10-Q: Hawkeye Systems Q2 Loss Widens Amid Cybersecurity Pivot

Hawkeye Systems reports increased net loss for the quarter, highlighting a strategic shift to cybersecurity through Rift Cyber LLC while facing significant going concern doubts and internal control weaknesses.

Summary

• Hawkeye Systems, Inc. reported a net loss of $107,815 for the three months ended December 31, 2025, an increase from $87,675 in the prior year period.
• For the six months ended December 31, 2025, the net loss was $209,348, an improvement from $244,395 in the same period of 2024.
• The company had no operating revenues for both periods.
• Cash balance stood at $167 as of December 31, 2025, deemed insufficient for the next 12 months of operations.
• Total liabilities increased to $3,252,364 from $3,135,271, primarily due to an increase in related party promissory notes and accrued interest.
• The accumulated deficit grew to $13,419,879.
• The company is pursuing investment opportunities in cybersecurity through its 25% interest in Rift Cyber LLC, formed on April 1, 2025.
• Management identified material weaknesses in internal controls over financial reporting due to limited personnel and segregation of duties.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing with significant concern due to the company's critical cash position, ongoing losses, substantial accumulated deficit, and identified material weaknesses in internal controls, despite a strategic pivot into cybersecurity.

Positives

• Net loss for the six months ended December 31, 2025, decreased to $209,348 from $244,395 in the prior year.
• Net cash used in operating activities for the six months ended December 31, 2025, decreased to $88,703 from $119,263 in the prior year.
• The company has strategically pivoted into the cybersecurity space through its 25% investment in Rift Cyber LLC, which aims to develop a unified smart sensor ecosystem.
• Accounts payable and accrued liabilities related party decreased from $110,000 to $0, indicating settlement.
• Accounts payable and accrued liabilities decreased from $51,575 to $42,357.

Negatives

• The company reported no operating revenues for the three and six months ended December 31, 2025, and 2024.
• Net loss for the three months ended December 31, 2025, increased to $107,815 from $87,675 in the prior year.
• Cash balance is critically low at $167 as of December 31, 2025, which is insufficient for operations over the next 12 months.
• The company has an accumulated deficit of $13,419,879 as of December 31, 2025.
• Total liabilities increased to $3,252,364, driven by a rise in related party promissory notes to $2,318,263 and accrued interest to $449,493.
• The company is a non-operating entity with no full-time employees, relying on related party loans for public filing expenses.
• Management concluded that disclosure controls and internal controls over financial reporting were not effective due to material weaknesses, including limited segregation of duties.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to recurring losses and accumulated deficit.
• Dependence on obtaining adequate capital through equity sales, traditional financing, or contributions from management and significant stockholders, with no assurance of success.
• Failure to secure additional financing will have an adverse effect on the ability to remain in business.
• Additional issuances of equity or convertible debt securities will result in dilution to current shareholders.
• No guarantees or firm commitments that related party advances will continue in the near future.
• The company's business plan to build Rift Cyber LLC cybersecurity products or acquire/merge with a Target Business may be unsuccessful.
• Material weaknesses in internal control over financial reporting, including lack of segregation of duties and inconsistent financial information processing.
• Contingent liability to repay 33.3% of the Origination Loan and Additional Contribution and any losses of HIE, LLC, a joint venture that has been inactive since July 2021.

Future Outlook

The company plans to raise additional capital through equity or debt securities to fund its business plan. This includes developing Rift Cyber LLC's cybersecurity products, specifically launching the "seeker" product, hiring resources for public filings, developing a Minimum Viable Product (MVP) for Rift's first customer, and further establishing market requirements for the technology. If Rift Cyber LLC is unsuccessful, the company intends to acquire, merge, or combine with another company.

Management Comments

• "Our current business plan is to build Rift Cyber LLC cybersecurity products and if those are unsuccessful, then we will need to acquire, merge or combine with another company."
• "We intend to use capital stock, debt or a combination of both to effectuate business combinations with Target Businesses that have significant growth potential."
• "Management cannot provide any assurance that the Company will be successful in accomplishing this plan [to obtain additional capital resources]."
• "We do not believe these cash reserves are sufficient to cover our expenses for our operations for the next 12 months."
• "There are no assurances that we will be able to obtain further funds required for our continued operations, nor raise the money or recruit the proper talent to build out the market and develop sales and marketing strategy for the coming year."
• "Management believes that the material deficiency [in internal controls] has a limited impact on the Company [as it is a dormant entity]."

Industry Context

StockSavvy.ai notes that Hawkeye Systems' pivot into cybersecurity, particularly with the formation of Rift Cyber LLC and its focus on a unified smart sensor ecosystem, aligns with the growing demand for integrated physical and digital security solutions. This move positions the company in a competitive and rapidly evolving market, where innovation in IoT security, behavior anomaly detection, and secure access controls are key trends. However, the company's current non-operating status and significant financial challenges present a steep uphill battle in a capital-intensive industry dominated by established players and well-funded startups.

Comparison to Industry Standards

• StockSavvy.ai observes that Hawkeye Systems' lack of revenue and minimal cash balance of $167 are significantly below industry standards for technology development companies, which typically require substantial capital for R&D and market penetration.
• Unlike successful cybersecurity startups that often secure significant venture capital funding (e.g., CrowdStrike, Palo Alto Networks, Zscaler which raised hundreds of millions in early stages), Hawkeye Systems relies heavily on related-party loans and has not demonstrated external institutional investment.
• The identified material weaknesses in internal controls, including a single officer handling all financial transactions and lack of segregation of duties, fall far short of corporate governance best practices seen in publicly traded technology companies, which prioritize robust financial oversight to protect investor interests.
• The company's accumulated deficit of over $13.4 million and ongoing "going concern" warning are indicative of a distressed financial state, contrasting sharply with the growth and profitability metrics expected from viable industry participants.

Management Changes

Corporate Governance

Legal Proceedings

• No legal proceedings are currently contemplated by any governmental authority or other party involving the company or its properties.
• No director, officer, or affiliate is a party adverse to the company in any legal proceeding or has an adverse interest.

Related Party Transactions

• Accrued interest related party increased to $449,493 as of December 31, 2025, from $311,550 as of June 30, 2025.
• Promissory note payable related party increased to $2,318,263 as of December 31, 2025, from $2,219,895 as of June 30, 2025. This note is from Steve Hall, bearing 12% annual interest and matured on December 31, 2025.
• The company received $98,368 from a related party promissory note for the six months ended December 31, 2025.
• On September 30, 2025, the board granted 500,000 shares of common stock to current CEO Corby Marshall to settle $50,000 in outstanding accounts payable.
• On September 30, 2025, the board granted 600,000 shares of common stock to former CFO Chris Mulgrew to settle $60,000 in outstanding accounts payable.
• Corby Marshall, CEO, received no compensation between July 1 and December 31, 2025, under his consulting agreement which terminated in fiscal year 2026.
• Between January 1, 2026, and February 23, 2026, the outstanding loan balance of Note 4 Promissory Notes Payable Related Parties increased by $29,479, bringing the outstanding balance to $347,742.
• The company is contingently liable to repay 33.3% of the Origination Loan and Additional Contribution and any losses of HIE, LLC, a joint venture with Eagle Equities LLC and Ikon Supplies.

Stakeholder Impact

• Shareholders face significant dilution risk from future equity raises. Existing shares have $0 intrinsic value for options. The company's going concern risk poses a fundamental threat to shareholder value.
• Employees are minimally impacted as the company is currently non-operating with no full-time employees, though future hiring for Rift Cyber LLC could create opportunities.
• Creditors (Related Party) are exposed to significant risk due to the company's heavy reliance on related party loans and its going concern status, which impacts the recoverability of these loans.
• Customers are not currently impacted as the company has no revenue and is in the development stage for its new cybersecurity products. Potential future customers of Rift Cyber LLC could benefit from its proposed smart sensor ecosystem.

Next Steps

• Raise money necessary to launch "seeker," one of Rift Cyber LLC's first products.
• Hire appropriate resources to improve public filings from a time and compliance perspective.
• Develop a Minimum Viable Product (MVP) necessary to get Rift Cyber LLC's first customer.
• Further establish the requirements and opportunities for application and the segment that should emerge from Rift Cyber LLC's technology.
• Obtain additional capital resources through sales of equity instruments, traditional financing, or contributions from management and significant stockholders.
• If Rift Cyber LLC products are unsuccessful, acquire, merge, or combine with another company.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by critically low cash ($167), recurring losses, a substantial accumulated deficit, and a "going concern" warning. It has no revenue, relies entirely on related-party financing, and has identified material weaknesses in its internal controls. While a strategic pivot to cybersecurity is noted, the company lacks the capital and operational stability to execute effectively in a competitive market. The high risk of dilution, coupled with fundamental operational and financial deficiencies, makes this a strong sell for any investor.

Keywords

Cybersecurity, Rift Cyber LLC, Going Concern, SEC Filing, 10-Q, Financial Reporting, Internal Controls, Related Party Debt, Technology Investment, Smart Sensor Ecosystem, Hawkeye Systems