UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ___________ to ___________
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
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 Exchange Act Rule 12b-2 of the Exchange Act): Yes ☐
As of November 10, 2021, there were shares of common stock, $0.0001 par value 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 13, 2021.
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.
Condensed Balance Sheets
(Unaudited)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | - | |||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Right- of -use assets | ||||||||
| Intangible asset - net of accumulated amortization of $ | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued salaries and related expenses | ||||||||
| Due to stockholder | ||||||||
| Lease liability – current portion | ||||||||
| Total current liabilities | ||||||||
| Lease liability – net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred stock, $ par value; Authorized shares; designated Series A Preferred, issued and outstanding as of September 30, 2021 and December 31, 2020 | - | - | ||||||
| Common stock, $ par value; Authorized shares, issued and outstanding as of September 30, 2021 and December 31, 2020 | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
Webstar Technology Group, Inc.
Condensed Statements of Operations
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Salaries and related expense | ||||||||||||||||
| Consulting fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net loss before taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share-basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding-basic and diluted. (This reflects a common stock dividend issued on April 21, 2020 See Note 5). | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
Webstar Technology Group, Inc.
Statements of Stockholders’ Deficit
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in- | Accumulated | Stockholders | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance at December 31, 2020 | $ | - | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at March 31, 2021 | - | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at June 30, 2021 | ( |
) | ( |
) | ||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Balance at December 31, 2019 | - | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at March 31, 2020 | - | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Common stock dividend | - | ( |
) | |||||||||||||||||||||||||
| Preferred stock issued for repayment of amounts due to stockholder | - | |||||||||||||||||||||||||||
| Balance at June 30, 2020 | ( |
) | ( |
) | ||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Common stock issuance | - | |||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 7 |
Webstar Technology Group, Inc.
Condensed Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Amortization expense | ||||||||
| Change in assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ||||||||
| Accounts payable | ||||||||
| Accrued salaries and related expenses | ||||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Advances from stockholder | ||||||||
| Repayment of stockholder advances | ( | ) | ( | ) | ||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Schedule of non-cash investing and financing activities | ||||||||
| Common stock dividend charged against retained earnings | $ | $ | ||||||
| Repayment on due to stockholder with preferred stock issuance | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 8 |
WEBSTAR TECHNOLOGY GROUP, INC.
NOTES TO CONDENSED 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 condensed 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 condensed financial statements are adequate to make the information presented not misleading. The unaudited condensed 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, 2021 are not necessarily indicative of the results that the Company will have for any subsequent period or for the calendar year ending December 31, 2021. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2020 which was filed with the SEC on April 13, 2021.
Liquidity, Going Concern and Uncertainties
These
unaudited condensed 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, 2021, 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 condensed 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.
The Impact of COVID-19 On Business Operations
While the Company’s operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and business is uncertain. Accordingly, while the Company does not anticipate an impact on its operations, the duration of the pandemic and potential impact on the business cannot be estimated. The spread of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on our business. While the potential economic impact brought on by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruptions of global financial markets, which may reduce the Company’s future ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market events resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock. In addition, a severe or prolonged economic downturn could result in a variety of risks to the business, including a possible delay in implementing our business plan. At this time, the Company is unable to estimate the impact of this event on its operations.
Use of Estimates
The preparation of the unaudited condensed 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 condensed 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 fair value of preferred stock.
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 Company did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020.
Cash
The
Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less.
There are
| 10 |
Revenue Recognition
The Company recognizes revenue when control of the promised goods or services are transferred to its customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. For student fees, the Company generates student fee revenue by registering each student that participates in an on-line classroom utilizing our eCampus platform. This revenue is earned at the time the on-line class takes place and is accrued during the period whether or not actually billed. The student fees are billed to the college conducting the classes during the period the classes are conducted. There are no prepayments for student fees so there is no deferred revenue related to student fees. The annual fee charged to the college is billed in the first quarter of the year and the income is recognized over the entire year.
The Company lost its only customer in January 2021 due to circumstances at the customer level. The Company will maintain its eCampus platform for future customers and the Company’s revenue policies and procedures described above remain unchanged.
The
Company billed $
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, 2021, and for the nine months then ended, the Company had no customers or revenue. Prior to January 1, 2021 the Company
had one customer, an educational institution, responsible for
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.
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 if the additional common shares were dilutive. As of September 30, 2021 and 2020, there are dilutive securities and, therefore, basic and diluted loss per share is the same.
The common stock dividend issued on April 5, 2020 (see Note 5) has been retrospectively presented in the weighted-average shares outstanding-basic and diluted on the unaudited condensed statement of operations in order to compute net loss per share-basic and diluted for all periods.
| 11 |
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, 2021 and December 31, 2020, the Company does
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 condensed 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 condensed statements of operations.
NOTE 3 – RELATED PARTY TRANSACTIONS
Due to Stockholder
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, 2021, Mr. Owens loaned the Company $
Series A Preferred Stock
On
April 2, 2020, the Company issued James Owens shares of its Series A Preferred Stock at the agreed upon price of $ per share.
The estimated fair value of the Series A Preferred Stock was determined to be less than the $
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 $
| 12 |
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, 2021 were $
NOTE 4 – LEASES
As
of September 30, 2021, the Company has 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, 2021, the Company recorded $
The
term of the lease is
The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under the noncancelable copier operating lease to the total operating lease liabilities recognized on the unaudited condensed balance sheet as of September 30, 2021:
| Year | Undiscounted Lease Payments | |||||
| Copier Lease | 2021 (remainder of year) | $ | ||||
| 2022 | ||||||
| 2023 | ||||||
| 2024 | ||||||
| Total | ||||||
| Less: present value discount | ( | ) | ||||
| Total operating lease liabilities | $ | |||||
| 13 |
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 the Series A Preferred Stock as a series of preferred stock of the Company.
shares of Series A Preferred Stock are authorized in the Certificate.
Common Stock
On April 21, 2020, the Company’s Board of Directors approved a common stock dividend to issue each holder of the Company’s common stock a common stock dividend of shares per share of the Company’s outstanding common stock.
On April 21, 2020, the Company issued shares of its common stock to the Company’s common stockholders of record per the common stock dividend declaration. The table below shows all the Company’s stockholders of common stock and the number of shares held by each before and after the common stock dividend:
| Common Stockholders Name | 12/31/19 Shares | % Owned Pre-Div | Dividend Shares | Shares After Dividend | % Owned After Div | |||||||||
| James Owens | % | % | ||||||||||||
| Webstar Networks | % | % | ||||||||||||
| Ashok Mohan | % | % | ||||||||||||
| Michael Foster | % | % | ||||||||||||
| Heather Anan | % | % | ||||||||||||
| John England | % | % | ||||||||||||
| Total | % | % | ||||||||||||
The common stock dividend has been retrospectively presented in the weighted-average shares outstanding-basic and diluted on the condensed statement of operations in order to compute net loss per share-basic and diluted for all periods.
Initial Public Offering
On
April 24, 2020, the Company filed a Post-Effective Amendment to its original Form S-1 Registration Statement. The Securities and Exchange
Commission deemed the Post-Effective Amendment effective on May 1, 2020. Under the amended Registration Statement, on September 17, 2020,
the Company completed the initial public offering of shares of common stock, par value $
NOTE 6 - COMMITMENTS
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 (
| 14 |
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 these employment agreements accrued as of September 30, 2021 and 2020.
NOTE 7 – SUBSEQUENT EVENTS
Subsequent Events
Mr.
James Owens, the Chairman of the Board, Chief Technology Officer, founder, and controlling stockholder of the Company, loaned the Company
$
| 15 |
| 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 condensed 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, 2020 filed with the SEC on April 13, 2021. 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, 2020.
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 license agreements 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. Further, the Company purchased the intellectual property rights for the Webstar eCampus virtual classroom access platform from a related party. The Company completed the license of Gigabyte Slayer and WARP-G software on April 21, 2020 and is now implementing the marketing plan to sub-license the software.
COVID-19
While the Company’s operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and business is uncertain. Accordingly, while the Company does not anticipate an impact on its operations, the duration of the pandemic and potential impact on the business cannot be estimated. The spread of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on our business. While the potential economic impact brought on by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruptions of global financial markets, which may reduce the Company’s future ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market events resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock. In addition, a severe or prolonged economic downturn could result in a variety of risks to the business, including a possible delay in implementing our business plan. At this time, the Company is unable to estimate the impact of this event on its operations.
Recent Developments
On August 2, 2021, the Company’s Common Stock, under the trading symbol WBSR, began trading in the market for unlisted securities (i.e., the “over-the-counter market”).
Plan of Operations
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.
Webstar eCampus
Webstar eCampus is an affordable, virtual online education and e-learning technology that allows the possibility of almost any organization to offer educational services online. Following completion of the license of the Gigabyte Slayer software, we plan to enhance the Webstar eCampus virtual classroom access platform by incorporating the Gigabyte Slayer data technology which is designed to securely deliver all content at greater efficiency and significantly increase storage capabilities. This enhancement is expected to enable universities and other educational institutions to increase student participation and convenience with an enhanced experience for the students. Students will no longer experience delays in data transmission or “buffering” that is experienced by other online e-learning solutions. Webstar eCampus makes it possible for educators to offer their students visual online access to classroom activities from anywhere in the world. Remote students who use the service will be able to virtually access their classroom via the internet using their web enabled Smartphone, device or computer. The Webstar eCampus software was used in 2020 by California College of Early Childhood Development (the “California College”) pursuant to an oral agreement. Under the terms of the oral agreement, the California College paid us an annual non-refundable license fee of $995 plus $195 per classroom, and $49.95 per student per class. Either party could terminate this use right at any time during its month-to-month term. California College, our only customer, terminated our agreement in January 2021.
Designed with customer and user simplicity in mind, there is no complex customer setup, expensive servers or software to buy or build. Webstar eCampus allows classes with increased scheduling flexibility in real time or after hours. It makes it possible and affordable for educators to offer students virtual on-demand classroom activities and to increase their student base and attendance around the world through increased availability and reduced cost of education per student, with enhanced delivery quality. Webstar eCampus offers virtual real-time e-library and e-bookstore capabilities as well as virtual auditorium and student body gathering venues. Ongoing reach of this technology is planned to include the development and implementation of virtual online learning centers in third world countries as well as medical support services and disaster relief services connected to our innovative software and virtual capabilities. Moreover, Webstar eCampus encompasses Cloud learning with secured connection and is smartphone ready.
Results of Operations for the three and nine months ended September 30, 2021 and 2020
Revenue
Revenue was $0 and $2,197 for the three months ended September 30, 2021 and 2020, respectively, and $0 and $4,793 for the nine months ended September 30, 2021 and 2020, respectively. In January 2021, the Company lost its only customer for the eCampus software thereby causing the drop in revenue. In the immediate future, the Company is focusing its efforts on sub-licensing the Gigabyte Slayer and WARP-G software to generate revenue. Cost of sales was $0 and $400 for the three months ended September 30, 2021 and 2020, respectively and $0 and $1,200 for the nine months ended September 30, 2021 and 2020, respectively. The cost of sales for the three and nine months ended September 30, 2020 was the amortization expense of the eCampus software. The amortization expense of the software for the three and nine months ended September 30, 2021, was included in general and administrative expenses due to the lack of revenue resulting from the loss of the eCampus customer. Gross profit was $0 and $1,797 for the three months ended September 30, 2021 and 2020, respectively, and $0 and $3,593 for the nine months ended September 30, 2021 and 2020, respectively. The gross profit decline was also due to the loss of the eCampus customer.
Operating Expenses
Total operating expenses which are comprised of salaries and related expenses, consulting fees and general and administrative expenses were $298,935 and $350,094 for the three months ended September 30, 2021 and 2020, respectively, and $925,209 and $1,045,141 for the nine months ended September 30, 2021 and 2020, respectively. The decreases are primarily attributable to the decreases in professional services, consulting fees, maintenance, and telephone expenses resulting from the Company’s decreased need for legal services and the discontinuance of the use of consultants in an effort to reduce expenses and partially offset by increases in transfer agent fees due to the Company’s stock issuances and transfers.
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Net Loss
The net loss was $298,935 and $348,297 for the three months ended September 30, 2021 and 2020, respectively, and $925,209 and $1,041,548 for the nine months ended September 30, 2021 and 2020, respectively. The decrease in loss is primarily a result of the decreases in professional services, consulting fees, maintenance, and telephone expenses discussed above offset by an increase in transfer agent fees.
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, 2021, our working capital deficit amounted to $2,824,927 an increase of $924,113 as compared to working capital deficit of $1,900,814 as of December 31, 2020. This increase in working capital deficit is primarily a result of decreases in accounts receivable, and prepaid expenses and increases in accounts payable, accrued salaries and related expenses, and borrowings from our majority stockholder and partially offset by an increase in cash.
Net cash used in operating activities was $114,575 during the nine months ended September 30, 2021 compared to $204,997 for the nine months ended September 30, 2020. The decrease in cash used in operating activities was primarily attributable to a decrease in the net loss from less operating expenses, a decrease in accounts receivable and partially offset by increases in accounts payable and accrued salaries and related expenses.
Net cash provided by financing activities was $117,587 during the nine months ended September 30, 2021 compared to $229,172 in the nine months ended September 30, 2020. The decrease in cash from financing activities was the result of a decrease in cash advances received from our controlling stockholder and a decrease in proceeds from the sale of common stock.
The unaudited condensed 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 condensed 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, 2021 of $925,209 and an accumulated deficit as of September 30, 2021 of $9,498,267. 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 condensed financial statements included herein for the nine month period ended September 30, 2021 and in the notes to our annual report 10-K which includes audited financial statements for the years ended December 31, 2020 and 2019. 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 condensed 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 condensed 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 and fair value of preferred stock.
Revenue Recognition
The Company recognizes revenue when control of the promised goods or services are transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. For student fees, we generate student fee revenue by registering each student that participates in an on-line classroom utilizing our eCampus platform. This revenue is earned at the time the on-line class takes place and is accrued during the period whether or not actually billed. The student fees are billed to the college conducting the classes during the period the classes are conducted. There are no prepayments for student fees so there is no deferred revenue related to student fees. The annual fee charged to the college is billed in the first quarter of the year and the income is recognized over the entire year. The Company billed $0 in annual fees in January 2021 and recognized no revenue in annual fees during the nine months ended September 30, 2021. Annual fees paid in advance of services performed would be presented as contract liabilities. The Company recognized revenue of $0 and $2,197 from student and annual fees during the three months ended September 30, 2021 and 2020, respectively, and $0 and $4,793 during the nine months ended September 30, 2021 and 2020, 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 condensed 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 condensed statements of operations. During the three and nine months ended September 30, 2021, the Company recorded $438 and $1,314, respectively, and $438 and $1,314, respectively, for the three and nine months ended September 30, 2020 as operating lease expense which is included in general and administrative expenses on the condensed statements of operations. As of September 30, 2021 and December 31, 2020, the unamortized right-of-use assets resulting from the lease was $4,218 and $5,258, respectively, and the lease liabilities were $4,297 and $5,360, 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, 2021, 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 an adverse party 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, 2020, as filed with the SEC on April 13, 2021.
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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 10, 2021 | By: | /s/ Don D. Roberts |
| Don D. Roberts | ||
| Chief Executive Officer | ||
| (principal executive officer) | ||
| Dated: November 10, 2021 | By: | /s/ Harold E. Hutchins |
| Harold E. Hutchins | ||
| Chief Financial Officer | ||
| (principal financial and accounting officer) | ||
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