10-K: NAPC Defense, Inc. Reports Full Year 2024 Results, Transitions Focus to Defense Industry

NAPC Defense, Inc., formerly Treasure & Shipwreck Recovery, Inc., reported its full year 2024 results, highlighting a strategic shift towards the defense industry while maintaining its treasure recovery operations.

Summary

• NAPC Defense, Inc., formerly Treasure & Shipwreck Recovery, Inc., filed its annual report for the fiscal year ended April 30, 2024.
• The company has transitioned its focus to the defense industry, while still maintaining its treasure recovery business.
• The company reported revenue of $0 for the year ended April 30, 2024, compared to $85,000 in the previous year.
• Operating expenses increased to $583,720 in 2024 from $549,022 in 2023, primarily due to increased consulting, labor, and depreciation costs.
• The company's net loss for 2024 was $711,986, an improvement from the $941,125 loss in 2023, mainly due to decreased interest expenses.
• As of April 30, 2024, the company had total assets of $1,759,732, current liabilities of $1,045,060, and a net working capital deficit of $1,045,060.
• The company's independent auditors have raised substantial doubt about its ability to continue as a going concern.
• The company expects to expend its available cash in less than one month from August 13, 2024.
• The company acquired rights to the CornerShot firearm and other defense-related technologies from Native American Pride Constructors, LLC for 95,000,000 shares of common stock.
• The company is pursuing opportunities in the sale of small caliber arms, personal ballistics protection, and brokering of larger scale ammunition and armored vehicles.

Sentiment

Score: 3

Explanation: The document presents a concerning financial situation with significant losses, no revenue, and a going concern warning. While there is a strategic shift to a new industry, the company's current financial state and operational challenges overshadow any potential positives.

Positives

• The company's net loss decreased from $941,125 in 2023 to $711,986 in 2024, primarily due to reduced interest expenses.
• The company has acquired rights to the CornerShot firearm and other defense-related technologies, opening up new revenue streams.
• The company is actively pursuing opportunities in the defense industry, including sales of small arms, personal protection equipment, and brokering of munitions.
• The company has a 36 foot vessel outfitted with prop blowers and other technologies for search and diving.

Negatives

• The company reported zero revenue for the year ended April 30, 2024.
• The company has a net working capital deficit of $1,045,060 as of April 30, 2024.
• The company's independent auditors have raised substantial doubt about its ability to continue as a going concern.
• The company expects to expend its available cash in less than one month from August 13, 2024.
• The company's stock is thinly traded and highly volatile.
• The company has incurred recurring losses to date.
• The company has a material weakness in financial reporting due to a lack of segregation of duties.

Risks

• The company's ability to continue as a going concern is in doubt due to recurring losses and negative cash flow.
• The company needs to raise additional capital to meet its long-term operating requirements.
• The company's stock is thinly traded and highly volatile, making it a risky investment.
• The company faces risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns.
• The company has a material weakness in financial reporting due to a lack of segregation of duties.
• The company's convertible notes payable are in default, and lenders may file suit to foreclose on assets.
• The company's reliance on equity sales may cause substantial dilution to current shareholders.
• The company is subject to a lawsuit seeking $20,000, although it is pending dismissal for lack of prosecution.

Future Outlook

The company will continue to rely on equity sales to fund operations and is pursuing opportunities in the defense industry, including sales of small arms, personal protection equipment, and brokering of munitions. The company's ability to continue as a going concern is dependent on raising additional capital.

Management Comments

• Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company's success over the next year and in future years.
• Management believes that the financial statements and other information presented are materially correct.
• Management intends to take practical, cost-effective steps in implementing internal controls, including the possible remedial measures set forth below, upon obtaining sufficient capital and operations.

Industry Context

The company's shift to the defense industry reflects a strategic move to capitalize on growing demand for military and law enforcement equipment. This transition positions the company in a sector with potentially higher revenue opportunities compared to its previous focus on treasure recovery. The company is entering a competitive market with established players, and its success will depend on its ability to secure contracts and establish a reliable supply chain.

Comparison to Industry Standards

• The company's financial performance is significantly below industry standards for established defense companies, which typically generate substantial revenue and profits.
• The company's lack of revenue and significant net losses are not comparable to industry leaders such as Lockheed Martin, Raytheon, or General Dynamics, which have robust financial performance.
• The company's reliance on equity sales for funding is common among early-stage companies but is not sustainable in the long term compared to established companies that have access to debt financing and generate cash flow from operations.
• The company's acquisition of the CornerShot rights is a unique asset, but its success will depend on its ability to commercialize the technology and secure sales contracts, which is a challenge for any new entrant in the defense industry.
• The company's lack of internal controls and material weaknesses in financial reporting are not in line with industry standards for publicly traded companies, which are expected to have robust internal control systems.

Management Changes

Corporate Governance

Legal Proceedings

• In May of 2023, NAPC Defense, Inc. was sued in county court over a contract by the firm of Delmar, seeking $20,000.
• The company is defending the lawsuit on the basis that Del Mar never performed on its obligations.
• As of August 1, 2024, the suit was pending dismissal for lack of prosecution.

Related Party Transactions

• An officer of the company provided a loan to NAPC Defense, Inc. under a convertible promissory note, with a balance of $60,890 as of April 30, 2024.
• The company entered into a Master Convertible Corporate Note Agreement with Native American Pride, LLC, with a balance of $63,791 as of April 30, 2024.
• The company issued 95,000,000 shares of its restricted common stock to Native American Pride Constructors, LLC for the acquisition of defense-related rights and technologies.
• During the years ended April 30, 2024 and 2023, the company paid its President $48,900 and $93,350 respectively, for services provided.

Stakeholder Impact

• Shareholders face significant risks due to the company's financial instability, potential dilution from equity sales, and the possibility of a complete loss of investment.
• Employees may be impacted by the company's financial difficulties and potential restructuring.
• Customers may be affected by the company's ability to deliver products and services due to its financial challenges.
• Suppliers and creditors face the risk of non-payment due to the company's financial instability.
• The company's transition to the defense industry may create new opportunities for stakeholders, but also introduces new risks and challenges.

Next Steps

• The company needs to secure additional financing to continue operations.
• The company needs to finalize the acquisition of the defense-related technology and rights.
• The company needs to develop a business plan for the defense industry.
• The company needs to establish a reliable supply chain for its products.
• The company needs to secure contracts for its products and services.
• The company needs to improve its internal controls over financial reporting.

Key Dates

Keywords

defense, firearms, ammunition, treasure recovery, CornerShot, military, law enforcement, shipwreck, salvage, ballistics protection, munitions brokering