SDCO 10-Q
SDR Drone, Inc. (SDCO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from __________ to __________
Commission
file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 28, 2026, there were shares of the registrant’s common stock outstanding.
HALLMARK VENTURE GROUP, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2026
TABLE OF CONTENTS
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HALLMARK VENTURE GROUP, INC.
CONDENSED BALANCE SHEETS
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Note receivable, net | ||||||||
| Total Current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Due to a related party | ||||||||
| Convertible notes payable – related party, net of debt discount of $ | ||||||||
| Convertible notes payable – net of debt discount of $ and $, respectively | ||||||||
| Accrued interest - related party | ||||||||
| Accrued interest | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Series A Preferred stock, shares authorized, $ par value; and issued and outstanding, respectively | ||||||||
| Common stock, shares authorized, $ par value; and issued and outstanding, respectively | ||||||||
| Stock payable | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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HALLMARK VENTURE GROUP INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | $ | $ | ||||||
| Expenses: | ||||||||
| General and administrative | $ | $ | ||||||
| Professional fees | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest waived off | ||||||||
| Bad debt expense | ( | ) | ||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Change in fair value of derivative | ( | ) | ( | ) | ||||
| Loss on issuance of convertible note | ( | ) | ||||||
| Total other expense | ( | ) | ( | ) | ||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income tax | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Net loss from discontinued operations | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share – basic and diluted | $ | ) | $ | ) | ||||
| Weighted average shares outstanding – basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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HALLMARK VENTURE GROUP, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(Unaudited)
| Series A Preferred Stock | Common Stock | Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | payable | Capital | Deficit | Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Stock issued for conversion of debt | — | |||||||||||||||||||||||||||||||
| Stock issued for conversion of debt – related party | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Series A Preferred Stock | Common Stock | Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | payable | Capital | Deficit | Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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HALLMARK VENTURE GROUP, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss from continued operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Amortization of debt discount | ||||||||
| Bad debt expense | ||||||||
| Change in fair value of derivative | ||||||||
| Loss on issuance of convertible note | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued compensation | ( | ) | ||||||
| Accrued interest | ( | ) | ||||||
| Due to a related party | ||||||||
| Assets from discontinued operations | ||||||||
| Net cash (used) provided by operating activities from continued operations | ( | ) | ||||||
| Loss from discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from convertible note payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash beginning of period | ||||||||
| Cash end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| NON-CASH TRANSACTIONS: | ||||||||
| Common stock issued for payment of debt | $ | $ | ||||||
| Common stock issued for payment of debt – related party | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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HALLMARK VENTURE GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 1 — ORGANIZATION AND OPERATIONS
Hallmark Venture Group, Inc., was originally incorporated in the state of Colorado on July 14, 1995, with the name CPC Office Systems, Inc. On July 12, 1999, the Company changed its name to Homesmart USA, Inc. On March 8, 2006, the Company changed its name to Smart Truck Systems, Inc. On March 3, 2006, the Company moved its domicile to Nevada. On March 6, 2008, the Company changed its name to Speech Phone, Inc. On July 16, 2008, the Company changed its name to Hallmark Venture Group, Inc.
On May 4, 2020, Living Waters, LLC (“LWLLC”) obtained management control of the Company from its previous CEO and Director, Robert Cashman (“Cashman”), pursuant to a contingent Share Purchase Agreement (the “SPA”), dated as of May 4, 2020, by and among LWLLC and Cashman, whereby certain preferred shares (the “Preferred Shares”) that represent the voting control interest in the Company were to be issued to LWLLC (the “Transaction”).
On May 27, 2020, in connection with the Transaction and in accordance with provisions of the SPA, LWLLC assigned the SPA to Medical Southern, LLC (“MSLLC”). On August 13, 2020, all issued and outstanding Preferred Shares were issued to a designee of MSLLC, Top Knot, Inc. USA (“TKIU”).
On August 17, 2020, in connection with the Transaction and in accordance with provisions of the SPA, MSLLC assigned the SPA to Stonecrest Acquisition, LLC (“SALLC”). As a consequence of the Transaction, a change of control of the Company occurred. As a result of the Transaction TKIU obtained voting control of the Company. Subsequently, on October 19, 2020, TKIU assigned % of the Preferred Shares it held to Endicott Holdings Group, LLC (“Endicott”).
On June 20, 2022, Endicott transferred % of the preferred shares, and of the shares of common stock it held, to Beartooth Asset Holdings, LLC, an entity controlled by the Company’s Secretary, Paul Strickland, resulting in a change of control of the Company.
On July 7, 2022, Beartooth Asset Holdings, LLC (an entity controlled by Paul Strickland, the Company’s secretary and a member of its board of directors) transferred Series A Preferred Shares to JMJ Associates, LLC, an entity controlled by John D. Murphy, Jr., President and CEO of the Company and a Member of the Board of Directors, resulting in a change of control of the Company.
On July 12, 2022, Paul Strickland, the Company’s Principal Financial Officer, became a director of the Company.
On January 11, 2024, the Company entered into a Change of Control Agreement (the “CoC Agreement”) between John D. Murphy, Jr., the Company’s Director and Chief Executive Officer, and JMJ Associates, LLC, an entity controlled by Mr. Murphy (“Murphy”); Paul Strickland, the Company’s Director and Secretary, and Selkirk Global Holdings, LLC and Beartooth Asset Holdings, LLC, both entities controlled by Mr. Strickland (“Strickland”); and Steven Arenal and Aurum International Ltd., an entity controlled by Mr. Arenal (“Aurum”).
Pursuant
to the CoC Agreement, Murphy and Strickland would assign the Series A preferred shares controlled by each to Aurum, and Strickland was
to transfer restricted common shares to Aurum. In exchange, Murphy and Strickland would retain a
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In connection with the foregoing, the Company relocated its principal place of business to 626 Wilshire Boulevard, Suite 410, Los Angeles, California 90017.
On January 11, 2024, John D. Murphy, Jr. resigned as Director and Officer of the Company and all other positions he held with the Company.
On January 11, 2024, Paul Strickland resigned as Director and Officer of the Company and all other positions he held with the Company.
On January 11, 2024, Steven Arenal was elected as Director of the Company and appointed Chief Executive Officer, President, and Secretary of the Company.
On February 27, 2024, Steve Arenal and Aurum International Ltd. were given notice of default and failure to perform on the agreements they had signed, and Strickland and Murphy also gave notice of cancellation of all the foregoing agreements.
On February 28, 2024, a special meeting of shareholders was held removing Arenal and reinstating Murphy and Strickland and reversing and canceling all of the foregoing Aurum International Ltd / Arenal agreements.
On February 28, 2024, the Company filed an 8-K disclosing the cancellation, termination, and failure to perform on the aforementioned Arenal / Aurum agreements.
On
March 4, 2024, the Company and its Board of Directors approved a
On March 4, 2024, the shareholders required to vote approved the Board’s
On
March 7, 2024, the Company filed the Amended and Restated Articles of Incorporation with Florida Secretary of State reflecting the
On September 26, 2024, the Company and its Board of Directors approved the following; i) Agreement and Plan of Reorganization; ii) Change of Control Agreement; iii) Escrow Agreement, iv) Anti-Dilution Agreement; v) Cancellation of the October 6, 2022 Selkirk Global Holdings, LLC Note; vi) Cancellation of the April 6, 2023 Selkirk Global Holdings, LLC Note, vii) Cancellation of the December 12, 2023 Strickland Convertible Exchange Note; viii); and the Company authorized its Secretary to open a bank account in the name of the Company.
On
September 26, 2024, the Company and Jubilee Intel, LLC (“Jubilee”) entered into an Agreement and Plan of Reorganization (the
“Merger”) whereby the Company acquired
On
May 12, 2025, the Company executed a Membership Interest Assignment Agreement with Evan Bloomberg, its former officer and director. Under
this agreement, the Company transferred
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NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2026. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and the related footnotes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K/A.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and these differences could be material.
The most significant estimates made by management in the preparation of the financial statements relate to the estimates used to calculate the fair value of certain liabilities, the derivative liability, present value of note payable and the valuation of notes receivable. Management bases its estimates on historical experience and on other various assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from such estimates under different assumptions and conditions.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company and its wholly owned subsidiary in which the Company has a controlling financial interest during the year ended December 31, 2025. All significant intercompany transactions and balances are eliminated in consolidation.
The Company evaluates its ownership interests in accordance with applicable consolidation guidance to determine whether control exists. When the Company loses control of a subsidiary, it derecognizes the assets, liabilities, and any noncontrolling interests of that subsidiary as of the date control is lost. Any resulting difference between (i) the carrying value of the net assets derecognized and (ii) the consideration received, if any, is recognized as a gain or loss in the statements of operations.
Refer to Note 1 for the deconsolidation of Jubilee.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity date of three months or less at the time of purchase to be
cash equivalents. The Company has cash of $
Related Party Transactions
Under ASC 850 “Related Party Transactions” an entity or person is considered to be a “related party” if it has control, significant influence or is a key member of management personnel or affiliate. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company, in accordance with ASC 850 presents disclosures about related party transactions and outstanding balances with related parties.
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Derivative Financial Instruments
The Company evaluates warrants issued with notes payable and embedded conversion features of convertible notes under ASC 480 and ASC 815 to determine appropriate classification. Instruments that are not indexed to the Company’s own stock or do not meet equity classification criteria under ASC 815-40 are classified as derivative liabilities.
Derivative liabilities are recorded at fair value upon issuance and remeasured at each reporting date, with changes in fair value recognized in the statements of operations as other income (expense). Fair value is estimated using the Black-Scholes option pricing model and classified within Level 3 of the fair value hierarchy under ASC 820.
Proceeds from notes payable and convertible notes with associated derivative liabilities are allocated first to the derivative liability at fair value, with the residual allocated to the host debt instrument and recorded as a debt discount, which is amortized to interest expense over the note term using the straight line method.
Fair Value of Financial Instruments
The fair value is an exit price representing the amount that would be received to sell an asset or required to transfer a liability in an orderly transaction between market participants. As such, fair value of a financial instrument is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or a liability.
A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
| ● | Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
| ● | Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participants assumptions that are reasonably available. |
The
Company’s financial instruments reported at their fair values consist of derivative liabilities. The Company’s derivative
liabilities had a fair value of $
When determining fair value, whenever possible, the Company uses observable market data and relies on unobservable inputs only when observable market data is not available. As of March 31, 2026 and December 31, 2025, the Company did not have any level 1 or 2 financial instruments. On March 31, 2026 and December 31, 2025 the Company’s level 3 financial instruments were derivative liabilities.
The following table presents the Company’s assets and liabilities that are measured at fair value on a non-recurring basis.
At March 31, 2026
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Liabilities | ||||||||||||
| Derivative Liability | $ | |||||||||||
| 10 |
At December 31, 2025
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Liabilities | ||||||||||||
| Derivative Liability | $ | |||||||||||
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted EPS on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all diluted potential common shares outstanding during the period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of warrants or stock or conversion of stock. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
For periods with a net loss the effect of any potentially dilutive shares is anti-dilutive and they have been excluded from dilutive EPS.
Discontinued Operations
The Company accounts for discontinued operations in accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations. The disposal of a component or group of components is classified as a discontinued operation if the disposal represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results. This includes the sale, abandonment, or other disposal of legal entities, business segments, or significant components.
Upon meeting the criteria for discontinued operations, the results of operations, including any gain or loss on disposal, are presented separately in the consolidated statements of operations for all periods presented. Assets and liabilities of discontinued operations are presented separately in the consolidated balance sheets. The results of operations of the discontinued component are still reported separately in the consolidated statement of operations.
Management evaluates and updates the classification of operations as discontinued when relevant events occur, such as the approval of a sale plan, abandonment, or completion of disposal.
Segment Reporting
The Company uses the “management approach” to identify its reportable segments. This approach is based on the internal organizational structure used by management for making operational decisions and assessing the performance of the business.
The Company previously operated through two reportable segments. Through May 12, 2025, the Company, through its subsidiary Jubilee, operated an Advertising segment that launched and managed Yahoo partner advertisements and provided a SaaS platform for third parties to run such advertisements. This segment subsequently ceased to meet the criteria for classification as a continuing operation and was therefore reclassified as a discontinued operation. As a result of this reclassification, all prior period segment information has been recast to conform to the current period presentation.
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Following this reclassification, the Company operates through a single reportable segment, the Holding Segment. The Holding Segment includes corporate functions such as finance, legal, human resources, and executive management, and represents the parent-level activities of the Company, including the identification and pursuit of new business opportunities. This segment will provide financing support to other operating units, and corporate-level expenses are recorded within this segment.
As the Company operates as a single reportable segment, no further disaggregated segment information is required to be disclosed under ASC 280, Segment Reporting. Financial information related to the discontinued Advertising segment operations is presented separately in Note 15 — Discontinued Operations.
Reverse Stock Split
On
April 24, 2025,
In accordance with Staff Accounting Bulletin (“SAB”) Topic 4C and ASC 260-10-55-12, the reverse stock split has been retrospectively reflected in these financial statements for all periods presented, including the balance sheets and statements of stockholders’ equity. All share and per-share amounts — including earnings per share and weighted-average shares outstanding — have been restated to give effect to the reverse stock split.
No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares resulting from the split were rounded up to the next whole share, consistent with the Company’s corporate charter. This accounting policy ensures the comparability of share-related information across all periods presented.
The reverse stock split did not affect the total dollar amount of common stock or total stockholders’ equity.
Allowance for Credit Losses
The Company applies the CECL model under ASC 326 to estimate expected credit losses on financial assets, including trade receivables, notes receivable, and held-to-maturity debt securities. CECL requires consideration of historical loss experience, current conditions, and reasonable forecasts over the asset’s contractual life.
As of the reporting date, the Company recorded a material allowance for credit losses related to an outstanding note receivable, establishing a full reserve for the entire balance of the note and the related interest receivable.
The allowance is reassessed at each reporting period, and changes are recognized in the income statement as credit loss expense. The Company has considered the recent guidance and does not have receivables that would require this level of analysis in determining the net realizable balance of accounts receivable.
Income taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have determined that the Company does not have uncertain tax positions on its tax returns for the years 2025, and prior. Based on the evaluation of the 2025 transactions and events through March 31, 2026, the Company does not believe it has any material uncertain tax positions that require measurement.
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The IRS requires all domestic corporations in existence for any part of the tax year to file an income tax return whether or not they have taxable income. The Company incurred a loss for the fiscal years ended December 31, 2025, and 2024 and has not filed tax returns for either year. The Company has not received any notifications from the IRS. Reported tax benefits and valuation allowances are the Company’s best estimate of its tax positions and have not been reviewed by the taxing authority.
Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for interest or penalties on our balance sheets at March 31, 2026 and December 31, 2025, and have not recognized interest and/or penalties in the statement of operations for the periods ended March 31, 2026 and December 31, 2025.
The Company is subject to taxation in the United States and the State of Nevada.
The Company has not filed federal or applicable state income tax returns for the fiscal years ended December 31, 2025 and 2024. Accordingly, those tax years remain open to examination by the respective tax authorities once filed.
Commitments And Contingencies
The Company accounts for contingencies in accordance with ASC 450-20. Liabilities for loss contingencies, including claims, assessments, litigation, fines, penalties, and other matters, are recognized when it is probable that a liability has been incurred and the amount can be reasonably estimated.
If a loss contingency is reasonably possible but not probable, or if the amount cannot be reasonably estimated, the Company discloses the nature of the contingency and an estimate of the possible loss or range of loss, if determinable.
Concentration And Credit Risk
Financial
instruments which potentially subject the Company to credit risk consist of cash. Cash is maintained with a major financial institution
in the USA that is creditworthy. The Company maintains cash in bank accounts insured up to $
Recently Issued Accounting Pronouncements
ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures. This ASU requires enhanced disclosures in the rate reconciliation and disaggregation of income taxes paid by federal, state, and foreign jurisdiction. The standard was effective for public business entities for annual periods beginning after December 15, 2024. The Company adopted ASU 2023-09 effective January 1, 2025. As the Company recognized no income tax expense and made no income tax payments during the quarter ended March 31, 2026, and maintains a full valuation allowance against its deferred tax assets, the adoption did not have a material impact on the Company’s financial statements or disclosures.
ASU 2024-03, Income Statement — Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disaggregated disclosure of certain income statement expense line items within the notes to financial statements. For smaller reporting companies, the standard is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect this standard to have a material impact on its financial statements given the limited nature of its expense categories.
The Company periodically evaluates newly issued accounting standards and has not identified any other recently issued pronouncements expected to have a material effect on its financial statements.
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NOTE 3 — GOING CONCERN
The accompanying condensed financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As
of March 31, 2026, the Company had an accumulated deficit of $
These factors and uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might incur in the event the Company cannot continue in existence. Management intends to seek additional capital from new equity securities offerings, debt financing and debt restructuring to provide funds needed to increase liquidity, fund internal growth and fully implement its business plan. However, management can give no assurance that these funds will be available in adequate amounts, or if available, on terms that would be satisfactory to the Company.
The timing and amount of the Company’s capital requirements will depend on a number of factors, including maintaining its status as a public company and supporting shareholder and investor relations.
NOTE 4 — NOTE RECEIVABLE
On
May 2, 2024, the Company entered into a $
As of December 31, 2024, the note was in default, and the Company recorded a full allowance for credit losses on the outstanding principal balance and related accrued interest. The Company continued to maintain the full allowance as of December 31, 2025. As of March 31, 2026, the note remains in default, and the Company continued to maintain a full allowance on the outstanding balance and related accrued interest, including additional accrued interest recorded during the three months ended March 31, 2026.
| Description | March 31, 2026 | December 31, 2025 | ||||||
| Notes receivable - current portion | $ | $ | ||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Notes receivable, net | $ | $ | ||||||
NOTE 5 — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
An
unrelated third party paid $
During the year ended December 31, 2025, certain vendors issued a demand for payments of outstanding balances through legal counsel and third-party collection agencies. The Company evaluated these matters and recorded the related liabilities in its consolidated financial statements, as management believes such amounts are probable and reasonably estimated.
The following table presents the Company’s accounts payable and accrued liabilities balance as of March 31, 2026 and December 31, 2025.
| Description | March 31, 2026 | December 31, 2025 | ||||||
| Credit cards | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Deposits payable | ||||||||
| Accrued expenses | ||||||||
| $ | $ | |||||||
| 14 |
NOTE 6 — CONVERTIBLE NOTE PAYABLE — RELATED PARTY
On
December 5, 2023, the Company issued a Convertible Exchange Note to John Murphy, for $
On
October 6, 2022, the Company issued a
On
April 6, 2023, the Company issued a
On
December 12, 2023, the Company issued a Convertible Exchange Note to Paul Strickland. The note was unsecured, non-interest-bearing, and
matured on December 12, 2023. On August 7, 2025, the note was converted into shares of common stock. As of March 31, 2026 and
December 31, 2025, the balance of the note was $
In
connection with the acquisition of Jubilee Intel, LLC in fiscal year 2024, debt obligations totaling $
As
a result, the Company recognized the reinstated debt of $
On
July 17, 2025, the Company issued a
As
of March 31, 2026, the principal balance, accrued interest, and unamortized debt discount related to the note were $
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NOTE 7 — CONVERTIBLE NOTES PAYABLE
On
March 1, 2024, the Company issued a $
On
May 1, 2024, the Company issued a $
On
March 7, 2025, the Company issued a $
On
July 8, 2025, the Company issued a
On
May 15, 2025, the Company issued six
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The notes were convertible, at the option of the holder, into shares of the Company’s common stock at a conversion price determined pursuant to the terms of the notes. The Company evaluated the conversion features under ASC 815, Derivatives and Hedging, and determined that the features required bifurcation and classification as derivative liabilities. Accordingly, the Company recognized the derivative liabilities at fair value on the issuance dates, with a corresponding offsetting debt discount. The derivative liabilities were subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations. Upon conversion of the notes during the year ended December 31, 2025 and the three months ended March 31, 2026, the related derivative liabilities were extinguished.
On
May 14, 2025, the Company issued a $
On
May 30, 2025, the Company issued a $
On
February 12, 2026, the Company issued a new
As
of March 31, 2026, the total amount due to a loan holder was $
As
of December 31, 2025, the total amount due to a loan holder was $
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NOTE 8 — DERIVATIVE LIABILITY
The
Company has various convertible notes outstanding that require derivative liability considerations for its conversion features. Total
derivative liability on March 31, 2026 and December 31, 2025 was $
| Balance at December 31, 2024 | $ | |||
| Decrease to derivative due to repayment | ( | ) | ||
| Increase to derivative due to new issuances | ||||
| Derivative loss due to mark to market adjustment | ||||
| Balance at December 31, 2025 | ||||
| Decrease to derivative due to conversion | ( | ) | ||
| Increase to derivative due to new issuances | ||||
| Derivative loss due to mark to market adjustment | ||||
| Balance at March 31, 2026 | $ |
The following table summarizes the weighted average key inputs used in the Black-Scholes model for all outstanding conversion feature derivative liabilities as of the measurement dates:
| March 31, 2026 | December 31, 2025 | |||||||||||||||
| Input | Weighted Avg. | Range | Weighted Avg. | Range | ||||||||||||
| Stock price | $ | $ | $ | $ | ||||||||||||
| Exercise price (conversion price) | $ | $ | $ | $ | ||||||||||||
| Risk-free interest rate | % | % | % | % | ||||||||||||
| Expected term (years) | ||||||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Dividend yield | ||||||||||||||||
NOTE 9 — STOCK PAYABLE
The Company’s prior related party settlement liability included a requirement to issue shares of the Company’s common stock to cover litigation and legal expenses associated with the settlement agreement. The settlement originally provided for the issuance of shares of common stock.
On March 28, 2024, the settlement agreement was assigned to a non-affiliated third party. On May 6, 2024, the liability was further assigned to another non-affiliated third party.
The settlement agreement does not contain provisions for adjustment of the number of shares in the event of a reverse stock split. Accordingly, the Company continues to account for the obligation based on the original shares.
The
value of the stock payable was determined as $
The
remaining shares to be issued at March 31, 2026 and December 31, 2025 were and , respectively. The remaining balance
of the stock payable liability was $
NOTE 10 — WARRANTS
On
May 1, 2024, the Company issued under a Warrant Subscription Agreement for
The assumptions used to determine the fair value of the Warrants as follows:
| Expected life (years) | ||||
| Risk-free interest rate | % | |||
| Expected volatility | % | |||
| Dividend yield | % |
| 18 |
On
October 9, 2024, the Company authorized the issuance of up to $
The assumptions used to determine the fair value of the Warrants as follows:
| Expected life (years) | ||||
| Risk-free interest rate | % | |||
| Expected volatility | % | |||
| Dividend yield | % |
As of March 31, 2026, the Company had warrants outstanding to purchase shares of common stock at an exercise price of $ per share, with a weighted average remaining contractual term of approximately years. There was no warrant activity during the three months ended March 31, 2026.
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contract Term | Intrinsic Value | |||||||||||||
| Outstanding, December 31, 2024 | $ | $ | ||||||||||||||
| Issued | $ | — | — | |||||||||||||
| Expired | ( | ) | $ | — | — | |||||||||||
| Exercised | $ | — | — | |||||||||||||
| Outstanding, December 31, 2025 | $ | $ | ||||||||||||||
| Issued | $ | — | — | |||||||||||||
| Expired | $ | — | — | |||||||||||||
| Exercised | $ | — | — | |||||||||||||
| Outstanding, March 31, 2026 | $ | $ | ||||||||||||||
NOTE 11 — COMMON STOCK
On May 20, 2025, the Company issued shares of common stock for legal fees associated with the settlement liability (Note 9).
On
June 2, 2025, a debt holder converted $
On May 16, 2025, the Company issued million shares of common stock to Beartooth Asset Holdings, Inc. (“Beartooth”) a related party as a corporate restructuring transaction in preparation for a potential merger. The Company had not entered into any agreement or obligation for a specific merger transaction.
On
July 21, 2025, John D. Murphy, Jr. retired $
On
August 5, 2025, an unrelated party retired $
On
August 5, 2025, an unrelated party retired $
On
August 5, 2025, an unrelated party retired $
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On
August 7, 2025, Paul Strickland, the Company’s sole director and officer, retired $
On
August 12, 2025, Selkirk retired $
On
August 12, 2025, Selkirk retired $
Refer Note 5 and 7 for the common stock issued in conversion of debt to an unrelated party.
Refer Note 6 for the common stock issued in conversion of debt to related parties.
NOTE 12 — PREFERRED STOCK
The
Company is authorized to issue shares of $ par value Series A preferred stock. The Company increased the number of authorized
shares of the Series A preferred stock from to on January 19, 2021. Each share of the Series A Preferred Stock is convertible
at the option of the holder into shares of common stock.
NOTE 13 — RELATED PARTY TRANSACTIONS
On February 24, 2026, Beartooth Asset Holdings, LLC, an entity managed by Mr. Strickland, executed an Irrevocable Stock Power transferring shares of the Company’s restricted common stock to the Hallmark Venture Group, Inc. Acquisition Account in connection with anticipated corporate restructuring. The shares had originally been issued to Beartooth on May 16, 2025.
Refer note 6 for the related parties transactions.
As
of March 31, 2026 and December 31, 2025, the Company had a Due to Related Party balance of $
NOTE 14 — INCOME TAX
For the periods ending March 31, 2026 and December 31, 2025, there was no provision for income taxes and deferred tax assets have been entirely offset by valuation allowances.
As
of March 31, 2026 and December 31, 2025, the Company had net operating loss carry forwards of approximately $
The tax computations are as follows:
March 31, 2026 | December 31, 2025 | |||||||
| Net losses before taxes | $ | ( | ) | $ | ( | ) | ||
| Adjustments to arrive at taxable income/loss | ||||||||
| Permanent differences: | ||||||||
| Temporary differences: | ||||||||
| Taxable (loss) | ( | ) | ( | ) | ||||
| Current Year Taxable (loss) | ( | ) | ( | ) | ||||
| NOL carried forward prior year (tax return) | ( | ) | ( | ) | ||||
| NOL carried forward at period end | $ | ( | ) | $ | ( | ) | ||
| Deferred Tax Asset - Federal Rate ( | ( | ) | ( | ) | ||||
| Deferred Tax Asset - State Rate | ||||||||
| Total Deferred Tax Asset | ( | ) | ( | ) | ||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Deferred tax per books | $ | $ | ||||||
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NOTE 15 — DISCONTINUED OPERATIONS
Subsequent to March 31, 2025, Jubilee Intel, LLC is no longer a wholly-owned subsidiary of the Company. The revenues and costs associated with this business are displayed as losses from discontinued operations.
Net loss from discontinued operations for the three months ended March 31, 2025, was comprised of the following components:
| Discontinued operations - net loss | March 31, 2025 | |||
| Revenue | ||||
| Service revenue | $ | |||
| Revenue total | $ | |||
| Expenses: | ||||
| General and administrative - cost of revenue | $ | |||
| General and administrative - other costs | ||||
| Bad debts | ||||
| Expenses total | ||||
| Net loss from discontinued operations | ( | ) | ||
| Discontinued operations - cash flows | ||||
| Net loss for the period from discontinued operations | $ | ( | ) | |
| Net cash used by operating activities from discontinued operations | $ | ( | ) | |
NOTE 16 — SUBSEQUENT EVENTS
In accordance with ASC 855-10, Subsequent Events, management evaluated subsequent events through the date these condensed financial statements were issued and noted no material subsequent events requiring disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and our audited financial statements and related notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K/A.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include those discussed under the headings “Risk Factors” in our Annual Report on Form 10-K and elsewhere in this Quarterly Report. Forward-looking statements speak only as of the date hereof, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Overview
We have no operations from a continuing business other than expenditures related to running the Company. All of our historical business operations have ceased. Management intends to explore and identify business opportunities within the U.S. and other jurisdictions, including a potential acquisition of an operating entity through a reverse merger, asset purchase or similar transaction. No assurances can be given that our management can identify and implement a viable business strategy or that any such strategy will result in profits.
We do not currently engage in any business activities that provide revenue or cash flow. During the next 12-month period, we anticipate incurring costs in connection with investigating, evaluating, and negotiating potential business combinations and/or asset acquisitions, filing reports with the SEC, and consummating any acquisition of an operating business or assets.
Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Revenue. We had no revenue during the three months ended March 31, 2026 or 2025.
Operating Expenses. Total operating expenses for the three months ended March 31, 2026 were $38,572, consisting of professional fees of $34,296 (audit, accounting and legal), and general and administrative expenses of $4,276. Total operating expenses for the three months ended March 31, 2025 were $58,010, consisting of professional fees of $18,293 and general and administrative expenses of $37,717.
Other Income (Expense). Other income (expense) for the three months ended March 31, 2026 included interest expense of $1,338, amortization of debt discount of $80,865, a loss for the change in fair value of derivative liability of $140,937, and loss on issuance of convertible note of $15,351. For the three months ended March 31, 2025, the Company incurred total other expense of $243,957, which was comprised of $97,752 in interest expense, $105,326 in bad debt expense, $25,000 in amortization of debt discount and $15,879 in change in fair value of derivative,
Our net loss for the three months ended March 31, 2026 was $273,496 compared to $728,927 for the three months ended March 31, 2025. For the three months ended March 31, 2025, the Company incurred a net loss from discontinued operations of $426,960, resulting in a net loss of $728,927.
Liquidity and Capital Resources
As of March 31, 2026, we had cash of $1,946 compared to $3,382 as of December 31, 2025. We had negative working capital and a stockholders’ deficit at both dates. We have historically funded our operations through the issuance of convertible promissory notes, with note holders paying expenses directly to vendors on our behalf. We do not currently have any committed sources of additional funding, and we cannot guarantee that we will be able to obtain any such funding in the future on acceptable terms or at all.
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During the three months ended March 31, 2026, we received aggregate funding of $57,641 under the February 12, 2026 6% Convertible Promissory Note issued to the debt holders, all of which was utilized to pay third-party vendor obligations directly by the lender. As of March 31, 2026, the outstanding principal balance under that Note was approximately $5,500 and the remaining was converted.
We will continue to require additional funding to support our operations, satisfy our existing obligations and maintain our reporting status, including the payment of professional fees, transfer-agent fees and SEC filing-related expenses. There can be no assurance that we will be able to obtain additional funding on terms acceptable to us or at all. The condition of our business raises substantial doubt about our ability to continue as a going concern.
Critical Accounting Policies and Estimates
Refer to Note 2 to the accompanying Financial Statements for the three months ended March 31, 2025, for a condensed discussion of our critical accounting policies and to our Form 10-K/A for the year ended December 31, 2025, for a full discussion of our critical accounting policies and procedures.
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 investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information otherwise required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2026, our disclosure controls and procedures were not effective due to the material weaknesses described in our Annual Report on Form 10-K for the year ended December 31, 2025, which include (i) lack of segregation of duties, (ii) absence of an independent audit committee, and (iii) limited documentation of the design and operation of internal control over financial reporting. The Company is a single-employee, single-officer company with limited resources. Notwithstanding the existence of material weaknesses, management believes that the condensed financial statements included in this report fairly present, in all material respects, the financial position, results of operations and cash flows of the Company for the periods presented, in conformity with U.S. GAAP.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in various claims, lawsuits, and disputes arising in the ordinary course of business. As of the date of this report, the Company is not a party to any material legal proceedings.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide the information otherwise required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 15, 2026, a debt holder converted $90,200, from the Convertible Note dated July 7, 2025, into 1,555,172 shares of common stock, paying the note in full.
On February 9, 2026, Selkirk Global Holdings, LLC converted $27,346, from the Convertible Note dated July 17, 2025, into 379,811 shares of common stock, paying the note in full.
On March 10, 2026, a Note holder elected to convert $42,141 (representing the assigned principal of $39,841 plus additional principal of $2,300) into 247,889 shares of the Company’s common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
101.INS Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
| 24 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HALLMARK VENTURE GROUP, INC. | ||
| Date: May 28, 2026 | By: | /s/ Paul Strickland |
| Paul Strickland | ||
| President, Chief Executive Officer, Chief Financial Officer and Director | ||
| (Principal Executive Officer and Principal Financial Officer) | ||
| 25 |