OTAQ : Annual Report for the nine-month period ended 31 December 2022

Company Registration No. 11429299

OTAQ PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE NINE-MONTH PERIOD ENDED 31 DECEMBER 2022

OTAQ PLC

CONTENTS

	Page
Strategic Report
Company Information	1
Financial Highlights	2
Chairman's Statement	3
Chief Executive's Report	4 - 5
Chief Financial Officer's Review	6 - 8
Directors' Duty to Promote the Success of the Group	9
Environmental, Social and Governance	10
Company Overview and Risks	11 - 13
Corporate Governance
Board of Directors	14
Corporate Governance Statement	15 - 18
Audit Committee Report	19 - 20
Remuneration Committee Report	21 - 23
Directors' Report	24 - 27
Independent Auditor's Report	28 - 31
Financial Statements
Consolidated Statement of Comprehensive Income	32
Consolidated Statement of Financial Position	33
Consolidated Statement of Changes in Equity	34
Consolidated Statement of Cash Flows	35
Notes to the Consolidated Financial Statements	36 - 66
Company Statement of Financial Position	67
Company Statement of Changes in Equity	68
Notes to the Company Financial Statements	69 - 71

OTAQ PLC

STRATEGIC REPORT

Company registration number	11429299
Directors	Mr A Reynolds
	Mrs S E Stoten
	Mr P D Newby
	Mr W G Watt
	Mr M J Enright
	Mr G T Clifford
	Dr HV Rotsch
Secretary	Mr M J Enright
Registered office	8-3-4 Harpers Mill, South Road
	White Cross
	Lancaster
	England
	LA1 4XF
Auditor	Azets Audit Services
	Fleet House
	New Road
	Lancaster
	LA1 1EZ
Corporate advisor and broker	Dowgate Capital Limited
	15 Fetter Lane
	London
	EC4A 1BW
Solicitors	CMS Cameron McKenna Nabarro Olswang LLP
	1 West Regent Street
	Glasgow
	G2 1AP
Website	www.otaq.com

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OTAQ PLC

STRATEGIC REPORT

The directors' present their strategic report for the Group for the nine-month period ended 31 December 2022. Comparatives are for the twelve month period to 31 March 2022.

FINANCIAL HIGHLIGHTS FOR THE NINE-MONTH PERIOD ENDED 31 DECEMBER 2022

Group	2022	2021/22
	£'000	£'000
Revenue	2,561	4,292
Gross profit	794	2,027
Adjusted EBITDA*	(258)	(49)
Net (debt) / cash**	758	(1,268)

*Adjusted EBITDA (earnings before income, tax, depreciation, exceptional costs, impairment, share option charges and amortisation) is reconciled from the statutory operating loss per the consolidated statement of comprehensive income as follows:

	2022	2021/22
	£'000	£'000
Operating loss	(2,310)	(2,114)
Share option charge	-	20
Exceptional costs	1,230	257
Amortisation of intangible assets	326	572
Impairment of rental units	62	311
Right-of-use depreciation	130	164
Depreciation on property, plant and equipment	304	741
Adjusted EBITDA	(258)	(49)

Statutory basic losses per share were 5.0p (2021/22: loss 5.9p) and statutory diluted losses per share totalled

5.0p (2021/22: loss 5.9p)

Adjusted EBITDA is an alternative performance measure used internally to monitor the Group's performance. Exceptional costs in the year relate to legal fees of £233,000 in relation to the November 2022 share issue, delisting from the London Stock Exchange and admittance to the Aquis Stock Exchange. There is £121,000 charge for recoverability of a loan to the Employee Benefit Trust based on the fall in OTAQ plc's share price and a further charge of £876,000 related to the impairment of assets and stock in relation to the Aquaculture division.

**Net debt is reconciled from the statutory cash position per the consolidated statement of financial position as follows:

	2022	2021/22
	£'000	£'000
Cash and cash equivalents	2,337	1,008
Non-current lease liabilities	(181)	(255)
Current lease liabilities	(172)	(161)
Non-current financial liabilities	(1,054)	(1,392)
Current financial liabilities	(447)	(421)
Current deferred payment for acquisition	-	(213)
Income tax asset	275	166
Net cash / (debt)	758	(1,268)

This is an alternative performance measure and used internally to monitor the Group's liquidity. The directors consider the income tax credit to be part of net debt as the asset will be converted into cash and is not part of its normal working capital requirements as other assets are.

Strategic and Operational Highlights

• £2.3m of cash following the successful equity fund raising in November 2022
• New sales resource recruited in Aquaculture and Offshore divisions
• Commercialisation and near-commercialisation of key projects in Aquaculture and Geotracking poised to deliver growth in 2023

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OTAQ PLC

STRATEGIC REPORT

CHAIRMAN'S STATEMENT FOR THE NINE-MONTH PERIOD ENDED 31 DECEMBER 2022

I'm pleased to present my first Chairman's Statement for the nine-month period ended 31 December 2022.

The Group has spent the past nine-months working hard to develop and expand its product portfolio in each of its core markets, being Offshore, Aquaculture and Geotracking. Initial sales of some of these new products have been made in this or the prior financial period and the Group is now working hard to develop new markets and commercial opportunities for these products. Where development of key strategic products is not yet complete, efforts are being made in the new year to complete this development where credible market conditions prevail.

I am hopeful that 2023 will yield the benefit of our expanded product portfolio and I will be able to present improved revenue and profit performance for the year to 31 December 2023.

Strategy

The strategy of the business is to use the Group's customer base in the Offshore and Aquaculture industries to allow it to sell our new products developed by the Group's product development team. Over time, the Group intends to have a full suite of complementary and sophisticated products for use in the Aquaculture industry, be that salmon or shrimp, as well as target niche markets in the Offshore sector where the Group can continue to enjoy the success historically seen. The Geotracking division will also make use of the products developed for this division to target specific sectors that the Group believe will benefit significantly from this technology.

Offshore

The Offshore division, comprised of the previously separately reported Connectors and Offshore divisions, has continued to perform well and is expected to continue do so in 2023. The Group now sees additional opportunities for this division in new territories such as North America and other global markets. Sales and marketing resource is being invested to help develop the potential in this division and accelerate revenue growth.

Aquaculture

The Group has developed exciting new products for use in the Aquaculture industry. As revenue from the company's historically core product, Sealfence, has reduced, product development has been pursued in collaboration with key strategic partners to permit entry into the shrimp market, water quality monitoring sectors and plankton analysis. Whilst not all of these products are yet fully commercialised, the Group continues to believe in these technologies and the huge market potential that is possible.

Geotracking

The Geotracking technology developed since 2020 has enjoyed some commercial success. In the year to 31 March 2022, the Group benefited from a large contract award. Variants of the Geotracking device remain in development consisting of tracking devices for use in the railway industry and other similar sectors. Trials with partners in the railway industry are ongoing with orders placed and deliveries made. The potential for significant orders within this division in 2023 exists and the Group is working hard to achieve this.

Our Team

Despite the challenges the Group has faced over the past year, I have been impressed since I joined with the passion and enthusiasm that exists within the business. I am delighted to welcome Giles Clifford to the Board and thank Malcolm Pye for his contribution now he has left. I am confident the team will work diligently to deliver the performance that the Board expects over the next twelve months.

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