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

Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following information should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.

Defense Technologies International Corp. (the "Company ") was incorporated in the State of Delaware on May 27, 1998. Effective June 15, 2016, the Company changed its name to Defense Technologies International Corp. from Canyon Gold Corp. to more fully represent the Company's expansion goals into the advanced technology sector.

On October 19, 2016, the Company entered into a Definitive Agreement with Controlled Capture Systems, LLC ("CCS"), representing the inventor of the technology and assets previously acquired by DTC, that included a new exclusive Patent License Agreement and Independent Contractor agreement. Under the license agreement with CCS, the Company acquired the world-wide exclusive rights and privileges to the CCS security technology, patents, products, and improvements. The Company agreed to pay CCS an initial licensing fee of $25,000 and to pay ongoing royalties as defined in the Definitive Agreement.

On May 30, 2018, the Company and Control Capture Systems, LLC amended their license agreement as follows (1) Royalty payments of 5% of gross sale from the license agreement will be calculated and paid quarterly with a minimum of $12,500 paid each quarter (2) All payment will be in US dollars or stock of the Company and its subsidiary. The value of the stock will be a discount to market of 25% of the average trading price for the 10 days prior to conversion. The number of shares received by Control Capture prior to any reverse split are anti-dilutive.

Effective January 12, 2017, Passive Security Scan, Inc. ("PSSI") was incorporated in the state of Utah as subsidiary controlled by the Company. The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company. The Company owns 79.8% of PSSI with 20.2% acquired by several individuals and entities. The Company plans to continue the development of the technology. All sales and marketing activities are through PSSI.

The extent to which the COVID-19 pandemic may directly or indirectly impact our business, financial condition, and results of operations is highly uncertain and subject to change. We considered the potential impact of the COVID-19 pandemic on our estimates and assumptions and there was not a material impact to our consolidated financial statements as of and for the three months ended July 31, 2024.

The Company's security products are licensed from CCS and developed by the company designed for personal and collateral protection. Products derived from this technology are intended to provide passive security scanning units for either walk-through or hand-held use to improve security for schools and other public facilities. Passive Portal units use electromagnets and do not emit anything (such as x-rays) through the subject. We have also completed a prototype with optional "Digital Imaging," which will give the user of the scanner the ability to recall the entire traffic passing through the scanner at any time thereafter.

As of May 19, 2020, the Company added an IR Camera for detection of elevated body temperatures and is presently offering these products:

Forward Looking and Cautionary Statements

This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Results of Operations

During the three and six months ended October 31, 2025 and 2024, the Company did not receive any revenue.

Our operating expenses for the three and six months ended October 31, 2025, were $142,182 and $329,412 compared to $366,065 and $529,582 for the same periods in 2024. The variance was due primarily to lower consulting costs, which were $80,000 and $180,250 compared to $219,292 and $336,792 for the same periods in 2024; along with lower general and administrative costs of $62,182 and $149,162 compared to $146,773 and $192,790 in the same periods in 2024.

Interest expenses incurred in the three and six month periods ended October 31, 2025, were $6,253 and $13,318 compared to $7,096 and $14,154 for the same periods in 2024. A loan origination fee of $5,000 and $42,529 was incurred during the three and six months ended October 31, 2025, compared to $5,000 during the six months in 2024, along with a loss on notes of $5,000 being incurred during the period in 2024. The Company had a gain on debt settlement of $723,065 in the three and six months periods in 2024 along with a loss on accounts payable of $250,000 for the six months period in 2024.

Change in derivative liability resulted in a loss of $16,359 and $21,467 for the three and six months period ended October 31, 2025, compared to a loss of $709 for the three months period and gain of $7,457 during the six months period for the same period in 2024. We estimate the fair value of the derivative for the conversion feature of our convertible notes payable using the American Binominal Lattice pricing model at the inception of the debt, at the date of conversions to equity, cash payments and at reporting date, recording a derivative liability, debt discount and a gain or loss on change in derivative liability as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, and variable conversion prices based on market prices as defined in the respective loan agreements. These inputs are subject to significant changes from period to period; therefore, the estimated fair value of the derivative liability will fluctuate from period to period and the fluctuation may be material.

Total other income and expense for the three and six month periods ended October 31, 2025 was a loss of $29,112 and $78,814, compared to other income of $394,195 and other loss of $73,214 for the same periods in 2024.

Net loss before non-controlling interest for the three and six month periods ended October 31, 2025, were a net loss of $171,294 and $408,226 compared to a net income of $394,195 and net loss of $73,214 for the same periods in 2024. After adjusting for our consolidated subsidiary, net loss for the three and six-month period ended October 31, 2025 was a net loss of $159,942 and $382,106 compared to a net income of $398,527 and net loss of $62,712 for the same periods in 2024.

Liquidity and Capital Resources

At October 31, 2025 the Company had total current assets of $7,662 and total current liabilities of $2,477,014 resulting in a working capital deficit of $2,469,352. Included in our current liabilities and working capital deficit at October 31, 2025 are derivative liabilities totaling $53,333 related to the conversion features of certain of our convertible notes payable, convertible notes of $215,392, net of discount, payables due related parties of $937,877, accounts payable and accrued expense of $197,596, accrued interest and fees payable of $233,491, notes payable related parties $183,662 and notes payables of $541,288. We anticipate that in the short term, operating funds will continue to be provided by related parties and other lenders.

During the six months period ended October 31, 2025, net cash used in operating activities was $93,577 compared to cash used of $40,603 in the same period in 2024. Net cash used in the six months period in 2025 consisted of net loss of $408,226, change in payables to related parties of $190,669, increase in accounts payable of $63,484, along with loss on notes of $29,629, loss on derivative of $21,467, loss on notes of $29,629, debt settlement of $1,500 and Loan origination fees of $7,900.

During the six months ended October 31, 2025 net cash provided by financing activities was $92,147 consisting of proceeds from notes payable related parties of 41,803 and notes payable of $80,400 offset by repayment of notes payable of $30,056. We have had no revenue and have paid expenses and costs with proceeds from the issuance of securities as well as by loans from investor, stockholders and other related parties.

Our immediate goal is to provide funding for the completion of the production of the Offender Alert Passive Scan licensed from CCS. The Offender Alert Passive Scan is an advanced passive scanning system for detecting and identifying concealed threats.

We believe a related party and other lenders will provide sufficient funds to carry on general operations in the near term and fund DTC's production and sales. We expect to raise additional funds from the sale of securities, stockholder loans and convertible debt. However, we may not be successful in our efforts to obtain financing to carry out our business plan.

See the notes to our condensed consolidated financial statements for a discussion of recently issued accounting pronouncements that we have either implemented or that may have a material future impact on our financial position or results of operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.