253
Net loss attributable to noncontrolling interest, September 30, 2022		(56,161	)

Non-redeemable noncontrolling interest, September 30, 2022		(60,041	)

Net loss attributable to noncontrolling interest, December 31, 2022		(33,679	)

Non-redeemable noncontrolling interest, December 31, 2022		(93,720	)

F-13

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, and Contract Liabilities

The Company derives revenue from the sale of products and delivery of services. Revenue disaggregated by type for the three and nine months ended December 31, 2022, and 2021 is as follows:

	Three Months Ended December 31, 2022 $		Three Months Ended December 31, 2021 (Restated) $		Nine Months Ended December 31, 2022 $		Nine Months Ended December 31, 2021 (Restated) $

Products		2,253,221		3,710,227		4,607,668		4,452,518
Services		1,386,771		1,542,580		2,251,553		2,262,076

Total		3,639,992		5,252,807		6,859,221		6,714,594

Revenue from services include specific services provided to marine scrubber systems as well as design and engineering services for Concentrated Solar Power. Contracts for specific services provided to marine scrubber systems represent maintenance services. Contracts for Concentrated Solar Power include design and engineering services provided to clients. Revenue for service contracts is recognized as the services are provided at a point in time.

Service revenue by type for the three and nine months ended December 31, 2022, and 2021 is as follows:

	Three Months Ended December 31, 2022 $		Three Months Ended December 31, 2021 (Restated) $		Nine Months Ended December 31, 2022 $		Nine Months Ended December 31, 2021 (Restated) $

Specific services provided to marine scrubber systems		1,237,663		625,983		1,889,215		1,034,450
Design and engineering services for Concentrated Solar Power		149,108		916,597		362,338		1,227,626

Total		1,386,771		1,542,580		2,251,553		2,262,076

The Company has analyzed its sales contracts under ASC 606 and has identified that the percentage of completion of the contract often is not directly correlated with contractual billing terms with customers. As a result of the timing differences between customer sales invoices and percentage of completion of the contract, contractual assets and contractual liabilities have been recognized.

F-14

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, and Contract Liabilities (continued)

Changes in the Company’s contract assets and liabilities for the periods are noted as below:

	Accrued Revenue $			Prepaid Manufacturing Costs $			Sales (Cost of Goods Sold) $			Contract Liabilities $

Balance, March 31, 2021 (Restated)		1,574,584			1,065,465			–			(11,580,894	)

Customer receipts and receivables		–			–			–			(9,242,318	)
Scrubber sales recognized in revenue		–			–			12,680,103			12,680,103
Payments and accruals under contracts		(1,042,637	)		1,478,124			–			–
Cost of goods sold recognized in earnings		–			(2,505,579	)		(2,505,579	)		–

Balance, March 31, 2022		531,947			38,010			–			(8,143,109	)

Customer receipts and receivables		–			–			–			(5,373,037	)
Scrubber sales recognized in revenue		–			–			4,607,668			4,607,668
Payments and accruals under contracts		414,081			3,711,327			–			–
Cost of goods sold recognized in earnings		–			(3,686,591	)		(3,686,591	)		–

Balance, December 31, 2022		946,028			62,746						(8,908,478	)

F-15

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

Sales, Prepaid Manufacturing Costs, Cost of Goods Sold, and Contract Liabilities (continued)

Cost of goods sold for the period ended December 31, 2022 and 2021 is comprised as follows:

	Three Months Ended December 31, 2022 $		Three Months Ended December 31, 2021 (Restated) $		Nine Months Ended December 31, 2022 $		Nine Months Ended December 31, 2021 (Restated) $

Scrubber costs recognized		1,670,574		316,468		2,713,475		1,100,755
Salaries and wages		235,800		117,897		322,119		367,952
Amortization of intangibles		219,367		219,367		658,101		658,101
Commission type costs		73,531		113,023		205,824		544,850
Design and engineering services for CSP		104,545		624,004		246,490		803,867
Specific services provided to marine scrubber systems		713,688		592,500		1,154,718		912,803
Total		3,017,505		1,983,259		5,300,727		4,188,328

As of December 31, 2022, Contract liabilities included $8,038,674 (March 31, 2022 - $8,098,009) being aggregate cash receipts from one customer relating to thirteen vessels (March 31, 2022 – fourteen vessels). At March 31, 2021 all nineteen had been postponed under the terms of a Postponement Agreement dated February 2, 2021, with an option to either proceed or cancel.

Under a subsequent Option Agreement dated August 9, 2021, six of these vessels were contracted by the customer to proceed. None of the total contract liability at December 31, 2022 relates to these six vessels. The contract liability balance was mainly related to the other thirteen postponed vessels in the Postponement Agreement, which was due to expire on February 9, 2023. However, in January 2023, the Postponement Agreement deadline was extended to December 2023. Should the thirteen vessels that are currently postponed remain as such at the expiry date, since there is no obligation to return the funds to the client, the contract liability would be recognized as revenue in full at that point in time.

F-16

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

10.

Accounts Payable and Accrued Liabilities

	December 31, 2022 $		March 31, 2022 $

Accounts payable		1,165,948		757,102
Accrued liabilities		3,117,847		8,567,795
Loans payable		–		55,003
Payroll liabilities		235,238		214,887

Total short term accounts payable and accrued liabilities		4,519,033		9,594,787

Balance, end of period		4,519,033		9,594,787

11.

Loans Payable

On June 16, 2022, the Company signed a Facilities Agreement with Close Leasing Limited, for a total of £28.25 million ($34.90 million) for the Richborough project. The Facilities Agreement, governed by English law, is secured by debentures containing fixed and floating charges entered into by one of the Company’s subsidiaries, Richborough Energy Park Limited and its immediate parent Pacific Green Battery Energy Parks 1 Limited, as well as a debt service reserve guarantee entered into by the Company. The Facilities Agreement comprises a development facility at 4.5% above bank base rate until December 31, 2023 at which point it will be reclassified as a 5-year term loan on a 10-year amortization profile, until maturity on December 31, 2028. The term loan will bear interest at 4.5% above bank base rate for 20% of the balance, and a fixed rate of 7.173% for the 5-year period on the remaining 80% of the balance. There is also a revolving credit facility of up to £1.19 million ($1.47 million) available until March 31, 2024.

As at December 31, 2022, a total of $8,236,888 (£6,820,310) of the development facility had been utilized. This is not repayable until the development facility has been reclassified into the term facility. Meanwhile a total of $261,755 (£216,739) of the revolving credit facility was drawn as at December 31, 2022. As at December 31, 2022, the Company is compliant with all financial covenants specified in the Facilities Agreement.

On December 15, 2022, the Company signed a Loan Agreement with Sheaf Storage Limited, for a total of $9,261,789 (£7,500,000) for the acquisition of Sheaf Energy Ltd. The loan is secured on a share pledge over the entire share capital of Sheaf Energy Limited. This constitutes a loan facility bearing no interest until the repayment date of September 15, 2023, at which point interest accrues at 22%. Upon repayment of the loan, a minimum repayment fee of 20% will be due and payable. If the company decides to sell Sheaf Energy Ltd, then the lender (Sheaf Storage Limited) is entitled to 8% of the net equity proceeds received by the Company.

On November 5, 2022, the Company signed an unsecured Loan Agreement with a related party, Alexander Group & Co. Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February 4, 2023. Subsequently, the original agreement has been extended until August 31^st, 2023, after which point interest shall accrue at a rate 2% above the Bank of England base rate. Upon repayment of the loan, a minimum repayment fee of 20% will be due and payable.

On November 5, 2022, the Company signed an unsecured Loan Agreement with Cherryoak Investments Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February 3, 2023, after which point interest shall accrue at a rate 2% above the Bank of England base rate. Upon repayment of the loan, a minimum repayment fee of 20% will be due and payable. The loan principal and repayment fee were paid in full on February 2, 2023.

F-17

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

11. Loans Payable (continued)

On November 5, 2022, the Company signed an unsecured Loan Agreement with D&L Milne Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February 4, 2023. Subsequently, the original agreement has been extended until August 31, 2023, after which point interest shall accrue at a rate 2% above the Bank of England base rate. Upon repayment of the loan, a minimum repayment fee of 20% will be due and payable.

On November 5, 2022, the Company signed an unsecured Loan Agreement with Gerstle Consulting Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February 4, 2023. Subsequently, the original agreement has been extended until August 31, 2023, after which point interest shall accrue at a rate 2% above the Bank of England base rate. Upon repayment of the loan, a minimum repayment fee of 20% will be due and payable.

On November 7, 2022, the Company signed an unsecured Loan Agreement with Wahnarn 2 Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February 6, 2023. Subsequently, the original agreement has been extended until August 31, 2023, after which point interest shall accrue at a rate 2% above the Bank of England base rate. Upon repayment of the loan, a minimum repayment fee of 20% will be due and payable.

On November 8, 2022, the Company signed an unsecured Loan Agreement with a related party, Distributed Generation LLC, for a total of $226,000 (£187,000) to partially fund the acquisition of Sheaf Energy Ltd. This constitutes a loan facility bearing interest at 20% per annum until the repayment date of February 7, 2023. Subsequently, the original agreement has been extended until August 31, 2023, after which point interest shall accrue at a rate 2% above the Bank of England base rate. Upon repayment of the loan, a minimum repayment fee of 20% will be due and payable.

	December 31, 2022 $		March 31, 2022 $

Loans payable		10,550,533		–
Long term loans payable		8,236,888		–
Balance, end of period		18,787,421		–

12.

Warranty Costs

During the three and nine months ended December 31, 2022, the Company recorded a non-cash warranty recovery of $120,859 (2021 - $17,794) and expense of $60,741 (2021 - warranty recovery of $3,853) 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 costs is shown below:

	December 31, 2022 $			March 31, 2022 $

Balance, beginning of period		865,451			2,425,107
Provision for warranty, net of expirations		201,340			(731,529	)
Warranty recoveries (costs)		(419,525	)		(828,127	)

Balance, end of period		647,266			865,451

13.

Related Party Transactions

(a)

As at December 31, 2022, the Company owed $108,502 (March 31, 2022 – $4,250) to companies controlled by a director and officer of the Company. The amounts owed are unsecured, non-interest bearing, and due on demand.

(b)

During the three and nine months ended December 31, 2022, the Company incurred $206,843 (2021 - $297,723) and $633,753 (2021 – $297,723) in consulting fees, salaries, and commissions to companies controlled by a director of the Company.

	(c)	During the three and nine months ended December 31, 2022, the Company incurred $61,693 (2021 - $12,750) and $162,848 (2021– $38,250) in consulting fees to a director, or companies controlled by a director of the Company.

	(d)	During the three and nine months ended December 31, 2022, the Company incurred $259,558 (2021 - $nil) and $759,622 (2021– $nil) in consulting fees to a director, or companies controlled by a director of a Subsidiary of the Company.

	(e)	As at December 31, 2022, the Company owed $346,770 (March 31, 2022 – $nil) in interest-bearing loans to companies controlled by a director and officer of the Company. The amounts owed are due within 12 months, and have accrued interest of $42,419 to date.

F-18

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

14.

Stock Options

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, 2021		3,302,500			1.52		0.72		2,300,425

Granted		125,000			1.14
Exercised		(25,000	)		0.01
Forfeited		(2,865,000	)		1.70

Balance, March 31, 2022		537,500			0.56		1.43		170,125

Granted		260,000			0.22
Balance, December 31, 2022		797,500			0.60		1.06		39,150

Balance, December 31, 2022, vested and exercisable		772,500			0.59		1.03		45,400

Additional information regarding stock options outstanding as at December 31, 2022 is as follows:

Issued and Outstanding
Number of shares		Weighted average remaining contractual life (years)		Exercise price $

	312,500		0.00		0.00
	25,000		0.00		0.07
	25,000		0.03		0.03
	50,000		0.08		0.09
	25,000		0.06		0.03
	20,000		0.06		0.03
	40,000		0.11		0.06
	40,000		0.13		0.06
	10,000		0.02		0.00
	25,000		0.05		0.08
	25,000		0.05		0.12
	200,000		0.46		0.03
	797,500

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, 2022, the fair value of $162,566 (2021 - $13,789) and $189,478 (2021 - $41,518) was recorded as salaries expense.

The fair values were estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the following weighted average assumptions:

	Three and Nine Months Ended December 31, 2022
Risk-free interest rate		4.44	%
Expected life (in years)		2
Expected volatility		118	%

F-19

15.

Segmented Information

The Company is located and operates in North America and its subsidiaries are primarily located and operating in Europe and Asia.

	December 31, 2022
	North America $		Europe $		Asia $		Total $

Property and equipment		60,854		152,393		732,481		945,728
Intangible Assets		6,432,787		–		6,167		6,438,954
Right of use assets		–		2,543,491		137,240		2,680,731

		6,493,641		2,695,884		875,888		10,065,413

	March 31, 2022
	North America $		Europe $		Asia $		Total $

Property and equipment		105,599		198,352		862,290		1,166,241
Intangible Assets		7,090,887		–		8,861		7,099,748
Right of use assets		10,462		532,976		195,653		739,091

		7,206,948		731,328		1,066,804		9,005,080

	Three Months Ended December 31, 2022
	North America $			Europe $			Asia $			South America $			Total $

Revenues by customer region		34,170			1,082,175			2,523,647			0			3,639,992
COGS by customer region		26,954			803,963			2,186,587			0			3,017,504
Gross Profit by customer region		7,216			278,212			337,060			0			622,488
GP% by customer region		21	%		26	%		13	%		0	%		17	%

	Three months ended December 31, 2021 (Restated)
	Europe $			Asia $			South America $			Total $

Revenues by customer region		4,336,130			497,695			418,982			5,252,807
COGS by customer region		1,359,180			498,992			125,088			1,983,260
Gross Profit by customer region		2,776,950			(1,297	)		293,894			3,269,547
GP% by customer region		69	%		(0	)%		70	%		62	%

F-20

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

15. Segmented Information (continued)

	Nine Months Ended December 31, 2022
	North America $			Europe $			Asia $			South America $			Total $

Revenues by customer region		54,653			3,239,954			3,535,920			28,694			6,859,221
COGS by customer region		37,190			2,083,243			3,172,039			8,255			5,300,727
Gross Profit by customer region		17,463			1,156,711			363,881			20,439			1,558,494
GP% by customer region		32	%		36	%		10	%		71	%		23	%

	Nine months ended December 31, 2021 (Restated)
	Europe $			Asia $			South America $			Total $

Revenues by customer region		5,477,815			663,296			573,482			6,714,593
COGS by customer region		3,362,646			654,467			171,215			4,188,328
Gross Profit by customer region		2,115,170			8,829			402,267			2,526,265
GP% by customer region		39	%		1	%		70	%		38	%

For the three and nine Months Ended December 31, 2022, 35% (2021 – 75%) and 29% (2021 – 63%) of the Company’s revenues were derived from the largest customer.

16.

Commitments

The Company’s subsidiaries have entered into two long-term operating leases for office premises in London, United Kingdom, and Shanghai, China. These lease assets are categorized as right of use assets under ASU No. 2016-02.

On June 16, Richborough Energy Park Ltd. entered into a long-term operating lease for 3.87 acres of land for the construction of Richborough battery facility. This lease asset is categorized as right of use assets under ASU No. 2016-02.

Long-term premises lease	Lease commencement	Lease expiry	Term (years)	Discount rate*

London, United Kingdom	April 1, 2019	December 25, 2023	3.75		4.50	%
Shanghai, China	March 1, 2020	May 31, 2025	5.25		4.65	%
Richborough, United Kingdom	June 16, 2022	June 15, 2037	15		5.25	%

*	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.

Lease cost for the three and nine months are summarized as follows:

		Three Months Ended December 31, 2022 $				Three Months Ended December 31, 2021 $				Nine Months Ended December 31, 2022 $				Nine Months Ended December 31 2021 $
Operating lease expense *			231,789				117,350				440,779				360,717

*	Including right of use amortization and imputed interest. Lease payments include maintenance, operating expense, and tax.

F-21

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

16. Commitments (continued)

The Company has entered into premises lease agreements with minimum annual lease payments expected over the remaining fiscal years of the leases as follows:

	$

2023		138,949
2024		527,337
2025		281,608
2026		233,690
2027		233,690
Thereafter		2,336,900
Total future minimum lease payments		3,752,173
Imputed interest		(1,121,045	)
Operating lease obligations		2,631,129

17.

Income Taxes

The majority of our revenues from international sales are invoiced from and collected by our U.S. entity and recognized as a component of income before taxes in the United States as opposed to a foreign jurisdiction. The components of income before income taxes by U.S. and foreign jurisdictions were as follows:

	December 31, 2022 $			December 31, 2021 $

United States		(4,205,331	)		(10,521,684	)
Foreign		(3,499,784	)		2,448,408

Net loss before taxes		(7,705,115	)		(8,073,276	)

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, 2022 $			December 31, 2021 $

Net loss before taxes		(7,705,115	)		(8,073,276	)
Statutory tax rate		21	%		21	%

Expected income tax recovery		(1,618,074	)		(1,695,388	)
Permanent differences and other		151,871			94,034
Foreign tax rate difference		6,686			12,482
Change in valuation allowance		1,459,517			1,588,872

Income tax provision		–			–

Current		–			–
Deferred		–			–

Income tax provision		–			–

F-22

PACIFIC GREEN TECHNOLOGIES INC.

Notes to the Condensed Consolidated Interim Financial Statements

December 31, 2022

(Unaudited)

(Expressed in U.S. dollars)

17. Income Taxes (continued)

At December 31, 2022, the Company is current with statutory corporate income tax filings. Certain of the amounts presented above are based on estimates and what management believes are prudent filing positions. The actual losses available could differ from these estimates upon assessment and review by taxation authorities. U.S. federal and state income tax returns filed by us remain subject to examination for income tax years 2013 and subsequent. Canadian federal and provincial income tax returns filed by us remain subject to examination for income tax years 2018 and subsequent. Income tax returns associated with our operations located in the United Kingdom and China are subject to examination for income tax years 2017 and subsequent.

Tax positions are evaluated for recognition using a more-likely than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information.

The Company estimates that it has accumulated estimated net operating losses of approximately $28.4 million which were incurred mainly in the U.S, and which don’t begin to expire until 2033. In addition, the Company estimates that it has approximately $4.8 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.

18.

Subsequent Events

On January 16, 2023, a postponement agreement with a major client, in which 13 marine scrubber units had been deferred, was extended from the original expiration date of February 9, 2023, to December 31, 2023.

On January 26, 2023, the Company entered into an agreement with Jones Lang LaSalle Ltd for the sale of the 100MW Battery Storage Project within Richborough Energy Parks, and the 249MW Battery Storage Project within Sheaf Energy Limited.

On February 3, 2023, the unsecured Loan Agreement with Cherryoak Investments Pty Ltd, for a total of $121,000 (£100,000), to partially fund the acquisition of Sheaf Energy Ltd, was fully repaid, along with the 20% repayment fee.

On February 6, 2023, 250,000 ordinary shares in the Company were issued to McClelland Management Inc. at a price of $0.73 as part of the consideration for intellectual property transferred from McClelland Management Inc. to the Company under the terms of an IP transfer deed dated January 4, 2023. A further 250,000 shares will be issued in January 2024 and 250,000 shares in January 2025.

On February 6, 2023, the repayment date of the unsecured loan with Alexander Group & Co. Pty for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd, was extended until August 31st, 2023.

On February 7, 2023, the repayment date of the unsecured loan with D&L Milne Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd, was extended until August 31st, 2023.

On February 7, 2023, the repayment date of the unsecured loan with Gerstle Consulting Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd, was extended until August 31st, 2023.

On February 7, 2023, the repayment date of the unsecured loan with Wahnarn 2 Pty Ltd, for a total of $121,000 (£100,000) to partially fund the acquisition of Sheaf Energy Ltd, was extended until August 31st, 2023.

On February 7, 2023, the repayment date of the unsecured loan with a related party, Distributed Generation LLC, for a total of $226,000 (£187,000) to partially fund the acquisition of Sheaf Energy Ltd, was extended until August 31st, 2023.

F-23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this quarterly report and unless otherwise indicated, the terms “we”, “us”, “our”, the “Company”, and “our company” mean Pacific Green Technologies Inc., a Delaware corporation, and our wholly owned subsidiaries, (1) Pacific Green Innoergy Technologies Ltd., a United Kingdom company, (2) Pacific Green Marine Technologies Group Inc., a Delaware corporation, (3) Pacific Green Marine Technologies Inc., a Delaware corporation, (4) Pacific Green Technologies (UK) Ltd. (Formerly Pacific Green Marine Technologies Ltd.), a United Kingdom company, (5) Pacific Green Technologies (Middle East) Holdings Ltd., a United Arab Emirates company, (6) Pacific Green Technologies Arabia LLC, 70% owned, a Kingdom of Saudi Arabia company, (7) Pacific Green Technologies (Canada) Inc. (Formerly Pacific Green Marine Technologies Inc.), a Canadian corporation, (8) Pacific Green Solar Technologies Inc., a Delaware corporation, (9) Pacific Green Technologies International Ltd., a British Virgin Islands company, (10) Pacific Green Technologies Asia Ltd., a Hong Kong company, (11) Pacific Green Technologies Engineering Services Limited (Formally Pacific Green Technologies China Ltd.), a Hong Kong company, (12) Pacific Green Technologies (Australia) Pty Ltd., an Australia company, (13) Pacific Green Technologies (Shanghai) Co. Ltd. (Formerly Shanghai Engin Digital Technology Co. Ltd.), a Chinese company, (14) Guangdong Northeast Power Engineering Design Co. Ltd., a Chinese company, (15) Pacific Green Energy Parks Inc., a Delaware corporation, (16) Pacific Green Energy Storage Technologies Inc., a Delaware corporation, (17) Pacific Green Energy Storage (UK) Ltd. (Formerly Pacific Green Marine Technologies Trading Ltd.), a United Kingdom company, (18) Pacific Green Battery Energy Parks 1 Ltd., 50% owned, a United Kingdom company, (19) Pacific Green Battery Energy Parks 2 Ltd., a United Kingdom company, (20) Richborough Energy Park Ltd., 50% owned, a United Kingdom company, unless otherwise indicated, (21) Pacific Green Energy Parks (UK) Ltd., a United Kingdom company, (22) Sheaf Energy Ltd., a United Kingdom company.

Corporate History

Our company was incorporated in Delaware on March 10, 1994, under the name of Beta Acquisition Corp. In September 1995, we changed our name to In-Sports International, Inc. In August 2002, we changed our name from In-Sports International, Inc. to ECash, Inc. In 2007, due to limited financial resources, we discontinued our operations. Over the course of the ensuing five years, we sought out new business opportunities.

On June 13, 2012, we changed our name to Pacific Green Technologies Inc. and effected a reverse split of our common stock following which we had 27,002 shares of common stock outstanding with $0.001 par value.

Effective December 4, 2012, we filed with the Delaware Secretary of State a Certificate of Amendment of Certificate of Incorporation, wherein we increased our authorized share capital to 510,000,000 shares of stock as follows:

	●	500,000,000 shares of common stock with a par value of $0.001; and

	●	10,000,000 shares of preferred stock with a par value of $0.001.

The increase of authorized capital was approved by our board of directors on July 1, 2012 and by a majority of our stockholders by a resolution dated July 1, 2012.

Original Strategy and Recent Business

Since 2012, the Company has focused on marketing, developing and acquiring technologies designed to improve the environment by reducing pollution. The Company has acquired technologies, patents and intellectual property from EnviroTechnologies Inc. through share transfer, assignment and representation agreements entered into during 2012 and 2013. Following those acquisitions, management has expanded the registration of intellectual property rights around the world and pursued opportunities globally for the development and marketing of the emission control technologies.

Working with a worldwide network of agents to market the ENVI-Systems™ emission control technologies, the Company has focused on three applications of the technology:

ENVI-Marine ^TM

Diesel exhaust from ships, ferries and tankers includes ash and soot as particulate components and sulfur dioxide as an acid gas. Testing has been conducted on diesel shipping to confirm the application of seawater as a neutralizing agent for sulfur emissions as well as capturing particulate matter. In addition to marine applications, these tests also showed applicability of the system for large displacement engines such as stationary generators, compressors, container handling, heavy construction and mining equipment.

ENVI-Pure ^TM

Increasing legislation relating to landfill of municipal solid waste has led to the emergence of increasing numbers of waste to energy plants (“WtE”). A WtE plant obviates the need for landfill, burning municipal waste for conversion to electricity. A WtE plant is typically 45-100MW. The ENVI-Clean™ system is particularly suited to WtE as it cleans multiple pollutants in a single system.

ENVI-Clean ^TM

EnviroTechnologies Inc. has successfully conducted sulfur dioxide demonstration tests at the American Bituminous Coal Partners power plant in Grant Town, West Virginia. The testing achieved a three test average of 99.3% removal efficiency. The implementation of US Clean Air regulations in July 2010 has created additional demand for sulfur dioxide removal in all industries emitting sulfur pollution. Furthermore, China consumes approximately one half of the world’s coal, but introduced measures designed to reduce energy and carbon intensity in its 12th Five Year Plan. Applications include regional power facilities and heating for commercial buildings and greenhouses. Typical applications range in size from 1 to 20 megawatts (MW) with power generation occupying the larger end of the range. The ENVI-Clean™ system removes most of the sulfur dioxide, particulate matter, greenhouse gases and other hazardous air pollutants from the flue gases produced by the combustion of coal, biomass, municipal solid waste, diesel and other fuels.

Vision & Strategy

Pacific Green envisions a world of rapidly growing demand for renewable energy technological solutions to address the challenges presented by a changing climate. Having achieved success in marine emission control technologies we have now diversified our business to provide turnkey and scalable end-to-end environmental and renewable technology solutions in the energy sector. Our technological platform now has three main divisions:

●

Emission Control Systems (“ECS”);

●

Concentrated Solar Power (“CSP”); and

●

Battery Energy Storage Systems (“BESS”);

In all the above areas, Pacific Green plans to execute this vision by a dual strategy of equipment sales and proactive infrastructure development and ownership, each is led by acquisitions of technology capabilities and project investment opportunities, highlighted to date by the following events:

●

on December 20, 2019, the Company closed the acquisition of Shanghai Engin Digital Technology Co. Ltd. (“Engin”) a solar design, development and engineering company. Engin is a design and engineering business focused primarily on CSP, desalination and waste to energy technologies. Engin’s CSP reference plants in China comprise over 150MW and we are now in talks to provide CSP alongside future ammonia and hydrogen production facilities in Asia and South America;

●

on October 20, 2020, the Company closed the acquisition of Innoergy Limited (“Innoergy”), a UK based designer of BESS whose clients included Osaka Gas Co. Ltd, in Japan, and Limejump Limited in the UK, a subsidiary of Shell plc. The acquisition underpins our entry into the BESS market; and

●

on March 18, 2021, the Company acquired Richborough Energy Park Limited (“Richborough”), a BESS development project to deliver 100MW of energy in Kent, UK.

●

on December 6, 2022, the Company acquired Sheaf Energy Limited (“Sheaf”), a BESS development project to deliver 250MW of energy in Kent, UK.

In support of this dual strategy, we have adopted a Human Resource Strategy that seeks to hire the best talent in the core areas of our business. Our hiring plan includes the addition of sales and project execution specialists.

Strategic Partnerships

Pacific Green has forged global partnerships with private and state-owned energy providers and owners. This strategic alignment with leading energy industry platforms empowers Pacific Green to provide quickly scalable solutions in the core areas of our business, to gather unique insights on cutting-edge trends and leverage recurring revenue opportunities that enable us to cross-sell products and services.

The Company has entered into several partnership and framework agreements in the core areas of our business.

Concentrated Solar Power (“CSP”)

On December 23, 2019, the Company entered into a International Strategic Alliance Agreement with (1) Beijing Shouhang IHW Resources Saving Technology Company Ltd. (“Shouhang”), a company listed on the Shenzhen Stock Exchange in China, and (2) PowerChina.

The Strategic Alliance Agreement provides for the development of CSP plants whereby (1) the Company provides the Intellectual Property, the technical know-how, design and engineering, (2) Shouhang, with annual revenues of approximately USD$157 million, provides manufacturing of the solar field and molten salt tank services, and (3) PowerChina provides the EPC role worldwide.

Battery Energy Storage Systems (“BESS”)

On January 14, 2021, the Company signed a framework agreement with Shanghai Electric Gotion New Energy Technology Co., Ltd (“SEG”). The agreement provides for the supply of lithium-ion BESS. SEG is a joint-venture between Shanghai Electric Group Co., Ltd. (“Shanghai Electric”) and Guoxuan High-tech Co., Ltd. With multiple production facilities and a long-established history in technology manufacturing and supply-chain management, SEG is well-positioned to provide lithium-ion BESS technology around the world. Shanghai Electric has operating revenues in excess of USD$20bn.

On March 18, 2021, the Company signed a framework agreement with TUPA Energy Limited (“TUPA”) to gain exclusive rights to 1.1GW of BESS projects in the UK. TUPA is a UK based company with expertise in planning, grid connections and land acquisition. The Company has to date executed 100MW in relation to the Richborough Energy Park project.

On May 31, 2022, Pacific Green Technologies Inc. (the “Company”) announced that it has entered into agreements with Instalcom Limited for Principal Contractor and the ensuing Operations and Maintenance contractor for the 99.98 MW battery energy park that the Company is developing at Richborough Energy Park in Kent, England.

On June 8, 2022, Pacific Green Technologies Inc. (the “Company”) announced that it has entered into an energy optimization agreement with Shell Energy Europe Limited for the 99.98 MW battery energy park that the Company is developing at Richborough Energy Park in Kent, England

In addition to supply agreements, on December 2, 2020, the Company signed a joint venture and marketing agreement with AMKEST to assist with the promotion of the Company’s core business platform in the Kingdom of Saudi Arabia and the wider Middle East. Amkest Group is overseen by its founder, Amr Khashoggi, who holds board positions in numerous influential companies and government bodies across the Kingdom and is currently serving as Strategic Advisor to the Kingdom’s prominent new development city, King Abdullah Economic City (KAEC). Amkest Group’s leadership team is led by Chief Executive Officer, Salman Alireza, whose background includes various founding, executive and director-level positions in the business development sector within the Kingdom of Saudi Arabia, in addition to an MBA from London Business School.

Results of Operations

The following summary of our results of operations should be read in conjunction with our unaudited interim financial statements for the three and nine months ended December 31, 2022, and 2021.

Revenue for the three and nine Months Ended December 31, 2022 was $ 3,639,992 and $ 6,859,221 versus $5,252,807 and $6,714,594 for the three and nine months ended December 31, 2021. The Company’s revenues were mainly derived from the sale of marine scrubber units and related services. During the three months ended December 31, 2022, the Company was in the process of commissioning 3 (2021 – 6) marine scrubber units which contributed to revenue of $2,253,221 (2021 – $3,710,227). In February 2021, a major client deferred 32 marine scrubber units. Of these, 6 units have proceeded (2 commissioned in year ended March 31, 2022 and 4 commissioned in quarter ended June 30, 2022), while 13 were cancelled. The remainder are still postponed and the option to either proceed or cancel, which originally expired on February 9, 2023, has been extended to December 2023. During the three and nine months ended December 31, 2022, revenue from services, including specific services performed in the marine business sector and design and engineering services in the solar business sector, was $1,386,771 and $2,251,553 as compared to $1,542,580 and $2,262,076 for the three and nine months ended December 31, 2021.

During the nine months ended December 31, 2022, the gross profit margin for products and services were 20% (2021- 44%) and 38% (2021- 24%), respectively. The gross profit margin for products decreased in 2022 because of lower contract value and consistent cost of goods sold for marine scrubbers delivered in 2022. Overall, the gross profit margin for the nine months ended December 31, 2022 was approximately 26% (2021 – 38%).

Expenses for the three and nine months ended December 31, 2022, were $2,665,734 and $9,054,688 as compared to $3,752,629 and $11,025,916 for the three and six months ended December 31, 2021. Management and technical consulting fees were comprised of fees paid to our directors, officers and advisors for business development efforts and advisory services. Office-based costs, travel expenses, and professional fees also increased due to increased business activities. Additionally, the delivery of units resulted in warranty provision being recorded for possible maintenance and claim issues within a prescribed period. For the three and nine month periods, the Company recorded a warranty recovery of $744,918 (2021 – expense of $18,159) and $563,318 (2021 – $21,648) as a result of 1 (2021 – nil) and 5 (2021 – 2) vessels being commissioned and commencing their warranty period. Included in this was a large release of the warranty provision, for vessels whose warranty period has expired.

The three and nine Months Ended December 31, 2022, our company recorded a net loss of $2,224,179 ($0.05 per share) and $7,725,280 ($0.16 per share) as compared to net loss of $4,361,184 ($0.09 per share) and $7,622,887 ($0.16 per share) for the three and nine months ended December 31, 2021.

Our financial results for the nine months ended December 31, 2022 and 2021 are summarized as follows:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2022 $			2021 (As restated- Note 2) $			2022 $			2021 (As restated- Note 2) $
Revenues
Products		2,253,221			3,710,227			4,607,668			4,452,518
Services		1,386,771			1,542,580			2,251,553			2,262,076
Total revenues		3,639,992			5,252,807			6,859,221			6,714,594
Cost of goods sold											2,471,658
Products		1,986,344			766,756			3,686,591			1,716,671
Services		1,031,160			1,216,504			1,614,136			4,188,329
Total cost of goods sold		3,017,504			1,983,260			5,300,727			2,526,265
Gross profit		622,488			3,269,547			1,558,494			2,471,658

Expenses
Advertising and promotion		120,230			170,870			421,903			488,088
Amortization of intangible assets		639			177,172			1,989			520,116
Bad debts expense / (recovery)		36,341			21,012			(10,193	)		21,012
Depreciation		45,600			52,519			148,671			152,062
Foreign exchange (gain) / loss		(5,776	)		34,791			98,545			86,369
Management and technical consulting		802,533			764,379			2,106,857			2,292,632
Office and miscellaneous expense		509,864			525,009			1,499,940			1,318,839
Operating lease expense		231,789			117,350			440,779			360,717
Professional fees		547,538			390,866			1,295,198			1,338,544
Research and development		-			-			13,772			-
Salaries and wages		909,364			1,140,663			2,957,988			3,725,349
Transfer agent and filing fees		15,278			91,865			46,075			253,088
Travel and accommodation		197,252			249,338			596,482			473,953
Warranty and related expense / (recovery)		(744,918	)		16,795			(563,318	)		(4,853	)

Total expenses		2,665,734			3,752,629			9,054,688			11,025,916

Other income / (expense)
Financing interest income		32,790			85,889			89,090			378,840
Interest (expense) / income and other		(220,300	)		(53,198	)		(298,011	)		47,534

Net loss for the period before noncontrolling interest		(2,230,756	)		(450,389	)		(7,705,115	)		(8,073,276	)
Share of income / (loss) attributable to noncontrolling interest		(6,577	)		–			20,165			–

Net loss for the period		(2,224,179	)		(450,389	)		(7,725,280	)		(8,073,276	)

Liquidity and Capital Resources

Working Capital

	December 31, 2022 $			March 31, 2022 $
Current assets		6,647,605			24,854,658
Current liabilities		25,040,664			19,079,665

Working capital (deficit)		(18,393,059	)		5,774,993

Cash Flows

	Nine Months Ended December 31, 2022 $			Nine Months Ended December 31, 2021 $
Net cash used in operating activities		(6,094,070	)		(13,262,030	)
Net cash used in investing activities		(31,902,457	)		(398,507	)
Net cash provided by financing activities		34,947,926			(99,504	)
Effect of exchange rate changes on cash		(737,456	)		121,392

Net change in cash and cash equivalents		(3,786,057	)		(13,638,649	)

As of December 31, 2022, we had $2,500,411 in cash and cash equivalents, $6,647,605 in total current assets, $25,040,664 in total current liabilities and a working capital deficit of $18,393,059 compared to working capital of $5,774,993 as at March 31, 2022. The Company’s working capital reduced due to reduction of receivables.

During the nine months ended December 31, 2022, we used $6,094,070 in operating activities, whereas we used $13,262,030 from operating activities for the three months period ended December 31, 2021. The operating cash flow for the nine months ended December 31, 2022, was mainly due to the collection of large receivables.

During the nine months ended December 31, 2022, we used $31,902,457 in investing activities, whereas we used $398,507 in investing activities during the nine months ended December 31, 2021. Our investing activities for the nine months ended December 31, 2022, were primarily related to additions of project under development and equipment.

During the nine months ended December 31, 2022, we received $34,947,926 in financing activities, whereas we used $99,504 in financing activities for the nine months ended December 31, 2021. Our financing activities for the nine months ended December 31, 2022, were related to cash contribution from noncontrolling interest and loan facilities.

Anticipated Cash Requirements

We have raised funds to construct our first BESS 99.98MW facility project at Richborough Energy Park in Kent, United Kingdom. On May 11, 2022 the Company announced it had entered into a Subscription and Shareholders Agreement with a third party investor, who has committed $16 million (£13 million) of equity funds to the project. On June 21, 2022 the Company announced it had reached financial close (“Financial Close”) for $34.90 million (£28.25 million) of senior debt for the Richborough project. The senior debt, in conjunction with the equity investment, will provide the Company with the funding to bring the battery park to commercial operations anticipated between June and September 2023. The senior debt facility agreement is entered into with Close Leasing Limited (“CLL”), pursuant to which CLL will provide a development loan to fund the construction, which will be utilized in stages following the expenditure of the equity investment. The development loan will then be refinanced into a 10-year amortized term loan upon the start of commercial operations.

On December 6, 2022 the Company acquired Sheaf Energy Limited for $9,126,000 (£7,500,000) which will be developed into our second BESS 250MW facility project. The acquisition was funded with a secured loan from a third party investor, Sheaf Storage Limited. We anticipate reaching financial close during the first half of 2023. We anticipate requiring additional short-term funds to fund our Sheaf project expenditure prior to financial close, plus our normal operating expenditure over the next 12 months and are currently negotiating with several parties to raise sufficient funds from private placements, shareholder loans and other third party loans.

As of December 31, 2022, we had $2,500,411 cash on hand. After careful consideration we believe current operations, anticipated deliveries and expected profit from such deliveries, sales of products in our Batteries business and the raising of short-term funds to be sufficient to cover expected cash operating expenses over the next 12 months.

Our cash requirement estimates may change significantly depending on the nature of our business activities and our ability to raise capital from our shareholders or other sources.

We currently have office locations in the United States, Canada, United Kingdom, China, Hong Kong, Abu Dhabi, Kingdom of Saudi Arabia, and Australia. We have hired staff in various regions and rely heavily upon the use of contractors and consultants. Our general and administrative expenses for the period will consist primarily of technical consultants, management, salaries and wages, professional fees, transfer agent fees, bank and interest charges and general office expenses. The professional fees relate to matters such as contract review, business acquisitions, regulatory filings, patent maintenance, and general legal, accounting and auditing fees.

Going Concern

Our financial statements for the quarter ended December 31, 2022 have been prepared on a going concern basis.

The assessment of the liquidity and going concern requires the Company to make judgments about the existence of conditions or events that raise substantial doubt about the ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. This includes judgments about the Company’s future activities and the timing thereof and estimates of future cash flows. Significant assumptions used in the Company’s forecasted model of liquidity include forecasted sales, costs, and capital expenditures. Changes in the assumptions could have a material impact on the forecasted liquidity and going concern assessment.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Estimates

The preparation of these consolidated financial statements in conformity with United States Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.

Useful lives of Intangible Assets

The carrying value of our intangible assets represents its original cost at the time of purchase, less accumulated amortization. We amortize our intangible assets using the straight-line method over their estimated useful lives. The estimated useful life of our intangible assets are listed in the table below.

Patents		17 years straight-line
Software licensing		10 years straight-line

Impairment of Long-lived Assets

We review long-lived assets such as property and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. The determination of whether impairment indicators exist requires significant judgment in evaluating underlying significant assumptions including expected sales contracts, operating costs, and current market value of assets. If an indication is identified, and the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset.

We recorded an impairment charge of $2,641,639 on intangible assets during the year ended March 31, 2022 (March 31, 2021- $37,700) as management’s estimated fair value of the assets were less than its carrying value.

Goodwill

We allocate the cost of acquired companies to the identifiable tangible and intangible assets and liabilities acquired, with the remaining amount being classified as goodwill. The allocation of the purchase price of acquired companies requires certain judgments and estimates. Goodwill is not amortized but is evaluated annually for impairment at the reporting unit level or when indicators of a potential impairment are present. The process of evaluating the potential impairment of goodwill requires significant judgment and are based upon existing contracts, historical experience, financial forecasts, and general economic conditions.

We recorded an impairment charge of $3,870,223 on Engin goodwill and $549,092 on Innoergy goodwill during the year ended March 31, 2022 as management’s estimated fair value of the reporting unit was less than its carrying value determined during impairment testing.

Revenue Recognition

We derive revenue from the sale of products and delivery of services. Irrespective of the types of revenue described above, revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those promised products or services. The majority of the Company’s marine scrubber sales contracts contain a single performance obligation satisfied over time. Other contracts contain a single performance obligation satisfied at point in time.

Revenue recognition requires significant judgements from management in regard to the determination of accounting treatment for contracts with customers. Management is required to assess contracts with customers to identify whether performance obligations in the contract are distinct and to determine whether contract terms provide the Company with a basis to recognize revenue over time.

According to ASC 606-10-25-27, if the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date, revenue should be recognized over time. The Company’s scrubber system is customized to each vessel at the detailed design level, so the performance under the contract does not create an asset with an alternative use. According to the Company’s contracts signed with customers under English law, the customers are contractually and legally obliged to pay for performance completed to date that covers cost plus a reasonable profit margin. Therefore, the Company concluded that revenue should be recognized over time. The Company recognizes revenue based on the input method using a percentage of costs to complete.

In the case of settlement agreements with customers where no continued performance obligation is required, we recognize revenue based on consideration settled according to the agreement.

A contract signed with one customer has a significant financing component. 20% of the contract price is payable at least 6 calendar months prior to the dry dock date. The remaining 80% is payable in 24 equal monthly installments starting at the end of the calendar month following the installation date on a vessel-by-vessel basis. As 80% of the contract price is payable after the last performance obligation towards the scrubber, a significant financing component is separated from revenue and interest income at 5.4% is recorded when payments are received from the customer.

Contract Liabilities, Prepaid Manufacturing Costs, and Accrued Revenue

We have analyzed our sales contracts under ASC 606 and identified performance conditions that are not directly correlated with contractual billing terms with customers. As a result of the timing differences between customer sales invoices and satisfaction of performance conditions, contractual assets and contractual liabilities have been recognized.

Contractual arrangements with customers for the sale of a scrubber unit generally provide for deposits and installments through the procurement and design phases of equipment manufacturing. Amounts invoiced to customers, which are not yet recorded as revenues under the Company’s revenue recognition policy, are presented as contract liabilities.

Similarly, contractual arrangements with suppliers and manufacturers normally involved with the manufacturing of scrubber units may require advances and deposits at various stages of the manufacturing process. Payments to our manufacturing partners, which are not yet recorded as costs of goods sold under the Company’s revenue recognition policy, are recorded as prepaid manufacturing costs.

The Company presents the contract liabilities and prepaid manufacturing costs on its balance sheet when one of the parties to the revenue contract and supply contract, respectively, has performed before the other.

Accrued revenue is revenue that has been earned by providing a good or service, but for which the Company has not yet billed the customer.

Accounts Receivable

We assess the collectability of accounts receivable and long-term receivable on an ongoing basis and establish an allowance for doubtful accounts when collection is no longer reasonably assured. In establishing the allowance, we consider factors such as known troubled accounts, historical experience, age, financial information that is publicly accessible and other currently available evidence.

Warranty Provision

The Company reserves a 2% warranty provision on the completion of a contract following the commissioning of marine scrubbers. The specific terms and conditions of those warranties vary depending upon the product sold and geography of sale. The Company’s product warranties generally start from the commissioning date and continue for up to twelve to twenty-four months. The Company provides warranties to customers for the design, materials, and installation of scrubber units. The Company has a back-to-back manufacturing guarantee from its major supplier, which covers materials, production, and installation. Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures. These factors are estimates that may change based on new information that becomes available each period. Similarly, the Company also accrues the estimated costs to address reliability repairs on products no longer in warranty when, in the Company’s judgment, and in accordance with a specific plan developed by the Company, it is prudent to provide such repairs. The Company intends to assess the adequacy of recorded warranty liabilities quarterly and adjusts the liability as necessary.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act) of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act as of December 31, 2022.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of December 31, 2022 due to the two material weaknesses identified and described below.

Management’s Report on Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States Generally Accepted Accounting Principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States Generally Accepted Accounting Principles , and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework).

In June 2022, while preparing the financial statements for the year ending March 31, 2022, the Company identified an error with respect to the application of the revenue recognition accounting policy. The Company has two material weaknesses; firstly, it lacked adequate controls to correctly recognize revenue and cost of goods sold and, secondly, Certain amortization expenses, sales commissions, salaries and wages, and technical consulting fees should have been presented within cost of goods. The control deficiency relates to the ineffective design of controls to analyze revenue contracts appropriately on a timely basis and to identify certain costs as relating to the initiation and fulfilment of its revenue contracts.

Based on this evaluation our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2022, the Company has not maintained effective internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There has been no significant change in the Company’s internal control over financial reporting during the quarter ended December 31, 2022, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II– OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

As a “smaller reporting company” we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(31)		Rule 13a-14 (d)/15d-14d) Certifications
31.1*		Section 302 Certification by the Principal Executive Officer
31.2*		Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer
(32)		Section 1350 Certifications
32.1*		Section 906 Certification by the Principal Executive Officer
32.2*		Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer
101*		Interactive Data Files
101.INS*		Inline XBRL Instance Document.
101.SCH*		Inline XBRL Taxonomy Extension Schema Document.
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PACIFIC GREEN TECHNOLOGIES INC.
	(Registrant)

Dated: February 14, 2023	By:	/s/ Scott Poulter
		Scott Poulter
		Chief Executive Officer and Director
		(Principal Executive Officer)

Dated: February 14, 2023	By:	/s/ Richard Fraser-Smith
		Richard Fraser-Smith
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: February 14, 2023	By:	/s/ Scott Poulter
		Scott Poulter
		Chief Executive Officer and Director
		(Principal Executive Officer)

Dated: February 14, 2023	By:	/s/ Richard Fraser-Smith
		Richard Fraser-Smith
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)