REG - Narf Industries PLC - Final Results
11/07/2023 15:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230711:nRSK6905Fa&default-theme=true
RNS Number : 6905F Narf Industries PLC 11 July 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH
LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. ON
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
11 July 2023
NARF INDUSTRIES PLC
FINAL RESULTS
ANTICIPATED LIFTING OF SUSPENSION OF SHARE TRADING
Narf Industries plc ("Narf", the "Company", or the "Group"),
(LSE: 'NARF')(OTCQB: NFIN.F) the cybersecurity group specializing in high-end
threat intelligence and critical infrastructure security, today announces its
audited results for the year ended 31 December 2022 ("FY2022"). In addition,
the Company announces the anticipated lifting of the suspension from trading
of its Ordinary Shares, shortly.
OVERVIEW
· Suspension of share trading to be lifted in the coming days as 2022
audit is now complete
· Record-breaking multi-year contracted backlog) of $10.4 million
at the close of FY2022
· FY2022 Revenue of $2.5 million to more than double in 2023 from
backlog alone.
· Projected year-on-year revenue growth of 130% to $5.8 million in 2023
· Forecasting a 50% other operating expense reduction of $1.4 million
in 2023, when compared to 2022
· Targeted break-even EDITDA for 2023 in contrast to FY2022 Operating
Loss of $2.6 million
· Sufficient cash-flow from internal cash generation and credit line
facilities to accomplish 2023 plan
· Appointment of new Executive Chairman
· Remaining audit disclaimers and qualifications continue to be
addressed by new CFO
Executive Chairman, John Herring said: "We are experiencing an exciting 2023
delivering high growth with fiscal discipline. That said, we also continue to
address challenges transitioning from an acquisition vehicle to an operating
group, most prominently with our audit. To avoid any further delays in
returning our shares to trading we took the difficult decision of accepting a
number of disclaimers and qualifications to the audit report at this time, but
are working to resolve all 2022 matters and preclude any future disruption to
timely reporting. I want to assure you that the disclaimers and opinion in the
audit report do not diminish the value of the team's achievement or the
underlying strength of our business."
EXECUTIVE CHAIRMAN 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 significant 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 $10.4 million.
It speaks to the trust and confidence 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 $2.5 million. 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 confidence.
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 significant
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% ($1.4 million) in 2023.
This combination of growing revenues and operational efficiencies 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
financed by internal cash generation and current credit line facilities.
In summary, our team in 2023 looks to execute an invaluable, high growth,
fiscally responsible Company that protects and builds shareholder value and
confidence. 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 market segments.
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 first financial reporting period for which consolidated financial
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 significant hurdle
for a small team of 15 research and software developers busy meeting contract
deadlines, generating revenue and cash flow. 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 30 April 2023 deadline and led to
suspension of trading in its shares.
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 significant 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 confidence.
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 financial 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 influenced my decision.
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 the interest of all parties.
As you read this annual report and the Company's accounts, please be aware any
financial figures presented are subject to adjustment for overstatement or
understatement as we work with auditors to confirm 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 financial 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 benefit of
investing now to improve the quality of our executive leadership, financial
reporting, and business execution to instill confidence 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, difficult past few months.
Here's what to expect in the next 6 months:
· Scale and expand our government business. We have 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 efficient go to
market strategies.
· Build an experienced and capable Board. We look to align
strategic objectives with specific areas of expertise, source qualified
candidates, and appoint new members over the course of the year.
· Strengthen our internal and external financial 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
reflected in the valuation of our Company.
ENDS
For further information on the Group please visit www.narfgroup.com
(http://www.narfgroup.com) or contact:
John Herring NARF jh@narfgroup.com
Catherine Leftley/Paul Dulieu /Isabel de Salis St Brides Partners narf@stbridespartners.co.uk
Peter Krens Tennyson Securities Tel: +44 (0)207 186 9030
About NARF Industries plc
Narf Industries (LSE: NARF)(OTCQB: NFIN.F) is a US based cyber security group
specialising in high-end threat intelligence with a focus on critical
infrastructure. The Group leads commissioned cyber security R&D and is
commercialising a portfolio of products including TIGR that can be used by
utilities and cyber first responders to restore power to electric grids and
protecting other key infrastructure that have suffered a cyber-attack. The
Group aims to further strengthen its portfolio organically and via
acquisition; its team of highly qualified cyber security experts is well
placed to identify opportunities.
STRATEGIC REPORT
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 31
December 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 31
December 2022 ("FY2022") and 31 December 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
reflected 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 reflect 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 Official
List of the UK Listing Authority on the London Stock Exchange ("LSE"). During
the year the Company raised $7.6 million (gross) in placings and issued shares
at an equivalent value of $19.4 million as consideration for the acquisition
of the Operating Group. The acquisitions completed on 15 March 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
confidentiality and integrity of their missions. With our industry-leading
expertise, advanced technologies, and unwavering commitment to excellence, we
provide the government with the confidence 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.
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 justified 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 this segment.
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, specifically 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 the capabilities
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 sufficiently to organically finance 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 financial metrics of the Group:
· At year-end, the consolidated statement of financial position
presents Current Assets totaling $1.2 million. This included cash of
$443,000 and trade receivables of $640,000 that were collected in Q1 2023.
· Total liabilities at year-end were $2.1 million, 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 $2 million 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 31 December, 2022, the Group had a $10.4 million backlog
(representing contracts in progress), of which $5.9 million is expected to be
realized in 2023.
· The Company has available net operating loss carryforwards of
$5.9 million 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.
the need to seek additional funds from the
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 flow, 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 briefing were conducted on a regular
basis
· The CEO targeted on-boarding experienced executive and financial
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 finance within the
bounds or organic cash flow and current financing facilities.
· Build an experienced and capable Board of Directors.
· Strengthen our internal and external financial reporting.
· Scale and expand our government business.
· Unlock the value of our IP with innovative and efficient 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 and operating 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 confident in our immediate-term prospects.
Specifically:
· 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 confidence. The multi-year nature of these contracts
not only ensures a consistent cash flow 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.
Reliance on a limited number of products and customers
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 $6.7
million. 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 new
products.
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/benefit. 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 significantly influenced 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 financial 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, including career
opportunities elsewhere or unforeseen circumstances.
Inability to Fund Operations
As an emerging company in a rapidly evolving industry, we face certain
financial 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 efficiency,
and manage cash flow 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 influencing
their perceptions of the Group. We recognize that any adverse event or
negative perception can significantly impact our reputation, market standing,
and long-term success.
Our reputational risk is mitigated to a significant extent due to the strong
track record and exemplary conduct of our key executives with decades of
experience in their respective fields. 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, inflation and deflation or currency
exchange fluctuations. The impact is likely to include disruption to financial
markets and higher inflation. 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 Officer and one Non-Executive
Director. The Company is committed to gender equality and diversity. If future
roles are identified, 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 sufficient training and
qualifications 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 qualifies as a low energy user under SI 2018/1155 and is not
required to report on its emissions, energy consumption or energy efficiency
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 benefit 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 benefit 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 fulfilment of this long-term goal.
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 benefit 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 flow; to reduce expenses by in 2023 from 2022 by
50%; and work to EBITDA neutral results; and cash flow 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 financial standards. A CEO was appointed in June 2022, an Executive
Chairman and CFO in April 2023, a baseline of identified financial reporting
standards shortfall identified in in the audit, and a Company commitment to
resolve shortfalls over the next quarter. The consequences of these
decisions are the longer-term benefit 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 financial 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,
financial 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.
· 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 fulfilling 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 flat organizational structure ensures that every team member has
an equal voice and opportunity to contribute their skills and expertise.
· Consider the interests of the Company's employees (continued);
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 field of cybersecurity.
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.
· 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 firmly
believe that a secure digital ecosystem fosters productivity, connectivity,
and access to information, leading to a thriving society that benefits all
stakeholders.
· Consider the impact of the Company's operations on the community and
the environment (continued)
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-efficient 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
11 July 2023
DIRECTORS REPORT
The Directors present their report and the audited consolidated financial
statements for the year ended 31 December 2022 ("FY2022"). The Company was
incorporated on 28 November 2018 and on 27 February 2020 extended its initial
accounting reference date to 31 March 2020. On 7 March 2021 the Company
shortened its accounting period to 31 December 2020 to align with the
accounting periods of its target acquisition companies. On 3 August 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 $2.6 million (2021: $0.9m for Narf
US). Group losses for the year before taxation were US$18.4 million (2021:
$0.8m for Narf US), which included a one-off charge of $15.4 million
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 $2.5 million and the
Group ended the year with contracted backlog of $10.4 million.
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 financial statements 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.
The RTO has been accounted for by 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 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 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.
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 final dividend (prior year: $nil).
Prior to the acquisition, the previous members of Narf US drew US$75,000 and
US$360,000 for the years ended 31 December, 2022 and 2021 (unaudited),
respectively.
Directors
The Directors who served at any time during the period were:
Steve Bassi Chief Executive
Officer
John Herring Executive Chairman
Rory Heier Non-Executive
Director
Robert Mitchell Non-Executive Chairman
(resigned 23 April 2023)
Details of the Directors' holding of Ordinary Shares and Warrants are set out
in the Directors' Remuneration Report from page 21.
Further details of the interests of the Directors in the Warrants of the
Company are set out in Note 18 of the financial 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 Shareholding
At 30 June 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 29.58%
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 Q3 2023, including
the shareholding policy.
The Directors' remuneration comprises a basic fee and discretionary bonuses
and/or long-term incentives to reflect their contribution to significant
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 office 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 office 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 conflicts 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 2 ½ years, is not paying dividends, is currently incurring losses as it
gains scale, Its focus during the year ended 31 December 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
future reports. r,
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 31 December
2022 was:
Base fee Bonus US$ Long-term incentive US$ Total US$
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
Particulars of Directors' Remuneration (audited) (continued)
For the comparative period being the year to 31 December 2021:
Base salary US$ Additional time-based payments Pension contribution Total US$
US$ 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 25 million 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 benefits to any Directors.
Approval by members (unaudited)
The remuneration policies established during the transition will be put to
members for approval at the next Annual General Meeting.
Directors' interests in shares
The Company has no minimum Director shareholding requirements.
The beneficial interest of the Directors in the Ordinary Share Capital of the
Company at 30 June 2023 was:
Number % age of issued share capital
Rory Heier 11,375,000 0.67%
Steve Bassi 502,079,484 29.58%
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 office at the date of approval of the Directors' Report
confirm 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 specific
information on the areas which resulted in a disclaimer of opinion.
This is the first financial reporting period for which consolidated financial
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
significant 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 significant 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 financials.
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 (see Note 24)
There have been no material events since the reporting date which have a
material impact on an understanding of these financial statements.
Directors' Indemnity Provisions
The Company has taken out Directors and Officers Liability Indemnity
insurance.
Going concern
The following represents key financial metrics of the Group.
· At year-end, the consolidated statement of financial position
presents Current Assets totaling $1.2 million. This included cash of
$440,000 and trade receivables of $690,000.
· Total liabilities at year-end were $2.1 million, 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 31 December, 2022, the Group had a $10.4 million backlog
(representing contracts in progress), of which $5.9 million is expected to be
realised in 2023.
· The Company has available net operating loss carryforwards of
$5.9 million to offset future taxes.
Since the year-end, the CEO agreed to provide a $2 million 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 $10.4 million backlog, whilst reducing
operating expenses by 50% resulting in estimated break-even EBITDA and finance
within the bounds or organic cash flow and current financing 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 financial statements. Further details are given
in Note 2.3.
Auditors
The Board appointed PKF Littlejohn LLP as auditors of the Company on 21 March
2019 and thus this is their fourth period of appointment. They have expressed
their willingness to continue in office 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 financial statements
The Directors are responsible for preparing this report and the financial
statements in accordance with applicable United Kingdom law and regulations
and those UK-adopted international accounting standards.
Company law requires the Directors to prepare financial statements for each
financial period which present fairly the financial position of the Company
and the financial performance and cash flows of the Company for that period.
In preparing those financial 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 financial statements;
· prepare the financial 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 specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the entity's
financial position and financial performance.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Company financial 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 financial 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 financial 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 financial statements may differ from
legislation in their jurisdiction.
The Directors confirm that to the best of their knowledge:
these financial statements, prepared in accordance with IFRS (UK adopted
IASs), give a true and fair view of the assets, liabilities, financial
position and profit 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 financial 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
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF NARF INDUSTRIES PLC
Disclaimer of opinion
We were engaged to audit the financial statements of Narf Industries Plc (the
'parent company') and its subsidiaries ("the group") for the year ended 31
December 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 Cashflows,
the Parent Company Statement of Cashflows, the Consolidated Statement of
Changes in Equity, the Parent Company Statement of Changes in Equity and notes
to the financial statements, including significant accounting policies. The
financial reporting framework that has been applied in their preparation is
applicable law and UK-adopted international accounting standards and as
regards the parent company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
We do not express an opinion on the accompanying financial statements of the
group and the parent company. Because of the significance of the matters
described in the Basis for disclaimer of opinion section of our report, we
have not been able to obtain sufficient appropriate audit evidence to provide
a basis for an audit opinion on these financial statements.
Basis for disclaimer of opinion
We identified 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 sufficient 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
financial 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 financials of the acquired subsidiaries for the period ending 31 December
2021 were unaudited. Our audit opinion on the financial statements for the
year ended 31 December 2022 is also disclaimed due to the inability to gain
sufficient and appropriate audit evidence in respect of the opening balances
of these subsidiaries.
Other matter
The financial statements of the two acquired subsidiaries for the year ended
31 December 2021 were not audited and as such, the comparatives of the
consolidated primary statements within these financial statements are
unaudited.
Our application of materiality
The scope of our audit was influenced 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 financial statements was set as $76,000 based
upon loss before tax. Materiality has been based upon loss before tax due to
the value and significance of revenue, cost of sales and administrative
expenses in the year Performance materiality and the triviality threshold for
the consolidated financial statements was set at $53,200 and $3,800
respectively due to our accumulated knowledge of the group, the number of
significant risks identified and their assessed risk.
Materiality for the parent company financial 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 qualitative
grounds.
Our approach to the audit
In designing our audit, we determined materiality and assessed the risks of
material misstatement in the financial statements. In particular we looked at
areas involving significant accounting estimates and judgements by the
directors and considered 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 financial 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 sufficient and appropriate audit
evidence and therefore are unable to give an opinion on the financial
statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, 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 financial
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 31 Our work in this area included but was not limited to:
December 2022. The revenue recognised in the year within the group relates to
contracts entered into with a small number of customers. These contracts · Obtaining an understanding of the information system and related
include a significant number of performance obligations and are of significant controls relevant to each material income stream;
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 · Evaluating the appropriateness of the information system and the
has not been recognised correctly in accordance with IFRS 15 and the effectiveness of the design and implementation of the related controls;
performance obligations met during the year. Furthermore, revenue may be
materially misstated due to cut-off errors as significant judgements may be · Obtaining each contract that was active in the year, reviewing
required to be made where milestones have not been fully met by the year-end. 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.
Sufficient 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 financial statements and supporting disclosure
notes.
Business combinations accounting treatment and disclosure
During the year, the parent company acquired two entities, Narf Industries LLC Our work in this area included but was not limited:
and Narf Industries PR LLC, through the issuance of shares as well as cash
consideration. The directors have assessed these acquisitions to fall outside · Obtaining the agreements in respect of the business combination
the scope of IFRS 3 as they do not believe that Narf Industries Plc meets the transaction and ascertaining the key terms of the transaction;
definition of a business per IFRS 3 (Notes 2.16 and 8).
· Assessing the accounting treatment of the acquisitions and
The treatment and disclosure of business combinations during the year are a management's justifications;
significant risk area due to the complexity of the accounting for such
acquisitions, the judgement required to be made by management in assessing the · Obtaining management's acquisition workings and ensuring that they
accounting treatment thereon as the acquisitions falls outside the scope of have correctly valued the investment in the subsidiaries, the net assets of
IFRS 3 and the value of the consideration paid for the two subsidiaries. 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 financial
position; and
· Ensuring disclosures in the financial 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 Our work in this area included but was not limited:
during the period and the carrying value of the investments in these
subsidiaries as at 31 December 2022 was $25,600k (Note 12). · Obtaining and reviewing management's impairment assessment in respect
of the investment in subsidiaries and supporting calculations; and
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 · Ascertaining and challenging management's key assumptions and inputs.
recoverable. Furthermore, management are required to make significant
estimates and judgements (Note 2.16) when assessing the recoverable value of
the investment in subsidiaries and whether it is impaired.
Carrying value of capitalised development costs
As at 31 December 2022, the carrying value of capitalised development costs at Our work in this area included but was not limited:
group level totalled $2,697k (Note 9).
· Obtaining the directors' assessment of impairment and reviewing and
Given the value of the balance, the estimation required when conducting challenging the key estimates and judgements used therein; and
impairment reviews and the judgement required when capitalising costs (Note
2.16), there is a risk that capitalised development costs may be materially · Reviewing disclosures in the financial statements to ensure that they
misstated as costs have been inappropriately capitalised and/or the asset is are in line with IAS 38.
not fully recoverable.
Sufficient 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
financial statements and supporting disclosure notes.
Other information
The other information comprises the information included in the strategic and
directors' report, other than the financial 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 financial 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 financial
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 financial
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 significance 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 financial year for which the financial statements are prepared
is consistent with the financial 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 financial 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 identified material
misstatements in the strategic report or the directors' report.
Arising from the limitation of our work referred to above:
· 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 financial 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 specified 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
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the Group and Parent Company financial 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 financial
statements. We obtained our understanding in this regard through discussions
with management, industry research and our cumulative audit knowledge and
experience of the sector.
· 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:
o Discussions with management regarding compliance with laws and regulations
by the group and parent company;
o Review of board minutes; and
o Review of regulatory news announcements made throughout and post year-end.
· We also identified the risks of material misstatement of the
financial 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 significant accounting estimates but were not able to conclude thereof
(see the Key audit matters section of our report).
· 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
significant 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 financial 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 reflected in the financial
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 financial statements
Our responsibility is to conduct an audit of the group's and parent company's
financial statements in accordance with ISAs (UK) and to issue an auditor's
report.
However, because of the matters described in the Basis for disclaimer of
opinion section of our report, we were not able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion on these
financial statements.
We are independent of the group and parent company in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Other matters which we are required to address
We were appointed by the Audit Committee on 21 March 2019 to audit the
financial statements for the period ending 31 March 2020 and subsequent
financial periods. Our total uninterrupted period of engagement is 3 periods,
covering the periods ending 31 March 2020, 31 December 2021 and 31 December
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)
15 Westferry Circus
For and on behalf of PKF Littlejohn LLP
Canary Wharf
Registered Auditor
London E14 4HD
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Year ended 31 December 2022 (Unaudited)
US$ Year ended 31
Notes December 2021
US$
Contract Revenue 3 2,547,125 1,939,516
Cost of Sales (1,828,887) (678,831)
Gross profit 718,238 1,260,685
Administrative expenses (3,303,583) (2,133,711)
Loss before depreciation and software license amortisation, share based 4 (2,585,345) (873,026)
payment expenses, interest and taxes
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 finance 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 (18,425,707) (842,669)
of the company
Earnings per share (basic and diluted) attributable to the equity holders 7 (1.3) (0.1)
(cents)
The comparative information is presented for Narf US, the accounting acquirers
(see note 2.2)
The above results relate entirely to continuing activities.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
As at (Unaudited)
31 December 2022 As at
Notes 31 December 2021
US$ US$
FIXED ASSETS
Intangible assets 9 2,697,076 1,303,351
Tangible assets 11 15,990 49,519
2,713,066 1,352,870
CURRENT ASSETS
Trade and other receivables 13 756,481 48,074
Cash and cash equivalents 14 442,751 446,879
1,199,232 494,953
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 deficit (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 form part of these financial statements.
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
As at As at As at 31 December 2020 (Restated)*
31 December 2022 31 December 2021 (Restated)*
Notes
US$ US$ US$
FIXED ASSETS
ITIntangible 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 deficit (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 figures 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 profit and loss account.
The Parent Company loss for the year was $2,714,845 (2021: $1,963,034).
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Year ended 31 December 2022 (unaudited)
US$ Year ended
31 December 2021
US$
Notes
Cash flow 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)
RTO expenses
Net cash outflow from operating activities (2,992,811) (424,760)
Cashflow from investing activities
Net amounts paid to former members to acquire control (3,615,433) -
Licence fee expenditure (500,000) -
Net cashflow from investing activities (4,115,433) -
Cashflow from financing 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 inflow from financing 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
The comparative information is presented for Narf US, the accounting acquirers
(see note 2.2)
The accompanying notes form part of these financial statements.
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Year ended 31 December 2022 Year ended
US$ 31 December 2021 (Restated)
US$*
Notes
Cash flow 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 outflow from operating activities (2,315,721) (2,058,367)
Cash flow 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 outflow from investing activities (4,254,046) (2,000,000)
Cashflow from financing 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 inflow from financing 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 figures have been restated as the presentational
currency has been changed from GBP £ to USD $.
The accompanying notes form part of these financial statements.
Share Capital Share Premium FX reserve Share based payment Reverse Retained Deficit Members' Equity Total
reserve Acquisition
reserve
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
US$ US$ US$ US$ US$ US$ US$ US$
Balance at 1 January 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 31 December 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)
Reclassification 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 31 December 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 form part of these financial statements.
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Restated in US$
Share Capital Share Premium Share based payment reserve Retained Deficit Total
FX reserve
US$ US$ US$ US$ US$ 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 31 December 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 31 December 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 31 December 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 of listing.
Retained deficit - 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 form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 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 as a public limited company. The Company's registered
office is 5 Fleet Place, London EC4M 7RD. The Company's 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.
2.2 Consolidation and Acquisitions (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.
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)
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 fixed 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.
Classification
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.
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.
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.
2.11 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.
2.12 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.
2.13 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.
2.14 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.
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.
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.
2.17 Standards, amendments and interpretations to existing standards
that are not yet effective
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 TBC
Non-current
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.
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.
Based on the above categories, disaggregated contract revenue was as follows:
(unaudited)
Year ended Year ended
31 December 31 December 2021
US$
2022
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 Year ended 31 December 2021 US$ (Unaudited) 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.
4. OPERATING PROFITS
This is stated after charging:
(unaudited)
31 December 31 December 2021
US$
2022
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:
(unaudited)
2022 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:
(unaudited)
31 December 2022 31 December 2021
US$
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
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 19 to 21. 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 (unaudited)
US$ 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:
(unaudited)
31 December 2022 31 December 2021
US$ 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 (3,499,395) (146,410)
Rico (4%)
Weighted average Tax Rate - 18.96%
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: $3,500,000) are available for
relief against future profits. No related deferred tax asset has been provided
for in the accounts based on the uncertainty as to when profits will be
generated against which to relieve said asset.
7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the loss attributable to
equity holders of the Company by the weighted average number of ordinary
shares in issue during the period.
(Unaudited)
31 December 2022 31 December
US$ 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.
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 US$25.6 million, inclusive of the US$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 US$21.9 million based on a share price of 1.8p and 932.0 million Ordinary
Shares in issue immediately prior to the reverse acquisition. According to
IFRS 2 the value of the share-based payment is calculated as the difference
between the deemed cost and the fair value of the net assets as at the
acquisition date which are as follows:
US$
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 (US$21.9m) and the fair value of the
net assets assumed per above of US$6.5m resulted in US$15,355,123 being
expensed within "reverse acquisition expenses" in accordance with IFRS 2,
Share Based Payments, reflecting the economic cost to Narf US's owners of
acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse takeover is made
up as follows:
US$
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.
9. INTANGIBLE ASSETS - GROUP
Software
Licenses US$ 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 - -
11. TANGIBLE ASSETS - GROUP
Cars Leasehold Improvements US$ Furniture & Total
Equipment
US$ US$ US$
Cost
At 1 January 2022 147,098 25,425 222,723 395,246
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 9,435 222,723 379,256
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.
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 2022 2021
Principal Activity
Narf Industries LLC USA 548 Market St. #37005 Provision of security goods and services to USG and affiliated entities 100% 0%
San Francisco, CA 94104
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
(Unaudited) As at 31 Dec 2021 (Restated)
US$
As at As at As at
31 Dec 31 Dec 31 Dec 2022
2022 2021 US$
US$ 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$1 million to each of Narf Industries LLC and
Narf Industries PR LLC in accordance with heads of terms agreed between the
Company and Narf whereby it was agreed, subject to legal diligence, that the
Company would agree to acquire the entire equity capital of Narf. As detailed
in Note 8 the acquisition of Narf was completed during the year and
accordingly the prepaid consideration is part of the acquisition cost.
The Directors consider that the carrying value amount of trade and other
receivables approximates to their fair value.
Ageing analysis
The following presents an ageing analysis of Accounts Receivable:
(Unaudited) As at 31 December 2021
As at 31 December 2022 US$
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 Dec (unaudited) 31 Dec 2022 31 Dec 2021 (Restated)
US$
2022 31 Dec
2021 US$
US$ 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
(Unaudited) 31 Dec 2021 (Restated)
US$
31 Dec 31 Dec 31 Dec 2022
2022 2021 US$
US$ 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.
16. CREDITORS AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR - GROUP
(Unaudited)
31 December 2022 31 December 2021
US$
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 $1,170,144. This credit facility is being
presented without any discount to account for time as the facility may be
partially or fully repaid prior to the due date of 30 June, 2024. Should the
Group and this individual decide any future excess working capital to repay
this facility would be better invested in growing Group operations, the due
date of 30 June, 2024 could be extended.
17. SHARE CAPITAL / SHARE PREMIUM - GROUP AND PARENT COMPANY
The Company has only one class of share. All ordinary shares of 0.1p each
("Shares") have equal voting rights and rank pari passu for the distribution
of dividends and repayment of capital. As at 31 December 2022 the Company's
issued and outstanding capital structure comprised 1,697,381,100 shares and
there were no other securities in issue and outstanding.
From 1 January 2021 to 31 December 2021 the Company issued 100,000,000 Shares
at a price of £0.02 per placing share.
On 7 March 2022 the Company issued 7,500,000 Shares at a price of £0.01 per
warrant share following the exercise of warrants.
On 15 March 2022 the Company issued 300,000,000 Shares at a price of £0.02
per placing share
On 16 March 2022 the Company issue 699,999,600 Shares to the former members of
Narf US in exchange for 100% of the voting rights of Narf US at an equivalent
price of £0.02 per share.
On 17 March 2022 the Company issued 59,856,100 Shares to SRI International in
exchange for certain licensing rights at an equivalent price of £0.02 per
share.
On 18 May 2022 the Company issued 1,000,000 shares to a supplier in settlement
of outstanding professional fees at an equivalent price of £0.0168 per share.
At 31 December 2022 the Company had 50 million options outstanding and 63
million warrants (see note 18)
Number of shares on issue Share capital Share premium Total
(Restated) US$
(Restated) US$
(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 31 December 2021 (Restated)
US$
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
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
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 US$114,592 related to
options issued for services provided and therefore resulted in a charge to the
Statement of comprehensive Income and US$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 $4,800 per month. The Group also has an installment note
on a vehicle that expires in January 2024 (see Note 16).
Amounts payable in respect of leases:
31 December 2022 At 31 December 2021 (Restated)
US$
USS$
Less than 1yr 49,385 78,370
1 to 5 years 1,727 51,112
More than 5 years - -
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 Dec 31 Dec 31 Dec 2022 31 Dec 2021 (Restated)
US$
2022 2021
US$
US$ 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 Dec 31 Dec 31 Dec 2022 31 Dec 2021 (Restated)
US$
2022 2021
US$
US$ 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: $20,292) which is repayable in
equal monthly instalments over the upcoming year. The long term loans have a
repayment date of 30 June 2024.
Credit risk
The maximum exposure to credit risk at the reporting date by class of
financial asset was:
Group Company
31 Dec 31 Dec 31 Dec 2022 31 Dec 2021 (Restated)
US$
2022 2021
US$
US$ 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
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 although it did not raise the expected amount of capital during
the year and is considering its options to provide 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 company and
the Group maintains adequate bank balances to meet those financial liabilities
that are payable in the short term (between 0 to 3 months).
Foreign exchange risk
The Company 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 maintain 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 Company's assets and liabilities are
denominated in US dollars.
22. CAPITAL MANAGEMENT
The Company 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 Group, 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 has amount has been recovered in full.
During the year payments were made to former members of Narf US totaling
US$75,000 relating to profit distributions to members, prior to the
acquisition in March 2022. Such distributions were USS360,000 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 US$57,600 and US$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 are $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, a Director and CEO 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.
24. EVENTS SUBESQUENT 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 hat
the Comparatives in the Company Statement of Financial Position, Statement of
Changes in Equity and Cashflow Statement for that restated in US Dollars.
Sterling amounts reported in the statement of financial position in the
Company's financial statements 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 statement of comprehensive income and statement of
cashflows in the Company's financial statements at 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR NKDBNNBKDDODRecent news on Narf Industries
See all newsREG - Narf Industries PLC - Progress update re: commercialization
AnnouncementREG - Narf Industries PLC - US$6.8M Multi-Phase Contract with US Gov Agency
AnnouncementREG - Narf Industries PLC - Interim Results
AnnouncementREG - Narf Industries PLC - Business Update & Financial Guidance
AnnouncementREG - Narf Industries PLC - Result of AGM
Announcement