10-K/A: NAPC Defense Reports Significant Losses, Going Concern Doubt

NAPC Defense, Inc. filed an amended annual report revealing substantial net losses, a significant working capital deficit, and auditor concerns about its ability to continue as a going concern for the fiscal year ended April 30, 2025.

Summary

• The company changed its name from Beliss Corp. to NAPC Defense, Inc. on April 1, 2024, to reflect a new focus on defense and security industries.
• The treasure and shipwreck recovery business was discontinued as of April 30, 2025, to focus solely on defense-related activities.
• Rights, intellectual property, and associated contracts from Native American Pride Constructors, LLC (NAPC, LLC) were acquired for 95,000,000 shares of common stock, valued at $1,615,000, on March 26, 2024.
• The acquired intellectual property, valued at $1,615,000, was fully impaired to $0 as of April 30, 2025, due to a lack of closed sales and licensing deals for CornerShot and related products.
• A net loss of $3,376,999 was reported for the year ended April 30, 2025, a significant increase from the $711,986 net loss for the prior year.
• Total operating expenses increased by 547.1% to $2,484,960 in 2025 from $384,007 in 2024, primarily due to a $1,755,296 impairment expense and increased rent.
• Total other expenses increased by 483.4% to $748,307 in 2025 from $128,266 in 2024, driven by financing fees, amortization of debt discount, and loss on extinguishment of debt.
• The company had a working capital deficit of $1,146,674 as of April 30, 2025.
• Auditors raised substantial doubt about the company's ability to continue as a going concern.
• Cash used in operating activities increased to $797,225 in 2025 from $340,738 in 2024.
• The company expects to expend its available cash in less than one month from the issuance date of these financial statements.
• A lawsuit seeking $20,000 is pending against the company, which was awaiting dismissal for lack of prosecution as of April 30, 2025.
• 69,851,625 shares of restricted common stock were issued during the year ended April 30, 2025, for various purposes including debt conversion, financing fees, and services.
• Outstanding shares of common stock increased to 238,251,927 as of April 30, 2025, from 168,400,302 as of April 30, 2024.
• The company has significant convertible notes payable, which may result in substantial dilution to current shareholders.
• Management concluded that financial disclosure controls and procedures were not effective due to limited internal resources and lack of multiple levels of transaction review.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, evidenced by substantial losses, zero revenue, significant working capital deficit, and an explicit going concern warning from auditors. The impairment of its core intellectual property for the new defense business, coupled with numerous defaulted debts and a very short cash runway, indicates critical operational and financial challenges.

Positives

• Successfully transitioned and rebranded to NAPC Defense, Inc., focusing on the defense and security sector.
• Secured rights to CornerShot firearms and surveillance technology, including a Letter of Intent for a potential 37,000-unit order to Saudi Arabia.
• Established relationships for domestic CornerShot production with plastics and metals manufacturers.
• Pursuing overseas brokering opportunities for ammunition and artillery sales to US Allies, with State Department approval.
• Developing proprietary lines of small arms and suppressor technology.
• Entered partnerships for distribution of ballistic protection products through Extremis and less-than-lethal products with Lamperd Less Lethal of Canada.

Negatives

• Incurred a significant net loss of $3,376,999 for the year ended April 30, 2025, a substantial increase from $711,986 in the prior year.
• Total operating expenses surged by 547.1% to $2,484,960, largely due to a $1,755,296 impairment expense.
• The $1,615,000 intellectual property acquired for the defense business was fully impaired to $0 due to a lack of closed sales and licensing deals for CornerShot.
• Reported $0 revenue for both the years ended April 30, 2025, and 2024.
• A working capital deficit of $1,146,674 as of April 30, 2025.
• Auditors raised substantial doubt about the company's ability to continue as a going concern.
• Expects to expend available cash in less than one month.
• Several convertible notes payable are in default due to non-payment of principal and/or accrued interest.
• The company's stock is thinly traded on the Pink Sheets, leading to high volatility and difficulty for shareholders to deposit shares.
• Management concluded that financial disclosure controls and procedures were not effective due to limited internal resources and lack of multiple levels of transaction review.
• Material weaknesses in financial reporting exist due to limited resources, lack of segregation of duties, and absence of an audit committee or independent audit committee financial expert.
• Significant potential dilution to current shareholders from convertible notes and warrants.

Risks

• **Going Concern Risk**: Substantial doubt about the ability to continue as a going concern due to recurring losses, negative cash flow, and a working capital deficit.
• **Liquidity Risk**: Immediate need for further working capital; available cash is expected to be expended in less than one month.
• **Capital Raise Risk**: No assurance of raising additional capital through equity or debt, which could lead to curtailment or cessation of operations.
• **Dilution Risk**: Convertible notes payable and warrants may result in significant dilution to current shareholders and a decrease in stock price.
• **Market Volatility**: Common stock is thinly traded on the Pink Sheets, leading to high price volatility and difficulty in liquidating investments.
• **Business Execution Risk**: Impairment of intellectual property indicates challenges in closing sales and licensing deals for key products like CornerShot.
• **Regulatory Compliance Risk**: Need to meet financial disclosure and reporting requirements (e.g., Sarbanes-Oxley Act Section 404) with limited resources, potentially diverting management time from business plan implementation.
• **Litigation Risk**: A pending lawsuit seeking $20,000, though dismissal for lack of prosecution is pending.
• **Default Risk**: Several convertible notes are in default, potentially leading to lawsuits and foreclosure on assets.
• **Internal Control Deficiencies**: Material weaknesses in financial reporting due to limited resources, lack of segregation of duties, and absence of an audit committee or independent audit committee financial expert.

Future Outlook

The company will continue to rely on equity sales of common shares and debt, including convertible promissory notes, to fund operations, with no assurance that additional capital will be raised. It does not expect to generate significant revenues for the foreseeable future. Management believes current trends toward lower capital investment in start-up companies pose a significant challenge and anticipates diverting management time to regulatory compliance, which could impede business plan implementation.

Management Comments

• "Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially..."
• "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 has determined that a material weakness exists due to a lack of segregation of duties, resulting from the Company's limited resources and personnel."
• "As of April 30, 2025, we did not have sufficient capital and/or operations to implement any of the remedial measures described below [for internal control deficiencies]."

Industry Context

NAPC Defense, Inc.'s pivot from treasure recovery to the defense and security sector aligns with global geopolitical trends and increased defense spending. The focus on specialized firearms (CornerShot), non-lethal solutions, protective systems, and brokering ammunition and armored vehicles positions the company in a high-demand, but also highly regulated and competitive, market. The impairment of intellectual property for CornerShot, despite securing rights, suggests challenges in commercializing defense technologies, which often require significant capital, long sales cycles, and complex government approvals. The reliance on convertible debt for funding is common for early-stage defense tech companies but carries substantial dilution risks.

Management Changes

Corporate Governance

Legal Proceedings

• The company is being sued in county court by the firm of Delmar for $20,000 over a contract related to its Regulation A offering in 2022. The company is defending on the basis that Delmar never performed its obligations. As of April 30, 2025, the suit was pending dismissal for lack of prosecution.

Related Party Transactions

• Acquisition agreement with Native American Pride Constructors, LLC (NAPC, LLC) for 95,000,000 shares of restricted common stock valued at $1,615,000. NAPC, LLC is a disabled veteran Native American and woman-owned limited liability company.
• Lease agreement for commercial office space and warehousing with a related party, with a base monthly rent of $25,000, entered on May 1, 2024, and amended to month-to-month on August 1, 2024.
• Related party convertible loans include a non-interest bearing convertible promissory note from an officer with a balance of $60,890 as of April 30, 2025, and a $50,000 convertible note from a former Board member (due August 1, 2024, principal balance $50,000 at April 30, 2025).
• NAPC, LLC advanced $63,791 to NAPC Defense, Inc. during FY2024, of which $59,689 was repaid, leaving a balance of $4,102.
• Related party short-term loans include $51,000 from a limited liability company controlled by a Director, with balances outstanding at April 30, 2025.
• Payments to Craig Huffman's law firm for legal and strategic consulting services totaled $30,250 in FY2025 and $48,900 in FY2024.
• Payments to a limited liability company controlled by John Spence for financial and strategic services totaled $25,650 in FY2025.
• Subsequent to April 30, 2025, a loan of $18,800 was made with Edward K. West (CEO).
• Subsequent to April 30, 2025, a loan of $20,000 was made with a related party individual lender.

Stakeholder Impact

• **Shareholders**: Face significant dilution risk from convertible notes and warrants, high stock price volatility, and a potential for total loss of investment if the company cannot continue as a going concern.
• **Creditors/Note Holders**: Several convertible notes are in default, indicating a high risk of non-payment and potential for legal action, including foreclosure on assets.
• **Employees/Management**: Management's time may be diverted to regulatory compliance due to limited resources, creating uncertainty regarding the company's future operations and business plan execution.
• **Customers/Partners**: Potential impact on the company's ability to deliver products and services if financial distress continues or operations cease, affecting existing and prospective contracts.

Next Steps

• Raise additional capital through equity or debt securities to meet long-term operating requirements and continue as a going concern.
• Implement practical, cost-effective steps to address material weaknesses in internal controls, including assessing duties, potentially hiring additional personnel, and considering an audit committee.
• Continue pursuing contracts for the CornerShot system and developing proprietary small arms.
• Further develop partnerships for ballistic protection and less-than-lethal products.
• Follow up on overseas brokering opportunities for ammunition and artillery.
• Address pending motions in the Delmar lawsuit.
• Gather information for filing tax returns for past years.

Key Dates

Recommendation

The company is in severe financial distress, evidenced by substantial and increasing net losses, zero revenue, a significant working capital deficit, and an explicit 'going concern' warning from its auditors. The impairment of its core intellectual property for the new defense business, coupled with multiple defaulted convertible notes and a very short cash runway (less than one month), indicates critical operational and financial challenges. The high risk of significant dilution from future capital raises and the illiquid, volatile trading on the Pink Sheets further exacerbate the negative outlook. An investment in NAPC Defense, Inc. at this stage carries an extremely high risk of total capital loss.

Keywords

Defense, Security, CornerShot, Weapons Systems, Tactical Platforms, Non-Lethal Solutions, Ballistic Protection, Ammunition Brokering, Armored Vehicles, SEC Filing, 10-K/A, Financial Report, Going Concern, Dilution, Convertible Notes, NAPC Defense, Military, Law Enforcement, Risk Factors, Financial Performance