Item
1. Business
This
annual report contains forward-looking statements. These statements relate to future events or our future financial performance.
In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”,
“plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”
or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions
and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk
Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance or achievements expressed or implied by these
forward-looking statements.
Although
we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United
States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our
financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.
In
this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to
“common shares” refer to the common shares in our capital stock.
As
used in this annual report and unless otherwise indicated, the terms “we”, “us”, “our” and
“our company” mean Pacific Green Technologies Inc., a Delaware corporation, and our wholly owned subsidiaries, Pacific
Green Technologies Limited, a United Kingdom corporation, Pacific Green Energy Parks Limited, a British Virgin Islands corporation,
and its wholly owned subsidiary, Energy Park Sutton Bridge, a United Kingdom corporation, unless otherwise indicated.
Corporate
History
Our
company was incorporated in Delaware on March 10, 1994, under the name of Beta Acquisition Corp. In September 1995, we changed
our name to In-Sports International, Inc. In August 2002, we changed our name from In-Sports International, Inc. to ECash, Inc.
In 2007, due to limited financial resources, we discontinued our operations. Over the course of the last five years, we have sought
out new business opportunities.
On
June 13, 2012, we changed our name to Pacific Green Technologies Inc. and effected a reverse split of our common stock following
which we had 27,002 shares of common stock outstanding with $0.001 par value.
Effective
December 4, 2012, we filed with the Delaware Secretary of State a Certificate of Amendment of Certificate of Incorporation, wherein
we increased our authorized share capital to 510,000,000 shares of stock as follows:
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500,000,000
shares of common stock with a par value of $0.001; and
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10,000,000
shares of preferred stock with a par value of $0.001.
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The
increase of authorized capital was approved by our board of directors on July 1, 2012 and by a majority of our stockholders by
a resolution dated July 1, 2012.
Historical
Business Overview
On May 1, 2010 we entered into a consulting
agreement with Sichel Limited. Sichel has investigated new opportunities for us and has subscribed for new shares of our company’s
common stock. The consulting agreement entitles Sichel to $20,000 per calendar month. With an effective date of March 31, 2013,
the consulting agreement, along with all amounts owed to Sichel, were assigned to Pacific Green Group Limited (“
PGG
”).
As at our year ended March 31, 2018, we owed Sichel $Nil and we owed PGG approximately $198,000 in loans and unpaid management
fees. Pursuant to the terms of the consulting agreement, if we are unable to pay the monthly consulting fee, PGG may elect to
be paid in shares of stock.
Details
of other material contracts and commitments follows the New Strategy and Current business section.
New
Strategy and Current business
Since
2012, the Company has focused on marketing, developing and acquiring technologies designed to improve the environment by reducing
pollution. The Company has acquired technologies, patents and intellectual property from EnviroTechnologies Inc. through share
transfer, assignment and representation agreements entered into during 2012 and 2013. Following those acquisitions, management
has expanded the registration of intellectual property rights around the world and pursued opportunities globally for the development
and marketing of the emission control technologies.
Working
with a worldwide network of agents to market the ENVI-Systems™ emission control technologies, the Company has focused on
three applications of the technology:
ENVI-Marine
TM
Diesel
exhaust from ships, ferries and tankers includes ash and soot as particulate components and sulphur dioxide as an acid gas. Testing
has been conducted on diesel shipping to confirm the application of seawater as a neutralizing agent for sulphur emissions as
well as capturing particulate matter. In addition to marine applications, these tests also showed applicability of the system
for large displacement engines such as stationary generators, compressors, container handling, heavy construction and mining equipment.
The
Company manufactured the components for an ENVI-Marine unit to be installed in Union Maritimes’ (Union) MV Westminster chemical
ship during the summer of 2017. Under the terms of an Energy Management Lease dated December 16, 2016, Union will make quarterly
payments to the Company determined on their savings realized by the ENVI-Marine units’ operation up to an aggregate of $1,995,000.
The
Company has been actively marketing its ENVI-Marine™ units to ship brokers and ship owners through most of the year.
ENVI-Pure
TM
Increasing
legislation relating to landfill of municipal solid waste has led to the emergence of increasing numbers of waste to energy plants
(“
WtE
”). A WtE plant obviates the need for landfill, burning municipal waste for conversion to electricity.
A WtE plant is typically 45-100MW. The ENVI-Clean™ system is particularly suited to WtE as it cleans multiple pollutants
in a single system.
ENVI-Clean
TM
EnviroTechnologies
Inc. has successfully conducted sulphur dioxide demonstration tests at the American Bituminous Coal Partners power plant in Grant
Town, West Virginia. The testing achieved a three test average of 99.3% removal efficiency. The implementation of US Clean Air
regulations in July 2010 has created additional demand for sulphur dioxide removal in all industries emitting sulphur pollution.
Furthermore, China consumes approximately one half of the world’s coal, but introduced measures designed to reduce energy
and carbon intensity in its 12th Five Year Plan. Applications include regional power facilities and heating for commercial buildings
and greenhouses. Typical applications range in size from 1 to 20 megawatts (MW) with power generation occupying the larger end
of the range.
Following
the signing of a joint venture agreement with Power China SPEM, subsequent to year end an ENVI-Clean™ was sold to a steelworks
company in Yancheng to remove SO
2
from its 93MW gas combustion powerplant.
The
ENVI-Clean™ system removes most of the sulphur dioxide, particulate matter, greenhouse gases and other hazardous air pollutants
from the flue gases produced by the combustion of coal, biomass, municipal solid waste, diesel and other fuels.
The
ENVI-Clean™ system is comprised of five components:
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an
induced draft fan (“ID fan”);
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a
gas conditioning chamber;
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the
ENVI-Clean™ unit;
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a
demister; and
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settling
tanks.
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The
ID fan creates the pressure differential required to force the gas through the scrubbing fluid suspended on each head and move
it through the other components in the system. The gas conditioning chamber cools the hot flue gas prior to entering the ENVI-Clean™
System. The ENVI-Clean™ System contains the heads and the demister pads at the exhaust exit. The neutralizing fluid is constantly
circulated and cleaned by mechanical means with the contaminated component of the separation going to a settling tank prior to
dewatering. The settled solids are disposed of with the bottom ash produced by the combustion process.
The
ENVI-CES™ technology forces 100% of the polluted exhaust flue gas into the neutralizing fluid to produce a highly turbulent
interaction between the target pollutants and the fluid. The aggressive mixing produces small bubbles which create a very high
surface contact area between the exhaust gas and fluid to enhance the transfer of particulate and targeted gaseous and hazardous
pollutants from the exhaust to the fluid.
Schematic
of the ENVI-Clean™ Emission’s System as installed for Biomass applications
Unique
to the ENVI approach is the introduction of the gas in the lower section of the ENVI-Clean™ unit which makes the greatest
portion of its cross section available for fluid–gas interaction. This permits a smaller and highly flexible footprint.
Furthermore, the system design allows for multiple heads each containing different neutralizing fluids to remove various pollutants
from the flue gas. The ordered removal of acid and greenhouse gases within a single unit makes the system highly desirable by
industries whose fuels contain multiple contaminants. The resulting ENVI-Clean™ unit has high efficiency and is very simple
to operate.
The
neutralizing solution is selected to remove targeted pollutants: limestone and hydrated lime are used to neutralize the scrubbing
solution for the removal of acid gases such as sulphur dioxide, hydrogen chloride and hydrogen fluoride. The unique design of
the ENVI system allows for the sequential removal of pollutants by stacking heads and utilizing different neutralizing chemistry
in each operating unit. This provides industry with a system that fulfills multiple applications.
The
ENVI-Clean™ system has numerous new and retrofit applications:
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coal
and coal waste fuelled CFBC boilers;
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pulverized
coal and stoker-grate boilers;
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heavy
oil fired boilers;
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biomass
and waste to energy boilers;
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lime
kilns, dryers, shredders and foundries;
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industrial
exhaust scrubbing of particulates and acid gases;
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diesel
engines, large marine and stationary engines; and
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sewage
sludge, hazardous waste and MSW incinerators.
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Significant
transactions
Management,
assisted by PGG, identified an opportunity to build a business focused on marketing, developing and acquiring technologies designed
to improve the environment by reducing pollution. To this end, we entered into and closed an assignment and share transfer agreement,
on June 14, 2012, for the assignment of a representation agreement and the acquisition of a company involved in the environmental
technology industry.
The
assignment and share transfer agreement provided for the acquisition of 100% of the issued and outstanding shares of Pacific Green
Technologies Limited, formerly PGG’s subsidiary in the United Kingdom. Additionally, PGG has assigned to our company a ten
year exclusive worldwide representation agreement with EnviroTechnologies Inc., (formerly EnviroResolutions, Inc.), a Delaware
corporation, to market and sell EnviroTechnologies’ current and future environmental technologies. The representation agreement
entitles PGG to a commission of 20% of all sales (net of taxes) generated by EnviroTechnologies. Pursuant to the terms of the
assignment and share transfer agreement, all rights and obligations under the representation agreement have been transferred to
our company. We currently anticipate that sales under the representation agreement will be our sole source of revenue for the
foreseeable future. We had intended to complete an acquisition of EnviroTechnologies, as this would have been a logical step in
our development. However, as discussed herein, we have settled with EnviroTechnologies as an alternative.
Both
Sichel and PGG are wholly owned subsidiaries of the Hookipa Trust. PGG’s wholly owned subsidiary was Pacific Green Technologies
Limited. As a result, we acquired Pacific Green Technologies Limited from PGG. Sichel is a significant shareholder of our company
and also provides us with consulting services. The sole director of Sichel is also the sole director of PGG. Further, PGG is a
significant shareholder of EnviroTechnologies.
The
assignment and share transfer agreement closed on June 14, 2012 via the issuance of 5,000,000 shares of our common stock as well
as a $5,000,000 promissory note to PGG. We have consequently undertaken the operations of Pacific Green Technologies Limited and
PGG’s obligations under the representation agreement.
Full
consideration contemplated by the assignment and share transfer agreement was $25,000,000 satisfied through the issue of 5,000,000
new shares of our common stock at a price of $4 per share with the balance of $5,000,000 structured as a promissory note over
the next five years as follows:
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June
12, 2013, $1,000,000;
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June
12, 2014, $1,000,000;
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June
12, 2015, $1,000,000;
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June
12, 2016, $1,000,000 and;
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June
12, 2017, $1,000,000.
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Under
the terms of the promissory note, the loan repayments specified above shall not exceed the amount we earn under the terms of the
representation agreement. If we are unable to meet the repayment schedule set out above, PGG will have the option to either roll
over any unpaid portion to the following payment date or to convert the outstanding amount into new shares of our common stock.
However, the entire amount of the promissory note is due upon the maturity date on the fifth anniversary. On September 25, 2017,
the Company and PGG agreed to a settlement of the outstanding promissory by way of a subscription agreement for 5,000,000 shares
of common stock at $1.00 per share.
The
initial total consideration of $25,000,000 was a purchase price not determined under U.S. GAAP, and both the $25,000,000 total
price and the deemed price of $4 per share does not represent the fair value of the stock issued or a value used in accounting
for the acquisition. The number of shares issued and the terms of the promissory note were negotiated between the parties and
are intended to represent full consideration for the acquisition of Pacific Green Technologies Limited and the representation
agreement.
Our
management believes that the ENVI-Clean™ system has significant competitive advantages in the market for emission control
systems including:
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Efficiency
:
tests performed at an 84MW coal power plant in West Virginia (USA) indicate that the ENVI-Clean™ system removed on average
99.3% of sulfur dioxide over a three day period from the plant’s emissions;
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Low
Capital Cost
: the system has a compact and flexible footprint relative to competitive products. For electricity generation
applications, EnviroTechnologies’ system is priced for market at approximately $90 per kilowatt of electricity generation.
In comparison, industry consultants state that comparable systems in North America are typically priced at $300-500 per kilowatt
(Source: High Energy Services/Babcock & Wilson-wet scrubber systems for S02 removal in North America);
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Low
Ongoing Operating Cost
: the ENVI-Clean™ system is more affordable in the long term for customers compared to competitor
products;
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New
and Retrofit Applications
: for retrofit applications in particular (as required by the 2011 EPA Boiler MACT Requirements),
the system is considered by management to be more compact and adaptable than rival systems;
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Scalability
:
the ENVI-Clean™ system can be adapted for the largest power stations but also smaller applications such as diesel marine
engines. It can also remove multiple pollutants in a single system, unlike much of the competition.
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On
October 5, 2011, EnviroResolutions, a British Columbia corporation, signed a contract to supply the ENVI-Clean™ system to
a new waste to energy plant being built in Peterborough, United Kingdom (the “Peterborough Contract”). The initial
material term and condition of the contract was that EnviroResolutions demonstrate testing of the system that achieved the performance
levels represented in regards to emissions by March 31, 2012. This condition was successfully satisfied and confirmed with Peterborough
Renewable Energy Limited (“
PREL
”) prior to the required date. The Peterborough Contract entitles us, as the
holder of the representation agreement, to a commission of approximately $4,600,000 before third party agency fees.
Effective
March 5, 2013, we entered into a supplemental agreement with EnviroTechnologies and EnviroResolutions. The supplemental agreement
amends the representation agreement between PGG and EnviroTechnologies dated June 7, 2010, which was later assigned to us from
PGG in connection with an assignment and share transfer agreement dated June 14, 2012. The supplemental agreement entitles our
company to a commission of equal to 50% (previously 20%) of any licensing revenue that may be generated by EnviroTechnologies
Inc. in respect of its existing and future technologies.
In
addition, pursuant to the supplemental agreement, we will receive from EnviroResolutions an amount equal to 50% of any assets
or consideration received as compensation from PREL for PREL’s failure to perform under a contingent sale agreement dated
October 5, 2011 between EnviroResolutions and PREL. We will receive the fee for our assistance to EnviroResolutions during their
negotiations with PREL regarding PREL’s failure to perform. The fee, if any, provided to us will not constitute any repayment
of our loans that were made to EnviroResolutions.
The
supplemental agreement supplements the Peterborough Contract dated October 5, 2011 entered into among EnviroResolutions, PREL
and GEPL. Pursuant to the Peterborough Contract, EnviroResolutions was to supply PREL with a wet scrubbing emission control system
to a proposed waste to energy plant being built in Peterborough, United Kingdom.
Information
on Pacific Green Technologies Limited
Pacific
Green Technologies Limited is a limited liability company incorporated under the laws of England and Wales on April 5, 2011 (“
PGT
”).
The director of PGT was Mr. Joseph Grigor Kelly. On November 7, 2012, Mr. Joseph Grigor Kelly tendered his resignation to the
board of directors. PGT has no employees. Concurrently, Neil Carmichael consented to and was appointed as the sole director and
chief executive and financial officer of PGT.
The
purpose of incorporating PGT was to utilize local knowledge and contacts to build a platform for sales in the following regions:
Western Europe, Eastern Europe, Russian Federation, Turkey, Middle East, Azerbaijan, Kazakhstan and Africa. However, our company
has found that the cost to have physical presence in England far out weights the benefit. As a result, PGT is now in the process
of being dissolved as of the date of the filing of this annual report.
Information
on Pacific Green Energy Parks Limited
Pacific
Green Energy Parks Limited (“PGEP”) sees an opportunity to develop renewable power stations with capacities up to
50MW in the biomass and waste to energy sectors. In addition to their positive impact on the world’s environment, these
projects have the potential to deliver a sustainable post-tax equity IRR and may provide our company with an opportunity to deploy
its technologies. To this end our company has been identifying and investigating appropriate projects worldwide.
On
March 26, 2012, PGEP reached an agreement with the shareholders of Energy Park Sutton Bridge Limited (“EPSB”), whereby
PGEP would fund a planning application for the development of a biomass energy plant in return for a 75% shareholding in EPSB.
EPSB was incorporated in the UK in 2009 to develop a 49 MW biomass energy plant in Sutton Bridge, Lincolnshire, UK. A planning
application for EPSB was submitted to South Holland District Council (“
SHDC
”) on September 4, 2012.
On
March 5, 2013, PGEP acquired the remaining 25% of EPSB. On May 8, 2013, EPSB secured planning permission for a 49MW biomass power
plant at Sutton Bridge, Lincolnshire.
The
facility will have an installed energy capacity of 49MW. The export capacity of the facility will be circa 44MW. The electricity
will be supplied to the National Grid. Heat from the operation will be used within the facility and the ancillary buildings whilst
off-take points will be provided for future combined heat and power needs in the area. The location of the plant alongside an
existing industrial estate and in proximity of an area proposed for future industrial expansion makes the realization of the potential
for combined heat and power more likely than in other possible locations. EPSB has secured options to purchase the freehold of
the Energy Park site from the land owners.
Biomass
is considered to be carbon neutral because the quantity of CO
2
released during combustion is the same as that
absorbed by plants as a result of photosynthesis during their growth. This differs from fossil fuels in that, although both originating
from organic matter, the carbon in fossil fuels has been locked away for millions of years, and when released during combustion,
results in a net increase in CO
2
levels in the atmosphere.
Biomass
is also considered environmentally sustainable as in many cases it is derived from by-products of other industries such as agriculture
and forestry management. This contains a closed carbon cycle with no net increase in atmospheric CO
2
levels. As
a result, EPSB will be entitled to renewables obligation certificates (“
ROCs
”) under the UK’s Renewable
Obligation regime. As of April 2016, pure biomass will be afforded 1.4 ROCs/MWh of electricity produced, for a 20 year tariff
period. EPSB’s forecasts assume:
EPSB
will recover energy from virgin wood using steam turbine technology. The plant will require approximately 325,000 tonnes of virgin
wood per annum (“
Feedstock
”).
Following
discussions with industry experts, engineers, consultants and financiers, our company estimates that EPSB should cost approximately
£165,000,000 to construct. Once the project is “spade ready”, construction should take 2 years. Previously,
we anticipated that the project would be “spade ready” by March 2014. However, our company’s application for
planning consent was not accepted by council and we resubmitted our application on June 20, 2014. The EPC contractor will provide
a fixed cost turnkey completion guarantee. Planning consent was again turned down April 2015.
A
detailed carbon assessment has been submitted within the EIA presenting the carbon savings offered by the operation of the facility.
The
project will deliver combined heat and power (“
CHP
”) infrastructure. Our company is investigating potential
opportunities for supplying local heat customers at both existing and potential new developments off site. EPSB will maintain
an open dialogue with the local authority and will ensure that an appropriate boiler and turbine design is selected to facilitate
the distribution of heat.
Currently
our company is identifying and assessing further renewable power plant developments that are complimentary to the use of ENVI-Emissions
Systems where possible.
Securing
additional financial and human capital
We
have limited capital and four directors. It is anticipated that we will expand our management team to fully exploit the representation
agreement and it will also therefore be necessary to raise financial capital. We will therefore proactively seek the raising of
additional financial capital.
Form
of any subsequent acquisitions
The
manner in which we participate in an opportunity will depend upon the nature of the opportunity, our respective needs and desires
and those of the promoters of the opportunity, and our relative negotiating strength compared to that of such promoters.
It
is likely that we will acquire further participations in business opportunities through the issuance of our common stock, or other
of our securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances
the criteria for determining whether or not an acquisition is a so-called “tax free” reorganization under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, or the Code, depends upon whether the owners of the acquired business
own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions
rather than other “tax free” provisions provided under the Code, all prior stockholders would in such circumstances
retain 20% or less of the total issued and outstanding shares of the surviving entity. Under other circumstances, depending upon
the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued
and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who
were our stockholders prior to such reorganization.
Our
stockholders will likely not have control of a majority of our voting securities following a reorganization transaction. As part
of such a transaction, our directors may resign and one or more new directors may be appointed without any vote by stockholders.
In
the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or
approval by our stockholders. In the case of a statutory merger or consolidation directly involving our company, it will likely
be necessary to call a stockholders’ meeting and obtain the approval of the holders of a majority of our outstanding securities.
The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed
transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek
to structure any such transaction so as not to require stockholder approval.
It
is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial management time and attention and substantial
cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs
theretofore incurred in the related investigation might not be recoverable. Furthermore, even if an agreement is reached for the
participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to us of the
related costs incurred.
Other
Business Matters
On
April 3, 2013, we entered into and closed a share exchange agreement with certain shareholders of EnviroTechnologies. Pursuant
to the terms of the share exchange agreement, we agreed to acquire 17,653,872 issued and outstanding common shares of EnviroTechnologies
from the shareholders in exchange for the issuance of 1,765,395 shares of the common stock of our company. We issued an aggregate
of 1,765,395 common shares to 47 shareholders.
On
April 25, 2013, we entered into and closed share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant
to the terms of the share exchange agreement, we agreed to acquire 6,682,357 issued and outstanding common shares of EnviroTechnologies
from the shareholders in exchange for the issuance of 668,238 shares of common stock of our company. We issued an aggregate of
668,238 common shares to 20 shareholders.
On
May 15, 2013, we entered into and closed a stock purchase agreement with all five of the shareholders of Pacific Green Energy
Parks Limited (“PGEP”), a company incorporated in the British Virgin Islands. PGEP is the sole shareholder of Energy
Park Sutton Bridge Limited, a company incorporated in the United Kingdom. PGEP is developing a biomass power plant facility and
holds an option to purchase the real property upon which the facility will be built.
Pursuant
to the stock purchase agreement, we agreed to acquire all of the 1,752 issued and outstanding common shares of PGEP from the shareholders
in exchange for:
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a
payment of $100 upon execution of the stock purchase agreement, which has been paid by us;
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2.
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$14,000,000
paid in common shares in our capital stock at a deemed price at the lower of $4 per share or the average closing price per
share of our capital stock in the ten trading days immediately preceding the date of closing of the stock purchase agreement,
which have been issued by us;
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3.
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$3,000,000
payable in common shares of our capital stock at a deemed price at the lower of $4 per share or the average closing price
per share of our capital stock in the ten trading days immediately preceding the date upon which PGEP either purchases the
property or secures a lease permitting PGEP to operate the facility on the property, which has not yet occurred; and
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4.
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subject
to leasing or purchasing the property and PGEP securing sufficient financing for the construction of the facility, $33,000,000
payable in common shares of our capital stock at a deemed price at the lower of $4 per share or the average closing price
per share of our capital stock in the ten trading days immediately preceding the date that PGEP secures sufficient financing
for the construction of the facility, which has not yet occurred.
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All
consideration from our company to the shareholders has been and will be issued on a pro-rata, pari-passu basis in proportion to
the respective number of shares of PGEP sold by each respective shareholder. On May 15, 2013, pursuant to the stock purchase agreement,
we issued an aggregate of 3,500,000 common shares, at an agreed upon deemed price of $4 per share, to the five shareholders.
Pacific
Green Energy Parks Limited and its wholly owned subsidiary, Energy Park Sutton Bridge, are now subsidiaries of our company.
On
May 17, 2013, we entered into a debt settlement agreement with EnviroTechnologies and EnviroResolutions (collectively, the “
Debtors
”).
Pursuant to the terms of the debt settlement agreement, we agreed to release and waive all obligations of the Debtors to repay
debts, in the aggregate of $293,406 and CAD$38,079, to us and agreed to return an aggregate of 88,876,443 (as of March 31, 2015,
2,217,130 common shares of EnviroTechnologies remain to be returned) common shares of EnviroTechnologies to EnviroResolutions.
As consideration for this release and waiver and return of shares, the Debtors agreed to transfer all rights, interests and title
to certain intellectual property, the physical embodiments of such intellectual property, and to the supplemental agreement dated
March 5, 2013 among EnviroResolutions, PREL and Green Energy Parks Limited (“
GEPL
”) (collectively, the “
Debtors’
Assets
”).
The
Debtors’ Assets include the intellectual property rights throughout most of the world for the
ENVI-Clean™
system, the ENVI-Pure™ system and the ENVI-SEA™ scrubber.
The ENVI-Clean™ system removes most of
the sulphur dioxide, particulate matter, greenhouse gases and other hazardous air pollutants from the flue gases produced by the
combustion of coal, biomass, municipal solid waste, diesel and other fuels. The ENVI-Pure™ emission system combines the
ENVI-Clean™ highly effective patent-pending wet scrubbing technology with an innovative wet electrostatic precipitator and
a granular activated carbon adsorber to remove particulate matter, acid gases, regulated metals, dioxins and VOCs from the flue
gas to levels significantly below those required by strictest international regulations. The ENVI-SEA™ scrubber can be applied
to diesel exhaust emissions that require sulphur and particulate matter abatement. Using seawater on a single-pass basis as the
scrubbing fluid in combination with its patent pending scrubbing head will provide a highly interactive zone of turbulent mixing
for absorption of SO
2
, particulate matter and other pollutants from the engine’s exhaust.
The
following is a brief description of further terms and conditions of the debt settlement agreement that are material to our company:
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we
pay 25% of all funds, if any, received under the supplemental agreement to the Debtors within 14 days upon receipt of funds,
if any, pursuant to the supplemental agreement;
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2.
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we
enter into definitive agreements with the Debtors to:
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a.
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license
the Debtors’ Assets back to the Debtors, under arm’s length commercial terms, for use in the USA and Canada, with
the exception of NRG Energy, Inc. and Edison Mission and affiliates; and
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b.
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have
the Debtors provide engineering services to us on terms to be agreed upon, acting reasonably;
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3.
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the
Debtors pay pro-rata any third party broker fees and legal fees, if any, that are subsequent costs associated with the Supplemental
Agreement; and
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4.
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the
Debtors retain possession of, yet make a pilot-scale scrubber available for rental to our company at a nominal cost.
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On
June 11, 2013, we submitted 24,336,229 common shares of EnviroTechnologies to EnviroTechnologies for cancellation pursuant to
our debt settlement agreement with EnviroTechnologies and EnviroResolutions dated May 17, 2013.
Pursuant
to a debt settlement agreement dated May 17, 2013 among our company, EnviroTechnologies and EnviroResolutions, on November 22,
2013, our company was transferred a 40% shareholding in PREL by GEPL (who had, prior to this transfer, held all the issued and
outstanding shares of PREL). PREL is a limited liability company incorporated under the laws of the United Kingdom.
PREL
was incorporated by GEPL to develop a 79MWe waste to energy power station at Peterborough, United Kingdom (the “Peterborough
Plant”). The Peterborough Plant has full planning permission at 79MWe and environmental agency permits. It is understood
that the Peterborough Plant will be built in two stages at a total capital cost of approximately GBP£500 million (approximately
US$824,534,442). As of May 17, 2013, PREL owns 20% of Energy Park Investments Limited, the holding company that is currently intended
to finance the development of the Peterborough Plant in turn through its wholly owned operating subsidiary Energy Park Peterborough
Limited.
On
June 17, 2013, we entered into and closed share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant
to the terms of the share exchange agreements we agreed to acquire 8,061,286 issued and outstanding common shares of EnviroTechnologies
from the shareholders in exchange for the issuance of 806,132 shares of common stock of our company. We issued as aggregate of
806,132 shares of common stock to 19 shareholders.
On
August 6, 2013, we entered into two share exchange agreements with two shareholders of EnviroTechnologies. Pursuant to the terms
of the agreements, we agreed to acquire 440,000 issued and outstanding common shares of EnviroTechnologies from one shareholder
in exchange for shares of common stock of our company on a 1 for 10 basis. Pursuant to the terms of the other agreement, we agreed
to acquire 600,000 issued and outstanding common shares of EnviroTechnologies from one shareholder in exchange for shares of common
stock of our company on a 1 for 15 basis.
On
August 27, 2013, we entered into share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant to the terms
of the agreements, we have agreed to acquire 32,463,489 issued and outstanding common shares of EnviroTechnologies from the shareholders
in exchange for shares of common stock of our company on a 1 for 10 basis.
On
September 13, 2013, we submitted 41,564,775 common shares of EnviroTechnologies to EnviroTechnologies for cancellation pursuant
to our debt settlement agreement with EnviroTechnologies and EnviroResolutions dated May 17, 2013.
On
September 26, 2013, we entered into an agreement with Andrew Jolly, wherein Dr. Jolly agreed to serve as a director of our company.
Pursuant to the agreement, our company is to compensate Dr. Jolly for serving as a director of our company at GBP£2,000
(approximately $3,235) per calendar month. Effective October 1, 2013, we appointed Dr. Jolly as a director of our company.
On
October 11, 2013, we entered into share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant to the terms
of the agreements, we have agreed to acquire 674,107 issued and outstanding common shares of EnviroTechnologies from the shareholders
in exchange for shares of common stock of our company on a 1 for 10 basis.
Effective
October 31, 2013, we entered into a private placement agreement. Pursuant to the agreement, we issued 18,750 common shares in
our capital stock at a purchase price of $4.00 per share, for total proceeds of $75,000.
Effective
December 19, 2013, we entered into private placement agreements with nine subscribers. Pursuant to the agreements, we issued an
aggregate of 262,500 common shares in our capital stock at a purchase price of $3.20 per share, for total proceeds of $840,000.
On
December 18, 2013, we announced that our company has engaged BlueMount Capital to spearhead the development of its proprietary
emission control technologies, ENVI-Clean™ and ENVI-Pure™, in the People's Republic of China (“PRC”).
In addition to corporate finance advisory services both within and outside China, BlueMount offers a tailored service to clients
wishing to enter the PRC market with a particular emphasis on companies that own proprietary technology, intellectual property
and expertise. To that end, BlueMount provides a comprehensive suite of services to enhance the effectiveness and long-term sustainability
of foreign brands entering the PRC market via: Our company's strategic objective is to establish an operating presence in China
with established local partners and rapidly rollout its technologies.
On
December 27, 2013, we entered into and closed share exchange agreements with certain shareholders of EnviroTechnologies. Pursuant
to the terms of the share exchange agreements, we acquired 130,000 issued and outstanding common shares of EnviroTechnologies
from the shareholders in exchange for shares of common stock of our company on a 1 for 10 basis. On December 27, 2013, we issued
an aggregate of 13,000 common shares to the shareholders of EnviroTechnologies.
On
May 27, 2014, we entered into a $200,000 convertible debenture with Intrawest Overseas Limited. Under the terms of the debenture,
the amount is unsecured, bears interest at 10% per annum, and is due on May 27, 2015. Pursuant to the agreement, should any portion
of loan remain outstanding past maturity the interest will increase to 15% per annum. The note is convertible into shares of common
stock 180 days after the date of issuance (November 27, 2014) until maturity at a conversion rate of 75% of the average offer
price of our company’s common stock for the 45 days ending one trading day prior to the date the conversion notice is sent
by the holder to our company.
Our
company analyzed the conversion option under ASC 815, “Accounting for Derivative Instruments and Hedging Activities”,
and determined that the conversion feature should be classified as a liability and recorded at fair value due to there being no
explicit limit to the number of shares to be delivered upon settlement of the conversion option. In accordance with ASC 815, our
company recognized the intrinsic value of the embedded beneficial conversion feature of $33,922. On November 27, 2014, the note
became convertible resulting in our company recording a derivative liability of $33,922 with a corresponding adjustment to loss
on change in fair value of derivative liabilities.
On
June 12, 2014, we entered into a $100,000 convertible debenture with Gerstle Consulting Pty Limited. Under the terms of the debenture,
the amount is unsecured, bears interest at 10% per annum, and was due on June 12, 2015. Pursuant to the agreement, should any
portion of loan remain outstanding past maturity the interest would increase to 15% per annum. The note was convertible into shares
of common stock 180 days after the date of issuance (December 12, 2014) until maturity at a conversion rate of 75% of the average
closing bid prices of our company’s common stock for the 45 days ending one trading day prior to the date the conversion
notice was sent by the holder to our company.
Our
company analyzed the conversion option under ASC 815, “Accounting for Derivative Instruments and Hedging Activities”,
and determined that the conversion feature should be classified as a liability and recorded at fair value due to there being no
explicit limit to the number of shares to be delivered upon settlement of the conversion option. In accordance with ASC 815, our
company recognized the intrinsic value of the embedded beneficial conversion feature of $9,793. On December 12, 2014, the note
became convertible resulting in our company recording a derivative liability of $9,793 with a corresponding adjustment to loss
on change in fair value of derivative liabilities.
On
June 30, 2015, through our wholly owned subsidiary, Pacific Green Energy Parks Limited, we purchased all of the issued and outstanding
shares in Pacific Green Technologies Asia Limited for $1.00 from Alexander Shead.
We
entered into an agreement dated July 20, 2015 with Mr. Alexander Shead. Pursuant to this agreement, Mr. Shead agreed to serve
as a director of our company. As a director of our company, Mr. Shead was to be compensated $1,000 for every calendar month of
the term of the agreement. The term of the agreement was for 12 months. On July 20, 2015, we appointed Mr. Shead as a director
of our company.
On October 27, 2015, our company entered into a loan agreement with a significant shareholder for proceeds of approximately
$4,231. The loan is unsecured, bears an interest rate of US Prime Rate plus 4%, and is due on demand.
On
November 10, 2015,
we issued a convertible note (the “
Note
”) to Tangiers Investment Group, LLC
(“
Tangiers
”) in exchange for an aggregate of $100,000 from Tangiers. The Note is for the aggregate sum of $110,000
with 10% interest as an original issue discount and convertible into our common shares of (the “
Shares
”) at
a price of equal to the lower of: (a) $.40 per common share of our company or (b) 60% of the lowest trading price of our common
stock during the 20 consecutive trading days prior to the date on which the holder of the Note elects to convert all or part of
the Note.
On
November 17, 2015, Pacific Green Technologies China Limited, a wholly-owned subsidiary of our company, entered into a commercial
joint venture agreement with PowerChina SPEM Company Limited (“
PowerChina
”) wherein PowerChina would receive
and process orders from our company for customers, and manufacture and install products as an engineering procurement construction
process. In return, our company agreed to design the product and provide a technology license and technical supports to PowerChina.
During the Agreement, we will provide PowerChina with a non-transferrable right and license to use Technology to manufacture and
install our product within the Peoples’ Republic of China.
Upon
receiving each order from us, PowerChina and we shall submit to each other the respective estimated budgets. For each project,
after receipt of the revenue from the relevant customer, the budgets of our company and PowerChina shall be deducted and reimbursed
from the revenue proportionally. We have agreed to share the gross profit pursuant to an even split of 50% to PowerChina and 50%
to our company.
On
July 14, 2017, the Company entered into a new memorandum of understanding to establish a new joint venture company in China with
PowerChina (the "Supplier") wherein the Supplier would receive and process orders, manufacture, and install products
for the Company's customers. In return, the Company agreed to design the product, provide strategic pricing, sales and marketing
direction, as well as provide technology licenses and technical support (the "Technology") to the Supplier. During the
term of the agreement, the Company will provide the Supplier with a non-transferrable right and license to use the Technology
to manufacture and install the product within the Asia and Russia region.
The
parties will fund the venture proportionately, 50.1% by the Company and 49.9% by the Supplier, and excess operating cash flows
will be distributed on a quarterly basis.
Competition
We
face competition from various companies involved in the environmental technology industries and specifically companies involved
in filtering of pollutants.
Many
of our competitors have longer operating histories, better brand recognition and greater financial resources than we do. In order
for us to successfully compete in our industry we will need to:
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●
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establish
our product’s competitive advantage with customers;
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develop
a comprehensive marketing system; and
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increase
our financial resources.
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However,
there can be no assurance that even if we do these things, we will be able to compete effectively with the other companies in
our industry.
As
we are a newly-established company, we face the same problems as other new companies starting up in an industry, such as lack
of available funds. Our competitors may be substantially larger and better funded than us, and have significantly longer histories
of research, operation and development than us. In addition, they may be able to provide more competitive products than we can
and generally be able to respond more quickly to new or emerging technologies and changes in legislation and regulations relating
to the industry. Additionally, our competitors may devote greater resources to the development, promotion and sale of their products
or services than we do. Increased competition could also result in loss of key personnel, reduced margins or loss of market share,
any of which could harm our business.
Intellectual
Property
We
do not own, either legally or beneficially, any patent or trademark, except for the following:
We
now own the proprietary emission abatement systems, currently known as ENVI-Clean™, ENVI-Pure™, for removing acid
gases, particulate matter, dioxins, VOCs and other regulated hazardous air pollutants from the flue gases produced by the combustion
of coal, biomass, municipal solid waste, diesel and other fuels, and ENVI-SEA™, scrubber that can be applied to diesel exhaust
emissions that require sulphur and particulate matter abatement, previously owned or controlled by the Debtors, and includes,
without limitation, all developments, improvements, and derivative works based upon or incorporating the Technology, all work
product created by the Debtors, and all intellectual property in the foregoing
.
The
ENVI-Clean™ system has protected intellectual property rights throughout most of the world. Its technology is protected
by Patent Cooperation Treaty (PCT) patent application no. PCT/CA210/000988 filed June 25, 2010 with a priority filing date of
June 25, 2009. The International Preliminary Report on Patentability for this PCT application considered all patent claims of
the application to be patentable. EnviroTechnologies has pending national or regional phase patent applications claiming priority
from PCT/CA2010/000988 covering 127 countries. Once patents issue, patent rights in this technology will generally endure until
June 25, 2030.
Further,
we own the rights to the US provisional patent application no. US 61/614696 for the integrated wet scrubbing system. Additionally,
we own the rights to US provisional patent application no. US 61/645874 for the flooded wet scrubbing head patent.
Identification
of Certain Significant Employees
Currently,
we do not have any employees. Other than as set out below, we have not entered into any consulting or employment agreements with
any of our other directors.
Effective
December 18, 2012, we entered into a non-executive director agreement with Dr. Neil Carmichael, wherein Dr. Carmichael received
compensation of $1,000 for the term of the agreement and was granted options to purchase up to 62,500 shares of common stock at
an exercise price of $0.01 per share of common stock. The options were to terminate the earlier of 24 months, or upon the termination
of the agreement and Dr. Carmichael's engagement with our company. Those options expired unexercised.
On
September 26, 2013, we entered into an agreement with Andrew Jolly, wherein Dr. Jolly agreed to serve as a director of our company.
Pursuant to the agreement, our company is to compensate Dr. Jolly for serving as a director of our company at GBP£2,000
(approximately $3,235) per calendar month. Effective October 1, 2013, we appointed Dr. Jolly as a director of our company.
On
October 22, 2013, we entered into an agreement with Mr. Chris Williams, wherein Mr. Williams agreed to serve as business development
director of our company effective December 5, 2013. As business development director of our company, Mr. Williams was to focus
on developing potential new business opportunities and generating sales from our existing assets. Mr. Williams resigned effective
April 23, 2014.
We
entered into an agreement dated July 20, 2015 with Mr. Alexander Shead. Pursuant to this agreement, Mr. Shead agreed to serve
as a director of our company for consideration of $1,000 per month for a term of one year.
Our
directors, executive officers and certain contracted individuals play an important role in the running of our company. We do not
expect any material changes in the number of employees over the next 12 month period. We do and will continue to outsource contract
employment as needed.
We
engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection
with our operations.
Government
Regulations
Some
aspects of our intended operations will be subject to a variety of federal, provincial, state and local laws, rules and regulations
in North America and worldwide relating to, among other things, worker safety and the use, storage, discharge and disposal of
environmentally sensitive materials. For example, we are subject to the Resource Conservation Recovery Act (“RCRA”),
the principal federal legislation regulating hazardous waste generation, management and disposal.
Under
some of the laws regulating the use, storage, discharge and disposal of environmentally sensitive materials, an owner or lessee
of real estate may be liable for the costs of removing or remediating certain hazardous or toxic substances located on or in,
or emanating from, such property, as well as related costs of investigation and property damage. Laws of this nature often impose
liability without regard to whether the owner or lessee knew of, or was responsible for, the presence of the hazardous or toxic
substances. These laws and regulations may require the removal or remediation of pollutants and may impose civil and criminal
penalties for violations. Some of the laws and regulations authorize the recovery of natural resource damages by the government,
injunctive relief and the imposition of stop, control, remediation and abandonment orders. The costs arising from compliance with
environmental and natural resource laws and regulations may increase operating costs for both us and our potential customers.
We are also subject to safety policies of jurisdictional-specific Workers Compensation Boards and similar agencies regulating
the health and safety of workers.
We
are not aware of any material violations of environmental permits, licenses or approvals issued with respect to our operations.
We expect to comply with all applicable laws, rules and regulations relating to our intended business. At this time, we do not
anticipate any material capital expenditures to comply with environmental or various regulations and requirements.
While
our intended projects or business activities have been designed to produce environmentally friendly green energy or other alternative
products for which no specific regulatory barriers exist, any regulatory changes that impose additional restrictions or requirements
on us or on our potential customers could adversely affect us by increasing our operating costs and decreasing potential demand
for our technologies, products or services, which could have a material adverse effect on our results of operations.
Subsidiaries
Both
Sichel Limited and Pacific Green Group Limited are wholly owned subsidiaries of the Hookipa Trust. Pacific Green Group Limited’s
wholly owned subsidiary was Pacific Green Technologies Limited. As a result, we acquired Pacific Green Technologies Limited from
Pacific Green Group Limited. Sichel is a significant shareholder of our company, and also provides us with consulting services
pursuant to a consulting agreement. The sole director of Sichel is also the sole director of Pacific Green Group Limited. Further,
PGG is a significant shareholder of EnviroTechnologies.
Our
company’s wholly owned subsidiaries are Pacific Green Marine Technologies Limited,(formerly Pacific Green Technologies Marine
Limited and Pacific Green Technologies Limited) a United Kingdom corporation, Pacific Green Technologies International Limited,
(Formerly Pacific Green Energy Parks Limited) a British Virgin Islands corporation, and its wholly owned subsidiary, Energy Park
Sutton Bridge, a United Kingdom corporation, as well as Pacific Green Technologies Asia Ltd and Pacific Green Technologies China
Ltd, both Hong Kong companies.
REPORTS
TO SECURITY HOLDERS
We
are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange
Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website
at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the
Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330.
The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding
issuers that file electronically with the SEC, at http://www.sec.gov.
Employees
As
of March 31, 2018, we did not have any full-time or part-time employees. Our president, treasurer, secretary and director, Neil
Carmichael, works as a part-time consultant and devotes approximately 10 hours per week to our business. Our directors, Andrew
Jolly, Alexander Shead, and Scott Poulter each work as part-time consultants to our company and devote time to our business on
an as needed basis. If our financial position permits, as required by our business, we may enlist certain individuals on a full
or part-time salaried basis to assist with marketing, advertising, administration and data management for our business.
Item
1A. Risk Factors
Risks
Related to our Business
We
have a limited operating history with significant losses and losses may continue for the foreseeable future.
We
have yet to establish any history of profitable operations. We incurred a cumulative deficit of $67,764,051 for the period from
April 5, 2011 (inception) to March 31, 2018. We had a net loss of $4,205,840 for the year ended March 31, 2018. We generated our
first revenues this year of $1,995,000 since our inception and are working on further sales and establishing long-term profitability
to sustain our operations. We expect that future revenues and profitability will be sufficient to sustain our operations for the
foreseeable future. Our profitability will depend on our ability to successfully market and sell the ENVI-Clean™ system
and there can be no assurance that we will be able to do so.
There
is doubt about our ability to continue as a going concern due to recurring losses from operations, accumulated deficit and insufficient
cash resources to meet our business objectives, all of which means that we may not be able to continue operations.
Our
independent auditors have added an explanatory paragraph to their audit opinion issued in connection with the consolidated financial
statements for the years ended March 31, 2018 and 2017, respectively, with respect to their doubt about our ability to continue
as a going concern. As discussed in Note 1 to our consolidated financial statements for the year ended March 31, 2018, we have
incurred operating losses since inception, and our cash resources are insufficient to meet our planned business objectives, which
together raises substantial doubt about our ability to continue as a going concern.
We
may not be able to secure additional financing to meet our future capital needs due to changes in general economic conditions.
We
anticipate needing significant capital to develop our sales force and effective market the ENVI-Clean™ systems. We may use
capital more rapidly than currently anticipated and incur higher operating expenses than currently expected, and we may be required
to depend on external financing to satisfy our operating and capital needs. We may need new or additional financing in the future
to conduct our operations or expand our business. Any sustained weakness in the general economic conditions and/or financial markets
in the United States or globally could adversely affect our ability to raise capital on favorable terms or at all. From time to
time we have relied, and may also rely in the future, on access to financial markets as a source of liquidity to satisfy working
capital requirements and for general corporate purposes. We may be unable to secure debt or equity financing on terms acceptable
to us, or at all, at the time when we need such funding. If we do raise funds by issuing additional equity or convertible debt
securities, the ownership percentages of existing stockholders would be reduced, and the securities that we issue may have rights,
preferences or privileges senior to those of the holders of our common stock or may be issued at a discount to the market price
of our common stock which would result in dilution to our existing stockholders. If we raise additional funds by issuing debt,
we may be subject to debt covenants, which could place limitations on our operations including our ability to declare and pay
dividends. Our inability to raise additional funds on a timely basis would make it difficult for us to achieve our business objectives
and would have a negative impact on our business, financial condition and results of operations.
We
are a development stage company and we may not be successful in marketing the ENVI-Clean™ system and the value of your investment
could decline.
We
are a development stage company with no substantial tangible assets in a highly competitive industry. We have little operating
history, are working hard to secure customers, and additional revenues. This makes it difficult to evaluate our future performance
and prospects. Our prospects must be considered in light of the risks, expenses, delays and difficulties frequently encountered
in establishing a new business in an emerging and evolving industry, including the following factors:
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our
business model and strategy are still evolving and are continually being reviewed and revised;
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we
may not be able to raise the capital required to develop our initial client base and reputation; and
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we
may not be able to successfully develop our planned products and services.
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We
cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are
unable to do so, our business will not be successful and the value of your investment in us will decline.
Our
business is subject to environmental and consumer protection legislation and any changes in such legislation could prevent us
from becoming profitable.
The
energy production and technology industries are subject to many laws and regulations which govern the protection of the environment,
quality control standards, health and safety requirements, and the management, transportation and disposal of hazardous substances
and other waste. Environmental laws and regulations may require removal or remediation of pollutants and may impose civil and
criminal penalties for violations. Some environmental laws and regulations authorize the recovery of natural resource damages
by the government, injunctive relief and the imposition of stop, control, remediation and abandonment orders. Similarly, consumer
protection laws impose quality control standards on products marketed to the public and prohibit the distribution and marketing
of products not meeting those standards.
The
costs arising from compliance with environmental and consumer protection laws and regulations may increase operating costs for
both us and our potential customers. Any regulatory changes that impose additional environmental restrictions or quality control
requirements on us or on our potential customers could adversely affect us through increased operating costs and potential decreased
demand for our services, which could prevent us from becoming profitable.
The
development and expansion of our business through acquisitions, joint ventures, and other strategic transactions may create risks
that may reduce the benefits we anticipate from these strategic alliances and may prevent us from achieving or sustaining profitability.
We
intend to enter into technology acquisition and licensing agreements and strategic alliances such as joint ventures or partnerships
in order to develop and commercialize our proposed technologies and services, and to increase our competitiveness. We currently
do not have any commitments or agreements regarding acquisitions, joint ventures or other strategic alliances. Our management
is unable to predict whether or when we will secure any such commitments or agreements, or whether such commitments or agreements
will be secured on favorable terms and conditions.
Our
ability to continue or expand our operations through acquisitions, joint ventures or other strategic alliances depends on many
factors, including our ability to identify acquisitions, joint ventures, or partnerships, or access capital markets on acceptable
terms. Even if we are able to identify strategic alliance targets, we may be unable to obtain the necessary financing to complete
these transactions and could financially overextend ourselves.
Acquisitions,
joint ventures or other strategic transactions may present financial, managerial and operational challenges, including diversion
of management attention from existing business and difficulties in integrating operations and personnel. Acquisitions or other
strategic alliances also pose the risk that we may be exposed to successor liability relating to prior actions involving a predecessor
company, or contingent liabilities incurred before a strategic transaction. Due diligence conducted in connection with an acquisition,
and any contractual guarantees or indemnities that we receive from sellers of acquired companies, may not be sufficient to protect
us from, or compensate us for, actual liabilities. Liabilities associated with an acquisition or a strategic transaction could
adversely affect our business and financial performance and reduce the benefits of the acquisition or strategic transaction. Any
failure to integrate new businesses or manage any new alliances successfully could adversely affect our business and financial
performance and prevent us from achieving profitability.
Our
sole officer will only spend a modest portion of his available time managing our company. As a result, our success depends on
the continuing efforts of other members of our senior management team and significant contractors and the loss of the services
of such key personnel could result in a disruption of operations which could result in reduced future revenues.
We
are dependent upon our officer for execution of our business plan. However, our sole officer, Neil Carmichael, will only spend
a modest amount of his time in managing our company. As a result, our future success depends heavily upon the continuing services
of the other members of our senior management team. If one or more of such other of our senior executives or other key personnel
are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business
may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for
senior management and key personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain
the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel
in the future. We do not currently maintain key man insurance on our senior managers. The loss of the services of our senior management
team and employees could result in a disruption of operations which could result in reduced revenues.
We
are at risk that the ENVI-Clean™ system will not perform to expectations.
As
at the date of this annual report, the ENVI-Clean™ system has been tested to satisfactory requirements but there is no guarantee
that the ENVI-Clean™ system will continue to perform satisfactorily in the future which would damage our prospects following
the Assignment.
The
market for alternative energy products, technologies or services is emerging and rapidly evolving and its future success is uncertain.
Insufficient demand for the ENVI-Clean™ system would prevent us from achieving or sustaining profitability.
It
is possible that we may spend large sums of money to bring the ENVI-Clean™ system to the market, but demand may not develop
or may develop more slowly than we anticipate.
Our
future success is dependent on EnviroTechnologies and its technologies in regards to:
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(a)
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its
ability to quickly react to technological innovations;
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(b)
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the
cost-effectiveness of its technologies;
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(c)
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the
performance and reliability of alternative energy products and services that it develops;
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(d)
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its
ability to formalize marketing relationships or secure commitments for our technologies, products and services;
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(e)
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realization
of sufficient funding to support our and EnviroTechnologies marketing and business development plans; and
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(f)
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availability
of government incentives for the development or use of any products and services that we or EnviroTechnologies develop.
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We
may be unable to develop widespread commercial markets or obtain sufficient demand or broad acceptance for the EnviroTechnologies
alternative energy products or technologies or services. We may be unable to achieve or sustain profitability.
Competition
within the environment sustainability industry may prevent us from becoming profitable.
The
alternative energies industry is competitive and fragmented and includes numerous small companies capable of competing effectively
in the market we target as well as several large companies that possess substantially greater financial and other resources than
we do. Larger competitors' greater resources could allow those competitors to compete more effectively than we can with the EnviroTechnologies
technology. A number of competitors have developed more mature businesses than EnviroTechnologies has and have successfully built
their names in the international alternative energy markets. These various competitors may be able to offer products, sustainability
technologies or services more competitively priced and more widely available than EnviroTechnologies and also may have greater
resources to create or develop new technologies and products than EnviroTechnologies. Failure to compete in the alternative energy
industry may prevent us from becoming profitable, and thus you may lose your entire investment.
We
are at risk of EnviroTechnologies not being able to manufacture the ENVI-Clean™ system in accordance with contractual terms.
All
contracts which we secure for the sale of ENVI-Clean™ system between EnviroTechnologies and a third party will require that
EnviroTechnologies supplies a functioning emission control system. There is a risk that EnviroTechnologies is unable to manufacture
and supply such a system in accordance with the terms of the contract. Any failure by EnviroTechnologies to perform its obligations
under any such contract may have a detrimental impact on our financial standing and reputation.
Risks
Related to our Stockholders and Shares of Common Stock
The
continued sale of our equity securities will dilute the ownership percentage of our existing stockholders and may decrease the
market price for our common stock.
As
of the date of this report, the Company’s cash reserves are approximately $2,000,000. We expect to continue our efforts
to market, manufacture and deliver the Company’s ENVI systems to customers. Should the Company need additional resources,
we may consider selling additional equity securities which will result in dilution to our existing stockholders. In short, our
continued need to sell equity will result in reduced percentage ownership interests for all of our investors, which may decrease
the market price for our common stock.
We
do not intend to pay dividends and there will thus be fewer ways in which you are able to make a gain on your investment.
We
have never paid dividends and do not intend to pay any dividends for the foreseeable future. To the extent that we may require
additional funding currently not provided for in our financing plan, our funding sources may prohibit the declaration of dividends.
Because we do not intend to pay dividends, any gain on your investment will need to result from an appreciation in the price of
our common stock. There will therefore be fewer ways in which you are able to make a gain on your investment. In the future when
we do intend to pay dividend, we will formalize a dividend policy.
Because
the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling
to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment
to decline.
Our
shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange
Act”) which imposes additional sales practice requirements on brokers-dealers who sell our securities in this offering or
in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written
agreement prior from you to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices,
it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your
shares and may cause the value of your investment to decline.
Financial
Industry Regulatory Authority (FINRA) sales practice requirements may limit your ability to buy and sell our common stock, which
could depress the price of our shares.
FINRA
rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending
that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers,
broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and
investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability
such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell
our shares, have an adverse effect on the market for our shares, and thereby depress our share price.
We
are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make our common stock less attractive to investors.
We
are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”),
and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor
attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors
will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less
attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We
will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues
exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of
our common stock that is held by non-affiliates exceeds $700 million as of any May 30.
Our
status as an “emerging growth company” under the JOBS Act of 2012 may make it more difficult to raise capital as and
when we need it.
Because
of the exemptions from various reporting requirements provided to us as an “emerging growth company” we may be less
attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable
to compare our business with other companies in our industry if they believe that our reporting is not as transparent as other
companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results
of operations may be materially and adversely affected.