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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 £4.6 million
fundraise in April 2022
• Appointment of Peter Tierney as CEO in July 2022
• Award of £600,000 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 £418,000 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) 020 3934 6630
Tim Metcalfe
Zach Cohen
Grant Thornton UK LLP (Financial Adviser) 020 7383 5100
Samantha Harrison
Jamie Barklem
Ciara Donnelly
WH Ireland (Broker) 020 7220 1666
Chris Hardie
Andrew de Andrade
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
(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® drives, the award of
£600,000 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 £418,000 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® 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® 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 £4.6m 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® 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® e-drive for marine operations. While scale-up and
testing of the Company's hard carbon anode material continued, the £160,000
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® 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 £418,000 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® 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 £2,615,534 (2021: £587,235). This was primarily due to increased
administration expenses of £2,715,557 (2021: £1,529,089) and a share-based
payment charge of £338,864 (2021: £Nil), which were somewhat offset by grant
income of £433,989 (2021: £938,818).
A one-off reverse acquisition expense of £5,094,074 (2021: £Nil) 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 £67,873 (2021: £112,903) 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 £188,864 for the year (2021: £55,273). 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 £7,679,512
(2021: £644,865). 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 £5,298,683
(2021: £4,999,456), including intangible assets of £4,573,592 (2021:
£4,139,805) and property, plant and equipment of £725,091 (2021: £859,651).
Intangible assets increased by £433,787 during the year (2021: £436,650),
due to the capitalisation of internally generated development costs.
Non-current liabilities were £495,860 (2021: £1,148,103), including lease
liabilities of £237,182 (2021: £256,803) and loans of £234,653 (2021:
£880,675).
Group net current assets at year-end were £618,313 (2021: (£1,150,495)).
Cash movement
Group cash and equivalents at 31 December 2022 was £234,990 (2021: £57,454).
Net cash outflow from operating activities for the Group during the year was
£2,392,663 (2021: £501,906), and cash outflow from investments was
£1,010,477 (2021: (£1,287,718). On 8 April 2022, the Group raised £4.6
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 £418,000 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 £600,000 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 Shares Number of Ordinary 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 £7,679,512
(2021: £644,865).
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: £Nil).
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 Plc Subsidiary Companies Total
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 £234,990 and net current assets of
£618,313.
On 8 April 2022, the Group successfully raised £4.6 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
£418,000 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® 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®
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® 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® 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
£ £
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 (7,679,512) (644,865)
holders
Earnings per share
- Basic and diluted earnings attributable to the equity holders from 10 (0.11) (0.04)
continuing and total operations
All operating income and operating gains and losses relate to continuing
activities.
There was no other comprehensive income for the year (2021: £Nil).
The notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Share Premium Capital Redemption Reserve Reverse Acquisition Merger Share Option Reserve Retained earnings Total
Reserve Reserve
£ £ £ £ £ £ £ £
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 Capital Share Premium Capital Redemption Share Option Reserve Merger Reserve Retained earnings Total
Reserve
£ £ £ £ £ £ £
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
£ £
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
£ £
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 £1,549,027 for the year ended 31
December 2022 (2021: £3,903,459).
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 31 December Year ended 31 December
Note 2022 2021
£ £
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, plant and equipment 50,832 -
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 31 December Year ended 31 December
Note 2022 2021
£ £
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
£32,490,188 (2021: £Nil).
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 £234,990 and net current assets of
£618,313.
On 8 April 2022, the Group successfully raised a further £4.6 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 £418,000 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® 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® 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 to IAS 1 and IFRS practice 1 January 2023
statement 2)
Definition of accounting estimate (amendments to IAS 8) 1 January 2023
Deferred tax related to assets and liabilities arising from a single 1 January 2023
transaction - amendments to IAS 12 income taxes)
IFRS 16 - Leases - amendments regarding the classification of liabilities 1 January 2024
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® 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
£ £
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
£ £
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 £96,249 (2021: £Nil).
Included in the total employees costs above, £593,153 (2021: £684,093) was
capitalised in relation to internally generated development costs.
6. AUDITOR'S REMUNERATION
2022 2021
£ £
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
£ £
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 £170,248 (2021: £225,000).
The amount included within accruals as at 31 December 2022 includes
remuneration accrued during 2022 but remaining unpaid as at 31 December 2022
of £96,249 (2021: £84,000).
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
£ £
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 £9,536,000 (2021: £8,041,000). In addition, the Company has
non-trading loan relationship debits to carry forward to offset against future
non-trading loan relationship credits of approximately £18,917,000 (2021:
£18,917,000).
2022 2021
£ £
Current tax - -
Loss on ordinary activities before taxation (7,868,376) (700,138)
Loss on ordinary activities before taxation multiplied by average effective (1,494,992) (133,026)
rate of corporation tax of 19% (2021: 19%)
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 £1,779,983 (2021: £702,091) 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 £792,913 (2021: £531,771) 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 £7,679,512 (2021: £644,865) 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 to leasehold Plant & Right of use asset Total
equipment
£ £ £ £
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 to leasehold Plant & Right of use asset Total
Equipment
£ £ £ £
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 Vehicles Total
Equipment
£ £ £
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 Vehicles Total
Equipment
£ £ £
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
£32,490,188 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 £Nil (2021: £Nil).
Please refer to note 13 in these accounts for further detail.
Total
£
Cost
At 1 January 2022 -
Additions 32,490,188
At 31 December 2022 32,490,188
13. INTANGIBLE ASSETS
GROUP - CURRENT YEAR
Goodwill Intellectual Property Intellectual Property Total
Developed Under development
£ £ £ £
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 Property Intellectual Property Total
Developed Under development
£ £ £ £
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
£700,000 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® 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 £Nil (2021: £Nil). The carrying value of the intangible assets of the two
identified CGUs as at 31 December 2022 are Enhanced Drive Technology
£2,292,986 (2021: £2,041,581) and Enhanced Battery Technology £2,280,606
(2021: £2,098,224).
14. TRADE AND OTHER RECEIVABLES
GROUP 2022 2021
£ £
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 £188,036 (2021: £127,702)
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
£ £
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 £2,904,740 (2021: £nil) by DG Innovate Plc to Deregallera
Holdings Ltd and management fees (net of VAT) of £569,600 (2021: £nil)
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 £611,934 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 £188,036 (2021: £127,702) 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
£ £
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
£ £
Trade payables 159,043 131,959
Accruals and deferred income 168,654 605,207
327,697 737,166
Other unsecured borrowings included £350,000 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 £35,600 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
£ £
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 £639,930 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
£ £
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
£ £
Non-current liabilities 30,046 50,000
18. LEASE LIABILITY (GROUP)
2022 2021
£ £
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 £
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 £32.4
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
£ £
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
£ £
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 and equipment 60,026 -
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 31 December Year ended 31 December
2022 2021
£ £
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 cash equivalents Total
£
£ £
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 31 December Year ended 31 December
2022 2021
£ £
Cash and cash equivalents 156,193 686,400
Net debt 156,193 686,400
Borrowings Cash and cash equivalents Total
£ £ £
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
£ £
Cash at bank and in hand 234,990 57,454
COMPANY
2022 2021
£ £
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
£ £
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
£ £
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 price per share Number of Weighted average exercise price per share
Options & Options &
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 of grant Number of ordinary shares under Granted during year Exercised during year Lapsed/ waived during year Number of ordinary shares under option at 31 December 2022 Weighted average exercise price Expiry date
option at 1 January 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 of grant Number of warrants at Granted during year Exercised during year Lapsed during Number of warrants at 31 December 2022 Weighted average exercise price Exercise date
1 January 2022 year
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) £2,550,000 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 £2,077,000 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 2021 8 April 2022 8 April 2022 18 Mar 2021 18 Mar 2021 18 Oct 2020
Expected volatility 31% 62% 62% 31% 31% 50%
Expected life 5 years 10 years 8 years 2 years 10 years 10 years
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 £338,864 (2021: £Nil).
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 of grant Held at 1 January 2022 Surrendered during the year Granted during the Period Held at 31 December Exercise price
2022
C Theis 08/10/2020 42,500,000 - - 42,500,000 £0.001
18/03/2021 739,520,000 - - 739,520,000 £0.001
08/04/2022 - 72,048,463 78,052,051 6,003,588 £0.001
N Fitzpatrick 18/03/2021 162,820,000 - - 162,820,000 £0.001
J Allardyce 18/03/2021 62,500,000 - - 62,500,000 £0.001
08/04/2022 - - 156,105,002 156,105,002 £0.001
M Boughtwood 08/04/2022 - - 156,105,002 156,105,002 £0.001
P Tierney 12/10/2022 - - 690,790,814 690,790,814 £0.001
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 £137,369 (2021: £37,021), Brent Fitzpatrick £50,667
(2021: £27,005), Jack Allardyce £Nil (2021: £36,651), Nicholas Tulloch
£Nil (2021: £27,025).
Included in accruals is a balance of £Nil (2021: £70,000) 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 £5,000 (30 June 2021: £Nil; 31 December 2021: £Nil) in
respect of IT services.
Included in other debtors is a balance of £3,193,531 (2021: £611,934) 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 £898,334 for the year ended 31 December 2022 (2021:
£1,632,554). Total remuneration of key management personnel is analysed as
follows:
2022 2021
£ £
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 £32.4 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 £5.4 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 £5.0 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
£
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 £400,000
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 £18,000 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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