CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE year ENDED 31 MARCH 2021

	Note	31 March 2021	31 March 2020
		£'000	£'000
Cash flows from operating activities
Loss before taxation		(726)		(2,760)
Adjustments for non-cash/non-operating items:
Depreciation of property, plant and equipment	10	693		579
Loss on disposal of property, plant and equipment	10	5		8
Depreciation of right-of-use assets	11	118		20
Gain on write-off of lease liability	11	(37)		-
Loss on disposal of right-of-use assets	11	25		-
Amortisation of intangible assets	12	165		163
Impairment of goodwill	12	-		28
Gain on remeasurement of deferred consideration payable	21	(13)		-
Re-translation of foreign subsidiaries		21		-
Share option charge	25	55		559
Share-based payment charge as a result of listing		-		661
Non-cash costs of acquisition		-		1,216
Finance income		-		(2)
Finance expense		58		158
		───────		───────
		364		630
Changes in working capital:
Decrease/ (Increase) in inventories		73		(375)
Decrease/ (Increase) in trade and other receivables		47		(121)
(Decrease)/ Increase in trade and other payables		(360)		633
		───────		───────
Cash from operations		124		767
Taxation		48		70
		───────		───────
Net cash from operating activities		172		837
		───────		───────
Cash flows from investing activities
Purchases of tangible fixed assets	10	(804)		(497)
Purchases of intangible assets	12	(966)		(383)
Cash acquired on reverse acquisition		-		2,601
Acquisition of subsidiaries	21	(329)		(288)
Acquisition of unlisted equity securities	13	(297)		-
Interest received		-		2
		───────		───────
Net cash (used in)/ from investing activities		(2,396)		1,435
		───────		───────
Cash flows from financing activities
Proceeds from issues of ordinary share capital		-		1,500
Expenses of share issues		-		(141)
Shares issued during the year		11		-
Proceeds from loans		2,000		-
Proceeds from shareholder loan advances		-		175
Principal element of lease payments		(111)		(20)
EBT loan		(150)		-
Repayment of development loan		(487)		(8)
Repayment of hire purchase		-		(2)
Interest paid		(6)		(57)
		───────		───────
Net cash from financing activities	24	1,257		1,447
		───────		───────
Net (decrease)/ increase in cash and cash equivalents		(967)		3,719
Cash and cash equivalents at beginning of year		4,087		368
		───────		───────
Cash and cash equivalents at end of year		3,120		4,087
		═══════		═══════

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2021

 

1.       Reporting entity

 

OTAQ plc ("the Company'') and its subsidiaries (together, "the Group'') develop, provide and support the technology for use in the aquaculture industry and offshore oil & gas industries.

 

The principal activity of the Company is that of a holding company for the Group as well as performing all administrative, corporate finance, strategic and governance functions of the Group.

 

The Company is a public limited company, which is listed on the London Stock Exchange and domiciled in England and incorporated and registered in England and Wales.

 

The address of its registered office is 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England, LA1 4XF. The registered number of the Company is 11429299. 

 

The principal accounting policies adopted by the Group and Company are set out in note 2.

 

2.       Accounting policies

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied unless otherwise stated.

 

(a)       Basis of preparation

 

The consolidated financial statements of OTAQ plc have been prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002, issued by the International Accounting Standards Board (IASB), including interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified for any financial assets which are stated at fair value through profit or loss. The consolidated financial statements of OTAQ plc are presented in pounds sterling, which is the presentation currency for the consolidated financial statements. The functional currency of each of the group entities is Sterling apart from OTAQ Chile SpA which is the Chilean Peso. Figures have been rounded to the nearest thousand.

 

The preparation of financial statements in conformity with IFRS prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement and complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

 

The Group has taken advantage of the audit exemption for three of its subsidiaries, OTAQ Aquaculture Limited (company number SC498922), OTAQ Offshore Limited (company number SC314760) and OTAQ Connectors Limited (company number 03390514) by virtue of s479A of the Companies Act 2006. The Group has provided parent guarantees to these three subsidiaries which have taken advantage of the exemption from audit.

 

Reverse Takeover of Hertsford Capital plc

On 31 March 2020 the Company, then named Hertsford Capital plc, became the legal parent of OTAQ Group Limited. The consolidated financial statements are presented as proforma to present the substance of the transaction.

 

This transaction is deemed outside the scope of IFRS 3 Business Combinations (Revised 2008) and not considered a business combination because the directors made a judgement that prior to the transaction, Hertsford Capital plc was not a business under the definition of IFRS 3 Appendix A and the application guidance in IFRS 3.B7-B12 due to Hertsford Capital plc being a shell company that had no processes or capability for outputs (IFRS 3.B7).

 

On this basis, the Directors have developed an accounting policy for this transaction, applying the principles set out in IAS 8.10-12, in that the policy adopted is:

 

-     relevant to the users of the financial information;

-     more representative of the financial position;

-     performance and cash flows of the Group;

-     reflects the economic substance of the transaction, not merely the legal form; and

-     free from bias, prudent and complete in all material aspects.

                                                                                                                                  

The accounting policy adopted by the Directors applies the principles of IFRS 3 in identifying the accounting acquirer and the presentation of the consolidated financial statements of the legal parent (OTAQ plc) as a continuation of the accounting acquirer's financial statements (OTAQ Group Limited). This policy reflects the commercial substance of this transaction as follows:

-     the original shareholders of the subsidiary undertakings are the most significant shareholders post initial public offering, owning 70.5 per cent of the issued share capital; and

-     the cash consideration paid as part of the initial public offering returned equity to the original shareholders of the legal subsidiary undertaking and as a consequence diluted their shareholding.

                                                                                                                                                                  

Accordingly, the following accounting treatment and terminology has been applied in respect of the reverse acquisition:

-     the assets and liabilities of the legal subsidiary OTAQ Group Limited are recognised and measured in the group financial statements at the pre-combination carrying amounts, without reinstatement to fair value;

-     the retained earnings and other equity balances recognised in the group financial statements reflect the retained earnings and other equity balances of OTAQ Group Limited immediately before the business combination, and the results of the year from 1 April 2019 to the date of the business combination are those of OTAQ Group Limited.

However, the equity structure appearing in the group financial statements reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the business combination; the cost of the combination has been determined from the perspective of OTAQ Group Limited.

 

The fair value of the shares in OTAQ Group Limited has been determined from the OTAQ plc shares prior to its suspension for the trading on the London Stock Exchange for 10 pence per share. The value of the consideration shares was £12,385,000. The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is £3,231,000. The difference between the notional consideration paid by OTAQ plc for OTAQ Group Limited and the OTAQ plc net assets acquired of £2,570,000 has been charged to the consolidated statement of comprehensive income as a share-based payment charge as a result of listing amounting to £661,000 with a corresponding entry to the reverse acquisition reserve.                                  

 

Transaction costs of equity transactions relating to the issue and re-admission of the Company's shares are accounted for as a deduction from equity where they relate to the issue of new shares and listing costs are charged to the consolidated statement of comprehensive income.     

                                                                                        

(b)       Basis of consolidation

The Group's financial statements consolidate the financial information of OTAQ plc and the entities it controls (its subsidiaries) drawn up to 31 March each year.

 

All business combinations (except for the Hertsford Capital plc reverse takeover on 31 March 2020 which used the merger accounting method) are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

 

The Group measures goodwill at the acquisition date as:

-     the fair value of the consideration transferred; plus

-     the recognised amount of any non-controlling interests in the acquiree; plus

-     the fair value of the existing equity interest in the acquiree; less

-     the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

 

Transaction costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

 

All subsidiaries are entities over which the Group has the power to govern the financial and operating policies. The percentage holdings of the Company in its subsidiaries is set out in note 14. The subsidiaries have been fully consolidated from the date control passed.

 

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. The accounting policies of subsidiaries are amended where necessary to ensure consistency with the policies adopted by the Group.                         

 

(c)       Going concern

The Group is developing new products for its services, including procurement of hardware for installation on aquaculture sites, principally salmon farms. The Group has invested heavily in the development and procurement of these products and has achieved this through use of its cash reserves as well as the drawdown of a £2m loan facility during the year to 31 March 2021.

 

As at 31 March 2021, the Group had cash and cash equivalents of £3,120,000. The directors have prepared and reviewed the Group's funding requirements over the next two years and are confident the Group has sufficient financial resources to meet its financial commitments and strategic objectives.

 

The Group has experienced some impact due to the Covid-19 pandemic but has taken measures to ensure it can continue to operate including introducing safe ways of working for its employees. The Offshore business unit has experienced varied demand during the year but the continued development and launch of new products during the year has allowed it to deliver a solid financial performance. The Aquaculture business unit, particularly in Scotland, has been the subject of proposed regulatory reviews and the impact of these on customer sentiment continues to be monitored. However, the forecasts generated by the Group, which cover the period to July 2022 and have been modelled for reductions in anticipated revenue, demonstrate sufficient ongoing demand to satisfy liabilities as they fall due.

 

For these reasons the directors continue to adopt the going concern basis in preparing Group's financial statements.

 

(d)       Functional and presentational currency

The financial statements are presented in pounds sterling, which is the Group's functional currency. All financial information presented has been rounded to the nearest thousand.

 

(e)       Foreign currency transactions

Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the Consolidated statement of comprehensive income.

 

(f)        Segmental reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segmental information is set out in note 4.

 

(g)       Revenue recognition

Revenue is recognised in accordance with IFRS 15. Revenue is recognised when a contract with a customer is held and the performance obligation associated with the customer contract has been satisfied. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other sales taxes or duties.  Revenue under service contracts is recognised over time following the performance obligation being satisfied over time.

 

(h)       Government grants

Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment.  Government grants of a revenue nature are deducted from administrative expenses in the consolidated statement of comprehensive income in line with the terms of the underlying grant agreement. Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset. Government grants relating specifically to Covid-19 support measures have been disclosed as "other operating income".

 

(i)        Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.

 

Lease payments included in the measurement of the lease liability comprise:

 

-     Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;

-     Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

-     The amount expected to be payable by the lessee under residual value guarantees;

-     The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

-     Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

 

The lease liability is presented as a separate line in the statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

 

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

 

-     The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

-     The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and

-     A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

 

The Group did not make any such adjustments during the periods presented.

 

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

 

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

 

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.

 

The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the statement of financial position.

 

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in 'Administrative expenses' in profit or loss.

 

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.

 

(i)        Finance expense

Finance expense comprises interest expense on borrowings. All borrowing costs are recognised using the effective interest method.

 

(j)        Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

 

(k)       Income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to, the tax authorities.  The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:

-     where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss; and

-     in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantively enacted by the date and which are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.

 

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future is uncertain.

 

(l)        Property, plant and equipment

Property, plant and equipment assets are recognised initially at cost.  After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses.  Cost comprises both the aggregate amount paid and the fair value of any other consideration given to acquire the asset, and includes costs directly attributable to making the asset capable of operating as intended.

 

Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component.

The following bases and rates are used to depreciate classes of assets:

 

Systems for rental	straight line over 4 years
Plant and equipment	straight line over 4 to 5 years
Office Equipment	straight line over 2 to 4 years
Motor vehicles	straight line over 3 years

 

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

 

All property, plant and equipment items are de-recognised on disposal, or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset is included in the Consolidated statement of comprehensive income in the period of de-recognition.

 

(m)     Intangible assets

Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill, provided they are separable and their fair value can be measured reliably.  This includes the costs associated with acquiring and registering patents in respect of intellectual property rights. Trademarks are assessed on recognising fair value of assets acquired by calculating the future net book value of expected cash flows.

 

Development costs are also charged to the statement of comprehensive income in the year of expenditure, except when individual projects satisfy the following criteria:

·    the project is clearly defined and related expenditure is separately identifiable;

·    the project is technically feasible and commercially viable;

·    current and future costs will be exceed by future sales; and

·    adequate resources exist for the project to be completed.

 

Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight-line basis over those lives. Development costs are amortised once the project to which they relate is viewed to be completed and capable of generating revenue. The nature of those intangibles recognised and their estimated useful lives are as follows:

 

Intellectual property licence	straight line over 4 years
Development costs	straight line over 6 years
Trademarks	straight line over 8 years

 

(n)       Impairment of assets

At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an assessment of the asset's recoverable amount.

 

An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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. In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators.  Impairment losses on continuing operations are recognised in the Consolidated statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

 

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased.  If such indication exists, the recoverable amount is estimated.  A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised.  If that is the case the carrying amount of the asset is increased to its recoverable amount.  That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.  Such reversal is recognised in the Consolidated statement of comprehensive income unless the asset is carried at re-valued amount, in which case the reversal is treated as a valuation increase. 

 

After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

 

The carrying values of plant, equipment, intangible assets and goodwill as at the reporting date have not been subjected to impairment charges.

 

(o)       Inventories

Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving or obsolete items.

 

(p)       Financial instruments

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) - debt investment; FVOCI - equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

The Group has only financial assets measured at amortised cost. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

 

-     it is held within a business model whose objective is to hold assets to collect contractual cash flows;

-     its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

Financial assets - Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

-     the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

-     how the performance of the portfolio is evaluated and reported to the Company's management;

-     the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

-     how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

-     the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

 

-     contingent events that would change the amount or timing of cash flows;

-     terms that may adjust the contractual coupon rate, including variable‑rate features;

-     prepayment and extension features; and

-     terms that limit the Group's claim to cash flows from specified assets (e.g. non‑recourse features).

 

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in the income statement. Any gain or loss on derecognition is recognised in the income statement.

 

Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into.

 

Basic financial liabilities, including trade and other payables and bank loans are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

 

Derecognition of financial liabilities

Financial liabilities are derecognised when, and only when, the company's obligations are discharged, cancelled, or they expire.

 

(p)       Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less.

 

(q)       Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the consolidated statement of comprehensive income, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain. 

 

Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

 

There were no provisions at 31 March 2021 (2020: £nil).

 

(r)        Share capital

Proceeds on issue of shares are included in shareholders' equity, net of transaction costs.  The carrying amount is not re-measured in subsequent years.

 

(s)       Investments

Fixed asset investments in subsidiaries are stated at cost less provision for impairment.

 

(t)        Unlisted Investments

Unlisted investments are stated at cost less provision for impairment.

 

(u)       Defined contribution pension scheme

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period.

 

(w)      New and amended standards adopted by the Group

 

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 April 2020:

 

·    Definition of Material - Amendments to IAS 1 and IAS 8;

·    Definition of a Business - Amendments to IFRS 3;

·    Revised Conceptual Framework for Financial Reporting; and

·    Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7.

 

With an exception of the amended definition of a Business, which will likely result in more acquisitions being accounted for as asset acquisitions, the amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. 

 

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2021 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods.

 

3.       Use of estimates and judgements

 

The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year.  The nature of estimation means that actual amounts could differ from those estimates.  Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements. The key sources of judgement and estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

 

Taxation

Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised deferred tax asset for tax losses and other timing differences at 31 March 2021 was £243,000 (2020: £647,000). The value of the deferred tax liability at the year-end is £176,000 (2020: £136,000) and which has not been recognised, as it is covered by accumulated tax losses. Further information is included in notes 8 and 23.

 

Revenue recognition

Judgements are required as to whether and when contractual obligations have been fulfilled and in turn the period over which systems rental revenue should be recognised. Further information is included in note 4.

 

Useful Economic Life of Assets

Judgements are required as to the useful economic life of Sealfence assets. Further information on all useful economic lives of assets is included in notes 2 and 10.

 

Development costs

Management judgement is required to determine the appropriate value of an asset as well as when an asset should be recognised. These judgements are based upon the likely timing and level of future revenues. Development costs are periodically assessed for impairment and costs are written-off if the project to which they relate is no longer considered to be commercially viable. The value of the development costs capitalised at 31 March 2021 was £1,262,000 (2020: £650,000). Further information is included in note 12.

 

4.       Segmental information

 

A segment is a distinguishable component of the Group's activities from which it may earn revenue and incur expenses, whose operating results are regularly reviewed by the Group's chief operational decision makers to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available. In identifying its operating segments, management generally follows the Group's service line which represent the main products and services provided by the Group.

 

The directors believe that the Group operates in three primary segments being the rental and sale of intelligent acoustic systems designed to deter seals and sea lions from attacking fish farms (Aquaculture), the rentals and sale of underwater measurement and leak detection devices in the Offshore (oil & gas) market and the manufacture and supply of underwater communication and other marine goods in the Connectors division. 

 

All of the Group's revenue have been generated from continuing operations and are from external customers.

 

		31 March 2021	31 March 2020
		£'000	£'000
Analysis of revenue
Amounts earned from Aquaculture equipment rentals, sales and associated charges		2,553	2,108
Amounts earned from Offshore rentals and sales		505	616
Amounts earned Connectors' sales		859	696
Other sales and development income		136	-
		───────	───────
		4,053	3,420
		═══════	═══════

 

Included within revenue are amounts earned from system rentals and associated charges from two material customers of £1,081,000 and £411,000 (2020: £1,041,000 and £506,000).

 

 

		31 March 2021	31 March 2020
		£'000	£'000
Analysis of gross profit
Amounts earned from Aquaculture equipment rentals, sales and associated charges		1,510	1,261
Amounts earned from Offshore rentals and sales		357	517
Amounts earned from Connectors' sales		319	186
Product sales and development income		117	-
		───────	───────
		2,303	1,964
		═══════	═══════

 

 

 

 

The Group operates in six main geographic areas, although all are managed in the UK. The Group's revenue per geographical segment based on the customer's location is as follows:

 

		31 March 2021	31 March 2020
		£'000	£'000
Revenue
UK		2,818	2,620
Chile		293	298
Asia		150	214
Europe (excluding UK)		454	218
North America		287	70
Rest of the World		51	-
		───────	───────
		4,053	3,420
		═══════	═══════

 

The Group's assets are located in the UK and Chile and although some of its tangible assets, in the form of systems for rental, are located in Chile, all are owned by the company or its subsidiaries.

 

5.       Operating loss

 

Operating loss is stated after charging/(crediting):

							31 March 2021	31 March 2020
							£'000	£'000
Depreciation of property, plant and equipment (see note 10)							693	579
Depreciation of right of use assets (see note 11)							118	20
Amortisation and impairment of intangible assets (see note 12)							165	191
Research and development costs							105	-
Exceptional costs							161	-
Government grants relating to Covid-19							(123)	-
Share-based payment charge (see note 25)							55	-
Net foreign exchange (gains)/losses							(8)	2
							───────	───────
		Exceptional costs relate to one-off and non-recurring costs primarily professional fees incurred In relation to investment activities, financing and share scheme constitution.
	Auditor remuneration
							31 March 2021	31 March 2020
							£'000	£'000
	Audit services:
	Fees payable to the Group's auditor for the audit of the Group and Company annual accounts						25	22
	Fees payable to the Group's auditor for the audit of the Company's subsidiaries						40	53
	Fees payable to the Group's auditor and their associates for other services to the Group and Company - other non-audit services						-	200
							───────	───────
							65	275
							═══════	═══════

 

 

The fees payable to the Group's auditor for non-audit services in the previous year related to services provided to OTAQ Group Limited and its subsidiaries prior to the reverse acquisition with Hertsford Capital Plc. Since the date of the reverse acquisition no non-audit services have been provided.

 

6.       Staff costs and numbers

 

The average monthly number of employees (including executive directors) for the continuing operations was:

 

				31 March 2021		31 March 2020
				No.		No.
Directors				2		-
Administration				20		20
Engineering				7		6
Manufacturing				13		10
				───────		───────
				42		36
				═══════		═══════

Directors are nil in the previous year as the executive directors were appointed on 31 March 2020.

 

Staff costs for the Group during the year including executive directors:

 

		31 March 2021	31 March 2020
		£'000	£'000
Wages and salaries		1,878	1,967
Social security costs		206	149
Other pension costs		60	27
		───────	───────
		2,144	2,143
		═══════	═══════

         Directors' remuneration

 

Full details of the directors' remuneration, for current directors, is provided in the audited part of the Directors' Remuneration Report.

 

The Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in an independently administered fund.

 

The charge to the statement of comprehensive income in respect of defined contribution schemes was £60,000 (2020: £27,000). Contributions totalling £9,000 (2020: £5,000) were payable to the fund at the year-end and are included in creditors.

 

7.       Net finance costs

		31 March 2021	31 March 2020
		£'000	£'000
Finance income
Bank interest received		-	2
		───────	───────
Total finance income		-	2
		───────	───────
Finance costs
Bank and loan interest payable		(5)	(56)
Unwinding of discount on deferred cost		(52)	(101)
Hire purchase interest payable		-	(1)
Lease interest payable		(1)	-
		───────	───────
Total finance costs		(58)	(158)
		───────	───────
Net finance costs		(58)	(156)
		═══════	═══════

 

8.       Taxation

 

The tax credit is made up as follows:

 

		31 March 2021	31 March 2020
		£'000	£'000
Current income tax:
UK corporation tax credit for the year		-	(51)
Adjustments in respect of prior year		(99)	-
Research and development income tax credit receivable		(177)	(62)
		───────	───────
Total current income tax		(276)	(113)
		───────	───────
Deferred tax expense:
Origination and reversal of temporary differences		86	-
		───────	───────
Tax credit per statement of comprehensive income		(192)	(113)
		═══════	═══════

 

The tax charge differs from the standard rate of corporation tax in the UK of 19% for the year ended 31 March 2021 (19% for the year ended 31 March 2020).  The differences are explained below:

 

		31 March 2021	31 March 2020
		£'000	£'000
Loss on ordinary activities before taxation		(726)	(2,760)
Add back losses incurred in Chile		87	107
Deduct losses in acquired company pre acquisition		-	(67)
		───────	───────
UK loss on ordinary activities before taxation		(639)	(2,720)
UK tax credit at standard rate of 19% (2020: 19%)		(121)	(517)
Effects of:
Fixed assets timing differences		42	-
Expenses not deductible for tax		51	268
Additional deduction for R&D expenditure		(186)	(134)
Adjustments in respect of prior year		(99)	(50)
Prior year losses utilised		55	0
Changes in tax rate		-	(18)
Deferred tax not recognised		66	338
		───────	───────
Total taxation credit		(192)	(113)
		═══════	═══════

 

The Chancellor announced in the Spring 2020 Budget that the corporation tax rate would remain at 19%, rather than falling to 17% for financial years starting on 1 April 2020. This became substantially enacted on the 17 March 2020 through the Provision of Collection Taxes mechanism as a result of Coronavirus.

 

The Group has accumulated losses available to carry forward against future trading profits. The estimated value of the deferred tax asset measured at a standard rate of 19% (2020: 19%) is £243,000 (2020: £647,000), of which £Nil (2020: £Nil) has been recognised, as it is not certain that future taxable profits will be available against which the unused tax losses can be utilised.

 

The Group also has a deferred tax liability being accelerated capital allowances, for which the tax measured at a standard rate of 19% (2020: 19%) is £176,000 (2020: £136,000) and which has not been recognised, as it is covered by accumulated tax losses.

 

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. Since the proposal to increase the rate to 25% had not been substantively enacted at the balance sheet date, its effects are not included in these financial statements.

 

9.    Losses per share

 

Basic earnings or losses per share are calculated by dividing the loss or profit after tax attributable to the equity holders of the Group by the weighted average number of shares in issue during the year.

 

Diluted earnings or losses per share are calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potential dilutive shares, namely share options. The calculation of earnings or losses per share is based on the following losses and number of shares.

 

In calculating the weighted average number of ordinary shares outstanding (the denominator of the earnings per share calculation) during the period in which the reverse occurs:

 

(a)  The number of ordinary shares outstanding from the beginning of that period to the acquisition date shall be computed, on the basis of the weighted average number of ordinary shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement; and

 

(b)  The number of ordinary shares outstanding from the acquisition date to the end of that period shall be the actual number of ordinary shares of the legal acquirer (the accounting acquiree) outstanding during that period.

 

A reconciliation is set out below.

	2021		2020
	£'000		£'000
Loss for the year attributable to owners of the Group	(534)		(2,636)
Weighted average number of shares:
- Basic	30,561,747		31,888,358
- Diluted	30,894,123		33,690,270
Basic losses per share (pence)	(1.7)		(8.3)
Diluted losses per share (pence)	(1.7)		(8.3)*

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has share options that are dilutive potential ordinary shares.

 

*These shares are not considered dilutive because they decrease the loss per share.

 

 

		2021 £'000		2020 £'000
Operating loss		(668)		(898)
Share option charge		55		559
Exceptional costs		161		-
Amortisation of intangible assets		165		163
Impairment of goodwill		-		28
IFRS16 depreciation		118		20
Depreciation on property, plant and equipment		693		579
Adjusted EBITDA*		524		451
Weighted average number of shares:
- Basic		30,561,747		31,888,358
- Diluted		30,894,123		33,690,270
Adjusted basic losses per share (pence)		1.7		1.4
Adjusted diluted losses per share (pence)		1.7		1.3

 

       

Property, plant and equipment

 

	Systems for rental	Plant and equipment	Motor vehicles	Total
	£'000	£'000	£'000	£'000
COST
At 31 March 2019	1,930	63	30	2,023
Additions	378	99	20	497
Acquisition at NBV	-	8	-	8
Disposals	(204)	-	-	(204)
	───────	───────	───────	───────
At 31 March 2020	2,104	170	50	2,324
Additions	557	191	56	804
Disposals	(73)	-	(20)	(93)
	───────	───────	───────	───────
At 31 March 2021	2,588	361	86	3,035
	───────	───────	───────	───────
DEPRECIATION
At 1 April 2019	458	30	11	499
Depreciation charge for year	547	11	21	579
Depreciation eliminated on disposals	(196)	-	-	(196)
	───────	───────	───────	───────
At 31 March 2020	809	41	32	882
Depreciation charge for year	594	83	16	693
Depreciation eliminated on disposals	(73)	-	(15)	(88)
	───────	───────	───────	───────
At 31 March 2021	1,330	124	33	1,487
	───────	───────	───────	───────
NET BOOK VALUE
At 31 March 2021	1,258	237	53	1,548
	═══════	═══════	═══════	═══════
At 31 March 2020	1,295	129	18	1,442
	═══════	═══════	═══════	═══════
At 31 March 2019	1,472	33	19	1,524
	═══════	═══════	═══════	═══════

 

11.     Leases

		Right-of-use assets
					Buildings and facilities	Motor vehicles	Total
					£'000	£'000	£'000
Cost
At 1 April 2020					312	-	312
Additions					243	134	377
Disposals					(44)	-	(44)
					───────	───────	───────
At 31 March 2021					511	134	645
					───────	───────	───────
Accumulated depreciation
At 1 April 2020					20	-	20
Charge for the year					100	18	118
Disposals					(19)	-	(19)
					───────	───────	───────
At 31 March 2021					101	18	119
					───────	───────	───────
Carrying amount
At 31 March 2021					410	116	526
					───────	───────	───────
At 31 March 2020					292	-	292
					═══════	═══════	═══════

 

The Group leases several assets including buildings and facilities as well as motor vehicles acquired during the year. The average lease term by asset is 3.6 years. This term includes an extension option, which the Group is reasonably certain to exercise.

	Amounts recognised in profit and loss:
				31 March 2021		31 March 2020
					£'000	£'000
Depreciation expense on right-of-use assets					118	20
Interest expense (included in finance cost)					1	-

The total cash outflow for leases amount to £111,000 (2020: £20,000).

 

Lease liabilities

 

Maturity analysis

A maturity analysis of lease liabilities based on discounted gross cash flows is reported in the table below:

		31 March  2021	31 March  2020
		£'000	£'000
Year 1		249	78
Year 2		120	73
Year 3		82	55
Year 4		54	47
Year 5		16	39
		───────	───────
Total lease liabilities		521	292
		═══════	═══════

The Group does not face a significant liquidity risk with regard to its lease liabilities. All lease obligations are denominated in pounds sterling.

 

12.     Intangible assets

 

	Goodwill	Trademarks	IP licence	Development costs	Total intangible assets
	£'000	£'000	£'000	£'000	£'000
COST
At 31 March 2019	612	515	142	364	1,633
Additions	447	-	-	383	830
	──────	───────	───────	───────	───────
At 31 March 2020	1,059	515	142	747	2,463
	──────	───────	───────	───────	───────
Additions	-	-	286	680	966
	──────	───────	───────	───────	───────
At 31 March 2021	1,059	515	428	1,427	3,429
	──────	───────	───────	───────	───────
AMORTISATION
At 31 March 2019	-	-	83	35	118
Charge for the year	-	65	36	62	163
Impairment	28	-	-	-	28
	──────	───────	───────	───────	───────
At 31 March 2020	28	65	119	97	309
Charge for the year	-	64	33	68	165
	──────	───────	───────	───────	───────
At 31 March 2021	28	129	152	165	474
	──────	───────	───────	───────	───────
NET BOOK VALUE
At 31 March 2021	1,031	386	276	1,262	2,955
	══════	═══════	═══════	═══════	═══════
At 31 March 2020	1,031	450	23	650	2,154
	══════	═══════	═══════	═══════	═══════
At 31 March 2019	612	515	59	329	1,515
	══════	═══════	═══════	═══════		═══════

 

IP license additions during the year mainly pertained to the intellectual property acquired as a part the acquisition of assets and liabilities of ROS Technology Limited, which took place during the year. The Group elected to apply the optional concentration test, which resulted in a conclusion that the acquisition is not a business combination on the basis that substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable assets. Therefore, this acquisition was accounted as an asset acquisition (i.e. outside the scope of IFRS 3).

 

Intellectual property licenses are amortised on a straight line basis over four or five years, development costs are amortised on a straight line basis over six years and trademarks are amortised on a straight line basis over eight years. Amortisation provided during the year is recognised in administrative expenses.

 

Goodwill

In the year to 31 March 2020, shares were issued for the purchase of the minority interest of 10% in OTAQ Chile SpA valued at £28,000 and this was subsequently impaired. 

 

 

13.     Unlisted investments

 

 

		31 March 2021	31 March 2020
		£'000	£'000
Unlisted equity securities		297	-
		───────	───────
		297	-
		═══════	═══════

 

 

Unlisted equity securities pertain to 15% of ordinary share capital of Minnowtech LLC held directly by OTAQ Group Limited.

 

The directors consider that the carrying amount of unlisted equity securities approximates to their fair value and that no impairment is required at the reporting date.

 

14.     Subsidiaries of the Group

 

The principal subsidiaries of the Group at 31 March 2021 and 31 March 2020 are as follows:

 

Subsidiary undertakings	Country of incorporation	Principal activity	Class of shares held	% Held
OTAQ Group Limited 1	England	Fish farm security; rental and sale to offshore and gas industry	Ordinary	100% direct
OTAQ Aquaculture Limited (formerly OTAQ Limited) 2	Scotland	Fish farm security	Ordinary	100% indirect
OTAQ Chile SpA* 3	Chile	Fish farm security	Ordinary	100% indirect
OTAQ Offshore Limited (formerly MarineSense Limited) 2	Scotland	Rental and sale to offshore and gas industry	Ordinary	100% indirect
OTAQ Connectors Limited (formerly Link Subsea Limited) 1	England	Manufacture and supply of underwater communication and other marine goods	Ordinary	100% indirect
OTAQ Group UK Limited 1	England	Dormant	Ordinary	100% indirect
OTAQ UK Limited (formerly, OTAQ Lancaster Limited, formerly OTAQ Limited) 1	England	Dormant	Ordinary	100% indirect

 

*OTAQ Chile SpA has a year end date of 31 December in order to comply with the requirements of the Chilean authorities.

 

¹ Registered office address: 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England, LA1 4XF

² Registered office address: Crombie Lodge, Aberdeen Innovation Park, Campus 2, Aberdeen, Scotland, AB22 8GU

³ Registered office address: Pacheco Altamarino 2875, Puerto Montt, Chile

 

 

15.     Trade and other receivables

		31 March 2021	31 March 2020
		£'000	£'000
Current:
Trade receivables - gross claim value		531	406
Provision for impairment of trade receivables		(28)	-
Prepayments		207	106
Other		150	245
		───────	───────
		860	757
		═══════	═══════

 

Trade receivables are non-interest bearing and are generally due and paid within 30 days. The directors consider that the carrying amount of trade and other receivables approximates to their fair value and that no impairment is required at the reporting date. Trade and other receivables represent financial assets and are considered for impairment on an expected credit loss model. Therefore, there is a provision for impairment at the statement of financial position date of £28,000 (2020: £Nil).

 

The Group's trade receivables at 31 March 2021 included £nil (2020: £174,000) for OTAQ Connectors Limited (formerly Link Subsea Limited) added at date of acquisition.

 

The age of net trade receivables is all within one year (2020: one year) and the average gross debtor days calculated on a count back basis were 44 days (2020: 54 days).

 

16.     Income tax asset

		31 March 2021	31 March 2020
		£'000	£'000
Research and development tax credit receivable		286	56
		───────	───────
		286	56
		═══════	═══════

 

 

17.     Inventories

		31 March 2021	31 March 2020
		£'000	£'000
Stock		899	972
		───────	───────
		899	972
		═══════	═══════

 

 

 

The Group's inventories at 31 March 2021 included £nil (2020: £60,000) for OTAQ Connectors Limited (formerly Link Subsea Limited) inventories added at date of acquisition.

 

The value of inventory provided for as at 31 March 2021 is £97,000 (2020: £90,000). £671,000 of stock was expensed in the year through cost of sales (2020: £664,000).

 

18.     Cash and cash equivalents

		31 March 2021	31 March 2020
		£'000	£'000
Cash at bank and in hand		3,120	4,087
		───────	───────
		3,120	4,087
		═══════	═══════

 

Cash at banks earns interest at floating rates based on daily bank deposit rates. An analysis of cash and cash equivalents by denominated currency is given in note 28.

 

19.     Share capital and share premium

 

The called-up and fully paid share capital of the Company is as follows:

 

		31 March 2021	31 March 2020
		£'000	£'000
Allotted, called-up and fully paid: 30,763,251 (2020: 30,548,599) Ordinary shares of £0.15 each (2020: £0.15 each)		4,614	4,582
		═══════	═══════

 

 

Movements in ordinary shares:

 

	Number of shares	Share capital	Share premium
	No	£'000	£'000
At 31 March 2020	30,548,599	4,582	2,892
Shares issued during the year	37,240	6	5
Exercise of share options	177,412	26	-
	───────	───────	────
At 31 March 2021	30,763,251	4,614	2,897
	═══════	═══════	════

 

 

During the year, 37,240 of ordinary shares were issued as part of the Share Incentive Plan.

 

 

Share premium

The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value and is non-distributable.

 

20.     Reserves

 

Share option reserve

The share option reserve arises from the requirement to value share options in existence at the year end at fair value. Further details of share options are included at note 25.

 

Merger relief reserve

The merger relief reserve arose on the Company's reverse acquisition of OTAQ Group Limited and relates to the share premium on the 21,539,904 shares issued to acquire OTAQ Group Limited.

 

Reverse acquisition reserve

The reverse acquisition reserve was created in accordance with IFRS 3 'Business Combinations'. The reserve arises due to the elimination of the Company's investment in OTAQ Group Limited. Since the shareholders of OTAQ Group Limited became the majority shareholders of the enlarged group, the acquisition is accounted for as though there is a continuation of the legal subsidiary's financial statements. In reverse acquisition accounting, the business combination's costs are deemed to have been incurred by the legal subsidiary.

 

Other reserve

Other reserve represents the value of the exercised or lapsed share options which were exercised and the foreign exchange in relation to the translation of subsidiaries reporting in foreign currencies.

 

Revenue reserve

The revenue reserve accumulates the losses attributable to the equity holders of the parent company.

 

21.     Deferred payment for acquisition

 

		31 March 2021	31 March 2020
		£'000	£'000
Current
Fair value of deferred cash consideration on the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited)		187	230
Fair value of deferred cash consideration on the acquisition OTAQ Connectors Limited (formerly Link Subsea Limited)		28	43
		───────	───────
		215	273
		═══════	═══════
Non-current
Fair value of deferred and contingent consideration on the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited)		-	188
Fair value of deferred cash consideration on the acquisition OTAQ Connectors Limited (formerly Link Subsea Limited)		-	44
		───────	───────
		-	232
		═══════	═══════

 

		31 March 2021	31 March 2020
		£'000	£'000
Deferred payment for acquisition movement
Opening balance		505	418
Additions on acquisition (discounted)		-	87
Unwinding of discount		52	-
Interest paid on deferred consideration		(29)	-
Repayments		(300)	-
Revaluation of the deferred consideration		(13)	-
		───────	───────
Closing balance		215	505
		═══════	═══════

 

 

 

 

As part of the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited) on 23 November 2018, there is a contingent consideration in place in that in the event that on the third anniversary of completion the market value of OTAQ plc's share is less than 64p per share, a sum of up to £250,000 might  be payable to the previous owners. The fair value of the contingent consideration of £187,000 was estimated by calculating the present value of the future expected cash flows. The estimates are based on a discount rate of 10% and assumed the market value of OTAQ plc's shares on the third anniversary of completion of 36 pence per share. The fair value of the contingent consideration is included in liabilities as shown above.  

 

As part of the acquisition of OTAQ Connectors Limited (formerly Link Subsea Limited) on 29 April 2019, there is deferred cash payment of £50,000, which is due on the second anniversary of completion. The fair value of the deferred consideration of £28,000 was estimated by calculating the present value of the future expected cash flows. The estimates are based on a discount rate of 10%. The fair value of the deferred consideration is included in liabilities as shown above.  

 

22.     Trade and other payables

		31 March 2021	31 March 2020
		£'000	£'000
Current:
Trade payables		712	955
Accrued expenses		199	946
Deferred revenue		764	198
Other creditors		133	107
		───────	───────
		1,808	2,206
		═══════	═══════
Non-current:
Other creditors		38	-
		───────	───────
		38	-
		═══════	═══════

 

 

Trade and other payables comprise amounts outstanding for trade purchases and on-going costs. Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period on purchases is 30 days. No interest is paid on trade payables over 30 days.

 

The directors consider that the carrying amount of trade payables approximates to their fair value. 

 

The Group's trade and other payables at 31 March 2021 included £nil (2020: £195,000) for OTAQ Connectors Limited (formerly Link Subsea Limited) added at date of acquisition.

 

Non-current other creditors due pertain to the deferred portion of the consideration for the intangible assets acquired during the year.

 

23.     Deferred tax liability

		31 March 2021	31 March 2020
		£'000	£'000
Deferred tax liability
Deferred taxation due to timing differences		88	2
Deferred taxation on intangibles recognised at acquisition		88	88
		───────	───────
		176	90
		═══════	═══════

 

 

 

24.     Borrowings

		31 March 2021	31 March 2020
		£'000	£'000
Interest bearing loans		2,000	487
		───────	───────
		2,000	487
		═══════	═══════

Analysis of loans and borrowings

 

Borrowings 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 date, as follows:

 

		31 March 2021	31 March 2020
		£'000	£'000
Current liabilities		187	487
Non-current liabilities		1,813	-
		───────	───────
		2,000	487
		═══════	═══════

The terms and conditions of outstanding loans are as follows:

 

				31 March 2021					31 March 2020
	Nominal interest rate				Date of maturity	Face value	Carrying amount		Face value	Carrying amount
						£'000	£'000		£'000	£'000
Loans from shareholders	10% p.a.				30 April 2020	-	-		487	487
CBILS loan	The higher of 8% p.a. and the monthly average Sterling Over Night Index Average ("SONIA") plus 6.0%				1 January 2026	2,000	2,000		-	-
Total interest-bearing liabilities						─────── 2,000	─────── 2,000		─────── 487	─────── 487
						═══════	═══════		═══════	═══════

 

On 1 February 2021, one of the Company's subsidiaries, OTAQ Aquaculture Ltd, signed a £2,000,000 loan agreement which is supported by the Government's Coronavirus Business Interruption Loan Scheme (CBILS).

 

The loan was fully drawn on 2 February 2021 and amortised as follows:

•    Months 0 - 6: 0% amortisation;

•    Months 7 -12: 1% amortisation of initial drawn amount, per tranche, to be paid each month;

•    Month 12 onwards: remaining amount to be repaid in equal instalments over the remaining term of the facility.

 

In addition, 1.5% of the total Facility was paid on completion as the Facility fees. Loans due to shareholders were fully repaid in April 2020.

 

Liabilities arising from financing activities

 

		Lease liabilities	Loan to Employee Benefit Trust	CBILS	Loans from shareholders
		£'000	£'000	£'000	£'000
Balance at 1 April 2020		292	-	-	487
Cash flows
Repayment of borrowings					(487)
Proceeds from new loans				2,000	-
New loan issued			(150)
Lease payments		(111)
Non-cash changes*		340
Balance at 31 March 2021		521	(150)	2,000	-

 

 

*This balance includes £377,000 of new leases entered to in the year.

 

 

25.     Share options

 

Prior to admission on the Main Market of London Stock Exchange, 438,312 share options equating to 1.43 per cent of the share capital of the Company were granted to Jag Mundi (a director and Chairman of OTAQ Group Limited up to admission), and 1,043,600 share options equating to 3.42 per cent of the share capital were granted to Philip Newby (a director) under the Share Option Scheme, subject to certain performance criteria. All Jag Mundi's shares were exercised during the year.

 

In addition, 320,000 share warrants equating to 1.05 per cent of the share capital were granted to various key management personnel on admission.

 

On 16 October 2020, the Company granted further 750,000 of share options to various key management personnel under the Enterprise Management Incentive ("EMI") Share options.

 

On the same date, 1,043,600 share options, granted to Philip Newby (a director) prior to admission (as disclosed above), were replaced by the following Enterprise Management Incentive ("EMI") and Non-EMI Share Option Schemes (the "Options"):

 

Type of Option: EMI Option / Non-Qualifying Option	Option Price	Vesting Dates	Number of Shares under Option
EMI Option	£nil	584,416 vest on the date of grant; 10,819 vest on 31 March 2021	595,235
Non-Qualifying Option	£nil	218,773 vest on 31 March 2021; 229,592 vest on 31 March 2022	448,365
Total number of shares under option			1,043,600

 

An option-holder has no voting or dividend rights in the Company before the exercise of a share option.

 

Set out below are summaries of options granted under the plan: 

 

	31 March 2021		31 March 2020
	Average exercise price per share option	Number of options	Average exercise price per share option	Number of options
At 1 April	£0.32	1,801,912	-	-
Granted during the year	£0.24	1,793,600	£0.32	1,801,912
Exercised during the year	£0.01	(177,412)	-	-
Lapsed during the year	£0.01	(229,592)	-	-
Cancelled during the year	£0.01	(1,043,600)	-	-
	───────	───────	───────	───────
As at 31 March	£0.30	2,144,908	£0.32	1,801,912
	═══════	═══════	═══════	═══════

 

The remaining weighted average contractual life of the share options and warrants at 31 March 2021 is 7.54 years.

 

Fair value of options granted

 

The estimated average fair value of 1,793,600 (2020: 1,801,912) options granted during the year was £0.25 (2020: £0.31). The fair value at grant date is determined using an adjusted form of the Black-Scholes model which includes a Monte Carlo simulation model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, and the risk-free interest rate for the term of the option.

 

The model inputs were:

•     share prices at grant date of £0.42 (2020: £0.57);

•     exercise prices of £0.001 to £0.595 (2020: £0.001 to £0.50);

•     expected volatility of 58% (2020: 40%);

•     expected dividend rate of 0% (2020: 0%);

•     contractual life of 0 to 3 years (2020: 3 to 10 years); and

•     a risk-free interest rate of 1% (2020: 1%).

 

The total reserve and share-based payment expense recognised in the statement of comprehensive income for the year ended 31 March 2021 in respect of these options granted was £55,428 (2020: £559,000).

 

229,592 share options granted to Philip Newby have a vesting condition requiring the share price to be £0.728 on or before 31 March 2021. A further 229,592 share options granted to Philip Newby have a vesting condition requiring the share price to be £1.093 on or before 31 March 2022.

 

On 16 October 2020, share options belonging to Philip David Newby totalling 200 shares in OTAQ Group Limited, which would have converted to 1,043,600 shares in OTAQ plc, were cancelled and replaced with new options totalling 1,043,600. A fair valuation calculation and adjustment for these options was made on 16 October 2020.

 

26.     Commitments and contingencies

 

Capital commitments

The Group is committed to the following capital expenditure contracted in the current financial year:

 

		31 March 2021	31 March 2020
		£'000	£'000
		1,025	360
		═══════	═══════

 

Contingencies

There were no contingent liabilities at 31 March 2021 and 31 March 2020.

 

27.     Financial instruments - classification and measurement

 

Financial assets

Financial assets measured at amortised cost comprise trade receivables and cash, as follows:

 

		31 March 2021	31 March 2020
		£'000	£'000
Trade receivables		503	406
Cash at bank and in hand		3,120	4,087
		───────	───────
		3,623	4,493
		═══════	═══════

 

Financial assets measured at FVPL include the following:

 

		31 March 2021	31 March 2020
		£'000	£'000
Unlisted equity securities		297	-
		───────	───────
		297	-
		═══════	═══════

 

 

Financial liabilities

Financial liabilities measured at amortised cost comprise trade and other creditors, loans, deferred payment for acquisition and lease liabilities as follows:

 

		31 March 2021	31 March 2020
		£'000	£'000
Trade payables		751	955
Other creditors		133	107
Loans		2,000	487
Deferred payment for acquisition		215	505
Lease liabilities		521	292
		───────	───────
		3,620	2,346
		═══════	═══════

 

28.     Financial risk management

 

The Group's activities expose it to a variety of financial risks: interest rate risk, liquidity risk, market risk, currency risk and credit risk.  Risk management is carried out by the board of directors.  The Group uses financial instruments to provide flexibility regarding its working capital requirements and to enable it to manage specific financial risks to which it is exposed.

 

The Group finances its operations through a mixture of equity finance, cash, loans and liquid resources and various items such as trade debtors and trade creditors which arise directly from the Group's operations.

 

(a)    Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows associated with the instrument will fluctuate due to changes in market interest rates. 

 

Interest bearing assets including cash and cash equivalents are considered to be short-term liquid assets. It is the Group's policy to settle trade payables within the credit terms allowed and the Group does therefore not incur interest on overdue balances. 

 

The Group has external borrowings linked to SONIA but capped until SONIA exceeds 2%; the risk is therefore limited in the short to medium term given current low SONIA rates. The reduction of interest received on cash surpluses held at bank is based on a floating rate of interest. The principal impact to the Group is the result of interest-bearing loans and cash including cash equivalent balances held as set out below:

 

 

 

		31 March 2021				31 March 2020
		Fixed rate	Floating rate	Total		Fixed rate	Floating rate	Total
		£'000	£'000	£'000		£'000	£'000	£'000
Cash at bank and in hand		-	3,120	3,120		-	4,087	4,087
Interest bearing loans		(2,000)	-	(2,000)		(487)	-	(487)
		────	─────	────		────	─────	────
Total		(2,000)	3,120	1,120		(487)	4,087	3,600
		════	═════	════		════	═════	════

 

(b)   Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities.  Liquidity risk arises from the repayment demands of the Group's lenders. 

 

The Group manages all of its external bank relations centrally. Any material change to the Group's principal banking facility requires approval by the board. The cash requirements of the Group are forecasted by the board annually.  The Group is not dependent on any external borrowings.

 

At the reporting date the Group was cash positive.

 

The following tables set out the maturity profile of the Group's non-derivative financial liabilities, based on undiscounted contractual cash outflows, as at the following dates:

 

		31 March 2021	31 March 2020
		£'000	£'000
Trade and other payables
Less than 2 months		846	1,062
Other financial liabilities
Less than 2 months		100	273
3 months - 1 year		551	565
1 - 5 years		2,123	446
		───────	───────
Total		3,620	2,346
		═══════	═══════

 

(c)    Capital risk management

The Group reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. It is the current strategy of the Group to finance its activities from existing equity and reserves as well as additional financing where appropriate and by the issue of new equity as required.

 

The capital structure of the Group consists of equity attributable to equity holders, comprising issued share capital, share premium, other reserves and retained earnings as disclosed in notes 19 to 20 and the statement of changes in equity.  Total equity attributable to the equity holders of the parent company was £5,733,000 at 31 March 2021 (31 March 2020: £6,180,000).

 

The Group is not subject to externally imposed capital requirements.

 

(d)   Credit risk management

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group and the risk that any debtors of the Group may default on amounts due to the Group.  The Group's principal financial assets are trade receivables, other debtors and cash equivalents.

 

The Group has a policy of only dealing with credit worthy counterparties.  The Group had £503,000 of trade receivables at the year end (2020: £406,000). The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer or counterparty.  However, management also considers the factors that may influence the credit risk of its customer or counterparty base, including the default risk associated with the industry and country in which the customer or counterparty operates.  Receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. All trade receivables are ultimately overseen by the director responsible for finance and are managed on a day-to-day basis by the finance team.  Credit limits are set as deemed appropriate for the customer.

 

The maximum exposure to credit risk in relation to cash and cash equivalents is the carrying value at the statement of financial position date.

 

(e)   Currency risk

The Group has limited exposure to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group. The risk is in respect of United States Dollars, Euros and Chilean Pesos. Transactions outside these currencies are limited.

 

The Group may use forward exchange contracts as an economic hedge against currency risk, where cash flow can be judged with reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing of the receipt is less certain. There were no open forward contracts as at 31 March 2021 or at 31 March 2020 and the Group did not enter into any such contracts during 2021 nor 2020.

 

The summary quantitative data about the Group's exposure to currency risk as reported to the management of the Group is as follows:

 

				31 March 2021					31 March 2020
	GBP	CLP	USD		AUD	EUR	Total		GBP	CLP	EUR	Total
	£'000	£'000	£000		£000	£'000	£'000		£'000	£'000	£'000	£'000
Cash at bank and in hand	3,048	30	41		-	1	3,120		4,061	22	4	4,087
Trade receivables	359	76	40		-	28	503		359	42	6	407
Trade payables	(713)	(6)	(2)		(30)	-	(751)		(735)	(220)	-	(955)
	───	────	────		────	───	───		───	────	───	───
Total	2,694	100	79		(30)	29	2,872		3,685	(156)	10	3,539
	═══	════	════		════	═══	═══		═══	═══	════	═══

 

Sensitivity analysis to movement in exchange rates

Given the immaterial asset balances in foreign currency, the exposure to a change in exchange rate is negligible.

 

(f)    Offsetting financial assets and financial liabilities

The Group has not presented any of its financial assets and financial liabilities on a net basis and no master netting arrangements are in place.

 

 

 

29.     Related party transactions

 

Transactions with directors and companies controlled by directors

The following transactions with directors and companies controlled by directors of the Company were recorded, including VAT, during the year:

 

	31 March 2021	31 March 2020
	£'000	£'000
Charges incurred during the year by OTAQ Aquaculture Limited:
Corsie Technology Limited - a company controlled by a director
For goods and services provided	32	97

 

 

 

	31 March 2021	31 March 2020
	£'000	£'000
Balances outstanding at year end with OTAQ Aquaculture
Limited: Corsie Technology Limited - a company controlled by a director
Invoices payable by the Company	-	-

 

Balances and transactions between the Company and its subsidiaries are eliminated on consolidation and are not disclosed in this Note.

 

30.     Subsequent events

 

On 7^th May 2021, one of the Company's subsidiaries, OTAQ Group Limited, invested US$300,000 in Blue Lion Labs LLC, a company incorporated in Ontario, Canada, in return for a 10% equity stake.