UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the period ended
or
For the transition period from ___________ to ___________
(Name of Registrant As Specified In Its Charter)
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files). Yes ☐
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 | ☐ |
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☒ | Smaller reporting company |
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| Emerging growth company |
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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 Act). Yes ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
There was no active public trading market as of the last business day of the Company’s second fiscal quarter, so there was no aggregate market value of common stock held by non-affiliates.
As of November 13, 2023, there were , shares of common stock, par value $0.0001 per share and 1,000 shares of Series A Preferred Stock, $0.0001 par value per share of the registrant outstanding.
TABLE OF CONTENTS
| PART I | 4 | |
| ITEM 1 | FINANCIAL STATEMENTS | 4 |
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 16 |
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 20 |
| ITEM 4 | CONTROLS AND PROCEDURES | 20 |
| PART II | 20 | |
| ITEM 1 | LEGAL PROCEEDINGS | 20 |
| ITEM 1A | RISK FACTORS | 20 |
| ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 21 |
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 21 |
| ITEM 4 | MINE SAFETY DISCLOSURE | 21 |
| ITEM 5 | OTHER INFORMATION | 21 |
| ITEM 6 | EXHIBITS | 21 |
| 2 |
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about future business and financial performance or conditions, anticipated sales growth across markets, distribution channels and product categories, competition from larger, more established companies with greater economic resources than we have, expenses and gross margins, profits or losses, new product introductions, financing and working capital requirements and resources, control by our principal equity holders and the other factors set forth under “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on April 14, 2023.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
| 3 |
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS. |
| 4 |
Webstar Technology Group, Inc.
Balance Sheets
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September 30,
2023 |
December 31,
2022 |
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| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ |
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$ |
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| Prepaid expenses |
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| Total current assets |
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| Noncurrent assets | ||||||||
| Right-of-use assets |
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Intangible asset - net of accumulated amortization of $
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| Total assets | $ |
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$ |
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| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ |
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$ |
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| Accrued salaries and related expenses |
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| Accrued interest - related party |
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| Due to stockholder |
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| Lease liability |
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| Total current liabilities |
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| Noncurrent liabilities | ||||||||
| Lease liability - net of current portion |
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| Convertible note payable – related party |
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| Total liabilities |
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| Commitments and contingencies (Note 6) | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred stock, $ par value; Authorized shares; designated Series A Preferred, issued and outstanding as of September 30, 2023 and December 31, 2022 | ||||||||
| Common stock, $ par value; Authorized shares; and issued and outstanding as of September 30, 2023 and December 31, 2022, respectively |
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| Additional paid-in-capital |
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| Accumulated deficit |
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| Total stockholders’ deficit |
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| Total liabilities and stockholders’ deficit | $ |
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$ |
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The accompanying condensed notes are an integral part of these unaudited financial statements.
| 5 |
Webstar Technology Group, Inc.
Statements of Operations
( Unaudited)
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Three Months
Ended September 30, |
Nine Months
Ended September 30, |
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| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Salaries and related expense |
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| General and administrative |
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| Total operating expenses |
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| Operating loss |
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| Other expense | ||||||||||||||||
| Loss on extinguishment of debt with a related party |
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| Interest expense – related party |
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| Total other expense |
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| Net loss before taxes |
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| Income tax expense | ||||||||||||||||
| Net loss | $ |
(
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(
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(
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| Net loss per share-basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average shares outstanding-basic and diluted |
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The accompanying condensed notes are an integral part of these unaudited financial statements.
| 6 |
Webstar Technology Group, Inc.
Statements of Stockholders’ Deficit
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited)
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in- | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
(
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| Net loss | - | - |
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| Balance at March 31, 2023 |
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| Partial conversion of convertible note payable to related party | - |
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| Net loss | - | - |
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| Balance at June 30, 2023 |
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| Net loss | - | - |
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| Balance at September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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| Balance at December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
(
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| Net loss | - | - |
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| Balance at March 31, 2022 |
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| Loss on extinguishment of liabilities and stock based compensation with related party | - | - |
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| Net loss | - | - |
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| Balance at June 30, 2022 |
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| Net loss | - | - |
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| Balance at September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
(
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The accompanying condensed notes are an integral part of these unaudited financial statements.
| 7 |
Webstar Technology Group, Inc.
Statements of Cash Flows
(Unaudited)
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For the Nine Months Ended September 30, |
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| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ |
(
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| Adjustments to reconcile net loss to cash used in operating activities | ||||||||
| Stock based compensation and loss on extinguishment of debt |
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| Amortization expense |
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| Change in assets and liabilities | ||||||||
| Prepaid expenses |
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| Accounts payable |
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| Accrued salaries and related expenses |
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| Accrued interest – related party |
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| Lease liabilities |
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| Net cash used in operating activities |
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| Cash flows from financing activities | ||||||||
| Advances from stockholder |
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| Net cash provided by financing activities |
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| Net decrease in cash |
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| Cash at beginning of the period |
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| Cash at end of the period | $ |
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$ |
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| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Schedule of non-Cash investing and financing activities | ||||||||
| Conversion of notes payable into common stock | $ |
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$ | |||||
| Reclassifications of accrued salary and related expenses and advances due to related party to additional paid-in-capital upon settlement | $ | $ |
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| Issuance of convertible note payable for accrued salary and advances due to related party | $ | $ |
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The accompanying condensed notes are an integral part of these unaudited financial statements.
| 8 |
WEBSTAR TECHNOLOGY GROUP, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
Webstar
Technology Group, Inc. (the “Company”) was incorporated in
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements are prepared in accordance with Rule 8-01 of Regulation S-X of the Securities Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures included in these unaudited financial statements are adequate to make the information presented not misleading. The unaudited financial statements included in this document have been prepared on the same basis as the annual financial statements, and in our opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with US GAAP and SEC regulations for interim financial statements. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that the Company will have for any subsequent period or for the calendar year ending December 31, 2023. These unaudited financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2022 which was filed with the SEC on April 14, 2023.
Liquidity, Going Concern and Uncertainties
These
unaudited financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going
concern. To date, the Company’s commercial operations have not generated sufficient revenues to enable profitability. As of September
30, 2023, the Company had an accumulated deficit of $
The Company’s continued operations will depend on its ability to raise additional capital through various potential sources, such as future equity offerings and/or debt financings, strategic relationships, and to successfully execute its business plans. The Company has relied upon advances from its Chairman, majority stockholder to fund operations since inception. Management is actively pursuing financing, but can provide no assurances that such financing will be available on acceptable terms, or at all. Without this funding, the Company could be required to delay, scale back or eliminate some or all of its business plans which would likely have a material adverse effect on the Company.
| 9 |
The unaudited financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Generally, the Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to, the results of its marketing efforts to attract users for its software solutions and rapidly changing technology, the successful launch and the acceptance of its software solutions in the marketplace, competition of its software solutions, attraction of talented and skilled employees to support the business and the ability to raise capital to support its operations.
Use of Estimates
The preparation of the unaudited financial statements 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 unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Certain of our estimates could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary. Significant estimates made by management include the valuation of deferred tax assets and a convertible note payable with a related party.
Fair Value of Financial Instruments and Fair Value Measurements
The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, accrued expenses, and due to stockholder approximate their fair market value based on the short-term maturity of these instruments. The carrying amount reported in the balance sheet for the convertible note payable-related party approximates its fair value based on the valuation on the issue date as discussed in Note 3 below. The Company did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.
Cash
The
Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less.
There are
Accounts Receivable
Accounts
receivable are recorded as revenue is earned and billed during the period the on-line classes are conducted. The billings are due within
30 days of the billing date. If accounts receivable are not paid within 90 days of billing, an allowance for doubtful accounts will be
established. Accounts receivable were $
As of September 30, 2023 and 2022, and for the three and nine months then ended, the Company had no customers or revenue.
| 10 |
Leases
The Company accounts for leases under ASU 2016-02. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the balance sheets. The Company leases office equipment used to conduct our business.
Operating lease ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative expenses in the unaudited statements of operations.
The Company transferred its leased copy machine to a related party on April 1, 2023. As of September 30, 2023, the Company has no leased assets. There was no gain or loss to the Company related to the transfer of the lease.
Intangible Assets
Intangible
assets are initially capitalized at cost, which includes the purchase price (net of any discounts and rebates) and other directly attributable
costs of preparing the asset for its intended use. Direct expenditure including employee costs, which enhances or extends the performance
of computer software beyond its specifications and which can be reliably measured, is added to the original cost of the software. Costs
associated with maintaining the computer software are recognized as an expense when incurred. Computer software is subsequently carried
at cost less accumulated amortization and accumulated impairment losses. These costs are amortized to profit or loss using the straight-line
method over their estimated useful lives of
Revenue Recognition
The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company anticipates receiving revenue from licensing its software to customers. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The
Company recognized
Stock Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation ”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment .
Income Taxes
Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the assets or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. As of September 30, 2023 and December 31, 2022, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying unaudited financial statements.
| 11 |
The Company reports net loss per share in accordance with ASC Topic 260-10, “Earnings per Share.” Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted loss per share is computed similarly to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and were dilutive.
As of September 30, 2023 and December 31, 2022, the Company had a convertible note outstanding with a related party. For the three and nine month periods ended September 30, 2023, the note was convertible into shares of common stock. For the three and nine month periods ended September 30, 2022, the note was convertible into shares of common stock. (see Note 3). The dilutive securities have been excluded from loss per share as the inclusion would be anti-dilutive.
Recently Issued Accounting Pronouncements
Changes to accounting principles are established by the Financial Accounting Standards Board in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the financial statements of the Company.
NOTE 3 – RELATED PARTY TRANSACTIONS
Due to Stockholder and Convertible Note Payable
Mr.
James Owens, the founder, controlling stockholder, and chairman of the board of directors of the Company, advances the Company money
as needed for working capital needs. During the nine months ended September 30, 2023, Mr. Owens loaned the Company $
On
June 3, 2022, the Company entered into a settlement agreement with Mr. Owens whereby Mr. Owens was issued a two-year convertible note
payable in the amount of $
On
May 15, 2023, the Frank Perone Trust partially converted $
As
of September 30, 2023, $
The
Company believes the convertible note’s standalone value to be minimal given the current financial position of the Company. Therefore,
the Company estimated the value of the conversion feature using the fair value of the equity shares that the convertible note could be
converted into on the date the note was issued. Per
ASC 470-20-30-25
, the fair value of a convertible note at date of issuance
shall be deemed no less than the fair value of the shares of equity for which it can be converted into if there is no other reliable
measure of fair value. The Company’s market price at date of issue for one share of common stock was $
resulting in a fair
value of the convertible note of $
| 12 |
With
the valuation of the convertible note determined, the convertible note fair value was allocated pro-rata between the two instruments
being extinguished with the resulting difference being recognized in the statement of operations. Compensation expense relative to the
convertible note issued in exchange for the elimination of accrued salary and related expenses owed is $
for the three and nine months
ended September 30, 2023, and $
and $
for the three and nine months ended September 30, 2022, respectively, in the accompanying
unaudited statements of operations. Loss on extinguishment of debt relative to the convertible note issued in exchange for advances owed
to Mr. Owens is $
The
Company notes that if a convertible debt instrument is issued at a substantial premium compared to the principal (or par) amount to be
settled at maturity, ASC 470-20-25-13 indicates that there is a presumption that the premium should be recognized in equity as paid-in
capital, if substantial. Such is the case here. The convertible note was recorded at $
Employment Agreements
On
February 21, 2020, effective January 1, 2020, the Company entered into executive employment agreements with Don D. Roberts as its President
and Chief Executive Officer, Harold E. Hutchins as its Chief Financial Officer, and James Owens as its Chief Technology Officer. The
details of these agreements are found in Note 6 below (Commitments). The agreements provide for salaries of $
The
salaries and related expenses related to these agreements for the three and nine months ended September 30, 2023 were $
The employment agreements contain a termination provision that states if employment is terminated by the Company, without cause, the employee is entitled to severance pay equal to one year of the employee’s annual salary. If the termination is due to a change of control, the employee is entitled to severance pay equal to two years of the employee’s salary. See Note 6. The CEO, CFO and Board of Directors do not anticipate the termination of either of these agreements without cause or that there will be a change of control and therefore, have not accrued any provision for the termination of the employment agreements.
License Agreement
On
April 21, 2020, the Company entered into a license agreement with Soft Tech Development Corporation (“Soft Tech”) to exclusively
license, market and distribute Soft Tech’s Gigabyte Slayer and WARP-G software (the “Licensed Technology”) and further
develop and commercialize these softwares throughout the world. James Owens, our controlling stockholder, owns Soft Tech. Pursuant to
the terms of the license agreement, we agreed to pay a contingent licensing fee of $
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NOTE 4 – LEASES
As of September 30, 2023, the Company has no leases. The Company transferred its copy machine and related lease to the Frank Perone Trust, a related party. There was no gain or loss associated with the transfer of the lease.
As
of December 31, 2022, the Company had one lease for a copier that meets the provisions of ASU 2016-02 which requires the recognition
of a right-of-use asset representing the rights to use the underlying leased asset for the lease terms with an offsetting lease liability.
Operating lease expense is recognized on a straight-line basis over the lease term. During the three and nine months ended September
30, 2023, the Company recorded $
NOTE 5 – STOCKHOLDERS’ DEFICIT
Series A Preferred Stock
On
March 16, 2020, the Company filed a Certificate of Designations (the “Certificate”) with the Secretary of State of Wyoming
to amend its Articles of Incorporation to designate
Common Stock
As of September 30, 2023 and December 31, 2022, the Company had and , respectively, issued and outstanding shares of common stock. On May 15, 2023, shares of the Company’s common stock were issued to the Frank Perone Trust for a partial conversion of a convertible note pursuant to the conversion provisions of the note (see Note 3).
Settlement Agreement
On
June 3, 2022, the Company entered into a settlement agreement with Mr. Owens whereby Mr. Owens was issued a two-year convertible note
payable in the amount of $
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NOTE 6 – COMMITMENTS
Executive Employment Agreements
James
Owens
. On February 21, 2020, the Company’s Board of Directors approved and executed, effective January 1, 2020, an employment
agreement with Mr. Owens to serve as its Chief Technology Officer. The term of this agreement is indefinite and may be terminated by
either party at any time provided that prior to termination, twenty (
Mr.
Owens’ employment agreement was amended on June 3, 2022 reducing his salary to $
Don
D. Roberts
. Prior to February 21, 2020, the Company did not have any written employment agreement or other formal compensation agreement
with Mr. Roberts. On February 21, 2020, the Company’s Board of Directors approved and executed, effective January 1, 2020, an employment
agreement with Mr. Roberts to serve as its Chief Executive Officer. The term of this agreement is indefinite and may be terminated by
either party at any time provided that prior to termination, twenty (
Harold
E. Hutchins
. Prior to February 21, 2020, the Company did not have any written employment agreement or other formal compensation agreement
with Mr. Hutchins. On February 21, 2020, the Company’s Board of Directors approved and executed, effective January 1, 2020, an
employment agreement with Mr. Hutchins to serve as its Chief Financial Officer. The term of this agreement is indefinite and may be terminated
by either party at any time provided that prior to termination, twenty (
Refer to Note 3 for amounts related to the Owens, Roberts, and Hutchins employment agreements included in the accompanying unaudited financial statements.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes to those financial statements that are included elsewhere in this report and in conjunction with the audited financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2022 filed with the SEC on April 14, 2023. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Statement Regarding Forward-Looking Statements and Business sections in the audited financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2022.
Background and Overview
Webstar Technology Group, Inc. (the “Company”) was incorporated in Wyoming on March 10, 2015. The Company was established for the operation of certain licensed and purchased software solutions. Since inception, the Company signed two letters of intent with a related party to license proprietary software technology solutions, i.e., Gigabyte Slayer and WARP-G. The Company has been focused in large part on organizational activities and the development of its business plans to license the Gigabyte Slayer software application that is designed to deliver live video streams, video downloads and large data files more efficiently by using new proprietary data compression technology and to license the WARP-G software solution that is designed to enable enterprise customers that transmit live video streams, video downloads and large data files to push such data over existing pipelines at higher speeds in less time also by using new proprietary data compression technology. The Company completed the license of Gigabyte Slayer and WARP-G software on April 21, 2020. In 2023, the Company is taking a three-pronged approach to commercialize its business: 1) sub-license the Gigabyte Slayer and WARP-G software; 2) acquire rights to additional technology; 3) sell the right to sublicense the software.
Plan of Operations
Marketing the Products
Management has decided that the fastest way to get the Company’s technologies to market is to not bear the burden ourselves. Numerous third parties already have the requisite infrastructure in place and there is no need for the Company to re-build those elements. Additionally, the third parties we seek to align ourselves with, are better positioned to handle the retail, business and governmental marketing sectors worldwide. They will be experienced, globally well-known entities with everything already in place for a quick launch/utilization of the Company’s technology.
There are three main paths that the Company is pursuing: 1) Licensing the technology to third parties; 2) Selling the technology via Permanent License to a third-party; 3) Acquisition of the Company by a third party via a change of control of the Company; all of which would generate up-front and residual revenues for the Company.
Gigabyte Slayer Software
Gigabyte Slayer is a distinct mobile application created to enable users to transmit more data over existing data streams to optimize data usage across mobile devices including smartphones and tablets. The application is designed to eliminate video streaming delays and reduce customers’ data plan bandwidth usage from any 3G or 4G LTE cell phone network provider. The application is designed to deliver live video streams, video downloads and large data files more efficiently by using new proprietary data compression technology. This technology significantly reduces the data package size and enhances the data traffic control between cell phone provider data downloads and uploads to customers’ mobile devices.
Web browsers perform various levels of caching data, the practice of storing data in and retrieving data from a memory device. Unfortunately, many use unsophisticated cache control capabilities. In comparison, Gigabyte Slayer data compression is capable of optimizing the high bandwidth downloads and returns the data to users’ mobile devices. This process is expected to dramatically reduce the data bandwidth needed when watching online videos, playing online games, or simply downloading large data files. The service is targeted to enter the mobile device market by offering application downloads with a monthly service fee. A smartphone and tablet user utilizing the Gigabyte Slayer application is expected to be able to decrease their data usage on their current data plan, at no additional cost, from their cell phone provider. Further, Gigabyte Slayer is designed to eliminate downloads “buffering” currently experienced by many current applications.
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WARP-G Software
WARP-G is a business-to-business software solution that companies can use on an enterprise wide basis to transmit more data over existing data streams to optimize their data usage. The software is designed to enable enterprise users to deliver faster data streams, experience shorter download/upload times and increase the volume and speed of the data. The software is designed to create less congestion and increase the speed of packets being delivered more efficiently by using new proprietary data compression technology. This technology is expected to allow the enterprise users to push more data through existing pipelines meeting increasing consumer video demands and other large files.
Results of Operations for the three and nine months ended September 30, 2023 and 2022
Revenue
Revenue was $0 for the three and nine-month periods ended September 30, 2023 and 2022. In January 2021, the Company lost its only customer for the eCampus software thereby causing the drop in revenue. Gross profit was $0 for the three and nine months ended September 30, 2023 and 2022.
Operating Expenses
Total operating expenses which are comprised of salaries and related expenses, and general and administrative expenses were $199,401 and $199,432 for the three months ended September 30, 2023 and 2022, respectively, and $647,379 and $16,873,492 for the nine months ended September 30, 2023 and 2022, respectively. The decrease in the nine month periods is primarily attributable to the settlement agreement in 2022 with Mr. Owens which resulted in a significant loss on extinguishment of liabilities and compensation expense, and decreases in internet and office expenses, partially offset by increases in legal fees and transfer agent fees.
Net Loss
The net loss was $219,401 and $221,452 for the three months ended September 30, 2023 and 2022, respectively, and $703,524 and $30,798,361 for the nine months ended September 30, 2023 and 2022, respectively. The decreases are primarily attributable to the settlement agreement in 2022 with Mr. Owens which resulted in a significant loss on extinguishment of liabilities and compensation expense and decreases in internet fees and office expense, partially offset by increases in interest expense and legal fees.
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Liquidity, Going Concern and Uncertainties
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of September 30, 2023, our working capital deficit amounted to $3,160,506 an increase of $617,996 as compared to working capital deficit of $2,542,510 as of December 31, 2022. This increase in working capital deficit is primarily a result of the increases in accrued salaries and related expenses, borrowings from our majority stockholder and an increase in accrued interest, and partially offset by increases in prepaid expenses and a decrease in accounts payable.
Net cash used in operating activities was $128,428 during the nine months ended September 30, 2023 compared to $149,547 for the nine months ended September 30, 2022. The decrease in cash used in operating activities was primarily attributable to increases in accrued salaries and related expenses and accrued interest, partially offset by increases in prepaid expenses and a decrease in accounts payable.
Net cash provided by financing activities was $128,420 during the nine months ended September 30, 2023 compared to $149,440 in the nine months ended September 30, 2022. The decrease in cash from financing activities was the result of a decrease in cash advances received from our controlling stockholder.
The unaudited financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. To date, the Company’s commercial operations have not generated adequate revenues to enable profitability. Based on the current business plans and the Company’s operating requirements, management believes that the current cash balance will not be sufficient to fund operations for at least the next twelve months following the issuance of these financial statements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
The Company’s continued operations will depend on its ability to raise additional capital through various potential sources, such as equity offerings and/or debt financings, strategic relationships, and to successfully execute its business plans. Management is actively pursuing financing, but can provide no assurances that such financing will be available on acceptable terms, or at all. Without this funding, the Company could be required to delay, scale back or eliminate some or all of its business plans which would likely have a material adverse effect on the Company.
The unaudited financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Generally, the Company’s operations are subject to a number of factors that can affect its operating result and financial condition. Such factors include, but are not limited to, the results of our marketing efforts to promote users for our software solutions, successful launch and acceptance of our software solutions in the marketplace, competition of our software solutions, attraction of talented and skilled employees to support the business and the ability to raise capital to support its operations.
Since our inception, we have been funded by loans from our controlling shareholder, James Owens. The loans from Mr. Owens are pursuant to an oral agreement, are non-interest bearing and payable upon demand by Mr. Owens. Mr. Owens has orally agreed not to demand repayment of his loans until such time as we have sufficient capital resources to repay such loans. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. There can be no assurance that additional capital will be available to us. Since we have no other such arrangements or plans currently in effect, our inability to raise funds for the above purposes that exceed our current working capital will have a severe negative impact on our ability to remain a viable company.
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We have incurred significant losses since our inception on March 10, 2015. We had a net loss for the nine-month period ended September 30, 2023 of $703,524 and an accumulated deficit as of September 30, 2023 of $42,926,140. In the event we are unable to secure a line of credit from a related company, we will continue to seek sub-license agreements for our Gigabyte Slayer and WARP-G products but delay, scale back or eliminate some or all of our additional business plans until we raise additional capital. Since we have no agreement or arrangements for any future funding from Mr. Owens, we are unable to determine how long we will be able to operate our business. This raises substantial doubt about our ability to continue as a going concern.
Management’s plan is to obtain such resources for our capital needs by obtaining capital from management and significant shareholders sufficient to meet its operating expenses. However, management cannot provide any assurances that we will be successful in accomplishing any of our plans.
Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if we were unable to continue as a going concern.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our unaudited financial statements included herein for the nine month period ended September 30, 2023 and in the notes to our annual report 10-K which includes audited financial statements for the years ended December 31, 2022 and 2021. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.
Use of Estimates
The preparation of the unaudited financial statements 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 unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Certain of our estimates, including evaluating the collectability of accounts receivable, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary. Significant estimates made by management include the valuation of deferred tax assets, fair value of preferred stock, and a convertible note with a related party.
Revenue Recognition
The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company anticipates receiving revenue from licensing its software to customers. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company recognized no revenue from licensing fees during each of the three month periods ended September 30, 2023 and 2022, respectively.
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Leases
The Company accounts for leases under ASU 2016-02. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the unaudited balance sheets. The Company leased office equipment used to conduct our business. The lease was transferred to a related party on April 1, 2023.
Operating lease ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative expenses in the unaudited statements of operations. During the three and nine months ended September 30, 2023, the Company recorded $0 and $438, respectively, and $438 and $1,314, respectively, for the three and nine months ended September 30, 2023 as operating lease expense which is included in general and administrative expenses on the unaudited statements of operations. As of September 30, 2023 and December 31, 2022, the unamortized right-of-use assets resulting from the lease were $0 and $2,347, respectively, and the lease liabilities were $0 and $2,389, respectively.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
As a “ smaller reporting company,” we are not required to provide the information required by Item 3.
| ITEM 4. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (the Company’s principal executive officer and principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the quarter covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, due to the material weaknesses identified in our annual report 10-K.
Changes in Internal Controls over financial reporting
There has been no change in our internal control over financial reporting occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
We know of no existing or pending legal proceedings against us, nor are we involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of our directors, officers or any of their respective affiliates, or any beneficial shareholder, is a party adverse to the Company or has a material interest adverse to our interest.
| ITEM 1A. | RISK FACTORS |
There have been no material changes from the risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on April 14, 2023.
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| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds . |
None.
| ITEM 3. | Defaults Upon Senior Securities . |
None.
| ITEM 4. | Mine Safety Disclosures . |
Not applicable.
| ITEM 5. | Other Information . |
None.
| ITEM 6. | EXHIBITS. |
EXHIBIT INDEX
|
Exhibit Number |
Description | |
| 31.1* | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| Webstar Technology Group, Inc. | ||
| Dated: November 13, 2023 | By: | /s/ Don D. Roberts |
| Don D. Roberts | ||
| Chief Executive Officer | ||
| (principal executive officer) | ||
| Dated: November 13, 2023 | By: | /s/ Harold E. Hutchins |
| Harold E. Hutchins | ||
| Chief Financial Officer | ||
| (principal financial and accounting officer) | ||
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