10-K/A: Webstar Technology Group Restates Financials Amidst Control Weaknesses

Webstar Technology Group, Inc. has filed an amended annual report (10-K/A) to restate its financial statements for the fiscal years ended December 31, 2025 and 2024, citing errors in derivative liability classification and liability settlement with shares, alongside identifying material weaknesses in internal controls.

Summary

• Webstar Technology Group, Inc. has filed an amended annual report (10-K/A) to restate its previously issued financial statements for the fiscal years ended December 31, 2025 and 2024.
• The restatements are due to errors in classifying equity-linked financial instruments as derivative liabilities, resulting in an $18,676,168 derivative liability in fiscal year 2024, and a misclassification of liabilities settled with shares, amounting to $4,021,910 in fiscal year 2024.
• The company identified material weaknesses in its internal control over financial reporting as of December 31, 2024, primarily due to a lack of adequate accounting personnel expertise and insufficient segregation of duties.
• The company has no revenue and significant accumulated deficits, raising substantial doubt about its ability to continue as a going concern.
• Significant debt obligations are in default or have missed payment deadlines, with ongoing negotiations for restructuring.
• The company is actively pursuing additional funding through public offerings or asset sales to support its operations and business plan.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a very negative filing due to significant restatements, material weaknesses in internal controls, substantial doubt about going concern, and ongoing financial distress with multiple defaults and payment issues.

Positives

• The company has a new management team in place since June 2024, focused on expanding into real estate development.
• The company is pursuing a strategy to develop mixed-use commercial and residential complexes, with a significant project in Atlanta (Forge Atlanta).
• The company has entered into agreements for potential bond issuance up to $223,726,750 for the Forge Atlanta project.
• The company has a plan to add experienced staff to the accounting department in 2027 to address material weaknesses.

Negatives

• The company has restated its financial statements for fiscal years 2024 and 2025 due to accounting errors.
• Material weaknesses in internal controls over financial reporting have been identified.
• The company has no revenue and a significant accumulated deficit of $63,337,851 as of December 31, 2025.
• The company has a working capital deficit of $55,386,238 as of December 31, 2025.
• Substantial doubt exists regarding the company's ability to continue as a going concern.
• Multiple debt obligations are in default or have missed payment deadlines, with ongoing negotiations for restructuring.
• The company has a very limited cash balance of $4,271 as of December 31, 2025.
• The company's stock is classified as a penny stock, potentially limiting liquidity and investor interest.

Risks

• The company's ability to continue as a going concern is dependent on its ability to raise additional capital through public offerings or asset sales, with no assurance of success.
• Failure to make payments or refinance properties could result in foreclosure and loss of opportunities, particularly for the Atlanta Forge project.
• The company faces significant debt obligations and potential defaults, with ongoing negotiations to restructure terms.
• The company has identified material weaknesses in internal controls, increasing the risk of financial misstatements.
• The company's operations are highly dependent on a small management team, and the departure of key personnel could be detrimental.
• The company's success is contingent on the popularity of its hospitality and entertainment facilities, which is unpredictable and subject to changing consumer tastes.
• The company operates in a highly competitive market with established players like Disney and Six Flags.
• The company has not yet acquired insurance and may not be able to obtain adequate coverage at commercially reasonable rates.

Future Outlook

The company's future outlook is highly uncertain, dependent on its ability to secure significant additional funding through public offerings or asset sales to support its real estate development plans and ongoing operations. Without this funding, the company may be forced to scale back or cease operations.

Management Comments

• 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 intends to raise additional funds by way of a public offering or an asset sale transaction.
• Management believes that these remediation efforts to address material weaknesses in internal controls will be complete by the end of 2027.

Industry Context

StockSavvy.ai notes that Webstar Technology Group is attempting a significant pivot from software solutions to early-stage specialty real estate development, focusing on mixed-use and entertainment/resort projects. This is a capital-intensive sector, and the company's current financial distress and lack of revenue present substantial hurdles to executing its ambitious development plans, especially in a competitive market.

Comparison to Industry Standards

• The company's lack of revenue and significant accumulated deficit are far below industry standards for established real estate developers.
• The company's reliance on debt financing and ongoing defaults on payments are concerning compared to industry norms where stable financing and timely payments are critical.
• The identification of material weaknesses in internal controls is a significant deviation from the robust financial reporting expected of companies in the real estate development sector.

Corporate Governance

Related Party Transactions

• A convertible note payable related party plus accrued interest was entered into with the Company's previous CEO, Mr. James Owens, which may convert at a rate of $0.01 per share.
• Liabilities settled with shares of common stock of $4,021,910 for the year ended December 31, 2024, were reclassified from other expense to additional paid in capital.
• Acquisition of licenses from Webnet Technologies Incorporated, owned by James Owens, where Webnet assumed liabilities of $3,317,472.
• A promissory note with Urbantec, a related party, for $3,000,000, is non-interest bearing and recorded as project related costs.
• Management Services Agreement with CEO Ricardo Haynes for $25,000 monthly compensation and retroactive $250,000.
• Convertible promissory notes to Eric Collins, the Company's Chairman, for $14,500.
• The company has a balance due from related party of $107,126 and a balance owed to related party of $41,218 as of December 31, 2025.

Stakeholder Impact

• Shareholders face significant risk of loss due to the company's precarious financial situation, material control weaknesses, and going concern doubts.
• Investors may experience dilution if the company issues additional shares to raise capital.
• Creditors and lenders face increased risk of default given the company's missed payment deadlines and ongoing restructuring negotiations.
• Employees may face uncertainty regarding job security due to the company's financial instability and potential need to scale back operations.

Next Steps

• Add experienced staff to the accounting department during 2027 to remediate material weaknesses.
• Continue to assess accounting department needs and hire additional staff as needed.
• Continue to evaluate acquisitions and/or investments in products, technologies, capital equipment, or companies that complement its business.
• Pursue public offering or asset sale transactions to raise additional capital.
• Continue negotiations to convert or restructure the defaulted convertible note payable to Mr. James Owens.
• Continue discussions to restructure terms of defaulted promissory notes and investment agreements.
• Obtain necessary funding to make required Modification payments for the MCRR note.
• Seek approval from the Securities and Exchange Commission for its Regulation A Tier II offering.

Key Dates

Recommendation

The company exhibits severe financial distress, including a lack of revenue, substantial accumulated deficits, a going concern warning, material control weaknesses, and multiple debt defaults. The restatement of financials further erodes confidence. While there are plans for real estate development, the execution risk is extremely high given the current financial state and the need for significant capital raises with no guarantee of success. The risks far outweigh any potential positives.

Keywords

SEC Filing, Amended Annual Report, Financial Restatement, Internal Controls, Going Concern, Real Estate Development, Derivative Liability, Convertible Notes