Narf Industries (LSE:NARF) — Introduction to Narf Industries

0:01 Good afternoon, and welcome to the introduction of NARF INDUSTRIES PLC. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be sent at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to John Herring, executive chairman. Good afternoon to you, sir.

0:30 Yeah. Thank you very much. Welcome, everybody. We're pleased to be here in this platform today to give you an update on NARF. I'm John Herring, executive chairman. With me, I've got Steve Bassi, who is our founder and CEO. Set a little bit of context for the meeting today. This is not a earnings report or any of those activities. This is actually Steve and mine's first time to use this platform to get in contact with investors and give them an overview of NARF, and that's what we plan to do today. So that is the, context of which we'll be, presenting and, look forward to, getting any questions in the q and a period later. But Steve and I will probably do an interactive trade off on this presentation that we have going on.

1:20 So as an introduction to NARF innovation to impact, you'll see three words there, cert, research, systems, and products. And that's gonna be a main theme that we build with everybody. Next slide, Steve. Yep. Right. Let me give Steve, let me turn this over to you, see a little bit of the timeline on the company, and then I'll come back and frame a little more information. Sure. Good afternoon, everybody. I'm Steve Bassi. I'm the CEO of NARF. I I think it's, pretty important to understand, you know, how the company built, and the, the team and our backgrounds, behind the company. Specifically, I started in in cybersecurity and hacking back as a teenager and ended up on a system I wasn't supposed to be on and got my first summer job as a result.

2:13 Now we and my cofounders all had similar backgrounds where we progressed into undergraduate and graduate school, but we all arrived in graduate school at playing something called capture

2:24 the flag. This is a a nerdy version of the game where we're attacking, defending servers on a closed competition network. But, effectively, we're pay but we're playing games against some of the the best hackers in the world. And and my team and I each have a couple of what are called DEF CON CTFs under our belt, which are basically the world series in this. I tell you all this because this is this is the type of team member we we have over here in NARF, these highly experienced, you know, decades of skills hacker types working for the working for the company. You know, that that leads into the company and some of the stuff we do very well, which is, as you've seen from our previous reports, we land large ish r and d contracts from the likes of DARPA.

3:10 If you're not familiar with them, that stands for the Defense Advanced Research Projects Agency. They actually did a lot of the initial work behind the Internet when routers were the size of refrigerators. So, you know, John will kinda take you through some of the the history last year, but fast forward to the present. And last year was our first, full operating, year as a company past the reversal. We did, 6,000,000 in revenue. And importantly, and we'll get deeply into it in this presentation, this was the first year that we actually took in more revenue for government software as a service or SaaS products than r and d. We did about 60% in those last year. I think you forgot to tell them, did you do anything else after graduate school? Where'd you go? Yeah. That's a great question. So I ended up at the Naval Research Lab, which is a military research lab that does both offensive and defensive cybersecurity tools.

4:07 My cofounders, ended up in similar places, scattered throughout the department of defense intelligence communities, and that's where most of our backgrounds on the technical side come through today. But do you wanna reciprocate and talk about your background? No. I'm good with that. But

4:22 I will say that, I met Steve back in 2018. I was very impressed with what he's doing. I did come out of the, military world, the intelligence community, and then running companies similar to Steve's over the course of my career and with some success. So I was very excited to have met Steve back in 2018 time frame, and I kinda watched him progress. My time with NARF really began after their RTO, which Steve became president of the of the entire group and CEO probably in June 2022 after the acquisition.

5:02 During that period of time, I worked with Steve a little bit getting to know what was going on. We had a team of financiers that were doing the acquisition into the shell. So during the last part of 2022, had managed to begin that transition. I stepped in as executive chairman

5:23 early in twenty twenty four, three, and began to work with the team here. I think what Steve said, you know, that is pretty pretty important that it was our first operating year as the sole company. So it kinda cleared out any of the overhead and activities of the acquisition activities that came from before. So very proud to have seen the team achieve what they did with the 6,000,000 in revenue and EBITDA and cash flow positive. But the the long and short story of that, Steve and I aren't here to merely accomplish 6,000,000. 6,000,000 was nice. It's nice to have done that, but the key thing was what it validated in our business model, which is very key to me in regards to taking these next steps with working to build the company.

6:13 What they were able to show me with that 6,000,000 was the mix of revenue they have and execution of a business model, which is very key, which step from this research world into larger dollar government systems contracts that lead us in into commercial prod projects. And so we're gonna talk a little bit about that transit in that business model as we we get started here today. Next slide, Steve. It kinda looks like this. I'm gonna let Steve go into the detail of it, but you can see there on the left side us beginning with our research activities, which Steve and the team had been executing on since about 2021 and building into it. This past year, I did see the transition of their work, beginning to grow greater in the systems area.

7:02 And so to me, that kinda concluded the first thirty six months of the the NARF's commitment to this business model. We're beginning the next thirty six months is what we've laid down as an internal team with a goal to grow to 20,000,000 in annual revenue within that over the course of that three years. So at the end of three years, we've got that run rate.

7:24 One of the key things to talk today that Steve will address is that it's strategic revenue, how it relates, what this government SaaS model looks like, what it means to seeding some commercial activities that are going to be in the next phase of our company, but we will be starting during this period. The key thing that we are here to do is to really communicate the value of that 20,000,000 of revenue in that path that we're off to go, achieve and that, we do have a very executable model, to accomplish that and to move the company forward. Steve, I'll throw it back to you. Sure. So I think what we're gonna spend the most of our time talking about today is, how, we at NARF, take this, r and d work, which, comes from DARPA and actually three out of the four ARPAs.

8:19 Again, ARPA stands for advanced research projects agencies. You can basically think of them as, like, a national security venture capitalist. They make smart investments. These are their words, not mine. And cybersecurity technologies and other technologies that really help with with national security, but also also things like protecting critical infrastructure. So when we receive those r and d dollars, they're typically a two to three year program through one of the ARPAs, anywhere from a million to two year or 2,000,000 for that for that year across the the life of the program. And those function for us as, really, as nondilutive product development dollars. Since we are in cybersecurity, we're asked to answer these research and development questions, but our outcomes are actually software. So we actually build beta level software in these r and d efforts that we then try to transition into what we call government solutions and systems.

9:19 With respect to GS and S, one of the big things to note there is that when we transition something from r and d to GS and S, which you can basically think of as government SaaS or software as a service. We try we we we see basically a one to or a five x multiple on those r and d dollars in the long term and value of those government SaaS installations and solutions. So I'll talk about this generally, but at the near the end of this talk, we'll

9:49 talk more specifically about one of those efforts that's happening right now and then transition from the this thing. It'll be relatively easy to see how we're going to scale to 20,000,000 within the next thirty six months, but really as fast as possible.

10:07 So let's talk specifically about what what what transition means and and why that comes up in in DARPA and the ARPAs. So when they get r and d research to give to advanced teams and cybersecurity organizations out there. They do this by getting problem sets from across the departments of the for department of defense, the intelligence community, federal health care infrastructure, those sorts of things. What they do is they they basically turn these into r and d projects, and they try to they try to get r and d that satisfy that that becomes a solution to their customer's problem.

10:53 At the end of that r and d effort, they're transitioning those r and d solutions into real systems that can solve that problem over time. Now the interesting thing about this is the scalability. There are basically two dozen organizations or departments within the federal government that are usually customers

11:11 of some of of cybersecurity software that comes out of these r and d efforts. Now critical to this is under these r and d efforts, NARF is allowed to keep the intellectual property and the commercialization rights to that intellectual property. And this is this is very intentional on the part of the ARPAS. The reason this is intentional is they want to see commercial viability out of these r and d efforts that leads to the long term health of the actual solution to the problem. So they wanna be able to also see the r and d and the IP holders to be able to take that to commercial markets to protect things like critical infrastructure or, say, hospitals and health care in The United States and beyond.

11:56 So we've been often asked in the last couple of years as we're here talking about our story in in London.

12:02 Does that mean that you cannot sell these solutions beyond US borders? And that is incorrect. Generally, we can take this this intellectual property and these solutions and and sell to any non sanctioned country. John, do you wanna add anything to that? No. I think you covered that well. Okay. So I wanna talk a bit about our team before we get into the specifics of of how this model is operating and talk to you a bit more about who these who these hackers are. I think it's also important to set some numbers up. Right? So

12:39 one of our one of our big big pieces of our team is all of us have the capability to be software developers, and there are about 26,000,000 software developers on the planet. I want you to keep these numbers in mind. About 1% of those software developers can actually apply or can actually look for security vulnerabilities and problems in their code and and possibly fix them. But only point 1% of those software developers are qualified to look for security vulnerabilities

13:08 across different code bases and suggest fixes and also write software and instruct artificial intelligence to do the same. Those are the technical guys on my team, and we'll get into this. But I wanna back up to some of our business achievements in 2023 and what we've been up to there in, you know, in in transitioning to the operating company under the structure. Very specifically, we had already, a couple years ago, hired doctor Michael Locasto, to run what we call GRD. So he runs this section within our organization, and their job is to go out and seek strategic revenue and continue to do that from the ARPAs. What do I mean by strategic revenue? Well, this is really r and d problems that DARPA is coming to the community with, that we can make typically a 50 per to 60% margin on those dollars.

14:01 But at the end of that, we actually end up with IP that can be transitioned into government SaaS consumers. And remember, we talked about earlier DARPA and the other ARPAs are incentivized to take good research outcomes and help us transition them back to the original customer that asked for that r and d effort in the first place. So doctor Locasto has done a great great job actually getting us into three out of the four ARPAs last year. Previously, we're only in DARPAs. So that's a great achievement. What that means is our our r and

14:34 d portfolio portfolio and our strategic revenue from r and d is, you know, is has a has a greater throughput rate into this transaction transition. One of the things I'm also excited about is we've organized we've Austin Fletcher as the section head to our GSNS or government systems and solutions

14:57 category. He's responsible for transitioning these great r and d outcomes generated by, doctor Locasto and his team into, software government software as a service, systems, within these, transition partners. And he's doing this to great effect this year. Austin came out of a place called two six Labs, which was acquired by the Carlyle Group in The US who's going around buying a lot of small NARF and trying to make a large cybersecurity defense contractor right now.

15:31 John, do you wanna add anything to the last year's org chart transition here specifically roles?

15:36 Yeah. Certainly. The this was one of the key criteria for for myself to get comfortable with Steve's team to, grow to this $20,000,000 number. When when I joined the organization, it was still very much a hub and spoke role, right, with you kind of at the center of being the founder and activities. So, one of the first things as we began to look and Steve saw this and and needed it also, was to kind of transition this as the into these two sectors, right, to give people specific specific mandates to go get this business and be responsible for it. The second thing that this did when we brought in Austin was to free up Steve. Steve had been the rainmaker in this government systems area. He's done a great job. Steve's not abandoning it, but it certainly gives with Austin in there the ability to take on a lot of that load, which frees Steve up even more to go expand this business into some other areas that we need to achieve that 20,000,000.

16:36 So for me, that was a very key achievement and to see Steve take the team through that. And I work very my my title is executive chairman. I work as an executive with Steve and these guys and to watch them go through their strategic planning process with both Michael and Austin in these roles and to take it forward. I have great confidence now in, Steve and his team to, achieve these objectives that they've laid out.

17:06 Great. So within the strategic the knowledge of strategic planning, we'll talk a bit about our marketing market positioning here, and a bit about the, the themes and the, the rapid march to 20,000,000 in in revenue that that we've tasked the team with. So, specifically, our current customer base is a mixture between these three types of customers. As I've described to you, we are primarily focused on scaling our government SaaS revenue as a proportion of our our total revenue towards that 20,000,000. But I wanna back up a little bit and tell you a bit about our market and the, the global assortment of threat actors, that we're we're trying to counter and that our government SaaS customers are very concerned about countering and and are, are employing my team to build software to counter these guys. So if this slide is busy, that is on purpose.

18:06 This slide is a is a sample of, threat actors that exist out there in the world today. Broadly, those threat actors are from, nation states and associated with the intelligence and military communities in those nation states, and you might be familiar with those. There's also a criminal set of threat actors. This is primarily exemplified by the ransomware gangs that you see out there.

18:31 So some of these some of these gangs make 100 to 150,000,000 a year in ransoms. They are interested in in compromising targets that have a lot of financial loss potential and ransoming those targets, you know, up to the maximum possible. Very, very interesting group of of actors, and they've actually started to specialize within the criminal

18:55 groups such that there's, you know, subsections of those criminal groups that are called initial access brokers. And their job is to use exploits and hacking techniques to break into lucrative targets, and they sell that access actually onto the ransomware gangs that are responsible for the the extortion of those targets. So kind of an interesting threat actor group. The last bucket of threat actors, you know, broad class of threat actors on here are those that are involved in the in the sort of contracting and surveillance tech piece. I'm sure you've heard about some of these in the news. There was actually a recent leak out of China about something called iSun, which was a leak out of one of their technology companies that was acting as one of these sort of mercenary contractors within the country and and pretty good and interesting media coverage around that if you're you're interested.

19:48 Steve, I think the one of the interesting stories and because of your insights into the industry is the sophistication once they get into the network and what they're looking for. Yeah. Yeah. So so broadly that's a great point. Broadly, what we see with some of these initial access brokers is they they will actually spend the time once they get in the target to pre study the target. So they'll do things like go hunting for find pre unreleased financial results. They'll look for cash positions within the target, and they'll also look for insurance policies, you know, PDFs involving those within the within the target. All of this is so they can maximize the actual ransom that they'd they'd like to charge the target, which is, you know, very interesting. So much like you as investors study the financial profiles and results of companies, the ransomware actors are doing the exact same thing for for much different purposes. Figuring out how much they can pay. Exactly. And it's something where they look at the insurance document, see the coverage Yep. Know this is a going in asking price for this. Balance of the bank accounts, you know, how much revenue they're making, downtime figures, how much it cost a company for manufacturing to be down for a day. What a business. What a business.

21:04 So look. This is a very, very long way of saying we have this new generation arms race. Right?

21:12 We have a very viable market for, exploitation of software, so both for intelligence gathering and, criminal purposes. This leads to, at most of our government SaaS customers and also in the commercial realm, this idea of an overwhelmed defensive analyst.

21:34 You know, there's there's a small subset of cybersecurity qualified people out there defending these networks. Right? And they simply have, too many, too many avenues of entry, to defend, too many pieces of vulnerable software to look after and make sure they're patched and up to date, and and these problems keep repeating themselves. And if they were being solved, you would see,

21:59 you know, real externally, you know, less successful, cyber intelligence operations. You would see less ransomware, ransoms being successful. I don't think you're seeing any of those things in the market today.

22:12 So where does that bring my team in and, and and what we deal with? So we deal with, broadly, software security. Right?

22:21 So my team's job is to take their decades of hacking experience, their understanding with how to find and fix vulnerabilities in the critical software we rely on, and their job is to really,

22:33 you know, identify those things, but be able to scale their workflow. Right? And so this is where we start to talk about how, my foot the focus of my team, my highly skilled team, is to be able to codify their knowledge into software, AI agents, and, other sort of scalable, technology, that really helps, in the first instance, our government SaaS customers, but is also applicable to the, to the commercial market. So a big theme for us here at NARF is is how can we take my point 1% of software developers who understand security problems in software, which is everywhere, in all of our critical systems, and scale that knowledge out across, you know, using software that they've built to to fix those problems. And so we think of this internally as as codifying and scaling the priesthood. Right?

23:31 You know, the reference there is is both hackers and priests enjoy wearing hoodies. So I I hope you'll get the I hope you'll get the the reference. You know, so I'm often asked, hey. And this Hey. Yeah. Let me interrupt you just real quick. So first time you were using Codify with me. Right? That was kinda, what do you exactly do you mean? And so when when you build on that, it's basically that and you call it the priesthood. So it is a small group of people, right, with the years of experience. Yeah. We've kind of developed this unique understanding of vulnerable software and and and what it looks like. And that's kinda, again, that limited group that you're talking about. Yeah. And it's really they can do it today, but it takes a body to do it.

24:20 Yeah. And to do it the way it's done today, it takes maybe eight to ten hours Yeah. To to figure out the answer. Right? Mhmm. And even your guys doing that are the one few that can do that. Many can't do that. But so the objective when you say codify is basically, how do I cut that eight hours down to fifteen minutes, and how can it be not a point 1% of the world, but for for more generalists, right, who are running the security operation centers, these socks, who don't have that. So that that was very helpful for me when you to to to explain the word codify. Right? And Sure. And and and codify into software, right Yeah.

25:05 That's repeatable. Okay. Because it is scalable. Right? So I want I want

25:10 everybody to keep in in mind some numerical issues that we have in cybersecurity. Right? And one of them is we've got a relatively small cybersecurity labor force. Right? And and that is because,

25:22 you know, cybersecurity is is attacking vulnerable software. Right? Right. Right. You know, the reason we have these problems is hackers are able to attack vulnerable software, and they're able to convince these systems to, a, give up their secrets or allow them presence on the systems, etcetera. So let's go back to that that software developer account because this is real important to understand. Hackers are really, really are are really just very, very specialized software developers with a very good understanding of how software works and how it breaks down. And we've got about 26,000,000 software developers on the planet. About 1% of those, if you if you tell them, hey. There's a there's a vulnerability in your code that's exploitable. Right?

26:06 They can go fix it because they understand their source code. They understand the project, and they may understand the vulnerability, and they can go close that up. Right? But only point 1% of that 26,000,000 is really qualified to understand where security issues exist in code bases and source code that is not theirs. Right? And so if you start looking at this, the labor force really doesn't scale. Right? So when we talk about codifying the priesthood, it's how can we take the that point 1%, and how can we get them to codify their skill set into both software and AI agents that that really scale out their abilities across that software that's being developed? One of the huge problems in in cybersecurity generally is that we're we're inventing new software products, and we're pushing them out there. And there's, you know, electric connected cars. There's, you know, Internet of things devices.

26:58 There's, you know, the new app of the week. Right? And it's it's it's all done it's all done by software developers who are pushing out a product and maybe not able to consider or fix the security implications when a mistake is made in there. It's not only that. It's they're under pressure to get a product out. 100%. Right? They're they they've got knucklehead CEOs beating them up to get product out in that activity, and so they're rushing. They are rushing. They are rushing. So talking about, you know, how we operate in that $147,000,000,000 cybersecurity market, we actually crosscut several verticals in there. It's growing about 13% year over year. It's a huge market. But the commonality across all the cybersecurity market is that whether you're in network resilience, threat intelligence, software hardening, all of these involve, you know, protecting software within critical systems so that this doesn't end up taken down by the intelligence organization or ransomed by a ransomware gang. The net effect is the same.

28:01 So as our first, you know, sort of complete operating year in '23, we we performed a lot of validation on our business model. And I wanna get back to this and explain some specific ways in which we are transitioning

28:17 r and d outcomes into government SaaS products this year because that is that is very instructive. So if you recall, we received these r and d dollars from DARPA and the other ARPAs. They act as nondilutive r and d investments. About 50 to 60% of those dollars is is margin for us, and that's great. But the margins really improve as these go into government SaaS solutions or software as a service solutions. Right? So what we're focused on now is transitioning those r and d outcomes, And I'll talk about one specific outcome from a a DARPA r and d effort called SocialCyber and get into that a bit here. But the other thing I wanna remind you of is that we retain the intellectual property under these r and d efforts to the beta software that we've developed that we then transitioned into these national security solutions.

29:11 We talked a bit about the ARPAs already, but these are kind of what they say about themselves in their own words. Right? So you can see that they're really focused on making these high leverage, high payoff, investments in cybersecurity technologies, that are really two to three years out when they commission the r and d effort.

29:33 Before we get there and talk about Social Cyber, I do kinda wanna illustrate our history of wins and tip my hat to our r and d team for adding the other ARPAs into this mix in the past year. Very specifically, we're really looking for strategic r and d dollars that we think have a have a great future in a government software as a service platform and later a commercial software as a service platform.

30:01 So on our road to 20,000,000, we're going to take those nondilutive government funded r and d things, and we're going to transition those into national security systems. Now the big thing here, we've said government SaaS a few times, but these basically had the the main feature of these is they have a annual recurring revenue component. So these are these are SaaS dollars in the true sense, and they have higher gross margins of 80 to 90%. Why the range? Well, additionally, in these government SaaS modules, we tend to do a fair amount or a little bit of customization on the on the actual SaaS product. So for while one defense customer may want it painted blue, as John likes to say, sometimes the next customer would like it painted green.

30:48 And so we're able to charge for those customizations. But then when those customizations make sense, to other customers, we're able to take those features and, replicate them across the SaaS platform to other customers. So the scalability is key, especially in the 20,000,000 here. Right? This is a sampling of DOD and intelligence community departments and services that our SaaS offerings service. Remember, DARPA and others are transitioning these good r and d outcomes to these services and to these departments all the time, and they're incentivized to do so. So once we're in one department or two departments, the scalability and what we call the past performance is pretty self evident to the other

31:33 government service departments. Now what these look like economically for us as we transition these SaaS solutions is they're anywhere about between a million and $2,000,000 a year recurring. The reason I'm giving the variance in there, again, is for the customization. And, also, we have to provide, data into these SaaS solutions that allows them to operate. We'll discuss what that means in a second. John, do you have anything to add before I get into No. Let's hop in. Let's hop into the actual one that you're kinda taking through because for me, it

32:05 was Steve. You know, Steve and the team represented this was their model so they could achieve these type of things. I talked to you about seeing the team in place, but this is importantly, they were able to come to me and show me some transition of dollars even this year. And at 2023, where GS and S dollars began to grow larger than GR and D dollars. And then also to show me one example. There are three others that we won't be talking about today, but one example of the scaling of activity from that r and d and into the g s and s. And as importantly, it's kind of the technology that lies behind this. And I think it'll become pretty self evident to the audience here what the the significance of that technology, not only is it moved through to the government activities, but then into our commercialization activities. Mhmm. Yeah. Let's do it.

33:01 So a few things. One, I I wanna highlight the long form title. So Social Cyber was a was an r and d effort that NARF put out about two years ago. NARF proposed some solutions to this problem and ended up being on contract for this. But the long form title is hybrid AI to protect open source software. Now I wanna point out hybrid AI here.

33:26 This predates the, the large language model and, eruption of interest in, in ChatGPT and related technologies this year. And I'll talk a lot about how we're leveraging that within this, within this work. But let's talk about the problem set behind social sector. So if you're familiar with open source software, if you've ever heard of the Linux kernel, the Firefox web browser, these are both open source products that a lot of people use. More specifically, a lot of critical defense and infrastructure systems use things like the Linux kernel. So for example, I I I would I would wager that five out of the six drones flying around out there right now use some version of the Linux kernel, for example.

34:12 So DARPA's question and a fair question was, hey. What is all this you know, what is the what are the social networks behind all this open source software that we're relying on? Right? Are the governance or the ability to introduce backdoors or security vulnerabilities either intentionally or unintentionally of this into this code a risk to our national security or our our our military investments? So we came up with a set of solutions that takes data from these open source software development networks. So these are probably some of the some of the nerdiest social networks you can imagine here. It involves software developers from all over the world convert converting or commit committing source code to things like the Linux kernel or things like the Firefox web browser or even more arcane things like a library called OpenSSL, which if you've ever seen the green lock come on in your web browser, OpenSSL is handling all the encryption and decryption behind much of the security of the Internet. And, actually, there's a critical vulnerability in this library a few years ago that we can talk about.

35:18 So we came up with a set of technologies to gather data about these source code commits, the social networks behind them. And we used software that, again, had codified my my my hackers and software developers' knowledge of how these vulnerabilities arise to point out weak places in these open source projects and and questionable commits that really put these upstream, you know, highly expensive and highly relied upon systems at risk. So interestingly enough, as we as we neared the end of this r and d effort, DARPA has has walked us in to a few different platforms and and and government entities out there, specifically one we can talk about in the defense community of the Air Force that is interested in in protecting open source software that they depend on helping their analysts understand in the hundreds of open source dependencies they have where they need to improve defenses and where security vulnerabilities might lie.

36:24 So right now, we are transitioning the the social cyber r and d effort into SaaS solution for this customer. We expect the the ARR to this to be somewhere between 1.2 and 2,000,000 US per year of the potential for add ons. Now the reason for this being software as a a service and a solution that has those annual recurring revenues is part of our solution is based on AI agents. Right? And if you guys have been avid users of ChatGPT or other other models out there, you'll understand that they occasionally do something called hallucinate, which means they make up answers to to questions you may have sometimes. So the antidote to a lot of AI hallucinations is is really good contextual data for these AIs to reason upon. Right? So a simple example would be if you ask the AI or, you know, ChatGPT what the weather is, right, it's not going to do very well if it doesn't know the current temperature and barometric pressure where you are. So it needs that data in order to reason well and make good decisions.

37:30 It's the very same for, social cyber and and how we, how we leverage AI. So part of our recurring revenue is we provide data about these software developments, these commits, along with, AI, which is built, and instructed from, from by point 1% of of, software developers who are also called hackers out there and their knowledge of how to find and eradicate these bugs. So that's how we're transitioning into one customer. We do have an an additional customer lined up there somewhere in the defense establishment, which I can't really get into the use case there. But that is that is a great example of how we're scaling these r and d developments into government SaaS models and really taking advantage of that, converting one r and d dollar into 5 recurring revenue dollars. Let me let me back up on that. I think I might have been hallucinating about lunch lunch that we missed here while you were going on. Did you make it clear about this? You talked about this nerdy community. Right? That, really, that world is software developers all over the world. Right? Right. So you've got people contributing to this code base from China.

38:38 Yep. Right? Russia, all over the world. Right? Yep. Zimbabwe. You name it. Okay. And in the code that's going into missile systems and defense systems everywhere. Right? In The US? Everywhere. Yeah. Okay. Yeah. So, I mean, even even commercial systems. Right? So Amazon Web Services. Right? Yeah. They probably run nine out of the 10 Fortune five hundred's cloud systems. Right? 90% of the CPUs today on AWS are running some variant of the Linux kernel. Right. Right? Every web server on most of the web servers on Amazon are probably using open SSL to do encryption, decryption for that website. You know, the the the the HTTPS and the lock on the top of your screen right now, it's it's likely that that's secured by open source software. So so so so what's going on is you're taking maybe information about where this IP address is coming from.

39:36 You're taking information about time of day. You're taking information about maybe some other account information that all give this kind of Sure. Of idea persona of a software developer. Yeah. And you're trying to, over time, figure out if that software developer's good or bad intended. Yeah. Right? Yeah. So great there's some great examples here. And then some anomaly detection. This is exactly what we're using largely, which models in AI for. Right? If if one day a key developer in the Linux kernel is committing, I don't know, you know, drivers for graphics cards. Right? And tomorrow, he's making a modification to a key security or cryptographic library in the kernel. Right? That's out of the pattern.

40:22 And, unfortunately, the analyst at at in the Air Force or any of the other people tasked with securing all of this software, they don't always understand the programming languages this is being done in. Right? And furthermore, they can't scale out. So if you'd look at something like GitHub, which is probably the busiest platform for open source software contributors to contribute code to a network. Right? It's where some things like the Linux kernel, OpenSSL, some of the development for that is hosted. Our average analyst, you know, in one of these desks has to sift through a 100 to a 150,000 source code commits a day Yeah. Without the help of software, without the help of AI is impossible. Can't be done. Can't be done. Can't be done to any standard. Okay.

41:08 And and I think the other the other real exciting thing about the way that these analysts interact with our systems and with AI in general is they get to do it as English in, English out. Right? Remember before two years ago, you know, to interact with some of these systems, to interact with machine learning modules, right, somebody had to be a part of the priesthood. They're damn near close. Right? Yeah. They had to be able to read and write a programming language, usually Python, c plus plus, something in that something that's highly specialized. Not only that, but a lot of the intelligence that's collected isn't in English, is it? No. I mean, open source software development occurs in many languages, Yeah. All of which I don't speak well. Yeah. Except for English, possibly. So, you know, having having a a natural language interface for these analysts to really be able to prioritize and deal with with these potential security issues and software they rely on is huge. Yeah. So that's back to the eight hours down to one hour fifteen minutes, right, activity. Yeah. So I think this was a really good example of one of the activities your team is involved in is really pushing along is really cutting edge.

42:15 That AWS example gave me a a pretty good idea of how it can be moved in the commercialization world. Yeah. So I think, you know, what, hopefully, Steve has been able to kinda give you by using the social cyber example of a r and d project started two years ago, which there was probably 2,500,000 to 3,000,000 generated on. Has now moved out and beginning to get into government systems, but he's got two already of those moving along. For each of those, he's probably getting 500 to $750,000 in new software development to paint it green or to paint it blue, depending upon the situation. And then after they do that, then that's built into a government SaaS system, which generates that recurring revenue.

43:06 You saw all those medallions back there of, you know, who the customers are once that r and d gets out there. So what that led me to look at with this company was a a couple of items. The first thing that I see in the business model is that this isn't where a small team has come up with an initial product and now has to build up marketing and sales and activities, take it out to a commercial market, find out that the product isn't ready for the commercial market, spend more money, and never get there. I'm seeing a company that is able to go to the same customers they have with plenty of budget still left in those customers. I mean, realize, you know, what we're we're talking about trying to get to 20,000,000 in revenue out of multibillion dollar contracts that are out there. So they're staying within their same customer. They're they're gonna grow where they know.

44:03 It's they've done this already. The second thing is they're already the local hero. Right? Think about that competitiveness that's generated. When you've been paid to do the r and d. You you've been selected because you already are one of the few that can do it. You've been paid the r and d to get the core capability that you own and that nobody else can use, and then you're being paid again to put it into the systems. I think that's a very good way to have a competitive position as you go. That gives me the confidence in regards to Steve and the team with getting into that 20,000,000 during that period. Once we're to that 20,000,000, we already have an office of the commercialization that we've set up that under under me.

44:48 With that, I'm already looking at, along with Steve, commercialization opportunities that are out there in the future to go through. Social cyber has become the lead horse in that game. Some of you might have remembered the activities we've been doing in the electrical grids, right, for projects called Tiger. We are still pursuing things in that area. But to give you an example of how those choices are made, with the Tiger activity, we had to develop hardware. We had to go into an entire new market of activities. So our focus is to stay in the software area, and that's why you saw in, December our announcement with MITRE, a, you know, an incredible organization in the, US that, leads a lot of efforts for the government to be able to work with them to develop the standards that the hardware guys would have to meet that would require our software.

45:48 So we kinda did that pivot, right, in there to make sure we had some light lift that we weren't trying to pursue projects that would require us to raise, you know, 20,000,000 to go do hardware development. So in our sites is this commercialization activity. We'll be updating people as we go along. But I think one of the key things is this $20,000,000 of getting to revenue is a high value capability. And we basically, look forward to, the activities of, of of the company to move it into there. But that 20,000,000 is strictly in the government area, and, we wanna make sure we educated people about that model first so they could give that. So our company could begin to be valued with a model out there.

46:37 And I think the work that Canaccord has done, we recently signed them up as our second broker along with Tennyson. Their analyst at Canaccord has put out some great great work on us. If you haven't seen that, gain access to that. They give some valuation models that are out there. Steve, is there any other item you you we we might might have missed in here? No. I think it might be appropriate to move on to to some questions. Yeah. And I I think we're doing you know, I think we're good for time. So Yeah. Can we turn it back over to to to yeah. Yeah. Perfect. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen.

47:25 But just while the company take a few moments to view those questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Steve, John, as you can see, we have received a number of questions throughout today's presentation. And if I could just hand back to you guys, just read out those questions and give responses where it's appropriate to do so. I'll pick up from you at the end. Sure. There there's a there's a question in here regarding scalability of services associated with future revenue and earnings. I wanted to address this specifically and that what we're designed to do and our our our scalability towards 20,000,000 is really about software, not about services. So I wanna be super clear that NARF is not a, what we call, butts and seats company where we are where where we are putting contracting out a very limited labor force into some of these government customers.

48:25 Our real value is taking that priesthood and codifying them into software that addresses those software security vulnerabilities and allows our customers to fix them in critical systems. So I I think that was a great question in in terms of, you know, in terms of the concerns around scalability. But I I I I think within the 20,000,000, it's it's very demonstrable that that software scales pretty well, at those continued 80 to 90% gross margins, which is, very exciting to me. I think we addressed, you know, how we're focusing on on social cyber and software stuff generally while we still have some some some interest in protecting critical infrastructure with some of our previous DARPA r and d efforts, and we're we're working on that.

49:14 Another question was recent awards under The US omnibus contract. How do we plan to leverage and scale this in the sector? It talks about us operating in a potentially competitive market where it might be hard to differentiate and compete to win deals like this. So I wanna I wanna explain what omnibus contract means and and why that's important to NARF and and how we continue to to win these. So, we announced, end of twenty two, I believe, that we had received a five year contract from a customer, where, we are effectively a sole source, and they can just add, what are called task orders on top of that. So through that, we sell some of our software as a service solutions into this customer.

50:00 And what sole source means with respect to The US is that we have a unique capability or unique set of intellectual property that we can sell into that customer that no other entity has. So that that, in some cases, requires that customer not to have to run a competitive bid or competitive tender and us to have to answer that that bid. What it really does is it speeds up the cycle where we can go directly to customers and say, we have a solution and software for the problem you have. They can put a task order on that contract, and we can start work immediately. So in terms of competitiveness, what that what that does for us is it makes it very attractive to the end customer. Their alternative is they can go out to a competitive tender.

50:46 They're going to get responses from the likes of Lockheed or Raytheon, And, those guys are gonna charge them $10,000,000 for a report, and they're gonna get no software product that solves their their their problem on an ongoing basis like they are with us. In terms of competitiveness, we talked about the, the 26,000,000 software developers and a small number of security qualified hackers that exist in that population. And, really, we we often find ourselves quite collegial with other organizations like ourself. In The US alone, there's more than enough cybersecurity work to go around, and it is one of the tightest labor forces in The US. And so you'll actually see us we're we're quite collegial with with some of our friends in the industry that we've actually met through these capture the flag competitions.

51:34 So not only do they eventually become part of the team as as we hire individuals that are really highly skilled, but, you know, we we really try to play together to sort of solve these problems because the labor source is so limited. However, we are very, very focused on codifying our limited labor force into software that scales. Some of our our collegial friends in the r and d world are purely focused on r and d and not commercializing or turning those those platforms into SaaS offerings that that have further life after the r and d effort. So I think those are the key differentiators between our team and some other teams that we we get along with quite well. Well, I I'd like to add to that because I I you know, I've run a a number of businesses in this industry and activities like that. Steve and his team really don't realize how unique they are. I mean, at this stage, in the r and d world, they're winning 60 to 65 of the contracts you bid on in the r and d world, which is a competitive world.

52:39 That's not magic. It's because they've worked with those people in the past. The people know their capabilities. They actually help form the requirements for the r and d program because they have so much experience. So it's that early on activity and even under the, you know, omnibus contract. That's because of Steve and now Austin and people like them. They get invited in and are shoulder to shoulder with the customers, figuring out what's gonna be done and innovative new approaches. So it's their ability to sit there, understand, listen, and come up with innovative approaches. So the majority of our work is being driven to us. And to get to that 20,000,000 that we're talking about, that's really, nickels in the ocean as far as the budgets of these customers go. So it's not like we're gonna be crowding somebody else out of the market Yeah.

53:35 To to to be getting those levels. So competition, if they were moving out to new markets, not growing where they know, if they had to be new competitors in the market rather than already being the established local hero in there, I'd see a lot more risk in what our three year plan is. But because of those reasons, again, just great confidence in this team's ability. Yeah. I've got another question here that's kinda near and dear to my heart because this is this is why working with this team is so exciting. It's it's it's given the innovation is key to maintain a competitive edge. What investments are you making in r and d and how you stay competitive and relevant? So I don't know if I'm gonna if I'm gonna give away the specific r and d investments we're making, but I will say that theme in in taking our really specialized knowledge and codifying it and scaling it, using these large language models and other software, is is really sort of our key theme.

54:36 But how we stay competitive and relevant is actually going back earlier to other, to these customers and to the r and d organizations that we collaborate. It's really listening to and shaping the solutions for the problems they have and having that collegial interaction with with other really smart teams in our industry as well as amongst ourselves. So we maintain that competitive edge by actually following through on our r and d wins and, you know, taking them out of the r and d and actually into operation as governmental SaaS. That's really what we're we're we're known for, and that's, that's really a strength of ours. And I think, I think it really hones our competitive edge because we bring that critical eye back to r and d where we can make really strategic and, and smart investments in saying, hey. Look.

55:25 I I see if we solve this problem, you know, that that will have a lot of value to a downstream customer, and that valuable is is that value is scalable and repeatable and implemented in software. That's really what we're looking for on our competitive edge. Think we maybe got time for one more, two more questions. Yeah. So let's see. You wanna more. So let me let me select one, and you can look through this list while I'm doing that and come to the next one. So the question is, you own the IP, but does the US government effectively have a right of video commercialization? The the the crack I've been making all week, if North Korea is a key market for you, we we clearly can't commercialize into that market.

56:15 But joking aside, no. They don't have the right to veto commercialization. We can effectively do it or do commercialization with any non sanctioned country. And, you know, there's a there's a couple where, you know, we we don't wanna be doing this in any way that that that sort of puts us in a in a difficult human rights position or things like that, which is, you know, interesting. And we've gotten a couple other questions during our presentations this week. Everybody thinks it's quite unique. Right? That the, wow. The government gives up this IP and and all. And it's been very interesting in our world where we come from. DARPA and those IARFAs, their mission is to make sure this gets out into the entire community. Right? Yeah. Not only the military and the intelligence community, but into the, you you know, oil and gas, electric the the the things the industry the military needs to run on, electricity. Right? And getting getting those out there to that. So it's and they are actually judged, DARPA and IARF.

57:23 They they champion ones that get out there. Right? They're proud of that that they serve the mission. Yes. Yeah. I mean, a great example is something like, we're talking about this earlier this week, GPS Right. And your smartphone. Right? Those global positioning satellites, that was strictly a military technology, and it had something called selective availability. So it was NARF for quite a while. And then they figured out that there's a huge economic value to be unlocked if they made GPS available everywhere to a specific precision, and that's what ended up happening. So a relatively inexpensive, you know, military r and d investment ended up being an economic and commercial boon for not only US companies, but the entire Western world. So when he's talking about the story about GPS being selective, they tuned down the resolution Yeah. Right, so that normal people could not get the ability of where to put a weapon system on. Right? Exactly. So being over here in London this week, if we didn't have GPS at that resolution, we would have missed every coffee shop we would have been looking for. Yeah. This I I cannot hack the streets here, apparently.

58:27 Okay. It looks like we're about at the end of the end of the period here. Investor Meet company, can we turn it back over to you to wrap us up? Perfect. Thank you very much, and thank you for answering all those questions from investors. Of course, the company can review all the questions submitted today, and we'll publish those responses on the Investor Meet Company platform. But just before redirecting investors to provide you with their feedback, which you know is particularly important to the company, Steve, could I just ask you for a few closing comments? Sure. Happy to. Well, thanks for the opportunity to chat with everybody today. I hope you understand a little bit more about our our highly focused and rapid March to 20,000,000. And, you know, we're we're very, excited about, you know, being at the forefront of applying a lot of the software and technologies to a to a continually interesting problem of this cybersecurity. Thank you all.

59:18 And in regards to using this platform, we plan to be back as we progress here to give everybody updates. Steve's been doing a number of interviews out in the community. Hope you tune in to those and learn about the company that way too. Thank you. Thank you. Perfect. And thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of NARF INDUSTRIES PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.