SDCO 10-K & 10-Q changes, risk factors and insider trading

We have no operations from a continuing business other than the 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. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control.

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 SEC reports, and consummating the acquisition of an operating business or assets.

Given our limited capital resources, we may consider a transaction with an entity which has recently commenced operations, is a developing company or is otherwise in need of additional funds for the development of new products, services or assets, or expansion into new markets, or is an established business or an established asset experiencing financial or operating difficulties and needs additional capital. Alternatively, a transaction may involve the acquisition of, or merger with, an entity that desires access to the U.S. capital markets.

As of the date of this Form 10-K, our management has not had any discussions with any representative of any other entity regarding a potential business combination or asset acquisition. Any target business or asset that is selected may be financially unstable or in the early stages of development. In such event, we expect to be subject to numerous risks inherent in the business and operations of a financially unstable or early-stage entity. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk or in which our management has limited experience, and, although our management will endeavor to evaluate the risks inherent in a particular target business or asset, there can be no assurance that we will properly ascertain or assess all significant risks.

Our management anticipates that we will likely only be able to effect just one business combination or asset acquisition due to our limited capital. This lack of diversification will likely pose a substantial risk in investing in the Company for the indefinite future, because it will not permit us to offset potential losses from one venture or operating territory against gains from another. The risks we face will likely be heightened to the extent we acquire a business or assets operating in a single industry or geographical region.

We anticipate that the selection of a target business or asset will be a complex and risk-prone process. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, management believes that there are many firms seeking acquisition opportunities at this time at discounted rates against which we will compete. We expect that any potentially available acquisition opportunities may appear in a variety of different industries or regions and at various stages of development, all of which will likely make the task of comparative investigation and analysis of such opportunities extremely difficult and complicated.

Once we have developed and begun to implement our business plan, management intends to fund our working capital requirements through a combination of our existing funds and future issuances of debt or equity securities. Our working capital requirements are expected to increase in line with the implementation of a business plan and commencement of operations.

Based upon our current operations, we do not have sufficient working capital to fund our operations over the next 12 months. If we are able to close a business combination or other acquisition, it is likely we will need capital as a condition of closing that transaction. Because of the uncertainties, we cannot be sure as to how much capital we need to raise or the type of securities we will be required to issue. In connection with a business combination that is structured as a reverse merger, or in connection with the acquisition of significant assets, we anticipate that we will be required to issue a controlling block of our securities to the target’s shareholders or to the owner of such assets, which will be very dilutive to existing shareholders.

Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences, or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, including acquisition opportunities, which could significantly and materially restrict our business operations.

We anticipate that we will incur operating losses in the next 12 months, principally costs related to our being obligated to file reports with the SEC. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model, recognition of revenue sources, and the management of growth. To address these risks, we must, among other things, develop, implement, and successfully execute our business strategy, respond to competitive developments, and attract, retain, and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition, and results of operations.

During the years ended December 31, 2025 and 2024, we had no operations other than incurring expenditures related to running the Company, and we generated no revenues. At December 31, 2024, the Company held a 100% membership interest in Jubilee Intel, LLC, which is now presented as a discontinued operation following the May 12, 2025 demerger and deconsolidation.

For the years ended December 31, 2025 and 2024, we had general and administrative expenses of $97,145 and $22,125, respectively, an increase of $75,020 or approximately 339%. Professional fees were $80,950 and $50,368, respectively, and payroll expenses were $50,000 and $56,666, respectively. Total operating expenses were $228,095 for 2025 as compared to $129,159 for 2024. The increase in operating expenses was primarily due to higher general, administrative and professional fees incurred in connection with the deconsolidation of Jubilee Intel, LLC, continued SEC reporting compliance, and related legal and accounting work.

We had a net loss from continuing operations of $126,948 for the year ended December 31, 2025, compared to a net loss (as restated) of $368,832 from continuing operations for the year ended December 31, 2024. Including discontinued operations, the 2024 net loss was $672,060. The decrease in net loss in 2025 was primarily driven by the favorable change in fair value of derivative liabilities, partially offset by higher amortization of debt discount and loss on issuance of convertible debt.

Paul Strickland, our Secretary and Director, individually, and through Selkirk Global Holdings, LLC, an entity controlled by him, is funding some of our limited operations by making advances of funds to cover our operating expenses. The advances are repayable upon demand and the obligations bear 6% interest. We expect that Mr. Strickland, directly or through Selkirk Global Holdings, LLC, will continue to fund some of our operations until we complete an acquisition or earlier if he sells his interest in the Company, and that we will continue to require additional financing to maintain our existence as a shell company for the next twelve months.

Our management is not required to fund our operations by any contract or other obligation. In the event that we undertake to complete an acquisition that requires financing, we will likely depend on an outside source for such financing. However, we have not identified any debt or equity financing sources that can be relied upon to provide such financing.

As a smaller reporting company, we are not required to provide the information otherwise required by this Item. However, our business, financial condition and prospects changed materially during the quarter as a result of the change of control and the intellectual property acquisition described in Note 4, and the following risks should be read together with the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

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. Forward-looking statements include statements about our plans to commercialize the acquired drone technology, to establish United States manufacturing, to complete an offering under Regulation A and to seek quotation of our common stock on the OTCQB Venture Market, as well as statements about our liquidity, capital requirements and ability to continue as a going concern. Words such as “anticipate,” “believe,” “expect,” “intend,” “plan,” “may,” “will” and similar expressions identify forward-looking statements, although not all forward-looking statements contain those words.

Forward-looking statements are not guarantees of future performance. They are based on assumptions and are subject to risks and uncertainties, many of which are outside our control. Those risks include our lack of revenue and our history of losses, our substantial doubt about our ability to continue as a going concern, our dependence on financing from related parties and convertible noteholders, the dilutive effect of our outstanding convertible instruments, our reliance on a single supplier relationship in the Republic of Korea, the fact that the acquired patents and design registrations are registered only in the Republic of Korea and the corresponding technologies are in the public domain elsewhere, the status of registration of the assignments with the Korean Intellectual Property Office, the substantial regulatory requirements applicable to unmanned aircraft systems in the United States, and our ability to raise capital on acceptable terms or at all. Actual results may differ materially. Except as required by law, we undertake no obligation to update any forward-looking statement.

We were originally incorporated in the State of Colorado on July 14, 1995, moved our domicile to Nevada in 2006 and redomiciled as a Florida corporation in March 2022. We filed Articles of Amendment with the Secretary of State of the State of Florida on June 16, 2026 changing our name from Hallmark Venture Group, Inc. to SDR Drone, Inc. The Financial Industry Regulatory Authority approved that amendment on July 15, 2026 and the name change, together with a change in our trading symbol from “HLLK” to “SDCO,” became effective at the open of business on July 16, 2026. Our common stock is quoted on the OTCID marketplace of OTC Link, operated by OTC Markets Group, Inc. Throughout the quarter covered by this report we were named Hallmark Venture Group, Inc. and our common stock was quoted under the symbol “HLLK.” Our principal executive offices are located at 801 US Highway 1, North Palm Beach, Florida 33408, and our telephone number is (877) 646-4833. Our transfer agent is Liberty Stock Transfer, Inc., 788 Shrewsbury Ave., Suite 2163, Tinton Falls, New Jersey 07724.

On June 9, 2026, we entered into a Change of Control Agreement with Selkirk Global Holdings, LLC, an entity owned by our director Paul L. Strickland, and EQUORIX LLC. In connection with that transaction, and as described in Note 4 to the accompanying financial statements, we entered into an Intellectual Property Transfer and Technology Assignment Agreement with Cho Sun Sik, a director and Co-Chief Executive Officer of the Company, and Sundori Drone Co., Ltd., under which the assignors transferred to us their rights in a portfolio of Korean drone technology. We simultaneously granted Sundori Drone Co., Ltd. a royalty-free, perpetual, exclusive license back to the assigned intellectual property within the Republic of Korea, and entered into a Master Services Agreement under which Sundori Drone Co., Ltd. will provide factory-setup, engineering-dispatch and training services on a fee-for-service basis.

Our business plan is to convert a proven Korean unmanned aerial systems platform into locally produced, supply- chain compliant unmanned aircraft for the United States and allied markets. We have not commenced commercial operations, we generated no revenue during the three or six months ended June 30, 2026, and we will require substantial additional capital before we can do so. Our activities during the quarter consisted of completing the change of control and intellectual property acquisition, maintaining our reporting status, and preparing for a proposed offering under Regulation A.

Acquired Intellectual Property

The acquired portfolio comprises twelve Korean patent registrations, six Korean industrial design registrations, and a body of unregistered technology consisting of firmware and source code, artificial intelligence and machine learning models, bill-of-materials and supplier qualification data, and manufacturing process documentation and know-how. There are no Korean utility model registrations. The Sundori brand names and trademarks were expressly excluded from the assignment and were retained by Sundori Drone Co., Ltd.

Because the acquisition was between entities under common control and the assets were not previously carried at an amount approximating the recorded value, the Company recorded the acquired intellectual property at the transferor’s historical carrying amount of nil in accordance with ASC 805-50, and the independent appraisal obtained by the Company was used for reference only and not as the basis of measurement. As described in Note 4, the acquired intellectual property has a finite useful life, but because it is carried at nil there is no amount to amortize and no amortization was recorded for the period from June 9, 2026 to June 30, 2026.

Title to the assigned patents and design registrations passed by contract on June 9, 2026. Registration of the assignments with the Korean Intellectual Property Office was not complete as of June 30, 2026 and remains in process. We regard registration as a step that perfects our rights against third parties rather than as a condition to the transfer of control. Until registration is complete, our recorded ownership may be more difficult to enforce against a third party in the Republic of Korea.

Revenue. We had no revenue for the three months ended June 30, 2026, compared to $20,872 for the three months ended June 30, 2025. Revenue in the prior-year period was generated by Jubilee Intel, LLC, our former subsidiary, which was deconsolidated and is presented within discontinued operations.

Other Income and Expense. Other expense, net, was $80,066 for the three months ended June 30, 2026, compared to other income, net, of $302,455 for the same period in 2025. The current period included amortization of debt discount of $30,684, a loss on issuance of convertible debt of $21,253, a loss of $28,179 from the change in fair value of our derivative liability, interest expense of $950, and other income of $1,000 representing the consideration received on the assignment of our impaired note receivable. The prior-year period included a gain of $1,366,421 from the change in fair value of the derivative liability, offset by a loss on conversion of debt of $469,164, a loss on issuance of convertible debt of $442,464, amortization of debt discount of $101,316, bad debt expense of $55,991 and interest expense of $28,231.

Net Loss. Net loss was $142,657 for the three months ended June 30, 2026, compared to net income of $637,595 for the three months ended June 30, 2025, which included income from discontinued operations of $411,952. Loss per share, basic and diluted, was $(0.00) for the current period, compared to income per share of $0.02 in the prior-year period.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

Revenue. We had no revenue for the six months ended June 30, 2026, compared to $20,872 for the six months ended June 30, 2025.

Operating Expenses. Total operating expenses were $101,162 for the six months ended June 30, 2026, compared to $134,822 for the same period in 2025. Professional fees increased to $81,917 from $26,898, while general and administrative expenses decreased to $19,245 from $57,924 and compensation expense decreased to nil from $50,000.

Other Income and Expense. Other expense, net, was $314,991 for the six months ended June 30, 2026, compared to other income, net, of $58,498 for the same period in 2025. The current period included a loss of $169,116 from the change in fair value of the derivative liability, amortization of debt discount of $111,549, a loss on issuance of convertible debt of $36,604 and interest expense of $2,288, partially offset by $3,566 of interest waived and $1,000 of other income.

Net Loss. Net loss was $416,153 for the six months ended June 30, 2026, compared to a net loss of $91,332 for the six months ended June 30, 2025. Loss per share, basic and diluted, was $(0.01) in each period.

As of June 30, 2026, we had cash of $1,036, compared to $3,382 as of December 31, 2025. Total current liabilities were $255,765 as of June 30, 2026, compared to $398,868 as of December 31, 2025, and we had negative working capital of $254,729 as of June 30, 2026. Total stockholders’ deficit improved to $254,729 as of June 30, 2026 from $395,486 as of December 31, 2025, principally because of the conversion of outstanding indebtedness into common stock. Our accumulated deficit was $5,731,318 as of June 30, 2026.

Net cash used in operating activities for the six months ended June 30, 2026 was $113,548. We have no revenue and no operating cash inflow. We have historically funded our operations through the issuance of convertible promissory notes to related parties and to a small number of non-affiliated holders, and through direct payment of our expenses by noteholders on our behalf.

On February 12, 2026 we issued a 6% convertible promissory note with a face value of up to $100,000 that funds on a drawn basis, and on May 26, 2026 we issued to EQUORIX LLC an 8% convertible promissory note with a face value of up to $100,000 on the same drawn basis. As of June 30, 2026 the convertible note balance was $1,540, net of debt discount, and the related party convertible note balance was $2,543, net of debt discount.

We will require additional financing to satisfy our existing obligations, to maintain our reporting status, and to execute any part of our business plan, including establishing United States manufacturing capability. We intend to seek that financing through an offering under Regulation A, for which we have filed an offering statement on Form 1-A, and through additional issuances of convertible debt or equity. We have no commitment from any person to provide that financing. If we are unable to obtain financing on acceptable terms, we will be required to curtail or cease our activities. Any financing we do obtain is likely to be substantially dilutive to existing holders.

Substantial Doubt About Our Ability to Continue as a Going Concern. As described in Note 3 to the accompanying financial statements, our recurring losses, our accumulated deficit of $5,731,318, our negative working capital and our lack of revenue raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of that uncertainty.

Our critical accounting policies are described in Note 2 to the accompanying financial statements and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The estimates that require the most significant judgment are the fair value of our derivative liabilities, which is measured using the Black-Scholes model and classified within Level 3 of the fair value hierarchy, and the measurement and useful life of the acquired intellectual property described in Note 4. Both are sensitive to the assumptions used, and actual results could differ materially from those estimates.