LIFTING OF SUSPENSION

Narf Industries PLC

14 July 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

14 July 2023

NARF INDUSTRIES PLC

LIFTING OF SUSPENSION OF SHARE TRADING

Narf Industries plc ("Narf", the "Company", or the "Group"), (LSE: 'NARF')(OTCQB: NFIN.F), the cybersecurity group specialising in high-end threat intelligence and critical infrastructure security, today announces that, following publication of the audited financial statements for the year ended 31 December 2022 ("FY2022"), suspension will be lifted and trading in the Ordinary shares of the Company on the Official List will commence later today.

Below is the Chairman's statement extracted from the recently published Audited Financial Statements:

Dear Shareholder,

As the recently appointed Executive Chairman, this statement offers me the opportunity to share your Company's accomplishments while acknowledging the challenges transitioning from a private and entrepreneurial led venture to the main operating business of an LSE listed company.

Accomplishment and Goals

It has been a year of significant growth and development within the Group. Our committed team of 15 research and software developers led by our CEO, Steve Bassi, delivered record breaking year-end contracted backlog of $10.4 million. It speaks to the trust and confidence government entities place in our highly specialized team and underscores its strong reputation as an innovative and reliable partner.

The backlog is 4x our 2022 revenue of $2.5 million.  The increase in government contract backlog translates into a sustainable revenue stream for our Group. These contracts provide a stable and predictable source of income, enabling us to plan and execute business strategies with confidence.

From this backlog alone, the Group forecast $5.9m revenue in 2023, delivering 130% year on year ("YOY") growth (up from 30% growth in 2022).  A significant decrease in expenses is also targeted this year.  As we transition from an acquisition vehicle to focus on our core operations, we are expecting operating expenses to drop by over 40% ($1.4 million) in 2023.

This combination of growing revenues and operational efficiencies help position the Company to achieve break-even EBITDA for 2023. This compares to a $2.6m operating loss in 2022. The plan looks to accomplish this performance financed by internal cash generation and current credit line facilities.

In summary, our team in 2023 looks to execute an invaluable, high growth, fiscally responsible Company that protects and builds shareholder value and confidence.  From this foundation, we plan to aggressively grow our government revenue, a market we are well positioned to scale and expand.  The attractive net margins, along with our innovative government funded R&D work, can fuel our intellectual property (IP) commercialisation targeted to multi-billion dollar cybersecurity market segments.

I'd like to express my appreciation to the team for their work ethic that delivered this outstanding business performance to date.  I'd like to thank our customers that acknowledge our worth through repetitive contract awards.

Fiscal Year 2022 Audit

This is the first financial reporting period for which consolidated financial statements, incorporating the businesses acquired in March 2022 (see Note 8 to the Financial Statements), are subject to International Finance Reporting Standards (IFRS). 

This administrative burden introduced by IFRS presented a significant hurdle for a small team of 15 research and software developers busy meeting contract deadlines, generating revenue and cash flow.  Previously, the private businesses produced records and internal documents only needed for servicing its contracts and primarily for tax purposes. This lack of infrastructure and resources caused the Company to miss its 30 April 2023 deadline and led to suspension of trading in its shares. 

Today we've announced the completion of the audit expect the trading suspension will be lifted within a matter of days.  However, not without accepting and acknowledging significant auditor disclaimers.

I've taken this decision to accept the auditor's disclaimers now.  It's become evident that resolution will require more time and extending the trading suspension of our shares would unfairly impact our shareholders, limiting their ability to engage with the market and potentially eroding investor confidence. 

I want to assure you that this disclaimer of opinion does not diminish the value of the team's achievement or the underlying strength of our business.  We are committed to resolving these issues and bringing the Company's consolidated financial reporting practices up to standards. 

There are several matters linked to the disclaimer that need resolution, but it's our inability to date to provide auditors access to a sensitive contract (and all materials associated with that contract), and our estimated timeline for resolution, that's most influenced my decision.

This contract accounts for about 50% of our reported 2022 revenue with terms that state disclosing the name of the customer, their address, or the nature of the work to restricted parties, is a basis for termination.  We are navigating this situation carefully and executing a plan to resolve this matter over the course of the next quarter in the interest of all parties.

As you read this annual report and the Company's accounts, please be aware any financial figures presented are subject to adjustment for overstatement or understatement as we work with auditors to confirm the appropriate accounting treatment.   The Company believes it has taken a conservative approach in its presentation of the accounts, for example applying a revenue recognition that errs on the side of understatement.

Period of Transition

This year's audit circumstance speaks to the challenges we face managing record revenue growth while building the infrastructure required of a publicly reporting entity.  While growth is a positive indicator, it requires us to remain agile and adapt our administrative systems to meet the evolving needs of our expanding organisation.

While establishing the necessary administrative and financial infrastructure during this transitional phase is important, it's equally vital to instill a shared understanding among our team that effective governance and responsible management extend beyond mere structures and processes.   For these reasons, your CEO strengthened the Board and executive team in late April 2023, with my appointment as Executive Chairman and appointment of our CFO.

Although posing short-term challenges, we recognise the long-term benefit of investing now to improve the quality of our executive leadership, financial reporting, and business execution to instill confidence in our stakeholders and facilitating better analysis and decision-making.

In respect to our most pressing challenge, our team, now resourced with a new CFO, will continue to work diligently, and resolve all matters.

Looking Forward

I am privileged to lead the Board, and as Executive Chairman, join the CEO and his team to actively develop, lead, and execute strategies to grow the business.  I would like to express my gratitude to our shareholders for their understanding during this initial, difficult past few months.  

Here's what to expect in the next 6 months:

·      Scale and expand our government business.  We have the potential to turbo-charge our growth, in a market we already know, with a proven competitive position.  Our team is already fast at work in driving success and identifying 18, 36, and 54 month strategic growth goals.

·      Unlock the value of our IP with innovative and efficient go to market strategies. 

·      Build an experienced and capable Board.  We look to align strategic objectives with specific areas of expertise, source qualified candidates, and appoint new members over the course of the year.

·      Strengthen our internal and external financial reporting. A solid foundation to support our decision-making processes, protect the interests of our shareholders, and maintain the trust of our stakeholders is paramount.  Included is a resolution of our auditor's disclaimers and opinion.

·      Maximize shareholder value.  We are committed to engaging with the investment community to ensure our accomplishments and strategies are reflected in the valuation of our Company.     

Thank you all.

John Herring

Executive Chairman

ENDS

For further information on the Group please visit www.narfgroup.com or contact:

John Herring	NARF	Tel: [phone]
Catherine Leftley/Paul Dulieu/Isabel de Salis	St Brides Partners	[e-mail]
Peter Krens	Tennyson Securities	Tel: [phone]

About NARF Industries plc

Narf Industries (LSE: NARF)(OTCQB: NFIN.F) is a US based cyber security group specialising in high-end threat intelligence with a focus on critical infrastructure. The Group leads commissioned cyber security R&D and is commercialising a portfolio of products including TIGR that can be used by utilities and cyber first responders to restore power to electric grids and protecting other key infrastructure that have suffered a cyber-attack. The Group aims to further strengthen its portfolio organically and via acquisition; its team of highly qualified cyber security experts is well placed to identify opportunities.

Important notice

The content of this announcement has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 (FSMA). This announcement has been issued by and is the sole responsibility of the Company. The information in this announcement is subject to change. This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act), and may not be offered or sold, directly or indirectly, in or into the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States. This announcement is not for release, publication or distribution, directly or indirectly, in or into the United States, Australia, Canada, the Republic of South Africa, Japan or any jurisdiction where to do so might constitute a violation of local securities laws or regulations (a Prohibited Jurisdiction). This announcement and the information contained herein are not for release, publication or distribution, directly or indirectly, to persons in a Prohibited Jurisdiction unless permitted pursuant to an exemption under the relevant local law or regulation in any such jurisdiction.

 

END