10-Q: Hallmark Venture Group Reports Q3 2024 Results, Posts Net Income Amidst Restructuring

Hallmark Venture Group reports a net income of $17,680 for the nine months ended September 30, 2024, a significant turnaround from a net loss of $270,031 in the same period last year, driven by gains from debt extinguishment and derivative valuation changes.

Summary

• Hallmark Venture Group, Inc. reported its financial results for the third quarter of 2024, showing a net income of $17,680 for the nine months ended September 30, 2024, compared to a net loss of $270,031 for the same period in 2023.
• The company's revenue remained at $0 for both the three and nine-month periods ending September 30, 2024 and 2023.
• General and administrative expenses decreased slightly to $35,437 for the nine months ended September 30, 2024, from $36,996 in the same period of 2023.
• The company experienced a significant swing in other income (expense), reporting $53,117 in other income for the nine months ended September 30, 2024, compared to a $233,035 loss in the same period of 2023.
• This change was primarily due to a gain on extinguishment of debt of $265,824 and a gain of $261,984 from the change in fair value of derivative liabilities, offset by a loss on issuance of convertible debt of $278,156 and amortization of debt discount of $177,893.
• The company's cash flow from operations showed a net cash used of $32,437 for the nine months ended September 30, 2024.
• The company issued a $100,000 note receivable, resulting in a net cash used in investing activities of $100,000.
• Financing activities provided net cash of $132,437, primarily from proceeds from notes payable.
• The company's accumulated deficit stands at $3,232,481 as of September 30, 2024.
• The company's financial statements have been prepared assuming that the company will continue as a going concern, which is dependent on securing additional capital.

Sentiment

Score: 6

Explanation: The document shows a mixed picture. While the company achieved a net income and benefited from debt extinguishment and derivative gains, the lack of revenue, going concern warning, and ineffective internal controls raise concerns. The acquisition of Jubilee Intel, LLC, is a positive development, but its success is yet to be determined.

Positives

• The company achieved a net income of $17,680 for the nine months ended September 30, 2024, a substantial improvement from the net loss of $270,031 in the same period of 2023.
• The company experienced a significant gain on extinguishment of debt of $265,824.
• The company also benefited from a gain of $261,984 due to the change in fair value of derivative liabilities.
• General and administrative expenses decreased slightly by $1,559 or 4.2% for the nine months ended September 30, 2024 compared to the same period in 2023.
• The company acquired Jubilee Intel, LLC, which is expected to provide a new revenue stream.

Negatives

• The company reported no revenue for both the three and nine-month periods ending September 30, 2024 and 2023.
• The company has an accumulated deficit of $3,232,481 as of September 30, 2024.
• The company's disclosure controls and procedures were deemed ineffective due to a lack of segregation of duties.
• The company's financial statements have been prepared assuming that the company will continue as a going concern, which is dependent on securing additional capital.
• The company incurred a loss on issuance of convertible debt of $278,156.

Risks

• The company's ability to continue as a going concern is dependent on securing additional capital.
• The company's disclosure controls and procedures were deemed ineffective due to a lack of segregation of duties.
• There is a limited trading market for the company's common stock, and there is no assurance that an active trading market will develop or be sustained.
• The company is subject to risks and uncertainties including changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, and competition.
• The company has a significant accumulated deficit of $3,232,481.

Future Outlook

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.

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 not aware of any pending, threatened or asserted claims.

Industry Context

The company's shift towards a technology-focused business model with the acquisition of Jubilee Intel, LLC, reflects a broader trend in the market where companies are leveraging digital platforms and AI for growth. The company's focus on Search Engine Marketing (SEM) aligns with the increasing importance of digital marketing in today's business environment.

Comparison to Industry Standards

• The company's lack of revenue is a significant deviation from industry standards for operating companies, as most companies generate revenue from their core business activities.
• The company's reliance on debt and equity financing to fund operations is not uncommon for early-stage companies, but the level of debt and the going concern warning raise concerns.
• The company's derivative liabilities are a complex financial instrument that is not typical for companies of this size, and the significant fluctuations in fair value indicate a high level of risk.
• The company's acquisition of Jubilee Intel, LLC, is a strategic move to diversify its business and generate revenue, but the success of this acquisition will depend on the company's ability to integrate and scale the new business.
• The company's lack of internal controls is a significant weakness that needs to be addressed to ensure the accuracy and reliability of its financial reporting.

Management Changes

Corporate Governance

Related Party Transactions

• The company had several transactions with related parties, including convertible notes payable to Selkirk Global Holdings, LLC, and a Convertible Exchange Note to John Murphy.
• The company also had settlement liabilities with Green Horseshoe, LLC, which were later assigned to Alpha Strategies Trading Software, Inc. and then Nicosel, LLC.
• John D. Murphy, Jr., has at times directly paid for various company expenses.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares for debt conversion and acquisitions.
• Employees may be affected by the company's restructuring and changes in management.
• Customers may be impacted by the company's new business model and offerings.
• Creditors may be concerned about the company's ability to repay its debts given the going concern warning.
• Suppliers may be affected by the company's financial instability.

Next Steps

• The company needs to secure additional capital to continue as a going concern.
• The company needs to improve its disclosure controls and procedures.
• The company needs to integrate and scale its newly acquired subsidiary, Jubilee Intel, LLC.
• The company needs to develop a sustainable revenue model.

Key Dates

Keywords

financial results, net income, debt extinguishment, derivative liability, going concern, reverse split, Jubilee Intel, convertible debt, promissory note, shareholder, restructuring