| Significant Accounting Policies | 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 (Formerly 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. (b) Use of 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. The Company regularly evaluates
estimates and assumptions related to the useful life and recoverability of property and equipment and intangible assets, prepaid manufacturing
costs, and contract liabilities associated with revenue contracts in progress, contingent consideration on asset acquisition, warranty
accruals, going concern, and deferred income tax asset valuation allowances. 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. (c) Property and Equipment Property and equipment is recorded at
cost. Depreciation is recorded at the following annual rates, net of any residual value determined.
Furniture and equipment 5 years straight-line
Leasehold improvements 3 years straight-line
Test Scrubber system 20 years straight-line
Computer equipment 5 years straight-line
Building 20 years straight-line (d) Intangible Assets Intangible assets are stated at cost
less accumulated amortization and include patents, customer relationships, plant designs, and software licensing. The patents, which were
acquired in 2013, are being amortized on a straight-line over the estimated useful life of 17 years. Additional intellectual property
acquired in the year ending March 31, 2023 is being amortized to coincide with the useful life of the existing intellectual property. The other intangible assets, which were
acquired in December 2019, are being amortized according to the following table. Intangible assets are reviewed annually for impairment.
Patents and technical information 17 years straight-line
Software licensing 10 years straight-line (e) Impairment of Long-lived Assets Our company reviews 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. If 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. (f) Financial Instruments and Fair Value Measurements ASC 820, “Fair Value Measurements
and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used
to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure
fair value: Level 1 Level 1 applies to assets or liabilities
for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities
for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets
or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally
from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities
for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the
assets or liabilities. The Company’s financial instruments
consist principally of cash, short-term investments, accounts receivable, amounts due from and to related parties, accounts payable and
accrued liabilities, and operating lease liability. The recorded values of all financial instruments are at amortized cost which approximate
their current fair values because of their nature and respective maturity dates or durations. The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash equivalents. As of March 31, 2023, and 2022, the Company
held $56,483 and $1,932,323, respectively in short term investment and amount in escrow. Accounts held in each U.S. institution are insured
by the Federal Deposit Insurance Company (“FDIC”) up to $250,000. At March 31, 2023 and March 31,
2022 the Company had nil 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. A significant portion of our accounts receivable
is concentrated with a few major customers. For the year ended March 31, 2023, 81% (2022 – 90%) of the Company’s
accounts receivable was from three customers (main 52%, two minor 17% and 12%). (g) Revenue Recognition The Company derives revenue from the
sale of products and delivery of services. Product revenue is generated from the sale of marine scrubbers. Service revenue includes specific
services provided to marine scrubber systems as well as design and engineering services for Concentrated Solar Power (“CSP”). Irrespective of the types of revenue
described above, revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those promised products or services. The Company’s marine scrubber
sales contracts contain a single performance obligation satisfied over time, based on percent completion of the contract. The Company determines revenue recognition
through the following five steps:
● Identification of the contract, or contracts, with a customer
● Identification of the performance obligations in the contract
● Determination of the transaction price
● Allocation of the transaction price to the performance obligations in the contract
● Recognition of revenue when, or as, performance obligations are satisfied The Company accounts for a contract
when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract
has commercial substance and collectability of consideration is probable. 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. Contracts for the sale of products (marine
scrubbers) include a single performance obligation for revenue recognition as the separate components identified in the revenue contracts
are not considered distinct as the customer does not benefit from the separate components on their own. The single performance obligation
is recognized over time, based on percentage completion of the contract, due to the unique nature of the assets and the Company’s
ability to obtain payment for performance to date. The Company recognizes revenue based on the input method and records balances as accrued
revenue to the extent that revenue has been recognized but the Company has not yet billed the customer. In the case of settlement agreements
with customers where no continued performance obligation is required, the Company recognizes 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. Contracts for specific services provided
to marine scrubber systems represent maintenance services. In relation to service agreements, the
service plan for maintaining the ENVI-Marine™ Exhaust Gas Cleaning Systems is undertaken over a period of 3 years. The standard
contract includes a set of activities to perform up to 12 separate performance obligations (depending on the goods and services provided).
The transaction price has been allocated to each performance obligation based on the relative standalone selling prices of the goods/services
included in the contract. For each contract a pricing schedule has been prepared. All contracts are analyzed, and revenue recorded in
accordance with the five-step revenue recognition model. From the analysis of the ASC 606-10-25-30, the indicators of transfer of control
resulted in recognition of revenue at a point-in-time. Contracts for CSP include design and engineering services provided to clients.
Performance obligations vary depending on the service contracts. All contracts are analyzed, and revenue recorded in accordance with the
five-step revenue recognition model. (h) Cost of Goods Sold The cost of providing services to our
customers is included in the cost of goods sold on the statement of operations and comprehensive income. Our cost of goods sold includes
direct costs associated with creating products and services. In addition, we have included within cost of goods sold other related costs
associated with obtaining or fulfilling our obligations in our revenue contracts, including sales commission, salaries and wages, technical
consulting costs, and amortization. We have adopted the practical expedient whereby costs associated with obtaining a revenue contract
can be expensed as incurred so long as the amortization period of the asset that the entity otherwise would have recognized is one year
or less. (i) Contract Liabilities, Prepaid Manufacturing Costs, and Accrued Revenue 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 received from 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 presented 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. (j) 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 delivery 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. (k) Income Taxes The Company accounts for income taxes
using the asset and liability method. The asset and liability method provides that deferred income tax assets and liabilities are recognized
for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities,
and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted
tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce
deferred income tax assets to the amount that is believed more likely than not to be realized. The Company provides for interest and
potential administrative penalties where management has assessed that the probability of assessment is greater than 50%. Interest and
penalties assessed or expected to be assessed by the US tax authority are included in other expenses for the period of $ nil (l) Noncontrolling Interest The Company owns a 50% controlling interest
in its subsidiary Pacific Green Battery Energy Parks 1 Ltd. Green Power Reserves Limited owns the remaining 50% nonredeemable noncontrolling
interests. Noncontrolling interests are recorded as a separate component of equity. Net income attributable to noncontrolling interests
is a component of consolidated net income. (m) Foreign Currency Translation The Company’s functional and reporting
currency is the United States dollar. The functional currencies of PGCD, PGEP, PGEST, PGMG, PGMT US, PGTA, PGTESL, PGTME, PGST, PGTAL,
PGT Can, PGTIL, PGTU, and PGWT are United States dollar. The functional currency of ENGIN and GNPE is Chinese Yuan. PGESU, PGBEP1, Innoergy,
PGBEP2, PGEPU, Richborough and Sheaf use the United Kingdom Pound as their functional currency. The functional currency of PGTAPL is Australian
dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance
sheet date. Non-monetary assets, liabilities, and items recorded in income arising from transactions denominated in foreign currencies
are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of
foreign currency denominated transactions or balances are included in the determination of income. The accounts of ENGIN, GNPE, PGESU,
PGBEP1, PGTAPL, Innoergy, PGBEP2, PGEPU, Richborough and Sheaf are translated to United States dollars using the current rate method.
Accordingly, assets and liabilities are translated into United States dollars at the period end exchange rate while revenue and expenses
are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component
of stockholders’ equity as accumulated other comprehensive income. (n) Research and Development Research and development costs are charged
as operating expenses as incurred. (o) Stock-based compensation The Company records share-based payment
transactions for acquiring goods and services from employees and nonemployees in accordance with ASC 718, Compensation – Stock Compensation,
using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments
are measured at grant-date fair value of the equity instruments issued. The Company uses the Black-Scholes option
pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as
assumptions regarding a number of subjective variables. These subjective variables include but are not limited to the Company’s
expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value
of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations
over the requisite service period. The majority of the Company’s awards vest upon issuance. The Company accounts for forfeitures
in share-based compensation expense as they occur. Subsequent to the adoption of ASU 2018-07
- Improvements to Nonemployee Share-Based Payment Accounting, the accounting for employee and non-employee stock options is now aligned. (p) Earnings (Loss) Per Share The Company computes net income (loss)
per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS)
on the face of the consolidated statement of operations. Basic EPS is computed by dividing net income (loss) (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential options and warrants
outstanding during the period using the treasury stock method and convertible debenture using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock
options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at March 31, 2023, the Company
had 275,000 (2022 – 225,000) anti-dilutive shares outstanding. (q) Comprehensive Income (Loss) Comprehensive income (loss) consists
of net income (loss) and items in other comprehensive income (loss) that are excluded from net income or loss. As at March 31, 2023 and
2022, other comprehensive income (loss) includes cumulative translation adjustments for changes in foreign currency exchange rates during
the period. (r) Lease Leases classified as operating leases, where the Company is the lessee, are recorded as lease liabilities based on the present value of minimum lease payments over the lease term, discounted using the lessor’s rate implicit in the lease for each individual lease arrangement or the Company’s incremental borrowing rate, if the lessor’s implicit rate is not readily determinable. Corresponding right-of-use assets are recognized consisting of the lease liabilities, initial direct costs and any lease incentive payments. Lease liabilities are drawn down as lease payments are made and right-of-use assets are depreciated over the term of the lease. Under an operating lease, we recognize lease payments as expenses on a straight-line basis over the lease term. Under a finance lease, we recognize the leased asset as a Right of Use asset and record a corresponding lease liability on the balance sheet. Lease payments are apportioned between the interest expense (representing the interest on the lease liability) and the reduction of the lease liability. (s) 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 December 15, 2022, 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. |
