XLON:NARF ESEF Annual Report
NARF INDUSTRIES PLC (XLON:NARF)
ESEF Annual Report
2023-07-18
For: 2022-12-31
View Original
Added on
September 19, 2026
Narf Industries Plc
(formerly CYBA plc)
Registered number 11701224 (England and Wales)
Annual Report and Consolidated Financial Statements
For the year to 31 December 2022
Overview
Executive Chairman’s Statement 01
Strategic Report 03
Directors’ Report 11
Corporate Governance
Corporate Governance Report 17
Independent Auditor’s Report to the Members 20
Financial Statements
Consolidated Statement of Comprehensive Income 26
Consolidated Statement of Financial Position 27
Parent Company Statement of Financial Position 28
Consolidated Statement of Cashows 29
Parent Company Statement of Cashows 30
Consolidated Statement of Changes in Equity 31
Parent Company Statement of Changes in Equity 32
Notes to the Financial Statements 33
Directors and Advisors 59
Annual Report and Consolidated Financial Statements
01
Overview Corporate Governance Financial Statements
Executive Chairman’s Statement
Dear Shareholder,
As the recently appointed Executive Chairman, this
statement offers me the opportunity to share your
Company’s accomplishments while acknowledging
the challenges transitioning from a private and
entrepreneurial led venture to the main operating
business of an LSE listed company.
Accomplishment and Goals
It has been a year of signicant growth and
development within the Group. Our committed team
of 15 research and software developers led by our
CEO, Steve Bassi, delivered record breaking year‑end
contracted backlog of $10.4million. It speaks to the
trust and condence government entities place in our
highly specialized team and underscores its strong
reputation as an innovative and reliable partner.
The backlog is 4x our 2022 revenue of $2.5million.
The increase in government contract backlog
translates into a sustainable revenue stream for
our Group. These contracts provide a stable and
predictable source of income, enabling us to plan and
execute business strategies with condence.
From this backlog alone, the Group forecast $5.8m
revenue in 2023, delivering 130% year on year (“YOY”)
growth (up from 30% growth in 2022). A signicant
decrease in expenses is also targeted this year. As
we transition from an acquisition vehicle to focus
on our core operations, we are expecting operating
expenses to drop by over 40% ($1.4million) in 2023.
This combination of growing revenues and
operational eciencies help position the Company to
achieve break‑even EBITDA for 2023. This compares
to a $2.6m operating loss in 2022. The plan looks to
accomplish this performance nanced by internal
cash generation and current credit line facilities.
In summary, our team in 2023 looks to execute
an invaluable, high growth, scally responsible
Company that protects and builds shareholder
value and condence. From this foundation, we
plan to aggressively grow our government revenue,
a market we are well positioned to scale and
expand. The attractive net margins, along with our
innovative government funded R&D work, can fuel
our intellectual property (IP) commercialisation
targeted to multi‑billion dollar cybersecurity
marketsegments.
I’d like to express my appreciation to the team for
their work ethic that delivered this outstanding
business performance to date. I’d like to thank our
customers that acknowledge our worth through
repetitive contract awards.
Fiscal Year 2022 Audit
This is the rst nancial reporting period for which
consolidated nancial statements, incorporating the
businesses acquired in March 2022 (see Note 8 to the
Financial Statements), are subject to International
Finance Reporting Standards (IFRS).
This administrative burden introduced by IFRS
presented a signicant hurdle for a small team
of 15 research and software developers busy
meeting contract deadlines, generating revenue
and cash ow. Previously, the private businesses
produced records and internal documents only
needed for servicing its contracts and primarily
for tax purposes. This lack of infrastructure and
resources caused the Company to miss its 30April
2023 deadline and led to suspension of trading in
itsshares.
Today we’ve announced the completion of the audit
expect the trading suspension will be lifted within a
matter of days. However, not without accepting and
acknowledging signicant auditor disclaimers.
I’ve taken this decision to accept the auditor’s
disclaimers now. It’s become evident that resolution
will require more time and extending the trading
suspension of our shares would unfairly impact our
shareholders, limiting their ability to engage with the
market and potentially eroding investor condence.
I want to assure you that this disclaimer of
opinion does not diminish the value of the team’s
achievement or the underlying strength of our
business. We are committed to resolving these
issues and bringing the Company’s consolidated
nancial reporting practices up to standards.
There are several matters linked to the disclaimer
that need resolution, but it’s our inability to date to
provide auditors access to a sensitive contract (and
all materials associated with that contract), and
our estimated timeline for resolution, that’s most
inuenced my decision.
Narf Industries Plc (formerly CYBA plc)
02
Overvi ew
This contract accounts for about 50% of our
reported 2022 revenue with terms that state
disclosing the name of the customer, their address,
or the nature of the work to restricted parties,
is a basis for termination. We are navigating this
situation carefully and executing a plan to resolve
this matter over the course of the next quarter in
theinterest of all parties.
As you read this annual report and the Company’s
accounts, please be aware any nancial gures
presented are subject to adjustment for
overstatement or understatement as we work with
auditors to conrm the appropriate accounting
treatment. The Company believes it has taken
a conservative approach in its presentation of
the accounts, for example applying a revenue
recognition that errs on the side of understatement.
Period of Transition
This year’s audit circumstance speaks to the
challenges we face managing record revenue
growth while building the infrastructure required of
a publicly reporting entity. While growth is a positive
indicator, it requires us to remain agile and adapt our
administrative systems to meet the evolving needs
of our expanding organisation.
While establishing the necessary administrative
and nancial infrastructure during this transitional
phase is important, it’s equally vital to instill
a shared understanding among our team that
effective governance and responsible management
extend beyond mere structures and processes.
For these reasons, your CEO strengthened the
Board and executive team in late April 2023, with
my appointment as Executive Chairman and
appointment of our CFO.
Although posing short‑term challenges, we
recognise the long‑term benet of investing now
to improve the quality of our executive leadership,
nancial reporting, and business execution to instill
condence in our stakeholders and facilitating better
analysis and decision‑making.
In respect to our most pressing challenge, our team,
now resourced with a new CFO, will continue to work
diligently, and resolve all matters.
Looking Forward
I am privileged to lead the Board, and as Executive
Chairman, join the CEO and his team to actively
develop, lead, and execute strategies to grow the
business. I would like to express my gratitude to our
shareholders for their understanding during this
initial, dicult past few months.
Here’s what to expect in the next 6 months:
• Scale and expand our government business.
Wehave the potential to turbo‑charge our growth,
in a market we already know, with a proven
competitive position. Our team is already fast at
work in driving success and identifying 18, 36, and
54 month strategic growth goals.
• Unlock the value of our IP with innovative and
ecient go to market strategies.
• Build an experienced and capable Board. We look
to align strategic objectives with specic areas of
expertise, source qualied candidates, and appoint
new members over the course of the year.
• Strengthen our internal and external nancial
reporting. A solid foundation to support our
decision‑making processes, protect the interests
of our shareholders, and maintain the trust of our
stakeholders is paramount. Included is a resolution
of our auditor’s disclaimers and opinion.
• Maximize shareholder value. We are committed
to engaging with the investment community to
ensure our accomplishments and strategies are
reected in the valuation of our Company.
Thank you, all.
John Herring
Executive Chairman
11July 2023
Executive Chairman’s Statement continued
Annual Report and Consolidated Financial Statements
03
Overview Corporate Governance Financial Statements
Narf Industries plc (the “Parent” or the
“Company”) is the UK parent company
of two US subsidiaries Narf Industries
LLC and Narf Industries PR LLC (the
“subsidiaries”, “Operating Group” or “Narf
US” – together with the UK Company, the
“Group”) principally involved in developing
and marketing software aimed at enhancing
the cybersecurity measures of its clients.
The directors of the Company are pleased to
present their report on the Group for the year
ended 31December 2022.
This section contains the Strategic report, which
includes the information that the Group is required
to produce to meet the need for a strategic report in
accordance with the Companies Act 2006. Biographies
of each director are on the Group’s website at
narfgroup.com. The Directors’ report is set out below.
This Strategic report is a consolidated report relating to
the Group as a whole. It includes matters relating to the
Company and its subsidiary undertakings.
Note any reference to $ will be for USD$ and any
reference to 2022 or 2021 will be for the Financial
Years (aligned with calendar years) ending
31December 2022 (“FY2022”) and 31December 2021
(“FY2021”) respectively.
Cautionary Statement
The Strategic report has been prepared for the
shareholders of the Company, as a body, and for no
other persons. Its purpose is to inform shareholders
of the Company and to help them assess how the
Directors have performed their duty to promote
the success of the Company. This Strategic report
contains forward‑looking statements that are
subject to risk factors associated with, amongst
other things, the economic, regulatory, policy and
business circumstances occurring from time to time
in the countries, sectors and markets in which the
Group operates. It is believed that the expectations
reected in these statements are reasonable, but
they may be affected by a wide range of variables
which could cause actual results to differ materially
from those currently anticipated. No assurances can
be given that the forward‑looking statements in this
Strategic report will be realised. The forward‑looking
statements reect the knowledge and information
available at the date of preparation.
Review of the business
The Company was formed as an investment vehicle
to undertake acquisitions in the cybersecurity
sector. In March 2021, the Company listed on the
Ocial List of the UK Listing Authority on the
London Stock Exchange (“LSE”). During the year the
Company raised $7.6million (gross) in placings and
issued shares at an equivalent value of $19.4million
as consideration for the acquisition of the Operating
Group. The acquisitions completed on 15March 2022
have been treated as a reverse takeover as explained
in Note 8.
Since the acquisition, the Company integrated the
US Operating Group, and it now constitutes the
Company’s sole business operations.
The Group is a leading provider of cybersecurity
research, solutions, and services to government
entities. With a steadfast commitment to protecting
national security and critical infrastructure, we offer
comprehensive expertise in addressing the evolving
cyber threats faced by our clients. We work with US
government agencies including the Department of
Defense (“DoD”), the Defense Advanced Research
Projects Agency (“DARPA”), Department of Homeland
Security (“DHS”). The Group often collaborates with
world renowned private research companies in the
performance of contracts.
Our strong track record of successful contract
performance underscores our ability to deliver
results. We understand the critical nature of
the work performed by these agencies and the
importance of maintaining the condentiality
and integrity of their missions. With our industry‑
leading expertise, advanced technologies, and
unwavering commitment to excellence, we provide
the government with the condence and peace of
mind they need to navigate the complex and ever‑
changing cybersecurity landscape.
The Group’s strategy leverages government funded
research and business to create and fund innovative
and disruptive products for billion‑dollar commercial
cybersecurity markets. Government Research
and Development (GR&D) work produces valuable
Company‑owned IP and Government Solutions
and Services (GS&S) work generates favourable
net margins to fund commercialization. Our 2022
revenues were split evenly between the two.
Strategic Report
Narf Industries Plc (formerly CYBA plc)
04
Overvi ew
Government Research and Development (“GR&D”)
The Group has a successful history of tendering
for, and winning, government R&D contracts for
groundbreaking technologies, predominantly from
DARPA. Our research work is focused on three,
multi‑billion cybersecurity market segments: critical
infrastructure protection; open‑source software
(OSS) vulnerabilities; and threat intelligence.
For these contracts, the agency retains government
purpose rights, but the Group has the sole right to
sell new solutions using the IP to the government
(i.e., GS&S business). For commercial markets, we
own the IP rights.
The GR&D contracting process may range from 9
to 15 months and once awarded performance can
range up to 18 months or longer. The Group projects
stepped growth in its GR&D business targeting
synergistic research areas that complement its
current rich IP portfolio.
For Note 3 of the Financial Statements, GR&D revenues
are included as part of Professional Services.
Government Solutions and Services (“GS&S”)
The Group develops solutions and performs services
for various US government agencies. Its software
solutions address immediate cybersecurity mission
needs. These needs continually evolve as the nature
of cybersecurity threats change. We also provide
on‑going services supporting the operations of the
delivered software solution.
The Group enjoys a unique competitive position
with GS&S work through a recently renewed 5‑year
omnibus contract. This streamlines government
procurement cycles and gives multiple agencies
access to the Group’s solutions and services.
Agencies execute task orders, many with awards
justied on a sole source basis. The timing from
ideation of task to award is 3 to 6 months. Tasks
performance typically range from 6 to 12 months to
complete, at which time software is delivered and
integrated into an operational system.
The Group believes GS&S offers the highest growth
potential and its strategy is to scale and expand
thissegment.
For Note 3 of the Financial Statements, GS&S
revenues include SaaS, Installation, and a portion of
the Professional Services revenues.
Commercialization
By collaborating closely with government agencies
and tapping into their R&D resources, we gain access
to cutting‑edge technologies, methodologies, and
insights. Through strategic partnerships, knowledge
transfer, and technology transfer programs, we
unlock the potential of these innovations for
commercial markets.
The Group’s most advanced commercialization effort
targets critical infrastructure protection, specically
vulnerabilities in Industrial Control Systems/
Operational Technology (ICS/OT) systems. This
effort leverages years of the Company’s work with
the Rapid Attack Detection and Incident Capability
(“RADICS”) and a critical subprogram, the Threat
Intelligent Grid Recovery (“TIGR”) project.
In April 2022, the Group licensed from SRI
International, a partner on the RADICS and TIGR
projects, complementary IP that in combination
creates a uniquely competitive software and
hardware solution for the Oil, Gas, and Electrical
utility customer base. We’ve since demonstrated
thecapabilities are engaged with customers with
known requirements.
The Group is currently limited in the resources it
can apply to its commercialization goals within
the bounds of its 2023 plan. Until government
business grows suciently to organically nance
commercialization initiatives, the strategy is to rely
on paid development from prospects or investments
by strategic partners.
The Group expects to incrementally build its
commercialization resources as its government
business grows and provides organic investment
capability. Currently, for 2023, no material
commercialization revenues are projected.
Financial position
The following presents key nancial metrics of
theGroup:
• At year‑end, the consolidated statement of
nancial position presents Current Assets totaling
$1.2million. This included cash of $443,000 and
trade receivables of $640,000 that were collected
in Q1 2023.
Strategic Report continued
Annual Report and Consolidated Financial Statements
05
Overview Corporate Governance Financial Statements
• Total liabilities at year‑end were $2.1million, with
70% of the balance being cash advances from the
founder and CEO for working capital purposes
and the remainder being trade and other payables
of$600,000.
• After year‑end, the CEO agreed to convert these
advances (which then had a balance of $1,322,000)
to a $2million credit facility not due until June
2024, leaving the Company $678,000 from which to
further draw, from which none has been drawn as
of the date of this report.
• At 31December, 2022, the Group had a $10.4million
backlog (representing contracts in progress),
of which $5.9million is expected to be realized
in2023.
• The Company has available net operating loss
carryforwards of $5.9million to offset future taxes.
These key measurements show the Groups ability
to execute its 2023 business plan funded through
organic cash generation and available credit
facilities.
Key performance indicators
The Company’s major KPI since its founding
and through March 2022 was completion of an
acquisition of a suitable target and all activities
necessary to that end. The Company completed an
acquisition in March 2022 of the Operating Group.
Since March 2022, and up until end of 2022, the
Group’s main KPIs included:
• Appoint a CEO, a role that had been vacant since
the Group’s founding;
• Ensure integration activities with the Company
does not impact the Operating Group’s
management focus on revenue, cash ow, and new
business generation;
• Communicate the vision of the combined entities
to stakeholders; and
• Identify activities for the continued transition of
the Company for 2023.
Regarding 2022 performance:
• Steve Bassi, the founder of Narf US, was appointed
the Group CEO in June 2022
• The Operating Group grew revenue from 2021 to
2022; managed cash within set guidelines; and
delivered record setting backlog. However, the
2022 audit has adversely impacted operations.
• RNS updates and shareholder brieng were
conducted on a regular basis
• The CEO targeted on‑boarding experienced
executive and nancial talent early in 2023.
For 2023 with the new Executive Chairman and CFO
in place, KPIs include:
• Deliver at least 100% YOY revenue growth; reduce
operating expenses by 50%; manage to nominal
EBITDA gain/loss; and nance within the bounds or
organic cash ow and current nancing facilities.
• Build an experienced and capable Board of Directors.
• Strengthen our internal and external nancial
reporting.
• Scale and expand our government business.
• Unlock the value of our IP with innovative and
ecient go to market strategies.
Principal risks and uncertainties
The principal risks and the steps taken by the Group
to mitigate these risks are as follows:
The Group is still in the early stages of its life
andoperating history
We face the inherent risk of all early‑stage
companies with limited operating history. We further
acknowledge the risk in transition as we integrate
and advance a private and entrepreneurial led
venture to the main operating business of an LSE
listed Company. We understand these factors may
impact investor perceptions, but we are condent in
our immediate‑term prospects. Specically:
• The increase in our government contract backlog
translates into a sustainable revenue stream for
our Company. These contracts provide us with a
stable and predictable source of income, enabling
us to plan and execute our business strategies
with condence. The multi‑year nature of these
contracts not only ensures a consistent cash ow
but also provides a solid foundation for future
growth and investment opportunities.
• We can scale and expand our government business
where we have a proven track‑record and demand
for cybersecurity capabilities is in limited supply.
• The founder of Narf US and now CEO of the
Group, is driving the on‑boarding of executives,
as evidenced by the Executive Chairman and CFO
appointments, with experience in to navigate the
risk in transition and growth.
Narf Industries Plc (formerly CYBA plc)
06
Overvi ew
Strategic Report continued
Reliance on a limited number of products
andcustomers
We acknowledge this risk but embrace it as strategic
and competitive advantage for an early‑stage
company. We are delivering highly specialized
capabilities to government agencies with multi‑
billion‑dollar budgets and a mission that only grows.
We are building our reputation as demonstrated
by our growing backlog and award of our largest
contract to date, of $6.7million. Our market share
even in this small niche is minuscule.
These achievements and reputation will serve as the
foundation to attract new customers. Our growing
government R&D work is leading to creation of
newproducts.
Technology risk
Cybersecurity is a rapidly changing industry with
many competitors seeking to further develop their
technologies, any of which can be displaced by new
and innovative approaches. We work at the most
advanced edges of cybersecurity technologies
where it so specialized and the mission so critical
that only US government agencies can justify the
cost/benet. We do not see this work exposed to
material technology risk.
Our primary technology risk is in our ability to
commercialize government R&D work, a core
strategy of the Group. The risk lies in identifying
commercial use cases where the Group can
embed advanced capabilities into products with
functionality at price points meeting market demand.
The Group does not project material
commercialization revenues until such time as
government revenues grow to enable organic
investments to fund product development. The
Company will then assemble an experienced team to
execute its commercialization strategies.
Key-person risk
Our success and prospects are signicantly
inuenced by the knowledge, experience, and
expertise of key individuals within our organization.
The loss of any key person, including members of
our senior management team or technical experts,
could have a material adverse effect on our business,
operations, and nancial performance.
This risk is largely mitigated largely at this stage
as the three most critical employees are major
shareholders in the Company.
We continuously strive to attract, retain, and
motivate key personnel through competitive
compensation packages, employee engagement
initiatives, and a supportive work environment.
However, there is always a risk that key individuals
may leave the company for various reasons,
includingcareer opportunities elsewhere or
unforeseen circumstances.
Inability to Fund Operations
As an emerging company in a rapidly evolving
industry, we face certain nancial risks, including
the potential inability to fund our operations. The
success of our business and our ability to achieve
our strategic objectives depend on our access to
adequate funding sources, including cash reserves,
credit facilities, and capital markets.
While we acknowledge this risk, we are committed to
taking proactive measures to mitigate it. Our Financial
position and going concern disclosures present our
2023 plans to leverage our strong backlog, achieve
operational eciency, and manage cash ow to
ensure alignment with our available resources.
We also actively evaluate potential strategic
alliances, partnerships, and collaborations that can
provide access to additional resources to fund our
commercialization goals.
While we have taken and continue to take reasonable
measures to address the risk of funding constraints,
there can be no assurance that we will be successful
in maintaining performance or securing the
necessary funding on favourable terms (see ‘Going
Concern’ section in the Directors Report below).
Reputational Risk
Reputational risk is a critical consideration for
the Board as it plays a pivotal role in shaping our
relationships with stakeholders and inuencing
their perceptions of the Group. We recognize that
any adverse event or negative perception can
signicantly impact our reputation, market standing,
and long‑term success.
Annual Report and Consolidated Financial Statements
07
Overview Corporate Governance Financial Statements
Our reputational risk is mitigated to a signicant
extent due to the strong track record and exemplary
conduct of our key executives with decades
of experience in their respective elds. Their
unwavering commitment to integrity, transparency,
and ethical business practices has established a
solid foundation of trust among our stakeholders.
As we continue to expand and grow, we remain
committed to upholding the values and principles
instilled by Management.
Economic Risk
The Group could be affected by unforeseen events
outside its control including economic and political
events and trends, ination and deation or currency
exchange uctuations. The impact is likely to include
disruption to nancial markets and higher ination.
Any economic downturn either globally or where the
Group operates, in the US, may have an effect on
the demand for the Group’s products and services.
However, the Board consider the US market and the
US Government to be a fairly stable counter party
in terms of economic risk. The Group strategy to
focus on strengthening and building further on that
relationship only enhances the mitigation.
Employee information
At present, there are no female Directors in the
Company. The Company has an Executive Chairman,
an Executive Chief Executive Ocer and one Non‑
Executive Director. The Company is committed
to gender equality and diversity. If future roles
are identied, a wide‑ranging search would be
completed with the most appropriate individual
being appointed irrespective of gender, religion or
certain additional needs.
Social/Community/Human rights
matters
The Company ensures that employment practices
take into account the necessary diversity
requirements and compliance with all employment
laws. The Board has experience in dealing with such
issues and sucient training and qualications to
ensure they meet all requirements.
Anti-corruption and anti-bribery policy
It is our policy to conduct all our business in an
honest and ethical manner. We take a zero‑tolerance
approach to bribery and corruption and are committed
to acting professionally, fairly and with integrity in all
our business dealings and relationships.
Greenhouse Gas (GHG) Emissions/TCFD
As the Company has not consumed more than 40,000
kWh of energy in the year period, it qualies as a low
energy user under SI 2018/1155 and is not required
to report on its emissions, energy consumption or
energy eciency activities. Furthermore, given
the size and nature of the business the Directors
consider that it is not possible to provide meaningful
TCFD information as would otherwise be required
under the Listing Rules. Until the Group has reached
break‑even the Directors intend to focus on growing
the business whilst minimising their carbon footprint
to the extent practicable and will look to focus on
disclosures thereafter.
Section 172(1) Statement – Promotion
of the Company for the benet of the
members as a whole
The Directors believe they have acted in the way
most likely to promote the success of the Company
for the benet of its members as a whole, as required
by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
• Consider the likely consequences of any decision
in the long term:
The Company undertakes decisions aligned with
its strategic vision. The focus is multi‑billion‑
dollar cyber security market segments which are
essential to societies’ fabric. The Company meets
the most demanding needs of the US government’s
mission to protect critical infrastructure, ensure
the integrity of software to thwart malware and
related ransomware extortion, and deliver threat
intelligence solutions to stop adversary attacks.
This demand will not abate and consequently our
most important decisions are directed towards the
fullment of this long‑term goal.
Narf Industries Plc (formerly CYBA plc)
08
Overvi ew
Strategic Report continued
Within this framework, the following are the
consequences of recent Board decisions on the
long‑term business:
Acquisition of the Operating Group – The Company
undertook a thorough review of the cybersecurity
industry before identifying Narf US as an ideal
acquisition candidate. This decision meets the
Company’s strategic goal to pursue business in the
cyber security industry and sets the Company’s
long‑term vision for the benet of all stakeholders.
Licensing SRI IP – The Group’s strategy leverages
government cyber‑security funded research
to create commercial products for multi‑billion
market opportunities. SRI owns IP and work
product complementary to the Group’s R&D assets
and relationships in the critical infrastructure
protection market segment. The Group’s
decision to license SRI assets offers more value
to prospective customers and an enhanced
competitive position. This decision advances
the long‑term potential of the Group’s declared
commercialization strategy.
Scaling GS&S Revenues – The Group relies on
government work to fund its operations and enable
commercialization investments. Leveraging 2022
historic contract wins in its GS&S business, the
Board is deciding to “grow where we know” and
turbo‑charge this core business. The consequence
is increased revenue and net margins that fund
operations and commercialization initiatives
through organic growth.
Performance Discipline and Fiscal Responsibility
– The Company decided to manage its 2023
performance assuming only backlog business
generates revenue, resulting margins, and cash
ow; to reduce expenses by in 2023 from 2022
by 50%; and work to EBITDA neutral results; and
cash ow break even within its current credit
facilities. The impact is an attractive non‑dilutive
model during challenging microcap markets as the
Company bridges to execute its long‑term strategy.
Governance and Public Company Standards –
The Company attracted experienced executives,
is executing on a governance plan, and working
to achieve public company nancial standards.
A CEO was appointed in June 2022, an Executive
Chairman and CFO in April 2023, a baseline
of identied nancial reporting standards
shortfall identied in in the audit, and a Company
commitment to resolve shortfalls over the next
quarter. The consequences of these decisions are
the longer‑term benet of capital market access
on future favourable terms.
The Board and executives routinely engage in
decisions that impact the long term, set plans
to execute, monitor execution, and pivot as
necessary from informed and valued employee
insights that lead to better progress.
• Act fairly between the members of the Company:
We are dedicated to acting fairly towards our
stakeholders.
We are driven to maximizing shareholder returns
while considering the sustainability and resilience
of our business. Alongside value creation, we also
prioritize the preservation of shareholder value.
We strive to manage risks, maintain nancial
stability, and make prudent decisions that
safeguard the assets and investments entrusted to
us by our shareholders.
We prioritize transparent and timely communication
with our shareholders. We will strive to improve
our offering regular updates on our performance,
nancial results, and key developments so
shareholders are well‑informed and have a clear
understanding of our business activities.
We look to uphold the highest standards of
corporate governance to protect and enhance
shareholder rights. We recognize the importance
of treating all shareholders fairly and equally,
irrespective of their shareholding size. We
are committed to providing fair and equitable
treatment to minority shareholders, ensuring that
their rights and interests are respected.
We work to align management incentives with
shareholder interests to promote responsible
and sustainable value creation. Our executive
compensation structure is designed to reward
performance, promote long‑term value creation,
and align the interests of management with those
of our shareholders.
Annual Report and Consolidated Financial Statements
09
Overview Corporate Governance Financial Statements
• Maintain a reputation for high standards of
business conduct:
The Company strives for the highest standards of
conduct with all its stakeholders.
We conduct our business with the utmost integrity,
adhering to ethical principles and demonstrating
honesty and transparency in all our interactions. We
work to uphold the highest standards of ethics and
integrity in all business activities. We are dedicated
to delivering high‑quality products/services that
meet or exceed our customers’ expectations.
We treat all stakeholders fairly and equally, and a
commitment to resolving any concerns or issues
in a fair and timely manner. We maintain open and
clear lines of communication and value effective
communication to build strong and lasting
relationships.
Our employees embody professionalism in their
interactions, displaying courtesy, respect, and a
commitment to understanding and fullling their
needs. They take accountability and responsibility for
their actions, decisions for roles and performance.
We maintain strict compliance with legal and
regulatory requirements, as well as industry
standards and best practices. We prioritize the
privacy and security of our customers’ data,
implementing robust measures to safeguard
their information and comply with applicable data
protection laws.
• Consider the interests of the Company’s
employees:
For context, the Company is a close‑knit group
of 15 highly research scientist and experienced
software developers, that have chosen to come
together in an environment that allows them
the freedom to advance their craft without
bureaucracy and make meaningful impact.
We embrace the principle of equality, treating
all employees with fairness and respect. Our at
organizational structure ensures that every team
member has an equal voice and opportunity to
contribute their skills and expertise.
Our organization operates on the principles of
meritocracy, where recognition and advancement
are based on individual abilities, accomplishments,
and contributions. We value and reward
performance, enabling employees to excel based
on their skills, dedication, and results.
We foster a collaborative work environment
where ideas are valued irrespective of hierarchy.
Our culture encourages open communication,
teamwork, and the exchange of diverse
perspectives, allowing everyone to contribute to the
success of the organization.
We empower our employees to make decisions,
take ownership of their work, and contribute to
the growth and development of the company.
This empowers individuals to utilize their skills
and knowledge effectively, promoting a sense of
ownership and responsibility.
We maintain a transparent and inclusive
environment, where information is shared openly,
and decisions are communicated clearly. We
encourage open and constructive feedback,
fostering a culture of continuous improvement.
• Foster the Company’s relationships with
suppliers, customers and others:
We strive to foster strong relationships with
customers and research organizations.
We are committed to fostering strong and enduring
relationships with our customers. We strive to
exceed customer expectations, building trust,
loyalty, and long‑term partnerships.
We actively seek collaboration with other research
organizations. Through partnerships and joint
research initiatives, we aim to drive innovation,
accelerate discoveries, and advance the eld
ofcybersecurity.
We recognize the importance of being responsive
and adaptable to changing customer requirements.
We are agile in our approach, quickly adapting
our research, solutions, and services to address
customer challenges effectively.
We actively engage with customers and other
research organizations to share our expertise,
insights, and thought leadership. By participating
in conferences, industry events, and collaborative
forums, we contribute to the broader cybersecurity
community, promoting knowledge exchange, best
practices, and collective learning.
Narf Industries Plc (formerly CYBA plc)
10
Overvi ew
Strategic Report continued
• Consider the impact of the Company’s operations
on the community and the environment:
At the core of our work lies a commitment to
safeguarding society from cyber threats and
promoting a secure digital environment. Our team’s
expertise and research have had a profound positive
impact on individuals, businesses, and critical
infrastructure. Through our relentless efforts, we
have contributed to strengthening the cybersecurity
landscape, protecting sensitive data, and ensuring
privacy in an increasingly interconnected world.
We take great pride in empowering society
through our cybersecurity solutions. By enabling
digital transformation, innovation, and economic
growth, our work paves the way for organizations
to embrace technology securely. We rmly believe
that a secure digital ecosystem fosters productivity,
connectivity, and access to information, leading to a
thriving society that benets all stakeholders.
Our dedication to ethical and responsible
cybersecurity practices is unwavering. We adhere
to stringent ethical guidelines and prioritize
the protection of human rights. Respecting
user privacy and fostering digital trust are
foundational principles that drive our research
and recommendations. We understand the
responsibility we bear in creating a secure and
inclusive digital environment, and we actively
champion these principles in our daily operations.
While our primary focus is on societal impact, we
also recognize the importance of minimizing our
environmental footprint. We have taken steps to
ensure our operations and research activities have
a minimal impact on the environment. Through
energy‑ecient infrastructure, responsible
resource consumption, and proper electronic
waste management, we strive to reduce our carbon
footprint and promote environmental sustainability.
Looking ahead, we remain committed to
continuous improvement in both societal and
environmental impact. We will continue to
enhance our positive contributions to society
while exploring ways to integrate sustainability
practices into our operations. By partnering
with environmental organizations, supporting
community projects, and advocating for
sustainable cybersecurity practices, we will
further our commitment to being responsible
corporate citizens.
Gender analysis
A split of our employees and directors by gender
during the year is shown below:
Male Female
Directors 4
*
–
* – At the time of this report the number of Directors is 3 (all Male).
Sustainability
We aim to conduct our business with honesty,
integrity and openness, respecting human rights and
the interests of our shareholders and employees. We
aim to provide timely, regular and reliable information
on the business to all our shareholders and conduct
our operations to the highest standards.
We strive to create a safe and healthy working
environment for the wellbeing of our staff and create
a trusting and respectful environment, where all
members of staff are encouraged to feel responsible
for the reputation and performance of the Company.
We aim to establish a diverse and dynamic workforce
with team players who have the experience and
knowledge of the business operations and markets
in which we operate. Through maintaining good
communications, members of staff are encouraged
to realise the objectives of the Company and their
own potential.
Steve Bassi
CEO
11July 2023
Annual Report and Consolidated Financial Statements
11
Overview Corporate Governance Financial Statements
The Directors present their report and the
audited consolidated nancial statements
for the year ended 31December 2022
(“FY2022”). The Company was incorporated
on 28November 2018 and on 27February
2020 extended its initial accounting reference
date to 31March 2020. On 7March 2021 the
Company shortened its accounting period to
31December 2020 to align with the accounting
periods of its target acquisition companies. On
3August 2022 the Company changed its name
from Cyba plc to Narf Industries plc to align its
identity with that of the operating subsidiaries.
Principal Activity
The principal activity of the Group during the year
was the development and marketing of software
offering cybersecurity solutions.
Results
The Group recorded an operating loss of $2.6million
(2021: $0.9m for Narf US). Group losses for the year
before taxation were $18.4million (2021: $0.8m
for Narf US), which included a one‑off charge of
$15.4million representing the deemed cost of the
listing achieved by Narf US as a result of the reverse
acquisition takeover as further explained further
below and in note 8 to the accounts). Revenue grew
by over 30% to $2.5million and the Group ended the
year with contracted backlog of $10.4million.
Operating expenses were up, primarily in relation to
the work involved in completing the RTO. Otherwise
they would have been consistent with 2021. The
Board is expecting them to fall by $1.4m (50%) to
2023 as a result of the one‑off costs in 2022 not
being incurred in 2023 matched with our plan to
streamline to core business.
Basis of presentation and RTO
These nancial statements have been prepared
to reect the acquisition of Narf Industries LLC
and Narf Industries PR LLC via a reverse takeover
on 15March 2022, which resulted in the Company
becoming the ultimate holding company of
theGroup.
The RTO has been accounted for by showing
the consolidated nancial statements as a
continuation of the Narf US subsidiaries. As such,
the comparatives of the consolidated primary
statements represent the combined results
and assets, liabilities and equity of the Narf
USsubsidiaries.
The transactions were accounted for as reverse
acquisitions since they did not meet the denition
ofa business combination under IFRS 3. In
accordance with IFRS 2, a share based payment
expense equal to the deemed cost of the acquisition
less the fair value of the net assets of the Company
at acquisition was recognised.
The comparatives within the consolidated statement
of comprehensive income, the consolidated
statement of nancial position, the consolidated
cashow statement and the consolidated statement
of changes in equity represent the combined
numbers of the legal subsidiaries and accounting
acquirers, Narf Industries LLC and Narf Industries
PR LLC. In the consolidated statement of nancial
position, the share capital and premium as at
31December 2022 is that of Narf Industries Plc
with the reverse acquisition reserve representing
the difference between the deemed cost of the
acquisition and the net assets of Narf Industries
plc at 15March 2022. The consolidated statement
of comprehensive income for 2021 represents the
results of Narf US only and for 2022 represents the
results of Narf US only up to the acquisition date
(15March 2022) at which point the results reect
the combined group, including both Narf US and the
Company up to the year‑end.
As a result of the acquisition the functional currency
of the Group is now USD$. As such we were
required to restate the Parent Company Statement
of Financial Position as historically it had been
presented in GBP £.
Dividends
No dividend has been paid during the year nor do the
Directors recommend the payment of a nal dividend
(prior year: $nil).
Prior to the acquisition, the previous members of
Narf US drew $75,000 and $360,000 for the years
ended 31December, 2022 and 2021 (unaudited),
respectively.
Directors’ Report
Narf Industries Plc (formerly CYBA plc)
12
Overvi ew
Directors
The Directors who served at any time during the
period were:
Steve Bassi Chief Executive Ocer
John Herring Executive Chairman
Rory Heier Non‑Executive Director
Robert Mitchell Non‑Executive Chairman
(resigned 23April 2023)
Details of the Directors’ holding of Ordinary
Shares and Warrants are set out in the Directors’
Remuneration Report from page12.
Further details of the interests of the Directors in the
Warrants of the Company are set out in Note 18 of the
nancial statements.
Share Capital
The Company is incorporated as a public limited
company and is registered in England and Wales
with the registered number 11701224. Details of the
Company’s issued share capital, together with details
of the movements during the period, are shown in
Note 17. The Company has one class of Ordinary
Share and all shares have equal voting rights and
rank pari passu for the distribution of dividends and
repayment of capital.
Substantial Shareholdings
At 30June 2023, the Company had been informed
of the following substantial interests over 3% of the
issued share capital of the Company.
Shareholder
No of
Ordinary
Shares
Percentage
of issued
Share Capital
Steve Bassi 502,079,484 31.69%
Banque Heritage 160,000,000 9.43%
Nick Davis 92,948,078 5.48%
Ben Schmidt 88,447,438 5.21%
Hadron Master
Fund Series II 65,064,542 3.83%
SRI International 59,856,100 3.53%
Directors’ Remuneration Report
(Audited)
Remuneration Policies (unaudited)
The Board believes that share ownership by
Executive Directors strengthens the link between
their personal interests and those of shareholders.
To date the Board members have not traded in the
Company shares since the admission to LSE.
With the late recent appointment of the Executive
Chairman there are a number of immediate
governance actions that will be addressed in
Q32023, including the shareholding policy.
The Directors’ remuneration comprises a basic
fee and discretionary bonuses and/or long‑term
incentives to reect their contribution to signicant
events such as the reverse takeover. Directors also
receive reimbursement for expenses incurred whilst
performing services for the Company.
Service contracts (unaudited)
The Directors have entered into Service Agreements
with the Company and continue to be engaged under
these agreements until terminated by the Company.
In the event of termination or loss of oce the Director
is entitled only to payment of their basic salary in respect
of his notice period. In the event of termination or loss
of oce in the case of a material breach of contract the
Director is not entitled to any further payment.
Directors are allowed to accept external
appointments with the consent of the Board,
provided that these do not lead to conicts of
interest. Directors are allowed to retain fees paid.
UK 10-year performance graph
The Directors have considered the requirement for
a UK 10‑year performance graph comparing the
Company’s Total Shareholder Return with that of a
comparable indicator. The Directors do not currently
consider that including the graph will be meaningful
because the Company has only been listed for less
than 2½years, is not paying dividends, is currently
incurring losses as it gains scale, Its focus during
the year ended 31December 2022 was to integrate
Narf US. In addition and as mentioned above,
the remuneration of Directors was not linked to
performance but to one‑off events and we therefore
do not consider the inclusion of this graph to be useful
to shareholders at the current time. The Directors will
review the inclusion of this table for futurereports.
Directors’ Report continued
Annual Report and Consolidated Financial Statements
13
Overview Corporate Governance Financial Statements
Implementation Report
Particulars of Directors’ Remuneration (audited)
Particulars of directors’ remuneration under the Companies Act 2006 are required to be audited, are given in
Notes 5 and further referenced in the Directors’ report.
Remuneration approved for the Directors’ during the year ended 31December 2022 was:
Base
fee
US$
Bonus
US$
Long-term
incentive
US$
Total
US$
Robert Mitchell (resigned 23.4.23) 149,994 187,493 29,479 366,966
Steve Bassi 60,000 – – 60,000
John Herring 60,000 – – 60,000
Rory Heier 123,794 187,493 29,479 340,766
393,788 374,986 58,958 827,732
For the comparative period being the year to 31December 2021:
Base
salary
US$
Additional
time-based
payments
US$
Pension
contribution
US$
Total
US$
Robert Mitchell* (resigned 23.4.23) 81,000 81,000 – 162,000
Steve Bassi 60,000 – – 60,000
John Herring 60,000 – – 60,000
Rory Heier* 81,000 81,000 – 162,000
282,000 162,000 – 444,000
* Mr Heier and Mr Mitchell were contracted to provide a maximum of ten hours of their time per month to the Company. Additional hours
beyond this were charged on a time spent basis.
There were no performance measures associated with any aspect of Directors’ remuneration during the year.
Payments to past Directors (audited)
There are no payments in the year to past Directors.
Bonus and incentive plans (audited)
During the year of Mr Mitchell and Mr Heier were
awarded 25million options (2021: nil) over the
ordinary shares of the Company with a strike price
of 2p per Share. These options vest immediately and
have a three year term (see note 18).
Percentage change in the remuneration of the
Chief Executive (audited)
The Chief Executive was appointed in June 2022 and
therefore no information on the percentage change
is presented. The CEO currently receives $5,000 per
month for his Board service and currently does not
take any other remuneration.
Other matters
The Company does not have any pension plans for
any of the Directors and does not pay contributions
in relation to their remuneration. The Company
has not paid out any excess retirement benets to
anyDirectors.
Approval by members (unaudited)
The remuneration policies established during the
transition will be put to members for approval at the
next Annual General Meeting.
Narf Industries Plc (formerly CYBA plc)
14
Overvi ew
Directors’ Report continued
Directors’ interests in shares
The Company has no minimum Director shareholding
requirements.
The benecial interest of the Directors in the Ordinary
Share Capital of the Company at 30June 2023 was:
Number
% age of
issued share
capital – 2022
Rory Heier
11,375,000 0.67%
Steve Bassi
502,079,484 31.69%
John Herring
26,000,000 1.53%
549,454,484 32.37%
Remuneration Committee (unaudited)
There is no separate Remuneration Committee
at present, instead all remuneration matters are
considered by the Board as a whole. It meets
when required to consider all aspects of Directors’
remuneration, share options and service contracts.
Auditor Information and Opinion
The Directors who held oce at the date of approval
of the Directors’ Report conrm that, so far as they
are each aware, there is no relevant audit information
of which the Company’s Auditor is unaware with the
exception of the matters included in the Auditor’s
report, which contains specic information on the
areas which resulted in a disclaimer of opinion.
This is the rst nancial reporting period for which
consolidated nancial statements, incorporating the
businesses acquired in March 2022 (see Note 8 to the
Financial Statements), are subject to International
Finance Reporting Standards (IFRS). This administrative
burden introduced by IFRS presented a signicant
hurdle which was the main reason for delay in
completion of the Audit.
In addition to the record keeping matter, certain
other challenges hindered the completion of the
audit, the most signicant being our ability to
provide the auditors with various contracts and
underlying records related to a sensitive contractual
relationship as further discussed in the Executive
Chairman’s Statement (see the Sensitive Contract
component of his Statement).
A decision was made to accept the auditor’
disclaimers, as resolution will require more time
and extending the trading suspension of our shares
would negatively impact stakeholders.
Our team, now resourced with a new CFO, will
continue to work diligently, and resolve all matters
with our auditors to give all stakeholders the
assurances they need in our reported nancials.
Emissions
The Company is aware that it needs to measure
its operational carbon footprint in order to limit
and control its environmental impact. However,
since the Company, due to its limited activities in
the year under review, did not consume more than
40,000kWh of energy, the Company’s emissions are
not disclosed for this reason.
In the future, the Company will only measure the
impact of its direct activities, as the full impact of
the entire supply chain of its suppliers cannot be
measured practically.
Financial Instruments
The Company has exposure to credit risk, liquidity
risk and market risk. Note 21 presents information
about the Company’s exposure to these risks, along
with the Company’s objectives, processes and
policies for managing the risks.
Events after the reporting period
(seeNote 24)
There have been no material events since the
reporting date which have a material impact on an
understanding of these nancial statements.
Directors’ Indemnity Provisions
The Company has taken out Directors and Ocers
Liability Indemnity insurance.
Annual Report and Consolidated Financial Statements
15
Overview Corporate Governance Financial Statements
Going concern
The following represents key nancial metrics of
theGroup.
• At year‑end, the consolidated statement of
nancial position presents Current Assets totaling
$1.2million. This included cash of $440,000 and
trade receivables of $690,000.
• Total liabilities at year‑end were $2.1million, with
70% of the balance being cash advances from the
founder and CEO for working capital purposes
and the remainder being trade and other payables
of$600,000.
• At 31December, 2022, the Group had a $10.4million
backlog (representing contracts in progress), of
which $5.9million is expected to be realized in 2023.
• The Company has available net operating loss
carryforwards of $5.9million to offset future taxes.
Since the year‑end, the CEO agreed to provide a
$2million credit facility not due until June 2024,
leaving the Company $680,000 from which to further
draw as of the date of this report. The year‑end
receivables of $690,000 were all collected in Q1 2023.
The Company is on course for its revenue projections
of at least 100% YoY growth, out of its $10.4million
backlog, whilst reducing operating expenses by
50% resulting in estimated break‑even EBITDA and
nance within the bounds or organic cash ow and
current nancing facilities.
These above points mean the Directors have a
reasonable expectation that the Group has adequate
resources to continue in operational existence
for the foreseeable future. For this reason, the
Directors continue to adopt the going concern basis
in preparing the nancial statements. Further details
are given in Note 2.3.
Auditors
The Board appointed PKF Littlejohn LLP as auditors
of the Company on 21March 2019 and thus this
is their fourth period of appointment. They have
expressed their willingness to continue in oce and
a resolution to reappoint them will be proposed at the
Annual General Meeting.
Donations
The Company made no political donations during the
current and prior periods.
Statement of Directors’ Responsibilities
in respect of the Annual Report and the
nancial statements
The Directors are responsible for preparing this report
and the nancial statements in accordance with
applicable United Kingdom law and regulations and
those UK‑adopted international accounting standards.
Company law requires the Directors to prepare
nancial statements for each nancial period which
present fairly the nancial position of the Company
and the nancial performance and cash ows of the
Company for that period.
In preparing those nancial statements, the
Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are
reasonable and prudent;
• present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
• state whether applicable UK‑adopted international
accounting standards have been followed, subject
to any material departures disclosed and explained
in the nancial statements;
• prepare the nancial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business; and
• provide additional disclosures when compliance
with the specic requirements in IFRSs is
insucient to enable users to understand the
impact of particular transactions, other events and
conditions on the entity’s nancial position and
nancial performance.
Narf Industries Plc (formerly CYBA plc)
16
Overvi ew
Directors’ Report continued
The Directors are responsible for keeping adequate
accounting records that are sucient to show and
explain the Company’s transactions and disclose
with reasonable accuracy at any time the nancial
position of the Company and enable them to ensure
that the Company nancial statements comply
with the Companies Act 2006 and Article 4 of
the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement that comply with
that law and those regulations, and for ensuring that
the Annual report includes information required by the
Listing Rules of the Financial Conduct Authority.
The nancial statements are published on the
Groups’s website. The work carried out by the Auditor
does not involve consideration of the maintenance
and integrity of this website and accordingly, the
Auditor accepts no responsibility for any changes
that have occurred to the nancial statements since
they were initially presented on the website. Visitors
to the website need to be aware that legislation in
the United Kingdom covering the preparation and
dissemination of the nancial statements may differ
from legislation in their jurisdiction.
The Directors conrm that to the best of their
knowledge:
• these nancial statements, prepared in
accordance with IFRS (UK adopted IASo), give a
true and fair view of the assets, liabilities, nancial
position and prot of the Group and Company;
• this Annual report includes the fair review of the
development and performance of the business and
the position of the Group and Company together
with a description of the principal risks and
uncertainties that it faces; and
• the Annual Report and nancial statements, taken
as a whole, are fair, balanced and understandable
and provide information necessary for
shareholders to assess the Group and Company’s
performance, business and strategy.
On behalf of the Board
Rory Heier
Non-Executive Director
11July 2023
Annual Report and Consolidated Financial Statements
17
Overview Corporate Governance Financial Statements
The Company recognises the importance
of, and is committed to, high standards of
Corporate Governance. Whilst the Company
is not formally required to comply with a
Corporate Governance Code, the Company
has looked to the requirements of the UK Code
of Corporate Governance published in July
2018 (the “Code”) and sought to apply aspects
of the Code for best practice where deemed
appropriate but does not comply with the Code
in full. The following sections explain how the
Company has applied the aspects of the Code
that it considers relevant to the Group.
Compliance with the UK Code of
Corporate Governance
The Company has a clear mandate to optimise the
allocation of limited resources to source acquisitions
and support its future plans. As such the Company
strives to maintain a balance between conservation
of limited resources and maintaining robust
corporate governance practices.
Whilst the Company has not sought to comply with
the Code in full, as noted below there are 3 provisions
it specically does not comply with:
• Section 4.24 of the Code requires that a majority
of the members of the Audit Committee must be
independent. The Audit Committee comprises of
only one Non‑Executive Director and one Executive
Director during this transition period. However, the
Directors will be looking to enhance the number of
independent Directors in due course.
• The Code requires that a smaller company should
have at least two Independent Non‑Executive
Directors. The Board currently consists of two
Executive Directors and one Non‑Executive
Director. The Non‑Executive Director is interested
in ordinary shares in the Company and cannot
therefore be considered fully independent under
the Code. However, the Non‑executive Director
is considered to be independent in character and
judgement and the Company considers that one
Non‑Executive Director is adequate given the
size and stage of development of the Company.
As above, the Company intends to strengthen the
Board in due course.
• As a consequence of the above, where provisions
of the Code require the appointment of
independent directors, for example as chairman
or as senior independent director, the Company is
not in full compliance with the Code – this applies in
relation to various provisions of the Code. including
those areas relating to ‘Remuneration’, ‘Audit, Risk
and Internal Control’ and ‘Composition, Succession
and Evaluation’. As above this is expected to
change in due course. For further details see the
UK Corporate Governance Code at www.frc.org.uk
Set our below is the Company’s corporate governance
practices:
Board of Directors
The Board is committed to maintaining appropriate
standards of corporate governance. The statement
below, together with the report on Directors’
remuneration on pages12 to 14, explains how the
Company has observed principles set out in The UK
Corporate Governance Code (the “Code”) as relevant
to the Company and contains the information
required by section 7 of the UK Listing Authority’s
Disclosure and Transparency Rules as the Company
has sought to adopt these prior to listing.
The Board currently consists of two executive
Directors and one non‑executive Director following
completion of both the listing and the subsequent
transaction. The Board met regularly throughout
the year, and since, to discuss key issues and to
monitor the overall performance of the Group.
At its current stage of development, the Board
considers all matters, such as Remuneration,
Audit and Nominations as a whole. The Directors
will actively seek to expand Board membership to
provide additional levels of corporate governance
procedures at the relevant opportunity.
Corporate Governance Report
Narf Industries Plc (formerly CYBA plc)
18
Corporate Governance
Audit Committee and Financial reporting
The Audit Committee comprises Rory Heier (Chair)
and John Herring (newly appointed Executive
Chairman), each of whom have recent and relevant
nancial experience. The Audit Committee meets
at least two times a year at the appropriate times
in the reporting and audit cycle. The committee
has responsibility for, amongst other things, the
monitoring of the nancial integrity of the nancial
statements of the Company and the involvement
of the Company’s auditors in that process. The
Audit Committee recognizes the weaknesses in the
nancial systems as outlined in the 31December
2022 audit report and will work with the auditors, the
Board, the Directors, and management to address
and resolve the issues contained in the 2022 audit
report; in particular, on compliance with accounting
policies and ensuring that an improved system of
internal nancial control is implemented. Note the
ultimate responsibility for reviewing and approving
the annual report and accounts and the half‑yearly
reports, remains with the Board.
The terms of reference of the Audit Committee
covers such issues as membership and the
frequency of meetings, as mentioned above,
together with requirements of any quorum for and
the right to attend meetings. The duties of the Audit
Committee covered in the terms of reference are:
nancial reporting, internal controls, internal audit,
external audit and reserving. The terms of reference
also set out the authority of the committee to carry
out its duties.
The Board seeks to present a balanced and
understandable assessment of the Company’s
position and prospects in all interim, nal and price‑
sensitive reports and information required to be
presented by statute.
External auditor
The Board plans to meet with the auditor later on
in the year to consider the internal procedures,
controls, and other matters raised by the auditor.
The Board considers auditor independence and
objectivity and the effectiveness of the audit
process. It also considers the nature and extent
of the non‑audit services supplied by the auditor
reviewing the ratio of audit to non‑audit fees
and ensures that an appropriate relationship is
maintained between the Company and its external
auditor. During the year PKF provided reporting
accountant services in relation to the audit of the
Historical Financial Information as part of the RTO
transaction to acquire Narf US, as well as providing
an informal review of the 30June 2022 interim
consolidated nancial statements. Details of the
total fees paid to the auditors are set out in Note 4 to
the accounts.
The Company has a policy of controlling the provision
of non‑audit services by the external auditor in
order that their objectivity and independence are
safeguarded. As part of the decision to recommend
the appointment of the external auditor, the
Board takes into account the tenure of the auditor
in addition to the results of its review of the
effectiveness of the external auditor and considers
whether there should be a full tender process.
There are no contractual obligations restricting the
Board’s choice of external auditor. PKF Littlejohn
LLP have been in their role as auditors for four years,
providing standard external auditing services for the
periods ended 31March 2020, 31December 2020,
31December 2021 and 31December 2022.
Remuneration committee
The Remuneration Committee consists of Rory
Heier (Chair) and John Herring. The Remuneration
Committee meets at least twice a year. It has
responsibility for the determination of specic
remuneration packages for each of the executive
directors and any senior executives or managers
of the Group, including pension rights and any
compensation payments, and recommending and
monitoring the level and structure of remuneration for
senior management, and the implementation of share
option, or other performance‑related, schemes.
Nominations committee
The Nomination Committee consists of John
Herring (Chair), Steve Bassi and Rory Heier. The
Committee is responsible for considering and
making recommendations to the board in respect of
appointments to the Board, the Board committees
and the chairmanship of the Board committees. It
is also responsible for keeping the structure, size
and composition of the Board under regular review,
and for making recommendations to the Board with
regard to any changes necessary. The Nomination
Committee also considers succession planning,
taking into account the skills and expertise that will
be needed on the Board in the future.
Corporate Governance Report continued
Annual Report and Consolidated Financial Statements
19
Overview Corporate Governance Financial Statements
Internal nancial control
Financial controls are being bolstered so as to
provide safeguards against unauthorised use
or disposition of the assets, to maintain proper
accounting records and to provide reliable nancial
information for internal use. Key nancial controls to
be considered include:
• the maintenance of proper records;
• a schedule of matters reserved for the approval of
the Board;
• evaluation, approval procedures and risk
assessment for acquisitions; and
• close involvement of the Directors in the day‑to‑
day operational matters of the Group.
The Directors consider the size of the Group and
the close involvement of Directors in the day‑to‑day
operations makes the maintenance of an internal
audit function unnecessary. The Directors will
continue to monitor this situation.
Shareholder Communications
The Company uses its corporate website
(www.narfgroup.com) to ensure that the latest
announcements, press releases and published
nancial information are available to all shareholders
and other interested parties.
The AGM is used to communicate with both
institutional shareholders and private investors
and all shareholders are encouraged to participate.
Separate resolutions are proposed on each issue
so that they can be given proper consideration and
there is a resolution to approve the Annual Report
and Accounts.
The Company counts all proxy votes and will indicate
the level of proxies lodged on each resolution after it
has been dealt with by a show of hands.
Narf Industries Plc (formerly CYBA plc)
20
Corporate Governance
Disclaimer of opinion
We were engaged to audit the nancial statements
of Narf Industries Plc (the ‘parent company’) and
its subsidiaries (“the group”) for the year ended
31December 2022 which comprise the Consolidated
Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the
Parent Company Statement of Financial Position, the
Consolidated Statement of Cashows, the Parent
Company Statement of Cashows, the Consolidated
Statement of Changes in Equity, the Parent Company
Statement of Changes in Equity and notes to the
nancial statements, including signicant accounting
policies. The nancial reporting framework that has
been applied in their preparation is applicable law and
UK‑adopted international accounting standards and
as regards the parent company nancial statements,
as applied in accordance with the provisions of the
Companies Act 2006.
We do not express an opinion on the accompanying
nancial statements of the group and the parent
company. Because of the signicance of the matters
described in the Basis for disclaimer of opinion section
of our report, we have not been able to obtain sucient
appropriate audit evidence to provide a basis for an
audit opinion on these nancial statements.
Basis for disclaimer of opinion
We identied weaknesses in management’s
internal processes and controls which meant that
proper accounting records were not maintained
by management. Given the potential wider
consequences of this on our audit, we sought to
extend our procedures. However, we were unable
to complete our audit procedures as management
was unable to provide sucient and appropriate
audit evidence in response to our extended testing
requests. For this reason, we are unable to form
an opinion on the reasonableness of the balances
presented in the nancial statements and the related
note disclosures.
Management acquired two subsidiaries in one
transaction during the year and in relation to
the acquisition, we were unable to validate the
opening balances. The nancials of the acquired
subsidiaries for the period ending 31 December 2021
were unaudited. Our audit opinion on the nancial
statements for the year ended 31December 2022 is
also disclaimed due to the inability to gain sucient
and appropriate audit evidence in respect of the
opening balances of thesesubsidiaries.
Other matter
The nancial statements of the two acquired
subsidiaries for the year ended 31December 2021
were not audited and as such, the comparatives of
the consolidated primary statements within these
nancial statements are unaudited.
Our application of materiality
The scope of our audit was inuenced by our
application of materiality. The quantitative and
qualitative thresholds for materiality determine
the scope of our audit and the nature, timing, and
extent of our audit procedures. Materiality for
the consolidated nancial statements was set as
$76,000 based upon loss before tax. Materiality
has been based upon loss before tax due to
the value and signicance of revenue, cost of
sales and administrative expenses in the year
Performance materiality and the triviality threshold
for the consolidated nancial statements was
set at $53,200 and $3,800 respectively due to our
accumulated knowledge of the group, the number of
signicant risks identied and their assessed risk.
Materiality for the parent company nancial
statements as a whole was set as $66,000 (2021:
£99,000). This was calculated based upon the
parent company’s share of the group’s loss before
tax (2021: net assets) due the focus in the parent
company on reducing costs and funding the
subsidiaries operations. Performance materiality
and triviality threshold for the parent company was
set at $46,200 (2021: £69,300) and $3,300 (2021:
£4,950) respectively due to the assessed risk and our
accumulated knowledge of the parent company.
We also agreed to report to the Audit Committee
any other differences below that triviality
threshold that we believe warranted reporting on
qualitativegrounds.
Our approach to the audit
In designing our audit, we determined materiality
and assessed the risks of material misstatement
in the nancial statements. In particular we looked
at areas involving signicant accounting estimates
and judgements by the directors and considered
Independent Auditor’s Report
To the Members of Narf Industries Plc
Annual Report and Consolidated Financial Statements
21
Overview Corporate Governance Financial Statements
future events that are inherently uncertain, such as
revenue recognition and the recoverable value of
the investment in subsidiaries and intangible assets.
We also addressed the risk of management override
of internal controls, including among other matters
consideration of whether there was evidence of bias
that represented a risk of material misstatement due
to fraud.
A full scope audit was performed on the complete
nancial information of the three components of
the group. The three components are based on
geographical location being the United Kingdom, the
United States of America and Puerto Rico.
We audited the ultimate parent company, situated
in the United Kingdom, and the two other reporting
components. All audit work was conducted in the
United Kingdom with regular interaction with the
entity during all stage of the audit. However, as
referenced in the Basis for disclaimer of opinion
section of our audit report, we were unable to
gain sucient and appropriate audit evidence
and therefore are unable to give an opinion on the
nancial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most signicance in our audit
of the nancial statements of the current period and include the most signicant assessed risks of material
misstatement (whether or not due to fraud) we identied, including those which had the greatest effect on:
the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the nancial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the
matter described in the Basis for disclaimer of opinion section we have determined the matters described
below to be the key audit matters to be communicated in our report.
Key Audit Matter How our scope addressed this matter
Revenue recognition
The group recognised revenues
totaling $2,547k (Note 3) for the year
ended 31December 2022. The revenue
recognised in the year within the group
relates to contracts entered into with
a small number of customers. These
contracts include a signicant number
of performance obligations and are of
signicant value. As such, there is a
risk that the revenue recognised in the
year in respect of these contracts may
be materially incomplete or overstated
as it has not been recognised correctly
in accordance with IFRS 15 and the
performance obligations met during
the year. Furthermore, revenue may be
materially misstated due to cut‑off errors
as signicant judgements may be required
to be made where milestones have not
been fully met by the year‑end.
Our work in this area included but was not limited to:
• Obtaining an understanding of the information system and
related controls relevant to each material income stream;
• Evaluating the appropriateness of the information system and
the effectiveness of the design and implementation of the
related controls;
• Obtaining each contract that was active in the year, reviewing
management’s revenue recognition accounting policy and
assessing whether this is in accordance with IFRS 15;
• For each contract obtained, reviewing the contract, and
ascertaining whether the performance obligations were met in
the year; and
• Ensuring that the revenue recognised in the year was
accurate and complete including whether revenue had been
appropriately deferred and/or accrued.
Sucient and appropriate audit evidence could not be obtained
in respect of the revenue and therefore, as noted in the Basis for
disclaimer of opinion section, we are unable form an opinion on
the reasonableness of the revenue balances presented in the
nancial statements and supporting disclosure notes.
Narf Industries Plc (formerly CYBA plc)
22
Corporate Governance
Independent Auditor’s Report continued
Key Audit Matter How our scope addressed this matter
Business combinations accounting
treatment and disclosure
During the year, the parent company
acquired two entities, Narf Industries
LLC and Narf Industries PR LLC, through
the issuance of shares as well as cash
consideration. The directors have
assessed these acquisitions to fall
outside the scope of IFRS 3 as they do not
believe that Narf Industries Plc meets the
denition of a business per IFRS 3 (Notes
2.16 and 8).
The treatment and disclosure of business
combinations during the year are a
signicant risk area due to the complexity
of the accounting for such acquisitions,
the judgement required to be made by
management in assessing the accounting
treatment thereon as the acquisitions
falls outside the scope of IFRS 3 and the
value of the consideration paid for the two
subsidiaries.
Our work in this area included but was not limited:
• Obtaining the agreements in respect of the business
combination transaction and ascertaining the key terms of the
transaction;
• Assessing the accounting treatment of the acquisitions and
management’s justications;
• Obtaining management’s acquisition workings and ensuring
that they have correctly valued the investment in the
subsidiaries, the net assets of the parent company at
acquisition, the reverse takeover share‑based payment charge
and the reverse acquisition reserve;
• Ensuring that management have correctly consolidated the
subsidiaries’ results for 2022 and that the comparatives in the
group primary statements represent the subsidiaries combined
results and nancial position; and
• Ensuring disclosures in the nancial statements are in line with
UK‑adopted IAS.
Carrying value of investment in
subsidiaries
As noted above, during the year the parent
company acquired two entities during
the period and the carrying value of the
investments in these subsidiaries as at
31December 2022 was $25,600k (Note 12).
Given the value of the balances and the
group is still in its growth phase, there is
a risk that the investment in subsidiaries
may not be fully recoverable. Furthermore,
management are required to make
signicant estimates and judgements
(Note 2.16) when assessing the recoverable
value of the investment in subsidiaries and
whether it is impaired.
Our work in this area included but was not limited:
• Obtaining and reviewing management’s impairment
assessment in respect of the investment in subsidiaries and
supporting calculations; and
• Ascertaining and challenging management’s key assumptions
and inputs.
Annual Report and Consolidated Financial Statements
23
Overview Corporate Governance Financial Statements
Key Audit Matter How our scope addressed this matter
Carrying value of capitalised
development costs
As at 31December 2022, the carrying
value of capitalised development costs at
group level totalled $2,697k (Note 9).
Given the value of the balance, the
estimation required when conducting
impairment reviews and the judgement
required when capitalising costs (Note
2.16), there is a risk that capitalised
development costs may be materially
misstated as costs have been
inappropriately capitalised and/or the
asset is not fully recoverable.
Our work in this area included but was not limited:
• Obtaining the directors’ assessment of impairment and
reviewing and challenging the key estimates and judgements
used therein; and
• Reviewing disclosures in the nancial statements to ensure
that they are in line with IAS 38.
Sucient and appropriate audit evidence could not be obtained
in respect of the carrying value of intangible assets and
therefore, as noted in the Basis for disclaimer of opinion section,
we were unable to form an opinion on the reasonableness of
the capitalised development costs balances presented in the
nancial statements and supporting disclosure notes.
Other information
The other information comprises the information
included in the strategic and directors’ report, other
than the nancial statements and our auditor’s
report thereon. The directors are responsible for
the other information contained within the strategic
and directors’ reports. Our opinion on the group
and parent company nancial statements does
not cover the other information and, except to the
extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion
thereon. Our responsibility is to read the other
information and, in doing so, consider whether the
other information is materially inconsistent with the
nancial statements, or our knowledge obtained in
the course of the audit, or otherwise appears to be
materially misstated. If we identify such material
inconsistencies or apparent material misstatements,
we are required to determine whether this gives
rise to a material misstatement in the nancial
statements themselves. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are
required to report that fact.
As described in the Basis for disclaimer of opinion
section of our report, we have concluded that a material
misstatement of the other information exists.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion the part of the directors’ remuneration
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Because of the signicance of the matters described in
the Basis for disclaimer of opinion section of our report,
we have been unable to form an opinion, whether based
on the work undertaken in the course of the audit:
• the information given in the strategic report and
the directors’ report for the nancial year for which
the nancial statements are prepared is consistent
with the nancial statements; and
• the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to
report by exception
Notwithstanding our disclaimer of an opinion on the
nancial statements, in the light of the knowledge
and understanding of the group and parent company
and its environment obtained in the course of the
audit performed subject to the pervasive limitation
described above, we have not identied material
misstatements in the strategic report or the
directors’ report.
Narf Industries Plc (formerly CYBA plc)
24
Corporate Governance
Independent Auditor’s Report continued
Arising from the limitation of our work referred
toabove:
• we have not obtained all the information and
explanations that we considered necessary for the
purpose of our audit; and
• we were unable to determine whether adequate
accounting records have been kept by the parent
company.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company nancial statements and the
part of the directors’ remuneration report to be
audited are not in agreement with the accounting
records and returns; or
• certain disclosures of directors’ remuneration
specied by law are not made.
Responsibilities of directors
As explained more fully in the Statement of Directors
Responsibilities, the directors are responsible for
the preparation of the Group and Parent Company
nancial statements and for being satised that they
give a true and fair view, and for such internal control
as the directors determine is necessary to enable the
preparation of nancial statements that are free from
material misstatement, whether due to fraud orerror.
In preparing the Group and Parent Company
nancial statements, the directors are responsible
for assessing the Group’s and Parent Company’s
ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and
using the going concern basis of accounting unless
the directors either intend to liquidate the group and
parent company or to cease operations, or have no
realistic alternative but to do so.
Extent to which the audit was
considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of
non‑compliance with laws and regulations. We
design procedures in line with our responsibilities,
outlined above, to detect material misstatements in
respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
• We obtained an understanding of the group and
parent company as well as the sector in which they
operate to identify laws and` regulations that could
reasonably be expected to have a direct effect
on the nancial statements. We obtained our
understanding in this regard through discussions
with management, industry research and our
cumulative audit knowledge and experience of
thesector.
• We determined the principal laws and regulations
currently relevant to the group and parent
company in this regard to be those arising from
UK Company Law, rules applicable to issuers on
the LSE Standard List Main Market, including the
FCA Listing Rules and the Disclosure Guidance and
Transparency Rules.
• We designed our audit procedures to ensure the
audit team considered whether there were any
indications of non‑compliance by the group and
parent company with those laws and regulations.
These procedures included, but were not limited to:
– Discussions with management regarding
compliance with laws and regulations by the
group and parent company;
– Review of board minutes; and
– Review of regulatory news announcements made
throughout and post year‑end.
• We also identied the risks of material misstatement
of the nancial statements due to fraud. We
considered, in addition to the non‑rebuttable
presumption of a risk of fraud arising from
management override of controls, that there was
potential for management bias in relation to revenue
recognition, the recoverable values assigned to the
investment in subsidiaries and the intangible assets.
We sought to address these risks by challenging the
assumptions and judgements made by management
when auditing these signicant accounting estimates
but were not able to conclude thereof (see the Key
audit matters section of our report).
Annual Report and Consolidated Financial Statements
25
Overview Corporate Governance Financial Statements
• As in all of our audits, we addressed the risk
of fraud arising from management override of
controls by performing audit procedures which
included, but were not limited to the testing of
journals; reviewing accounting estimates for
evidence of bias; and evaluating the business
rationale of any signicant transactions that are
unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there
is a risk that we will not detect all irregularities,
including those leading to a material misstatement
in the nancial statements or non‑compliance
with regulation. This risk increases the more that
compliance with a law or regulation is removed from
the events and transactions reected in the nancial
statements, as we will be less likely to become aware
of instances of non‑compliance. The risk is also
greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional
concealment, forgery, collusion, omission, or
misrepresentation.
Auditor’s responsibilities for the audit
of the nancial statements
Our responsibility is to conduct an audit of the
group’s and parent company’s nancial statements
in accordance with ISAs (UK) and to issue an
auditor’sreport.
However, because of the matters described in the
Basis for disclaimer of opinion section of our report,
we were not able to obtain sucient appropriate
audit evidence to provide a basis for an audit opinion
on these nancial statements.
We are independent of the group and parent
company in accordance with the ethical
requirements that are relevant to our audit of
the nancial statements in the UK, including
the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fullled our
other ethical responsibilities in accordance with
theserequirements.
Other matters which we are required to
address
We were appointed by the Audit Committee on
21March 2019 to audit the nancial statements for
the period ending 31March 2020 and subsequent
nancial periods. Our total uninterrupted period
of engagement is 3 periods, covering the periods
ending 31March 2020, 31December 2021 and
31December 2022.
The non‑audit services prohibited by the FRC’s
Ethical Standard were not provided to the group and
parent company and we remain independent of the
group and parent company in conducting our audit.
Our audit opinion is consistent with the additional
report to the audit committee.
Use of our report
This report is made solely to the company’s
members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the
company’s members those matters we are required
to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone,
other than the company and the company’s members
as a body, for our audit work, for this report, or for
the opinions we have formed.
Joseph Archer (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Registered Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
Narf Industries Plc (formerly CYBA plc)
26
Financial Statements
Consolidated Statement of Comprehensive Income
For the year to 31 December 2022
Notes
Year ended
31December
2022
US$
(Unaudited)
Year ended
31December
2021
US$
Contract Revenue 3 2,547,125 1,939,516
Cost of Sales (1,828,887 ) (678,831 )
Gross prot 718,238 1,260,685
Administrative expenses (3,303,583 ) ( 2,133,711 )
Loss before depreciation and software license amortisation,
share based payment expenses, interest and taxes 4 (2,585,345 ) ( 873,026 )
Depreciation and software license amortisation (329,999 ) ( 47,379 )
Other share based payment expense 18 ( 147,580 ) –
Operating loss (3,062,924 ) ( 920,375 )
RTO share based payment expense 8 ( 15,355,123 ) –
Interest receivable and other nance income 3,376 150,593
Finance costs (3,197 ) (767 )
Loss on ordinary activities before taxation (18,417,868 ) ( 770,579 )
Tax on loss on ordinary activities 6 (7,839 ) (72,090 )
Loss and total comprehensive income for the period
attributable to the owners of the company (18,425,707 ) ( 842,669 )
Earnings per share (basic and diluted) attributable to the
equity holders (cents) 7 (1.3 ) (0.1 )
The comparative information is presented for Narf US, the accounting acquirers (see note 2.2)
The above results relate entirely to continuing activities.
The accompanying notes on pages33 to 58 form part of these nancial statements.
Annual Report and Consolidated Financial Statements
27
Overview Corporate Governance Financial Statements
Consolidated Statement of Financial Position
For the year to 31 December 2022
Notes
As at
31December
2022
US$
(Unaudited)
As at
31December
2021
US$
Fixed Assets
Intangible assets 9 2,697,076 1,303,351
Tangible assets 11 15,990 49,519
Current Assets
Trade and other receivables 13 756,481 48,074
Cash and cash equivalents 14 442,751 446,879
Total Assets 3,912,298 1,847,823
Current Liabilities
Trade and other payables 15 595,962 193,984
Non-Current Liabilities
Loans 16 1,513,727 832,312
Total Liabilities 2,109,689 1,026,296
Net Assets 1,802,609 821,527
Equity
Share capital 17 204,012 – *
Share premium 17 35,074,061 –
Reverse acquisition reserve 8 (16,747,959 ) –
Foreign exchange reserve (43,411 ) –
Share based payment reserve 18 229,185
Retained decit (16,913,279 ) –
Members’ equity – 821,527
Total Equity 1,802,609 821,527
* – The comparative numbers for 2021 are that of the Narf US subsidiaries and as they are LLCs do not issue shares.
The comparative information is presented for the two subsidiaries Narf Industries LLC and Narf Industries PR
LLC (together “Narf US”), the accounting acquirers (see note 2.2).
The accompanying notes on pages33 to 58 form part of these nancial statements.
These nancial statements were approved by the Board of Directors on 11 July 2023 and were signed on its
behalf by:
Rory Heier
Non-Executive Director
Company number: 11701224
Narf Industries Plc (formerly CYBA plc)
28
Financial Statements
Notes
As at
31December
2022
US$
As at
31December
2021
(Restated)*
US$
As at
31December
2020
(Restated)*
US$
Fixed Assets
Intangible assets 10 1,620,663 – –
Investment in subsidiary undertakings 12 25,600,000 – –
27,220,663 – –
Current Assets
Trade and other receivables 13 67,364 2,007,220 222,752
Cash and cash equivalents 14 210,282 274,982 1,703,330
277,646 2,282,202 1,926,082
Total Assets 27,498,309 2,282,202 1,926,082
Current Liabilities
Trade and other payables 15 313,829 311,078 493,650
Total Liabilities 313,829 311,078 493,650
Net Assets 27,184,480 1,971,124 1,432,432
Equity
Share capital 17 204,012 84,293 70,796
Share premium 17 35,074,061 7,447,611 4,871,168
Share based payment reserve 18 229,185 32,578 32,578
Foreign exchange reserve (43,411) (17,767) –
Retained decit (8,279,367) (5,575,591) (3,542,110)
Total Equity 27,184,480 1,971,124 1,432,432
* – The 2021 and 2020 comparative gures have been restated as the presentational currency has been changed from GBP £ to USD $.
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the
Parent Company prot and loss account. The Parent Company loss for the year was $2,714,845 (2021: $1,963,034).
The accompanying notes on pages33 to 58 form part of these nancial statements.
These nancial statements were approved by the Board of Directors on 11 July 2023 and were signed on its
behalf by:
Rory Heier
Non-Executive Director
Company number: 11701224
Parent Company Statement of Financial Position
For the year to 31 December 2022
Annual Report and Consolidated Financial Statements
29
Overview Corporate Governance Financial Statements
Notes
Year ended
31December
2022
US$
(unaudited)
Year ended
31December
2021
US$
Cash ow from operating activities
Loss on ordinary activities before taxation (18,417,868 ) (770,579 )
Adjustments for:
Depreciation and software license amortisation 329,999 47,379
Software development amortisation 226,938 269,658
RTO and other share based payment expenses 15,502,703 –
(Increase)/decrease in trade and other receivables (701,723 ) 105,730
Increase in trade and other payables 67,140 (76,948 )
Net cash outow from operating activities (2,992,811 ) (424,760 )
Cashow from investing activities
Net amounts paid to former members to acquire control (3,615,433 ) –
Licence fee expenditure (500,000 ) –
Net cashow from investing activities (4,115,433 ) –
Cashow from nancing activities
Proceeds on the issue of shares 7,650,881 –
Costs related to share issues (1,145,814 ) –
Loan from former member 702,000 866,891
Loan repayment (20,292 ) (20,003 )
Drawings by former members (75,000 ) (360,000 )
Net interest received/(paid) 180 (766 )
Net cash inow from nancing activities 7,111,955 486,122
Taxation paid (7,839 ) (72,090 )
Net decrease in cash and cash equivalents (4,128 ) (10,728 )
Cash and cash equivalents at the beginning of the period 446,879 457,607
Cash and cash equivalents at the end of the period 442,751 446,879
Supplemental information non-cash transactions:
Shares issued to former members upon acquisition
in lieu of cash consideration 18,048,690 –
The comparative information is presented for Narf US, the accounting acquirers (see note 2.2)
The accompanying notes on pages33 to 58 form part of these nancial statements.
Consolidated Statement of Cash Flows
For the year to 31 December 2022
Narf Industries Plc (formerly CYBA plc)
30
Financial Statements
Notes
Year ended
31December
2022
US$
Year ended
31December
2021
(Restated)
US$*
Cash ow from operating activities
Loss for the period (2,714,845) (1,963,034)
Adjustments for:
Amortisation of intangible assets 296,470 –
(Increase)/decrease in trade and other receivables (63,147) 87,238
Increase/(decrease) in trade and other payables 37,330 (182,571)
Share based payments 128,471 –
Net cash outow from operating activities (2,315,721) (2,058,367)
Cash ow from investing activities
Decrease/(Increase) in prepaid consideration 9 2,000,000 (2,000,000)
Cash invested to acquire license (500,000) –
Cash amounts paid to acquire subsidiary undertaking (5,754,046) –
Net cash outow from investing activities (4,254,046) (2,000,000)
Cashow from nancing activities
Proceeds on the issue of shares 7,650,881 2,888,777
Costs related to share issues (1,145,814) (258,758)
Net cash inow from nancing activities 6,505,067 2,630,019
Net decrease in cash and cash equivalents (64,700) (1,428,348)
Cash and cash equivalents at the beginning of the period 274,982 1,703,330
Cash and cash equivalents at the end of the period 14 210,282 274,982
* – The 2021 comparative gures have been restated as the presentational currency has been changed from GBP £ to USD $.
The accompanying notes on pages33 to 58 form part of these nancial statements.
Parent Company Statement of Cash Flows
For the year to 31 December 2022
Annual Report and Consolidated Financial Statements
31
Overview Corporate Governance Financial Statements
Share
Capital
US$
Share
Premium
US$
FX reserve
US$
Share
based
payment
reserve
US$
Reverse
Acquisition
reserve
US$
Retained
Decit
US$
Members’
Equity
US$
Total
US$
Balance at 1January 2021 – – – – – – 2,024,196 2,024,196
Total comprehensive loss
for the period – – – – – – (842,669 ) (842,669 )
Drawings by former members – – – – – (360,000 ) (360,000 )
Balance at 31December 2021 – – – – – – 821,527 821,527
Total comprehensive loss
for the period – – – – – (18,425,707 ) – (18,425,707 )
Drawings by former members – – – – – – (75,000 ) (75,000 )
Reclassication of members’ at
acquisition – – – – – 746,527 (746,527 ) –
Recognition of plc equity at
acquisition date 112,346 15,804,717 (1,840,675 ) – 3,097,995 765,901 – 17,940,284
Issue of shares for acquisition 84,330 17,964,360 1,797,264 – (19,845,954 ) – – –
Share based payments 7,336 1,419,577 – – – – – 1,426,913
Issue of warrants and options – (114,593 ) – 229,185 – – – 114,592
Balance at 31December 2022 204,012 35,074,061 (43,411 ) 229,185 (16,747,959 ) (16,913,279 ) – 1,802,609
See notes below parent company statement of changes in equity for explanation as to the reserves
The accompanying notes on pages33 to 58 form part of these nancial statements.
Consolidated Statement of Changes in Equity
For the year to 31 December 2022
Narf Industries Plc (formerly CYBA plc)
32
Financial Statements
Restated in US$
Share
Capital
US$
Share
Premium
US$
Share based
payment
reserve
US$
FX reserve
US$
Retained
Decit
US$
Total
US$
Balance at April 2020 41,811 2,371,532 32,578 – (1,920,657) 525,264
Total comprehensive loss
for the period – – – – (1,621,453) (1,621,453)
Shares issued during the period 28,985 2,786,966 – – – 2,815,951
Costs related to share issues – (491,136) – – – (491,136)
Balance at 31December 2020 70,796 4,667,362 32,578 (3,542,110) 1,228,626
Total comprehensive loss
for the year – – – – (1,963,034) (1,963,034)
Shares issued during the year 13,497 2,888,777 – – – 2,902,274
Costs related to share issues – (258,758) – – – (258,758)
FX reserve arising on
conversion to reporting
currency – 150,230 – (17,767) (70,447) 62,016
Balance at 31December 2021 84,293 7,447,611 32,578 (17,767) (5,575,591) 1,971,124
Total comprehensive loss
for the year – – – – (2,714,845) (2,714,845)
Warrants expired during
the year – – (12,215) – – (12,215)
Shares issued during the year 127,828 25,893,481 (20,363) 2,972,867 – 28,973,813
Costs related to share issues – (1,147,989) – – – (1,147,989)
Issue of warrants and options – (114,593) 229,185 – – 114,592
FX reserve arising on conversion
to reporting currency (8,109) 2,995,551 – (2,998,511) 11,069 –
Balance at 31December 2022 204,012 35,074,061 229,185 (43,411) (8,279,367) 27,184,480
Share capital – the ordinary issued share capital of the Company.
Share premium – consideration less nominal value of issued shares and costs directly attributable to the issue of new shares.
Warrant reserve – the value of equity settled share-based payments provided to employees, including key management personnel, and
third parties for services provided.
Foreign exchange reserve – a reserve arising on conversion of company balances in the functional currency of sterling and the reporting
currency of US$.
Reverse acquisition reserve (see note 8) – the difference between the cost of acquiring the parent company and the fair value of the
parent company’s net assets on the acquisition date together with the deemed cost oflisting.
Retained decit – Cumulative net gains and losses recognised in the Statement of Comprehensive Income
Members’ equity – the net assets belonging to the former members.
The accompanying notes on pages33 to 58 form part of these nancial statements.
Parent Company Statement of Changes in Equity
For the year to 31 December 2022
Annual Report and Consolidated Financial Statements
33
Overview Corporate Governance Financial Statements
Notes to the Financial Statements
For the year to 31 December 2022
1. General Information
The principal activity of Narf Industries Plc (the “Company”) and its subsidiaries (the “Group’’) is to develop
and market software aimed at enhancing the cybersecurity measures of its clients. The subsidiaries consist
of Narf Industries LLC, a California limited liability company and Narf Industries PR, LLC, a Puerto Rican
limited liability company (“Narf US” or the “Operating Group”). The Company is the parent and sole member of
both subsidiaries.
The Company is domiciled in the United Kingdom and incorporated and registered in England and Wales
registered number is 11701224.
2. Accounting Policies
2.1 Basis of preparation
The Consolidated Financial Statements of the Group have been prepared in accordance with UK-adopted
international accounting standards.
The Financial Statements have been prepared under the historical cost convention unless otherwise
stated. The principal accounting policies are set out below and have, unless otherwise stated, been
applied consistently.
They have been prepared to reflect the acquisition of Narf Industries LLC and Narf Industries PR LLC via a
reverse takeover on 15 March 2022, which resulted in the Company becoming the ultimate holding company
of the Group. They have been prepared showing the consolidated financial statements as a continuation of
the Narf US subsidiaries. As such, the comparatives of the consolidated primary statements represent the
combined results and assets, liabilities and equity of the Narf US subsidiaries.
The Financial Statements are prepared in US Dollar (“US$”, “USD” or “$”) and presented to the nearest dollar.
2.2 Consolidation and Acquisitions
The Financial Statements consolidate the financial information of the Company and companies controlled
by the Group (its subsidiaries) at each reporting date following the acquisition last year. The comparative
information (for year ended 31 December 2021) shows only the unaudited financial information of Narf US.
The comparatives within the consolidated statement of comprehensive income, the consolidated statement of
financial position, the consolidated cashflow statement and the consolidated statement of changes in equity
represent the combined numbers of the legal subsidiaries and accounting acquirers, Narf Industries LLC and
Narf Industries PR LLC. In the consolidated statement of financial position, the share capital and premium
as at 31 December 2022 is that of Narf Industries Plc with the reverse acquisition reserve representing the
difference between the deemed cost of the acquisition and the net assets of Narf Industries plc at 15 March
2022. The consolidated statement of comprehensive income for 2021 represents the results of Narf US only
and for 2022 represents the results of Narf US only up to the acquisition date (15 March 2022) at which point the
results reflect the combined group, including both Narf US and the Company up to the year-end.
Control is achieved where the Company has the power to govern the financial and operating policies of an
investee entity, has the rights to variable returns from its involvement with the investee and has the ability
to use its power to affect its returns. The results of subsidiaries acquired or sold are included in the financial
information from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the results of acquired subsidiaries to bring their accounting policies into
line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated
on consolidation. The financial statements of all Group companies are adjusted, where necessary, to ensure
the use of consistent accounting policies.
Narf Industries Plc (formerly CYBA plc)
34
Financial Statements
2. Accounting Policies continued
They are deconsolidated from the date that control ceases. Please refer to note 8 for information on the
consolidation of Narf Industries plc and the application of the reverse acquisition accounting principles.
The Group applies the acquisition method to account for business combinations that fall within the scope of
IFRS 3. For commentary on how the acquisitions of Narf Industries US LLC and Narf Industries PR LLC, which
falls outside the scope of IFRS 3, was accounted for, see note 8 below.
Acquisition related costs are expensed as incurred.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability
is recognised either in profit or loss or as a charge to other comprehensive income. Contingent consideration
that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
On 15 March 2022, the Company acquired Narf Industries US LLC and Narf Industries PR LLC via a reverse
takeover which resulted in the Company becoming the ultimate holding company of the Group. The
transactions were accounted for as reverse acquisitions since they did not meet the definition of a business
combination under IFRS 3. In accordance with IFRS 2, a share based payment expense equal to the deemed
cost of the acquisition less the fair value of the net assets of the Company at acquisition was recognised. The
comparatives within the consolidated statement of comprehensive income, the consolidated statement of
financial position, the consolidated cashflow statement and the consolidated statement of changes in equity
represent the combined numbers of the legal subsidiaries and accounting acquirers, Narf Industries US LLC
and Narf Industries PR LLC. In the consolidated statement of financial position, the share capital and premium
as at 31 December 2022 is that of Narf Industries Plc with the reverse acquisition reserve representing the
difference between the deemed cost of the acquisition and the net assets of Narf Industries plc at 15 March
2022. The consolidated statement of comprehensive income for 2021 represents the results of Narf US and
the results of the Narf US subsidiaries and the results of the Company for the period from acquisition date
(15 March 2022) to the year-end. For more details of the key terms of the reverse takeover and a breakdown of
what the reverse acquisition reserve as at 31 December 2022 comprises of, see note 8.
2.3 Going concern
The financial statements have been prepared on a going concern basis, which assumes that the Group
will continue in operational existence for the foreseeable future. In making this determination, the Group
considered (in part):
• the Group’s $10.4 million backlog at 31 December, 2022 (representing contracts in progress at 31 December,
2022, see Note 3),
• the timing of near-term and future backlog receipts based on contract payment terms,
• the timing of receipt of the Group’s Accounts Receivable at 31 December, 2022 of $690,000, see Notes 3
and 13,
• $680,000 available on a $2 million credit facility with an officer and shareholder, see Notes 16 and 23,
• future Group expense projections, including anticipated growth of the Group’s operations along with
anticipated reductions in Company operating expenses,
• the sales pipeline, and
• the availability of a cumulative net operating loss carryforward of $5.9 million at 31 December, 2022, see
Note 6.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
35
Overview Corporate Governance Financial Statements
2. Accounting Policies continued
The Group is confident then that based on current cash position and the cash surplus to be generated from
the operations over the foreseeable future, along with the $680,000 available under the credit facility, they will
have sufficient liquid resources to meet its current and future liabilities as they fall due and that the Group is a
going concern.
2.4 Foreign currency translation
The financial information is presented in US Dollars which is the Group’s presentational currency as
substantially all of the Group’s operational activities are undertaken in US Dollars. The Company’s functional
currency is Sterling and the prior year Parent Company numbers have been restated from Sterling to US
Dollars. Sterling amounts recorded in the accounting records of the Company are converted using the year end
foreign exchange rate for the year end balances and the average foreign exchange rate for movements during
the year.
Transactions in currencies other than the functional currency are recognised at the rates of exchange on the
dates of the transactions. At each balance sheet date, monetary assets and liabilities are retranslated at the
rates prevailing at the balance sheet date with differences recognised in the Statement of comprehensive
income in the period in which they arise.
2.5 Cash and cash equivalents
Cash and cash equivalents comprise cash at hand and current and deposit balances at banks.
2.6 Intangible assets
Intangible assets comprise non-physical assets comprising amounts spent on developing software which
facilitates the Group generating future sales along with the cost of acquiring the licensing rights in relation to
the commercialisation of TIRG that can be determined with reasonable certainty. Royalty payments due to the
licensor upon future sales cannot be determined with any certainty and accordingly has not been included in cost.
Regarding software development costs, this intangible represent amounts capitalized related to SaaS
products available for subscription. In accordance with IAS 38, the Company expenses research and
development costs up until the SaaS product enters into the application development stage at which time
costs are capitalized through the point the SaaS product is ready for release at which point amortization
begins. The application development stage includes:
(a) the design of the development path, including the configuration and interfaces of the software,
(b) coding,
(c) installation to hardware, and
(d) testing, including parallel processing.
Subsequent costs for data conversion, training, enhancements and bug fixes are expensed as incurred.
Intangible fixed assets are being amortised on the following basis:
| Software development costs | 17.5% using the reducing balance basis (indefinite life) |
| License | Over 5 years straight-line (finite life) |
Narf Industries Plc (formerly CYBA plc)
36
Financial Statements
2. Accounting Policies continued
The useful life of the license is based on the term of that license agreement, whilst the amortisation method
for computer software is intended to reflect the diminishing value of that software over time as alternative
solutions are developed by the Group or third parties.
All intangible assets have been assessed by management for impairment. Management consider the assets
for impairment by considering if any impairment indicators, such as those per IAS 38, are met and that if any
are met, they assess the recoverable value of the asset, being the higher of the Fair value less costs to sell
and Value in use, and then compare this to the carrying value of the asset. No impairment provision has been
considered necessary.
2.7 Tangible xed assets
Tangible assets comprise physical assets such as cars, office furniture and leasehold improvements which will
benefit the Group over their useful life. Tangible fixed assets are being depreciated on a straight-line basis over
their estimate useful lives as follows:
| Cars | 4 years |
| Office furniture | 4 years |
| Leasehold improvements | Life of the lease |
2.8 Trade and other receivables
Trade receivables are amounts due from customers for goods or services rendered in the ordinary course
of business. Trade receivables are initially recognised at the amount of consideration that is unconditional,
i.e. fair value and subsequently measured at amortised cost using the effective interest method, less loss
allowance. Prepayments and other receivables are stated at their nominal values.
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as
their fair value.
2.9 Trade and other payables
Trade payables are recognised initially at their fair value and subsequently measured at amortised cost.
2.10 Financial instruments
Initial recognition
A financial asset or financial liability is recognised in the statement of financial position of the Company when it
arises or when the Company becomes part of the contractual terms of the financial instrument.
Classi cation
Financial assets at amortised cost
The Company measures financial assets at amortised cost if both of the following conditions are met
• the asset is held within a business model whose objective is to collect contractual cash flows; and
• the contractual terms of the financial asset generating cash flows at specified dates only pertain to capital
and interest payments on the balance of the initial capital.
Financial assets which are measured at amortised cost, are measured using the Effective Interest Rate
Method (EIR) and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
37
Overview Corporate Governance Financial Statements
2. Accounting Policies continued
Financial liabilities at amortised cost
Financial liabilities measured at amortised cost using the effective interest rate method include current
borrowings and trade and other payables that are short term in nature. Financial liabilities are derecognised if
the Company’s obligations specified in the contract expire or are discharged or cancelled.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the effective interest rate (“EIR”). The EIR amortisation is included as finance costs
in profit or loss. Trade payables other payables are non-interest bearing and are stated at amortised cost using
the effective interest method.
Derecognition
A financial asset is derecognised when:
• the rights to receive cash flows from the asset have expired, or
• the Company has transferred its rights to receive cash flows from the asset or has undertaken the
commitment to fully pay the cash flows received without significant delay to a third party under an
arrangement and has either (a) transferred substantially all the risks and the assets of the asset or (b) has
neither transferred nor held substantially all the risks and estimates of the asset but has transferred the
control of the asset.
Impairment
The Company recognises a provision for impairment for expected credit losses regarding all financial assets.
Expected credit losses are based on the balance between all the payable contractual cash flows and all
discounted cash flows that the Company expects to receive. Regarding trade receivables, the Company applies
the IFRS 9 simplified approach in order to calculate expected credit losses. Therefore, at every reporting date,
provision for losses regarding a financial instrument is measured at an amount equal to the expected credit
losses over its lifetime without monitoring changes in credit risk. To measure expected credit losses, trade
receivables and contract assets have been grouped based on shared risk characteristics.
2.11 Equity
Share capital is determined using the nominal value of shares that have been issued.
The Share premium account includes any premiums received on the initial issuing of the share capital. Any
transaction costs associated with the issuing of shares are deducted from the Share premium account, net of
any related income tax benefits.
Equity-settled share-based payments are credited to a warrant reserve, which is referred to as “Share based
payments reserve” within the Consolidated statement of financial position and the Parent statement of
financial position as a component of equity until related options or warrants are exercised or lapse.
The Warrant reserve includes share warrants issued to shareholders in connection with share capital issues
that are measured at fair value at the date of issue and treated as a separate component of equity.
The Foreign exchange reserve includes all exchange differences arising from translating other currencies into
the functional currency. Foreign exchange gains and losses resulting from the settlement of such transactions,
and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end
exchange rates are generally recognised in profit or loss. All foreign exchange gains and losses are presented
in the statement of profit or loss on a net basis, within ‘other gains/(losses)’.
Members equity represents the combined interests of each member of Narf US and Narf PR prior to the
RTO acquisition.
Narf Industries Plc (formerly CYBA plc)
38
Financial Statements
2. Accounting Policies continued
The Reverse acquisition reserve relates to the costs associated with the acquisition of Narf Industries Plc. A
reverse acquisition occurs if the entity that issues securities (the legal acquirer) is identified as the acquiree
for accounting purposes and the entity whose equity interests are acquired (legal acquiree) is the acquirer for
accounting purposes.
The reverse acquisition in the year did not constitute a business combination and was accounted for in
accordance with IFRS 2 “Share-based Payments” and associated IFRIC guidance. Although the reverse
acquisition is not a business combination, the Company has become a legal parent and is required to
apply IFRS 10 and prepare consolidated financial statements. The Directors have prepared these financial
statements using the reverse acquisition methodology, but with the result that rather than recognising
goodwill, the difference between the equity value given up by Narf US’s former owners and the share of
the fair value of the net assets gained by these former owners, is charged to the consolidated statement of
comprehensive income as a share-based payment on reverse acquisition.
Retained earnings includes all current and prior period results as disclosed in the income statement.
2.12 Foreign currency
For the purposes of the of the consolidated financial statements, the results and financial position of each
Group company are expressed in US Dollars (“$”), which is the functional currency of all of the operating entities
in the Group, excluding the Company, and the presentation currency for the consolidated financial statements.
Exchange differences are recognised in profit or loss in the period in which they arise.
2.13 Earnings per share
Basic earnings per share is calculated by dividing:
The loss attributable to owners of the Company, excluding any costs of servicing equity other than ordinary
shares.
By weighting the average number of ordinary shares outstanding during the financial period.
2.14 Share-based payments
The Company has issued options to one of the Directors, a former director and warrants to one of the initial
investors and to a major shareholder.
Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based
vesting conditions) at date of grant. The fair value so determined is expensed on a straight-line basis over the
vesting period, based on the Company’s estimate of the number of shares that will eventually vest and adjusted
for the effect of non-market based vesting conditions.
Fair value is measured using the Black Scholes pricing model. The key assumptions used in the model have
been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
As detailed in note 8 the difference between the fair value of the net assets of the Company acquired on the
reverse take over and the market value of the shares in issue on that date has been treated as a share based
payment representing the cost of Narf US obtaining a listing.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
39
Overview Corporate Governance Financial Statements
2. Accounting Policies continued
2.15 Taxation
The Company is subject to taxes in the United Kingdom tax jurisdiction. Substantially all revenue related
operations are conducted by Narf USA and Narf PR. Narf USA is a limited liability company taxed as a
partnership for the US federal tax jurisdiction. As partnership, Narf USA is not subject to US federal income tax
and the federal tax effect of Narf USA’s activities accrue to the Company, the sole member. Narf USA is also
subject to a nominal California franchise tax. Narf PR is subject to the Government of the Commonwealth of
Puerto income tax rate of 4%. Differences between Narf PR’s taxable income per IFRS and the basis used for
the Government of the Commonwealth of Puerto Rico are not material and, accordingly, no deferred tax assets
or liabilities related to Puerto Rico are reflected in the accompanying consolidated financial statements.
Taxable losses of the Company from its activities in the United Kingdom and that inure to the Company from
Narf USA as its sole partner differ from losses for the Company as reported in the accompanying consolidated
income statement because it excludes items of income and expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax
is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the
accompanying parent company financial statements and the corresponding tax bases used in the computation
of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from initial
recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or
the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and liabilities on a net basis.
Narf Industries Plc (formerly CYBA plc)
40
Financial Statements
2. Accounting Policies continued
2.16 Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the entity’s accounting policies, management makes estimates and assumptions
that have an effect on the amounts recognised in the financial information. Although these estimates are
based on management’s best knowledge of current events and actions, actual results may ultimately differ
from those estimates. The Directors consider that the following judgements are critical to an understanding of
these accounts:
Licenses
The Company was granted certain licenses during the year relating to the commercialisation of cybersecurity
software which is key to the business strategy. The license was granted by SRI International for a combination
of cash, shares and a royalty equal to 7.5% of future revenues deriving from the license. The Directors have
recognised the fair value of the license on acquisition as being the cash paid plus the market value of shares
issued to SRI International. No value has been assigned to the future royalty payments as they are uncertain.
Accordingly future royalty payments will be expensed as incurred.
The value of the license has been assessed by management for impairment. Management consider the asset
value for impairment by considering if any impairment indicators, such as those per IAS 38, are met and that
if any are met, they assess the recoverable value of the license, being the higher of the Fair value less costs to
sell and Value in use, and then compare this to the carrying value of the license. No impairment provision has
been considered necessary. Further details are provided in Note 9.
Acquisition Accounting
The Directors have made a judgement that the acquisition of Narf US constituted a reverse takeover, and that
it falls outside the scope of IFRS 3 (see Note 8). Accordingly, no goodwill or other intangible assets have been
recognised on acquisition. The Directors have recognised a share-based payment equal to the fair value of the
shares in issue immediately prior to the acquisition less the net assets of the parent Company on the date of
acquisition. Further details are provided in Note 8.
Impairment of Narf US
The parent Company Statement of Financial Position includes the investment in Narf US at cost. The Directors
have undertaken an impairment review to assess whether the investment should be written down. This review
involves judgements about potential future cash flows which are highly subjective and subject to matters
outside the control of the Directors.
Cost of Sales
Cost of sales primarily includes expenses associated with the amortisation of capitalised software
development costs, personnel and contractors. The amount of personnel costs to allocate is determined by the
respective project manager of each contract in progress during a given year. The project managers allocate a
percentage of gross wage costs of each professional working on a project upon which a factor for payroll taxes
and benefits is added. In addition, administrative costs are reviewed and costs directly related to servicing
contracts are added.
Software Development Intangibles
Judgement is required when determining when a SaaS product under development enters into the application
development stage, see 2.6. The Directors have undertaken an impairment review to assess whether the
amount capitalised for development costs should be written down. This review involves judgements about
potential future cash flows, which are highly subjective and subject to matters outside the control of the
Directors. Further details are provided in Note 9.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
41
Overview Corporate Governance Financial Statements
2. Accounting Policies continued
2.17 Standards, amendments and interpretations to existing standards that are not yet effective
Share Based Payments
Equity-settled share-based payments are measured at fair value. Fair value is measured using the Black
Scholes pricing model. The key assumptions used in the model have been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
As detailed in note 8 the difference between the fair value of the net assets of the Company acquired on the
reverse take over (RTO”) and the market value of the shares in issue on that date has been treated as a share-
based payment representing the cost of Narf US obtaining a listing.
New standards, amendments to standards and interpretations:
The Company has adopted all of the new and revised Standards and Interpretations that are relevant to their
operations and effective for accounting periods beginning 1 January 2022. The Company has not adopted any
standards or interpretations in advance of the required implementation dates.
The following Standards and Interpretations have become effective and have been adopted in these financial
statements. No other Standards or Interpretations have been adopted early in these financial statements.
| Standard/Interpretation | Subject |
| IFRS 9/IAS 39/IFRS 7/IFRS 4/IFRS 16 | Interest rate benchmark reform |
| IAS 16 | Amendments – Property Plant & Equipment |
| IAS37 | Provisions, Contingent Liabilities and Contingent Assets |
The new standards have not had a material impact on these consolidated financial statements.
Standards not yet applied
At the date of authorisation of these financial statements, the following relevant Standards and
Interpretations, which have not been applied in these financial statements, were in issue but not yet effective
(and in some cases have not yet been adopted by the UK Endorsements Board):
| Standard | Impact on initial application | Effective date |
| IAS 1 | Amendments – Presentation and Classification of Liabilities as | |
| Current or Non-current | ||
| TBC | ||
| IAS 8 | Amendments – Definition of Accounting Estimates | 1 January 2023 |
| IAS 1 | Amendments – Disclosure of Accounting Policies | 1 January 2023 |
| IFRS 3 | Amendments – Business Combinations – Conceptual Framework | 1 January 2022 |
| IFRS 17 | Insurance contracts | 31 December 2023 |
The directors are evaluating the impact that these standards will have on the consolidated financial statements of
the Group and Company but it is not anticipated that they will have a material impact on the Group and Company.
Narf Industries Plc (formerly CYBA plc)
42
Financial Statements
2. Accounting Policies continued
2.18 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Board as a whole.
The Group has no employees in the United Kingdom (bar one Non-Executive Director) and all of the current
operations of the Group are in North America and thus no separate segments have been identified.
2.19 Financial Risk Management Objectives and Policies
The Company does not enter into any forward exchange rate contracts.
The main financial risks arising from the Company’s activities are market risk, interest rate risk, foreign
exchange risk, credit risk, liquidity risk and capital risk management. Further details on the risk disclosures can
be found in Note 21.
3. Revenue
The Group records contract revenue in accordance with IFRS 15 Revenue from Contracts with Customers,
which requires that revenue be recorded over time as/when performance obligations within a contracts are
performed/delivered. Significant performance obligations are defined within the Group’s contracts. The Group
invoices customers based on billing schedules contained within the related contracts. The Group considers
trade and other receivables to be fully collectible; accordingly, no allowance for doubtful accounts has been
recorded. Costs incurred to obtain contracts are expensed as incurred and losses on contracts are recognized
in the period when determined. The Group warrants that its deliverables will perform within parameters
contained in the statements of work referenced in the contracts, and can measure such performance
independent of the customer. Trade and other receivables are considered impaired (typically resulting
from contract cancellations) and are decreased upon the determination of such impairment. No contract
impairments were recorded in the years ended 31 December, 2022 and 2021.
Revenue for performance obligations is recognized as follows:
• Professional Services: As each performance obligation is completed and delivered, an output measurement.
• Installation Services: Upon delivery and installation of the contract product(s).
• SaaS Subscriptions: On a straight-line basis over the term of the SaaS contract period.
As performance obligations are completed and delivered, revenue is accrued in the caption Trade Accounts
Receivable, which represents a conditional right to consideration. Should amounts invoiced and collected
exceed completed and delivered performance, a liability would be recorded. There were no amounts invoiced
and collected in excess of completed performance obligations at 31 December 2022 and 2021.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
43
Overview Corporate Governance Financial Statements
3. Revenue continued
Based on the above categories, disaggregated contract revenue was as follows:
| Year ended | ||
| 31 December | ||
| 2022 | ||
| US$ | ||
| (unaudited) | ||
| Year ended | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| Professional services | 1,373,875 | 939,513 |
| Installations | 218,400 | 170,000 |
| SaaS subscriptions | 954,850 | 830,003 |
| Total revenue | 2,547,125 | 1,939,516 |
Backlog represents performance obligations remaining on contracts in progress. The following table presents
the Group’s backlog at 31 December, 2022:
| 31 December 2022 | |
| US$ | |
| Professional services | 9,375,031 |
| SaaS subscriptions | 1,061,042 |
| Total revenue backlog | 10,436,073 |
Customers comprising 10% or more of Contract Revenue were as follows:
| Year ended | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | Percent | |||
| (Unaudited) | ||||
| Year ended | ||||
| 31 December | ||||
| 2021 | ||||
| US$ | Percent | |||
| US government procurement agency | 1,246,563 | 48.9% | 1,000,003 | 51.6% |
| DARPA | 1,154,939 | 45.4% | 333,966 | 17.2% |
| Dartmouth College | – | 0.0% | 153,059 | 7.9% |
| SRI International | 145,623 | 5.7% | 452,241 | 23.3% |
| 2,547,125 | 100.0% | 1,939,516 | 100.0% |
For contractual reasons, the Company may not disclose the name of the US government procurement agency
or the agencies for which this entity is a pass-through. DARPA stands for Defense Advanced Research Projects
Agency, a US government research and development organisation. Dartmouth College is a pass-through entity
for the US Office of Naval Research. SRI International is a US nonprofit research organisation and is a pass-
through agency for DARPA.
Narf Industries Plc (formerly CYBA plc)
44
Financial Statements
4. Operating Profits
This is stated after charging:
| 31 December | ||
| 2022 | ||
| US$ | ||
| (unaudited) | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| Auditor’s remuneration | ||
| – audit of the Parent Company | 49,000 | – |
| – audit of subsidiary undertakings | 50,000 | – |
| – non-audit services | ||
| Reporting accountant services | 12,000 | – |
| Informal review of interim financial statements | 1,800 | – |
| Amortisation of intangible assets | 512,937 | 269,658 |
| Depreciation of tangible fixed assets | 33,529 | 47,379 |
| Directors’ remuneration | 827,732 | – |
| Other staff remuneration | 1,909,454 | 1,394,472 |
| Legal, professional and consultancy fees | 451,628 | 337,135 |
5. Directors and Staff Costs
The average number of persons employed by the Group, including Directors, was:
| 2022 | ||
| (unaudited) | ||
| 2021 | ||
| Management and technical | 17 | 11 |
Remuneration, other benefits supplied and social security costs to the directors and staff during the period
was as follows:
| 31 December | ||
| 2022 | ||
| US$ | ||
| (unaudited) | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| Directors and Employees: | ||
| Wages and salaries | 1,594,840 | 1,171,663 |
| Social security costs | 92,245 | 88,115 |
| Pension costs and other benefits | 222,369 | 134,694 |
| Director fees | 393,788 | – |
| Director share based payments | 58,958 | – |
| Director bonuses | 374,986 | – |
| 2,737,186 | 1,394,472 |
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
45
Overview Corporate Governance Financial Statements
5. Directors and Staff Costs continued
The average number of staff employed by the Group during the year, including Directors was 17 (2021: 11).
The remuneration and associated social security costs per Director for the year ended 31 December 2022
was all short term in nature and are as stated in the remuneration report on pages 12 to 14. A matter of note is
that the chief executive officer of Narf Plc was a member of each of the Narf US entities until 15 March 2022
and received no remuneration or distribution from either entity during the years ended 31 December, 2022
and 2021.
6. Taxation
| 31 December | ||
| 2022 | ||
| US$ | ||
| (unaudited) | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| The charge for the period is made up as follows: | ||
| Taxation on the results of Narf PR for the year | 7,839 | 72,090 |
| Deferred tax | – | – |
| Taxation charge/credit for the period | 7,839 | 72,090 |
A reconciliation of the tax charge/credit appearing in the income statement to the tax that would result from
applying the standard rate of tax to the results for the period is:
| 31 December | ||
| 2022 | ||
| US$ | ||
| (unaudited) | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| Loss before taxation per accounts | (18,417,868) | (770,579) |
| Tax credit at the standard rate of corporation tax in the UK (19%), | ||
| and Puerto Rico (4%) | ||
| Weighted average Tax Rate – 18.96% | (3,499,395) | (146,410) |
| Overseas taxable profits | 7,839 | 72,090 |
| Impact of costs disallowed for tax purposes | 3,022,849 | 146,410 |
| Impact of unrelieved tax losses carried forward | 476,546 | – |
| 7,839 | 72,090 |
Estimated tax losses of $5,850,000 (FY2021: $3,500,000) are available for relief against future profits. No
related deferred tax asset has been provided for in the accounts based on the uncertainty as to when profits
will be generated against which to relieve said asset.
Narf Industries Plc (formerly CYBA plc)
46
Financial Statements
7. Earnings per Share
Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the period.
| 31 December | ||
| 2022 | ||
| US$ | ||
| (Unaudited) | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| Loss from continuing operations attributable to equity holders of the company | (18,425,707) | (842,669) |
| Weighted average number of ordinary shares in issue | 1,475,948,904 | 588,088,644 |
| Basic and fully diluted loss per share from continuing operations (cents) | (1.2) | (0.1) |
As the acquired entities are LLCs treated as a partnership with no issued shares, we have assessed the EPS for
2021 by comparing the earnings of Narf US to the weighted average number of shares of the Company.
8. Reverse Acquisition
On 15 March 2022, Narf Industries plc (“Company”) formerly known as Cyba plc, acquired through a combination
of a share for partnership interests exchange and a set of cash payments to the acquiree companies and
former partners, 100% ownership of Narf Industries US LLC and Narf Industries PR LLC (“Narf US”), whose
principal activities are the development and marketing of software aimed at providing cybersecurity solutions
to corporates.
Although the transaction resulted in each Narf US entity becoming wholly owned subsidiaries of the Company,
the transaction constituted a reverse acquisition, as the previous owners of Narf US own a substantial majority
of the Ordinary Shares of the Company and the executive management of Narf US became the executive
management of Narf Industries plc.
In substance, the former owners of Narf US acquired a controlling interest in the Company and the transaction
has therefore been accounted for as a reverse acquisition. As the Company’s activities prior to the acquisition
were purely the maintenance of the LSE listing, acquiring Narf US, seeking to acquire other cybersecurity firms
and raising equity finance to provide the required funding for the operations ahead of the acquisition, it did not
meet the definition of a business in accordance with IFRS 3.
Accordingly, this reverse acquisition does not constitute a business combination and was accounted for
in accordance with IFRS 2 “Share-based Payments” and associated IFRIC guidance. Although the reverse
acquisition is not a business combination, the Company has become a legal parent and is required to apply IFRS 10
and prepare consolidated financial statements. The Directors have prepared these financial statements using
the reverse acquisition methodology, but with the result that rather than recognising goodwill, the difference
between the equity value given up by Narf US’s former owners and the share of the fair value of the net assets
gained by these former owners, is charged to the consolidated statement of comprehensive income as a share
based payment on reverse acquisition and represents, in substance, the cost of acquiring an LSE listing.
The comparatives within the consolidated statement of comprehensive income, the consolidated statement of
financial position, the consolidated cashflow statement and the consolidated statement of changes in equity
represent the combined numbers of the legal subsidiaries and accounting acquirers, Narf Industries US LLC
and Narf Industries PR LLC. In the consolidated statement of financial position, the share capital and premium
as at 31 December 2022 is that of Narf Industries Plc with the reverse acquisition reserve representing the
difference between the deemed cost of the acquisition and the net assets of Narf Industries plc at 15 March
2022. The consolidated statement of comprehensive income for 2021 represents the combined results of Narf
US and Narf PR alone, and the 2022 consolidated statement of comprehensive income represents the result of
the Group for the period.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
47
Overview Corporate Governance Financial Statements
8. Reverse Acquisition continued
On 15 March 2022, the Company issued 699.6 million Ordinary Shares and paid a further $4,166,667 to acquire
all of the partnership interests in Narf US. Based on a share price of 2p per share (the price at which those
shares issued as part of the placing that day were issued at) the Company’s investment in Narf US was valued
at $25.6 million, inclusive of the $2 million prepaid consideration and prior to the share based payment charges
for the year recognised in the subsidiaries – see note 12 for further commentary regarding the carrying value of
the investment in the subsidiary as at 31 December 2022.
As the legal subsidiaries, Narf US, were treated on consolidation as the accounting acquirer and the legal
Parent Company, Narf Industries plc, was treated as the accounting subsidiary, the fair value of the shares
acquired was $21.9 million based on a share price of 1.8p and 932.0 million Ordinary Shares in issue immediately
prior to the reverse acquisition. According to IFRS 2 the value of the share-based payment is calculated as the
difference between the deemed cost and the fair value of the net assets as at the acquisition date which are as
follows:
| US$ | |
| Deemed cost | 21,858,204 |
| Trade and other receivables | 7,818,621 |
| Cash and cash equivalents | 138,613 |
| Trade and other payables | (1,454,153) |
| Net assets acquired | 6,503,082 |
| RTO share based payment expense | 15,355,123 |
The difference between the deemed cost ($21.9m) and the fair value of the net assets assumed per above of
$6.5m resulted in $15,355,123 being expensed within “reverse acquisition expenses” in accordance with IFRS 2,
Share Based Payments, reflecting the economic cost to Narf US’s owners of acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse takeover is made up as follows:
| US$ | |
| Pre-acquisition entity (a) | (6,503,082) |
| Narf US capital at acquisition (b) | 0 |
| Investment in Narf US (c) | (25,600,000) |
| Reverse acquisition expense (d) | 15,355,123 |
| Reverse acquisition reserve | (16,747,959) |
(a) Recognition of preacquisition equity of Narf Industries plc at 15 March 2022
(b) Narf US entities had not issued any equity
(c) The value of the shares issued, cash paid and advances made in exchange for 100% ownership of Narf US.
The above entry is required to eliminate the balance sheet impact of the transaction.
(d) The share based payment expense under IFRS 2 as per calculation above.
Narf Industries Plc (formerly CYBA plc)
48
Financial Statements
9. Intangible Assets – Group
| Licenses | |||
| US$ | |||
| Software | |||
| Development | |||
| Costs | |||
| US$ | |||
| Total | |||
| US$ | |||
| Cost | |||
| At 1 January 2022 | – | 2,094,027 | 2,094,027 |
| Additions | 1,906,662 | – | 1,906,662 |
| At 31 December 2022 | 1,906,662 | 2,094,027 | 4,000,689 |
| Amortisation/Impairment | |||
| At 1 January 2022 | – | 790,676 | 790,676 |
| Charge for the period | 285,999 | 226,938 | 512,937 |
| At 31 December 2022 | 285,999 | 1,017,614 | 1,303,613 |
| Net book amount | |||
| At 31 December 2022 | 1,620,663 | 1,076,413 | 2,697,076 |
| At 31 December 2021 (unaudited) | – | 1,303,351 | 1,303,351 |
Amortisation of licenses is charged to the Income statement in the period to which it relates and disclosed
within “Depreciation and software license amortisation”. Amortisation of software development costs are
included within “Cost of sales”.
10. Intangible Assets – Parent Company
| Licenses | ||
| US$ | ||
| Total | ||
| US$ | ||
| Cost | ||
| At 1 January 2022 | – | – |
| Additions | 1,906,662 | 1,906,662 |
| At 31 December 2022 | 1,906,662 | 1,906,662 |
| Amortisation/Impairment | ||
| At 1 January 2022 | – | – |
| Charge for the period | 285,999 | 285,999 |
| At 31 December 2022 | 285,999 | 285,999 |
| Net book amount | ||
| At 31 December 2022 | 1,620,663 | 1,620,663 |
| A 31 December 2021 | – | – |
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
49
Overview Corporate Governance Financial Statements
11. Tangible Assets – Group
| Cars | ||||
| US$ | ||||
| Leasehold | ||||
| Improvements | ||||
| US$ | ||||
| Furniture & | ||||
| Equipment | ||||
| US$ | ||||
| Total | ||||
| US$ | ||||
| Cost | ||||
| At 1 January 2022 | 147,098 | 25,425 | 222,723 3 | 95,246 |
| Additions | – | – | – | – |
| At 31 December 2022 | 147,098 | 25,425 | 222,723 | 395,246 |
| Amortisation/Impairment | ||||
| At 1 January 2022 | 116,714 | 6,290 | 222,723 | 345,727 |
| Charge for the period | 30,384 | 3,145 | – 33,529 | |
| At 31 December 2022 | 147,098 | 9,435 | 222,723 3 | 79,256 |
| Net book amount | ||||
| At 31 December 2022 | – | 15,990 | – | 15,990 |
| At 31 December 2021 (unaudited) | 30,384 | 19,135 | – | 49,519 |
Depreciation of tangible assets is charged to the Income statement in the period to which it relates and
disclosed within “Depreciation and software license amortisation”.
12. Investments in Subsidiary Undertakings – Parent Company
| Company | |
| US$ | |
| Acquisition of member interests in subsidiary undertakings: | |
| Opening balance | – |
| Prepaid consideration (Note 13) | 2,000,000 |
| Additional cash consideration | 4,166,667 |
| Shares issued to former members | 19,433,333 |
| Closing balance | 25,600,000 |
Investments in subsidiary undertakings are valued at cost which is the fair valuation of consideration paid in
cash and the Company’s shares.
Narf Industries Plc (formerly CYBA plc)
50
Financial Statements
12. Investments in Subsidiary Undertakings – Parent Company continued
Principal subsidiaries
The group’s subsidiaries at 31 December 2022 are set out below. Both of the subsidiaries are LLCs, which have
no issued share capital and accordingly the proportion of ownership interests held equals the voting rights held
by the group. The country of incorporation or registration is also their principal place of business
| Ownership | |||||
| Name | |||||
| Country of | |||||
| Incorporation | Registered office | Principal Activity | 2022 | 2021 | |
| Narf Industries LLC | USA | 548 Market St. | |||
| #37005 | |||||
| San Francisco, | |||||
| CA 94104 | |||||
| Provision of security | |||||
| goods and services | |||||
| to USG and affiliated | |||||
| entities | |||||
| 100% | 0% | ||||
| Narf Industries PR LLC | Puerto Rico | 1413 Avenue Ponce | |||
| de León, San Juan, | |||||
| Puerto Rico 00907 | |||||
| Provision of security | |||||
| goods and services to | |||||
| Non-USG entities | |||||
| 100% | 0% |
13. Trade and Other Receivables – Group and Parent Company
| Group | Company | |||
| As at | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| (Unaudited) | ||||
| As at | ||||
| 31 December | ||||
| 2021 | ||||
| US$ | ||||
| As at | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| As at | ||||
| 31 December | ||||
| 2021 | ||||
| (Restated) | ||||
| US$ | ||||
| Prepaid consideration | – | – | – | 2,000,000 |
| Accounts receivable | 688,617 | 14,201 | – | – |
| Prepayments and accrued income | 7,094 | 33,373 | 7,094 | 7,220 |
| Other receivables | 60,770 | 500 | 60,270 | – |
| 756,481 | 48,074 | 67,364 | 2,007,220 |
The prepaid consideration as at 31 December 2021 represented two non-refundable advances of US$1 million to
each of Narf Industries LLC and Narf Industries PR LLC in accordance with heads of terms agreed between the
Company and Narf whereby it was agreed, subject to legal diligence, that the Company would agree to acquire
the entire equity capital of Narf. As detailed in Note 8 the acquisition of Narf was completed during the year and
accordingly the prepaid consideration is part of the acquisition cost.
The Directors consider that the carrying value amount of trade and other receivables approximates to their
fair value.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
51
Overview Corporate Governance Financial Statements
13. Trade and Other Receivables – Group and Parent Company continued
Ageing analysis
The following presents an ageing analysis of Accounts Receivable:
| As at | ||
| 31 December | ||
| 2022 | ||
| US$ | ||
| (Unaudited) | ||
| As at | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| 0-30 days | 640,630 | 14,201 |
| 31-60 days | 47,987 | – |
| 688,617 | 14,201 |
The Group considers trade and other receivables to be fully collectible; accordingly, no bad debt provision or
expenses have been recorded in either financial periods ending 31 December 2022 and 2021 respectively.
14. Cash and Cash Equivalents – Group and Parent Company
| Group | Company | |||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| (unaudited) | ||||
| 31 December | ||||
| 2021 | ||||
| US$ | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| (Restated) | ||||
| US$ | ||||
| Cash at bank and in hand | 442,751 | 446,879 | 210,282 | 274,982 |
| 442,751 | 446,879 | 210,282 | 274,982 |
Cash at bank comprises balances held by the Company in current bank accounts, instant access deposit
account and electronic wallets. The carrying value of these approximates to their fair value. The majority of
cash is held in a bank with a BBB credit rating.
15. Trade and Other Payables – Group and Parent Company
| Group | Company | |||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| (Unaudited) | ||||
| 31 December | ||||
| 2021 | ||||
| US$ | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| (Restated) | ||||
| US$ | ||||
| Accounts payable | 100,291 | 22,810 | 73,593 | 110,123 |
| Other payables due within one year | 255,439 | 171,174 | – | – |
| Accrued expenses | 240,232 | – | 240,236 | 200,955 |
| 595,962 | 193,984 | 313,829 | 311,078 |
Trade payables and accruals principally comprise amounts outstanding for trade purchases and continuing
costs. The Directors consider that the carrying value amount of trade and other payables approximates to their
fair value. Refer Note 21.
Narf Industries Plc (formerly CYBA plc)
52
Financial Statements
16. Creditors amounts falling due after more than one year – Group
| 31 December | ||
| 2022 | ||
| US$ | ||
| (Unaudited) | ||
| 31 December | ||
| 2021 | ||
| US$ | ||
| Loan from Director and Chief Executive Officer | 1,512,000 | 810,000 |
| Installment note on a vehicle (see Note 18) | 1,727 | 22,312 |
| 1,513,727 | 832,312 |
The Loan from Director and Chief Executive Officer represents non-interest bearing advances to the Group
for working capital purposes from Steve Bassi, CEO (see Note 23). On 11 April, 2023, such advances, which then
totalled $1,322,000, were converted into a $2 million credit facility due 30 June 2024 accruing simple interest
daily at the US Federal short term 1 year interest rate (4.86% at 11 April, 2023) and leaving $678,000 available
for further draw. A portion or all of the note may be repaid early without penalty and the Director may request
the Group to pay amounts when working capital exceeds $750,000 at the end of any given month. No interest
was accrued against amounts owed prior to 11 April 2023. As of the reporting date the balance under this
credit facility was $1,170,144. This credit facility is being presented without any discount to account for time
as the facility may be partially or fully repaid prior to the due date of 30 June, 2024. Should the Group and this
individual decide any future excess working capital to repay this facility would be better invested in growing
Group operations, the due date of 30 June, 2024 could be extended.
17. Share Capital/Share Premium – Group and Parent Company
The Company has only one class of share. All ordinary shares of 0.1p each (“Shares”) have equal voting rights
and rank pari passu for the distribution of dividends and repayment of capital. As at 31 December 2022 the
Company’s issued and outstanding capital structure comprised 1,697,381,100 shares and there were no other
securities in issue and outstanding.
From 1 January 2021 to 31 December 2021 the Company issued 100,000,000 Shares at a price of £0.02 per
placing share.
On 7 March 2022 the Company issued 7,500,000 Shares at a price of £0.01 per warrant share following the
exercise of warrants.
On 15 March 2022 the Company issued 300,000,000 Shares at a price of £0.02 per placing share
On 16 March 2022 the Company issue 699,999,600 Shares to the former members of Narf US in exchange for
100% of the voting rights of Narf US at an equivalent price of £0.02 per share.
On 17 March 2022 the Company issued 59,856,100 Shares to SRI International in exchange for certain licensing
rights at an equivalent price of £0.02 per share.
On 18 May 2022 the Company issued 1,000,000 shares to a supplier in settlement of outstanding professional
fees at an equivalent price of £0.0168 per share.
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
53
Overview Corporate Governance Financial Statements
17. Share Capital/Share Premium – Group and Parent Company continued
At 31 December 2022 the Company had 50 million options outstanding and 63 million warrants (see note 18)
| Number of | ||||
| shares on | ||||
| issue | ||||
| Share capital | ||||
| (Restated) | ||||
| US$ | ||||
| Share premium | ||||
| (Restated) | ||||
| US$ | ||||
| Total | ||||
| (Restated) | ||||
| US$ | ||||
| Balance as at 1 January 2021 | 524,525,000 | 70,796 | 4,667,362 | 4,738,158 |
| Shares issued during the year to | ||||
| 31 December 2021 (net of issue costs) | 100,000,000 | 13,497 | 2,780,255 | 2,793,752 |
| Balance as at 31 December 2021 | 624,525,000 | 84,293 | 7,447,617 | 7,531,910 |
| Shares issued during the year to | ||||
| 31 December 2021 (net of issue costs) | – | 119,719 | 27,626,444 | 27,746,163 |
| Balance as at 31 December 2022 | 1,697,381,100 | 204,012 | 35,074,061 | 35,278,073 |
18. Share Based Payment Reserve – Group and Parent Company
Details of the warrants and options that were outstanding at 31 December 2022 are as follows:
Warrants
| Issued | Exercisable from | Expiry date | Number outstanding | Exercise price |
| 16.2.2022 | 14.03.22 | 14.03.23 | 13,000,000 | £0.02 |
| 24.05.22 | 24.05.22 | 31.03.23 | 50,000,000 | £0.02 |
Options
| Issued | Exercisable from | Expiry date | Number outstanding | Exercise price |
| 24.05.22 | 24.05.22 | 24.05.25 | 50,000,000 | £0.02 |
| 31 December | ||
| 2022 | ||
| US$ | ||
| 31 December | ||
| 2021 | ||
| (Restated) | ||
| USS$ | ||
| At beginning of year | 32,578 | 32,578 |
| Fair value of warrants exercised during the year | (20,363) | – |
| Fair value of warrants expired during the year | (12,215) | – |
| Fair value of warrants and options vesting during the year | 229,185 | – |
| At end of year | 229,185 | 32,578 |
Narf Industries Plc (formerly CYBA plc)
54
Financial Statements
18. Share Based Payment Reserve – Group and Parent Company continued
The estimated fair value of the warrants and options granted in May 2022 was calculated by applying the Black-
Scholes option pricing model. The assumptions used in the calculation were as follows:
| Options | Warrants | |
| Share price at date of grant | 1.55 pence | 1.55 pence |
| Exercise price | 2.00 pence | 2.00 pence |
| Expected volatility | 97% | 97% |
| Expected dividend | Nil | Nil |
| Vesting criteria | Vest over three years | Vested |
| Contractual life | 3 years | 0.83 years |
| Risk free rate | 1.58% | 1.58% |
| Estimate fair value of each | 0.96 cents (recognisable over 3 years) | 0.43 cents |
Of the amount credited to share based payment reserve $114,592 related to options issued for services
provided and therefore resulted in a charge to the Statement of comprehensive Income and $114,593 related to
brokerage services and therefore resulted in a reduction to the share premium account.
A share-based payment credit of $12,215 was recognised during the year on expiry of 4.5 million of the 12 million
warrants in issue at the start of the year. The 13 million warrants issued in February 2022 were issued to
investors in relation to a placing and therefore were not issued in lieu of services and accordingly have not been
valued and accounted for.
19. Capital Commitments
As further discussed in Note 23, the Group have a lease agreement in relation to their office in California which
expired on 1 June, 2023, including minimum rental payments of $4,800 per month. The Group also has an
installment note on a vehicle that expires in January 2024 (see Note 16).
Amounts payable in respect of leases:
| 31 December | ||
| 2022 | ||
| US$ | ||
| At | ||
| 31 December | ||
| 2021 | ||
| (Restated) | ||
| USS$ | ||
| Less than 1yr | 49,385 | 78,370 |
| 1 to 5 years | 1,727 | 51,112 |
| More than 5 years | – | – |
Notes to the Financial Statements continued
Annual Report and Consolidated Financial Statements
55
Overview Corporate Governance Financial Statements
20. Contingent Liabilities
There were no contingent liabilities at 31 December 2022 (2021; £nil).
21. Financial Instruments and Risk Management
The Company’s financial instruments comprise primarily cash and various items such as trade debtors and
trade payables which arise directly from operations. The main purpose of these financial instruments is
to provide working capital for the Company’s operations. The Company does not utilise complex financial
instruments or hedging mechanisms.
Financial assets by category
The categories of financial assets are as follows:
| Group | Company | |||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| US$ | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| (Restated) | ||||
| US$ | ||||
| Current assets at amortised cost: | ||||
| Accounts receivable | 688,617 | 14,201 | – | – |
| Other receivables | 60,770 | 500 | 60,270 | – |
| Cash and cash equivalents | 442,751 | 446,879 | 210,282 | 274,982 |
| 1,192,138 | 461,580 | 270,552 | 274,982 |
Financial liabilities by category
The categories of financial liabilities are as follows:
| Group | Company | |||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| US$ | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| (Restated) | ||||
| US$ | ||||
| Current Liabilities measured at amortised | ||||
| cost: | ||||
| Accounts payable | 100,291 | 22,810 | 73,593 | 110,123 |
| Other payables due within one year | 495,671 | 171,174 | 240,236 | 200.955 |
| Long term loans | 1,513,727 | 832,312 | – | – |
| 2,109,689 | 1,026,926 | 313,829 | 311,078 |
All amounts owed by the Company are short term and payable in 0 to 3 months, apart from the Long term loan
which is disclosed in Notes 16 and 23. Other payables includes an amount of $20,585 (2021: $20,292) which is
repayable in equal monthly instalments over the upcoming year. The long term loans have a repayment date of
30 June 2024.
Narf Industries Plc (formerly CYBA plc)
56
Financial Statements
Notes to the Financial Statements continued
21. Financial Instruments and Risk Management continued
Credit risk
The maximum exposure to credit risk at the reporting date by class of financial asset was:
| Group | Company | |||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| US$ | ||||
| 31 December | ||||
| 2022 | ||||
| US$ | ||||
| 31 December | ||||
| 2021 | ||||
| (Restated) | ||||
| US$ | ||||
| Accounts receivable | 688,617 | 14,201 | – | – |
| Other receivables | 60,770 | 500 | 60,270 | – |
| Cash and cash equivalents | 442,751 | 446,879 | 210,282 | 274,982 |
| 1,192,138 | 659,917 | 270,552 | 274,982 |
Interest rate risk
None of the Group’s assets or liabilities are subject to any material interest rate risk since the only asset or
liability which bears interest is a $22,312 lease liability (2021: $42,604) at a fixed interest rate and none of the
assets earn any material interest. All deposits are placed with main clearing banks or held in cash wallets to
facilitate non-sterling payments or expense payments. The deposits are placed in current accounts or short
term deposit accounts.
The nature of the Group’s activities and the basis of funding are such that the Group seeks to maintain liquid
resources to meet its expenses for at least twelve months. The current cash position and the cash surplus to
be generated from the operations over the foreseeable future, along with the $680,000 available under the
credit facility means the Group will have sufficient liquid resources to meet its expenditure requirements over
the upcoming twelve months.
Credit and liquidity risk
Credit risk is the risk of an unexpected loss if a counter party to a financial instrument fails to meet its
commercial obligations. The Group’s maximum credit risk exposure is limited to the carrying amount of cash
and receivables. Credit risk is managed by contracting with US government customers clients who have proven
ability to pay and by the Group depositing surplus funds with financial institutions with a credit rating equivalent
to, or above, the main UK clearing banks whilst keeping amounts in electronic wallets to the minimum required
for day-to-day operations. The Group and Company maintain adequate bank balances to meet those financial
liabilities that are payable in the short term (between 0 to 3 months).
Foreign exchange risk
The Group operates in a global market with income and costs possibly arising in a number of currencies. The
majority of the operating revenues and costs are incurred in US Dollars although there are a number of Sterling
costs incurred by the Company in relation to the Non-Executive directors and costs of maintaining a listing.
The Company does not hedge potential future income or costs, since the existence, quantum and timing of
such transactions cannot be accurately predicted. All of the Group's assets and liabilities are denominated in
US dollars.
Annual Report and Consolidated Financial Statements
57
Overview Corporate Governance Financial Statements
22. Capital Management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the
return to shareholders through the optimisation of the balance between debt and equity.
The capital structure of the Group as at 31 December 2022 consisted of equity attributable to the equity
holders of the Company, totalling $1,802,609 bolstered by working capital advances from an officer and
shareholder (see Notes 16 and 23).
The Company reviews the capital structure on an on-going basis. As part of this review, the directors consider
the cost of capital and the risks associated with each class of capital. The Company will balance its overall
capital structure through the payment of dividends and new share issues. The Company has no plans to take on
debt capital.
23. Related Party Transactions
The compensation payable to Key Management personnel, who comprise the Directors, comprised $827,732
payable by the Company in respect of services to the Group. Full details of the compensation for each Director
are provided in the Directors’ Remuneration Report. At year-end, an amount of $180,810 was due to a director
and officer in respect of Directors remuneration.
During the year the Company made an overpayment for services of $60,270 (2021: $nil) to a company of which
Robert Mitchell is a director. Since the year end this amount has been recovered in full.
During the year payments were made to former members of Narf US totaling $75,000 relating to profit
distributions to members, prior to the acquisition in March 2022. Such distributions were S360,000 for the year
ended 31 December 2021 (unaudited).
Included in the caption Trade and Other Payables on the accompanying Consolidated Statement of Financial
Position are $61,700 and $13,100 at 31 December, 2022 and 2021 respectively, related to an office operating
lease agreement between the Group and an entity in which an officer and shareholder is an owner. Included
in Administrative Expenses on the accompanying Consolidated Statement of Comprehensive Income is
$57,600 and $57,100 in operating lease expense for the years ended 31 December 2022 and 2021 (unaudited),
respectfully. This operating lease agreement expired on 1 June, 2023 and minimum rental payments of $4,800
per month means a charge of $28,800 for the year ending 31 December, 2023. The Group is currently reviewing
this arrangement to determine the economics of renewal.
As further discussed in Note 16, the CEO, a director and major shareholder, made loans to the Company which
at year end totalled $1,512,000 (2021: $810,000 unaudited). The amounts represented non-interest bearing
advances to the Group for working capital purposes.
At 31 December, 2020, Narf US owed a net $61,891 to certain companies owned by a director and
officer. This amount was forgiven in the year ended 31 December 2021 and is recorded as income in the
caption Interest Receivable and Other Finance Income in the accompanying Consolidated Statement of
Comprehensive Income.
Narf Industries Plc (formerly CYBA plc)
58
Financial Statements
Notes to the Financial Statements continued
24. Events subsequent to year end
There have been no events since the year end that have any material impact on an understanding of these
financial statements, with the exception of the conversion of advances from the Chief Executive Officer to a
credit facility, see Notes 16 and 23.
25. Prior Period Restatement – Parent Company
As both the operating companies that were acquired under the reverse takeover have a functional and reporting
currency of US Dollars, these financial statements have also been prepared in US Dollars. This has meant
that the Comparatives in the Company Statement of Financial Position, Statement of Changes in Equity and
Cashflow Statement were restated in US Dollars. Sterling amounts reported in the Company Statement of
Financial Position at 31 December 2021 have been restated to US Dollars using the closing foreign exchange
rate at 31 December 2021. Sterling amounts reported in the Company Statement of Comprehensive Income and
Statement of Cashflows for the year ended 31 December 2021 have been restated to US Dollars using the average
foreign exchange rate for the year ended 31 December 2021.
26. Control
In the opinion of the Directors there is no single ultimate controlling party.
Annual Report and Consolidated Financial Statements
59
Overview Corporate Governance Financial Statements
Directors John Herring, Executive Chairman
Steve Bassi, Chief Executive
Rory Heier, Non-Executive Director
Robert Mitchell, Non-Executive Chairman (resigned 23April 2023)
Company Secretary Rory Heier
Head Oce & Registered Oce 5 Fleet Place
London
EC4M 7RD
Auditors PKF Littlejohn LLP
15 Westferry Circus
London
E14 4HD
Financial Adviser and Broker Tennyson Securities Limited
2nd Floor, 65 Petty France
London
SW1H 9EU
Registrars and Transfer Oce Link Market Services Limited
The Registry, Beckenham Road
Beckenham
BR3 4TU
Lawyers Charles Russell Speechlys LLP
5 Fleet Place
London
EC4M 7RD
Financial Public Relations St Brides Partners Limited
Warnford Court
29 Throgmorton Street
London
EC2N 2AT
Registered Number 11701224
Directors and Advisors
narfgroup.com
