Quarterly Report for Quarter Ending July 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. 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 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 from historical results of operations and events and those presently anticipated or projected. 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.

Financial information contained in this report and in our financial statements is stated in United States dollars and are prepared in accordance with United States generally accepted accounting principals.

Description of Business

NAPC Defense, Inc. (the "Company") was incorporated in the State of Nevada on January 24, 2016 as Beliss Corp. The Company changed its name on April 1, 2024, to NAPC Defense, Inc. with the State of Nevada to reflect its new business focus. The Company is engaged in activities in the defense and security industries, including weapons systems, tactical platforms such as CornerShot®, and other technologies designed for use by military, paramilitary, and law enforcement agencies.

The Company's strategy includes:

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Weapons Systems - Development and adaptation of specialized firearms platforms, including the CornerShot® system, which allows operators to engage threats from protected positions.

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Non-Lethal Solutions - Exploration and development of non-lethal weapons designed for law enforcement and crowd control, providing alternatives to traditional force.

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Protective Systems - Research and potential acquisition of protective technologies, including ballistic shields, armor solutions, and personal protective equipment for defense and security personnel.

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Research and Development (R&D) - Establishing partnerships and internal programs to identify emerging defense technologies and advance them toward commercialization.

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Contracting and Distribution - Positioning to work with U.S. and allied defense agencies, law enforcement agencies, and approved international partners to supply equipment and tactical solutions.

Through these efforts, the Company intends to build a diversified portfolio of defense-related technologies, both through internal development and through acquisitions or licensing of proven systems, to serve government, military, and security clients worldwide.

Corporate History

NAPC Defense, Inc. (the "Company") was incorporated in the State of Nevada on January 24, 2016 as Beliss Corp. On April 1, 2024, the Company changed its name to NAPC Defense, Inc. to reflect its transition into the defense and security sector. Since the name change, the Company has focused exclusively on developing, licensing, and distributing advanced defense and security technologies for use by military, law enforcement, and government agencies.

The Company will produce and supply CornerShot® units under license from Silver Shadow of Israel to overseas militaries and governments, subject to U.S. government approvals, as well as to U.S.-based law enforcement agencies. In addition, the Company intends to leverage established supplier relationships for the sourcing and sale of personal ballistic protection equipment, including helmets, bullet-resistant vests, and shields, for both domestic and international clients.

The Company is also engaged in the procurement and distribution of small-caliber arms, including rifles and pistols, along with newly developing firearms technologies. Further initiatives include brokering the supply of larger-scale ammunition and artillery through approved overseas channels for sale to U.S. allies and other authorized purchasers. The Company is likewise pursuing opportunities in the brokering and distribution of armored vehicles for both domestic use and international markets.

In March of 2024, the board determined and entered into an acquisition agreement for the acquisition of the rights, intellectual property, and associated contracts, letters of intent, and assets from Native American Pride Constructors, LLC for acquisition of certain rights to sale and production of the CornerShot firearms and surveillance technology, owned by Silver Shadow of Israel and licensed to Native American Pride Constructors LLC (Native American), and other associated leads and rights into the defense industry, including munitions brokering overseas under United States State Department Approval for artillery, rocket, and other munitions sales from off shore sources to U.S. approved allies and other countries. Native American held rights to a number of ATF licenses for sale and production of arms, was a party to a transaction for potential contract and sale of the Cornershot to Saudi Arabia and for sale in the US, and held large access to broker munitions under US approval overseas, from foreign sourced to US Allies and approved countries.

In addition, NAPC Defense, Inc. intends to eventually develop other defense lines of technology including small arms, suppressor technology development business, and other items of opportunity held by Native American Pride Constructors LLC, the board determined that an acquisition agreement of such rights was in the best interest of the Company to pursue as an additional business direction while maintaining its treasure related business. Such agreement was reached on March 26, 2024, however, was subject to further diligence and verification of the list of acquired rights and business plans with a close out date of May 1, 2024 and sign off by NAPC Defense, Inc./BLIS by the CEO for release of the consideration to be made for the purchase of such rights. The board concluded that the addition of this business direction was in the best interest of the Company, regardless of the specific acquisition transaction closing. Pursuant to the March 26, 2024 agreement such acquisition of rights was made for 95,000,000 shares of common stock to be distributed upon approval by NAPC Defense, Inc../BLIS to enumerated parties at such time being May 1, 2024 or after. Such shares were not to be distributed to Native American upon release, so there was no change in control to Native American. There was an acquisition of such rights, intellectual property, sales leads, letters of intent, contract rights and leads, and other matters set forth in such agreement to gain the rights from Native American Pride and change the Company's name to its new defense line of work to NAPC Defense, Inc. but still maintain the treasure business on a more limited basis.

Such shares were subject to release by the Company upon approval of the business lines, by the then current but now former CEO and Director. Such shares did not cause a change in ownership control by any majority shareholder and have been under the rights as set forth in the acquisition agreement.

NAPC Defense, Inc. was able to secure the rights to the following items as part of the deal:

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CornerShot rights for sale, domestically and through Saudi Arabia as existing with Silver Shadow of Israel, including the LOI for the CornerShot sale for Saudi Arabia from the Ministry of Defense, which is expected, for an expected order and contract for some 37,000 units of the CornerShot firearms and tactical units to Saudi Arabia as held by Native American Pride for the Silver Shadow of Israel, amount owed for Saudi Arabian payment potential under a contract if transacted. Such rights include the ability to contract and utilize the ATF licenses held for production and sale of firearms and accessories related to such technology under contract with NAPC Defense, Inc./BLIS, and existing approvals from the Department of State for foreign arms transactions, an existing or expected approval for firearms under approval from the Saudi Government. As well this includes the existing relationship with the Saudi Ministry of Defense for interest in the CornerShot purchase, including the relationship and visits expected for closing of such contract. Rights to the proceeds from the joint venture in Saudi Arabia for such introductions and potential future sales, visit to occur in Saudi Arabia, and domestic US sales potentials, including domestic law enforcement shows, conventions and US Military demonstration.

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In addition, the ability and agreements to produce the CornerShot domestically in the United States which includes a current plastics manufacturer relationship and metals production relationship, both to be contracted, for such units of the CornerShot to be produced for all contracts or purchase orders which could be achieved. The Company attended various industry and networking conventions and conferences in Florida in June 2024, in New Jersey in June 2024 and the visit to Saudi Arabia in the summer of 2024.

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Rights as existing to the CornerShot from Silver Shadow of Israel. To include the foreign sales to Saudi Arabia created by persons related to Native American, as well as domestic sales to law enforcement or government agencies in the United States. To include all media, CornerShot units, additional show and demonstration units, videos, and other rights.

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Overseas brokering opportunities of ammunition sales to US Allies, with State Dept. the DDTC (Directorate of Defense Trade Controls, a government agency within the United States Department of State) as a registered broker the ability to request pre-brokering approval. This includes the sources and leads existing to large scale munitions inventories from third parties, including those on a revolving list that is held by parties which are available overseas for sale, to approved countries and end users. This includes all contacts and relations to overseas producers, holders, and potential purchasers of large-scale munitions sales for such areas as Allied and US military or foreign aid to Ukraine. These leads and brokering needed confirmation as to available inventories from owners overseas by the Company through relations created with the new operations. The amounts and the available rolling catalogues of available munitions and sources were subject to review and approval for final distribution. The verification was to be made as of or after May 1, 2024, through the former CEO with his experience and knowledge.

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Verification for ability to design, manufacture and sell new items and lines of firearms and accessories to include but not be limited to rifles, small arms, ammunition, and accessories. the Company had additional information and contacts and will use the abilities of production and sales under the Native American Pride permits to conduct such study of new technologies, firearms, production, prototyping knowledge, and sales rights as necessary.

Thus on April 1, 2024 there was the change in officers and directors, which was made for an additional new segment of the Company into the defense and law enforcement business. Pursuant to the Board of Directors resolution there was no change in control of the Issuer to any party. The change in officers and directors was made to include the following for the change in the main direction of the Company: The Agreement was entered into without abandoning the treasure and recovery business, while the board made a change in officers and directors. There was no change in control of the Company.

Thus, pursuant to the Board of Directors intent for the new addition of a business line for defense, it was decided and concluded that as of April 1, 2024, Craig A. Huffman, Patrick Scheider, and Frederick Conte, resigned as officer and directors, with Craig A. Huffman to continue as Secretary and Chief Legal Officer for the Corporation while overseeing and approval of the acquisition, overseeing corporate compliance, contracting and numerous other matters on a continuing basis. The board appointed Edward K. West as Director and Chief Executive Officer, Evelyn R. Gurba as director, Derrick West as director, and John Spence as director and Chief Financial Officer.

The Company determined the new business priority would best be reflected by a change in the name to NAPC Defense, which was reflected by a change of the corporate name in the State of Nevada to NAPC Defense, Inc.

At April 30, 2025 NAPC Defense, Inc. decided to discontinue its treasure and shipwreck recovery business in order to focus on its defense related business.

Results of operations

We have incurred recurring losses to date. Our consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities. However, there can be no assurances that we will be able to raise additional capital. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from the issuance date of these financial statements.

Summary of the Three Months Ended July 31, 2025 Results of Operations Compared to the Three Months Ended July 31, 2024 Results of Operations

Revenue

The Company recorded revenue of $0 and $67,467 during the three months ended July 31, 2025 and 2024, respectively.

During the three month period ended July 31, 2025, the Company incurred general and administrative expense of $29,874, rent expense of $13,001, consulting and accounting expense of $152,586, legal fees of $2,210, research and development expenses of $6,126, and professional fees of $54,262.

During the three month period ended July 31, 2024, the Company incurred consulting and accounting expense of $69,617, general and administrative expense of $137,450, legal fees of $20,650, professional fees of $3,150, research and development of $4,103 and rent expense of $80,000.

Total operating expenses were $258,059 for three month period ended July 31, 2025 versus $314,970 for the three month period ended July 31, 2024, a decrease of $56,911 or 18.1%. The decrease in operating expenses for the three month period ended April 30, 2025 is largely attributable to decreases in general and administrative expense of $107,576, rent expense of $66,999 and legal fees of $18,440. These decreases offset increases in consulting and accounting expenses of $82,969 and professional fees of $51,112 and research and development of $2,023.

Other Expenses

Total other expenses were $326,193 during the three month period ended July 31, 2025 and $156,491 during the three month period ended July 31, 2024, an increase of $169,702 or 108.4%. Other expenses increased during the three month period ended July 31, 2025 primarily due to an increases of $177,802 for amortization of debt discount and an increase of $100,312 in financing fees which offset a $123,653 decrease in loss on extinguishment of debt.

Discontinued Operations

During the three month period ended July 31, 2025, the Company had a loss from operations of discontinued operations of $0.

During the three month period ended July 31, 2024, the Company had a loss from operations of discontinued operations of $31,869.

Net Loss

For the year ended three month period ended July 31, 2025 the Company incurred net losses of $584,252 versus net losses of $435,863, for three month period ended July 31, 2024. The increase in net loss of $148,389 during the three month period ended July 31, 2025 was primarily due to increases in loss from other expenses.

Deemed Dividend

During the three month period ended July 31, 2025, the Company had a deemed dividend of $117,629 related to a price protection exercise price adjustment on warrants.

Net Loss Applicable To Common Stockholders

During the three month period ended July 31, 2025, net loss applicable to common stockholders was $701,881. During the three month period ended July 31, 2024, net loss applicable to common stockholders was $435,863.

Liquidity and capital resources

As at July 31, 2025, our total assets were $136,902 and our total liabilities were $1,582,743.

As at July 31, 2025, our current assets were $27,708 and current liabilities were $1,514,311.

As of July 31, 2025 our total stockholders' deficit was $1,445,841.

As of July 31, 2025 we had a working capital deficit of $1,486,603.

Cash flows from operating activities

For the three months ended July 31, 2025 net cash flows used in operating activities was $248,359.

For the three months ended July 31, 2024 net cash flows used in operating activities was $163,549.

The increase in cash used in operating activities is primarily attributable to an increase in the net loss and the amortization of debt discount.

Cash flows from investing activities

For the three months ended July 31, 2025 net cash flow used in investing activities was $6,500.

For the three months ended July 31, 2024 net cash flow used in investing activities was $0.

Cash flows from financing activities

For the three months ended July 31, 2025 we have generated $267,657 in cash flows from financing activities.

For the three months ended July 31, 2024 we have generated $170,288 in cash flows from financing activities.

The increase in cash provided by financing activities is primarily attributable to an increase in proceeds from short term loans and cash proceeds from the exercise of warrants.

We qualify as a "smaller reporting company" under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

For example, smaller reporting companies are not required to provide a compensation discussion and analysis under Item 402(b) of Regulation S-K or the auditor attestation of internal controls over financial reporting.

Future Financings

We will continue to rely on equity sales of the Company's common shares in order to continue to fund business operations. Issuances of additional shares will result in dilution to existing shareholders. There is no assurance that the Company will achieve any additional sales of equity securities or arrange for debt or other financing to fund planned operations.

Liquidity and Capital Resources and Cash Requirements

As of the date of this report, the current funds available to the Company will not be sufficient to continue maintaining a reporting status. At July 31, 2025, the Company had a working capital deficit of $1,486,603. The Company is in immediate need of further working capital and is seeking options, with respect to financing, in the form of debt, equity or a combination thereof. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from the issuance date of these financial statements.

The Company may not be able to continue as a going concern. The report of our independent auditors for the years ended April 30, 2025 and 2024 raises substantial doubt as to our ability to continue as a going concern. If the Company is not able to continue as a going concern, it is highly likely that all capital invested in the Company will be lost.

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. Additionally, the Company will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company's management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement its business plan and impede the speed of its operations.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.