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Final results for the year ended 31 December 2022

Published: 28/04/2023, 07:00

RNS Number : 7903X

DG Innovate PLC

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 Peter Tierney, CEO Jack Allardyce, CFO	C/O IFC
IFC Advisory (Financial PR & IR) Tim Metcalfe Zach Cohen	020 3934 6630
Grant Thornton UK LLP (Financial Adviser) Samantha Harrison Jamie Barklem Ciara Donnelly	020 7383 5100
WH Ireland (Broker) Chris Hardie Andrew de Andrade	020 7220 1666

About DG Innovate

DG Innovate is an advanced research and development company pioneering sustainable and environmentally considerate improvements to electric mobility and storage, using abundant materials and the best engineering and scientific practices. DG Innovate is currently developing its products alongside a number of major manufacturers across the transportation and energy sectors, research institutions and the UK Government, and has filed 18 patents worldwide. DG Innovate's current research and development activities are broadly split into two areas, focusing on novel electric motor technologies and energy storage solutions. Its two main products are:

- Enhanced Drive Technology (EDT) - High efficiency, cost-effective electric motors + power electronics; and

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

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

Chairman's Statement

In April 2022, DG Innovate Plc ("the Company") successfully completed the acquisition of Deregallera Holdings Ltd (previously DG Innovate Ltd) ("DHL") which, together with an accompanying fundraise provided by existing shareholders, provided the enlarged group ("the Group", or "DGI") with a platform to develop DGI's Enhanced Drive and Enhanced Battery Technologies (EDT and EBT) towards commercialisation. The Company changed its name to DG Innovate Plc to reflect the new group structure at completion.

In May 2022 the Company was delighted to announce the appointment of Peter Tierney as its new CEO. Peter took up his position on 1 July 2022, with his predecessor Christopher Theis stepping down at the same time. Peter brings a wealth of experience in building successful engineering businesses and achieving significant returns for investors.

During the following months we continued to make significant progress, including initial testing of our prototype 250kW Pareta® 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 kg CO₂e	Subsidiary Companies kg CO₂e	Total kg CO₂e
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 CO₂ 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 ended 31 December	Year ended 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 holders		(7,679,512)	(644,865)


Earnings per share
- Basic and diluted earnings attributable to the equity holders from continuing and total operations	10	(0.11)	(0.04)

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

There was no other comprehensive income for the year (2021: £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 Reserve	Merger Reserve	Share Option Reserve	Retained earnings	Total
	£	£	£	£	£	£	£	£

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 Reserve	Share Option Reserve	Merger Reserve	Retained earnings	Total
	£	£	£	£	£	£	£

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 31 December	As at 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 31 December	As at 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

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.

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 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
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 £
	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 Number	2021 Number
Administration	3	4
Directors	8	3
Engineering	14	14
	25	21


	2022 £	2021 £
Employment costs
Wages and salaries (including benefits in kind) Social security costs Pension costs Share based payment	990,382 94,490 107,550 338,864 1,531,286	320,531 18,212 105,689 - 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 £
	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 £
	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 rate of corporation tax of 19% (2021: 19%)	(1,494,992)	(133,026)
Effects of:
Non-deductible expenses	1,032,303	29,497
Short term timing differences	13,022	2,029
Other adjustments - non-taxable gains	-	-
Tax losses upon which no deemed tax asset is recognised	420,738	140,590
Research and development tax credit	(159,935)	(94,363)

Current tax	(188,864)	(55,273)

Group

A deferred tax asset of approximately £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 & equipment	Right of use asset	Total
	£	£	£	£

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 & Equipment	Right of use asset	Total
	£	£	£	£

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 Equipment	Motor Vehicles	Total
	£	£	£

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 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	-	-	-

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 £
	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 £
	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 £
	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 £
	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 £
	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 £
	2022 £	2021 £
Non-current liabilities	30,046	50,000

18. LEASE LIABILITY (GROUP)

	2022 £	2021 £
	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 2022 £	Year ended 31 December 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 2022 £	Year ended 31 December 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 £
	2022 £	2021 £

Cash at bank and in hand	234,990	57,454

COMPANY	2022 £	2021 £
	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 £
	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 £
	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 Options & Warrants	Weighted average exercise price per share	Number of Options & Warrants	Weighted average exercise price per share
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 option at 1 January 2022	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
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 1 January 2022	Granted during year	Exercised during year	Lapsed during year	Number of warrants at 31 December 2022	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
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 2022	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
	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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Market data

Final results for the year ended 31 December 2022