DG Innovate plc (LON:DGI), the advanced research and development company pioneering sustainable and environmentally considerate improvements to electric mobility and energy storage, has announced a subscription to raise gross proceeds of £400,000, a broker option to enable existing shareholders to participate in the fundraise for up to an additional £100,000, and to provide an update on the Company’s development and commercialisation strategy for its suite of technologies, together with announcing certain other corporate matters.
· Subscription raising gross proceeds of £400,000 through the issue of new ordinary shares at 0.12 pence per share, a premium of approximately 14.3 per cent. to the mid-market closing price on the London Stock Exchange of 0.105 pence per ordinary share on 20 January 2023
· The Broker Option to raise up to an additional £100,000 at the Issue Price from existing shareholders
· Participants in the Fundraise and the Broker Option will be issued with one warrant for every new ordinary share subscribed for with an exercise price of 0.18 pence per ordinary share. These warrants will be exercisable for two years from Admission (“New Warrants”)
· The funds raised will primarily be used to provide additional funding for the Company’s commercialisation strategy for its Enhanced Drive Technology and Enhanced Battery Technology. Further significant progress has been made in both areas over recent weeks
· The terms of the Company’s existing warrants in issue have been varied so that they now have an exercise price of 0.25 pence and are exercisable until 7 April 2024
· In order to reduce the Company’s ongoing costs and to ensure that the Company’s board is of an appropriate size and composition for its current stage of development, Sir Stephen Dalton and Andrew Boughtwood have both stepped down as Non-Executive Directors of the Company with immediate effect
Commenting, Peter Tierney, Chief Executive Officer of DG Innovate, said: “As set out in October last year we have a clear roadmap to commercialisation for both our electric mobility and energy storage technologies. Our goal is to ensure our world-class technology is appropriately exploited and brought to commercial scale production as quickly as possible. The proceeds of the Fundraise will provide the funding for the next stage of our plan as we continue to develop our technology and advance commercial discussions, both with our existing collaboration partners and other potential launch customers.
“This is an exciting time for DG Innovate and I look forward to making further announcements as we continue to progress. I would also like to take this opportunity to thank Sir Stephen and Andrew for their contribution to the Company and wish them well for the future.”
Details of the Subscription
The Company has raised gross proceeds of £400,000 through a subscription for 333,333,333 new ordinary shares of 0.001 pence in the capital of the Company at a price of 0.12 pence per share. The New Ordinary Shares will represent approximately 3.6 per cent. of the Company’s enlarged issued share capital. The Issue price represents a premium of approximately 14.3 per cent. to the mid-market closing price on the London Stock Exchange of 0.105 pence per ordinary share on 20 January 2023, being the latest practicable business day prior to the publication of this announcement.
The net proceeds of the Fundraise will be used by the Company to further advance its Enhanced Drive Technology and Enhanced Battery Technology as it seeks to bring these technologies to commercial scale production. In particular, the proceeds of the Fundraise are expected to allow certain milestones to be met in H1 2023 and the future funding needs of the Company will be reviewed towards the end of H1 2023 in light of the progress made and other sources of funding, such as grants, received by, and available to, the Company.
In addition, participants in the Fundraise will be issued with one warrant for every New Ordinary Share subscribed for with an exercise price of 0.18 pence per warrant. These warrants will be exercisable for two years from Admission (“New Warrants”).
The Company has also agreed to issue 17,500,000 ordinary shares in the Company and 20,000,000 warrants to an adviser to the Company for services provided in connection with the Fundraise. The 20,000,000 warrants provide the holder the right to acquire such number of new ordinary shares at an exercise price of 0.18 pence, which expire two years from Admission.
If the New Warrants and Broker Warrants were ultimately to be exercised in full, it would result in the issue of 353,333,333 new ordinary shares raising a further £636,000 for the development of the Company’s business.
To provide existing Company shareholders (“Existing Shareholders”) with an opportunity to participate in the Fundraise on the same basis as other investors, WH Ireland Limited (“WH Ireland”) has launched a Broker Option under which WH Ireland will, as agent for the Company, invite subscriptions for an additional 83,333,333 New Ordinary Shares and associated 83,333,333 New Warrants to raise up to £100,000 at the Issue Price.
Existing Shareholders who hold shares in the Company and are on the register of members as at the close of business on 20 January 2023, will be given a right to participate in the Broker Option and all orders from such Existing Shareholders will be accepted and processed by WH Ireland, subject to scale-back in the event of over-subscription under the Broker Option. The Broker Option has not been underwritten. The Broker Option opens immediately following this announcement and will close at 4.30 p.m. GMT on 30 January 2023.
There is no obligation on WH Ireland to exercise the Broker Option or to seek to procure subscribers for the Broker Option. WH Ireland may also, subject to prior consent of the Company, allocate new shares after the time of any initial allocation to any person submitting a bid after that time.
The Broker Option Shares are not being made available to the public and none of the Broker Option Shares are being offered or sold in any jurisdiction where it would be unlawful to do so. No prospectus will be issued in connection with the Broker Option.
Interested Existing Shareholders who wish to register their interest in participating in the Broker Option should do so through their nominated broker, who can contact Melvyn Brown of WH Ireland via telephone on 020 7220 1666 or email@example.com. Existing Shareholders should communicate their interest via their stockbroker as WH Ireland is unable to take orders from individual private investors.
A further announcement will be made following the end of the period during which the Broker Option is open.
Enhanced Drive Technology
As previously announced, the Company is working in collaboration with Meritor, the US-headquartered global commercial vehicle components company, to deliver a scalable 250kW/400kW format of the Company’s Pareta® electric drive platform, aimed at bus and HGV applications. The advanced prototypes produced have demonstrated good performance to date versus existing electric motor systems from global motor manufacturers, and cycle testing and optimisation continues. Work on the next design iterations is now underway, with the Company targeting delivery in Q2 2023. This is intended to prove the viability of DG Innovate’s commercial proposition to potential customers.
Following the successful completion of this stage, the Company intends to undertake a phase of pilot manufacturing and industrial engineering. This work will be part-funded by the ‘Scale up Readiness Validation of Parallel Motor for Automotive Applications’ project, which was awarded by the UK Government’s Advanced Propulsion Centre, as announced on 9 September 2022. Completion of the associated pilot facility is targeted for 2024.
The Company has also been awarded funding for, and has commenced work on, the MTorX project, which is exploring the potential of a motor design with no permanent magnet. Magnet supply chains are currently a significant issue for global motor manufacturing, with a magnetless design capable of comparable performance to traditional technologies expected to be of significant interest to OEMs.
In addition, DG Innovate was recently awarded grant funding for a feasibility study into a larger 3MW Pareta® e-drive for marine operations, with work on this study now underway. The Company believes the enhanced reliability, performance and compact nature of its novel motor technology would be very appealing to marine operators.
DG Innovate’s long-term relationship with the UK Ministry of Defence also continues to develop positively.
The Company continues to explore multiple potential routes to market for its Enhanced Drive Technology, and in addition to ongoing commercial discussions with its existing collaboration partners, it has recently entered into positive dialogue with new potential customers and partners concerning both product supply and partnerships. These include another Tier 1 supplier to the global commercial vehicle sector and a number of systems integration companies.
Enhanced Battery Technology
Development of the Company’s proprietary hard carbon anode materials continues. DG Innovate’s anode materials are produced from a sustainable bio waste product and are specifically developed for use in sodium-ion batteries. As previously noted, sodium-ion batteries offer an attractive sustainable alternative to lithium-ion, using more abundant materials, with lower carbon footprints and less environmental impact from extraction.
The previously announced Cap-Size project, which is to carry out a feasibility study for the evaluation of manufacturing the Company’s sodium-ion anode material at scale in the UK, is underway. In addition, DG Innovate’s anode material passed a significant scale-up milestone this month when it was successfully used on the industrial scale coater at the Company’s cell manufacturing partner. This key milestone serves as a proof-of-principle for coating on ‘Giga-factory’ lines and is a significant step towards full-scale commercial production.
The next milestone on DG Innovate’s development pathway is now expected to be a scale-up to produce 40Ah cells in a format that serves plug-In hybrid electric vehicles, as the Company builds the business case for full scale anode manufacture in the UK. In parallel, the EU passed a law in December 2022 stating that all battery manufacturers must now publish a full carbon footprint analysis of their whole supply chain, including manufacture of active anode and cathode materials, before allowing the sale of cells. The Company believe this further strengthens the appeal of DG Innovate’s low carbon footprint sustainable anode
Commercial discussions continue with potential customers and partners regarding the Company’s anode material. Subject to a successful conclusion to the Company’s scale-up activities, DG Innovate is continuing to evaluate in-house material production as a route to market. However, the Company still intends to primarily pursue a licensing model.
In order to reduce the Company’s ongoing costs and to ensure that the Company’s board is of an appropriate size and composition for its current stage of development, Sir Stephen Dalton and Andrew Boughtwood have both stepped down as Non-Executive Directors of the Company with immediate effect.
Following these resignations, the Company’s board comprises Nicholas Tulloch (Non-Executive Chairman), Peter Tierney (Chief Executive Officer), John (Jack) Allardyce (Chief Financial Officer), Martin Boughtwood (Chief Technical Officer), Patrick (Pat) Symonds (Non-Executive Director) and Trevor Gabriel (Non-Executive Director).
The remaining members of the board would like to thank Sir Stephen and Andrew for their contributions to the Company and wish them well in their future endeavours.
In order to reduce the cash outflow from the Company, the Directors have, since July 2022 only taken 75% of their salary and/or fee entitlements in cash. The remaining 25% of the Directors’ entitlements are being accrued by the Company and will be settled in cash or through the issue of new ordinary shares in the Company, at such time and in such manner as the Company’s Remuneration Committee determines to be appropriate. The unpaid and accrued Directors’ fees for Sir Stephen Dalton and Andrew Boughtwood are expected to be settled in cash shortly following their resignation from the Company.
Additionally, the Company’s Remuneration Committee are in discussions with the CEO, Peter Tierney, regarding increasing the exercise price of his options to acquire 690,790,814 new ordinary shares in the Company from 0.10 pence, as announced on 13 October 2022, to further demonstrate, at Mr Tierney’s request, his commitment to delivering value for, and to be in alignment with, shareholders. A further announcement will be made regarding this in due course, as appropriate.
Variation of Existing Warrant Terms
The Company currently has 790,000,000 warrants in issue affording the holder the right to acquire one new ordinary share in DG Innovate at an exercise price of 0.50 pence per share until 8 April 2023 and 645,640,300 warrants in issue affording the holder the right to acquire one new ordinary share in DG Innovate at an exercise price of 1 pence per share until 7 April 2023 (together the “Existing Warrants”). The Company announces that it has agreed with the Warrant holders that the terms of the Existing Warrants will be varied such that they will all now have an exercise price of 0.25 pence and the expiry date is now 7 April 2024.
If the above mentioned Existing Warrants were ultimately to be exercised in full, it would result in the issue of 1,435,640,300 new ordinary shares at 0.25 pence per share raising a further £3,589,101 for the development of the Company’s business.
Admission and Total Voting Rights
Application will be made for the 333,333,333 New Ordinary Shares and 17,500,000 Fee Shares to be admitted to the Official List of the FCA and to trading on the Main Market of the London Stock Exchange (“Admission”). It is expected that Admission will become effective and that unconditional dealings will commence on the London Stock Exchange at 8.00 a.m. on 30 January 2023.
Following Admission of the New Ordinary Shares and the Fee Shares, the total number of Ordinary Shares in issue will be 9,193,548,440, each with one voting right. The Company does not hold any rights in treasury. The total voting rights figure is therefore 9,193,548,440 and can be used by shareholders as the denominator for the calculations by which they will determine whether they are required to notify their interest in, or a change of their interest in, DG Innovate under the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.