Path Investments to change name to DG Innovate and £4.6 million fundraise

Path Investments plc

Path Investments plc (LON:PATH), has announced the publication of a prospectus in relation to the Company’s proposed acquisition of DG Innovate Ltd which contains a notice of General Meeting. This follows the Company’s announcements on 13 August 2021, 31 December 2021 and 1 February 2022 that it had entered into a conditional sale and purchase agreement to acquire the entire issued share capital of DG Innovate.

Highlights

·    As previously announced the Company has conditionally agreed to acquire DG Innovate. The initial consideration of £32.4 million is to be satisfied by the issue to the DG Innovate Shareholders of 5,397,451,305 Path Ordinary Shares (“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 Path Shares (“Deferred Consideration Shares”) on the first anniversary of completion, will become payable should DG Innovate 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 million or more.

·     The Acquisition is conditional, inter alia, on shareholder approval of the proposals and upon the Company’s Ordinary Shares being re-admitted to the Standard Listing segment of the Official List and trading on the Main Market of the London Stock Exchange. A general meeting to obtain Path shareholder approval is to be held at 2:00 p.m. on 1 April 2022.

·  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:

o  Enhanced Drive Technology (EDT) – High efficiency, lightweight, cost-effective electric motors and electronics; and

o  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.

·      The Company has conditionally raised £2,550,000 through the issue of 510,000,000 Subscription Shares at 0.5p per Ordinary Share. Further, the Company has received irrevocable exercise notices, conditional on Admission, in respect of 830,800,000 Warrants (0.25p) raising an additional £2,077,000.

·      It is proposed that the Company’s name be changed to DG Innovate plc.

·    The proposed appointment of Martin Boughtwood as CTO and Patrick Symonds, Sir Stephen Dalton, Andrew Boughtwood and Trevor Gabriel as non-executive directors of the Company and the proposed retirement of Brent Fitzpatrick.

·     If the proposals are approved at the General Meeting, it is expected that Admission and dealings in the Company’s Ordinary Shares will commence on the London Stock Exchange on or around 8.00 a.m. on 8 April 2022.

Commenting, Christopher Theis, CEO of Path Investments, said:

“We are delighted to have completed the required prospectus in relation to our proposed acquisition of DG Innovate and to now be seeking formal shareholder approval for the Acquisition. We believe that the acquisition of DG Innovate presents a compelling value opportunity for the Company with DG Innovate having a strong technology and IP portfolio, targeted at current market technology’s shortcomings, coupled with significant commercial relationships, high calibre technical staff and near-term commercialisation opportunities.

“We have assembled a strong board to guide the new DG Innovate plc and we look forward to shareholders having the opportunity to formally approve the proposals at the General Meeting later this month.  I would also like to take this opportunity to thank Brent Fitzpatrick, who is proposing to step down as Chairman at Admission, for his wise counsel, support and dedication over a long period as we sought to conclude an appropriate transaction that we believe can deliver significant value for shareholders.”

Capitalised terms in this announcement shall have the same meaning as in the Prospectus.

Background

The Company announced on 12 August 2021 that it had conditionally agreed to acquire the entire issued share capital of DG Innovate. The initial consideration, is £32,384,707, to be satisfied by the issue to the DG Innovate Shareholders of the Initial Consideration Shares at a deemed issue price of 0.6 pence per Ordinary Share.

The terms of the SPA were varied on 1 February 2022 and it was agreed that further consideration of £5,373,665 would be payable to the Sellers, to be satisfied by the issue of the Deferred Consideration Shares, subject to the achievement by DG Innovate of the Deferred Consideration Targets during the first year following Completion. The Deferred Consideration Targets require the obtention within 12 months following completion by the DG Innovate Group of one or more profit generating supply contract(s) with a combined value of £5,000,000 or more, or (as may be agreed in writing between the Company and the Sellers’ Representative) with a combined potential value of £5,000,000 or more.

The Acquisition constitutes a Reverse Takeover under the Listing Rules as it will result in a fundamental change in the business and management of the Company. Trading in the Existing Ordinary Shares was suspended with effect from 12 August 2021 on announcement of the potential reverse takeover and pending the publication of a prospectus and completion of the Acquisition. The Acquisition is conditional, inter alia, upon Admission and the approval by Existing Shareholders of certain Resolutions at the Company’s General Meeting to be held on 1 April 2022.

The Prospectus explains the background to and reasons for the Acquisition, how it aligns with the Company’s strategy and why the Existing Directors believe that the Acquisition and the Subscription are in the best interests of the Company and its Existing Shareholders.

The proposals are conditional, inter alia, on the passing of the Resolutions by Shareholders at the General Meeting and Admission. If the proposals are approved, it is expected that Admission will become effective and dealings in the Path Ordinary Shares will commence on the London Stock Exchange on or around 8.00 a.m. on 8 April 2022.

Background on DG Innovate

DG Innovate (formerly Deregallera Holdings Ltd) is an advanced research and development company pioneering sustainable and environmentally considerate improvements to electric mobility and storage, using abundant materials and the best engineering and scientific practices. DG Innovate is currently developing its products alongside a number of major manufacturers across the transportation and energy sectors, research institutions and the UK Government and has filed 18 patents worldwide.

DG Innovate’s current research and development activities are broadly split into two areas, focusing on novel electric motor technologies and energy storage solutions. Its two main products are:

•   Enhanced Drive Technology (EDT) – High efficiency, lightweight, cost-effective electric motors and electronics; 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

DG Innovate was founded in 2009 by Martin Boughtwood with a vision of delivering sustainable and environmentally considerate improvements to electric mobility and storage, using abundant materials and the best engineering and scientific practices. Specifically, DG Innovate has sought to address the major problems facing both electric mobility and energy storage. For the former, the key barrier to market penetration to date has been the effective real-world range of electric vehicles. DG Innovate has therefore focused on developing electric drive systems which aim to deliver improved range over existing technology, based on the same battery capacity, by reducing losses and improving efficiency. DG Innovate has a long-standing working relationship with the UK Government and is also collaborating with a global Tier 1 supplier to the commercial vehicle market.

In its energy storage development, which commenced in 2013, DG Innovate has focused on developing anode active materials as a key enabling technology for sodium-ion batteries. DG Innovate is in collaboration or commercial contact with several companies throughout the supply chain with the view towards volume commercialisation in the medium term.

DG Innovate has developed a significant intellectual property portfolio since its foundation, including a novel electric motor and corresponding architecture and a suite of energy storage materials (including sodium-ion cells and supercapacitors). It has been granted 11 patents during this time, with a further seven pending and a number of drafts under consideration.

To date DG Innovate has received approximately £18.6 million in funding through a mixture of equity from private funders, debt, grants and research funding from the UK Government, the Welsh Development Agency and through highly competitive grant awards under the Innovate UK Faraday Challenge. Additionally, Path has provided secured loan facilities to DG Innovate of which £900,000 has been drawn. As at the Last Practicable Date DG Innovate has £150,000 remaining available under the facilities.

Fundraising and use of proceeds

The Company is undertaking a Subscription to raise £2,550,000 by the issue of 510,000,000 Subscription Shares at 0.5p per Ordinary Share. The Company has entered into subscription agreements with the Subscribers which are conditional, inter alia, upon completion of the Acquisition and Admission. Further, the Company has received irrevocable exercise notices, conditional on Admission, in respect of 830,800,000 Warrants (0.25p) raising an additional £2,077,000.

The aggregate fundraise of approximately £4,627,000 will be used by the Enlarged Group to fund research and development costs, working capital for the Enlarged Group, transaction costs associated with the Acquisition and Admission, and to repay loans from certain DGI shareholders.

Proposed Board on Admission

The Company’s Existing Board consists of four Directors, Brent Fitzpatrick, Christopher Theis, John Allardyce and Nicholas Tulloch.  It is proposed that Mr Fitzpatrick will step down from the Board at Admission and it is proposed that Martin Boughtwood, Patrick Symonds, Sir Stephen Dalton, Andrew Boughtwood and Trevor Gabriel be appointed. The Board would like to thank Mr Fitzpatrick for his considerable efforts in his time with the Company.

Further details on the Directors are set out in the Appendix below.

The Takeover Code

The Acquisition gives rise to certain considerations under the Takeover Code. Under Rule 9 of the Takeover Code (“Rule 9”), any person who acquires an interest in shares (as defined in the Takeover Code), whether by a series of transactions over a period of time or not, which (taken together with any interest in shares held or acquired by persons acting in concert (as defined in the Takeover Code) with him) in aggregate, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, that person is normally required by the Panel to make a general offer, in cash, to all of the remaining shareholders to acquire their shares.

The Company has agreed with the Takeover Panel that certain of the shareholders of DG Innovate should be considered to be “acting in concert” for the purposes of the Takeover Code (as such term is defined in the Takeover Code).  At Admission, following completion of the Acquisition and Subscription and conditional on the Rule 9 Waiver, the Concert Party will be interested in an aggregate of 4,468,274,325 Ordinary Shares representing approximately 50.5 per cent. of the Enlarged Share Capital. The members of the Concert Party and the interest of each member of the Concert Party in the Enlarged Share Capital are set out below in the appendix.

The Company has applied to the Panel for, and the Panel has agreed to, a waiver of the obligations under Rule 9 of the Takeover Code, subject to the passing of the Rule 9 Waiver Resolution by the Independent Shareholders on a poll at the General Meeting, to waive the obligation of the Concert Party, collectively and/or individually, to make a mandatory general offer under Rule 9 for the Ordinary Shares not already owned by it as would otherwise arise following the issue of the Consideration Shares and Concert Party Options.

Given that, following the issue of the Initial Consideration Shares the Concert Party will hold more than 50 per cent. of the voting share capital of the Company, any further acquisitions of the Company’s shares by any member of the Concert Party, whether individually or collectively, would normally not trigger any obligation under Rule 9 of the Takeover Code to make a general mandatory offer to Shareholders to acquire the entire issued share capital of the Company. However, notwithstanding the waiver and Rule 9 Waiver resolution, individual members of the Concert Party would not be able to increase their percentage interest in the Ordinary Shares of the Company through, or between, a Rule 9 threshold without the consent of the Panel.

Following Admission, should the Deferred Consideration Shares be issued in full and the Concert Party exercise the options held by them (assuming no new shares are issued in the meantime), the Concert Party will hold in aggregate a maximum of 5,414,930,957 Ordinary Shares representing approximately 54.5 per cent. of the Partially Diluted Enlarged Share Capital. Should the Concert Party holding fall below 50 per cent. prior to the issue of Deferred Consideration Shares and/or the Concert Party Options being exercised, subject to approval of the Rule 9 Waiver, the Concert Party will not be required to make a mandatory general offer as a result of the acquisition of Ordinary Shares pursuant to either the exercise of the Concert Party Options or the issue of the Deferred Consideration Shares.

Change of Name

To support the strategy going forwards, the Company is also proposing to change its name to DG Innovate plc, subject to the passing of the proposals and Admission. At that time, the Company’s stock ticker symbol will be changed to “DGI”. The Company’s website address will be changed to www.dgiplc.com.

Issue of Warrants

The Company has agreed, subject to Shareholder approval at the General Meeting, to allot a total of 670,400,000 Warrants (1p) on the basis that: (i) one Warrant (1p) will be issued to each Subscriber for every two Subscription Shares issued to each Subscriber, which will result 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 will result in the issue of 415,400,000 Warrants (1p).

Availability of the Prospectus 

The Prospectus will be made available on the Company’s website at: www.pathinvestmentsplc.com. An electronic copy of the Prospectus will also be submitted to the National Storage Mechanism and should be available shortly for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Notice of General Meeting

A General Meeting of the Company will be held at the offices of Womble Bond Dickinson (UK) LLP, 4 More London Riverside, SE1 2AU on 1 April 2022 at 2:00 p.m.

The Notice of General Meeting and details of the matters to be considered at the meeting, which includes inter alia shareholder approval for the issue of shares in connection with the proposed acquisition of DG Innovate and the Subscription, is contained within the Prospectus.

In accordance with the requirements of the Panel, the Rule 9 Waiver Resolution will be taken on a poll of Independent Shareholders. Certain shareholders are not considered to be independent for the purposes of the Rule 9 Waiver and have undertaken to the Company that they will not vote on the Rule 9 Waiver Resolution in respect of in aggregate 355,300,000 Ordinary Shares. Consequently, only Independent Shareholders holding 1,674,163,802 Ordinary Shares, representing 82.5% of the existing share capital of the Company as at the date of this Document, will be entitled to vote on Rule 9 Waiver Resolution.

Total Voting Rights

The total number of Ordinary Shares with voting rights in the Company with effect from Admission is 8,842,715,107. The Company does not hold any shares in treasury and all of the ordinary shares have equal voting rights. This figure may be used by shareholders as the denominator for the calculations by which they determine if they are required to notify their interest in, or a change of their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules.

Proposed Timetable of Key Events

The proposed timetable of key events is as follows:

Publication of Prospectus14 March 2022
Latest time and date for receipt of Forms of Proxy for the General Meeting2.00 p.m. on 30 March 2022
Time and date of General Meeting2.00 p.m. on 1 April 2022
Result of the General Meeting announced through RIS1 April 2022
Cancellation of trading of Ordinary Shares8.00 a.m. on 8 April 2022
Completion of the Acquisition8 April 2022
Re-Admission and commencement of dealings on the London Stock Exchange of the Enlarged Share Capital8.00 a.m. on 8 April 2022
Delivery of New Ordinary Shares into CREST as soon as practicable after8:00 a.m. on 8 April 2022
New Ordinary Share certificates dispatched15 April 2022

Admission Statistics

Number of Existing Ordinary Shares at the date of this announcement2,029,463,802
Number of Initial Consideration Shares5,397,451,305
Number of Subscription Shares510,000,000
Number of Warrant Shares New Ordinary Shares issued on exercise of Warrants (0.25p)830,800,000
Number of Fee Shares75,000,000
Enlarged Share Capital8,842,715,107
Gross Proceeds of the Subscription£2,550,000
Expenses relating to the Subscription£153,000
Net Proceeds of the Subscription receivable by the Company£2,397,000
Transaction Costs£1,081,319
Warrant Exercise Proceeds following exercise of Warrants (0.25p)£2,077,000
Initial Consideration Shares as a percentage of the Enlarged Share Capital61.0%
Subscription Shares as a percentage of the Enlarged Share Capital5.8%
Warrant Shares as a percentage of the Enlarged Share Capital9.4%
Fee Shares as a percentage of the Enlarged Share Capital0.8%
Subscription Price0.5 pence
Market capitalisation at the Subscription Price on Admission£44,213,575.54
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Path Investments plc

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