PACIFIC GREEN TECHNOLOGIES INC. : Non-Reliance on Previous Financials, Audits or Interim Review (form 8-K)

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review

On July 8, 2022, the Audit Committee of the Board of Directors (the “Audit
Committee”) and management of Pacific Green Technologies Inc. (the “Company”)
determined that, due to accounting policy changes, the financial statements for
the following periods should no longer be relied upon:

(i) The Company’s consolidated financial statements for the year ended March 31,
2021 and 2020 included in Company’s Annual Report on Form 10-K, filed with the
SEC on June 29, 2021; and the Company’s unaudited condensed consolidated interim
financial statements for the three quarters during such year ended March 31,
2021 included in the Company’s respective Quarterly Reports filed on Form 10-Q
for such interim periods;

(ii) The Company’s unaudited condensed consolidated financial statements for the
quarter ended June 30, 2021 and 2020 included in the Company’s Quarterly Report
on Form 10-Q, filed with the SEC on August 13, 2021;

(iii) The Company’s unaudited condensed consolidated financial statements for
the quarter ended September 30, 2021 and 2020 included in the Company’s
Quarterly Report on Form 10-Q, filed with the SEC on November 12, 2021; and

(iv) The Company’s unaudited condensed consolidated financial statements for the
quarter ended December 31, 2021 and 2020 included in the Company’s Quarterly
Report on Form 10-Q, filed with the SEC on February 14, 2022.

Any previously issued or filed reports, press releases, earnings releases and
investor presentations or other communications describing the Company’s
consolidated financial statements and other related financial information
covering the periods described above should no longer be relied upon.

In previous accounting periods, the Company identified three distinct
performance obligations for sale of marine scrubbers: certified design and
engineering work, acceptance of delivered equipment to customers, and acceptance
of commissioned equipment. These three components are separately identifiable
from the contracts. However, based on further analysis of our contracts and a
review of the five-step revenue recognition model, the Company concluded that
the three components do not meet the definition of being “distinct” according to
ASC 606-10-25-14. Customers purchase the entire marine scrubber system and do
not benefit from the separate components on their own. Therefore, a single
performance obligation is appropriate.

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

In addition to the above revenue recognition changes, the Company has reassessed
its presentation of amortization of intangible patent assets and sales
commission costs and has decided it is appropriate to restate those from
expenses to cost of goods sold.

On July 8, 2022, the Company’s Audit Committee and management determined that
the financial effects resultant from the above changes in accounting policies
are material to the understanding of the Company’s financial statements and the
Company plans to restate the financial statements for the seven quarters
commencing with the quarter ended June 30, 2020 in its Annual Report on Form
10-K for the fiscal year ended March 31, 2022.

The Company’s disclosure controls and procedures as of March 31, 2022 are
ineffective as a result of the material weaknesses that existed in the Company’s
internal control over financial reporting and this will be reported in the 10-K
for the fiscal year ended March 31, 2022.

The Company’s management and its Board of Directors have discussed the matters
disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with
Grant Thornton UK LLP, the Company’s independent registered public accounting
firm and KPMG LLP, the Company’s previous independent registered public
accounting firm.

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