Final results for the year ended 31 December 2021

RNS Number : 9081V

DG Innovate PLC

12 August 2022

 

12 August 2022

DG Innovate plc  
("DG Innovate " or the "Company")

Final results for the year ended 31 December 2021

DG Innovate (LSE: DGI), the advanced research and development company pioneering sustainable and environmentally considerate improvements to electric mobility and storage, announces the Company's audited results for the year ended 31 December 2021.  DG Innovate was previously Path Investments plc and the results cover a period prior to the Company's acquisition of Deregallera Holdings Ltd (formerly DG Innovate Limited) ("DGI") on 8 April 2022, when the Company was an investment company.

Restoration of Trading

Following the publication of the Company's final results for the year ended 31 December 2021, the Company will apply to the Financial Conduct Authority to request a restoration of its listing on the Official List and to resume trading on the London Stock Exchange. 

Results Highlights

•	Successful fund raise with gross proceeds of £3.85 million in March 2021
•	Conditional Sale and Purchase Agreement with DG Innovate Limited ("DGI") signed 12 August 2021
•	Secured loans extended to DGI totalling £600,000 to accelerate technology development during 2021
•	Post year end successful completion of acquisition of DGI and accompanying funding, raising £4.6 million gross proceeds in April 2022

Post period Highlights

•	Successful completion of the acquisition of DGI and accompanying funding, raising £4.6 million in gross proceeds in April 2022
•	Commencement of an acceleration programme to advance commercial progress with the Company's suite of electric mobility and storage technologies
•	Continuing Innovate UK funding to support DG Innovate's Pareta©range of high-performance electric vehicle drives
•	Funding secured from the Ford Low Carbon Vehicle Transformation Fund to support the Company's ongoing electric motor development programme
•	Appointment of Peter Tierney as the Company's new Chief Executive Officer from 1 July 2022

Commenting Peter Tierney, Chief Executive Officer of DG Innovate said: "Whilst the delay to the publication of the accounts was disappointing, I believe we have now put the challenges of the DGI reverse takeover transaction behind us and we can focus solely on progressing the commercialisation of the Company's exciting suite of electric mobility and storage technologies.  Since joining the Company I have been very impressed by both the technology and the quality of the DG Innovate team.  I believe DG Innovate has world class solutions for both electric vehicle drives and energy storage that can address unmet needs using readily available materials and that can be manufactured at commercial scale.

We will be commencing formal testing of our 250kW Pareta^© integrated E-drive shortly and I look forward to reporting on this in due course. In addition, support from the Ford Fund will enable us to continue to work with electric powertrain experts at the Cwmbran-based firm Meritor and Cardiff University to design and test a new motor which uses less "rare earth" material than conventional motors, making them cheaper and minimising environmental and climate impacts.

We also hope to be shortly in a position to detail the results of the performance of our anode active materials, a key enabling technology for sodium-ion batteries, within the industrial scale up trials being undertaken by our consortium partners.  These are very exciting times for DG Innovate and I look forward to making further announcements as we progress."

The audited results for the year ended 31 December 2021 have been published today on the company's investor website at https://dgiplc.com/reports-documents , and will be made available on the National Storage Mechanism shortly at https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.

-  Ends -

The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information please contact:

DG Innovate plc	C/O IFC
Peter Tierney Jack Allardyce
IFC Advisory (Financial PR & IR)	020 3934 6630
Tim Metcalfe Zach Cohen
Grant Thornton UK LLP (Financial Adviser) Samantha Harrison Jamie Barklem Daphne Zhang Ciara Donnelly	020   7383 5100
OvalX (Broker)	020 7392 1400
Tom Curran Thomas Smith

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, lightweight, cost-effective electric motors and electronics;

- Enhanced Battery Technology (EBT) - Sodium-ion batteries offering a sustainable energy storage solution at similar/greater energy density to incumbent technologies at a lower cost, increased safety with lower environmental footprint.

Further information may be found at: https://www.dgiplc.com

CHAIRMAN'S STATEMENT

Review

In March 2021 the Company was delighted to receive the welcome support of new shareholders and certain existing holders in a fund raising with gross proceeds of £3.85 million received to accelerate the Company's investment strategy.

Having considered several opportunities during the prior period, the Company entered a period of exclusivity to undertake detailed due diligence on DGI, culminating in the signing of a conditional Sale and Purchase Agreement on 12 August 2021, reflecting an agreed all share Reverse Takeover ("RTO") transaction.

In the intervening period and prior to completion of the transaction, The Company advanced secured loans to DGI totalling £600,000 by year end 2021. These loans, together with an additional secured advance of £300,000 prior to completion (but following the year end), are carried as secured debtors on our balance sheet.

Post year end in April 2022, the transaction successfully completed which, together with an accompanying fundraise provided by existing shareholders, positions the enlarged group to further the development of DGI's Enhanced Drive and Enhanced Battery Technologies to commercialisation. The Company changed its name to DG Innovate plc to reflect the new group structure at completion.

We are pleased with the progress that has been made as the two businesses have come together post the RTO. We are already seeing the benefits of the complimentary skillsets that our new Board members bring to the business which has invigorated the push towards commercialisation of both the Enhanced Drive and Battery Technologies. Formal testing of the new 250kW Pareta^© integrated E-drive shall commence imminently, with results expected during the coming weeks. We also hope to be shortly in a position to detail the results of the performance of our anode within the industrial scale up of our consortium partners' Sodium-Ion battery trials.

I want to take this opportunity to express my gratitude to our shareholders and investors for the continued support that they have shown us over the years and welcome our new shareholders and staff that join us with this successful transaction. We look forward to the future with confidence.

Nicholas Tulloch

Non-Executive Chairman

OPERATIONAL REVIEW

The Company was incorporated and registered in England and Wales on 2 June 2000 under the Companies Act 1985 as a public company limited by shares with the name Hallco 459 Plc and with registered number 04006413. On 28 November 2000, the Company changed its name to The Niche Group Plc. On 20 February 2016, the Company changed its name to Path Investments Plc. 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 period under review the Company was a cash shell, whose stated strategy was to deliver acquisitions in the energy sector, and a number of opportunities were evaluated.

The Company has not traded over the past twelve months. Over that period its expenses have related to pre-deal costs, professional and associated expenses related to advisory and consultancy fees, along with general administration expenses.

In March 2021 the Company was delighted to receive the welcome support of new shareholders and certain existing holders in a fund raising with gross proceeds of £3.85 million to accelerate the Company's investment strategy.

The Company entered a period of exclusivity to undertake detailed due diligence on DGI, with particular detailed investigation of its proprietary Enhanced Drive and Enhanced Battery Technologies, culminating in the signing of a binding Sale and Purchase Agreement on 12 August 2021, reflecting an agreed all share Reverse Takeover transaction.

FINANCIAL REVIEW

Loss for the year

In the year ended 31 December 2021, the Company recorded a loss of £3,903,459 (2020 loss: £377,103).

Cash flow

On 18 March 2021, the Company successfully raised £3.85 million (before expenses) through a placing of new ordinary shares and admitted the new shares to trading on the Standard List of the Main Market of the London Stock Exchange.  On the same date the £108,767 of convertible loan notes were settled in full by issue of shares.

During the year ended 31 December 2021, the Company advanced secured loans to DGI totalling £600,000.

Post year end the Company advanced a further £300,000 in secured loans to DGI.

Peter Tierney

Chief Executive Officer

INDEPENDENT AUDITORS' REPORT

FOR THE YEAR ENDED 31 DECEMBER 2021

Opinion

We have audited the financial statements of DG Innovate Plc (previously known as Path Investments Plc) (the 'Company') for the year ended 31 December 2021 which comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Financial Position, the Statement of Cash Flows, and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.

In our opinion the financial statements:

·	give a true and fair view of the state of the Company's affairs as at 31 December 2021 and of the Company's loss for the year then ended;
·	have been properly prepared in accordance with UK adopted international accounting standards; and
·	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our approach to the audit

As part of scoping our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates such as the fair value of the share options and warrants that involved making assumptions and considering future events that are inherently uncertain.

We tailored the scope of our audit to ensure that we performed sufficient audit work to be able to give an opinion on the financial statements as a whole, taking into account an understanding of the Company and its environment, including the Company's system of internal control. We also addressed the risk of management override of internal controls. Our planned audit testing was directed accordingly and was focused on areas where we assessed there to be the highest risk of material misstatements.

We conducted our audit from our City of London office and the audit team communicated regularly throughout the audit with the Audit Committee and the directors in order to ensure we had a good knowledge of the operations of the Company. During the audit, we reassessed and re-evaluated audit risks and tailored our approach accordingly if needed.

The audit testing included substantive testing on significant transactions, balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, and the relevant specific risks.

We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant findings, including any significant deficiencies in internal controls that we identified during the audit.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of risks identified during our audit.

Key Audit Matters	How our scope addressed this matter
Going concern   The Company has no revenue for the year ended 31 December 2021 (2020: £Nil) and has incurred an operating loss of £3,914,764 (2020: £266,693) including a £2,042,335 non-cash exceptional share options and warrants charge. The Company has outstanding creditors of £737,166 at 31 December 2021 (2020: £2,145,256) and cash funds of £686,400 (2020: £468). The Company has continued incurring further losses subsequent to the year end. Given the performance in the year, including the significant losses, creditor balances and decreasing cash funds, going concern was considered to be a key audit risk area.	Our audit work and conclusion in respect of going concern has been detailed in the 'Material uncertainty related to going concern section of our audit report'.
Share options and warrants expense In the previous year and during the year ended 31 December 2020, the Company issued share options and warrants to its directors and one of its creditors in lieu of salary and settlement of the outstanding creditor balance respectively. As detailed in note 18, the Company has incurred a share options and warrants charge of £2,042,335 in the year (2020: £87,501). The recognition of the share-based payment and warrants expense requires estimates to be made regarding the fair value of the share options and warrants granted. These are dependent on the assumptions made in respect of the inputs into the relevant options pricing model. The use of the model and the assumptions made by management thus involve a number of judgements to establish the appropriate inputs into the model.	Our audit work included, but was not restricted to: - Reconciling the number of share options and warrants to their respective agreements. - Re-performing the option pricing model calculation of the share options and warrants charge prepared by the directors to determine if it had been calculated in accordance with the requirements of IFRS 2. - Critically assessing the judgements made by management in determining the share options and warrants charges and the assumptions underlying them to determine whether the options and warrants charge in the financial statements had been calculated in accordance with the requirements of IFRS 2 and all relevant disclosures had been appropriately made. Key observations: Based on our audit work, we identified a material error of £2,042,335 in the calculation of the share options and warrants charge which has now been adjusted in these financial statements by management. Following this audit adjustment, we have concluded that the treatment of the share options and warrants within the financial statements is not materially misstated.

Our application of materiality

The scope and focus of our audit was influenced by our assessment and application of materiality. We define materiality as the magnitude of misstatement that could reasonably be expected to influence the readers and the economic decisions of the users of the financial statements. We use materiality to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.

Due to the nature of the Company we considered expenditure incurred to be the main focus for the readers of the financial statements, accordingly this consideration influenced our judgement of materiality. Based on our professional judgement, we determined materiality for the Company to be £34,885 based on a percentage of expenditure incurred before share options and warrants charge (2%). This was based on expenditure per the draft financial statements at the planning stage of the audit.

On the basis of our risk assessment, together with our assessment of the overall control environment, our judgement was that performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Company was 50% of materiality, namely £17,442.

We agreed to report to the Audit Committee all audit differences in respect of the Company in excess of £1,744 and, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reported to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

Material uncertainty related to going concern

We draw attention to note 1.2 to the financial statements, which indicates that the Company's cash flow projections show that the Company will need to raise debt or equity funding in order to continue in business and meet its liabilities as they fall due for at least twelve months from the date of approval of the financial statements. The Company incurred an operating loss of £3,914,764 (2020: £266,693) for the year ended 31 December 2021.

These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

- a critical assessment of the detailed cash flow projections prepared by the directors, which are based on their current expectations of trading prospects, we also evaluated the sensitivities that the directors performed against this forecast.

- We evaluated the key assumptions in the forecast, which were consistent with our knowledge of the business and considered whether these were supported by the evidence we obtained. We obtained an understanding of all relevant uncertainties, including those arising as a result of the impact of the COVID-19 pandemic over the past years. We have factored the ongoing impact of COVID-19 into our analysis of the risks affecting the ability of the Company to continue to trade and meet its liabilities as they fall due for at least twelve months from the date of approval of the financial statements.

- We examined the disclosures relating to the going concern basis of preparation and found that these provided an explanation of the directors' assessment that was consistent with the evidence we obtained.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

- the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

- the strategic report and the directors' report have been prepared in accordance with applicable legal requirements;

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

- adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

- the financial statements and the part of the directors' remuneration report to be audited are not in agreement with the accounting records and returns; or

- certain disclosures of directors' remuneration specified by law are not made; or

- we have not received all the information and explanations we require for our audit; or

- a corporate governance statement has not been prepared by the Company.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities is available on the FRC's website at https://wwww.frc.org.uk/auditors/auditor-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for

This description forms part of our auditor's report.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the Company.

Our approach was as follows:

- We obtained an understanding of the legal and regulatory requirements applicable to the Company and considered that the most significant are the Companies Act 2006, UK adopted international financial reporting standards, the Listing Rules, the Disclosure and Transparency Rules, QCA Compliance and UK taxation legislation.

- We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.

- We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.

- We reviewed board minutes, legal expenses, and RNS announcements and inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.

- Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.

- We evaluated managements' incentives to fraudulently manipulate the financial statements and determined that the principal risks related to management bias in accounting estimates and judgemental areas of the financial statements. We challenged the assumptions and judgements made by management in respect of the significant areas of estimation, as described in the key audit matters section. Further audit procedures performed to address the risk of fraud included but were not limited to: the testing of journals and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Other matters which we are required to address

We were appointed by the Audit Committee on 3 May 2022 to audit the financial statements for the year ended 31 December 2021. Our total uninterrupted period of engagement is 1 year, covering the year ended 31 December 2021.

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company and we remain independent of the Company in conducting our audit.

Our audit opinion is consistent with the additional report to the Audit Committee.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken for no purpose other than to draw to the attention of the company's members those matters which we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and company's members as a body, for our work, for this report, or for the opinions we have formed.

MITAL SHAH Partner On behalf of Moore Kingston Smith LLP

Statutory Auditor

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

		Year ended 31 December		Year ended 31 December
	Note		2021		2020
			£		£
Administrative expenses			(1,872,429)		(179,192)
Share based payments	18		(2,042,335)		(87,501)
Operating loss	3		(3,914,764)		(266,693)
Finance income	7		11,934		-
Finance cost	7		(629)		(110,410)
Loss on ordinary activities before taxation			(3,903,459)		(377,103)
Income tax	8		-		-
Loss for the year and total comprehensive loss attributable to the equity holders			(3,903,459)		(377,103)
Earnings per share
- Basic and diluted earnings attributable to the equity holders from continuing and total operations	9		(0.22)		(0.19)

All operating income and operating gains and losses relate to continuing activities.

There was no other comprehensive income for the year (2020: £Nil).

The notes form an integral part of the financial statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

		Share Capital		Share Premium		Capital Redemption Reserve		Share Option Reserve		Retained earnings		Total
		£		£		£		£		£		£
As at 1 January 2020		8,979,767		25,413,617		-		-		(36,298,570)		(1,905,186)
Comprehensive income Loss for the period		-		-		-		-		(377,103)		(377,103)
Share based payments		-		-		-		87,501		-		87,501
Total Comprehensive loss		-		-		-		87,501		(377,103)		(289,602)
Total contributions by and distributions to owners of the Company		-		-		-		-		-		-
Issued share capital		6,667		43,333		-		-		-		50,000
Cancellation of deferred shares		(8,783,824)		-		8,783,824		-		-		-
As at 31 December 2020		202,610		25,456,950		8,783,824		87,501		(36,675,673)		(2,144,788)
As at 31 December 2020		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
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		2,977,005		(40,579,132)		934,435

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 notes form an integral part of the financial statements.

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2021

			As at 31 December	As at 31 December
	Note		2021	2020
			£	£
ASSETS
Property, plant and equipment	10		80,546	-
Current assets
Trade and other receivables	11		904,655	-
Cash and cash equivalents	16		686,400	468
			1,591,055	468
LIABILITIES
Current liabilities
Trade and other payables	12		(737,166)	(2,145,256)
Net Current Assets / (Liabilities)			853,889	(2,144,788)
NET ASSETS / (LIABILITES)			934,435	(2,144,788)
SHAREHOLDERS' EQUITY
Called up share capital	13		2,029,464	202,610
Capital redemption reserve	13		8,783,824	8,783,824
Share premium account			27,723,274	25,456,950
Share option reserve			2,889,504	87,501
Retained earnings			(40,491,631)	(36,675,673)
TOTAL EQUITY			934,435	(2,144,788)

The notes form an integral part of the financial statements.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

		Year ended 31 December	Year ended 31 December
	Note	2021	2021
		£	£
Cash flows from operating activities
Cash expended from operations	14	(2,862,941)	(154,284)
Net cash outflow from operating activities		(2,862,941)	(154,284)
Cash flows from investing activities
Purchase of fixed assets	10	(98,598)	-
Finance costs		(629)	(410)
Net cash used in investing activities		(99,227)	(410)
Cash flows from financing activities
Issue of share capital		3,850,000	50,000
Loan repayment		(50,000)	50,000
Issue of convertible loans		8,100	55,000
Repayment of convertible loans		(160,000)
Net cash generated from investing activities		3,648,100	155,000
Net increase in cash and cash equivalents		685,932	306
Cash and cash equivalents at beginning of year		468	162
Cash and cash equivalents at end of year	16	686,400	468

The notes form an integral part of the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

1.  ACCOUNTING POLICIES

1.1  Basis of preparation

DG Innovate Plc (formerly known as Path Investments 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 a cash shell whose strategy was deliver material acquisitions in the energy sector. Post period end the Company completed the acquisition of DGI, becoming an advanced research and development company pioneering sustainable and environmentally considerate improvements to electric mobility and storage.

The financial statements 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.

The financial statements are presented in UK pounds Sterling which is the Company'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 IFRS requires the use of certain critical accounting estimates, It also requires the board to exercise its judgement in the process of applying the Company'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 1.9.

1.2  Going concern

The financial statements have been prepared on the assumption that the Company 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 2021, the Company had cash and cash equivalents totalling £686,400 and net current assets of £853,889. 

On 18 March 2021, the Company successfully raised £3.85 million (before expenses) through a placing of new ordinary shares and admitted the new shares to trading on the Standard List of the Main Market of the London Stock Exchange. On the same date the £108,767 of convertible loan notes were settled in full by issue of shares. Post year end, in April 2022 the Company raised a further £4.6 million (before expenses) through the exercise of shareholder warrants and a subscription for new ordinary shares.

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. Significant progress is being made, with testing of DGI's Pareta©drives planned in the coming weeks. In line with all pre-revenue companies, further funding will be required as the Company moves through the development phase.   The new group recently announced the extension of its Pareta© range of high-performance electric vehicle drives to now include a 400kW version suitable for heavy vehicle applications, which is being developed in collaboration with a tier 1 supplier to the commercial vehicle industry, to target its growing electric drive needs. Performance and endurance verification testing of the new drive is planned to begin in the coming weeks.

The Board have considered a number of detailed cashflow scenarios and have identified a further funding requirement from late Q2 2023. As this falls within 12 months of the date of this report, a material uncertainty exists in relation to the ability of the Company to continue as a going concern.

The Directors would note that the previous two fundraises in March 2021 and April 2022 were predominantly made up of the same small group of investors, who remain supportive of the Company'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 Company 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 Company's policy with regard to financial risk management is set out in note 17. Generally, the Company does not acquire financial assets for the purpose of selling in the short term. 

The Company's business model is primarily that of "hold to collect" (where assets are held in order to collect contractual cash flows).  When the Company 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 Company 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 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 Company 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.
-	Derivatives which are not designated as a hedging instrument.  All subsequent fair value gains or losses are recognised in the income statement.

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 Company 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  Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Cost represents the cost of acquisition at historical cost. Depreciation is provided to allocate the cost less the residual value on a reducing balance basis over the asset's useful economic life as follows;

Office equipment	33% reducing balance basis
Motor Vehicles	25% reducing balance basis

The carrying amount of fixed assets shall be derecognised on disposal of assets or when no future economic benefits are expected from its use.

1.5  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.

1.6  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 2021:

Description	Effective date
Newly effective standards for 1 January 2021 to 31 December 2021
Interest Rate Benchmark Reform Phase2 (amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)	1 January 2021
Standards available for early adoption
Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current	1 January 2022
Annual improvements to IFRS standards 2018 -2020	1 January 2022
Property, plant and equipment: proceeds before intended use (amendments to IAS 16)	1 January 2022
Reference to conceptual framework (amendments to IFRS 3)	1 January 2022
Amendments to IFRS 17	1 January 2023
Disclosure of accounting policies (amendments to IAS 1 and IFRS practice statement 2)	1 January 2023
Definition of accounting estimate (amendments to IAS 8)	1 January 2023
Deferred tax related to assets and liabilities arising from a single transaction - amendments to IAS 12 income taxes)	1 January 2023

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.

1.7  Share-based payments

The Company 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 Company. 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 Company 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.

1.8  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 Company'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.

1.9  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.

2.  SEGMENTAL REPORTING

a.  Primary segment - business

The Company has only one business segment, which is investing in energy and natural resources, primarily either by way of equity or convertible loans.

b.  Secondary segment - geographical

The Company's loss for the period was derived wholly from activities undertaken in the United Kingdom. The Company's net assets are located entirely in the United Kingdom.

3.  EXPENSES BY NATURE

	2021 £	2020 £
Staff costs	513,235	454,205
Other expenses	3,401,529	(187,512)
	3,914,764	266,693
Details of the staff costs are shown in note 5.

4.  OPERATING LOSS

  The operating loss is stated after charging:

	2021 £	2020 £
Depreciation	18,052	-
Auditors remuneration
Audit services	70,000	15,000
Reporting accountants services	-	15,000
Total fees	70,000	30,000

5.  EMPLOYEES

Number of employees

The average monthly number of employees (including Directors) during the period was:

	2021 Number	2020   Number
Administration	2	2
	2021 £	2020 £
Employment costs
Wages and salaries (including benefits in kind) Social security costs Pension costs	427,786 52,498 34,950 515,234	454,205 - - 454,205

Included in employment costs above are Directors' accrued salaries, together with employer's national insurance contributions, amounting to £Nil (2020: £454,205). 

6.  DIRECTORS' REMUNerATION

		2021 £	2020 £
	Aggregate emoluments	427,786	454,205
	Pension costs	34,950	-
	Share based payments	1,517,628	87,501
		1,980,364	541,706

Remuneration for the highest paid director was £225,000 (2020: £1,320,288, which were waived in their entirety during the year ended 31 December 2020). The amount included within accruals as at 31 December 2021 includes remuneration accrued during 2020 but remaining unpaid as at 31 December 2021 of £84,000 (2020: £454,205). 

During the period, retirement benefits are accruing to two Directors (2020: retirement benefits are accruing to one Director).

7.  FINANCE income and costs

		2021 £	2020 £
	Finance Income	11,934
	Bank interest	-	-
	Total finance income	11,934	-
	Finance costs
	Bank charges	(629)	(410)
	Convertible loan note interest	-	(110,000)
	Total finance cost	11,305	(110,410)

8. TAXATION

No corporation tax charge arises in respect of the year due to the trading losses incurred.  The Company has surplus management expenses available to carry forward and use against trading profits arising in future periods of approximately £8,041,000 (2020: £6,180,000). 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 (2020: £18,917,000).

		2021 £	2020 £
	Current tax	-	-
	Loss on ordinary activities before taxation	(3,903,459)	(377,103)

	Loss on ordinary activities before taxation multiplied by average effective rate of corporation tax of 19% (2020: 19%)	(741,657)	(71,650)
	Effects of:
	Non-deductible expenses	121,606	760
	Short term timing differences	(4,476)	-
	Other adjustments - non taxable gains	-	-
	Tax losses upon which no deemed tax asset is recognised	624,527	70,890
	Current tax	-	-

A deferred tax asset of approximately £531,771 (2020: £114,309) in respect of losses has not been recognised due to the timing regarding the availability of future profits against which the losses of the Company could be offset.

The UK corporation tax at the standard rate for the year is 19.0% (2020: 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.

9.  EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the loss on ordinary activities after taxation of £3,903,459 (2020: £377,103) and on the weighted average number of ordinary shares in issue of 1,765,828,368 (2020: 199,414,122) in issue. The basic loss per share is 0.22p (2020: 0.19p 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 Company's ordinary shares during the period. However, due to the Company 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. 

10.  PROPERTY, PLANT AND EQUIPMENT

	Office Equipment	Motor Vehicles	TOTAL
	£	£	£
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	-	-	-

11.  Trade and other receivables

				2021 £	2020 £
		Prepayments		20,000	-
		Other taxes and social security		145,019	-
		Other Debtors		739,636	-
				904,655	-

Other debtors comprise amounts loaned to Deregallera Holdings Ltd of £611,934 (2020: £Nil), a company wholly acquired after the reporting period, as detailed in note 21.  The loan attracts an annual 6% interest charge.

Also included in other debtors are amounts repayable of £127,702 by certain Directors in respect of incorrectly awarded bonuses.  Further details are disclosed on page 26.

Other taxes and social security comprise the tax suffered on the bonuses noted above. 

12.  TRade and other payables

				2021 £	2020 £
		Trade payables		131,959	365,659
		Other payables (including convertible loan notes)		-	457,830
		Accruals and deferred income		605,207	1,271,767
		Bank loan		-	50,000
				737,166	2,145,256

  Bank Loan

The loan was repaid in full in May 2021 under the terms and conditions of the agreement.

Convertible Unsecured Loan Stock

On 3 April 2018 the Company constituted an instrument to issue £150,000 nominal convertible unsecured loan stock. The instrument was subsequently increased to a £200,000 nominal amount on 23 November 2020, of which a total of £162,000 was issued.

On admission of the Company to AIM or other recognised investment exchange, the Convertible Loan Stock, at the option of the loan note holder, was either convertible into shares at the price at which the Placing associated with the listing occurs or will be repayable out of the Placing proceeds together with 200% interest to compensate for the risk associated with the loan.

As at the Last Practicable Date the Directors hold the following Convertible Loan Stock. All Convertible Loan Stock held directly by the Directors will be converted on Admission into Conversion Shares:

Director		Amount
		£
C Theis*		51,000
Jack Allardyce		5,000
Brent Fitzpatrick**		46,100
Total		102,100
*	£50,000 of the amount was provided by Networkguru Limited, a company owned and controlled by Chris Theis' son.
**	£5,000 of which was provided by Ocean Park Developments, £8,000 by Pondermatters Limited (both companies ultimately owned by  Brent Fitzpatrick) and £5,000 by Alexander Fitzpatrick (Brent Fitzpatrick's son).

On 18 March 2021, a total of £53,333 (nominal) of Convertible Loan Stock was repaid in cash and £108,767 (nominal) of Convertible Loan Stock was converted into ordinary shares of the Company.

13.  SHARE Capital

Allotted, called up and fully paid
	Ordinary Shares of 0.1p each		Deferred shares of 39.9p each
	No	£	no	£
At 1 January 2020	195,943,802	195,943	22,014,596	8,783,824
Issue of shares	6,666,667	6,667
Cancellation of shares			(22,014,596)	(8,873,824)
At 31 December 2020	202,610,469	202,610	-	-
At 1 January 2021	202,610,469	202,610	-	-
Issue of shares	1,826,853,333	1,826,855	-	-
At 31 December 2021	2,029,463,802	2,029,464	-	-

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.

The deferred shares conferred upon the holders the following rights and were subject to the following restrictions, notwithstanding any other provisions in these Articles:

Return of Capital

On return of assets on a winding up of the Company after the holders of Ordinary shares have received the aggregate amount paid up thereon plus £10,000,000 for each such share held by them, there shall be a distribution to the holders of any deferred shares an amount equal to the nominal value of shares held and thereafter any surplus held will be distributed to holders of ordinary shares.

Dividend s

Holders of any deferred shares have no rights to dividends or other distributions or to participate in the income and profits of the Company.

Transfers

The Company may acquire all or any of any such deferred shares in issue at any time for no consideration.

On 30 September 2020 and in accordance with Article 3.4(iii) of the Company's Articles of Association, the Company acquired and cancelled the Deferred Shares of £0.399 nominal value per Deferred Share for no consideration.  After which no Deferred Shares will remain in issue and has been reflected in the creation of a capital redemption reserve account.

In February 2021 the Company r aised (before expenses) £3,850,000 by way of a subscription and placing of 1,400,000,000 new ordinary shares of 0.1 pence each in the Company at a price of 0.25 pence per Ordinary Share.   In addition, participants in the Fundraise were issued with one warrant for every two Placing Shares subscribed for with an exercise price of 0.25 pence per Ordinary Share and one warrant for every two Placing Shares subscribed for with an exercise price of 0.5 pence per Ordinary Share. The Warrants have a five-year exercise period from the date of grant.

Further shares were issued post year end, as detailed in note 21.

14.  Reconciliation of operating loss to net cash outflow from OPERATING ACTIVITIES

		2021 £	2020 £
	Operating loss	(3,903,459)	(266,693)
	(Increase)/decrease in debtors	(904,655)	10,056
	(Decrease)/increase in creditors within one year	(115,214)	124,852
	Depreciation	18,052	-
	Share based payments	2,042,335	87,501
	Convertible loan note interest	-	(110,000)
	Net cash outflow from operating activities	(2,862,941)	(154,284)

15.  Net Debt Reconcilliation

This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

		Year ended 31 December 2021 £	Year ended 31 December 2020 £
	Cash and cash equivalents	686,400	468
	Borrowings	-	(536,300)
	Net debt	686,400	(535,832)

		Borrowings £	Cash and cash equivalents £	Total £
	Net debt as at 1 January 2020	(321,300)	162	(321,138)
	Interest expense	(110,000)	-	(110,000)
	Financing cash flows	(105,000)	306	(104,694)
	Net debt as at 31 January 2020	(536,300)	468	(535,832)
	Financing cash flows	209,999	685,932	895,931
	Share based payments	326,301	-	326,301
	Net debt as at 31 January 2021	-	686,400	686,400

16.  CASH & CASH EQUIVALENTS

			2021 £	2020 £
	Cash at bank and in hand		686,400	468

17.  financial instruments

The Company's financial instruments comprise cash and cash equivalents and various other items, such as trade receivables and payables, which arise directly from its operations. It is, and has been throughout the period under review, the Company's policy to ensure that there is no trading in financial instruments. The main purpose of these financial instruments is to finance the Company's operations.

  Categories of Financial Instruments

			2021 £	2020 £
	Financial Assets at amortised cost
	Cash and cash equivalents		686,400	468
	Other debtors		884,655	-
			1,571,055	468
	Financial Liabilities at amortised cost
	Trade and other payables		737,166	1,687,426
	Convertible loan notes		-	457,830
			737,166	2,145,256
	Net Financial Assets/(Liabilities)		833,889	(2,144,788)

Financial Assets and Liabilities

Financial assets and financial liabilities are recognised on the Company's Statement of Financial Position when the Company becomes party to the contractual provisions of the instrument.

Financial Risk Factors

The Company's activities expose it to liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

Liquidity Risk

The Company has to date financed its operations from cash reserves funded from share issues. Management's objectives are now to manage liquid assets in the short term through closely monitoring costs.  The Company has no borrowing facilities that require repayment and therefore has no interest rate risk exposure.

Fair Values of Financial Assets and Liabilities

The Directors consider that the fair value of the Company's financial assets and liabilities are not considered to be materially different from their book values.

18.  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 2021		At 31 December 2020
	Number of Options & Warrants	Weighted average exercise price per share	Number of Options & Warrants	Weighted average exercise price per share
At 1 January	73,787,500	2.5p	73,787,500	3.0p
Granted	2,910,110,000	0.3p	60,375,000	0.1p
Exercised	-	-	-	-
Expired or waived	(600,000)	280.0p	(60,375,000)	0.7p
At 31 December	2,983,297,500	0.3p	73,787,500	2.5p

The weighted average remaining contractual life of options as at 31 December 2021 was 9 years (2020: 7.2 years).

The following share options have been granted by the Company and are outstanding as at the year end of 31 December 2021:

Date of grant	Number of ordinary shares under option at 1 January 2020	Granted during year	Exercised during year	Lapsed/ waived during year	Number of ordinary shares under option at 31 December 2020	Weighted average exercise price	Expiry date
03/05/2011	600,000	-	-	-	600,000	£2.80	02/05/2021
30/03/2017	32,500,000	-	-	(28,500,000)	4,000,000	0.1p	29/03/2027
30/03/2017	28,375,000	-	-	(22,500,000)	5,875,000	1p	29/03/2027
30/03/2017	12,312,500	-	-	(9,375,000)	2,937,500	2p	29/03/2027
08/10/2020	-	60,375,000	-	-	60,375,000	0.1p	07/10/2030
Total	73,787,500	60,375,000	-	(60,375,000)	73,787,500	2.5p

Date of grant	Number of ordinary shares under option at 1 January 2021	Granted during year	Exercised during year	Lapsed/ waived during year	Number of ordinary shares under option at 31 December 2021	Weighted average exercise price	Expiry date
03/05/2011	600,000	-	-	(600,000)	-	£2.80	02/05/2021
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	-	-	1,289,310,000	0.1p	18/03/2031
Total	73,787,500	1,289,310,000	-	(600,000)	1,362,497,500	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 1 January 2021	Granted during year	Exercised during year	Lapsed during  year	Number of warrants  at 31 December 2021	Weighted average exercise price	Exercise date
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
Total	-	1,620,800,000	-	-	1,620,800,000	0.375p

In March 2021 the Company r aised (before expenses) £3,850,000 by way of a subscription and placing of 1,400,000,000 new ordinary shares of 0.1 pence each in the Company at a price of 0.25 pence per Ordinary Share.   In addition, participants in the Fundraise were issued with one warrant for every two Placing Shares subscribed for with an exercise price of 0.25 pence per Ordinary Share and one warrant for every two Placing Shares subscribed for with an exercise price of 0.5 pence per Ordinary Share. The Warrants have a five-year exercise period from the date of grant.

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
Date of grant Expected volatility Expected life Risk-free interest rate Expected dividend yield Possibility of ceasing employment before vesting Fair value per option/warrant	26 Feb 2021 31% 5 years 2.00% - - - 0.001p	18 Mar 2021 31% 1 year 2.00% - - - 0.17p	18 Mar 2021    31%   2 years   2.00%   -   - -   0.10p	18 Mar 2021 31% 10 years 2.00% - - - 0.15p	18 Oct 2020 50% 10 years 2.50% - - - 0.6p

On 8 October 2020 the options dated 30 March 2017, held by Chris Theis and Andrew Yeo were surrendered and reissued with an exercise price of 0.1p and an expiry date of 7 October 2030.

The expense recognised by the Company for share based payments during the year ended 31 December 2021 was £2,042,335 (2020: £87,501).

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.

19.  RELATED PARTY TRANSACTIONS

The following share options were held by the directors during the year:

Director	Date of grant	Held at 1 January 2021	Surrendered during the year	Granted during the Period	Held at 31 December 2021	Exercise price
C Theis	08/10/2020	42,500,000	-	-	42,500,000	£0.001
	18/03/2021	-	-	739,520,000	739,520,000	£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
Total		42,500,000	-	964,840,000	1,007,340,000

	Outstanding at 31 December 2020	Convertible loan notes issued during year	Interest accrued during the year	Converted during the year	Repaid during the year	Outstanding at 31 December 2021
Director	£	£	£	£	£	£
C Theis*	150,000	-	-	-	(150,000)	-
C Theis	3,000	-	-	(3,000)	-	-
A Yeo	75,000	-	-	(75,000)	-	-
B Fitzpatrick	54,000	-	-	(54,000)	-	-
J Allardyce	-	15,000	-	(15,000)	-	-
Total	282,000	15,000	-	(147,000)	(150,000)	-

On 8 October 2020 the options dated 30 March 2017 were surrendered and reissued with an exercise price of 0.1p and an expiry date of 7 October 2030.

As at 31 December 2020, included in other payables were the following convertible loan notes issued to the Directors together with accrued interest thereon.

* these loan notes were issued to Networkguru Limited, a company owned by Chris Theis' son, who subscribed  under the convertible loan note instrument.

Included in other payables are loans of £Nil (2020: £Nil), and £Nil (2020: £2,067) made by each of the Directors Brent Fitzpatrick and Chris Theis.

Included in other debtors are balances due from the following Directors in respect of bonuses incorrectly awarded during the year and deemed to be held in trust.  Chris Theis £37,021 (2020: £Nil), Brent Fitzpatrick £27,005 (2020: £Nil), Jack Allardyce £36,651 (2020: £Nil), Nicholas Tulloch £27,025 (2020: £Nil). 

Included in accruals is a balance of £70,000 (2020: £Nil) reimbursed to Chris Theis, a director of the company, in respect of IT support provided by his son Elliot Theis.

20.  ultimate controlling party

The Company considers there to be no ultimate controlling party.

21.  SUBSEQUENT EVENTS

On 8 April 2022 the Company announced the completion of the reverse acquisition of Deregallera Holdings Ltd (formerly DG Innovate Limited) ("DGI") for an initial consideration of 32.4 million  satisfied by the issue to the DGI 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 DGI 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 DGI, it should be considered the acquiree for accounting purposes.

As the accounting acquirer (DGI) is deemed to have acquired the shares of the Company, 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.

Details of the fair value of the acquisition are as follows;

	Fair Value of assets acquired
	£'000
Cash & Cash equivalents	41
Loans	912
Fixed assets	83
Trade payables	(553)
Other payables	(98)
Net assets acquired	385
Listing expense	5,094
Consideration	5,480

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. 

These are provisional figures with consolidated financial statements to be presented in DG Innovate plc's combined interim financial statements and full year results to 30 June 2022 and 31 December 2022, respectively.

 

END

 

 

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