Narf Industries Plc

(formerly CYBA plc)

Registered number 11701224 (England and Wales)

Annual Report and Consolidated Financial Statements

For the year to 31 December 2022

Overview

Executive Chairman’s Statement 01

Strategic Report 03

Directors’ Report 11

Corporate Governance

Corporate Governance Report 17

Independent Auditor’s Report to the Members 20

Financial Statements

Consolidated Statement of Comprehensive Income 26

Consolidated Statement of Financial Position 27

Parent Company Statement of Financial Position 28

Consolidated Statement of Cashows 29

Parent Company Statement of Cashows 30

Consolidated Statement of Changes in Equity 31

Parent Company Statement of Changes in Equity 32

Notes to the Financial Statements 33

Directors and Advisors 59

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Executive Chairman’s Statement

Dear Shareholder,

As the recently appointed Executive Chairman, this

statement offers me the opportunity to share your

Company’s accomplishments while acknowledging

the challenges transitioning from a private and

entrepreneurial led venture to the main operating

business of an LSE listed company.

Accomplishment and Goals

It has been a year of signicant 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 condence 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 condence.

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 signicant

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 eciencies help position the Company to

achieve break‑even EBITDA for 2023. This compares

to a $2.6m operating loss in 2022. The plan looks to

accomplish this performance nanced by internal

cash generation and current credit line facilities.

In summary, our team in 2023 looks to execute

an invaluable, high growth, scally responsible

Company that protects and builds shareholder

value and condence. 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 rst nancial reporting period for which

consolidated nancial statements, incorporating the

businesses acquired in March 2022 (see Note 8 to the

Financial Statements), are subject to International

Finance Reporting Standards (IFRS).

This administrative burden introduced by IFRS

presented a signicant hurdle for a small team

of 15 research and software developers busy

meeting contract deadlines, generating revenue

and cash ow. Previously, the private businesses

produced records and internal documents only

needed for servicing its contracts and primarily

for tax purposes. This lack of infrastructure and

resources caused the Company to miss its 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 signicant 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 condence.

I want to assure you that this disclaimer of

opinion does not diminish the value of the team’s

achievement or the underlying strength of our

business. We are committed to resolving these

issues and bringing the Company’s consolidated

nancial reporting practices up to standards.

There are several matters linked to the disclaimer

that need resolution, but it’s our inability to date to

provide auditors access to a sensitive contract (and

all materials associated with that contract), and

our estimated timeline for resolution, that’s most

inuenced my decision.

Narf Industries Plc (formerly CYBA plc)

Overvi ew

This contract accounts for about 50% of our

reported 2022 revenue with terms that state

disclosing the name of the customer, their address,

or the nature of the work to restricted parties,

is a basis for termination. We are navigating this

situation carefully and executing a plan to resolve

this matter over the course of the next quarter in

theinterest of all parties.

As you read this annual report and the Company’s

accounts, please be aware any nancial gures

presented are subject to adjustment for

overstatement or understatement as we work with

auditors to conrm the appropriate accounting

treatment. The Company believes it has taken

a conservative approach in its presentation of

the accounts, for example applying a revenue

recognition that errs on the side of understatement.

Period of Transition

This year’s audit circumstance speaks to the

challenges we face managing record revenue

growth while building the infrastructure required of

a publicly reporting entity. While growth is a positive

indicator, it requires us to remain agile and adapt our

administrative systems to meet the evolving needs

of our expanding organisation.

While establishing the necessary administrative

and nancial infrastructure during this transitional

phase is important, it’s equally vital to instill

a shared understanding among our team that

effective governance and responsible management

extend beyond mere structures and processes.

For these reasons, your CEO strengthened the

Board and executive team in late April 2023, with

my appointment as Executive Chairman and

appointment of our CFO.

Although posing short‑term challenges, we

recognise the long‑term benet of investing now

to improve the quality of our executive leadership,

nancial reporting, and business execution to instill

condence 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, dicult 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

ecient go to market strategies.

• Build an experienced and capable Board. We look

to align strategic objectives with specic areas of

expertise, source qualied candidates, and appoint

new members over the course of the year.

• Strengthen our internal and external nancial

reporting. A solid foundation to support our

decision‑making processes, protect the interests

of our shareholders, and maintain the trust of our

stakeholders is paramount. Included is a resolution

of our auditor’s disclaimers and opinion.

• Maximize shareholder value. We are committed

to engaging with the investment community to

ensure our accomplishments and strategies are

reected in the valuation of our Company.

Thank you, all.

John Herring

Executive Chairman

11July 2023

Executive Chairman’s Statement continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Narf Industries plc (the “Parent” or the

“Company”) is the UK parent company

of two US subsidiaries Narf Industries

LLC and Narf Industries PR LLC (the

“subsidiaries”, “Operating Group” or “Narf

US” – together with the UK Company, the

“Group”) principally involved in developing

and marketing software aimed at enhancing

the cybersecurity measures of its clients.

The directors of the Company are pleased to

present their report on the Group for the year

ended 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

reected 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 reect 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

Ocial 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 condentiality

and integrity of their missions. With our industry‑

leading expertise, advanced technologies, and

unwavering commitment to excellence, we provide

the government with the condence and peace of

mind they need to navigate the complex and ever‑

changing cybersecurity landscape.

The Group’s strategy leverages government funded

research and business to create and fund innovative

and disruptive products for billion‑dollar commercial

cybersecurity markets. Government Research

and Development (GR&D) work produces valuable

Company‑owned IP and Government Solutions

and Services (GS&S) work generates favourable

net margins to fund commercialization. Our 2022

revenues were split evenly between the two.

Strategic Report

Narf Industries Plc (formerly CYBA plc)

Overvi ew

Government Research and Development (“GR&D”)

The Group has a successful history of tendering

for, and winning, government R&D contracts for

groundbreaking technologies, predominantly from

DARPA. Our research work is focused on three,

multi‑billion cybersecurity market segments: critical

infrastructure protection; open‑source software

(OSS) vulnerabilities; and threat intelligence.

For these contracts, the agency retains government

purpose rights, but the Group has the sole right to

sell new solutions using the IP to the government

(i.e., GS&S business). For commercial markets, we

own the IP rights.

The GR&D contracting process may range from 9

to 15 months and once awarded performance can

range up to 18 months or longer. The Group projects

stepped growth in its GR&D business targeting

synergistic research areas that complement its

current rich IP portfolio.

For Note 3 of the Financial Statements, GR&D revenues

are included as part of Professional Services.

Government Solutions and Services (“GS&S”)

The Group develops solutions and performs services

for various US government agencies. Its software

solutions address immediate cybersecurity mission

needs. These needs continually evolve as the nature

of cybersecurity threats change. We also provide

on‑going services supporting the operations of the

delivered software solution.

The Group enjoys a unique competitive position

with GS&S work through a recently renewed 5‑year

omnibus contract. This streamlines government

procurement cycles and gives multiple agencies

access to the Group’s solutions and services.

Agencies execute task orders, many with awards

justied 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, specically

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 suciently to organically nance

commercialization initiatives, the strategy is to rely

on paid development from prospects or investments

by strategic partners.

The Group expects to incrementally build its

commercialization resources as its government

business grows and provides organic investment

capability. Currently, for 2023, no material

commercialization revenues are projected.

Financial position

The following presents key nancial metrics of

theGroup:

• At year‑end, the consolidated statement of

nancial 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.

Strategic Report continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

• 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.

Key performance indicators

The Company’s major KPI since its founding

and through March 2022 was completion of an

acquisition of a suitable target and all activities

necessary to that end. The Company completed an

acquisition in March 2022 of the Operating Group.

Since March 2022, and up until end of 2022, the

Group’s main KPIs included:

• Appoint a CEO, a role that had been vacant since

the Group’s founding;

• Ensure integration activities with the Company

does not impact the Operating Group’s

management focus on revenue, cash ow, and new

business generation;

• Communicate the vision of the combined entities

to stakeholders; and

• Identify activities for the continued transition of

the Company for 2023.

Regarding 2022 performance:

• Steve Bassi, the founder of Narf US, was appointed

the Group CEO in June 2022

• The Operating Group grew revenue from 2021 to

2022; managed cash within set guidelines; and

delivered record setting backlog. However, the

2022 audit has adversely impacted operations.

• RNS updates and shareholder brieng were

conducted on a regular basis

• The CEO targeted on‑boarding experienced

executive and nancial talent early in 2023.

For 2023 with the new Executive Chairman and CFO

in place, KPIs include:

• Deliver at least 100% YOY revenue growth; reduce

operating expenses by 50%; manage to nominal

EBITDA gain/loss; and nance within the bounds or

organic cash ow and current nancing facilities.

• Build an experienced and capable Board of Directors.

• Strengthen our internal and external nancial

reporting.

• Scale and expand our government business.

• Unlock the value of our IP with innovative and

ecient 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 condent in

our immediate‑term prospects. Specically:

• 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 condence. The multi‑year nature of these

contracts not only ensures a consistent cash ow

but also provides a solid foundation for future

growth and investment opportunities.

• We can scale and expand our government business

where we have a proven track‑record and demand

for cybersecurity capabilities is in limited supply.

• The founder of Narf US and now CEO of the

Group, is driving the on‑boarding of executives,

as evidenced by the Executive Chairman and CFO

appointments, with experience in to navigate the

risk in transition and growth.

Narf Industries Plc (formerly CYBA plc)

Overvi ew

Strategic Report continued

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/benet. 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 signicantly

inuenced by the knowledge, experience, and

expertise of key individuals within our organization.

The loss of any key person, including members of

our senior management team or technical experts,

could have a material adverse effect on our business,

operations, and nancial performance.

This risk is largely mitigated largely at this stage

as the three most critical employees are major

shareholders in the Company.

We continuously strive to attract, retain, and

motivate key personnel through competitive

compensation packages, employee engagement

initiatives, and a supportive work environment.

However, there is always a risk that key individuals

may leave the company for various reasons,

includingcareer opportunities elsewhere or

unforeseen circumstances.

Inability to Fund Operations

As an emerging company in a rapidly evolving

industry, we face certain nancial risks, including

the potential inability to fund our operations. The

success of our business and our ability to achieve

our strategic objectives depend on our access to

adequate funding sources, including cash reserves,

credit facilities, and capital markets.

While we acknowledge this risk, we are committed to

taking proactive measures to mitigate it. Our Financial

position and going concern disclosures present our

2023 plans to leverage our strong backlog, achieve

operational eciency, and manage cash ow to

ensure alignment with our available resources.

We also actively evaluate potential strategic

alliances, partnerships, and collaborations that can

provide access to additional resources to fund our

commercialization goals.

While we have taken and continue to take reasonable

measures to address the risk of funding constraints,

there can be no assurance that we will be successful

in maintaining performance or securing the

necessary funding on favourable terms (see ‘Going

Concern’ section in the Directors Report below).

Reputational Risk

Reputational risk is a critical consideration for

the Board as it plays a pivotal role in shaping our

relationships with stakeholders and inuencing

their perceptions of the Group. We recognize that

any adverse event or negative perception can

signicantly impact our reputation, market standing,

and long‑term success.

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Our reputational risk is mitigated to a signicant

extent due to the strong track record and exemplary

conduct of our key executives with decades

of experience in their respective elds. Their

unwavering commitment to integrity, transparency,

and ethical business practices has established a

solid foundation of trust among our stakeholders.

As we continue to expand and grow, we remain

committed to upholding the values and principles

instilled by Management.

Economic Risk

The Group could be affected by unforeseen events

outside its control including economic and political

events and trends, ination and deation or currency

exchange uctuations. The impact is likely to include

disruption to nancial markets and higher ination.

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 Ocer and one Non‑

Executive Director. The Company is committed

to gender equality and diversity. If future roles

are identied, 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 sucient training and qualications 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 qualies as a low

energy user under SI 2018/1155 and is not required

to report on its emissions, energy consumption or

energy eciency 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 benet 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 benet 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

fullment of this long‑term goal.

Narf Industries Plc (formerly CYBA plc)

Overvi ew

Strategic Report continued

Within this framework, the following are the

consequences of recent Board decisions on the

long‑term business:

Acquisition of the Operating Group – The Company

undertook a thorough review of the cybersecurity

industry before identifying Narf US as an ideal

acquisition candidate. This decision meets the

Company’s strategic goal to pursue business in the

cyber security industry and sets the Company’s

long‑term vision for the benet of all stakeholders.

Licensing SRI IP – The Group’s strategy leverages

government cyber‑security funded research

to create commercial products for multi‑billion

market opportunities. SRI owns IP and work

product complementary to the Group’s R&D assets

and relationships in the critical infrastructure

protection market segment. The Group’s

decision to license SRI assets offers more value

to prospective customers and an enhanced

competitive position. This decision advances

the long‑term potential of the Group’s declared

commercialization strategy.

Scaling GS&S Revenues – The Group relies on

government work to fund its operations and enable

commercialization investments. Leveraging 2022

historic contract wins in its GS&S business, the

Board is deciding to “grow where we know” and

turbo‑charge this core business. The consequence

is increased revenue and net margins that fund

operations and commercialization initiatives

through organic growth.

Performance Discipline and Fiscal Responsibility

– The Company decided to manage its 2023

performance assuming only backlog business

generates revenue, resulting margins, and cash

ow; to reduce expenses by in 2023 from 2022

by 50%; and work to EBITDA neutral results; and

cash ow break even within its current credit

facilities. The impact is an attractive non‑dilutive

model during challenging microcap markets as the

Company bridges to execute its long‑term strategy.

Governance and Public Company Standards –

The Company attracted experienced executives,

is executing on a governance plan, and working

to achieve public company nancial standards.

A CEO was appointed in June 2022, an Executive

Chairman and CFO in April 2023, a baseline

of identied nancial reporting standards

shortfall identied in in the audit, and a Company

commitment to resolve shortfalls over the next

quarter. The consequences of these decisions are

the longer‑term benet of capital market access

on future favourable terms.

The Board and executives routinely engage in

decisions that impact the long term, set plans

to execute, monitor execution, and pivot as

necessary from informed and valued employee

insights that lead to better progress.

• Act fairly between the members of the Company:

We are dedicated to acting fairly towards our

stakeholders.

We are driven to maximizing shareholder returns

while considering the sustainability and resilience

of our business. Alongside value creation, we also

prioritize the preservation of shareholder value.

We strive to manage risks, maintain nancial

stability, and make prudent decisions that

safeguard the assets and investments entrusted to

us by our shareholders.

We prioritize transparent and timely communication

with our shareholders. We will strive to improve

our offering regular updates on our performance,

nancial results, and key developments so

shareholders are well‑informed and have a clear

understanding of our business activities.

We look to uphold the highest standards of

corporate governance to protect and enhance

shareholder rights. We recognize the importance

of treating all shareholders fairly and equally,

irrespective of their shareholding size. We

are committed to providing fair and equitable

treatment to minority shareholders, ensuring that

their rights and interests are respected.

We work to align management incentives with

shareholder interests to promote responsible

and sustainable value creation. Our executive

compensation structure is designed to reward

performance, promote long‑term value creation,

and align the interests of management with those

of our shareholders.

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

• Maintain a reputation for high standards of

business conduct:

The Company strives for the highest standards of

conduct with all its stakeholders.

We conduct our business with the utmost integrity,

adhering to ethical principles and demonstrating

honesty and transparency in all our interactions. We

work to uphold the highest standards of ethics and

integrity in all business activities. We are dedicated

to delivering high‑quality products/services that

meet or exceed our customers’ expectations.

We treat all stakeholders fairly and equally, and a

commitment to resolving any concerns or issues

in a fair and timely manner. We maintain open and

clear lines of communication and value effective

communication to build strong and lasting

relationships.

Our employees embody professionalism in their

interactions, displaying courtesy, respect, and a

commitment to understanding and fullling their

needs. They take accountability and responsibility for

their actions, decisions for roles and performance.

We maintain strict compliance with legal and

regulatory requirements, as well as industry

standards and best practices. We prioritize the

privacy and security of our customers’ data,

implementing robust measures to safeguard

their information and comply with applicable data

protection laws.

• Consider the interests of the Company’s

employees:

For context, the Company is a close‑knit group

of 15 highly research scientist and experienced

software developers, that have chosen to come

together in an environment that allows them

the freedom to advance their craft without

bureaucracy and make meaningful impact.

We embrace the principle of equality, treating

all employees with fairness and respect. Our at

organizational structure ensures that every team

member has an equal voice and opportunity to

contribute their skills and expertise.

Our organization operates on the principles of

meritocracy, where recognition and advancement

are based on individual abilities, accomplishments,

and contributions. We value and reward

performance, enabling employees to excel based

on their skills, dedication, and results.

We foster a collaborative work environment

where ideas are valued irrespective of hierarchy.

Our culture encourages open communication,

teamwork, and the exchange of diverse

perspectives, allowing everyone to contribute to the

success of the organization.

We empower our employees to make decisions,

take ownership of their work, and contribute to

the growth and development of the company.

This empowers individuals to utilize their skills

and knowledge effectively, promoting a sense of

ownership and responsibility.

We maintain a transparent and inclusive

environment, where information is shared openly,

and decisions are communicated clearly. We

encourage open and constructive feedback,

fostering a culture of continuous improvement.

• Foster the Company’s relationships with

suppliers, customers and others:

We strive to foster strong relationships with

customers and research organizations.

We are committed to fostering strong and enduring

relationships with our customers. We strive to

exceed customer expectations, building trust,

loyalty, and long‑term partnerships.

We actively seek collaboration with other research

organizations. Through partnerships and joint

research initiatives, we aim to drive innovation,

accelerate discoveries, and advance the eld

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.

Narf Industries Plc (formerly CYBA plc)

Overvi ew

Strategic Report continued

• Consider the impact of the Company’s operations

on the community and the environment:

At the core of our work lies a commitment to

safeguarding society from cyber threats and

promoting a secure digital environment. Our team’s

expertise and research have had a profound positive

impact on individuals, businesses, and critical

infrastructure. Through our relentless efforts, we

have contributed to strengthening the cybersecurity

landscape, protecting sensitive data, and ensuring

privacy in an increasingly interconnected world.

We take great pride in empowering society

through our cybersecurity solutions. By enabling

digital transformation, innovation, and economic

growth, our work paves the way for organizations

to embrace technology securely. We rmly believe

that a secure digital ecosystem fosters productivity,

connectivity, and access to information, leading to a

thriving society that benets all stakeholders.

Our dedication to ethical and responsible

cybersecurity practices is unwavering. We adhere

to stringent ethical guidelines and prioritize

the protection of human rights. Respecting

user privacy and fostering digital trust are

foundational principles that drive our research

and recommendations. We understand the

responsibility we bear in creating a secure and

inclusive digital environment, and we actively

champion these principles in our daily operations.

While our primary focus is on societal impact, we

also recognize the importance of minimizing our

environmental footprint. We have taken steps to

ensure our operations and research activities have

a minimal impact on the environment. Through

energy‑ecient 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

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

The Directors present their report and the

audited consolidated nancial 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 $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 nancial statements have been prepared

to reect 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 nancial statements as a

continuation of the Narf US subsidiaries. As such,

the comparatives of the consolidated primary

statements represent the combined results

and assets, liabilities and equity of the Narf

USsubsidiaries.

The transactions were accounted for as reverse

acquisitions since they did not meet the denition

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 nancial position, the consolidated

cashow statement and the consolidated statement

of changes in equity represent the combined

numbers of the legal subsidiaries and accounting

acquirers, Narf Industries LLC and Narf Industries

PR LLC. In the consolidated statement of nancial

position, the share capital and premium as at

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 reect

the combined group, including both Narf US and the

Company up to the year‑end.

As a result of the acquisition the functional currency

of the Group is now USD$. As such we were

required to restate the Parent Company Statement

of Financial Position as historically it had been

presented in GBP £.

Dividends

No dividend has been paid during the year nor do the

Directors recommend the payment of a nal dividend

(prior year: $nil).

Prior to the acquisition, the previous members of

Narf US drew $75,000 and $360,000 for the years

ended 31December, 2022 and 2021 (unaudited),

respectively.

Directors’ Report

Narf Industries Plc (formerly CYBA plc)

Overvi ew

Directors

The Directors who served at any time during the

period were:

Steve Bassi Chief Executive Ocer

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12.

Further details of the interests of the Directors in the

Warrants of the Company are set out in Note 18 of the

nancial statements.

Share Capital

The Company is incorporated as a public limited

company and is registered in England and Wales

with the registered number 11701224. Details of the

Company’s issued share capital, together with details

of the movements during the period, are shown in

Note 17. The Company has one class of Ordinary

Share and all shares have equal voting rights and

rank pari passu for the distribution of dividends and

repayment of capital.

Substantial Shareholdings

At 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

Percentage

of issued

Share Capital

Steve Bassi 502,079,484 31.69%

Banque Heritage 160,000,000 9.43%

Nick Davis 92,948,078 5.48%

Ben Schmidt 88,447,438 5.21%

Hadron Master

Fund Series II 65,064,542 3.83%

SRI International 59,856,100 3.53%

Directors’ Remuneration Report

(Audited)

Remuneration Policies (unaudited)

The Board believes that share ownership by

Executive Directors strengthens the link between

their personal interests and those of shareholders.

To date the Board members have not traded in the

Company shares since the admission to LSE.

With the late recent appointment of the Executive

Chairman there are a number of immediate

governance actions that will be addressed in

Q32023, including the shareholding policy.

The Directors’ remuneration comprises a basic

fee and discretionary bonuses and/or long‑term

incentives to reect their contribution to signicant

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 oce 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 oce 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 conicts 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 2½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.

Directors’ Report continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Implementation Report

Particulars of Directors’ Remuneration (audited)

Particulars of directors’ remuneration under the Companies Act 2006 are required to be audited, are given in

Notes 5 and further referenced in the Directors’ report.

Remuneration approved for the Directors’ during the year ended 31December 2022 was:

Base

fee

US$

Bonus

US$

Long-term

incentive

US$

Total

US$

Robert Mitchell (resigned 23.4.23) 149,994 187,493 29,479 366,966

Steve Bassi 60,000 – – 60,000

John Herring 60,000 – – 60,000

Rory Heier 123,794 187,493 29,479 340,766

393,788 374,986 58,958 827,732

For the comparative period being the year to 31December 2021:

Base

salary

US$

Additional

time-based

payments

US$

Pension

contribution

US$

Total

US$

Robert Mitchell* (resigned 23.4.23) 81,000 81,000 – 162,000

Steve Bassi 60,000 – – 60,000

John Herring 60,000 – – 60,000

Rory Heier* 81,000 81,000 – 162,000

282,000 162,000 – 444,000

* Mr Heier and Mr Mitchell were contracted to provide a maximum of ten hours of their time per month to the Company. Additional hours

beyond this were charged on a time spent basis.

There were no performance measures associated with any aspect of Directors’ remuneration during the year.

Payments to past Directors (audited)

There are no payments in the year to past Directors.

Bonus and incentive plans (audited)

During the year of Mr Mitchell and Mr Heier were

awarded 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 benets 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.

Narf Industries Plc (formerly CYBA plc)

Overvi ew

Directors’ Report continued

Directors’ interests in shares

The Company has no minimum Director shareholding

requirements.

The benecial interest of the Directors in the Ordinary

Share Capital of the Company at 30June 2023 was:

Number

% age of

issued share

capital – 2022

Rory Heier

11,375,000 0.67%

Steve Bassi

502,079,484 31.69%

John Herring

26,000,000 1.53%

549,454,484 32.37%

Remuneration Committee (unaudited)

There is no separate Remuneration Committee

at present, instead all remuneration matters are

considered by the Board as a whole. It meets

when required to consider all aspects of Directors’

remuneration, share options and service contracts.

Auditor Information and Opinion

The Directors who held oce at the date of approval

of the Directors’ Report conrm 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 specic information on the

areas which resulted in a disclaimer of opinion.

This is the rst nancial reporting period for which

consolidated nancial statements, incorporating the

businesses acquired in March 2022 (see Note 8 to the

Financial Statements), are subject to International

Finance Reporting Standards (IFRS). This administrative

burden introduced by IFRS presented a signicant

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 signicant being our ability to

provide the auditors with various contracts and

underlying records related to a sensitive contractual

relationship as further discussed in the Executive

Chairman’s Statement (see the Sensitive Contract

component of his Statement).

A decision was made to accept the auditor’

disclaimers, as resolution will require more time

and extending the trading suspension of our shares

would negatively impact stakeholders.

Our team, now resourced with a new CFO, will

continue to work diligently, and resolve all matters

with our auditors to give all stakeholders the

assurances they need in our reported nancials.

Emissions

The Company is aware that it needs to measure

its operational carbon footprint in order to limit

and control its environmental impact. However,

since the Company, due to its limited activities in

the year under review, did not consume more than

40,000kWh of energy, the Company’s emissions are

not disclosed for this reason.

In the future, the Company will only measure the

impact of its direct activities, as the full impact of

the entire supply chain of its suppliers cannot be

measured practically.

Financial Instruments

The Company has exposure to credit risk, liquidity

risk and market risk. Note 21 presents information

about the Company’s exposure to these risks, along

with the Company’s objectives, processes and

policies for managing the risks.

Events after the reporting period

(seeNote 24)

There have been no material events since the

reporting date which have a material impact on an

understanding of these nancial statements.

Directors’ Indemnity Provisions

The Company has taken out Directors and Ocers

Liability Indemnity insurance.

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Going concern

The following represents key nancial metrics of

theGroup.

• At year‑end, the consolidated statement of

nancial 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 realized 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

nance within the bounds or organic cash ow and

current nancing facilities.

These above points mean the Directors have a

reasonable expectation that the Group has adequate

resources to continue in operational existence

for the foreseeable future. For this reason, the

Directors continue to adopt the going concern basis

in preparing the nancial statements. Further details

are given in Note 2.3.

Auditors

The Board appointed PKF Littlejohn LLP as auditors

of the Company on 21March 2019 and thus this

is their fourth period of appointment. They have

expressed their willingness to continue in oce and

a resolution to reappoint them will be proposed at the

Annual General Meeting.

Donations

The Company made no political donations during the

current and prior periods.

Statement of Directors’ Responsibilities

in respect of the Annual Report and the

nancial statements

The Directors are responsible for preparing this report

and the nancial statements in accordance with

applicable United Kingdom law and regulations and

those UK‑adopted international accounting standards.

Company law requires the Directors to prepare

nancial statements for each nancial period which

present fairly the nancial position of the Company

and the nancial performance and cash ows of the

Company for that period.

In preparing those nancial statements, the

Directors are required to:

• select suitable accounting policies and then apply

them consistently;

• make judgements and estimates that are

reasonable and prudent;

• present information, including accounting policies,

in a manner that provides relevant, reliable,

comparable and understandable information;

• state whether applicable UK‑adopted international

accounting standards have been followed, subject

to any material departures disclosed and explained

in the nancial statements;

• prepare the nancial statements on the going

concern basis unless it is inappropriate to presume

that the Company will continue in business; and

• provide additional disclosures when compliance

with the specic requirements in IFRSs is

insucient to enable users to understand the

impact of particular transactions, other events and

conditions on the entity’s nancial position and

nancial performance.

Narf Industries Plc (formerly CYBA plc)

Overvi ew

Directors’ Report continued

The Directors are responsible for keeping adequate

accounting records that are sucient to show and

explain the Company’s transactions and disclose

with reasonable accuracy at any time the nancial

position of the Company and enable them to ensure

that the Company nancial statements comply

with the Companies Act 2006 and Article 4 of

the IAS Regulation. They are also responsible for

safeguarding the assets of the Company and hence

for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

Under applicable law and regulations, the Directors

are also responsible for preparing a Strategic Report,

Directors’ Report, Directors’ Remuneration Report and

Corporate Governance Statement that comply with

that law and those regulations, and for ensuring that

the Annual report includes information required by the

Listing Rules of the Financial Conduct Authority.

The nancial statements are published on the

Groups’s website. The work carried out by the Auditor

does not involve consideration of the maintenance

and integrity of this website and accordingly, the

Auditor accepts no responsibility for any changes

that have occurred to the nancial statements since

they were initially presented on the website. Visitors

to the website need to be aware that legislation in

the United Kingdom covering the preparation and

dissemination of the nancial statements may differ

from legislation in their jurisdiction.

The Directors conrm that to the best of their

knowledge:

• these nancial statements, prepared in

accordance with IFRS (UK adopted IASo), give a

true and fair view of the assets, liabilities, nancial

position and prot of the Group and Company;

• this Annual report includes the fair review of the

development and performance of the business and

the position of the Group and Company together

with a description of the principal risks and

uncertainties that it faces; and

• the Annual Report and nancial statements, taken

as a whole, are fair, balanced and understandable

and provide information necessary for

shareholders to assess the Group and Company’s

performance, business and strategy.

On behalf of the Board

Rory Heier

Non-Executive Director

11July 2023

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

The Company recognises the importance

of, and is committed to, high standards of

Corporate Governance. Whilst the Company

is not formally required to comply with a

Corporate Governance Code, the Company

has looked to the requirements of the UK Code

of Corporate Governance published in July

2018 (the “Code”) and sought to apply aspects

of the Code for best practice where deemed

appropriate but does not comply with the Code

in full. The following sections explain how the

Company has applied the aspects of the Code

that it considers relevant to the Group.

Compliance with the UK Code of

Corporate Governance

The Company has a clear mandate to optimise the

allocation of limited resources to source acquisitions

and support its future plans. As such the Company

strives to maintain a balance between conservation

of limited resources and maintaining robust

corporate governance practices.

Whilst the Company has not sought to comply with

the Code in full, as noted below there are 3 provisions

it specically does not comply with:

• Section 4.24 of the Code requires that a majority

of the members of the Audit Committee must be

independent. The Audit Committee comprises of

only one Non‑Executive Director and one Executive

Director during this transition period. However, the

Directors will be looking to enhance the number of

independent Directors in due course.

• The Code requires that a smaller company should

have at least two Independent Non‑Executive

Directors. The Board currently consists of two

Executive Directors and one Non‑Executive

Director. The Non‑Executive Director is interested

in ordinary shares in the Company and cannot

therefore be considered fully independent under

the Code. However, the Non‑executive Director

is considered to be independent in character and

judgement and the Company considers that one

Non‑Executive Director is adequate given the

size and stage of development of the Company.

As above, the Company intends to strengthen the

Board in due course.

• As a consequence of the above, where provisions

of the Code require the appointment of

independent directors, for example as chairman

or as senior independent director, the Company is

not in full compliance with the Code – this applies in

relation to various provisions of the Code. including

those areas relating to ‘Remuneration’, ‘Audit, Risk

and Internal Control’ and ‘Composition, Succession

and Evaluation’. As above this is expected to

change in due course. For further details see the

UK Corporate Governance Code at www.frc.org.uk

Set our below is the Company’s corporate governance

practices:

Board of Directors

The Board is committed to maintaining appropriate

standards of corporate governance. The statement

below, together with the report on Directors’

remuneration on pages12 to 14, explains how the

Company has observed principles set out in The UK

Corporate Governance Code (the “Code”) as relevant

to the Company and contains the information

required by section 7 of the UK Listing Authority’s

Disclosure and Transparency Rules as the Company

has sought to adopt these prior to listing.

The Board currently consists of two executive

Directors and one non‑executive Director following

completion of both the listing and the subsequent

transaction. The Board met regularly throughout

the year, and since, to discuss key issues and to

monitor the overall performance of the Group.

At its current stage of development, the Board

considers all matters, such as Remuneration,

Audit and Nominations as a whole. The Directors

will actively seek to expand Board membership to

provide additional levels of corporate governance

procedures at the relevant opportunity.

Corporate Governance Report

Narf Industries Plc (formerly CYBA plc)

Corporate Governance

Audit Committee and Financial reporting

The Audit Committee comprises Rory Heier (Chair)

and John Herring (newly appointed Executive

Chairman), each of whom have recent and relevant

nancial experience. The Audit Committee meets

at least two times a year at the appropriate times

in the reporting and audit cycle. The committee

has responsibility for, amongst other things, the

monitoring of the nancial integrity of the nancial

statements of the Company and the involvement

of the Company’s auditors in that process. The

Audit Committee recognizes the weaknesses in the

nancial systems as outlined in the 31December

2022 audit report and will work with the auditors, the

Board, the Directors, and management to address

and resolve the issues contained in the 2022 audit

report; in particular, on compliance with accounting

policies and ensuring that an improved system of

internal nancial control is implemented. Note the

ultimate responsibility for reviewing and approving

the annual report and accounts and the half‑yearly

reports, remains with the Board.

The terms of reference of the Audit Committee

covers such issues as membership and the

frequency of meetings, as mentioned above,

together with requirements of any quorum for and

the right to attend meetings. The duties of the Audit

Committee covered in the terms of reference are:

nancial reporting, internal controls, internal audit,

external audit and reserving. The terms of reference

also set out the authority of the committee to carry

out its duties.

The Board seeks to present a balanced and

understandable assessment of the Company’s

position and prospects in all interim, nal and price‑

sensitive reports and information required to be

presented by statute.

External auditor

The Board plans to meet with the auditor later on

in the year to consider the internal procedures,

controls, and other matters raised by the auditor.

The Board considers auditor independence and

objectivity and the effectiveness of the audit

process. It also considers the nature and extent

of the non‑audit services supplied by the auditor

reviewing the ratio of audit to non‑audit fees

and ensures that an appropriate relationship is

maintained between the Company and its external

auditor. During the year PKF provided reporting

accountant services in relation to the audit of the

Historical Financial Information as part of the RTO

transaction to acquire Narf US, as well as providing

an informal review of the 30June 2022 interim

consolidated nancial statements. Details of the

total fees paid to the auditors are set out in Note 4 to

the accounts.

The Company has a policy of controlling the provision

of non‑audit services by the external auditor in

order that their objectivity and independence are

safeguarded. As part of the decision to recommend

the appointment of the external auditor, the

Board takes into account the tenure of the auditor

in addition to the results of its review of the

effectiveness of the external auditor and considers

whether there should be a full tender process.

There are no contractual obligations restricting the

Board’s choice of external auditor. PKF Littlejohn

LLP have been in their role as auditors for four years,

providing standard external auditing services for the

periods ended 31March 2020, 31December 2020,

31December 2021 and 31December 2022.

Remuneration committee

The Remuneration Committee consists of Rory

Heier (Chair) and John Herring. The Remuneration

Committee meets at least twice a year. It has

responsibility for the determination of specic

remuneration packages for each of the executive

directors and any senior executives or managers

of the Group, including pension rights and any

compensation payments, and recommending and

monitoring the level and structure of remuneration for

senior management, and the implementation of share

option, or other performance‑related, schemes.

Nominations committee

The Nomination Committee consists of John

Herring (Chair), Steve Bassi and Rory Heier. The

Committee is responsible for considering and

making recommendations to the board in respect of

appointments to the Board, the Board committees

and the chairmanship of the Board committees. It

is also responsible for keeping the structure, size

and composition of the Board under regular review,

and for making recommendations to the Board with

regard to any changes necessary. The Nomination

Committee also considers succession planning,

taking into account the skills and expertise that will

be needed on the Board in the future.

Corporate Governance Report continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Internal nancial control

Financial controls are being bolstered so as to

provide safeguards against unauthorised use

or disposition of the assets, to maintain proper

accounting records and to provide reliable nancial

information for internal use. Key nancial controls to

be considered include:

• the maintenance of proper records;

• a schedule of matters reserved for the approval of

the Board;

• evaluation, approval procedures and risk

assessment for acquisitions; and

• close involvement of the Directors in the day‑to‑

day operational matters of the Group.

The Directors consider the size of the Group and

the close involvement of Directors in the day‑to‑day

operations makes the maintenance of an internal

audit function unnecessary. The Directors will

continue to monitor this situation.

Shareholder Communications

The Company uses its corporate website

(www.narfgroup.com) to ensure that the latest

announcements, press releases and published

nancial information are available to all shareholders

and other interested parties.

The AGM is used to communicate with both

institutional shareholders and private investors

and all shareholders are encouraged to participate.

Separate resolutions are proposed on each issue

so that they can be given proper consideration and

there is a resolution to approve the Annual Report

and Accounts.

The Company counts all proxy votes and will indicate

the level of proxies lodged on each resolution after it

has been dealt with by a show of hands.

Narf Industries Plc (formerly CYBA plc)

Corporate Governance

Disclaimer of opinion

We were engaged to audit the nancial statements

of Narf Industries Plc (the ‘parent company’) and

its subsidiaries (“the group”) for the year ended

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 Cashows, the Parent

Company Statement of Cashows, the Consolidated

Statement of Changes in Equity, the Parent Company

Statement of Changes in Equity and notes to the

nancial statements, including signicant accounting

policies. The nancial reporting framework that has

been applied in their preparation is applicable law and

UK‑adopted international accounting standards and

as regards the parent company nancial statements,

as applied in accordance with the provisions of the

Companies Act 2006.

We do not express an opinion on the accompanying

nancial statements of the group and the parent

company. Because of the signicance of the matters

described in the Basis for disclaimer of opinion section

of our report, we have not been able to obtain sucient

appropriate audit evidence to provide a basis for an

audit opinion on these nancial statements.

Basis for disclaimer of opinion

We identied 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 sucient and appropriate

audit evidence in response to our extended testing

requests. For this reason, we are unable to form

an opinion on the reasonableness of the balances

presented in the nancial statements and the related

note disclosures.

Management acquired two subsidiaries in one

transaction during the year and in relation to

the acquisition, we were unable to validate the

opening balances. The nancials of the acquired

subsidiaries for the period ending 31 December 2021

were unaudited. Our audit opinion on the nancial

statements for the year ended 31December 2022 is

also disclaimed due to the inability to gain sucient

and appropriate audit evidence in respect of the

opening balances of thesesubsidiaries.

Other matter

The nancial 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

nancial statements are unaudited.

Our application of materiality

The scope of our audit was inuenced by our

application of materiality. The quantitative and

qualitative thresholds for materiality determine

the scope of our audit and the nature, timing, and

extent of our audit procedures. Materiality for

the consolidated nancial statements was set as

$76,000 based upon loss before tax. Materiality

has been based upon loss before tax due to

the value and signicance of revenue, cost of

sales and administrative expenses in the year

Performance materiality and the triviality threshold

for the consolidated nancial statements was

set at $53,200 and $3,800 respectively due to our

accumulated knowledge of the group, the number of

signicant risks identied and their assessed risk.

Materiality for the parent company nancial

statements as a whole was set as $66,000 (2021:

£99,000). This was calculated based upon the

parent company’s share of the group’s loss before

tax (2021: net assets) due the focus in the parent

company on reducing costs and funding the

subsidiaries operations. Performance materiality

and triviality threshold for the parent company was

set at $46,200 (2021: £69,300) and $3,300 (2021:

£4,950) respectively due to the assessed risk and our

accumulated knowledge of the parent company.

We also agreed to report to the Audit Committee

any other differences below that triviality

threshold that we believe warranted reporting on

qualitativegrounds.

Our approach to the audit

In designing our audit, we determined materiality

and assessed the risks of material misstatement

in the nancial statements. In particular we looked

at areas involving signicant accounting estimates

and judgements by the directors and considered

Independent Auditor’s Report

To the Members of Narf Industries Plc

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

future events that are inherently uncertain, such as

revenue recognition and the recoverable value of

the investment in subsidiaries and intangible assets.

We also addressed the risk of management override

of internal controls, including among other matters

consideration of whether there was evidence of bias

that represented a risk of material misstatement due

to fraud.

A full scope audit was performed on the complete

nancial information of the three components of

the group. The three components are based on

geographical location being the United Kingdom, the

United States of America and Puerto Rico.

We audited the ultimate parent company, situated

in the United Kingdom, and the two other reporting

components. All audit work was conducted in the

United Kingdom with regular interaction with the

entity during all stage of the audit. However, as

referenced in the Basis for disclaimer of opinion

section of our audit report, we were unable to

gain sucient and appropriate audit evidence

and therefore are unable to give an opinion on the

nancial statements.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most signicance in our audit

of the nancial statements of the current period and include the most signicant assessed risks of material

misstatement (whether or not due to fraud) we identied, including those which had the greatest effect on:

the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement

team. These matters were addressed in the context of our audit of the nancial statements as a whole, and

in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the

matter described in the Basis for disclaimer of opinion section we have determined the matters described

below to be the key audit matters to be communicated in our report.

Key Audit Matter How our scope addressed this matter

Revenue recognition

The group recognised revenues

totaling $2,547k (Note 3) for the year

ended 31December 2022. The revenue

recognised in the year within the group

relates to contracts entered into with

a small number of customers. These

contracts include a signicant number

of performance obligations and are of

signicant value. As such, there is a

risk that the revenue recognised in the

year in respect of these contracts may

be materially incomplete or overstated

as it has not been recognised correctly

in accordance with IFRS 15 and the

performance obligations met during

the year. Furthermore, revenue may be

materially misstated due to cut‑off errors

as signicant judgements may be required

to be made where milestones have not

been fully met by the year‑end.

Our work in this area included but was not limited to:

• Obtaining an understanding of the information system and

related controls relevant to each material income stream;

• Evaluating the appropriateness of the information system and

the effectiveness of the design and implementation of the

related controls;

• Obtaining each contract that was active in the year, reviewing

management’s revenue recognition accounting policy and

assessing whether this is in accordance with IFRS 15;

• For each contract obtained, reviewing the contract, and

ascertaining whether the performance obligations were met in

the year; and

• Ensuring that the revenue recognised in the year was

accurate and complete including whether revenue had been

appropriately deferred and/or accrued.

Sucient and appropriate audit evidence could not be obtained

in respect of the revenue and therefore, as noted in the Basis for

disclaimer of opinion section, we are unable form an opinion on

the reasonableness of the revenue balances presented in the

nancial statements and supporting disclosure notes.

Narf Industries Plc (formerly CYBA plc)

Corporate Governance

Independent Auditor’s Report continued

Key Audit Matter How our scope addressed this matter

Business combinations accounting

treatment and disclosure

During the year, the parent company

acquired two entities, Narf Industries

LLC and Narf Industries PR LLC, through

the issuance of shares as well as cash

consideration. The directors have

assessed these acquisitions to fall

outside the scope of IFRS 3 as they do not

believe that Narf Industries Plc meets the

denition of a business per IFRS 3 (Notes

2.16 and 8).

The treatment and disclosure of business

combinations during the year are a

signicant risk area due to the complexity

of the accounting for such acquisitions,

the judgement required to be made by

management in assessing the accounting

treatment thereon as the acquisitions

falls outside the scope of IFRS 3 and the

value of the consideration paid for the two

subsidiaries.

Our work in this area included but was not limited:

• Obtaining the agreements in respect of the business

combination transaction and ascertaining the key terms of the

transaction;

• Assessing the accounting treatment of the acquisitions and

management’s justications;

• Obtaining management’s acquisition workings and ensuring

that they have correctly valued the investment in the

subsidiaries, the net assets of the parent company at

acquisition, the reverse takeover share‑based payment charge

and the reverse acquisition reserve;

• Ensuring that management have correctly consolidated the

subsidiaries’ results for 2022 and that the comparatives in the

group primary statements represent the subsidiaries combined

results and nancial position; and

• Ensuring disclosures in the nancial statements are in line with

UK‑adopted IAS.

Carrying value of investment in

subsidiaries

As noted above, during the year the parent

company acquired two entities during

the period and the carrying value of the

investments in these subsidiaries as at

31December 2022 was $25,600k (Note 12).

Given the value of the balances and the

group is still in its growth phase, there is

a risk that the investment in subsidiaries

may not be fully recoverable. Furthermore,

management are required to make

signicant estimates and judgements

(Note 2.16) when assessing the recoverable

value of the investment in subsidiaries and

whether it is impaired.

Our work in this area included but was not limited:

• Obtaining and reviewing management’s impairment

assessment in respect of the investment in subsidiaries and

supporting calculations; and

• Ascertaining and challenging management’s key assumptions

and inputs.

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Key Audit Matter How our scope addressed this matter

Carrying value of capitalised

development costs

As at 31December 2022, the carrying

value of capitalised development costs at

group level totalled $2,697k (Note 9).

Given the value of the balance, the

estimation required when conducting

impairment reviews and the judgement

required when capitalising costs (Note

2.16), there is a risk that capitalised

development costs may be materially

misstated as costs have been

inappropriately capitalised and/or the

asset is not fully recoverable.

Our work in this area included but was not limited:

• Obtaining the directors’ assessment of impairment and

reviewing and challenging the key estimates and judgements

used therein; and

• Reviewing disclosures in the nancial statements to ensure

that they are in line with IAS 38.

Sucient and appropriate audit evidence could not be obtained

in respect of the carrying value of intangible assets and

therefore, as noted in the Basis for disclaimer of opinion section,

we were unable to form an opinion on the reasonableness of

the capitalised development costs balances presented in the

nancial statements and supporting disclosure notes.

Other information

The other information comprises the information

included in the strategic and directors’ report, other

than the nancial statements and our auditor’s

report thereon. The directors are responsible for

the other information contained within the strategic

and directors’ reports. Our opinion on the group

and parent company nancial statements does

not cover the other information and, except to the

extent otherwise explicitly stated in our report, we

do not express any form of assurance conclusion

thereon. Our responsibility is to read the other

information and, in doing so, consider whether the

other information is materially inconsistent with the

nancial statements, or our knowledge obtained in

the course of the audit, or otherwise appears to be

materially misstated. If we identify such material

inconsistencies or apparent material misstatements,

we are required to determine whether this gives

rise to a material misstatement in the nancial

statements themselves. If, based on the work we

have performed, we conclude that there is a material

misstatement of this other information, we are

required to report that fact.

As described in the Basis for disclaimer of opinion

section of our report, we have concluded that a material

misstatement of the other information exists.

Opinions on other matters prescribed

by the Companies Act 2006

In our opinion the part of the directors’ remuneration

report to be audited has been properly prepared in

accordance with the Companies Act 2006.

Because of the signicance of the matters described in

the Basis for disclaimer of opinion section of our report,

we have been unable to form an opinion, whether based

on the work undertaken in the course of the audit:

• the information given in the strategic report and

the directors’ report for the nancial year for which

the nancial statements are prepared is consistent

with the nancial statements; and

• the strategic report and the directors’ report have

been prepared in accordance with applicable legal

requirements.

Matters on which we are required to

report by exception

Notwithstanding our disclaimer of an opinion on the

nancial statements, in the light of the knowledge

and understanding of the group and parent company

and its environment obtained in the course of the

audit performed subject to the pervasive limitation

described above, we have not identied material

misstatements in the strategic report or the

directors’ report.

Narf Industries Plc (formerly CYBA plc)

Corporate Governance

Independent Auditor’s Report continued

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 nancial statements and the

part of the directors’ remuneration report to be

audited are not in agreement with the accounting

records and returns; or

• certain disclosures of directors’ remuneration

specied by law are not made.

Responsibilities of directors

As explained more fully in the Statement of Directors

Responsibilities, the directors are responsible for

the preparation of the Group and Parent Company

nancial statements and for being satised that they

give a true and fair view, and for such internal control

as the directors determine is necessary to enable the

preparation of nancial statements that are free from

material misstatement, whether due to fraud orerror.

In preparing the Group and Parent Company

nancial statements, the directors are responsible

for assessing the Group’s and Parent Company’s

ability to continue as a going concern, disclosing,

as applicable, matters related to going concern and

using the going concern basis of accounting unless

the directors either intend to liquidate the group and

parent company or to cease operations, or have no

realistic alternative but to do so.

Extent to which the audit was

considered capable of detecting

irregularities, including fraud

Irregularities, including fraud, are instances of

non‑compliance with laws and regulations. We

design procedures in line with our responsibilities,

outlined above, to detect material misstatements in

respect of irregularities, including fraud. The extent

to which our procedures are capable of detecting

irregularities, including fraud is detailed below:

• We obtained an understanding of the group and

parent company as well as the sector in which they

operate to identify laws and` regulations that could

reasonably be expected to have a direct effect

on the nancial statements. We obtained our

understanding in this regard through discussions

with management, industry research and our

cumulative audit knowledge and experience of

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:

– Discussions with management regarding

compliance with laws and regulations by the

group and parent company;

– Review of board minutes; and

– Review of regulatory news announcements made

throughout and post year‑end.

• We also identied the risks of material misstatement

of the nancial statements due to fraud. We

considered, in addition to the non‑rebuttable

presumption of a risk of fraud arising from

management override of controls, that there was

potential for management bias in relation to revenue

recognition, the recoverable values assigned to the

investment in subsidiaries and the intangible assets.

We sought to address these risks by challenging the

assumptions and judgements made by management

when auditing these signicant accounting estimates

but were not able to conclude thereof (see the Key

audit matters section of our report).

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

• As in all of our audits, we addressed the risk

of fraud arising from management override of

controls by performing audit procedures which

included, but were not limited to the testing of

journals; reviewing accounting estimates for

evidence of bias; and evaluating the business

rationale of any signicant transactions that are

unusual or outside the normal course of business.

Because of the inherent limitations of an audit, there

is a risk that we will not detect all irregularities,

including those leading to a material misstatement

in the nancial statements or non‑compliance

with regulation. This risk increases the more that

compliance with a law or regulation is removed from

the events and transactions reected in the nancial

statements, as we will be less likely to become aware

of instances of non‑compliance. The risk is also

greater regarding irregularities occurring due to

fraud rather than error, as fraud involves intentional

concealment, forgery, collusion, omission, or

misrepresentation.

Auditor’s responsibilities for the audit

of the nancial statements

Our responsibility is to conduct an audit of the

group’s and parent company’s nancial statements

in accordance with ISAs (UK) and to issue an

auditor’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 sucient appropriate

audit evidence to provide a basis for an audit opinion

on these nancial statements.

We are independent of the group and parent

company in accordance with the ethical

requirements that are relevant to our audit of

the nancial statements in the UK, including

the FRC’s Ethical Standard as applied to listed

public interest entities, and we have fullled 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 nancial statements for

the period ending 31March 2020 and subsequent

nancial 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)

For and on behalf of PKF Littlejohn LLP

Registered Auditor

15 Westferry Circus

Canary Wharf

London E14 4HD

Narf Industries Plc (formerly CYBA plc)

Financial Statements

Consolidated Statement of Comprehensive Income

For the year to 31 December 2022

Notes

Year ended

31December

2022

US$

(Unaudited)

Year ended

31December

2021

US$

Contract Revenue 3 2,547,125 1,939,516

Cost of Sales (1,828,887) (678,831)

Gross prot 718,238 1,260,685

Administrative expenses (3,303,583) ( 2,133,711)

Loss before depreciation and software license amortisation,

share based payment expenses, interest and taxes 4 (2,585,345) ( 873,026)

Depreciation and software license amortisation (329,999) ( 47,379)

Other share based payment expense 18 ( 147,580) –

Operating loss (3,062,924) ( 920,375)

RTO share based payment expense 8 ( 15,355,123) –

Interest receivable and other nance income 3,376 150,593

Finance costs (3,197) (767)

Loss on ordinary activities before taxation (18,417,868) ( 770,579)

Tax on loss on ordinary activities 6 (7,839) (72,090)

Loss and total comprehensive income for the period

attributable to the owners of the company (18,425,707) ( 842,669)

Earnings per share (basic and diluted) attributable to the

equity holders (cents) 7 (1.3) (0.1)

The comparative information is presented for Narf US, the accounting acquirers (see note 2.2)

The above results relate entirely to continuing activities.

The accompanying notes on pages33 to 58 form part of these nancial statements.

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Consolidated Statement of Financial Position

For the year to 31 December 2022

Notes

As at

31December

2022

US$

(Unaudited)

As at

31December

2021

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 decit (16,913,279) –

Members’ equity – 821,527

Total Equity 1,802,609 821,527

* – The comparative numbers for 2021 are that of the Narf US subsidiaries and as they are LLCs do not issue shares.

The comparative information is presented for the two subsidiaries Narf Industries LLC and Narf Industries PR

LLC (together “Narf US”), the accounting acquirers (see note 2.2).

The accompanying notes on pages33 to 58 form part of these nancial statements.

These nancial statements were approved by the Board of Directors on 11 July 2023 and were signed on its

behalf by:

Rory Heier

Non-Executive Director

Company number: 11701224

Narf Industries Plc (formerly CYBA plc)

Financial Statements

Notes

As at

31December

2022

US$

As at

31December

2021

(Restated)*

US$

As at

31December

2020

(Restated)*

US$

Fixed Assets

Intangible assets 10 1,620,663 – –

Investment in subsidiary undertakings 12 25,600,000 – –

27,220,663 – –

Current Assets

Trade and other receivables 13 67,364 2,007,220 222,752

Cash and cash equivalents 14 210,282 274,982 1,703,330

277,646 2,282,202 1,926,082

Total Assets 27,498,309 2,282,202 1,926,082

Current Liabilities

Trade and other payables 15 313,829 311,078 493,650

Total Liabilities 313,829 311,078 493,650

Net Assets 27,184,480 1,971,124 1,432,432

Equity

Share capital 17 204,012 84,293 70,796

Share premium 17 35,074,061 7,447,611 4,871,168

Share based payment reserve 18 229,185 32,578 32,578

Foreign exchange reserve (43,411) (17,767) –

Retained decit (8,279,367) (5,575,591) (3,542,110)

Total Equity 27,184,480 1,971,124 1,432,432

* – The 2021 and 2020 comparative gures have been restated as the presentational currency has been changed from GBP £ to USD $.

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the

Parent Company prot and loss account. The Parent Company loss for the year was $2,714,845 (2021: $1,963,034).

The accompanying notes on pages33 to 58 form part of these nancial statements.

These nancial statements were approved by the Board of Directors on 11 July 2023 and were signed on its

behalf by:

Rory Heier

Non-Executive Director

Company number: 11701224

Parent Company Statement of Financial Position

For the year to 31 December 2022

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Notes

Year ended

31December

2022

US$

(unaudited)

Year ended

31December

2021

US$

Cash ow from operating activities

Loss on ordinary activities before taxation (18,417,868 ) (770,579)

Adjustments for:

Depreciation and software license amortisation 329,999 47,379

Software development amortisation 226,938 269,658

RTO and other share based payment expenses 15,502,703 –

(Increase)/decrease in trade and other receivables (701,723) 105,730

Increase in trade and other payables 67,140 (76,948)

Net cash outow from operating activities (2,992,811) (424,760)

Cashow from investing activities

Net amounts paid to former members to acquire control (3,615,433) –

Licence fee expenditure (500,000) –

Net cashow from investing activities (4,115,433) –

Cashow from nancing activities

Proceeds on the issue of shares 7,650,881 –

Costs related to share issues (1,145,814) –

Loan from former member 702,000 866,891

Loan repayment (20,292) (20,003)

Drawings by former members (75,000) (360,000)

Net interest received/(paid) 180 (766)

Net cash inow from nancing activities 7,111,955 486,122

Taxation paid (7,839) (72,090)

Net decrease in cash and cash equivalents (4,128) (10,728)

Cash and cash equivalents at the beginning of the period 446,879 457,607

Cash and cash equivalents at the end of the period 442,751 446,879

Supplemental information non-cash transactions:

Shares issued to former members upon acquisition

in lieu of cash consideration 18,048,690 –

The comparative information is presented for Narf US, the accounting acquirers (see note 2.2)

The accompanying notes on pages33 to 58 form part of these nancial statements.

Consolidated Statement of Cash Flows

For the year to 31 December 2022

Narf Industries Plc (formerly CYBA plc)

Financial Statements

Notes

Year ended

31December

2022

US$

Year ended

31December

2021

(Restated)

US$*

Cash ow from operating activities

Loss for the period (2,714,845) (1,963,034)

Adjustments for:

Amortisation of intangible assets 296,470 –

(Increase)/decrease in trade and other receivables (63,147) 87,238

Increase/(decrease) in trade and other payables 37,330 (182,571)

Share based payments 128,471 –

Net cash outow from operating activities (2,315,721) (2,058,367)

Cash ow from investing activities

Decrease/(Increase) in prepaid consideration 9 2,000,000 (2,000,000)

Cash invested to acquire license (500,000) –

Cash amounts paid to acquire subsidiary undertaking (5,754,046) –

Net cash outow from investing activities (4,254,046) (2,000,000)

Cashow from nancing activities

Proceeds on the issue of shares 7,650,881 2,888,777

Costs related to share issues (1,145,814) (258,758)

Net cash inow from nancing activities 6,505,067 2,630,019

Net decrease in cash and cash equivalents (64,700) (1,428,348)

Cash and cash equivalents at the beginning of the period 274,982 1,703,330

Cash and cash equivalents at the end of the period 14 210,282 274,982

* – The 2021 comparative gures have been restated as the presentational currency has been changed from GBP £ to USD $.

The accompanying notes on pages33 to 58 form part of these nancial statements.

Parent Company Statement of Cash Flows

For the year to 31 December 2022

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Capital

US$

Premium

US$

FX reserve

US$

based

payment

reserve

US$

Reverse

Acquisition

reserve

US$

Retained

Decit

US$

Members’

Equity

US$

Total

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)

Reclassication 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 on pages33 to 58 form part of these nancial statements.

Consolidated Statement of Changes in Equity

For the year to 31 December 2022

Narf Industries Plc (formerly CYBA plc)

Financial Statements

Restated in US$

Capital

US$

Premium

US$

Share based

payment

reserve

US$

FX reserve

US$

Retained

Decit

US$

Total

US$

Balance at April 2020 41,811 2,371,532 32,578 – (1,920,657) 525,264

Total comprehensive loss

for the period – – – – (1,621,453) (1,621,453)

Shares issued during the period 28,985 2,786,966 – – – 2,815,951

Costs related to share issues – (491,136) – – – (491,136)

Balance at 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 decit – Cumulative net gains and losses recognised in the Statement of Comprehensive Income

Members’ equity – the net assets belonging to the former members.

The accompanying notes on pages33 to 58 form part of these nancial statements.

Parent Company Statement of Changes in Equity

For the year to 31 December 2022

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Notes to the Financial Statements

For the year to 31 December 2022

1. General Information

The principal activity of Narf Industries Plc (the “Company”) and its subsidiaries (the “Group’’) is to develop

and market software aimed at enhancing the cybersecurity measures of its clients. The subsidiaries consist

of Narf Industries LLC, a California limited liability company and Narf Industries PR, LLC, a Puerto Rican

limited liability company (“Narf US” or the “Operating Group”). The Company is the parent and sole member of

both subsidiaries.

The Company is domiciled in the United Kingdom and incorporated and registered in England and Wales 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.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

2. Accounting Policies continued

They are deconsolidated from the date that control ceases. Please refer to note 8 for information on the

consolidation of Narf Industries plc and the application of the reverse acquisition accounting principles.

The Group applies the acquisition method to account for business combinations that fall within the scope of

IFRS 3. For commentary on how the acquisitions of Narf Industries US LLC and Narf Industries PR LLC, which

falls outside the scope of IFRS 3, was accounted for, see note 8 below.

Acquisition related costs are expensed as incurred.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability

is recognised either in profit or loss or as a charge to other comprehensive income. Contingent consideration

that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

On 15 March 2022, the Company acquired Narf Industries US LLC and Narf Industries PR LLC via a reverse

takeover which resulted in the Company becoming the ultimate holding company of the Group. The

transactions were accounted for as reverse acquisitions since they did not meet the definition of a business

combination under IFRS 3. In accordance with IFRS 2, a share based payment expense equal to the deemed

cost of the acquisition less the fair value of the net assets of the Company at acquisition was recognised. The

comparatives within the consolidated statement of comprehensive income, the consolidated statement of

financial position, the consolidated cashflow statement and the consolidated statement of changes in equity

represent the combined numbers of the legal subsidiaries and accounting acquirers, Narf Industries US LLC

and Narf Industries PR LLC. In the consolidated statement of financial position, the share capital and premium

as at 31 December 2022 is that of Narf Industries Plc with the reverse acquisition reserve representing the

difference between the deemed cost of the acquisition and the net assets of Narf Industries plc at 15 March

2022. The consolidated statement of comprehensive income for 2021 represents the results of Narf US and

the results of the Narf US subsidiaries and the results of the Company for the period from acquisition date

(15 March 2022) to the year-end. For more details of the key terms of the reverse takeover and a breakdown of

what the reverse acquisition reserve as at 31 December 2022 comprises of, see note 8.

2.3 Going concern

The financial statements have been prepared on a going concern basis, which assumes that the Group

will continue in operational existence for the foreseeable future. In making this determination, the Group

considered (in part):

• the Group’s $10.4 million backlog at 31 December, 2022 (representing contracts in progress at 31 December,

2022, see Note 3),

• the timing of near-term and future backlog receipts based on contract payment terms,

• the timing of receipt of the Group’s Accounts Receivable at 31 December, 2022 of $690,000, see Notes 3

and 13,

• $680,000 available on a $2 million credit facility with an officer and shareholder, see Notes 16 and 23,

• future Group expense projections, including anticipated growth of the Group’s operations along with

anticipated reductions in Company operating expenses,

• the sales pipeline, and

• the availability of a cumulative net operating loss carryforward of $5.9 million at 31 December, 2022, see

Note 6.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

2. Accounting Policies continued

The Group is confident then that based on current cash position and the cash surplus to be generated from

the operations over the foreseeable future, along with the $680,000 available under the credit facility, they will

have sufficient liquid resources to meet its current and future liabilities as they fall due and that the Group is a

going concern.

2.4 Foreign currency translation

The financial information is presented in US Dollars which is the Group’s presentational currency as

substantially all of the Group’s operational activities are undertaken in US Dollars. The Company’s functional

currency is Sterling and the prior year Parent Company numbers have been restated from Sterling to US

Dollars. Sterling amounts recorded in the accounting records of the Company are converted using the year end

foreign exchange rate for the year end balances and the average foreign exchange rate for movements during

the year.

Transactions in currencies other than the functional currency are recognised at the rates of exchange on the

dates of the transactions. At each balance sheet date, monetary assets and liabilities are retranslated at the

rates prevailing at the balance sheet date with differences recognised in the Statement of comprehensive

income in the period in which they arise.

2.5 Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and current and deposit balances at banks.

2.6 Intangible assets

Intangible assets comprise non-physical assets comprising amounts spent on developing software which

facilitates the Group generating future sales along with the cost of acquiring the licensing rights in relation to

the commercialisation of TIRG that can be determined with reasonable certainty. Royalty payments due to the

licensor upon future sales cannot be determined with any certainty and accordingly has not been included in cost.

Regarding software development costs, this intangible represent amounts capitalized related to SaaS

products available for subscription. In accordance with IAS 38, the Company expenses research and

development costs up until the SaaS product enters into the application development stage at which time

costs are capitalized through the point the SaaS product is ready for release at which point amortization

begins. The application development stage includes:

(a) the design of the development path, including the configuration and interfaces of the software,

(b) coding,

(d) testing, including parallel processing.

Subsequent costs for data conversion, training, enhancements and bug fixes are expensed as incurred.

Intangible fixed assets are being amortised on the following basis:

Software development costs	17.5% using the reducing balance basis (indefinite life)
License	Over 5 years straight-line (finite life)

Narf Industries Plc (formerly CYBA plc)

Financial Statements

2. Accounting Policies continued

The useful life of the license is based on the term of that license agreement, whilst the amortisation method

for computer software is intended to reflect the diminishing value of that software over time as alternative

solutions are developed by the Group or third parties.

All intangible assets have been assessed by management for impairment. Management consider the assets

for impairment by considering if any impairment indicators, such as those per IAS 38, are met and that if any

are met, they assess the recoverable value of the asset, being the higher of the Fair value less costs to sell

and Value in use, and then compare this to the carrying value of the asset. No impairment provision has been

considered necessary.

2.7 Tangible xed assets

Tangible assets comprise physical assets such as cars, office furniture and leasehold improvements which will

benefit the Group over their useful life. Tangible fixed assets are being depreciated on a straight-line basis over

their estimate useful lives as follows:

Cars	4 years
Office furniture	4 years
Leasehold improvements	Life of the lease

2.8 Trade and other receivables

Trade receivables are amounts due from customers for goods or services rendered in the ordinary course

of business. Trade receivables are initially recognised at the amount of consideration that is unconditional,

i.e. fair value and subsequently measured at amortised cost using the effective interest method, less loss

allowance. Prepayments and other receivables are stated at their nominal values.

Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as

their fair value.

2.9 Trade and other payables

Trade payables are recognised initially at their fair value and subsequently measured at amortised cost.

2.10 Financial instruments

Initial recognition

A financial asset or financial liability is recognised in the statement of financial position of the Company when it

arises or when the Company becomes part of the contractual terms of the financial instrument.

Classi cation

Financial assets at amortised cost

The Company measures financial assets at amortised cost if both of the following conditions are met

• the asset is held within a business model whose objective is to collect contractual cash flows; and

• the contractual terms of the financial asset generating cash flows at specified dates only pertain to capital

and interest payments on the balance of the initial capital.

Financial assets which are measured at amortised cost, are measured using the Effective Interest Rate

Method (EIR) and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is

derecognised, modified or impaired.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

2. Accounting Policies continued

Financial liabilities at amortised cost

Financial liabilities measured at amortised cost using the effective interest rate method include current

borrowings and trade and other payables that are short term in nature. Financial liabilities are derecognised if

the Company’s obligations specified in the contract expire or are discharged or cancelled.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs

that are an integral part of the effective interest rate (“EIR”). The EIR amortisation is included as finance costs

in profit or loss. Trade payables other payables are non-interest bearing and are stated at amortised cost using

the effective interest method.

Derecognition

A financial asset is derecognised when:

• the rights to receive cash flows from the asset have expired, or

• the Company has transferred its rights to receive cash flows from the asset or has undertaken the

commitment to fully pay the cash flows received without significant delay to a third party under an

arrangement and has either (a) transferred substantially all the risks and the assets of the asset or (b) has

neither transferred nor held substantially all the risks and estimates of the asset but has transferred the

control of the asset.

Impairment

The Company recognises a provision for impairment for expected credit losses regarding all financial assets.

Expected credit losses are based on the balance between all the payable contractual cash flows and all

discounted cash flows that the Company expects to receive. Regarding trade receivables, the Company applies

the IFRS 9 simplified approach in order to calculate expected credit losses. Therefore, at every reporting date,

provision for losses regarding a financial instrument is measured at an amount equal to the expected credit

losses over its lifetime without monitoring changes in credit risk. To measure expected credit losses, trade

receivables and contract assets have been grouped based on shared risk characteristics.

2.11 Equity

Share capital is determined using the nominal value of shares that have been issued.

The Share premium account includes any premiums received on the initial issuing of the share capital. Any

transaction costs associated with the issuing of shares are deducted from the Share premium account, net of

any related income tax benefits.

Equity-settled share-based payments are credited to a warrant reserve, which is referred to as “Share based

payments reserve” within the Consolidated statement of financial position and the Parent statement of

financial position as a component of equity until related options or warrants are exercised or lapse.

The Warrant reserve includes share warrants issued to shareholders in connection with share capital issues

that are measured at fair value at the date of issue and treated as a separate component of equity.

The Foreign exchange reserve includes all exchange differences arising from translating other currencies into

the functional currency. Foreign exchange gains and losses resulting from the settlement of such transactions,

and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end

exchange rates are generally recognised in profit or loss. All foreign exchange gains and losses are presented

in the statement of profit or loss on a net basis, within ‘other gains/(losses)’.

Members equity represents the combined interests of each member of Narf US and Narf PR prior to the

RTO acquisition.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

2. Accounting Policies continued

The Reverse acquisition reserve relates to the costs associated with the acquisition of Narf Industries Plc. A

reverse acquisition occurs if the entity that issues securities (the legal acquirer) is identified as the acquiree

for accounting purposes and the entity whose equity interests are acquired (legal acquiree) is the acquirer for

accounting purposes.

The reverse acquisition in the year did not constitute a business combination and was accounted for in

accordance with IFRS 2 “Share-based Payments” and associated IFRIC guidance. Although the reverse

acquisition is not a business combination, the Company has become a legal parent and is required to

apply IFRS 10 and prepare consolidated financial statements. The Directors have prepared these financial

statements using the reverse acquisition methodology, but with the result that rather than recognising

goodwill, the difference between the equity value given up by Narf US’s former owners and the share of

the fair value of the net assets gained by these former owners, is charged to the consolidated statement of

comprehensive income as a share-based payment on reverse acquisition.

Retained earnings includes all current and prior period results as disclosed in the income statement.

2.12 Foreign currency

For the purposes of the of the consolidated financial statements, the results and financial position of each

Group company are expressed in US Dollars (“$”), which is the functional currency of all of the operating entities

in the Group, excluding the Company, and the presentation currency for the consolidated financial statements.

Exchange differences are recognised in profit or loss in the period in which they arise.

2.13 Earnings per share

Basic earnings per share is calculated by dividing:

The loss attributable to owners of the Company, excluding any costs of servicing equity other than ordinary

shares.

By weighting the average number of ordinary shares outstanding during the financial period.

2.14 Share-based payments

The Company has issued options to one of the Directors, a former director and warrants to one of the initial

investors and to a major shareholder.

Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based

vesting conditions) at date of grant. The fair value so determined is expensed on a straight-line basis over the

vesting period, based on the Company’s estimate of the number of shares that will eventually vest and adjusted

for the effect of non-market based vesting conditions.

Fair value is measured using the Black Scholes pricing model. The key assumptions used in the model have

been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise

restrictions and behavioural considerations.

As detailed in note 8 the difference between the fair value of the net assets of the Company acquired on the

reverse take over and the market value of the shares in issue on that date has been treated as a share based

payment representing the cost of Narf US obtaining a listing.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

2. Accounting Policies continued

2.15 Taxation

The Company is subject to taxes in the United Kingdom tax jurisdiction. Substantially all revenue related

operations are conducted by Narf USA and Narf PR. Narf USA is a limited liability company taxed as a

partnership for the US federal tax jurisdiction. As partnership, Narf USA is not subject to US federal income tax

and the federal tax effect of Narf USA’s activities accrue to the Company, the sole member. Narf USA is also

subject to a nominal California franchise tax. Narf PR is subject to the Government of the Commonwealth of

Puerto income tax rate of 4%. Differences between Narf PR’s taxable income per IFRS and the basis used for

the Government of the Commonwealth of Puerto Rico are not material and, accordingly, no deferred tax assets

or liabilities related to Puerto Rico are reflected in the accompanying consolidated financial statements.

Taxable losses of the Company from its activities in the United Kingdom and that inure to the Company from

Narf USA as its sole partner differ from losses for the Company as reported in the accompanying consolidated

income statement because it excludes items of income and expense that are taxable or deductible in other

years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax

is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the

accompanying parent company financial statements and the corresponding tax bases used in the computation

of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are

generally recognised for all taxable temporary differences and deferred tax assets are recognised to the

extent that it is probable that taxable profits will be available against which deductible temporary differences

can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from initial

recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and

liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in

subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the

reversal of the temporary difference and it is probable that the temporary difference will not reverse in the

foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent

that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to

be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or

the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged

or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax

assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority

and the Company intends to settle its current tax assets and liabilities on a net basis.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

2. Accounting Policies continued

2.16 Critical accounting judgements and key sources of estimation uncertainty

In the process of applying the entity’s accounting policies, management makes estimates and assumptions

that have an effect on the amounts recognised in the financial information. Although these estimates are

based on management’s best knowledge of current events and actions, actual results may ultimately differ

from those estimates. The Directors consider that the following judgements are critical to an understanding of

these accounts:

Licenses

The Company was granted certain licenses during the year relating to the commercialisation of cybersecurity

software which is key to the business strategy. The license was granted by SRI International for a combination

of cash, shares and a royalty equal to 7.5% of future revenues deriving from the license. The Directors have

recognised the fair value of the license on acquisition as being the cash paid plus the market value of shares

issued to SRI International. No value has been assigned to the future royalty payments as they are uncertain.

Accordingly future royalty payments will be expensed as incurred.

The value of the license has been assessed by management for impairment. Management consider the asset

value for impairment by considering if any impairment indicators, such as those per IAS 38, are met and that

if any are met, they assess the recoverable value of the license, being the higher of the Fair value less costs to

sell and Value in use, and then compare this to the carrying value of the license. No impairment provision has

been considered necessary. Further details are provided in Note 9.

Acquisition Accounting

The Directors have made a judgement that the acquisition of Narf US constituted a reverse takeover, and that

it falls outside the scope of IFRS 3 (see Note 8). Accordingly, no goodwill or other intangible assets have been

recognised on acquisition. The Directors have recognised a share-based payment equal to the fair value of the

shares in issue immediately prior to the acquisition less the net assets of the parent Company on the date of

acquisition. Further details are provided in Note 8.

Impairment of Narf US

The parent Company Statement of Financial Position includes the investment in Narf US at cost. The Directors

have undertaken an impairment review to assess whether the investment should be written down. This review

involves judgements about potential future cash flows which are highly subjective and subject to matters

outside the control of the Directors.

Cost of Sales

Cost of sales primarily includes expenses associated with the amortisation of capitalised software

development costs, personnel and contractors. The amount of personnel costs to allocate is determined by the

respective project manager of each contract in progress during a given year. The project managers allocate a

percentage of gross wage costs of each professional working on a project upon which a factor for payroll taxes

and benefits is added. In addition, administrative costs are reviewed and costs directly related to servicing

contracts are added.

Software Development Intangibles

Judgement is required when determining when a SaaS product under development enters into the application

development stage, see 2.6. The Directors have undertaken an impairment review to assess whether the

amount capitalised for development costs should be written down. This review involves judgements about

potential future cash flows, which are highly subjective and subject to matters outside the control of the

Directors. Further details are provided in Note 9.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

2. Accounting Policies continued

2.17 Standards, amendments and interpretations to existing standards that are not yet effective

Share Based Payments

Equity-settled share-based payments are measured at fair value. Fair value is measured using the Black

Scholes pricing model. The key assumptions used in the model have been adjusted, based on management’s

best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

As detailed in note 8 the difference between the fair value of the net assets of the Company acquired on the

reverse take over (RTO”) and the market value of the shares in issue on that date has been treated as a share-

based payment representing the cost of Narf US obtaining a listing.

New standards, amendments to standards and interpretations:

The Company has adopted all of the new and revised Standards and Interpretations that are relevant to their

operations and effective for accounting periods beginning 1 January 2022. The Company has not adopted any

standards or interpretations in advance of the required implementation dates.

The following Standards and Interpretations have become effective and have been adopted in these financial

statements. No other Standards or Interpretations have been adopted early in these financial statements.

Standard/Interpretation	Subject
IFRS 9/IAS 39/IFRS 7/IFRS 4/IFRS 16	Interest rate benchmark reform
IAS 16	Amendments – Property Plant & Equipment
IAS37	Provisions, Contingent Liabilities and Contingent Assets

The new standards have not had a material impact on these consolidated financial statements.

Standards not yet applied

At the date of authorisation of these financial statements, the following relevant Standards and

Interpretations, which have not been applied in these financial statements, were in issue but not yet effective

(and in some cases have not yet been adopted by the UK Endorsements Board):

Standard	Impact on initial application	Effective date
IAS 1	Amendments – Presentation and Classification of Liabilities as
	Current or Non-current
		TBC
IAS 8	Amendments – Definition of Accounting Estimates	1 January 2023
IAS 1	Amendments – Disclosure of Accounting Policies	1 January 2023
IFRS 3	Amendments – Business Combinations – Conceptual Framework	1 January 2022
IFRS 17	Insurance contracts	31 December 2023

The directors are evaluating the impact that these standards will have on the consolidated financial statements of

the Group and Company but it is not anticipated that they will have a material impact on the Group and Company.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

2. Accounting Policies continued

2.18 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief

operating decision-maker.

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of

the operating segments, has been identified as the Board as a whole.

The Group has no employees in the United Kingdom (bar one Non-Executive Director) and all of the current

operations of the Group are in North America and thus no separate segments have been identified.

2.19 Financial Risk Management Objectives and Policies

The Company does not enter into any forward exchange rate contracts.

The main financial risks arising from the Company’s activities are market risk, interest rate risk, foreign

exchange risk, credit risk, liquidity risk and capital risk management. Further details on the risk disclosures can

be found in Note 21.

3. Revenue

The Group records contract revenue in accordance with IFRS 15 Revenue from Contracts with Customers,

which requires that revenue be recorded over time as/when performance obligations within a contracts are

performed/delivered. Significant performance obligations are defined within the Group’s contracts. The Group

invoices customers based on billing schedules contained within the related contracts. The Group considers

trade and other receivables to be fully collectible; accordingly, no allowance for doubtful accounts has been

recorded. Costs incurred to obtain contracts are expensed as incurred and losses on contracts are recognized

in the period when determined. The Group warrants that its deliverables will perform within parameters

contained in the statements of work referenced in the contracts, and can measure such performance

independent of the customer. Trade and other receivables are considered impaired (typically resulting

from contract cancellations) and are decreased upon the determination of such impairment. No contract

impairments were recorded in the years ended 31 December, 2022 and 2021.

Revenue for performance obligations is recognized as follows:

• Professional Services: As each performance obligation is completed and delivered, an output measurement.

• Installation Services: Upon delivery and installation of the contract product(s).

• SaaS Subscriptions: On a straight-line basis over the term of the SaaS contract period.

As performance obligations are completed and delivered, revenue is accrued in the caption Trade Accounts

Receivable, which represents a conditional right to consideration. Should amounts invoiced and collected

exceed completed and delivered performance, a liability would be recorded. There were no amounts invoiced

and collected in excess of completed performance obligations at 31 December 2022 and 2021.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

3. Revenue continued

Based on the above categories, disaggregated contract revenue was as follows:

	Year ended
	31 December
	2022
	US$
		(unaudited)
		Year ended
		31 December
		2021
		US$
Professional services	1,373,875	939,513
Installations	218,400	170,000
SaaS subscriptions	954,850	830,003
Total revenue	2,547,125	1,939,516

Backlog represents performance obligations remaining on contracts in progress. The following table presents

the Group’s backlog at 31 December, 2022:

	31 December 2022
	US$
Professional services	9,375,031
SaaS subscriptions	1,061,042
Total revenue backlog	10,436,073

Customers comprising 10% or more of Contract Revenue were as follows:

	Year ended
	31 December
	2022
	US$	Percent
			(Unaudited)
			Year ended
			31 December
			2021
			US$	Percent
US government procurement agency	1,246,563	48.9%	1,000,003	51.6%
DARPA	1,154,939	45.4%	333,966	17.2%
Dartmouth College	–	0.0%	153,059	7.9%
SRI International	145,623	5.7%	452,241	23.3%
	2,547,125	100.0%	1,939,516	100.0%

For contractual reasons, the Company may not disclose the name of the US government procurement agency

or the agencies for which this entity is a pass-through. DARPA stands for Defense Advanced Research Projects

Agency, a US government research and development organisation. Dartmouth College is a pass-through entity

for the US Office of Naval Research. SRI International is a US nonprofit research organisation and is a pass-

through agency for DARPA.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

4. Operating Profits

This is stated after charging:

	31 December
	2022
	US$
		(unaudited)
		31 December
		2021
		US$
Auditor’s remuneration
– audit of the Parent Company	49,000	–
– audit of subsidiary undertakings	50,000	–
– non-audit services
Reporting accountant services	12,000	–
Informal review of interim financial statements	1,800	–
Amortisation of intangible assets	512,937	269,658
Depreciation of tangible fixed assets	33,529	47,379
Directors’ remuneration	827,732	–
Other staff remuneration	1,909,454	1,394,472
Legal, professional and consultancy fees	451,628	337,135

5. Directors and Staff Costs

The average number of persons employed by the Group, including Directors, was:

	2022
		(unaudited)
		2021
Management and technical	17	11

Remuneration, other benefits supplied and social security costs to the directors and staff during the period

was as follows:

	31 December
	2022
	US$
		(unaudited)
		31 December
		2021
		US$
Directors and Employees:
Wages and salaries	1,594,840	1,171,663
Social security costs	92,245	88,115
Pension costs and other benefits	222,369	134,694
Director fees	393,788	–
Director share based payments	58,958	–
Director bonuses	374,986	–
	2,737,186	1,394,472

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

5. Directors and Staff Costs continued

The average number of staff employed by the Group during the year, including Directors was 17 (2021: 11).

The remuneration and associated social security costs per Director for the year ended 31 December 2022

was all short term in nature and are as stated in the remuneration report on pages 12 to 14. A matter of note is

that the chief executive officer of Narf Plc was a member of each of the Narf US entities until 15 March 2022

and received no remuneration or distribution from either entity during the years ended 31 December, 2022

and 2021.

6. Taxation

	31 December
	2022
	US$
		(unaudited)
		31 December
		2021
		US$
The charge for the period is made up as follows:
Taxation on the results of Narf PR for the year	7,839	72,090
Deferred tax	–	–
Taxation charge/credit for the period	7,839	72,090

A reconciliation of the tax charge/credit appearing in the income statement to the tax that would result from

applying the standard rate of tax to the results for the period is:

	31 December
	2022
	US$
		(unaudited)
		31 December
		2021
		US$
Loss before taxation per accounts	(18,417,868)	(770,579)
Tax credit at the standard rate of corporation tax in the UK (19%),
and Puerto Rico (4%)
Weighted average Tax Rate – 18.96%	(3,499,395)	(146,410)
Overseas taxable profits	7,839	72,090
Impact of costs disallowed for tax purposes	3,022,849	146,410
Impact of unrelieved tax losses carried forward	476,546	–
	7,839	72,090

Estimated tax losses of $5,850,000 (FY2021: $3,500,000) are available for relief against future profits. No

related deferred tax asset has been provided for in the accounts based on the uncertainty as to when profits

will be generated against which to relieve said asset.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

7. Earnings per Share

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the

weighted average number of ordinary shares in issue during the period.

	31 December
	2022
	US$
		(Unaudited)
		31 December
		2021
		US$
Loss from continuing operations attributable to equity holders of the company	(18,425,707)	(842,669)
Weighted average number of ordinary shares in issue	1,475,948,904	588,088,644
Basic and fully diluted loss per share from continuing operations (cents)	(1.2)	(0.1)

As the acquired entities are LLCs treated as a partnership with no issued shares, we have assessed the EPS for

2021 by comparing the earnings of Narf US to the weighted average number of shares of the Company.

8. Reverse Acquisition

On 15 March 2022, Narf Industries plc (“Company”) formerly known as Cyba plc, acquired through a combination

of a share for partnership interests exchange and a set of cash payments to the acquiree companies and

former partners, 100% ownership of Narf Industries US LLC and Narf Industries PR LLC (“Narf US”), whose

principal activities are the development and marketing of software aimed at providing cybersecurity solutions

to corporates.

Although the transaction resulted in each Narf US entity becoming wholly owned subsidiaries of the Company,

the transaction constituted a reverse acquisition, as the previous owners of Narf US own a substantial majority

of the Ordinary Shares of the Company and the executive management of Narf US became the executive

management of Narf Industries plc.

In substance, the former owners of Narf US acquired a controlling interest in the Company and the transaction

has therefore been accounted for as a reverse acquisition. As the Company’s activities prior to the acquisition

were purely the maintenance of the LSE listing, acquiring Narf US, seeking to acquire other cybersecurity firms

and raising equity finance to provide the required funding for the operations ahead of the acquisition, it did not

meet the definition of a business in accordance with IFRS 3.

Accordingly, this reverse acquisition does not constitute a business combination and was accounted for

in accordance with IFRS 2 “Share-based Payments” and associated IFRIC guidance. Although the reverse

acquisition is not a business combination, the Company has become a legal parent and is required to apply IFRS 10

and prepare consolidated financial statements. The Directors have prepared these financial statements using

the reverse acquisition methodology, but with the result that rather than recognising goodwill, the difference

between the equity value given up by Narf US’s former owners and the share of the fair value of the net assets

gained by these former owners, is charged to the consolidated statement of comprehensive income as a share

based payment on reverse acquisition and represents, in substance, the cost of acquiring an LSE listing.

The comparatives within the consolidated statement of comprehensive income, the consolidated statement of

financial position, the consolidated cashflow statement and the consolidated statement of changes in equity

represent the combined numbers of the legal subsidiaries and accounting acquirers, Narf Industries US LLC

and Narf Industries PR LLC. In the consolidated statement of financial position, the share capital and premium

as at 31 December 2022 is that of Narf Industries Plc with the reverse acquisition reserve representing the

difference between the deemed cost of the acquisition and the net assets of Narf Industries plc at 15 March

2022. The consolidated statement of comprehensive income for 2021 represents the combined results of Narf

US and Narf PR alone, and the 2022 consolidated statement of comprehensive income represents the result of

the Group for the period.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

8. Reverse Acquisition continued

On 15 March 2022, the Company issued 699.6 million Ordinary Shares and paid a further $4,166,667 to acquire

all of the partnership interests in Narf US. Based on a share price of 2p per share (the price at which those

shares issued as part of the placing that day were issued at) the Company’s investment in Narf US was valued

at $25.6 million, inclusive of the $2 million prepaid consideration and prior to the share based payment charges

for the year recognised in the subsidiaries – see note 12 for further commentary regarding the carrying value of

the investment in the subsidiary as at 31 December 2022.

As the legal subsidiaries, Narf US, were treated on consolidation as the accounting acquirer and the legal

Parent Company, Narf Industries plc, was treated as the accounting subsidiary, the fair value of the shares

acquired was $21.9 million based on a share price of 1.8p and 932.0 million Ordinary Shares in issue immediately

prior to the reverse acquisition. According to IFRS 2 the value of the share-based payment is calculated as the

difference between the deemed cost and the fair value of the net assets as at the acquisition date which are as

follows:

	US$
Deemed cost	21,858,204
Trade and other receivables	7,818,621
Cash and cash equivalents	138,613
Trade and other payables	(1,454,153)
Net assets acquired	6,503,082
RTO share based payment expense	15,355,123

The difference between the deemed cost ($21.9m) and the fair value of the net assets assumed per above of

$6.5m resulted in $15,355,123 being expensed within “reverse acquisition expenses” in accordance with IFRS 2,

Share Based Payments, reflecting the economic cost to Narf US’s owners of acquiring a quoted entity.

The reverse acquisition reserve which arose from the reverse takeover is made up as follows:

	US$
Pre-acquisition entity (a)	(6,503,082)
Narf US capital at acquisition (b)	0
Investment in Narf US (c)	(25,600,000)
Reverse acquisition expense (d)	15,355,123
Reverse acquisition reserve	(16,747,959)

(a) Recognition of preacquisition equity of Narf Industries plc at 15 March 2022

(b) Narf US entities had not issued any equity

The above entry is required to eliminate the balance sheet impact of the transaction.

(d) The share based payment expense under IFRS 2 as per calculation above.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

9. Intangible Assets – Group

	Licenses
	US$
		Software
		Development
		Costs
		US$
			Total
			US$
Cost
At 1 January 2022	–	2,094,027	2,094,027
Additions	1,906,662	–	1,906,662
At 31 December 2022	1,906,662	2,094,027	4,000,689
Amortisation/Impairment
At 1 January 2022	–	790,676	790,676
Charge for the period	285,999	226,938	512,937
At 31 December 2022	285,999	1,017,614	1,303,613
Net book amount
At 31 December 2022	1,620,663	1,076,413	2,697,076
At 31 December 2021 (unaudited)	–	1,303,351	1,303,351

Amortisation of licenses is charged to the Income statement in the period to which it relates and disclosed

within “Depreciation and software license amortisation”. Amortisation of software development costs are

included within “Cost of sales”.

10. Intangible Assets – Parent Company

	Licenses
	US$
		Total
		US$
Cost
At 1 January 2022	–	–
Additions	1,906,662	1,906,662
At 31 December 2022	1,906,662	1,906,662
Amortisation/Impairment
At 1 January 2022	–	–
Charge for the period	285,999	285,999
At 31 December 2022	285,999	285,999
Net book amount
At 31 December 2022	1,620,663	1,620,663
A 31 December 2021	–	–

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

11. Tangible Assets – Group

	Cars
	US$
		Leasehold
		Improvements
		US$
			Furniture &
			Equipment
			US$
				Total
				US$
Cost
At 1 January 2022	147,098	25,425	222,723 3	95,246
Additions	–	–	–	–
At 31 December 2022	147,098	25,425	222,723	395,246
Amortisation/Impairment
At 1 January 2022	116,714	6,290	222,723	345,727
Charge for the period	30,384	3,145	– 33,529
At 31 December 2022	147,098	9,435	222,723 3	79,256
Net book amount
At 31 December 2022	–	15,990	–	15,990
At 31 December 2021 (unaudited)	30,384	19,135	–	49,519

Depreciation of tangible assets is charged to the Income statement in the period to which it relates and

disclosed within “Depreciation and software license amortisation”.

12. Investments in Subsidiary Undertakings – Parent Company

Company
US$
Acquisition of member interests in subsidiary undertakings:
Opening balance	–
Prepaid consideration (Note 13)	2,000,000
Additional cash consideration	4,166,667
Shares issued to former members	19,433,333
Closing balance	25,600,000

Investments in subsidiary undertakings are valued at cost which is the fair valuation of consideration paid in

cash and the Company’s shares.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

12. Investments in Subsidiary Undertakings – Parent Company continued

Principal subsidiaries

The group’s subsidiaries at 31 December 2022 are set out below. Both of the subsidiaries are LLCs, which have

no issued share capital and accordingly the proportion of ownership interests held equals the voting rights held

by the group. The country of incorporation or registration is also their principal place of business

				Ownership
Name
	Country of
	Incorporation	Registered office	Principal Activity	2022	2021
Narf Industries LLC	USA	548 Market St.
		#37005
		San Francisco,
		CA 94104
			Provision of security
			goods and services
			to USG and affiliated
			entities
				100%	0%
Narf Industries PR LLC	Puerto Rico	1413 Avenue Ponce
		de León, San Juan,
		Puerto Rico 00907
			Provision of security
			goods and services to
			Non-USG entities
				100%	0%

13. Trade and Other Receivables – Group and Parent Company

	Group		Company
	As at
	31 December
	2022
	US$
		(Unaudited)
		As at
		31 December
		2021
		US$
			As at
			31 December
			2022
			US$
				As at
				31 December
				2021
				(Restated)
				US$
Prepaid consideration	–	–	–	2,000,000
Accounts receivable	688,617	14,201	–	–
Prepayments and accrued income	7,094	33,373	7,094	7,220
Other receivables	60,770	500	60,270	–
	756,481	48,074	67,364	2,007,220

The prepaid consideration as at 31 December 2021 represented two non-refundable advances of US$1 million to

each of Narf Industries LLC and Narf Industries PR LLC in accordance with heads of terms agreed between the

Company and Narf whereby it was agreed, subject to legal diligence, that the Company would agree to acquire

the entire equity capital of Narf. As detailed in Note 8 the acquisition of Narf was completed during the year and

accordingly the prepaid consideration is part of the acquisition cost.

The Directors consider that the carrying value amount of trade and other receivables approximates to their

fair value.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

13. Trade and Other Receivables – Group and Parent Company continued

Ageing analysis

The following presents an ageing analysis of Accounts Receivable:

	As at
	31 December
	2022
	US$
		(Unaudited)
		As at
		31 December
		2021
		US$
0-30 days	640,630	14,201
31-60 days	47,987	–
	688,617	14,201

The Group considers trade and other receivables to be fully collectible; accordingly, no bad debt provision or

expenses have been recorded in either financial periods ending 31 December 2022 and 2021 respectively.

14. Cash and Cash Equivalents – Group and Parent Company

	Group		Company
	31 December
	2022
	US$
		(unaudited)
		31 December
		2021
		US$
			31 December
			2022
			US$
				31 December
				2021
				(Restated)
				US$
Cash at bank and in hand	442,751	446,879	210,282	274,982
	442,751	446,879	210,282	274,982

Cash at bank comprises balances held by the Company in current bank accounts, instant access deposit

account and electronic wallets. The carrying value of these approximates to their fair value. The majority of

cash is held in a bank with a BBB credit rating.

15. Trade and Other Payables – Group and Parent Company

	Group		Company
	31 December
	2022
	US$
		(Unaudited)
		31 December
		2021
		US$
			31 December
			2022
			US$
				31 December
				2021
				(Restated)
				US$
Accounts payable	100,291	22,810	73,593	110,123
Other payables due within one year	255,439	171,174	–	–
Accrued expenses	240,232	–	240,236	200,955
	595,962	193,984	313,829	311,078

Trade payables and accruals principally comprise amounts outstanding for trade purchases and continuing

costs. The Directors consider that the carrying value amount of trade and other payables approximates to their

fair value. Refer Note 21.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

16. Creditors amounts falling due after more than one year – Group

	31 December
	2022
	US$
		(Unaudited)
		31 December
		2021
		US$
Loan from Director and Chief Executive Officer	1,512,000	810,000
Installment note on a vehicle (see Note 18)	1,727	22,312
	1,513,727	832,312

The Loan from Director and Chief Executive Officer represents non-interest bearing advances to the Group

for working capital purposes from Steve Bassi, CEO (see Note 23). On 11 April, 2023, such advances, which then

totalled $1,322,000, were converted into a $2 million credit facility due 30 June 2024 accruing simple interest

daily at the US Federal short term 1 year interest rate (4.86% at 11 April, 2023) and leaving $678,000 available

for further draw. A portion or all of the note may be repaid early without penalty and the Director may request

the Group to pay amounts when working capital exceeds $750,000 at the end of any given month. No interest

was accrued against amounts owed prior to 11 April 2023. As of the reporting date the balance under this

credit facility was $1,170,144. This credit facility is being presented without any discount to account for time

as the facility may be partially or fully repaid prior to the due date of 30 June, 2024. Should the Group and this

individual decide any future excess working capital to repay this facility would be better invested in growing

Group operations, the due date of 30 June, 2024 could be extended.

17. Share Capital/Share Premium – Group and Parent Company

The Company has only one class of share. All ordinary shares of 0.1p each (“Shares”) have equal voting rights

and rank pari passu for the distribution of dividends and repayment of capital. As at 31 December 2022 the

Company’s issued and outstanding capital structure comprised 1,697,381,100 shares and there were no other

securities in issue and outstanding.

From 1 January 2021 to 31 December 2021 the Company issued 100,000,000 Shares at a price of £0.02 per

placing share.

On 7 March 2022 the Company issued 7,500,000 Shares at a price of £0.01 per warrant share following the

exercise of warrants.

On 15 March 2022 the Company issued 300,000,000 Shares at a price of £0.02 per placing share

On 16 March 2022 the Company issue 699,999,600 Shares to the former members of Narf US in exchange for

100% of the voting rights of Narf US at an equivalent price of £0.02 per share.

On 17 March 2022 the Company issued 59,856,100 Shares to SRI International in exchange for certain licensing

rights at an equivalent price of £0.02 per share.

On 18 May 2022 the Company issued 1,000,000 shares to a supplier in settlement of outstanding professional

fees at an equivalent price of £0.0168 per share.

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

17. Share Capital/Share Premium – Group and Parent Company continued

At 31 December 2022 the Company had 50 million options outstanding and 63 million warrants (see note 18)

	Number of
	shares on
	issue
		Share capital
		(Restated)
		US$
			Share premium
			(Restated)
			US$
				Total
				(Restated)
				US$
Balance as at 1 January 2021	524,525,000	70,796	4,667,362	4,738,158
Shares issued during the year to
31 December 2021 (net of issue costs)	100,000,000	13,497	2,780,255	2,793,752
Balance as at 31 December 2021	624,525,000	84,293	7,447,617	7,531,910
Shares issued during the year to
31 December 2021 (net of issue costs)	–	119,719	27,626,444	27,746,163
Balance as at 31 December 2022	1,697,381,100	204,012	35,074,061	35,278,073

18. Share Based Payment Reserve – Group and Parent Company

Details of the warrants and options that were outstanding at 31 December 2022 are as follows:

Warrants

Issued	Exercisable from	Expiry date	Number outstanding	Exercise price
16.2.2022	14.03.22	14.03.23	13,000,000	£0.02
24.05.22	24.05.22	31.03.23	50,000,000	£0.02

Options

Issued	Exercisable from	Expiry date	Number outstanding	Exercise price
24.05.22	24.05.22	24.05.25	50,000,000	£0.02

	31 December
	2022
	US$
		31 December
		2021
		(Restated)
		USS$
At beginning of year	32,578	32,578
Fair value of warrants exercised during the year	(20,363)	–
Fair value of warrants expired during the year	(12,215)	–
Fair value of warrants and options vesting during the year	229,185	–
At end of year	229,185	32,578

Narf Industries Plc (formerly CYBA plc)

Financial Statements

18. Share Based Payment Reserve – Group and Parent Company continued

The estimated fair value of the warrants and options granted in May 2022 was calculated by applying the Black-

Scholes option pricing model. The assumptions used in the calculation were as follows:

	Options	Warrants
Share price at date of grant	1.55 pence	1.55 pence
Exercise price	2.00 pence	2.00 pence
Expected volatility	97%	97%
Expected dividend	Nil	Nil
Vesting criteria	Vest over three years	Vested
Contractual life	3 years	0.83 years
Risk free rate	1.58%	1.58%
Estimate fair value of each	0.96 cents (recognisable over 3 years)	0.43 cents

Of the amount credited to share based payment reserve $114,592 related to options issued for services

provided and therefore resulted in a charge to the Statement of comprehensive Income and $114,593 related to

brokerage services and therefore resulted in a reduction to the share premium account.

A share-based payment credit of $12,215 was recognised during the year on expiry of 4.5 million of the 12 million

warrants in issue at the start of the year. The 13 million warrants issued in February 2022 were issued to

investors in relation to a placing and therefore were not issued in lieu of services and accordingly have not been

valued and accounted for.

19. Capital Commitments

As further discussed in Note 23, the Group have a lease agreement in relation to their office in California which

expired on 1 June, 2023, including minimum rental payments of $4,800 per month. The Group also has an

installment note on a vehicle that expires in January 2024 (see Note 16).

Amounts payable in respect of leases:

	31 December
	2022
	US$
		At
		31 December
		2021
		(Restated)
		USS$
Less than 1yr	49,385	78,370
1 to 5 years	1,727	51,112
More than 5 years	–	–

Notes to the Financial Statements continued

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

20. Contingent Liabilities

There were no contingent liabilities at 31 December 2022 (2021; £nil).

21. Financial Instruments and Risk Management

The Company’s financial instruments comprise primarily cash and various items such as trade debtors and

trade payables which arise directly from operations. The main purpose of these financial instruments is

to provide working capital for the Company’s operations. The Company does not utilise complex financial

instruments or hedging mechanisms.

Financial assets by category

The categories of financial assets are as follows:

	Group		Company
	31 December
	2022
	US$
		31 December
		2021
		US$
			31 December
			2022
			US$
				31 December
				2021
				(Restated)
				US$
Current assets at amortised cost:
Accounts receivable	688,617	14,201	–	–
Other receivables	60,770	500	60,270	–
Cash and cash equivalents	442,751	446,879	210,282	274,982
	1,192,138	461,580	270,552	274,982

Financial liabilities by category

The categories of financial liabilities are as follows:

	Group		Company
	31 December
	2022
	US$
		31 December
		2021
		US$
			31 December
			2022
			US$
				31 December
				2021
				(Restated)
				US$
Current Liabilities measured at amortised
cost:
Accounts payable	100,291	22,810	73,593	110,123
Other payables due within one year	495,671	171,174	240,236	200.955
Long term loans	1,513,727	832,312	–	–
	2,109,689	1,026,926	313,829	311,078

All amounts owed by the Company are short term and payable in 0 to 3 months, apart from the Long term loan

which is disclosed in Notes 16 and 23. Other payables includes an amount of $20,585 (2021: $20,292) which is

repayable in equal monthly instalments over the upcoming year. The long term loans have a repayment date of

30 June 2024.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

Notes to the Financial Statements continued

21. Financial Instruments and Risk Management continued

Credit risk

The maximum exposure to credit risk at the reporting date by class of financial asset was:

	Group		Company
	31 December
	2022
	US$
		31 December
		2021
		US$
			31 December
			2022
			US$
				31 December
				2021
				(Restated)
				US$
Accounts receivable	688,617	14,201	–	–
Other receivables	60,770	500	60,270	–
Cash and cash equivalents	442,751	446,879	210,282	274,982
	1,192,138	659,917	270,552	274,982

Interest rate risk

None of the Group’s assets or liabilities are subject to any material interest rate risk since the only asset or

liability which bears interest is a $22,312 lease liability (2021: $42,604) at a fixed interest rate and none of the

assets earn any material interest. All deposits are placed with main clearing banks or held in cash wallets to

facilitate non-sterling payments or expense payments. The deposits are placed in current accounts or short

term deposit accounts.

The nature of the Group’s activities and the basis of funding are such that the Group seeks to maintain liquid

resources to meet its expenses for at least twelve months. The current cash position and the cash surplus to

be generated from the operations over the foreseeable future, along with the $680,000 available under the

credit facility means the Group will have sufficient liquid resources to meet its expenditure requirements over

the upcoming twelve months.

Credit and liquidity risk

Credit risk is the risk of an unexpected loss if a counter party to a financial instrument fails to meet its

commercial obligations. The Group’s maximum credit risk exposure is limited to the carrying amount of cash

and receivables. Credit risk is managed by contracting with US government customers clients who have proven

ability to pay and by the Group depositing surplus funds with financial institutions with a credit rating equivalent

to, or above, the main UK clearing banks whilst keeping amounts in electronic wallets to the minimum required

for day-to-day operations. The Group and Company maintain adequate bank balances to meet those financial

liabilities that are payable in the short term (between 0 to 3 months).

Foreign exchange risk

The Group operates in a global market with income and costs possibly arising in a number of currencies. The

majority of the operating revenues and costs are incurred in US Dollars although there are a number of Sterling

costs incurred by the Company in relation to the Non-Executive directors and costs of maintaining a listing.

The Company does not hedge potential future income or costs, since the existence, quantum and timing of

such transactions cannot be accurately predicted. All of the Group's assets and liabilities are denominated in

US dollars.

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

22. Capital Management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the

return to shareholders through the optimisation of the balance between debt and equity.

The capital structure of the Group as at 31 December 2022 consisted of equity attributable to the equity

holders of the Company, totalling $1,802,609 bolstered by working capital advances from an officer and

shareholder (see Notes 16 and 23).

The Company reviews the capital structure on an on-going basis. As part of this review, the directors consider

the cost of capital and the risks associated with each class of capital. The Company will balance its overall

capital structure through the payment of dividends and new share issues. The Company has no plans to take on

debt capital.

23. Related Party Transactions

The compensation payable to Key Management personnel, who comprise the Directors, comprised $827,732

payable by the Company in respect of services to the Group. Full details of the compensation for each Director

are provided in the Directors’ Remuneration Report. At year-end, an amount of $180,810 was due to a director

and officer in respect of Directors remuneration.

During the year the Company made an overpayment for services of $60,270 (2021: $nil) to a company of which

Robert Mitchell is a director. Since the year end this amount has been recovered in full.

During the year payments were made to former members of Narf US totaling $75,000 relating to profit

distributions to members, prior to the acquisition in March 2022. Such distributions were S360,000 for the year

ended 31 December 2021 (unaudited).

Included in the caption Trade and Other Payables on the accompanying Consolidated Statement of Financial

Position are $61,700 and $13,100 at 31 December, 2022 and 2021 respectively, related to an office operating

lease agreement between the Group and an entity in which an officer and shareholder is an owner. Included

in Administrative Expenses on the accompanying Consolidated Statement of Comprehensive Income is

$57,600 and $57,100 in operating lease expense for the years ended 31 December 2022 and 2021 (unaudited),

respectfully. This operating lease agreement expired on 1 June, 2023 and minimum rental payments of $4,800

per month means a charge of $28,800 for the year ending 31 December, 2023. The Group is currently reviewing

this arrangement to determine the economics of renewal.

As further discussed in Note 16, the CEO, a director and major shareholder, made loans to the Company which

at year end totalled $1,512,000 (2021: $810,000 unaudited). The amounts represented non-interest bearing

advances to the Group for working capital purposes.

At 31 December, 2020, Narf US owed a net $61,891 to certain companies owned by a director and

officer. This amount was forgiven in the year ended 31 December 2021 and is recorded as income in the

caption Interest Receivable and Other Finance Income in the accompanying Consolidated Statement of

Comprehensive Income.

Narf Industries Plc (formerly CYBA plc)

Financial Statements

Notes to the Financial Statements continued

24. Events subsequent to year end

There have been no events since the year end that have any material impact on an understanding of these

financial statements, with the exception of the conversion of advances from the Chief Executive Officer to a

credit facility, see Notes 16 and 23.

25. Prior Period Restatement – Parent Company

As both the operating companies that were acquired under the reverse takeover have a functional and reporting

currency of US Dollars, these financial statements have also been prepared in US Dollars. This has meant

that the Comparatives in the Company Statement of Financial Position, Statement of Changes in Equity and

Cashflow Statement were restated in US Dollars. Sterling amounts reported in the Company Statement of

Financial Position at 31 December 2021 have been restated to US Dollars using the closing foreign exchange

rate at 31 December 2021. Sterling amounts reported in the Company Statement of Comprehensive Income and

Statement of Cashflows for the year ended 31 December 2021 have been restated to US Dollars using the average

foreign exchange rate for the year ended 31 December 2021.

26. Control

In the opinion of the Directors there is no single ultimate controlling party.

Annual Report and Consolidated Financial Statements

Overview Corporate Governance Financial Statements

Directors John Herring, Executive Chairman

Steve Bassi, Chief Executive

Rory Heier, Non-Executive Director

Robert Mitchell, Non-Executive Chairman (resigned 23April 2023)

Company Secretary Rory Heier

Head Oce & Registered Oce 5 Fleet Place

London

EC4M 7RD

Auditors PKF Littlejohn LLP

15 Westferry Circus

London

E14 4HD

Financial Adviser and Broker Tennyson Securities Limited

2nd Floor, 65 Petty France

London

SW1H 9EU

Registrars and Transfer Oce Link Market Services Limited

The Registry, Beckenham Road

Beckenham

BR3 4TU

Lawyers Charles Russell Speechlys LLP

5 Fleet Place

London

EC4M 7RD

Financial Public Relations St Brides Partners Limited

Warnford Court

29 Throgmorton Street

London

EC2N 2AT

Registered Number 11701224

Directors and Advisors

narfgroup.com