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DGI plc
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== Growth Strategy == Following the reverse takeover and associated fund raising DGI PLC finds itself in a strong position to move its two key areas of focus towards product commercialisation. Some of the funding proceeds, estimated at £0.3 million - £0.6 million per annum, will be spent on strengthening the management and commercial teams. This will have the added advantage of allowing founder Martin Boughtwood to focus on product development in his new role of Chief Technical Officer. For both EDT and EBT, the near-term strategy is to progress to commercial sales agreements with existing contacts. To support this, the R&D team will be expanded during 2022, increasing overheads by c.£0.2 million per annum. In EDT, the following three near-term objectives are expected to have development costs of c.£0.3 million. Firstly, concluding the current discussions with regard to a joint venture or supply agreement with a Tier 1 supplier to the commercial vehicle sector for incorporation of EDT into a future electric drivetrain solution during 2022. Secondly, to complete the current Innovate UK grant funded project, which is being developed in conjunction with the same Tier 1 supplier, during 2022. Finally, to complete the integration and testing of EDT systems under the UK Government contract by the end of 2022. In EBT, the following short-term objectives are expected to cost a total of c.£0.25 million in development expenses. Ongoing internal testing and the manufacture of cells suitable for external testing; completing external comparison test work of EBT anode material cell level performance during H2 2022; and completing the scale-up of the current pilot scale battery manufacture, which has been partially funded by Innovate UK, in Q4 2022. Alongside the above, DGI PLC is looking to develop applications for EDT outside of its existing automotive solutions. To that end, the company is developing a zero emission marine drive application and aims to enter into a framework agreement with a marine system developer during 2022. Given the pace of progress, and following the building of the EBT pilot assembly production line, the existing R&D facilities in Caerphilly are now close to capacity. As a result, the intention is to lease an additional facility during 2022 ahead of expected product manufacturing which is likely to commence in 2023/24. In the longer term, DGI PLC sees significant potential for its revenues to scale up, particularly given the growth forecasts in its target markets, including some of those Align Research has described. Its ultimate goal is to evolve from being an R&D business into a Tier 2 supplier and/or technology licensor to the electric mobility and energy storage industries. In terms of business model, in-house manufacturing and direct product sales are expected to form the basis of any future commercial agreements with the UK Government and potentially Tier 1 manufacturers in the longer term. This model is likely to offer the opportunity for higher margins but also requires moderate up-front capital expenditure. To broaden the mix of revenues, DGI PLC expects its longer-term revenue model to include licensing (whereby a customer would pay an upfront fee for the technology transfer) and royalty agreements based on sales or savings. Joint ventures will also be considered, allowing a sharing of margins while keeping large-scale manufacturing costs at arm’s length.
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