10-Q: Webstar Pivots to Real Estate, Faces Going Concern

Webstar Technology Group shifts focus to real estate development, reporting a reduced net loss but facing significant liquidity challenges and a going concern warning.

Summary

• Webstar Technology Group, Inc. has transitioned from software solutions to early-stage specialty real estate development, focusing on multi-tenant green buildings and entertainment/resort projects.
• The company formed Forge Atlanta Asset Management LLC, an 80/20 joint venture with Urbantec Development Partners, LLC, to acquire and redevelop a 10-acre mixed-use project in Downtown Atlanta for $33,000,000.
• Paid $50,000 non-refundable earnest money and an additional $50,000 earnest money payment for the Forge Atlanta project, with the land purchase scheduled for November 25, 2025.
• Reported a net loss of $(153,776) for the six months ended June 30, 2025, a significant reduction from $(4,425,220) for the same period in 2024, primarily due to the absence of a $4,021,910 liability settlement expense in the current period.
• Operating expenses decreased by 70.3% to $107,776 for the six months ended June 30, 2025, from $363,310 in the prior year, mainly due to lower compensation and consulting costs.
• Cash at June 30, 2025, was $5,576, up from $20 at December 31, 2024, but net cash used in operating activities increased to $(128,681) for the six months ended June 30, 2025, from $(2,126) in the prior year.
• Total liabilities increased to $1,254,444 at June 30, 2025, from $1,101,605 at December 31, 2024, resulting in a working capital deficit of $(1,201,887).
• The company has an accumulated deficit of $47,791,160 as of June 30, 2025, and management believes existing cash is insufficient to fund operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern.
• Filed a Regulation A Offering on March 17, 2025, to raise up to $10 million at $7 per share, which has not yet been declared effective by the SEC.
• New management team appointed on June 14, 2024, following the acquisition of Series A Preferred Stock, with Mr. Ricardo Haynes as President and CEO.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including a 'going concern' warning, no revenue, and increasing cash burn from operations. While a strategic pivot to real estate and efforts to raise capital are underway, the execution risk is extremely high, and internal controls are weak. The reduced net loss is misleading as it's due to a one-time prior-year expense, not operational improvement.

Positives

• Net loss significantly reduced to $(153,776) for the six months ended June 30, 2025, from $(4,425,220) in the prior year, primarily due to the absence of a large one-time liability settlement expense.
• Operating expenses decreased by 70.3% to $107,776 for the six months ended June 30, 2025, reflecting reduced compensation and consulting costs.
• Successfully raised $209,237 in financing activities during the six months ended June 30, 2025, including proceeds from convertible notes and promissory notes.
• Established a new strategic direction in specialty real estate development with the formation of Forge Atlanta Asset Management LLC and initial steps towards a significant project acquisition.
• New management team is in place, actively pursuing business development and financing.

Negatives

• No revenues generated for the three and six months ended June 30, 2025 and 2024, indicating a lack of commercial operations.
• Accumulated deficit of $47,791,160 and a working capital deficit of $1,201,887 as of June 30, 2025.
• Net cash used in operating activities increased significantly to $(128,681) for the six months ended June 30, 2025, from $(2,126) in the prior year, indicating higher cash burn.
• Existing cash of $5,576 at June 30, 2025, is insufficient to fund operations for the next twelve months, raising substantial doubt about the company's ability to continue as a going concern.
• A $1,000,000 convertible note payable to a related party, plus $95,357 in accrued interest, is due on demand as of June 30, 2025.
• The $325,000 final payment for the Series A Preferred Stock has not been remitted to the former CEO, Mr. James Owens, by the purchasers, despite being due 90 days after June 14, 2024, meaning Mr. Owens retains voting control of the Preferred Stock.
• Material weaknesses in internal control over financial reporting persist, including lack of risk assessment, comprehensive entity-level controls, adequate system/manual controls, and insufficient segregation of duties.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to accumulated deficit, working capital deficit, net losses, and insufficient cash.
• Reliance on future capital raises (equity offerings, debt financings, strategic relationships) with no assurance of availability on acceptable terms or at all.
• Inability to secure additional funding could lead to delays, scaling back, or elimination of business plans, materially adversely affecting the company.
• The company has limited operating history and no guarantee of success in its new real estate development business.
• Risks inherent in establishing a new business enterprise, including limited capital resources and potential cost overruns.
• Material weaknesses in internal control over financial reporting, including inadequate segregation of duties, could lead to financial misstatements or fraud.
• The former CEO, Mr. James Owens, retains voting control of the Series A Preferred Stock because the final payment of $325,000 has not been remitted by the purchasers, posing a potential governance risk.

Future Outlook

Management believes existing cash is insufficient to fund operations for at least the next twelve months and intends to raise additional funds through a public offering (Regulation A) or an asset sale transaction. The company will continue to evaluate acquisitions and investments that complement its new real estate business. The Forge Atlanta project has a scheduled land purchase closing date of November 25, 2025, with an option to extend to February 6, 2026.

Management Comments

• Management believes that the existing cash at June 30, 2025 will not be sufficient to fund operations for at least the next twelve months.
• 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.
• Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.
• Management believes that our condensed financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Industry Context

Webstar Technology Group is undergoing a significant strategic pivot from its original software licensing business to specialty real estate development. This move places the company in a highly competitive and capital-intensive industry, distinct from its prior operations. The focus on 'green/energy efficient' upgrades and 'entertainment and resort' real estate aligns with growing trends in sustainable development and experiential properties, but the company is an early-stage entrant with no prior track record in this sector. Its success will depend heavily on its ability to secure substantial financing and execute complex real estate projects, competing with established developers.

Comparison to Industry Standards

• As an early-stage company with no revenue and a significant accumulated deficit, Webstar Technology Group's financial performance is not comparable to established real estate development firms or software companies.
• The company's current financial state, including its 'going concern' warning and reliance on future capital raises, falls significantly below industry standards for operational stability and financial health in both the real estate and technology sectors.
• Specific comparable companies, projects, or results are not provided in the filing, making a direct quantitative comparison impossible. However, typical real estate development projects require substantial upfront capital, robust financing, and a proven development pipeline, none of which are currently demonstrated by Webstar.

Management Changes

Corporate Governance

Legal Proceedings

• Not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on the business, prospects, financial condition, or results of operations.
• May become involved in material legal proceedings in the future.

Related Party Transactions

• Purchasers of Series A Preferred Stock (Mr. Ricardo Haynes, Mr. Eric Collins, Mr. Lance Lehr, Ms. Tori White, Mr. Donald Keer) acquired 100% of the Preferred Stock from the Frank T. Perone Irrevocable Trust (controlled by Mr. James Owens) for $500,000. The final $325,000 payment was not remitted as of the filing date, meaning Mr. Owens retains voting rights.
• Acquired contracts with a net book value of zero from Electrical and Compression Optimization, Inc. (ECO), a Wyoming corporation owned and controlled by James Owens, in exchange for 201,057,278 common shares issued directly to stockholders.
• Acquired licenses for Gigabyte Slayer and WARP-G software from Webnet Technologies Incorporated, a Wyoming corporation owned and controlled by James Owens. Webnet assumed $3,317,472 in accrued salaries and related expenses and made a $22,869 cash payment to Webstar's accounts payable.
• Acquired assets and intellectual property of Bear Village, Inc. from Thunder Energies Corporation, an entity owned and controlled by the purchasers of the company's Preferred Stock, for 201,057,278 common shares.
• Received working capital advances of $3,000 during the three months ended June 30, 2025, and made repayments of $81,350 from an entity controlled by the Preferred Stock purchasers. A balance of $37,132 is due from related party and $41,218 owed to related party at June 30, 2025 and December 31, 2024 respectively.
• The Trust (controlled by Mr. James Owens) loaned the company $2,110 for working capital and paid $68,448 in expenses on behalf of the company during the six months ended June 30, 2024.
• A $1,101,000 convertible note payable to Mr. Owens (subsequently transferred to Mr. Hendrickson, a former director) with 8% interest, due on demand as of June 30, 2025, with $1,000,000 principal and $95,357 accrued interest outstanding.
• In July 2025, received working capital advances of $14,200 from an entity controlled by the Preferred Stock purchasers.
• In July 2025, entered into a promissory note with a director of the company for $12,500 ($10,000 cash received).

Stakeholder Impact

• Shareholders: Face significant dilution risk from future equity raises and convertible note conversions. The 'going concern' warning indicates a high risk of capital loss. The retention of voting control by the former CEO due to unremitted payment adds governance uncertainty.
• Employees: The company's financial instability and lack of consistent revenue could impact job security and future compensation, although past accrued salaries were assumed by a related party.
• Creditors: The company's substantial liabilities, including a demand-due convertible note, and 'going concern' status indicate high credit risk.
• Customers: As the company is in an early-stage pivot with no current revenue, there are no existing customers to be directly impacted, but future customers of the real estate projects face development and completion risks.
• Suppliers: Potential for payment delays or non-payment due to the company's liquidity issues.

Next Steps

• Secure additional capital through a public offering (Regulation A) or asset sale transaction to fund operations.
• Acquire land for the Forge Atlanta project, with a scheduled closing date of November 25, 2025 (with an option to extend to February 6, 2026).
• Implement remediation plan for material weaknesses in internal control over financial reporting in fiscal year 2026, including appointing qualified personnel and modifying financial controls.
• Continue to evaluate acquisitions and investments that complement the new real estate development business.

Key Dates

Recommendation

The company is in a highly precarious financial position, evidenced by a 'going concern' warning, zero revenue, a substantial accumulated deficit, and increasing cash burn from operations. While a strategic pivot to real estate development and active capital raising efforts are underway, these are early-stage and highly speculative, with no guarantee of success. The persistence of material weaknesses in internal controls further exacerbates risk. A seasoned investor would likely view this as an extremely high-risk investment with significant downside potential and would typically divest or avoid.

Keywords

Real Estate Development, Mixed-Use Development, Atlanta Real Estate, Special Purpose Vehicle (SPV), Going Concern, SEC Filing, 10-Q, Capital Raise, Convertible Notes, Corporate Governance, Internal Controls