Main Market listed cybersecurity company Narf Industries (LON: NARF) has continued to win contracts with US government organisations, but additional funding is likely to be required to take advantage of the opportunities in a total addressable market that is valued at $7.5bn.
US-focused Narf was founded in 2018 and is involved in vulnerability research, software hardening, which reduces the potential for software to be attacked, security protocol and algorithm design. The core technical staff have a wide knowledge of hacking and cyber security.
There is an important relationship with US government agency DARPA, which pays Narf to carry out research and development on specific topics and areas. Narf does not do any of its own speculative development, but software developed for DARPA can be commercialised via a Software-as-a-Service (SaaS) model.
In the 15 months to March 2024, revenues were $7.6m, which was treble the level for the previous twelve months. The reported loss was $1.44m, although that includes a share-based payment cost of £1.02m. A lower proportion of costs related to subcontractors. There was a cash inflow from operating activities of $173,000.
There was $654,000 of cash in the balance sheet. The chief executive has increased the facility made available to the company from $2m to $2.5m and this lasts until July 2025. At the end of March 2024, there was $1.55m drawn down.
Canaccord Genuity says that there could be a joint venture with a third-party investor that would bring in additional capital. Narf could inject its open source code protection IP into the joint venture, which would seek other commercial partners. Currently revenues come from contracted work.
There would be a reorganisation of activities that could hamper short-term progress. Narf has set a target of $20m of revenues in 2027 and this can still be achievable.
The share price fell 18.2% to 0.9p following the results. This reflects the short-term uncertainty. Narf has strong growth prospects, and it is worth keeping an eye on the company as it sets out its plans to take advantage of the potential cybersecurity market.