# Webstar Technology Group Inc.: Form 10-Q for the period ended Jun 30, 2020 - Company: [Webstar Technology Group Inc.](/companies/wbsr.md) (CIK 1645155) - Form: 10-Q - Filed: 2020-08-13 - Accepted by EDGAR: Aug 13, 2020, 18:53 ET - Period: 2020-06-30 - Accession: 0001493152-20-015497 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1645155/000149315220015497/form10-q.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1645155/000149315220015497/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2020-06-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2020-04-01 to 2020-06-30 | $898 | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Revenue | 6 months, 2020-01-01 to 2020-06-30 | $2.6k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 3 months, 2020-04-01 to 2020-06-30 | $400 | us-gaap:CostOfRevenue | | Cost of revenue | 6 months, 2020-01-01 to 2020-06-30 | $800 | us-gaap:CostOfRevenue | | Gross profit | 3 months, 2020-04-01 to 2020-06-30 | $498 | us-gaap:GrossProfit | | Gross profit | 6 months, 2020-01-01 to 2020-06-30 | $1.8k | us-gaap:GrossProfit | | Net income | 3 months, 2020-04-01 to 2020-06-30 | −$311.5k | us-gaap:NetIncomeLoss | | Net income | 6 months, 2020-01-01 to 2020-06-30 | −$693.3k | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2020-04-01 to 2020-06-30 | $0.00 | us-gaap:EarningsPerShareBasicAndDiluted | | Diluted EPS | 6 months, 2020-01-01 to 2020-06-30 | $0.00 | us-gaap:EarningsPerShareBasicAndDiluted | | Operating cash flow | 6 months, 2020-01-01 to 2020-06-30 | −$149.2k | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Cash and equivalents | at 2020-06-30 | $1.1k | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2020-06-30 | $1.1k | us-gaap:AssetsCurrent | | Total assets | at 2020-06-30 | $12.6k | us-gaap:Assets | | Current liabilities | at 2020-06-30 | $1.3m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2020-06-30 | $1.3m | us-gaap:Liabilities | | Shareholders' equity | at 2020-06-30 | −$1.3m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 26,879 characters. 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, 2019 filed with the SEC on March 23, 2020. 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, 2019. ### 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. 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 developing the marketing plan to sub-license the software. ### COVID-19 In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. We are monitoring the impact of the COVID-19 pandemic on all aspects of our business, and although 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 our business is uncertain. Accordingly, while we do not anticipate an impact on our operations, we cannot estimate the duration of the pandemic and potential impact on our business. In addition, a severe or prolonged economic downturn could result in a variety of risks to our 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 ### Series A Preferred Stock On March 16, 2020, the Company amended its Articles of Incorporation as filed with the Secretary of State of the State of Wyoming to designate as set forth in the Certificate of Designations (the “Certificate”) the Series A Preferred Stock as a series of preferred stock of the Company. 1,000 shares of Series A Preferred Stock are authorized in the Certificate. The Series A Preferred Stock has voting rights equivalent to three times the total voting power of the total common stock outstanding at any time. The Series A Preferred Stock has no transfer rights, no conversion rights, no dividends, and no liquidation preference. The Company entered into a subscription agreement (the “Preferred Subscription Agreement”) pursuant to which the Company agreed to issue to James Owens, the Company’s Chairman of the Board, Chief Technology Officer, founder, and controlling shareholder one thousand (1,000) shares of the Series A Preferred Stock, at an agreed upon price of $250,000 which was recorded as a reduction to the due to stockholder account and an increase to the additional paid-in capital due to the related party nature of the transaction. On April 2, 2020, the Company sold and issued James Owens 1,000 of the Series A Preferred Stock for a total price of $250,000 per the Preferred Subscription Agreement. The total price of $250,000 was recorded as a reduction to the due to stockholder account which represents amounts owed to Mr. Owens by the Company. ### Common Stock 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, the Company is offering for sale to the public a minimum of 300,000 shares and a maximum of 600,000 shares of the Company’s authorized common stock, par value $0.0001 per share, for a fixed purchase price of $0.10 per share. On June 4, 2020, James Owens contributed 39,281,715 shares of common stock of Webstar Technology Group, Inc., owned by Mr. Owens, to Webstar Networks Corporation, a corporation controlled by Mr. Owens. On July 31, 2020, Webstar Networks Corporation distributed all of its holdings in Webstar Technology Group, Inc. common stock, 60,000,000 shares, to the stockholders of Webstar Networks Corporation in a liquidating distribution. This distribution increased the number of stockholders in Webstar Technology Group, Inc. by 277 stockholders. None of the additional stockholders now hold 5% or more of the Company’s common stock. ### Stock Dividends On April 20, 2020, the Company’s Board of Directors declared a common stock dividend of .218723 shares of common stock per share of the Company’s current outstanding common stock. On April 21, 2020, the Company issued 25,000,000 shares of its common stock to the Company’s common stockholders of record per the common stock dividend declaration. ### Agreements ### Software Licenses On April 21, 2020, the Company entered into the License Agreement with 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, the controlling stockholder of the Company, owns Soft Tech. Pursuant to the terms of the License Agreement, the Company agreed to pay a contingent licensing fee of $650,000 for each of the two components of Soft Tech’s technology, for a total of $1,300,000 for the Licensed Technology. The contingent licensing fee becomes due and payable only upon the earlier of: (i) the closing of an aggregate of $20 million in net capital offering of the Company’s stock or (ii) when the Company’s cumulative net sales from the Licensed Technology reaches $20 million. Further, the Company has agreed to pay a royalty rate of 7% based on the net sales of the Licensed Software. The term of the license agreement is five years with one automatic renewal period. However, the royalty will continue as long as the Company is selling the Licensed Technology. ### 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. ### 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. 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 is currently in beta testing and is in use by California College of Early Childhood Development (the “California College”) on a trial basis pursuant to an oral agreement. Under the terms of the oral agreement, the California College has agreed to pay us an annual license fee of $995 plus $195 per classroom per month, and $100 per student per month. Either party may terminate this use right at any time during its month-to-month term. Currently we are dependent on California College for our revenue as they are our only customer at this time. 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 will 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 six months ended June 30, 2020 and 2019 The following comparative analysis on results of operations was based primarily on the comparative unaudited condensed financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. The results discussed below are for the three and six months ended June 30, 2020 and 2019. ### Revenue Revenue was $898 and $749 for the three months ended June 30, 2020 and 2019, respectively, and $2,596 and $2,346 for the six months ended June 30, 2020 and 2019, respectively. The quarterly revenue has remained flat due to the Company primarily focusing on completion of its data compression technology. Gross profit was $498 and $349 for the three months ended June 30, 2020 and 2019, respectively, and $1,796 and $1,546 for the six months ended June 30, 2020 and 2019, respectively. The gross profit also remained flat as the cost of sales was constant. ### Operating Expenses Total operating expenses which are comprised of salaries and related expenses, consulting fees and general and administrative expenses were $312,045 and $278,388 for the three months ended June 30, 2020 and 2019, respectively, and $695,047 and $570,051 for the six months ended June 30, 2020 and 2019, respectively. The increases are primarily attributable to the increases in salaries and related expenses relative to the new employment agreements of the executive officers and increases in general and administrative expenses due to increased activity preparing for the testing and marketing of the Company’s technology and partially offset by decreases in consulting fees and stock compensation expense. ### Net Loss The net loss was $311,547 and $281,060 for the three months ended June 30, 2020 and 2019, respectively, and $693,251 and $571,526 for the six months ended June 30, 2020 and 2019, respectively. The increase in loss is primarily a result of the increase in salaries and related expenses and general and administrative expenses discussed above offset by decreases in consulting fees and stock compensation expenses. ### 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 June 30, 2020, our working capital deficit amounted to $1,303,039, an increase of $442,633 as compared to working capital deficit of $860,406 as of December 31, 2019. This increase in working capital deficit is primarily a result of a decreases in cash, accounts receivable, prepaid expenses, and borrowings from our majority stockholder, and increases in accounts payable and accrued salaries and related expenses. Net cash used in operating activities was $149,205 during the six months ended June 30, 2020 compared to $93,648 for the six months ended June 30, 2019. The change in cash from operating activities is primarily attributable to an increase in accrued salaries and related expenses due to the employment agreements executed January 1, 2020 and an increase in accounts payable. Net cash provided by financing activities was $113,739 during the six months ended June 30, 2020 compared to $92,440 in the six months ended June 30, 2019. The increase in cash from financing activities was the result of advances received from our controlling stockholder. 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 its planned initial public offering, other 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. We have incurred significant losses since our inception on March 10, 2015. We had a net loss for the six month period ended June 30, 2020 of $693,251 and an accumulated deficit as of June 30, 2020 of $7,914,435. In the event we are unable to sell at least $30,000 of our common stock in a planned offering of our common stock and secure a line of credit from a related company, we will continue to operate the Webstar eCampus software virtual classroom access platform but delay, scale back or eliminate some or all of our additional business plans until we raise additional capital. There can be no assurance that the offering will commence as planned or that any funds can be raised thereunder. 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 while seeking to raise capital from an offering of our common stock. 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 six month period ended June 30, 2020 and in the notes to our annual report 10-K which includes audited financial statements for the years ended December 31, 2019 and 2018. 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 stock based compensation. ### 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 $995 in annual fees in January 2020 and recognized revenue of $249 and $498 of the annual fees during the three and six months ended June 30, 2020, respectively. Annual fees paid in advance of services performed are presented as contract liabilities. The Company recognized revenue of $898 and $749 from student and annual fees during the three months ended June 30, 2020 and 2019, respectively, and $2,596 and $2,346 during the six months ended June 30, 2020 and 2019, respectively. ### Stock Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee, and director services received in exchange for an award based on the grant-date fair value of the award. ### 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 consolidated balance sheets. The Company leased an office space in 2019 and continues to lease office equipment used to conduct our business. On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. 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 months ended June 30, 2020 and 2019, the Company recorded $423 and $24,000, respectively, and $978 and $24,000 during the six months ended June 30, 2020 and 2019, respectively, as operating lease expense which is included in general and administrative expenses on the condensed statements of operations. As of June 30, 2020 and December 31, 2019, the unamortized right-of-use assets resulting from the lease was $5,919 and $6,555, respectively, and the lease liabilities were $6,036 and 6,687, respectively. ### Reclassifications Certain reclassification of prior period amounts have been made to conform to the 2020 presentation. These reclassifications had no effect on net loss or loss per share previously reported. ### Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. ## Controls and procedures As filed, 1,346 characters. ### 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 June 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ## Risk factors As filed, 201 characters. 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, 2019, as filed with the SEC on March 23, 2020. Filed Aug 13, 2020. Source: SEC EDGAR, the filing index for accession 0001493152-20-015497. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.