10-Q: Hallmark Venture Group Deconsolidates Subsidiary, Faces Going Concern

Hallmark Venture Group reported a net loss for the six months ended June 30, 2025, and deconsolidated its sole operating subsidiary, Jubilee Intel, LLC, raising substantial doubt about its ability to continue as a going concern.

Summary

• Hallmark Venture Group, Inc. (HLLK) filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025.
• The Company deconsolidated Jubilee Intel, LLC on May 12, 2025, which was its only operating segment generating revenue.
• Reported a net loss of $91,332 for the six months ended June 30, 2025, an improvement from a $107,527 net loss in the prior year period.
• Achieved a net income of $637,595 for the three months ended June 30, 2025, primarily due to a $1,366,421 gain from the change in fair value of derivative liabilities.
• Cash balance stood at $1,776 as of June 30, 2025, down from $3,629 at December 31, 2024.
• Total assets significantly decreased to $1,776 from $686,536, largely due to the deconsolidation of Jubilee Intel, LLC.
• Stockholders' deficit worsened to $(655,162) from $(557,375) at December 31, 2024.
• Operating activities provided $34,293 in cash for the six months ended June 30, 2025, compared to using $31,610 in the prior year period.
• The Company is currently defined as a shell company, actively seeking a merger or acquisition with a private entity.
• A 1-for-500 reverse stock split was effected on April 24, 2025.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative due to the Company's shell status, critical liquidity issues, substantial accumulated deficit, and identified material weaknesses in internal controls. While there was a quarterly net income, it was driven by non-operational derivative fair value changes, and the overall six-month performance remains a loss. The going concern warning is a major red flag.

Positives

• Net income of $637,595 for the three months ended June 30, 2025, driven by a significant gain in the fair value of derivative liabilities.
• Net loss from continuing operations for the six months ended June 30, 2025, improved to $91,332 from $107,527 in the prior year.
• Cash provided by operating activities for the six months ended June 30, 2025, was $34,293, a positive shift from cash used of $31,610 in the same period last year.

Negatives

• Substantial doubt exists about the Company's ability to continue as a going concern due to an accumulated deficit of $3,565,840 and a cash balance of only $1,776 as of June 30, 2025.
• The Company discontinued its only operating segment, Jubilee Intel, LLC, which generated all prior revenue, leaving it without current revenue generation streams.
• Total assets decreased dramatically to $1,776 from $686,536 due to the deconsolidation of Jubilee Intel, LLC.
• Stockholders' deficit worsened to $(655,162) from $(557,375) at December 31, 2024.
• Identified material weaknesses in internal control over financial reporting, including inadequate segregation of duties, ineffective risk assessment, and insufficient written policies.
• Cash used by financing activities was $36,146 for the six months ended June 30, 2025, a negative shift from cash provided in the prior year.

Risks

• Substantial doubt about the Company's ability to continue as a going concern due to recurring losses, accumulated deficit, and insufficient cash.
• The Company is currently a shell company with nominal assets and operations, and there is no assurance it will successfully locate and consummate a merger or acquisition.
• Inability to secure additional financing could adversely affect remediation efforts for material weaknesses in internal controls and the ability to implement its business plan.
• The Company's common stock is subject to quotation on the OTC Pink Market, with currently only a limited trading market, and no assurance of an active or sustained trading market.
• The Company's net operating loss carryforwards may be subject to annual limitations due to ownership changes, which could reduce or defer their utilization.

Future Outlook

The Company is currently a shell company with the sole purpose of locating and consummating a merger or acquisition with a private entity. Management anticipates participating in only one potential business venture due to nominal assets and limited financial resources. There is no assurance that these efforts will be successful or that sufficient funding will be secured to support operations and business development goals. Management intends to seek additional capital from new equity securities offerings, debt financing, and debt restructuring.

Management Comments

• "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."
• "Management is actively seeking additional sources of capital through the sale of equity, including in this offering, advances from related parties, and exploring strategic partnerships."
• "The Company is also focused on attracting suitable investors to support its business plan without relying heavily on existing cash reserves."
• "Management is implementing cost-saving measures and exploring opportunities to diversify through acquisitions or entering into new markets."
• "This period-to-period fluctuation in change in fair value of derivative can be expected for the foreseeable future."

Industry Context

Hallmark Venture Group's transition to a shell company status, following the deconsolidation of its sole operating subsidiary, places it in a unique position within the market. This strategy is typically employed by companies seeking to acquire an operating business to become a publicly-traded entity without undergoing a traditional IPO. The success of this strategy is highly dependent on identifying a suitable acquisition target and securing the necessary capital, which presents significant challenges given the Company's limited financial resources and going concern issues. The lack of an active trading market for its common stock on the OTC Pink further complicates its ability to attract investors or use its shares as acquisition currency.

Comparison to Industry Standards

• NA As a shell company with no ongoing operations, direct comparison to industry-specific financial benchmarks or operational performance metrics is not applicable. Its primary activity is seeking a merger or acquisition, which is not a standard operational comparison.
• The Company's financial health, characterized by a significant accumulated deficit and minimal cash, falls well below typical industry standards for operating companies, highlighting its distressed state prior to any potential acquisition.

Management Changes

Corporate Governance

Legal Proceedings

• None reported in the filing.

Related Party Transactions

• On May 12, 2025, the Company transferred 100% of its membership interest in Jubilee Intel, LLC to Evan Bloomberg (former officer/director) in exchange for 100,000 Series A Preferred Shares, which were then transferred to Selkirk Global Holdings, LLC (controlled by Paul Strickland, current sole director/officer).
• Previously canceled debt of $97,424 owed to Selkirk Global Holdings, LLC (controlled by Paul Strickland) was reinstated following the deconsolidation of Jubilee Intel, LLC.
• John D. Murphy, Jr. (former CEO/Director) retired $74,501 of debt by converting 1,275,702 shares of common stock on July 21, 2025.
• Paul Strickland (sole director/officer) retired $7,119 of debt by converting 83,753 shares of common stock on August 7, 2025.
• Selkirk Global Holdings, LLC retired $75,309 and $32,163 of debt by converting into 941,363 and 402,038 shares of common stock, respectively, on August 12, 2025.
• On August 14, 2025, Selkirk Global Holdings, LLC paid $5,481 to a vendor on behalf of the Company, which was added to the July 17, 2025 note payable to Selkirk.

Stakeholder Impact

• Shareholders face significant dilution risk from ongoing debt conversions and potential future equity raises, as well as uncertainty regarding the Company's ability to find a suitable merger partner or achieve profitability.
• Creditors holding convertible notes have seen their debt converted into common stock, potentially impacting their recovery depending on the stock's market performance.
• Employees (primarily management) face job insecurity given the shell company status and reliance on future acquisitions and financing.

Next Steps

• Locate and consummate a merger or acquisition with a private entity.
• Seek additional capital from new equity securities offerings, debt financing, and debt restructuring.
• Implement cost-saving measures and explore opportunities to diversify through acquisitions or entering new markets.
• Appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management (subject to financing).
• Adopt sufficient written policies and procedures for accounting and financial reporting (subject to financing).

Key Dates

Recommendation

The Company is a shell entity with no ongoing revenue-generating operations, a critically low cash balance, and a substantial accumulated deficit, raising significant going concern doubts. The deconsolidation of its only operating subsidiary further exacerbates its precarious financial position. While a quarterly net income was reported, it was driven by non-operational derivative fair value adjustments, not sustainable business performance. Material weaknesses in internal controls indicate poor governance and operational risk. The stock trades on the OTC Pink market with limited liquidity, and future prospects are entirely dependent on an uncertain merger or acquisition, coupled with highly dilutive capital raises. These factors present an extremely high risk profile with little to no fundamental value.

Keywords

Shell Company, Going Concern, SEC Filing, 10-Q, Financial Report, Merger and Acquisition, Jubilee Intel LLC, Deconsolidation, Reverse Stock Split, Convertible Notes, OTC Pink Market, Internal Controls, Hallmark Venture Group