TIDMDGI
RNS Number : 7903X
DG Innovate PLC
28 April 2023
28 April 2023
DG Innovate plc
("DG Innovate" or the "Company")
Final results for the year ended 31 December 2022
DG Innovate (LSE: DGI), the advanced research and development
company pioneering sustainable and environmentally considerate
improvements to electric mobility and energy storage, announces the
Company's audited results for the year ended 31 December 2022.
Highlights
-- Completion of acquisition of Deregallera Holdings Ltd and
GBP4.6 million fundraise in April 2022
-- Appointment of Peter Tierney as CEO in July 2022
-- Award of GBP600,000 in grant funding from APC for the SUPAR
project in September 2022
-- Strategic update and publication of commercial roadmaps
for EDT and EBT in October 2022
-- Post year end subscription and broker option to raise total
of GBP418,000 in January 2023
-- Post year end Collaboration Framework Agreement with axle
suppliers BRIST and BASE in February 2023
For further information please contact:
DG Innovate plc C/O IFC
Peter Tierney, CEO
Jack Allardyce, CFO
IFC Advisory (Financial PR & IR)
Tim Metcalfe
Zach Cohen 020 3934 6630
Grant Thornton UK LLP (Financial Adviser)
Samantha Harrison
Jamie Barklem
Ciara Donnelly 020 7383 5100
WH Ireland (Broker)
Chris Hardie
Andrew de Andrade 020 7220 1666
About DG Innovate
DG Innovate is an advanced research and development company
pioneering sustainable and environmentally considerate improvements
to electric mobility and storage, using abundant materials and the
best engineering and scientific practices. DG Innovate is currently
developing its products alongside a number of major manufacturers
across the transportation and energy sectors, research institutions
and the UK Government, and has filed 18 patents worldwide. DG
Innovate's current research and development activities are broadly
split into two areas, focusing on novel electric motor technologies
and energy storage solutions. Its two main products are:
- Enhanced Drive Technology (EDT) - High efficiency,
cost-effective electric motors + power electronics; and
- Enhanced Battery Technology (EBT) - Sodium-ion batteries
offering a sustainable energy storage solution at similar/greater
energy density to incumbent technologies at a lower cost, increased
safety with lower environmental footprint.
Further information may be found at: https://www.dgiplc.com
Chairman's Statement
In April 2022, DG Innovate Plc ("the Company") successfully
completed the acquisition of Deregallera Holdings Ltd (previously
DG Innovate Ltd) ("DHL") which, together with an accompanying
fundraise provided by existing shareholders, provided the enlarged
group ("the Group", or "DGI") with a platform to develop DGI's
Enhanced Drive and Enhanced Battery Technologies (EDT and EBT)
towards commercialisation. The Company changed its name to DG
Innovate Plc to reflect the new group structure at completion.
In May 2022 the Company was delighted to announce the
appointment of Peter Tierney as its new CEO. Peter took up his
position on 1 July 2022, with his predecessor Christopher Theis
stepping down at the same time. Peter brings a wealth of experience
in building successful engineering businesses and achieving
significant returns for investors.
During the following months we continued to make significant
progress, including initial testing of our prototype 250kW
Pareta(R) drives, the award of GBP600,000 in funding from the APC
towards our SUPAR project and positive test results from our hard
carbon anode material. Following an initial period of evaluation
while working with the team at our premises in Caerphilly, in
October 2022 Peter laid out his vision for the business in the form
of commercialisation roadmaps for both EDT and EBT.
Post year end
In January 2023 we successfully raised an additional GBP418,000
through a subscription and broker option, in order to continue the
development of our technologies. We were especially grateful for
the support and faith of shareholders against a particularly
difficult market backdrop at the time. I would also like to extend
my thanks to Andrew Boughtwood and Sir Stephen Dalton, who stepped
down from the Board at this time, for their contributions.
In February 2023 we were delighted to announce the signing of a
Collaboration Framework Agreement with tier one commercial and
off-highway vehicle axle suppliers, BRIST and BASE. This will see
us work together to develop and integrate DGI's innovative
Pareta(R) motor technology into our partners' range of axles,
accelerate our joint activities in the retrofit and conversion
market, and ultimately assemble a full electric drivetrain offering
in the UK. This is a particularly exciting development, opening up
a number or commercial opportunities with two very credible
industry partners, and what we hope is the beginning of a long and
very fruitful relationship for all parties. It is also
complementary to our other existing relationships, which we hope to
convert into commercial opportunities.
Outlook
On the ground, the hard work continues for both our electric
drive and energy storage teams. For the former, our SUPAR, MTorX
and Marine projects are underway, and we hope to test the next
design iteration of our 250kW/400kW Pareta(R) electric drive in Q2
2023, in collaboration with Meritor. In terms of the latter, our
Cap-Size feasibility study is ongoing, as is scale up and testing
of our proprietary hard carbon anode materials, as we continue to
work towards full-scale commercial production.
I would like to offer my sincere thanks to our shareholders for
their continued support. 2022 was a transformation year for DGI and
we are excited for what lies ahead over the coming months and
years.
Nicholas Tulloch
Non-Executive Chairman
27 April 2023
Operational Review
On 8 April 2022, the Company changed its name to DG Innovate
Plc. It is domiciled and its principal place of business is in the
United Kingdom and is subject to the City Code.
The Company was admitted to the Official List by way of a
Standard Listing and to trading on the London Stock Exchange's Main
Market for listed securities on 30 March 2017.
During the year under review the Company was initially a cash
shell, with its shares suspended from trading pending the
completion of the all-share acquisition of DHL, the details of
which had been laid out in a binding Sale and Purchase Agreement
signed on 12 August 2021. During the period prior to the completion
of the acquisition, the Company did not trade and its expenses
related to deal costs, professional and associated expenses related
to advisory and consultancy fees, and general administration
expenses.
On 8 April 2022 the Company completed the acquisition of DHL,
being renamed DG Innovate Plc. It concurrently raised GBP4.6m via a
subscription and the exercise of existing warrants, to cover the
costs associated with the transaction, settle historical debts and
provide working capital for the enlarged group. Its subsequent
primary business has been a continuation of the advanced research
and development work historically undertaken by the acquired
companies, with management now seeking to commercialise the nascent
technologies being developed.
The period post completion involved the ongoing research and
development projects across the Group's electric drive and energy
storage division. These included the ongoing Pareta(R) project to
develop an integrated electric drive for bus and truck applications
in collaboration with Meritor, with prototype drives continuing to
be tested and a new design iteration expected to be completed in
the coming weeks. In addition, the Group was awarded and commenced
the SUPAR ('Scale up Readiness Validation of Parallel Motor for
Automotive Applications') project, which will establish a pilot
production facility to assemble drives, the MTorX project, which is
exploring the potential of a motor design with no permanent magnet,
and a feasibility study into a larger 3MW Pareta(R) e-drive for
marine operations. While scale-up and testing of the Company's hard
carbon anode material continued, the GBP160,000 Cap-Size project
also commenced, which will deliver a feasibility study on
manufacturing the material at scale in the UK.
The Company announced the appointment of Peter Tierney as CEO in
May 2022, with Mr Tierney taking up his post on 1 July 2022. His
predecessor, Christopher Theis, left the Company on the same date.
Following a strategic review of both DGI's operations and
technology, the Group announced a strategic update in October,
targeting commercial sales of Pareta(R) during 2025 and the
monetisation of EBT, either through manufacturing or licensing,
within a 42-month timescale. The potential for aftermarket
conversion revenues was also identified, and an ongoing focus on
targeting commercial supply agreements through discussions with
existing and new partners was highlighted.
Since the year end, in January 2023 the Company raised
GBP418,000 through a subscription and broker option, to cover
ongoing project costs and working capital. Then in February 2023,
the Group announced a Collaboration Framework Agreement with tier
one commercial vehicle and off-highway axle suppliers, BASE and
BRIST. The agreement will see the parties develop and integrate
DGI's Pareta(R) technology into the current range of BRIST and BASE
axles to provide a turnkey offering, focused on commercial
vehicles, buses, coaches, military and specialty vehicle axles
globally. It also envisages the provision of the Group's existing
vehicle control and torque vectoring system to the partners, a
collaborative drive to increase joint activities in the retrofit
and conversion market, DGI providing UK presence for sales and
customer support and the establishment of assembly operations in
the UK.
Financial Review
The financial performance and position of the Group during the
year ended 31 December 2022 reflects the Group's ongoing focus on
the development of its electric drive and energy storage
technologies, with the aim of progressing towards
commercialisation. Nominal revenues were attributable to ongoing
work for the UK Government, with the Group's activities funded by a
combination of new equity capital and new and existing grant
awards. Increased general and administrative costs were incurred
due to the enlarged group structure and corporate costs post the
acquisition of DHL, with substantial one-off expenses associated
with the reverse takeover process also impacting the P&L.
The Group's consolidated accounts presented in the financial
statements and associated notes within this report, and summarised
here, are prepared under reverse acquisition accounting rules. As
such, consolidated figures represent the enlarged Group from
completion of the reverse takeover in April 2022 to 31 December
2022, and the DG Innovate companies acquired prior to this date
(including for the comparable 2021 financial year).
Trading performance
The Group remained pre-revenue during the year, except for a
small contribution from work for the UK Government. The Group made
an operating loss of GBP2,615,534 (2021: GBP587,235). This was
primarily due to increased administration expenses of GBP2,715,557
(2021: GBP1,529,089) and a share-based payment charge of GBP338,864
(2021: GBPNil), which were somewhat offset by grant income of
GBP433,989 (2021: GBP938,818).
A one-off reverse acquisition expense of GBP5,094,074 (2021:
GBPNil) was recognised, relating to the fair value of the Company
at the time of completing the acquisition of DHL, under reverse
acquisition accounting. Further detail is contained in note 26 of
the Consolidated Financial Statements contained within this
report.
Net finance costs of GBP67,873 (2021: GBP112,903) were
predominantly due to interest on shareholder and CBILS loans, with
the former settled on completion of the reverse takeover. The Group
received R&D tax claims, resulting in a positive tax credit of
GBP188,864 for the year (2021: GBP55,273). As the business is
currently loss making, there is no corporation tax payable on
earnings.
For the year ended 31 December 2022, the Group made a net loss
of GBP7,679,512 (2021: GBP644,865). The basic and diluted loss per
share for the year was 0.11 pence (2021: 0.04 pence).
Financial position
As at 31 December 2022, the Group's non-current assets amounted
to GBP5,298,683 (2021: GBP4,999,456), including intangible assets
of GBP4,573,592 (2021: GBP4,139,805) and property, plant and
equipment of GBP725,091 (2021: GBP859,651).
Intangible assets increased by GBP433,787 during the year (2021:
GBP436,650), due to the capitalisation of internally generated
development costs.
Non-current liabilities were GBP495,860 (2021: GBP1,148,103),
including lease liabilities of GBP237,182 (2021: GBP256,803) and
loans of GBP234,653 (2021: GBP880,675).
Group net current assets at year-end were GBP618,313 (2021:
(GBP1,150,495)).
Cash movement
Group cash and equivalents at 31 December 2022 was GBP234,990
(2021: GBP57,454). Net cash outflow from operating activities for
the Group during the year was GBP2,392,663 (2021: GBP501,906), and
cash outflow from investments was GBP1,010,477 (2021:
(GBP1,287,718). On 8 April 2022, the Group raised GBP4.6 million
(before expenses) through the exercise of shareholder warrants and
a subscription for new ordinary shares.
Post year end, in January 2023, the Group raised a further
GBP418,000 through a subscription and broker option. These funds
were raised to cover the costs of the DGI acquisition and to fund
the ongoing development of the Company's technologies towards
commercialisation.
Key Performance Indicators
During the year, the Group progressed from being a cash shell
targeting acquisitions to an advanced research and development
company which is seeking to pursue commercial activities, alongside
continuing to expand its intellectual property portfolio and
technology offering. As noted in the Chairman's Statement and
Operational Review, the period post completion of the RTO was
focused on the hiring of our CEO Peter Tierney, his subsequent
review of the business and developing a strategy to deliver value
for shareholders. Given this period of transition, we believe the
nature and stage of the business will change significantly over the
coming months and years, and the manner in which we measure our
performance will also need to develop to remain fit for
purpose.
While we present KPIs showing the progress we continue to make
on our ongoing research and development work below, we have begun
to identify a number of additional financial and non-financial key
performance indicators, for both the near and longer term, to
monitor progress on our technology commercialisation efforts and
ramp up in trading. These will begin to be introduced over the
coming financial year as well as subsequent periods, to ensure that
the business is performing or to signal any problems which may be
arising. These will include financial KPIs such as order book,
sales revenue and volumes, which will be key to long-term,
sustainable organic growth. Technical KPIs will benchmark motor,
inverter and material performance, and patents filed/granted,
whilst operational KPIs will include engineering hours worked,
completed units produced and employee headcount. The Directors
believe these will provide strong indications of the Group's
ability to secure a long-term sustainable competitive
advantage.
Key Performance Indicator 2022 2021 Change (%)
Patents held 10 10 0%
Projects completed 3 3 0%
Grant funding received 433,989 938,818 (54%)
The grant award of GBP600,000 from APC for the SUPAR project in
2022 will be received in 2023 and 2024.
There were seven Innovate UK funded projects being undertaken in
2021, four of which completed during that year, with three which
continued into 2022. Another three new grant funded projects
commenced in 2022, although no grant payments were received during
the year in relation to these new projects. Therefore, there was a
significant reduction in grant income in 2022.
Directors' Report
The Directors present their report and financial statements for
the year ended 31 December 2022.
Directors and Directors' interests
The Directors at the date of these financial statements who
served during the period and their interest in the ordinary shares
of the Group are as follows:
31 December 2022 31 December 2021
Number of Ordinary Number of Ordinary
Shares Shares
C. Theis* 60,995,589 60,995,589
B. Fitzpatrick** 57,336,875 57,336,875
J. Allardyce 6,000,000 6,000,000
M. Boughtwood*** 3,026,591,664 -
T. Gabriel **** 555,561,720 -
A. Boughtwood 75,758,416 -
* 60,995,500 Ordinary Shares are held in Mr. Theis'
self-invested pension plan administered by Hargreaves Lansdown.
** Mr. Fitzpatrick has an indirect interest in 6,015,000
Ordinary Shares which are registered in the name of Ocean Park
Developments Limited, a company of which he is the holder of 100%
of the issued share capital and a further indirect interest in
9,610,000 Ordinary Shares which are registered in the name of
Pondermatters Limited, a company of which he is the holder of 10%
of the issued share capital. 6,000,000 Ordinary shares are
registered to Alexander Fitzpatrick (Brent Fitzpatrick's son).
*** 3,026,591,664 Ordinary Shares are held by Deregallera Trust
and its beneficiary is Martin's wife, Denise Boughtwood.
**** 555,561,720 Ordinary Shares are held by Disruptech Limited
owned by Trevor Gabriel.
Major interests in ordinary shares
Save for the interests of the Directors, as at 24 April 2023
being the latest practicable date prior to the publication of this
Annual Report, the Group has identified the following holdings of
Ordinary Shares which represent more than 3 per cent. of its issued
share capital:
Shareholder Number of Shares % of issued share
capital
Deregallera Trust 3,026,591,664 32.87%
The Bank of New York (Nominees) 636,399,327 6.91%
Disruptech Limited 555,561,720 6.03%
JIM Nominees Limited 467,213,562 5.07%
David Williams 436,280,093 4.74%
Cantor Fitzgerald Europe 386,666,666 4.20%
ISI Nominees Limited 384,647,257 4.18%
--------------------------------- ----------------- ------------------
Results
The Group's loss for the year to 31 December 2022 amounted to
GBP7,679,512 (2021: GBP644,865).
Managing business risk
The Board constantly monitors the operational and financial
aspects of the Group's activities and is responsible for the
implementation and ongoing review of business risks that could
affect the Group. Duties in relation to risk management that are
conducted by the Directors include but are not limited to:
- Initiate action to prevent or reduce the adverse effects of
risk
- Control further treatment of risks until the level of risk
becomes acceptable
- Identify and record any problems relating to the management of
risk
- Initiate, recommend or provide solutions through designated
channels
- Verify the implementation of solutions
- Communicate and consult internally and externally as
appropriate
The Board has carried out a review of the effectiveness of the
Group's risk management and internal controls systems, including
financial, operational and compliance controls as is appropriate at
this early stage of the Group's business.
As part of the reverse takeover of DHL the Group's Financial
Position and Prospects Procedures Board Memorandum (FPPP) and all
internal policies were overhauled. This was to ensure that they
remained appropriate for the enlarged Group. These documents lay
out all controls and procedures relating to finance, reporting,
systems & IT, disclosures and corporate governance.
Taxation status
The Company was not a close company within the provisions of the
Corporation Tax Act 2010 and this position has not changed since
the end of the financial period.
Future developments
Information about the future plans of the Group is covered in
the Strategic Report.
Dividends
The Directors do not recommend the payment of a dividend (2021:
GBPNil).
Capital structure
The Group's issued share capital consists of Ordinary Shares
(100% of total share capital).
The ordinary shares shall confer upon the holders the right to
receive dividends and other distributions and participate in the
income or profits of the Company.
Financial instruments
Details of the use of financial instruments by the Group are
contained in note 23.
Environmental Reporting
Under the Companies (Directors' Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018, we are
mandated to disclose our UK energy use and associated greenhouse
gas (GHG) emissions. Specifically, and as a minimum, we are
required to report those GHG emissions relating to natural gas,
electricity and transport fuel, as well as an intensity ratio,
under the Streamlined Energy and Carbon Reporting (SECR)
Regulations.
Emissions data
The Group's Scope 1 and Scope 2 emissions are limited to those
associated with business travel and electricity consumption at the
premises in Caerphilly.
Standard conversion rates used in this report were obtained from
the UK Government. The energy data used in this report relates to
invoiced consumption against specific meter points for the
specified period and has been qualified by the suppliers of the
invoices. Transport and supplementary fuel data was provided
directly by the Company, together with the selected intensity ratio
metric and the supporting intensity ratio data.
Summary of usage
The Group's Scope 1 and Scope 2 Emissions are summarised in the
table below.
DG Innovate Subsidiary Companies Total
Plc kg CO(2) e kg CO(2) e
kg CO(2) e
Scope 1 - Business
Travel 1,873 1,266 3,139
Scope 2 - Energy
Usage* - 26,377 26,377
Total 1,873 27,643 29,516
*provider SSE Energy Supply Limited
The Group has taken steps to improve its CO(2) emissions as
follows:
- Installation of EV charging points at the company premises for
use with the company vehicles which are now electric. The
electricity is generated onsite from the solar panels.
- A review of the buildings energy rating has been carried out
and improvements are being made to the air conditioning and heating
systems, ensuring that the building is only heated when it is
occupied, thus saving energy.
- We have reorganised our office space to reduced energy
consumption for heating and lighting.
Donations
There were no charitable or political donations during the
current period or prior year.
Post balance sheet events
Post balance sheet events are discussed in the Chairman's
Statement on page 3 and in note 28.
Going concern
The financial statements have been prepared on the assumption
that the Group will continue as a going concern. Under this
assumption, an entity is ordinarily viewed as continuing in
business for the foreseeable future with neither the intention nor
the necessity of liquidation, ceasing trading or seeking protection
from creditors pursuant to laws or regulations. In assessing
whether the going concern assumption is appropriate, the Directors
take into account all available information for the foreseeable
future, in particular for the twelve months from the date of
approval of the financial statements.
The Directors consider the use of the going concern assumption
to be appropriate. At the latest reported date of 31 December 2022,
the Group had cash and cash equivalents totalling GBP234,990 and
net current assets of GBP618,313.
On 8 April 2022, the Group successfully raised GBP4.6 million
(before expenses) through the exercise of shareholder warrants and
a subscription for new ordinary shares. Post period end, in January
2023, the Group raised a further GBP418,000 through a subscription
and broker option. These funds were raised to cover the costs of
the DHL acquisition and to fund the ongoing development of the
Group's technologies towards commercialisation.
Significant progress is being made, with a final design
iteration of the Group's Pareta(R) drive due to be tested during Q2
2023, in collaboration with major Tier 1 axle supplier Meritor. In
addition, the Group announced in February 2023 that it had signed a
Collaboration Framework Agreement with Tier 1 axle suppliers BRIST
and BASE, representing DGI's first commercial partnership. The
parties will work together to develop and integrate Pareta(R) into
the current range of BRIST and BASE axles to provide a turnkey
offering for commercial and military vehicles globally.
Furthermore, DGI will provide BRIST and BASE its existing vehicle
control and torque vectoring system to allow the partners to
accelerate the penetration of the product in the market sectors
identified, the parties will work together to accelerate activities
in the retrofit and conversion market and DGI will provide UK 'in
country' presence for sales and customer support. Ultimately, the
intention is for DGI to assemble BRIST and BASE axles within the UK
in due course, with the partners to support the establishment of
operations when demand requires. As our first "commercial"
agreement we believe this has scope to result in significant
revenues across a number of different business models. The Group
also continues its work with the UK Ministry of Defence.
In line with all pre-revenue companies, further funding will be
required as the Group moves through the development phase. The
Board have considered a number of detailed cashflow scenarios and
have identified a further funding requirement from mid-2023. As
this falls within 12 months of the date of this report, a material
uncertainty exists in relation to the ability of the Group to
continue as a going concern.
The Directors would note that the previous fundraises in March
2021, April 2022 and January 2023 were predominantly made up of the
same small group of investors, who remain supportive of the Group's
strategy. The Directors therefore believe that a further equity
fundraise would be well supported. The Directors have also
progressed discussions with lenders regarding debt facilities,
should it achieve material customer orders post-testing. Taking
this into account, the Directors have formed the opinion that there
are adequate arrangements in place to enable the settlement of
their financial commitments as and when they fall due.
For this reason, the Directors continue to adopt the going
concern basis in preparing the financial statements. While there
are inherent uncertainties in relation to future events and
ultimately no certainty over the outcome of matters described
above, in the opinion of the Directors, the newly formed group will
be a going concern for the next 12 months.
Research and Development
The Group is focusing on advanced research and development of
sustainable and environmentally considerate improvements to
electric mobility and energy storage, Enhanced Drive Technology and
Enhanced Battery Technology
Enhanced Drive Technology
The Group's electric drive technology platform, Pareta(R)
consists of a motor, high power inverter and control electronics,
with a novel 'multi motor/inverter' architecture and a number of
fundamental and patent pending innovations. This technology has
been developed over a number of years via the Group's ongoing work
to build ultra-high performance and durable electric drives for the
UK Ministry of Defence, with the resulting product family currently
in its third iteration.
The Pareta(R) platform has most recently been extended to
deliver its associated performance and durability parameters at a
competitive cost point for volume manufacture for commercial
electric vehicles, initially for the Company's collaboration
partner Meritor, the US-headquartered global commercial vehicle
components company. The advanced prototypes produced in a scalable
250kW/400kW format, aimed at bus and HGV applications, have already
shown good performance versus electric motor systems from global
motor manufacturers.
To develop this new offering from its current advanced prototype
phase to final product release and volume manufacture, the Group
plans to take a staged approach. Having successfully produced an
advanced prototype design, work is now ongoing to progress to a
final design prototype.
The Group is undertaking a phase of preparing for pilot
manufacturing with the financial support from the UK Government's
Advanced Propulsion Centre ("APC") through their Scale-up Readiness
Validation competition, part of the Automotive Transformation fund,
in parallel with completing the final design prototype. Further
prototypes will be followed, enabling the design to be optimised,
particularly regarding performance and costings, in order to
progress to the production stage.
The Group has also commenced a feasibility project under the
competition of "Clean Maritime Demonstration Competition Round 2 -
Feasibility", to define an innovative multi parallel design for 3
MW marinised fuel cell systems encompassing highly redundant
end-to-end whole-ship energy efficiency design and integration.
Enabled by novel motor, drives, and power electronics, the modular
marinised fuel cell system will deliver more than 3 MW power.
Enhanced Battery Technology
The Group's proprietary energy storage technology encompasses a
family of hard carbon anode materials produced from a sustainable
bio waste product, specifically developed for use in sodium-ion
batteries, with potential applications in existing lithium-ion
battery production. Sodium-ion batteries offer an attractive
alternative to lithium-ion batteries, using materials that are more
abundant, with lower carbon footprints, and which circumvent
natural resource constraints involved in the production of
lithium-ion batteries.
The Group believes that its battery partners consider the
Group's technology to be a disruptive alternative in their
aspiration to reduce dependency on hydrocarbon-derived anodes for
both sodium and lithium-ion battery technologies. The Group's hard
carbon anode materials have already demonstrated commercially
attractive performance characteristics, particularly enabling
significant energy densities, in line with the best performing
sodium-ion batteries currently available, in battery cells
manufactured at a small scale in the Group's own facility.
Further scale up of material production will involve an
iteration of process engineering to maintain the desired
performance and material characteristics in high volume.
Additionally, integrating the material into commercial scale
battery cell production will require a parallel process of
optimising cell design and large-scale production engineering.
The Group intends to primarily pursue a licensing model to bring
its battery technology to the market, through licensing to
sodium-ion battery manufacturers, with the potential for in-house
material production should that prove commercially attractive.
Whilst there is currently limited volume sodium-ion battery
manufacture worldwide, a number of large global battery
manufacturers have recently announced plans to establish
substantial sodium-ion battery manufacturing capabilities. As
global sodium-ion battery production increases in the coming years,
the Group believes there will be a substantial addressable market
for its technology.
The Group commenced a feasibility study under Innovate UK's
competition "Automotive Transformation Fund Feasibility Studies:
Round 3" for the evaluation of manufacturing its sodium-ion anode
material at scale in the UK, in particular to enable the Company to
refine its economic and technology model out to 10,000
tonnes-per-annum production of the Company's hard anode
material.
Statement of Directors' responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared financial statements in accordance with UK-adopted
International Accounting Standards ('IAS'). Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and Group and of the Statement of
Comprehensive Income of the Group for that year.
In preparing those financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- state whether they have been prepared in accordance with
UK-adopted IASs, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company and Group
will continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company and
Group transactions and disclose with reasonable accuracy at any
time the financial position of the Group and enable them to ensure
that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Group's website in accordance with
legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Group's website is the responsibility of the Directors. The
Directors' responsibility also extends to the ongoing integrity of
the financial statements contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
- the Group financial statements have been prepared in
accordance with UK-adopted International Accounting Standards
(IASs) and give a true and fair view of the assets, liabilities,
financial position and profit and loss of the Group.
- The annual report includes a fair review of the development
and performance of the business and financial position of the Group
together with a description of the principal risks and
uncertainties that they face.
The Directors' Report was approved by the board of Directors and
signed on its behalf by:
Peter Tierney
Chief Executive Officer
27 April 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year Year
ended ended
31 December 31 December
Note 2022 2021
GBP GBP
Revenue
Turnover 4,280 -
Cost of sales (2,000) -
Gross Profit 2,280 -
Grant income 433,989 938,818
Other income 2,618 3,036
Administrative expenses (2,715,557) (1,529,089)
Share based payments 24 (338,864) -
Operating loss 4 (2,615,534) (587,235)
Reverse acquisition expenses 26 (5,094,074) -
Finance income 8 - 230
Finance cost 8 (67,873) (113,133)
Other gains and losses (90,895) -
Loss on ordinary activities
before taxation (7,868,376) (700,138)
Income tax 9 188,864 55,273
Loss for the year and total
comprehensive loss attributable
to the equity holders (7,679,512) (644,865)
Earnings per share
- Basic and diluted earnings
attributable to the equity holders
from continuing and total operations 10 (0.11) (0.04)
All operating income and operating gains and losses relate to
continuing activities.
There was no other comprehensive income for the year (2021:
GBPNil).
The notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Capital Reverse Merger Share Retained Total
Capital Premium Redemption Acquisition Reserve Option earnings
Reserve Reserve Reserve
GBP GBP GBP GBP GBP GBP GBP GBP
As at 1
January
2021 202,610 25,456,950 8,783,824 (36,439,255) - - 1,369,558 (626,313)
Comprehensive
income
loss for the
period - - - - - - (644,865) (644,865)
Share based - - - - - - - -
payments
Total
Comprehensive
loss - - - - - - (644,865) (644,865)
Total
contributions
by and
distributions
to owners of
the Group
Issue of share
capital 1,826,854 2,266,324 - - - - - 4,093,178
As at 31
December
2021 2,029,464 27,723,274 8,783,824 (36,439,255) - - 724,693 2,822,000
As at 1
January
2022 2,029,464 27,723,274 8,783,824 (36,439,255) - - 724,693 2,822,000
Comprehensive
income
Loss for the
period - - - - - - (7,679,512) (7,679,512)
Share based
payments - - - - - 338,864 - 338,864
Total
Comprehensive
loss - - - - - 338,864 (7,679,512) (7,340,648)
Total
contributions
by and
distributions
to owners of
the Group
Reverse
acquisition - - - (29,772,482) - - - (29,772,482)
Issue of share
capital 6,813,251 5,881,712 - - 26,987,257 - - 39,682,219
As at 31
December
2022 8,842,715 33,604,986 8,783,824 (66,211,737) 26,987,257 338,864 (6,954,819) 5,391,090
The Share Capital represents the nominal value of the equity
shares.
The Share Premium represents the amount subscribed for share
capital, in excess of the nominal amount, less costs directly
relating to the issue of shares.
The Capital Redemption reserve represents the nominal value of
cancelled deferred shares.
The Retained Earnings reserve represents the cumulative net
gains and losses less distributions made.
The Share option reserve represents share-based payments which
represents the cumulative fair value of options and warrants
granted.
The reverse acquisition reserve was recognised on the reverse
acquisition of DHL, which while being the legal acquiree, was
considered to be the accounting acquirer under the rules of IFRS 3.
As the accounting acquiree was not a business under IFRS 3, a part
of the transaction was outside the scope of IFRS 3. This resulted
in the recognition of a 'reverse acquisition reserve' on
consolidation. Please see note 26 for further detail.
The merger reserve represents the share premium on the
acquisition shares.
The notes form an integral part of the financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share Capital Share Merger Retained Total
Capital Premium Redemption Option Reserve earnings
Reserve Reserve
GBP GBP GBP GBP GBP GBP GBP
As at 1 January
2021 202,610 25,456,950 8,783,824 87,501 - (36,675,673) (2,144,788)
Comprehensive
income
Loss for the
period - - - - - (3,903,459) (3,903,459)
Share based payments - - - 2,889,504 - - 2,889,504
Total Comprehensive
loss - - - 2,889,504 - (3,903,459) (1,013,955)
Total contributions - - - - - - -
by and distributions
to owners of
the Company
Issued share
capital 1,826,854 2,266,324 - - - - 4,093,178
As at 31 December
2021 2,029,464 27,723,274 8,783,824 2,977,005 - (40,579,132) 934,435
As at 1 January
2022 2,029,464 27,723,274 8,783,824 2,977,005 - (40,579,132) 934,435
Comprehensive
income
Loss for the
period - - - - - (1,549,027) (1,549,027)
Warrants exercised - 758,055 - (758,055) - - -
Share based payments - - - 338,864 - 338,864
Total Comprehensive
loss - 758,055 - (419,191) - (1,549,027) (1,210,163)
Total contributions
by and distributions
to owners of
the Company
Issue of share
capital 6,813,251 3,036,805 - - 26,987,257 - 36,837,313
As at 31 December
2022 8,842,715 31,518,134 8,783,824 2,557,814 26,987,257 (42,128,159) 36,561,585
The Share Capital represents the nominal value of the equity
shares.
The Share Premium represents the amount subscribed for share
capital, in excess of the nominal amount, less costs directly
relating to the issue of shares.
The Capital Redemption reserve represents the nominal value of
cancelled deferred shares.
The Retained Earnings reserve represents the cumulative net
gains and losses less distributions made.
The Share option reserve represents share-based payments which
represents the cumulative fair value of options and warrants
granted.
The merger reserve represents the share premium on the
acquisition shares.
The notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
31 December 31 December
Note 2022 2021
GBP GBP
ASSETS
Non-current assets
Property, plant and equipment 11 725,091 859,651
Intangible assets 13 4,573,592 4,139,805
5,298,683 4,999,456
Current assets
Trade and other receivables 14 1,023,552 117,277
Cash and cash equivalents 22 234,990 57,454
1,258,542 174,731
LIABILITIES
Current liabilities
Trade and other payables 15 (640,229) (1,150,495)
Net Current Assets / (Liabilities) 618,313 (975,764)
Non-current liabilities 16 (495,860) (1,148,103)
Provision for liabilities 17 (30,046) (53,589)
Net Assets 5,391,090 2,822,200
SHAREHOLDERS' EQUITY
Called up share capital 19 8,842,715 2,029,464
Capital redemption reserve 8,783,824 8,783,824
Share premium account 33,604,986 27,723,274
Share option reserve 338,864 -
Merger reserve 26,987,257 -
Reverse acquisition reserve (66,211,737) (36,439,255)
Retained earnings (6,954,819) 724,693
TOTAL EQUITY 5,391,090 2,822,200
The financial statements were approved and authorised for issue
by the Board of Directors on 27 April 2023 and were signed on its
behalf by:
Jack Allardyce
Chief Financial Officer
The attached notes form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
As at As at
31 December 31 December
Note 2022 2021
GBP GBP
ASSETS
Non-current assets
Property, plant and equipment 11 2,240 80,546
Investment in subsidiaries 12 32,490,188 -
32,492,428 80,546
Current assets
Trade and other receivables 14 4,240,661 904,655
Cash and cash equivalents 22 156,193 686,400
4,396,854 1,591,055
LIABILITIES
Current liabilities
Trade and other payables 15 (327,697) (737,166)
Net current assets 4,069,157 853,889
Net assets 36,561,585 934,435
SHAREHOLDERS' EQUITY
Called up share capital 19 8,842,715 2,029,464
Capital redemption reserve 19 8,783,824 8,783,824
Share premium account 31,518,134 27,723,274
Merger reserve 26,987,257 -
Share option reserve 2,557,814 2,977,005
Retained earnings (42,128,159) (40,579,132)
Total equity 36,561,585 934,435
The Company has taken advantage of the exemption contained in
S408 Companies Act 2006 and has not presented a separate income
statement for the Company. The Company recorded a loss after tax of
GBP1,549,027 for the year ended 31 December 2022 (2021:
GBP3,903,459).
The financial statements were approved and authorised for issue
by the Board of Directors on 27 April 2023 and were signed on its
behalf by:
Jack Allardyce
Chief Financial Officer
Company Registration No. 04006413 (England and Wales)
The attached notes form an integral part of the financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
Note 2022 2021
GBP GBP
Cash flows from operating activities
Cash expended from operations 20 (2,477,933) 323,455
Tax refunded 85,270 178,451
Net cash (outflow) / inflow from
operating activities (2,392,663) 501,906
Cash flows from investing activities
Proceeds from disposal of property, 50,832 -
plant and equipment
Purchase of property, plant and
equipment 11 (76,563) (391,104)
Purchase of intangible assets (848,443) (856,303)
Finance income - 230
Finance cost (50,241) (40,541)
Cash payment on acquisition (86,062) -
Net cash used in investing activities (1,010,477) (1,287,718)
Cash flows from financing activities
Proceeds from borrowings - 600,000
Repayment of borrowings (735,876) (118,905)
Proceeds from issue of shares 4,347,125 -
Repayment of lease liabilities (71,661) (12,400)
Net cash generated from investing
activities 3,539,588 468,695
Net increase in cash and cash
equivalents 136,448 (317,117)
Cash and cash equivalents at the
beginning of year 57,454 374,571
Cash balance on acquisition 41,088 -
Cash and cash equivalents at end
of year 22 234,990 57,454
The notes form an integral part of the financial statements.
COMPANY STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
Note 2022 2021
GBP GBP
Cash flows from operating activities
Cash expended from operations 20 (4,872,331) (2,862,941)
Net cash outflow from operating
activities (4,872,331) (2,862,941)
Cash flows from investing activities
Purchase of property, plant and
equipment 11 (3,068) (98,598)
Finance costs (1,933) (629)
Net cash used in investing activities (5,001) (99,227)
Cash flows from financing activities
Issue of share capital 4,347,125 3,850,000
Loan repayment - (50,000)
Issue of convertible loans - 8,100
Repayment of convertible loans - (160,000)
Net cash generated from investing
activities 4,347,125 3,648,100
Net (decrease)/increase in cash
and cash equivalents (530,207) 685,932
Cash and cash equivalents at the
beginning of year 686,400 468
Cash and cash equivalents at end
of year 22 156,193 686,400
Significant non-cash transactions from investing activities are
as follows:
Equity consideration for the reverse acquisition of DHL in the
year totalled GBP32,490,188 (2021: GBPNil).
The notes form an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
1.1 Basis of preparation
DG Innovate Plc is a public limited company incorporated and
domiciled in the England and Wales, registered under company number
04006413. The address of the registered office is 15 Victoria Mews,
Cottingley Business Park, Bingley, BD16 1PY, England. DG Innovate
Plc is a public company incorporated under the Companies Act 1985
and domiciled in the United Kingdom. During the period under review
the Company was initially a cash shell whose strategy was deliver
material acquisitions in the energy sector. On 8 April 2022 the
Company completed the acquisition of DHL, becoming an advanced
research and development company pioneering sustainable and
environmentally considerate improvements to electric mobility and
storage.
The consolidated financial statements comprise the financial
statements of DG Innovate Plc and its subsidiaries ('the Group').
They have been prepared and approved by the Directors in accordance
with UK-Adopted International Accounting Standards ('IASs') and
with those parts of the Companies Act 2006 applicable to companies
reporting under IAS.
For the year ended 31 December 2022, the subsidiary companies
were entitled to exemption from audit under section 479c of the
Companies Act 2006 relating to subsidiary companies. DGI Innovate
Plc, the parent company, guarantees all outstanding liabilities
that the subsidiary companies are subject to at the end of the
financial year.
The financial statements are presented in UK pounds Sterling
which is the Group's functional and presentational currency, and
all values are rounded to the nearest pound except where indicated
otherwise.
The financial statements have been prepared under the historical
cost convention or fair value where appropriate. The significant
accounting policies adopted are described below.
The preparation of the financial statements in conformity with
UK-adopted IFRS requires the use of certain critical accounting
estimates, it also requires the board to exercise its judgement in
the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity or areas where
assumptions and estimates are significant to the financial
statements are disclosed in Note 1.14. Under reverse acquisition
accounting the comparatives comprise details of the group prior to
the reverse takeover.
1.2 Going concern
The financial statements have been prepared on the assumption
that the Group will continue as a going concern. Under this
assumption, an entity is ordinarily viewed as continuing in
business for the foreseeable future with neither the intention nor
the necessity of liquidation, ceasing trading or seeking protection
from creditors pursuant to laws or regulations. In assessing
whether the going concern assumption is appropriate, the Directors
take into account all available information for the foreseeable
future, in particular for the twelve months from the date of
approval of the financial statements.
The Directors consider the use of the going concern assumption
to be appropriate. At the latest reported date of 31 December 2022,
the Group had cash and cash equivalents totalling GBP234,990 and
net current assets of GBP618,313.
On 8 April 2022, the Group successfully raised a further GBP4.6
million (before expenses) through the exercise of shareholder
warrants and a subscription for new ordinary shares. Post period
end, in January 2023, the Group raised a further GBP418,000 through
a subscription and broker option. These funds were raised to cover
the costs of the DHL acquisition and to fund the ongoing
development of the Group's technologies towards
commercialisation.
Significant progress is being made, with a final design
iteration of its Pareta(R) drive due to be tested during Q2 2023,
in collaboration with major Tier 1 axle supplier Meritor. In
addition, the Group announced in February 2023 that it had signed a
Collaboration Framework Agreement with Tier 1 axle suppliers BRIST
and BASE, representing DGI's first commercial partnership. The
parties will work together to develop and integrate Pareta(R) into
the current range of BRIST and BASE axles to provide a turnkey
offering for commercial and military vehicles globally.
Furthermore, DGI will provide BRIST and BASE its existing vehicle
control and torque vectoring system to allow the partners to
accelerate the penetration of the product in the market sectors
identified, the parties will work together to accelerate activities
in the retrofit and conversion market and DGI will provide UK 'in
country' presence for sales and customer support. Ultimately, the
intention is for DGI to assemble BRIST and BASE axles within the UK
in due course, with the partners to support the establishment of
operations when demand requires. As our first "commercial"
agreement we believe this has scope to result in significant
revenues across a number of different business models. The Group
also continues its work with the UK Ministry of Defence.
In line with all pre-revenue companies, further funding will be
required as the Group moves through the development phase. The
Board have considered a number of detailed cashflow scenarios and
have identified a further funding requirement from mid-2023. As
this falls within 12 months of the date of this report, a material
uncertainty exists in relation to the ability of the Group to
continue as a going concern.
The Directors would note that the previous fundraises in March
2021, April 2022 and January 2023 were predominantly made up of the
same small group of investors, who remain supportive of the Group's
strategy. The Directors therefore believe that a further equity
fundraise would be well supported. The Directors have also
progressed discussions with lenders regarding debt facilities,
should it achieve material customer orders post-testing. Taking
this into account, the Directors have formed the opinion that there
are adequate arrangements in place to enable the settlement of
their financial commitments as and when they fall due.
For this reason, the Directors continue to adopt the going
concern basis in preparing the financial statements. While there
are inherent uncertainties in relation to future events and
ultimately no certainty over the outcome of matters described above
the newly formed group will be a going concern for the next 12
months.
1.3 Financial instruments
Classification and measurement
The Group classifies its financial assets into the following
categories: those to be measured subsequently at fair value (either
through other comprehensive income (FVOCI) or through the profit or
loss (FVPL)) and those to be held at amortised cost.
Classification depends on the business model for managing the
financial assets and the contractual terms of the cash flows.
Management determines the classification of financial assets at
initial recognition. The Group's policy with regard to financial
risk management is set out in note 23. Generally, the Group does
not acquire financial assets for the purpose of selling in the
short term.
The Group's business model is primarily that of "hold to
collect" (where assets are held in order to collect contractual
cash flows). When the Group enters into derivative contracts, these
transactions are designed to reduce exposures relating to assets
and liabilities, firm commitments or anticipated transactions.
Financial Assets held at amortised cost
The classification applies to debt instruments which are held
under a hold to collect business model and which have cash flows
that meet the "Solely Payments of Principal and Interest" (SPPI)
criteria.
Other financial assets are initially recognised at fair value
plus related transaction costs, they are subsequently measured at
amortised costs using the effective interest method. Any gain or
loss on derecognition or modification of a financial asset held at
amortised cost is recognised in the income statement.
Financial Assets held at fair value through other comprehensive
income (FVOCI)
The classification applies to the following financial
assets:
- Equity investments where the Group has irrevocably elected
to present fair value gains and losses on revaluation of
such equity investments, including any foreign exchange
component, are recognised in other comprehensive income.
When an equity investment is derecognised, there is no
reclassification of fair value gains or losses previously
recognised in other comprehensive income to the income
statement. Dividends are recognised in the income statement
when the right to receive payment is established.
Financial Assets held at fair value through profit or loss
(FVPL)
The classification applies to the following financial assets. In
all cases, transaction costs are immediately expensed to the income
statement.
- Debt instruments that do not meet the criteria of amortised
costs or fair value through other comprehensive income.
The Group has a significant proportion of trade receivables
with embedded derivatives for professional pricing. These
receivables are generally held to collect but do not meet
the SPPI criteria and as a result must be held at FVPL.
Subsequent fair value gains or losses are taken to the
income statement.
- Equity investments which are held for trading or where
the FVOCI election has not been applied. All fair value
gains or losses and related dividend income are recognised
in the income statement.
Leases
Lease agreements under which the Group is lessee give rise to
both a right of use asset and a lease liability.
The lease liability is recognised at the present value of future
lease payments under the lease, including any rental incentives,
and discounted at the incremental rate of borrowing of the lessee,
which is determined based on the risk-free rate and margin payable
on borrowing over a term equivalent to the lease. Right of use
assets are initially recognised at the value of the lease
liability.
Lease liabilities are subsequently measured by adjusting the
carrying amount to reflect the interest charge, the lease payments
made and any reassessment or lease modifications. Leases with a
remaining term less than 12 months at the reporting date are
assessed for a period of expected renewal, and where renewal is
expected, the lease liability is remeasured to include the terms of
the expected renewal.
Right of use assets are subsequently depreciated on a
straight-line basis over the shorter of the expected life of the
asset and the lease term, adjusted for any remeasurements of the
lease liability and amendments to associated provisions for
dilapidation on property leases. Right of use assets are
derecognised on handing the leased asset back to the lessor of the
asset.
Lease agreements under which the Group is lessor are assessed to
determine if they represent operating or finance leases. The Group
has one lease agreement under which the Group is lessor, which is
classified as a finance lease, in respect of part of a property for
which the Group is also lessor.
Finance leases of leased assets under which the Group is lessor
give rise to both a finance lease receivable and the partial
de-recognition of the right of use asset in respect of the head
lease of the leased asset. De-recognition of right of use assets
are measured at an amount equal to the lease receivable. Finance
lease receivables are subsequently measured by adjusting the
carrying amount to reflect the interest income, the lease payments
received and any reassessment or lease modifications.
Where a lease has a term of less than 12 months or is of low
value, the Group applies the exemption not to recognise right of
use assets and liabilities for these leases. The Group recognises
the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
Financial liabilities
Borrowings and other financial liabilities (including trade
payables but excluding derivative liabilities) are recognised
initially at fair value, net of transaction costs incurred, and are
subsequently measured at amortised costs.
Impairment of financial assets
A forward-looking expected credit loss (ECL) review is required
for: debt instruments measured at amortised costs. Other financial
assets are held at fair value through other comprehensive income:
loan commitments and financial guarantees not measured at fair
value through profit or loss; lease receivables and trade
receivables that give rise to an unconditional right to
consideration.
As permitted by IFRS 9, the Group applies the "simplified
approach" to trade receivable balances and the "general approach"
to all other financial assets. The general approach incorporates a
review for any significant increase in counter party credit risk
since inception. The ECL reviews including assumptions about the
risk of default and expected loss rates. For trade receivables, the
assessment takes into account the use of credit enhancements, for
example, letters of credit.
1.4 Revenue Recognition
Revenue is measured based on the consideration specified in a
contract with a customer and excludes amounts collected on behalf
of third parties. The group recognises revenue when it transfers
control of a product or service to a customer.
When cash inflows are deferred and represent a financing
arrangement, the fair value of the consideration is the present
value of the future receipts. The difference between the fair value
of the consideration and the nominal amount received is recognised
as interest income.
The nature, timing of satisfaction of performance obligations
and significant payment terms of the group's major sources of
revenue are as follows:
Government grants
Government grants are not recognised at their fair value until
there is reasonable assurance that the group will comply with the
conditions attaching to them and that the grants will be received.
The Group has applied for grant funding to support its research and
development projects focusing on the electric motor and drive and
energy storage technologies. Project costs comprise both capital
purchases for equipment and operational expenditure for labour and
project related supplies.
The Group agree the project costs with the funding body at the
commence of each project and a level of grant income which is
allocated for payment defrayed against the project expenditure
incurred. The Group continue seeking grant funding to finance
ongoing and future research and development activities.
The Group recognises the costs of a project in the period in
which they are incurred when related to qualifying expenditure. The
grant income that is provided against the relevant expenditure is
recognised as income when it is probable that grant income will be
received from the funding body, and at the time when cash payments
have been received in Group's bank accounts. Recognition occurs at
this point as the grant income release is subject to the funding
body's review and approval for grant income payment. The grant in
relation to capital assets is deferred and recognised as income in
the period in which the grant-related asset is in use and being
depreciated. Assets acquired for use in projects are depreciated
following the company/group's depreciation policy.
1.5 Intangible assets other than goodwill
The Group recognises with the statement of financial position,
costs associated with the acquisition of
patents, licences and development costs.
(i) Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives. The
estimated useful life and amortisation method are reviewed at the
end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired
separately are carried at the cost less accumulated impairment
losses.
(ii) Internally generated intangible assets (Patents and
licences and development expenditure)
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally generated intangible asset arising from
development (or from the development phase of an internal project)
is recognised if, and only if, all of the following have been
demonstrated:
- the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
- the intention to complete the intangible asset and use or sell
it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable future
economic benefit;
- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible assets; and
- the ability to measure reliably the expenditure attributed to
the intangible asset during its development.
The amount initially recognised for internally generated
intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Where no internally generated intangible asset can be
recognised, development expenditure is recognised in the statement
of profit and loss in the period in which it incurred.
Subsequent to initial recognition, internally generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses.
Amortisation is provided at the following annual rates:
- Intellectual property - Straight line 5 - 10 years
- Patent applications are capitalised once they have been
successful and are amortised over its useful economic life of 10
years.
Subsequent development expenditure which meets the criteria for
capitalisation as an intangible asset is
capitalised in the specific asset to which it relates. All other
expenditure is recognised in profit or loss.
(iii) Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no
further economic benefits are expected from use or disposal. Gains
or losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds and
the carrying amount of the asset, are recognised in profit or loss
when the asset is derecognised.
(iv) Impairment of intangible assets
At the end of each reporting period the group reviews the
carrying amounts of its intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any).
Intangible assets with indefinite useful economic lives and
intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication
that the asset may be impaired.
The recoverable amount is considered to be the higher of fair
value less costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated
as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset in prior years. A
reversal of an impairment loss is recognised immediately in profit
or loss, unless the relevant asset is carried at a revalued amount,
in which case the reversal of the impairment loss is treated as a
revaluation increase.
1.6 Property, plant and equipment
Property, plant and equipment are initially measured at cost and
subsequently measured at cost or valuation, net of depreciation and
any impairment losses.
Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives on the following bases:
- Improvements to leasehold property - Straight line between
over 5 years
- Plant and equipment - Straight line between 3 and 10 years
- Computers & Office equipment - Straight line between 3 and
5 years
- ALD & major equipment - Straight line over 15 years
- Right of use asset - Straight line over the lease term of 10
years
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying value of the asset, and is recognised in the income
statement.
1.7 Investments in subsidiaries
Interests in subsidiaries, are initially measured at cost and
subsequently measured at cost less any accumulated impairment
losses. The investments are assessed for impairment at each
reporting date and any impairment losses or reversals of impairment
losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the parent company.
Control is the power to govern the financial and operating policies
of the entity so as to obtain benefits from its activities.
1.8 Impairment of non-current, tangible and intangible
assets
At each reporting end date, the group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment
annually, and whenever there is an indication that the asset may be
impaired. Recoverable amount is the higher of fair value less costs
to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a
revaluation increase.
1.9 Consolidation
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the day that such control ceases.
The financial statements of the subsidiaries are prepared for the
same reporting period as the parent company, using consistent
accounting policies. All intra-group balances, income and expenses
resulting from intra-group transactions are eliminated in full.
The following wholly owned entities are included in the
consolidated financial statements, the registered office of all
entities is that of the parent company.
- Deregallera Holdings Ltd
- Deregallera Ltd
- Leading Technology Developments Ltd
1.10 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and at bank and
other short-term deposits. They are stated at carrying value which
is deemed to be fair value.
1.11 New Standards and Interpretations
The IASB and IFRIC have issued the following standards and
interpretations which are in issue but not in force at 31 December
2022:
Description Effective date
Newly effective standards for 1 January 2022
to 31 December 2022
Amendments to IFRS 17 1 January 2023
Disclosure of accounting policies (amendments 1 January 2023
to IAS 1 and IFRS practice statement 2)
Definition of accounting estimate (amendments 1 January 2023
to IAS 8)
Deferred tax related to assets and liabilities 1 January 2023
arising from a single transaction - amendments
to IAS 12 income taxes)
IFRS 16 - Leases - amendments regarding the 1 January 2024
classification of liabilities
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements other than in terms of
presentation.
1.12 Share-based payments
The Group operates a number of equity-settled share-based
compensation plans, under which the entity receives services from
employees or suppliers as consideration for equity instruments
(options) of the Group. The fair value of the employee or supplier
services received in exchange for the grant of options is
recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the options
granted:
- including any market performance conditions;
- excluding the impact of any service and non-market performance
vesting conditions (for example, profitability, sales
growth targets and remaining an employee of the entity
over a specified time period); and
- excluding the impact of any non-vesting conditions (for
example, the requirement of employees to save).
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
is recognised over the vesting period, which is the period over
which all of the specified vesting conditions are to be satisfied.
At the end of each reporting period, the entity revises its
estimates of the number of options that are expected to vest based
on the non-marketing vesting conditions. It recognises the impact
of the revision to original estimates, if any, in the profit or
loss statement, with a corresponding adjustment to equity.
When the options are exercised, the Group issues new shares. The
proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share
premium when the options are exercised.
The Company has issued warrants giving the holder the right to
acquire shares in the Group at a fixed price in the future, should
the holders decide to exercise them. At the date of issue the
warrants are recognised at fair value, which has been calculated
using an appropriate pricing model.
1.13 Taxation
Current tax, including UK corporation tax and foreign tax, is
provided at amounts expected to be paid (or recovered) using the
tax rates and laws that have been enacted or substantially enacted
by the balance sheet date.
Deferred tax is recognised, using the liability method, in
respect of temporary differences between the carrying amount of the
Group's assets and liabilities and their tax base.
Deferred tax liabilities are offset against deferred tax assets.
Any remaining deferred tax asset is recognised only when, on the
basis of all available evidence, it can be regarded as probable
that there will be suitable taxable profits, within the same
jurisdiction, in the foreseeable future against which the
deductible temporary difference can be utilised.
Deferred tax is determined using tax rates that are expected to
apply in the periods in which the asset is realised or liability
settled, based on tax rates and laws that have been enacted or
substantially enacted by the balance sheet date.
Current and deferred tax are recognised in the income statement,
except when the tax relates to items charged or credited directly
in equity, in which case the tax is also recognised in equity.
1.14 Sources of estimation uncertainty
The preparation of financial statements requires the use of
estimates and assumptions that affect the reported amount of assets
and liabilities at the date of the financial statements and the
reporting amount of income and expenses during the period. Although
these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately may differ from
those estimates.
Share based payments
The share-based payment charge is calculated using the
Black-Scholes model which requires the estimation of share price
volatility, expected life and the bid price discount. Please see
note 24 for further detail.
Provision for dilapidations
The Group recognises a provision for dilapidations which exist
at the reporting date. Estimates applied in determining provisions
include assessment of the likelihood of a claim being successful
and the actual amount and timing of future cash flows, which are
dependent on future events. Management reviews these provisions at
each reporting date to ensure they are measured at the current best
estimate of the expenditure required to settle the obligation and
discounted over the period. Any difference between the amounts
previously recognised and the current estimate is recognised
immediately in the statement of comprehensive income.
Impairment of intangible assets
The Group reviews whether intangible assets are impaired on an
annual basis, or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
This comprises an estimation of the fair value less cost to sell
and the value in use of the assets. Please see note 13 for further
detail.
2. SEGMENTAL REPORTING
The Group has two distinct areas of focus (Enhanced Drive
Technology and Enhanced Battery Technology), and management have
identified the Group's series of Pareta(R) electric drives and hard
carbon anode materials as its two cash generating units (CGUs).
However, as the Group is currently in the development phase and
effectively operates as one operating unit under IFRS 8, segmental
information is not available or presented within these
accounts.
3. REVERSE ACQUISITION
On 8 April 2022, the Company acquired DHL via a reverse takeover
which resulted in the Company becoming the ultimate holding company
of the Group. The transaction was accounted for in accordance with
the principles of reverse acquisition accounting, since it did not
meet the definition of a business combination under IFRS 3. In
accordance with IFRS 2, a share-based payment expense equal to the
deemed cost of the acquisition less the fair value of the net
assets of the Company at acquisition was recognised. The
comparatives within the consolidated statement of financial
position, the consolidated statement of comprehensive income,
consolidated statement of changes in equity and the consolidated
cashflow statement represent that of the legal subsidiary and
accounting acquirer, DHL. In the consolidated statement of
financial position, the share capital and premium as at 31 December
2021 is that of the Company (DG Innovate Plc) with the reverse
acquisition reserve representing the difference between the deemed
cost of the acquisition and the net assets of the Company as at 7
April 2022. The consolidated statement of comprehensive income for
the period represents the results of both DG Innovate Plc and DHL.
For more details on the key terms of the reverse takeover, see note
26.
The basis of consolidation is detailed in note 1.9. The results
for the period under review have been consolidated from 8 April
2022, the date of acquisition. Under reverse acquisition accounting
the comparatives comprise details of the group prior to the reverse
takeover, with the exception of equity.
4. OPERATING LOSS
The operating loss is stated after charging/(crediting):
2022 2021
GBP GBP
Research and development costs 240,175 296,046
Government grants (433,989) (938,818)
Depreciation 149,942 104,577
Amortisation 414,656 414,653
5. EMPLOYEES
Number of employees
The average monthly number of employees (including Directors)
during the period was:
2022 2021
Number Number
Administration 3 4
Directors 8 3
Engineering 14 14
25 21
2022 2021
GBP GBP
Employment costs
Wages and salaries (including benefits
in kind) 990,382 320,531
Social security costs 94,490 18,212
Pension costs 107,550 105,689
Share based payment 338,864 -
1,531,286 444,432
Included in employment costs above are Directors' accrued
salaries amounting to GBP96,249 (2021: GBPNil).
Included in the total employees costs above, GBP593,153 (2021:
GBP684,093) was capitalised in relation to internally generated
development costs.
6. AUDITOR'S REMUNERATION
2022 2021
GBP GBP
Audit services - group 68,000 70,000
Audit services - company 5,400 5,900
Total fees 73,400 75,900
7. DIRECTORS' REMUNERATION
2022 2021
GBP GBP
Aggregate emoluments 783,921 427,736
Pension costs 61,460 35,000
Share based payments 244,538 1,517,628
1,089,919 1,980,364
Remuneration for the highest paid director was GBP170,248 (2021:
GBP225,000). The amount included within accruals as at 31 December
2022 includes remuneration accrued during 2022 but remaining unpaid
as at 31 December 2022 of GBP96,249 (2021: GBP84,000).
During the period, retirement benefits are accruing to two
Directors (2021: retirement benefits are accruing to two
Directors).
8. FINANCE INCOME AND COSTS
2022 2021
GBP GBP
Bank interest - 230
Total finance income - 230
Finance costs (67,873) (113,133)
Net finance cost 67,873 112,903
9. TAXATION
No corporation tax charge arises in respect of the year due to
the trading losses incurred. The Group has surplus management
expenses available to carry forward and use against trading profits
arising in future periods of approximately GBP9,536,000 (2021:
GBP8,041,000). In addition, the Company has non-trading loan
relationship debits to carry forward to offset against future
non-trading loan relationship credits of approximately
GBP18,917,000 (2021: GBP18,917,000).
2022 2021
GBP GBP
Current tax - -
Loss on ordinary activities before
taxation (7,868,376) (700,138)
Loss on ordinary activities before
taxation multiplied by average effective
rate of corporation tax of 19% (2021:
19%) (1,494,992) (133,026)
Effects of:
Non-deductible expenses 1,032,303 29,497
Short term timing differences 13,022 2,029
Other adjustments - non-taxable gains - -
Tax losses upon which no deemed tax
asset is recognised 420,738 140,590
Research and development tax credit (159,935) (94,363)
Current tax (188,864) (55,273)
Group
A deferred tax asset of approximately GBP1,779,983 (2021:
GBP702,091) in respect of losses has not been recognised due to the
timing regarding the availability of future profits against which
the losses of the Group could be offset.
Company
A deferred tax asset of approximately GBP792,913 (2021:
GBP531,771) in respect of losses has not been recognised due to the
timing regarding the availability of future profits against which
the losses of the Group could be offset.
The UK corporation tax at the standard rate for the year is
19.0% (2021: 19.0%). The main UK corporation tax rate for the
current and prior year has remained at 19%. No changes in the UK
rate of tax were substantially enacted by the year end.
10. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the
loss on ordinary activities after taxation of GBP7,679,512 (2021:
GBP644,865) and on the weighted average number of ordinary shares
in issue of 7,032,070,240 (2021: 1,765,828,368) in issue. The basic
loss per share is 0.11p (2021: 0.04p loss per share).
In order to calculate the diluted earnings per share, the
weighted average number of ordinary shares in issue is adjusted to
assume conversion of all dilutive potential ordinary shares
according to IAS 33. Dilutive potential ordinary shares include
convertible loan notes and share options granted to Directors and
consultants where the exercise price (adjusted according to IAS 33)
is less than the average market price of the Group's ordinary
shares during the period. However, due to the Group making a loss
in the year (and prior year) any dilutive potential ordinary shares
are disregarded and diluted earnings per share is equal to basic
earnings per share.
11. PROPERTY, PLANT AND EQUIPMENT
GROUP
Improvements Plant & Right of Total
to leasehold equipment use asset
GBP GBP GBP GBP
Cost
At 1 January 2022 314,294 1,511,755 311,012 2,137,061
Additions at RTO - 12,844 85,754 98,598
Additions in the
year - 14,122 62,441 76,563
Disposals - (170,626) (85,754) (256,380)
At 31 December 2022 314,294 1,368,095 373,453 2,055,842
Depreciation
At 1 January 2022 312,021 957,614 7,775 1,277,410
Charge at RTO - 1,900 16,153 18,053
Charge in the period 2,273 96,864 50,805 149,942
Eliminated on disposal - (81,530) (33,124) (114,654)
At 31 December 2022 314,294 974,848 41,609 1,330,751
Carrying value
At 31 December 2022 - 393,247 331,844 725,091
At 31 December 2021 2,273 554,141 303,237 859,651
Improvements Plant & Right of Total
to leasehold Equipment use asset
GBP GBP GBP GBP
Cost
At 1 January 2021 314,294 1,431,663 - 1,745,957
Additions - 80,092 311,012 391,104
Disposals - - - -
At 31 December 2021 314,294 1,511,755 311,012 2,137,061
Depreciation
At 1 January 2021 309,861 862,972 - 1,172,833
Charge in the period 2,160 94,642 7,775 104,577
Eliminated on disposal - - - -
At 31 December 2021 312,021 957,614 7,775 1,277,410
Carrying value
At 31 December 2021 2,273 554,141 303,237 859,651
At 31 December 2020 4,433 568,691 - 573,124
COMPANY
Office Motor Total
Equipment Vehicles
GBP GBP GBP
Cost
At 1 January 2022 12,844 85,754 98,598
Additions 3,068 - 3,068
Disposals (12,334) (85,754) (98,088)
At 31 December 2022 3,578 - 3,578
Depreciation
Depreciation at 1 January
2022 1,900 16,152 18,052
Charge in the period 4,376 16,972 21,348
Eliminated on disposal (4,938) (33,124) (38,062)
Depreciation at 31 December
2022 1,338 - 1,338
Carrying value
At 31 December 2022 2,240 - 2,240
At 31 December 2021 10,944 69,602 80,546
Office Motor Total
Equipment Vehicles
GBP GBP GBP
Cost
At 1 January 2021 - - -
Additions 12,844 85,754 98,598
At 31 December 2021 12,844 85,754 98,598
Depreciation
Depreciation at 1 January - - -
2021
Charge in the period 1,900 16,152 18,052
Depreciation at 31 December
2021 1,900 16,152 18,052
Carrying value
At 31 December 2021 10,944 69,602 80,546
At 31 December 2020 - - -
12. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
On 8 April 2022, the Company acquired the DHL group via a
reverse takeover which resulted in the Company becoming the
ultimate holding company of the Group. The DHL sub-group consists
of the following wholly owned companies, which were all
incorporated in England and Wales:
- Deregallera Holdings Ltd
- Deregallera Ltd
- Leading Technology Developments Ltd
Investments in subsidiaries are initially measured at cost and
subsequently measured at cost less any accumulated impairment
losses. This includes GBP32,490,188 for the DHL group, which is
eliminated from the Group's balance sheet on consolidation. As per
IAS 36 (Impairment of Assets), at the end of each reporting date
the Group must assess whether the amount carried for investments in
subsidiaries may be impaired based on internal and external
triggers, to ensure that assets are carried at no more than their
recoverable amount. Any impairment losses or reversals of
impairment losses are recognised immediately in profit or loss.
The Directors have estimated the associated recoverable amount
as equal to that of the value in use determined for the Group's
intangible assets. This figure is in excess of the carrying value
of the investments in subsidiaries, and the Directors therefore
believe the value of these assets is not impaired at 31 December
2022. This accounting treatment resulted in an impairment loss of
GBPNil (2021: GBPNil).
Please refer to note 13 in these accounts for further
detail.
Total
GBP
Cost
At 1 January 2022 -
Additions 32,490,188
At 31 December 2022 32,490,188
13. INTANGIBLE ASSETS
GROUP - CURRENT YEAR
Goodwill Intellectual Intellectual Total
Property Property
Developed Under development
GBP GBP GBP GBP
Cost
At 1 January 2022 263,156 3,502,109 2,455,046 6,220,311
Additions - - 848,443 848,443
Disposals - - - -
At 31 December 2022 263,156 3,502,109 3,303,489 7,068,754
Amortisation
Amortisation at 1 January
2022 263,156 1,817,350 - 2,080,506
Charge in the period - 414,656 - 414,656
Eliminated on disposal - - - -
Depreciation at 31 December
2022 263,156 2,232,006 - 2,495,162
Carrying value
At 31 December 2022 - 1,270,103 3,303,489 4,573,592
At 31 December 2021 - 1,684,759 3,303,489 4,139,805
GROUP - PREVIOUS YEAR
Goodwill Intellectual Intellectual Total
Property Property
Developed Under development
GBP GBP GBP GBP
Cost
At 1 January 2021 263,156 3,502,109 1,598,743 5,364,008
Additions - - 856,303 856,303
Disposals - - - -
At 31 December 2021 263,156 3,502,109 2,455,046 6,220,311
Amortisation
Amortisation at 1 January
2021 263,156 1,402,697 - 1,665,805
Charge in the period - 414,653 - 414,653
Eliminated on disposal - - - -
Depreciation at 31 December
2021 263,156 1,817,350 - 2,080,506
Carrying value
At 31 December 2021 - 1,684,759 2,455,046 4,139,805
At 31 December 2020 - 2,099,412 1,598,743 3,698,155
No intangible assets were held by the Parent Company.
Upon review during the preparation of the audited accounts, an
additional GBP700,000 of development costs have been recognised and
capitalised for the year end 31 December 2021, compared with the
figure presented in the interim accounts for the period ended 30
June 2022.
Intangible assets, both internally generated and acquired, are
recognised as per note 1.5 of these accounts. Notably, given the
Group's current status as a research and development business, the
internally generated intangibles assets are initially recognised as
the sum of development expenditure on meeting a number of
commercialisation criteria (as set out in note 1.5). While
management have identified the Group's series of Pareta(R) electric
drives and hard carbon anode materials as its two cash generating
units (CGUs), given the pre-revenue status of the Group intangibles
are not yet individually allocated to either.
As per IAS 36 (Impairment of Assets), at the end of each
reporting date the Group must assess whether its intangible assets
may be impaired based on internal and external triggers, to ensure
that assets are carried at no more than their recoverable amount.
Any impairment losses or reversals of impairment losses are
recognised immediately in profit or loss.
The determination of whether the Group's intangible assets are
impaired requires an assessment of their recoverable amount, being
the higher of fair value less costs of disposal, and value in use.
We have assessed fair value less costs to sell, based on the
enterprise value of the Group at the year-end date, and determined
that the value in use is higher than the enterprise value.
To assess value in use, the estimated future cash flows from
each CGU are discounted to their present value using pre-tax
discount rates of 12.0 - 14.5% (2021: N/A), reflecting current
market assessments of the time value of money and the risks
specific to these assets. The key assumptions used in respect of
value in use calculations are those regarding growth rates and
anticipated changes to revenues and costs during the period covered
by the calculations, based upon management's expectation.
The estimated cash flows for each segment are derived from
discrete forecasts to 31 December 2028, extrapolated for a further
four years assuming medium-term growth rates and assumptions of
market share, and long-term growth rates of 2.5 - 3.0% (2021: N/A),
which management considers appropriate.
The aggregate value in use calculated for the two identified
CGUs as at 31 December 2022 was in excess of the carrying value of
the intangible assets, and the Directors therefore believe the
value of these assets is not impaired at 31 December 2022. This
accounting treatment resulted in an impairment loss of GBPNil
(2021: GBPNil). The carrying value of the intangible assets of the
two identified CGUs as at 31 December 2022 are Enhanced Drive
Technology GBP2,292,986 (2021: GBP2,041,581) and Enhanced Battery
Technology GBP2,280,606 (2021: GBP2,098,224).
14. TRADE AND OTHER RECEIVABLES
GROUP 2022 2021
GBP GBP
Prepayments 129,159 30,608
Other taxes and social security 706,222 85,269
Other debtors 188,171 1,400
1,023,552 117,277
Included in other debtors are amounts repayable of GBP188,036
(2021: GBP127,702) by certain Directors in respect of incorrectly
awarded bonuses.
Other taxes and social security comprise the tax suffered on the
bonuses noted above.
COMPANY 2022 2021
GBP GBP
Prepayments 70,207 20,000
Other taxes and social security 394,158 145,019
Other debtors 188,036 739,636
Amounts due from subsidiary undertakings 3,588,260 -
4,240,661 904,655
Amounts due from subsidiary undertakings comprise amounts loaned
and interest accrued, of GBP2,904,740 (2021: GBPnil) by DG Innovate
Plc to Deregallera Holdings Ltd and management fees (net of VAT) of
GBP569,600 (2021: GBPnil) charged to three subsidiaries in the
year. The balance of loan and interest accrued advanced by the
Company to Deregallera Holdings Ltd in previous year prior to the
RTO is GBP611,934 included in Other debtors. The loan repayment has
been deferred and the amount outstanding includes accrued interest.
Deregallera Holdings Ltd has provided a legal mortgage by way of a
fixed and floating charge over all its property and assets. The
loan attracts an annual 6% interest charge.
Other debtors are amounts repayable of GBP188,036 (2021:
GBP127,702) by certain Directors in respect of incorrectly awarded
bonuses. Further details are disclosed on page 28.
Other taxes and social security comprise the tax suffered on the
bonuses noted above and VAT refund for the period up to 31 December
2022.
15. TRADE AND OTHER PAYABLES
GROUP 2022 2021
GBP GBP
Trade payables 204,356 234,626
Accruals and deferred
income 231,290 55,681
Loans and other borrowings 83,349 715,249
Lease liabilities 59,839 49,600
Other creditors 61,395 95,339
640,229 1,150,495
COMPANY
2022 2021
GBP GBP
Trade payables 159,043 131,959
Accruals and deferred income 168,654 605,207
327,697 737,166
Other unsecured borrowings included GBP350,000 advanced in 2021
under the UK Government's CBILS loan scheme. The loan is for a
60-month period with annual fixed interest of between 10.10% and
10.20%. The first year's interest is paid by the UK government and
amounts to GBP35,600 for the element included in these financial
statements, this has been included in the income statement as grant
income.
16. NON-CURRENT LIABILITIES (GROUP)
2022 2021
GBP GBP
Lease liabilities 286,443 256,803
Loans and other borrowings 185,393 880,675
Deferred income 24,024 10,625
495,860 1,148,103
Loans and other borrowings in the previous year include loans
with accrued interest of GBP639,930 from two shareholders of
Deregallera Holdings Ltd. These loans were secured by way of a
legal mortgage of fixed and floating charges over all property and
assets of Deregallera Holdings Ltd. The loans and accrued interest
were fully repaid in April 2022 post RTO. The legal charges have
been removed.
17. PROVISION FOR LIABILITIES
Under the terms of the leases for the Group's premises, the
Group has an obligation to return the property in a specified
condition at the end of the lease term. The Group provides for the
estimated fair value of the cost of any dilapidations. Management
reviews these provisions at each reporting date to ensure they are
measured at the current best estimate of the expenditure required
to settle the obligation. Any difference between the amounts
previously recognised and the current estimate is recognised
immediately in the statement of comprehensive income.
2022 2021
GBP GBP
Provision for dilapidations 30,046 50,000
Provisions are classified based on the amounts that are expected
to be settled within the next 12 months and after more than 12
months from the reporting dates, as follows:
2022 2021
GBP GBP
Non-current liabilities 30,046 50,000
18. LEASE LIABILITY (GROUP)
2022 2021
GBP GBP
Maturity analysis - contractual
undiscounted cashflows:
Within one year 59,839 49,600
In two to five years 247,661 198,400
In over five years 38,782 58,403
Total liabilities 346,282 306,403
There are no leases in the parent company.
19. SHARE CAPITAL
Allotted, called up and
fully paid
Ordinary Shares of 0.1p
each
No GBP
At 1 January 2021 202,610,469 202,610
Issue of shares 1,826,853,333 1,826,854
At 31 December 2021 2,029,463,802 2,029,464
At 1 January 2022 2,029,463,802 2,029,464
Issue of shares 6,813,251,305 6,813,251
At 31 December 2022 8,842,715,107 8,842,715
The ordinary shares shall confer upon the holders the right to
receive dividends and other distributions and participate in the
income or profits of the Group. On 8 April 2022 the Group announced
the completion of the reverse acquisition of DHL for an initial
consideration of GBP32.4 million satisfied by the issue to the DHL
Shareholders of 5,397,451,305 Initial Consideration Shares at a
deemed issue price of 0.6 pence per Ordinary Share.
20. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
GROUP
2022 2021
GBP GBP
Net loss for the year after tax (7,679,512) (644,865)
(Increase)/decrease in debtors (992,206) 1,518
(Decrease)/increase in creditors within
one year 61,024 443,599
Reverse takeover expenses 5,094,074 -
Provisions (23,543) (50,000)
Taxation - (58,981)
Share based payments 338,864 -
Finance income - (230)
Finance costs 67,873 113,133
Amortisation 414,656 414,653
Depreciation 149,942 104,577
Losses on disposal of fixed assets 90,895 -
Write-off of share capital - 51
------------ ----------
Net cash (outflow) / inflow from
operating activities (2,477,933) 323,455
COMPANY
2022 2021
GBP GBP
Net loss for the year after tax (1,549,027) (3,903,459)
(Increase) in debtors (3,336,006) (904,655)
(Decrease) in creditors within one
year (409,469) (115,214)
Depreciation 21,348 18,052
Loss on disposal of property, plant 60,026 -
and equipment
Finance costs 1,933 -
Share based payments 338,864 2,042,335
Net cash outflow from operating activities (4,872,331) (2,862,941)
21. NET DEBT RECONCILIATION
This section sets out an analysis of net debt and the movements
in net debt for each of the periods presented.
GROUP
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
Cash and cash equivalents 234,990 57,454
Leases and borrowings (615,024) (1,902,327)
Net debt (33,750) (1,538,470)
Borrowings Cash and Total
cash equivalents
GBP GBP GBP
Net debt as at 1 January
2022 (1,595,924) 57,454 (1,538,470)
Financing cash flows 1,327,184 177,536 1,504,720
Net debt as at 31 December
2022 (268,740) 234,990 (33,750)
COMPANY
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
Cash and cash equivalents 156,193 686,400
Net debt 156,193 686,400
Borrowings Cash and Total
GBP cash equivalents GBP
GBP
Net debt as at 1 January
2021 (536,300) 468 (535,832)
Financing cash flows 197,436 685,932 883,368
Share based payments 338,864 - 338,864
Net debt as at 31 December
2021 - 686,400 686,400
Financing cash flows (530,207) (530,207)
Net debt as at 31 December
2022 - 156,193 156,193
22. CASH & CASH EQUIVALENTS
GROUP
2022 2021
GBP GBP
Cash at bank and in hand 234,990 57,454
COMPANY
2022 2021
GBP GBP
Cash at bank and in hand 156,193 686,400
23. FINANCIAL INSTRUMENTS
The Group's financial instruments comprise cash and cash
equivalents, trade receivables and payables and leases, which arise
directly from its operations. It is, and has been throughout the
period under review, the Group's policy to ensure that there is no
trading in financial instruments. The main purpose of these
financial instruments is to finance the Group's operations.
Categories of Financial Instruments (Group)
2022 2021
GBP GBP
Financial Assets at amortised
cost
Cash and cash equivalents 234,990 57,454
Other debtors 188,171 48,205
423,161 105,659
Financial Liabilities at amortised
cost
Trade and other payables 640,889 1,200,495
640,889 1,200,495
Net Financial Assets/(Liabilities) (214,728) (1,094,836)
Categories of Financial Instruments (Company)
2022 2021
GBP GBP
Financial Assets at amortised
cost
Cash and cash equivalents 156,193 686,400
Other debtors 3,493,143 739,636
3,649,336 1,426,036
Financial Liabilities at amortised
cost
Trade and other payables 327,697 737,166
Convertible loan notes - -
327,697 737,166
Net Financial Assets/(Liabilities) 3,321,649 688,870
Financial Assets and Liabilities
Financial assets and financial liabilities are recognised on the
Group's Statement of Financial Position when the Group becomes
party to the contractual provisions of the instrument.
Credit Risk
The Group trades only with third parties it recognises as being
creditworthy. In addition, receivable balances are monitored on an
ongoing basis.
Financial Risk Factors
The Group's activities expose it to liquidity risk. The Group's
overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the Group's financial performance.
Foreign exchange Risk
The Group's activities expose it to foreign exchange risk
meaning it will be exposed to various currencies other than UK
pound sterling. The Group seeks to reduce this risk by regularly
reviewing its projects to identify where foreign exchange risk
exists. The Group will seek to mitigate any identified risks of
adverse currency fluctuations through the use of financial
instruments where necessary to secure favourable, predetermined
rates of exchange.
Liquidity Risk
The Group's borrowing exposes it to liquidity risk. Management's
objectives are now to manage liquid assets in the short term
through closely monitoring costs. The Group has borrowing
facilities that require repayment and the interest is on a fixed
basis limiting the risk exposure.
Fair Values of Financial Assets and Liabilities
The Directors consider that the fair value of the Group's
financial assets and liabilities are not considered to be
materially different from their book values.
24. SHARE OPTIONS AND WARRANTS
Movement in the number of options and warrants outstanding and
their related weighted average exercise price are as follows:
At 31 December 2022 At 31 December 2021
Number of Weighted average exercise Number of Weighted average exercise price
Options & price per share Options & per share
Warrants Warrants
At 1 January 2,983,297,500 0.25p 73,787,500 2.5p
Granted 1,900,233,137 0.26p 2,910,110,000 0.3p
Exercised (830,800,000) 0.25p - -
Expired or waived (115,203,727) 0.10p (600,000) 280.0p
------------------- -------------- ------------------------------- -------------- --------------------------------
At 31 December 3,937,526,910 0.33p 2,983,297,500 0.3p
------------------- -------------- ------------------------------- -------------- --------------------------------
The weighted average remaining contractual life of options as at
31 December 2022 was 9 years (2021: 9 years).
The following share options have been granted by the Company and
are outstanding as at the year-end of 31 December 2022:
Date Number Granted Exercised Lapsed/ Number Weighted Expiry
of grant of ordinary during year during waived during of ordinary average date
shares under year year shares under exercise
option option at price
at 1 January 31 December
2022 2022
30/03/2017 4,000,000 - - - 4,000,000 0.1p 29/03/2027
30/03/2017 5,875,000 - - - 5,875,000 1p 29/03/2027
30/03/2017 2,937,500 - - - 2,937,500 2p 29/03/2027
08/10/2020 60,375,000 - - - 60,375,000 0.1p 07/10/2030
18/03/2021 1,289,310,000 - - (40,000,000) 1,249,310,000 0.1p 18/03/2031
08/04/2022 - 563,802,023 - (75,203,727) 488,598,296 0.1p 13/04/2032
12/10/2022 - 690,790,814 - - 690,790,814 0.1p 12/10/2032
Total 1,362,497,500 1,254,592,837 - (115,203,727) 2,501,886,610 0.1p
------------ -------------- -------------- ---------- --------------- -------------- ---------- -----------
All options outstanding at the year-end are exercisable at that
date.
The following warrants have been granted by the Company:
Date Number Granted Exercised Lapsed Number Weighted Exercise
of grant of warrants during year during year during of warrants average date
at year at 31 December exercise
1 January 2022 price
2022
18/03/2021 830,800,000 - (830,800,000) - - 0.25p 18/03/2026
18/03/2021 790,000,000 - - - 790,000,000 0.5p 18/03/2026
08/04/2022 - 645,640,300 - - 645,640,300 1.0p 08/04/2023
Total 1,620,800,000 645,640,300 (830,800,000) - 1,435,640,300 0.72p
------------ -------------- ------------- -------------- -------- ---------------- ---------- -----------
In April 2022 the Group raised (before expenses) GBP2,550,000 by
way of a subscription for 510,000,000 new ordinary shares at a
price of 0.5 pence each. Further, the Group raised an additional
GBP2,077,000 following the irrevocable exercise of 830,800,000
Warrants (0.25p). Participants in the Fundraise were issued
warrants and the group was to allot a total of 670,400,000 Warrants
(1p) on the basis that: (i) one Warrant (1p) was issued to each
Subscriber for every two Subscription Shares issued to each
Subscriber, resulting in the issue of 255,000,000 Warrants (1p);
and (ii) one Warrant (1p) will be issued to each holder of Warrants
(0.25p) for every two Warrants (0.25p) exercised pursuant to the
Warrant Exercise Notices, which resulted in the issue of
415,400,000 Warrants (1p). During settlement only 645,640,300
warrants were taken up out of the 670,400,000.
The fair value of equity settled share options and warrants
granted is estimated at the date of grant using a Black-Scholes
option pricing model, taking into account the terms and conditions
upon which the options were granted. The following table lists the
inputs to the model:
Warrants Options Options Options Options Options
Date of grant 26 Feb 8 April 8 April 18 Mar 18 Mar 18 Oct
2021 2022 2022 2021 2021 2020
Expected
volatility 31% 62% 62% 31% 31% 50%
Expected 5 years 10 years 8 years 2 years 10 years 10 years
life
Risk-free
interest
rate 2.00% 4.40% 1.76% 2.00% 2.00% 2.50%
Expected - - - - - -
dividend
yield
Possibility - - - - - -
of ceasing
employment
before vesting
Fair value
per option/warrant 0.001p 0.12p 0.22p 0.10p 0.15p 0.6p
The expense recognised by the Group for share-based payments
during the year ended 31 December 2022 was GBP338,864 (2021:
GBPNil).
The average volatility is used in determining the share-based
payment expense to be recognised in the period. This was calculated
by reference to the standard deviation of the share price over the
preceding 12-month period.
25. RELATED PARTY TRANSACTIONS (GROUP)
The following share options were held by the directors during
the year:
Director Date Held at Surrendered Granted Held at Exercise
of grant 1 January during during the 31 December price
2022 the year Period 2022
-------------- ----------- ------------- ----------- ------------- ------------- --------
C Theis 08/10/2020 42,500,000 - - 42,500,000 GBP0.001
18/03/2021 739,520,000 - - 739,520,000 GBP0.001
08/04/2022 - 72,048,463 78,052,051 6,003,588 GBP0.001
N Fitzpatrick 18/03/2021 162,820,000 - - 162,820,000 GBP0.001
J Allardyce 18/03/2021 62,500,000 - - 62,500,000 GBP0.001
08/04/2022 - - 156,105,002 156,105,002 GBP0.001
M Boughtwood 08/04/2022 - - 156,105,002 156,105,002 GBP0.001
P Tierney 12/10/2022 - - 690,790,814 690,790,814 GBP0.001
------------- ----------- ------------- -------------
Total 1,007,340,000 72,048,463 1,081,052,869 2,016,344,406
------------- ----------- ------------- -------------
Included in other debtors are balances due from the following
Directors and former directors, who served during the period under
review, in respect of bonuses incorrectly awarded during the year
and deemed to be held in trust. Christopher Theis GBP137,369 (2021:
GBP37,021), Brent Fitzpatrick GBP50,667 (2021: GBP27,005), Jack
Allardyce GBPNil (2021: GBP36,651), Nicholas Tulloch GBPNil (2021:
GBP27,025).
Included in accruals is a balance of GBPNil (2021: GBP70,000)
reimbursed to Christopher Theis, a former director of the Group,
and who served during the period under review in respect of IT
support provided by his son Elliot Theis.
COMPANY
During the period Gareth Boughtwood (son of Martin Boughtwood, a
director in the Group) was paid GBP5,000 (30 June 2021: GBPNil; 31
December 2021: GBPNil) in respect of IT services.
Included in other debtors is a balance of GBP3,193,531 (2021:
GBP611,934) due from Deregallera Ltd, a wholly owned subsidiary, in
respect of monies loaned between the entities. The balance includes
capital and interest charged at a rate of 6%.
Group Key Management
Key management personnel, representing those Executive Directors
who served throughout the year and 1 (2021: 0) other executives,
received compensation in the form of short-term employee benefits
and equity compensation benefits which totalled GBP898,334 for the
year ended 31 December 2022 (2021: GBP1,632,554). Total
remuneration of key management personnel is analysed as
follows:
2022 2021
GBP GBP
Wages and salaries 538,374 350,000
Pensions 52,710 35,000
Benefits in kind 38,257 6,281
Share option charge 268,993 1,241,273
Total 898,334 1,632,554
26. REVERSE ACQUISITION
On 8 April 2022 the Company announced the completion of the
reverse acquisition of DHL for an initial consideration of GBP32.4
million satisfied by the issue to the DHL Shareholders of
5,397,451,305 Initial Consideration Shares at a deemed issue price
of 0.6 pence per Ordinary Share.
Further conditional deferred consideration of up to GBP5.4
million, to be satisfied by the issue of up to 895,610,844 Deferred
Consideration Shares on the first anniversary of completion, will
become payable should DHL sign one or more supply agreements for
the provision of their motor technology with certain defined
customers prior to this date with a combined potential value of
GBP5.0 million or more.
On acquisition, the assets, liabilities and contingent
liabilities of subsidiaries are measured at their fair values at
the date of acquisition. Any excess cost of acquisition over net
fair values of the identifiable assets, liabilities and contingent
liabilities acquired is recognised as an expense under IFRS 2
equity settled transactions. Any deficiency of the cost of
acquisition below the net fair values of the identifiable assets,
liabilities and contingent liabilities acquired is credited to the
Statement of Comprehensive Income in the year of acquisition.
Due to the Company being a non-operating entity which was not
classified as a business under IFRS 3 Business Combinations ("IFRS
3"), the transaction does not fall under the scope of this standard
and is not a business combination but an equity-settled transaction
which should be accounted for in accordance with IFRS 2 Share-based
Payment ("IFRS 2"). However, the IFRS 3 guidance on reverse
acquisitions should still be followed, under which despite the
Company being the legal acquirer of DHL, it should be considered
the acquiree for accounting purposes.
1. Accordingly, the following accounting treatment has been
applied in respect of the reverse acquisition: DGI was
the deemed accounting acquirer.
2. The presentation of the consolidated financial statements
of the legal parent (DG Innovate Plc) is a continuation
of the accounting acquirer's financial statements.
3. Consolidated financial statements for the period ended
31 December 2022 for the Group present the results of
DHL from 1 January 2022 to 7 April 2022 and the enlarged
group thereafter. The comparative results for the period
ended 31 December 2021 represent those of the DHL business,
prior to the reverse takeover. The dormant subsidiary,
Deregallera Technology Ltd has been excluded in the consolidated
financial statements of 2022 and 2021.
4. The equity structure appearing in the Group financial
statements reflects the equity structure of the legal
parent (DG Innovate Plc), including the shares issued
and shares to be issued under the share for share exchange
to the effect of business combination.
5. The retained earnings and other equity balances recognised
in the Group financial statements reflect the retained
earnings and other equity balances of the DHL business
immediately before the business combination and includes
that of the group after the reverse takeover on 8 April
2022.
6. The reverse acquisition reserve relates to adjustments
in respect of 4 and 5 above for the reverse acquisition
between DG Innovate Plc and DHL.
As the accounting acquirer (DHL) is deemed to have acquired the
shares of DGI, the fair value of the shares of the Company should
be used to measure the consideration paid. This is calculated as
the number of DGI Plc shares multiplied by the quoted market price
of DGI Plc (Path Investments Plc at the time). The consideration is
then split into net assets acquired, with the difference
representing the cost to DGI for obtaining a listing. This
difference has been expensed within "reverse acquisition expenses"
in accordance with IFRS 2.
Details of the fair value of the acquisition are as follows:
Fair Value of assets acquired
GBP
Cash & Cash equivalents 41,088
Loans 911,934
Property, plant and
equipment 82,546
Trade payables (552,590)
Other payables (97,500)
Net assets acquired 385,748
Listing expense 5,094,074
Consideration 5,479,552
The Listing Expense is attributable to the difference between
the net assets acquired and the fair value of the Company on the 7
April 2022.
27. ULTIMATE CONTROLLING PARTY
The Group considers there to be no ultimate controlling
party.
28. SUBSEQUENT EVENTS
On 23 January 2023 the Company announced a subscription to raise
GBP400,000 through the issue of 333,333,333 new ordinary shares at
an issue price of 0.12 pence. Subscribers were also issued one
warrant for every new ordinary share subscribed for, with an
exercise price of 0.18 pence per warrant, exercisable for two years
from admission on 30 January 2023. A follow on broker option raised
an additional GBP18,000 through the issue of a further 15,000,000
shares on the same terms. In addition, the Company announced that
it was varying the terms of the existing issued 1,435,640,300
warrants, with the exercise price being reduced to 0.25p and expiry
being extended to 7 April 2024.
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END
FR FFFEFSFIDFIV
(END) Dow Jones Newswires
April 28, 2023 02:00 ET (06:00 GMT)
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