10-Q: Webstar Q3 Loss Narrows, Real Estate Pivot Faces Hurdles

Webstar Technology Group reported a reduced nine-month net loss but faces significant liquidity challenges and a going concern warning amidst its pivot to real estate development.

Summary

• Webstar Technology Group, Inc. (WBSR) filed its Form 10-Q for the quarter ended September 30, 2025.
• The company transitioned its business model from licensed software solutions to early-stage specialty real estate development in June 2024.
• Net revenues remained $0 for both the three and nine months ended September 30, 2025 and 2024.
• The net loss for the nine months ended September 30, 2025, significantly decreased to $(363,736) from $(4,466,798) in the prior year, primarily due to a large loss on extinguishment of liabilities in 2024.
• However, the net loss for the three months ended September 30, 2025, increased to $(209,960) from $(41,578) in the same period last year.
• Total assets increased to $607,960 as of September 30, 2025, from $20,369 at December 31, 2024, largely due to Forge Atlanta escrow deposits and related party receivables.
• Total liabilities also significantly increased to $1,919,807 from $1,101,605 over the same period.
• The company reported a working capital deficit of $(1,426,847) and an accumulated deficit of $(47,990,101) as of September 30, 2025.
• Cash at the end of the period was $7,789, up from $20 at year-end 2024, but net cash used in operating activities for the nine months was $(661,468).
• The company is pursuing the Forge Atlanta project, a 10-acre mixed-use real estate development, with a non-binding Letter of Intent to acquire the property for $33,000,000.
• Forge Atlanta has secured initial financing through promissory notes, including one offering a condominium unit as part of the consideration.

Sentiment

Score: 2

Explanation: The company faces severe liquidity issues, a going concern warning, and has no revenue. While the nine-month net loss improved, the quarterly loss worsened, and cash burn increased. The strategic pivot to real estate is highly capital-intensive and carries significant execution risk, compounded by identified material weaknesses in internal controls. The reliance on dilutive and complex debt financing further adds to the negative sentiment.

Positives

• Net loss for the nine months ended September 30, 2025, improved significantly to $(363,736) compared to $(4,466,798) in the prior year, largely due to the absence of a large loss on extinguishment of liabilities seen in 2024.
• Cash balance increased to $7,789 as of September 30, 2025, from $20 at December 31, 2024, indicating some successful financing activities.
• The company successfully raised $754,237 in cash from financing activities during the nine months ended September 30, 2025, through convertible notes, short-term loans, and promissory notes.
• The strategic pivot to real estate development, particularly the Forge Atlanta project, represents a new potential growth avenue and has attracted initial investment.

Negatives

• The company has not generated any revenues since its inception, including for the three and nine months ended September 30, 2025 and 2024.
• A substantial doubt exists about the company's ability to continue as a going concern due to significant accumulated deficit ($47,990,101), working capital deficit ($1,426,847), and ongoing net losses.
• Net loss for the three months ended September 30, 2025, worsened to $(209,960) from $(41,578) in the comparable prior-year period.
• Net cash used in operating activities for the nine months ended September 30, 2025, increased significantly to $(661,468) from $(2,126) in the prior year, indicating a higher cash burn rate.
• Total liabilities increased substantially to $1,919,807 as of September 30, 2025, from $1,101,605 at December 31, 2024.
• The company's existing cash of $7,789 is insufficient to fund operations for the next twelve months.
• Material weaknesses in internal control over financial reporting were identified, including lack of risk assessment, inadequate entity-level controls, insufficient system/manual controls, and poor segregation of duties (officers approve own reimbursements).

Risks

• Substantial doubt about the company's ability to continue as a going concern due to lack of revenues, accumulated deficit, and working capital deficit.
• Inability to raise additional capital through equity offerings, debt financings, or strategic relationships on acceptable terms, or at all, which could force the company to delay or eliminate business plans.
• Reliance on advances from related parties, which may not continue to be available.
• Risks inherent in establishing a new business enterprise, including limited capital resources and potential cost overruns in real estate development.
• Uncertainty regarding the successful acquisition and redevelopment of the Forge Atlanta project, including securing financing and meeting closing conditions.
• Potential for acceleration of amounts due under short-term convertible notes if customary events of default occur.
• Material weaknesses in internal control over financial reporting, which could adversely affect the ability to record, process, summarize, and report financial information accurately.
• The global economic crisis may make it difficult to obtain additional financing.
• Future financing, if obtained, may contain undue restrictions (debt) or cause substantial dilution for stockholders (equity).

Future Outlook

Management believes existing cash is insufficient to fund operations for at least the next twelve months and is actively pursuing additional financing through public offerings, debt financings, or asset sales. The company expects to purchase approximately $50,000 of equipment for business expansion in the next twelve months. There is no assurance that future financing will be available on acceptable terms, or at all, and the company may need to delay or eliminate business plans. The Regulation A Offering for up to $10 million of common stock at $7 per share is not yet effective.

Management Comments

• Management believes that the existing cash at September 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.
• 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's pivot from software to specialty real estate development, particularly mixed-use projects like Forge Atlanta, aligns with broader urban revitalization and green building trends. However, entering a capital-intensive industry like real estate development as an early-stage company with no revenue and significant financial deficits presents substantial challenges. The reliance on complex financing structures, including convertible notes and equity-linked debt, is common for early-stage developers but also indicates a high-risk profile, especially given the current global economic uncertainties that could impact financing availability and terms.

Comparison to Industry Standards

• NA The company is an early-stage real estate development company with no revenues, making direct comparisons to established industry benchmarks or specific comparable projects difficult without more detailed operational data. The financial metrics indicate a pre-revenue, high-burn startup phase, which is not uncommon for new development ventures but highlights significant execution risk.

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.

Related Party Transactions

• Mr. James Owens, former CEO and founder, remains the controlling stockholder due to the Series A Preferred Stock being held in escrow, with $325,000 of the purchase price not yet remitted by the new Purchasers.
• The company acquired contracts from Electrical and Compression Optimization, Inc. (owned by James Owens) in exchange for 201,057,278 common shares.
• Webnet Technologies Incorporated (owned by James Owens) acquired licenses for Gigabyte Slayer and WARP-G software from the company, assuming $3,317,472 in accrued salaries and making a $22,869 cash payment.
• The company acquired assets and intellectual property of Bear Village, Inc. from Thunder Energies Corporation (controlled by the new Purchasers) for 201,057,278 common shares, with 2,000,000 shares subsequently cancelled.
• Working capital advances were received from an entity controlled by the new Purchasers, resulting in a balance due from related party of $80,129 as of September 30, 2025.
• A convertible note payable to Mr. Owens' Trust, with a principal of $1,000,000 and accrued interest of $115,357, remains outstanding and is due on demand. This note was transferred to Mr. Hendrickson, a former director.
• In June 2024, $427,863 of liabilities owed to Mr. Owens' Trust were settled with 42,786,278 common shares, resulting in a $4,021,910 loss on extinguishment.

Stakeholder Impact

• **Shareholders**: Significant dilution risk from future equity raises and conversions of existing convertible notes. The going concern warning and lack of revenue pose substantial risk to investment value. The cancellation of 2,000,000 common shares impacts existing shareholders.
• **Employees**: The company's financial instability and going concern warning could impact job security and future compensation. The assumption of accrued salaries by a related party in 2024 indicates past issues with employee compensation.
• **Customers**: Currently no revenue-generating customers. Future customers for real estate projects face risks associated with project completion and quality given the company's early stage and financial position.
• **Suppliers/Creditors**: Increased risk due to the company's working capital deficit, substantial liabilities, and going concern warning. Promissory notes are tied to the success of the Forge Atlanta land acquisition, adding specific risk.
• **Management**: Faces significant pressure to secure financing, execute the real estate development strategy, and address internal control weaknesses to ensure the company's survival and growth.

Next Steps

• Raise additional capital through future equity offerings, debt financings, or strategic relationships.
• Successfully acquire the land for the Forge Atlanta project by the scheduled closing date of November 25, 2025, or exercise the extension option to February 6, 2026.
• Secure financing and manage the development of the Forge Atlanta mixed-use real estate project.
• Implement remediation plans to address identified material weaknesses in internal control over financial reporting during the 2026 fiscal year.
• Obtain SEC effectiveness for the Regulation A Offering to raise up to $10 million.

Key Dates

Recommendation

The company presents an extremely high-risk profile. It has no revenue, a substantial accumulated deficit, and a severe working capital deficit, leading to a 'going concern' warning. While the nine-month net loss improved, the quarterly loss worsened, and cash burn from operations significantly increased. The strategic pivot to real estate is highly capital-intensive, and the company's current cash position is explicitly stated as insufficient for the next 12 months. Reliance on future, uncertain financing, coupled with identified material weaknesses in internal controls and complex related-party transactions, indicates fundamental operational and financial instability. For a seasoned investor, the risks far outweigh any potential, highly speculative rewards, making a 'strong sell' recommendation appropriate.

Keywords

Real Estate Development, Forge Atlanta, Going Concern, SEC 10-Q, Quarterly Report, Liquidity, Capital Raise, Convertible Notes, Promissory Notes, Corporate Governance, Internal Controls, Mixed-Use Development, Atlanta Real Estate, Webstar Technology Group