BLIS.OIDNapc Defense, INC
10-Q: NAPC Defense Reports Deepening Losses, Urgent Capital Need
Sentiment:
Quarterly Report
NAPC Defense, Inc. reported a significant increase in net losses for the six months ended October 31, 2025, alongside a critical working capital deficit and a going concern warning.
Delay expectedThe Letter of Intent for the CornerShot sale to Saudi Arabia, for an expected order of 37,000 units, has not yet materialized into a contract.The company has not closed sales and licensing deals for CornerShot and related products and services as of April 30, 2025, leading to the impairment of related intellectual property.The Certificate of Designation for the "Voting Control Preferred" shares, authorized on October 14, 2025, has not yet been filed with the State of Nevada.
Capital raiseManagement explicitly states plans to raise capital through equity markets to fund operations.The company is in immediate need of further working capital and is seeking options in the form of debt, equity, or a combination thereof.Issuances of additional shares will result in dilution to existing shareholders.Proceeds from convertible notes payable and common stock sales were a primary source of cash from financing activities in the current period.
Worse than expectedNet loss significantly increased to $1,481,668 for the six months ended October 31, 2025, from $889,784 in the prior year period.No revenue was generated in the current reporting periods, indicating a failure to commercialize its new defense business.The working capital deficit worsened to $1,775,936, and cash on hand is expected to last less than one month.Multiple convertible notes payable are in default, totaling $732,500.Intellectual property acquired for the defense business was impaired to $0 due to a lack of sales and licensing deals.
Summary
- NAPC Defense, Inc. has fully transitioned its focus to the defense and security industries as of April 30, 2025, discontinuing its former treasure recovery business.
- The company reported no revenue for the three and six months ended October 31, 2025, a decrease from $67,467 in revenue for the six months ended October 31, 2024.
- Net loss increased to $1,481,668 for the six months ended October 31, 2025, compared to $889,784 in the prior year period.
- Total operating expenses rose by 84.5% to $959,006 for the six months ended October 31, 2025, primarily due to increases in general and administrative, consulting, and professional fees.
- The company reported a working capital deficit of $1,775,936 as of October 31, 2025.
- Available cash of $27,492 is expected to be expended in less than one month from the filing date.
- Management has raised substantial doubt about the company's ability to continue as a going concern.
- Total liabilities increased to $1,885,156 as of October 31, 2025, from $1,163,126 as of April 30, 2025.
- Common shares outstanding increased to 334,633,460 as of December 15, 2025, from 238,251,927 as of April 30, 2025, indicating significant dilution.
- Intellectual property related to CornerShot and other defense products was impaired to $0 as of April 30, 2025, due to the company not having closed sales and licensing deals.
- The authorized common shares were increased from 500,000,000 to 2,000,000,000 on October 15, 2025.
- The Board authorized a new series of "Voting Control Preferred" shares (70 shares, representing 70% of total voting power) on October 14, 2025, to be voted as a block by the Board, though the Certificate of Designation has not yet been filed.
- 50,000,000 restricted common shares were issued to directors and officers on October 22, 2025, in recognition of services rendered.
Sentiment
Score: 2
Explanation: The company faces severe financial distress, including a going concern warning, significant losses, no revenue, and a critical working capital deficit. The impairment of key intellectual property and numerous debt defaults highlight substantial operational and financial challenges.
Positives
- Successfully completed the strategic pivot to focus solely on the defense and security industries, discontinuing the non-performing treasure recovery business.
- Secured rights for the sale and production of CornerShot units, including a Letter of Intent for an expected order of 37,000 units to Saudi Arabia, subject to U.S. Government approval.
- Established partnerships for the distribution of ballistic protection products through Extremis and less-than-lethal products with Lamperd Less Lethal of Canada.
- Management believes that the financial statements and other information presented are materially correct, despite identified internal control weaknesses.
Negatives
- No revenue was generated for the three and six months ended October 31, 2025, indicating a lack of commercialization in the new defense business.
- Net loss significantly increased to $1,481,668 for the six months ended October 31, 2025, compared to $889,784 in the prior year period.
- The company faces a critical working capital deficit of $1,775,936 as of October 31, 2025.
- Cash on hand of $27,492 is projected to be expended in less than one month from the filing date.
- Multiple convertible notes payable, totaling $732,500, were in default as of October 31, 2025.
- Significant shareholder dilution occurred due to the conversion of debt to common stock and the issuance of shares for services and commitment fees.
- Intellectual property acquired for the defense business, valued at $1,615,000, was impaired to $0 due to the failure to close sales and licensing deals.
- Operating expenses increased by 84.5% ($439,306) for the six months ended October 31, 2025, without corresponding revenue generation.
- Other expenses increased by 81.7% ($234,936) for the six months ended October 31, 2025, primarily due to amortization of debt discount and financing fees.
Risks
- Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses, negative cash flows, and insufficient working capital.
- The company is in immediate need of further working capital, and failure to raise adequate capital could result in curtailment or cessation of operations.
- Significant potential dilution to current shareholders from the conversion of numerous convertible notes payable and future equity raises.
- Multiple convertible notes payable are in default, which could lead to lenders filing suit or foreclosing on assets.
- The company has not yet generated significant revenues from its new defense business, raising concerns about operational execution and market acceptance.
- Material weaknesses in internal control over financial reporting exist due to limited resources and lack of segregation of duties, increasing the risk of financial misstatement or fraud.
- CornerShot sales to overseas militaries and governments are subject to U.S. Government approval, which may not be obtained or may be delayed.
- The company operates in a highly competitive defense and security industry, making market penetration challenging.
- Current trends toward lower capital investment in start-up companies pose a significant challenge to the company's success.
Future Outlook
Management plans to raise additional capital through equity markets to fund operations and generate revenue, but does not expect significant revenues in the foreseeable future. The company will continue to rely on equity sales, which will result in dilution to existing shareholders, and there is no assurance of securing additional financing. Upon obtaining sufficient capital, management intends to implement practical, cost-effective steps to address internal control weaknesses.
Management Comments
- "We intend that such forward-looking statements be subject to the safe harbors for such statements."
- "We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made."
- "Any forward-looking statements represent managements best judgment as to what may occur in the future."
- "We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events."
- "Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Companys success over the next year and in future years."
- "Management believes that the financial statements and other information presented herewith are materially correct."
Industry Context
NAPC Defense, Inc. has fully pivoted to the defense and security industries, focusing on weapons systems (CornerShot), non-lethal solutions, protective systems, and brokering. This sector is highly competitive and regulated, demanding substantial capital, government approvals, and established contracts. The company's current pre-revenue status and the impairment of its acquired intellectual property suggest significant challenges in effectively entering and commercializing within this market. While a Letter of Intent for Saudi Arabia for 37,000 CornerShot units represents a potential major opportunity, its unconfirmed status highlights the hurdles in securing large-scale defense contracts.
Comparison to Industry Standards
- The company's pre-revenue status in its new defense and security segment makes direct financial comparisons to established industry players inappropriate.
- The significant net losses, negative working capital, and going concern warning are far below the financial health and operational stability typically seen in viable defense industry companies.
- The impairment of intellectual property related to core defense products indicates a failure to meet commercialization milestones, which is a critical deviation from successful industry practices.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Executive Officer and Director | Craig A. Huffman (former CEO) | Edward K. West | 2024-04-01 | Transition into the defense and law enforcement business. |
| Chief Financial Officer and Director | NA | John Spence | 2024-04-01 | Transition into the defense and law enforcement business. |
| Director | Patrick Scheider | Evelyn R. Gurba | 2024-04-01 | Transition into the defense and law enforcement business. |
| Director | Frederick Conte | Derrick West | 2024-04-01 | Transition into the defense and law enforcement business. |
| Secretary and Chief Legal Officer | NA | Craig A. Huffman | 2024-04-01 | To continue overseeing corporate compliance and acquisition. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Authorized Shares Increase | Authorized common shares increased from 500,000,000 to 2,000,000,000. | 2025-10-15 | Enables significant future equity raises, potentially leading to substantial dilution for existing shareholders. |
| New Preferred Stock Series Authorization | Board authorized 'Voting Control Preferred' shares (70 shares, 70% aggregate voting power, non-transferable, non-convertible, no dividends/liquidation rights, to be voted as a block by the Board). | 2025-10-14 | Centralizes significant voting power with the Board, potentially limiting common shareholder influence on major corporate actions, while providing governance stability. The Certificate of Designation has not yet been filed. |
| Internal Control Weaknesses | Material weaknesses identified in internal control over financial reporting due to limited resources, lack of segregation of duties, and absence of an independent audit committee/financial expert. | 2025-10-31 | Increases the risk of financial misstatement or fraud; management acknowledges but lacks capital to remediate immediately. |
Legal Proceedings
- A lawsuit by the firm Delmar, filed in May 2023, seeking $20,000 over a contract related to a Regulation A offering in 2022. The company is defending on the basis that Delmar never performed its obligations. As of October 31, 2025, the suit was pending dismissal for lack of prosecution.
Related Party Transactions
- Security deposit of $10,000 with a related party as of October 31, 2025.
- Account payable, related party of $10,000 as of October 31, 2025, for rent.
- Related party advances of $6,470 as of October 31, 2025.
- Related party convertible loan of $64,992 as of October 31, 2025, from an officer and NAPC, LLC.
- Related party short term loans of $51,000 as of October 31, 2025, from an LLC controlled by a Director.
- Lease agreement for commercial office space with a related party commenced August 15, 2025, with a month-to-month term and $10,000 monthly rent; $30,000 expensed for rent during the six months ended October 31, 2025.
- $25,000 rent owed to a related party from a previous lease (ended April 30, 2025) was paid during the six months ended October 31, 2025.
- A related party limited liability company provided $6,500 of construction services for office improvements during the six months ended October 31, 2025.
- Acquisition Agreement with NAPC, LLC on March 26, 2024, for defense-related product rights, intellectual property, and business leads, in exchange for 95,000,000 restricted common shares (valued at $1,615,000), which were later impaired to $0.
- A loan in the amount of $1,400 with an individual related party lender was entered into subsequent to October 31, 2024.
Stakeholder Impact
- Shareholders face significant dilution from past and future equity issuances, including 50,000,000 shares to directors/officers and potential conversions of numerous convertible notes. There is a high risk of complete loss of capital due to going concern issues. The proposed 'Voting Control Preferred' shares could also reduce common shareholder influence on major corporate actions.
- Creditors, particularly convertible note holders, face increased risk of non-payment or forced conversion at potentially unfavorable terms due to multiple notes being in default and the company's liquidity issues.
- Employees and management face uncertainty regarding the company's ability to continue operations, although management received significant share issuances for services.
- Customers are currently non-existent for the new defense business, as no revenue has been generated.
- Suppliers may face potential risk of non-payment due to the company's severe liquidity challenges.
Next Steps
- Raise additional capital through equity or debt financing to fund operations and address liquidity issues.
- Generate revenue through the commercialization of its defense and security business, including CornerShot units and proprietary small arms.
- Implement internal controls to address identified material weaknesses, contingent upon obtaining sufficient capital.
- File the Certificate of Designation for the "Voting Control Preferred" shares with the State of Nevada.
- Pursue and secure contracts for defense products, such as the CornerShot system, and leverage existing partnerships for distribution.
Key Dates
| Date | Description |
|---|---|
| 2016-01-24 | Incorporated in Nevada as Beliss Corp. |
| 2021-05-19 | Entered into a convertible note payable with an original face value of $150,000, bearing 10% interest, due February 19, 2023. |
| 2021-12-06 | Entered into a convertible note payable with an original face value of $70,666, bearing 15% interest, due February 6, 2023. |
| 2023-02-05 | Entered into a Media Use and License Agreement with an initial net rights fee of $85,000. |
| 2023-03-05 | Entered into a vessel loan agreement for $50,000 at 0% interest for treasure recovery activities. |
| 2023-05-01 | Sued by the firm Delmar for $20,000 over a contract related to a Regulation A offering in 2022. |
| 2023-08-01 | Entered into a convertible note payable with a face value of $50,000, bearing 10% interest, due August 1, 2024. |
| 2024-02-01 | Entered into a master convertible corporate note agreement with Native American Pride Constructors, LLC (NAPC, LLC), which advanced $63,791. |
| 2024-03-26 | Entered into an Agreement for Acquisition with NAPC, LLC for defense-related product rights, intellectual property, and business leads. |
| 2024-04-01 | Company changed its name to NAPC Defense, Inc. and new officers/directors were appointed, including Edward K. West as CEO and John Spence as CFO. |
| 2024-06-14 | Entered into a convertible promissory note with a principal amount of $150,000, bearing 10% interest, due June 14, 2025. |
| 2024-07-03 | Entered into a convertible promissory note with a principal amount of $75,000, bearing 10% interest, due July 3, 2025. |
| 2024-08-12 | Entered into a convertible promissory note with a face value of $30,000, bearing 6% interest, due February 12, 2025. |
| 2024-10-17 | Entered into a convertible promissory note with a principal amount of $75,000, bearing 10% interest, due October 17, 2025. |
| 2024-12-16 | Entered into a convertible promissory note with a face value of $10,000, bearing 10% interest, due December 15, 2025. |
| 2024-12-18 | Entered into two convertible promissory notes with face values of $15,000 and $5,000, both bearing 10% interest, due December 18, 2025. |
| 2024-12-20 | Entered into a convertible promissory note with a face value of $250,000, bearing 10% interest, due December 19, 2025. |
| 2025-01-16 | Entered into a convertible promissory note with a face value of $5,000, bearing 10% interest, due January 15, 2026. |
| 2025-01-30 | Entered into a convertible promissory note with a face value of $5,000, bearing 10% interest, due January 29, 2026. |
| 2025-02-28 | A limited liability company controlled by a Director provided a short-term loan of $6,000, bearing 10% interest, due on demand. |
| 2025-03-04 | A limited liability company controlled by a Director provided a short-term loan of $15,000, bearing 10% interest, due on demand. |
| 2025-03-11 | A limited liability company controlled by a Director provided a short-term loan of $30,000, bearing 10% interest, due on demand. |
| 2025-03-19 | Entered into two convertible promissory notes with face values of $75,000 each, bearing 10% interest, due December 31, 2025. |
| 2025-04-18 | Entered into a convertible promissory note with a face value of $5,000, bearing 10% interest, due April 19, 2026. |
| 2025-04-30 | Discontinued treasure and shipwreck recovery business; intellectual property related to defense products impaired to $0. |
| 2025-05-01 | Commercial office space lease commenced in Clearwater, Florida, with base rent of $3,138 per month, terminating May 1, 2028. |
| 2025-05-02 | Entered into two convertible promissory notes with face values of $27,500 each, bearing 10% interest, due August 2, 2025. |
| 2025-05-19 | Entered into a convertible promissory note with a face value of $5,000, bearing 10% interest, due May 20, 2026. |
| 2025-06-23 | Entered into a convertible promissory note with a face value of $50,000, bearing 10% interest, due June 24, 2026. A Director also provided a loan of $18,800. |
| 2025-07-01 | A Director provided a loan of $20,000, bearing 10% interest, due on demand. |
| 2025-07-02 | Entered into a convertible promissory note with a face value of $55,000, bearing 10% interest, due October 1, 2025. |
| 2025-07-18 | Entered into a convertible promissory note with a face value of $27,500, bearing 10% interest, due October 17, 2025. |
| 2025-07-21 | Entered into a convertible promissory note with a face value of $13,750, bearing 10% interest, due October 21, 2025. |
| 2025-08-15 | Commercial office space lease with a related party commenced with a month-to-month term and $10,000 monthly rent. |
| 2025-08-21 | Entered into a convertible promissory note with a face value of $150,000, bearing 10% interest, due August 22, 2026. |
| 2025-09-11 | Entered into a convertible promissory note with a face value of $50,000, bearing 10% interest, due September 12, 2026. |
| 2025-10-06 | Entered into a convertible promissory note with a face value of $50,000, bearing 10% interest, due January 4, 2026. |
| 2025-10-14 | Board of Directors authorized the designation of 'Voting Control Preferred' shares. |
| 2025-10-15 | Authorized common shares increased from 500,000,000 to 2,000,000,000. |
| 2025-10-22 | Board of Directors approved the issuance of 50,000,000 restricted common shares to certain directors and officers. |
| 2025-10-31 | End of the quarterly period covered by this report. |
| 2025-12-15 | Filing date of the Form 10-Q; 334,633,460 common shares issued and outstanding. |
Recommendation
strong sellThe company is in a precarious financial position, evidenced by a going concern warning, escalating losses, and a complete lack of revenue in its new business segment. The significant working capital deficit and reliance on dilutive financing, coupled with numerous debt defaults and the impairment of key intellectual property, indicate severe operational and financial distress. The proposed 'Voting Control Preferred' shares also raise concerns about common shareholder influence. These factors collectively present an extremely high-risk investment profile with a high probability of capital loss.
Keywords
Defense, Security, CornerShot, Military Arms, Law Enforcement, Ballistic Protection, Less-Lethal Products, Small Arms, Ammunition, Armored Vehicles, SEC Filing, 10-Q, Quarterly Report, Financials, Going Concern, Convertible Debt, Dilution, Corporate Governance
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