UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31,June 30, 2022

For the transition period from __________ to ___________

Commission file number: 000-55730

BLACKSTAR ENTERPRISE GROUP, INC.

(Exact name of registrant as specified in its charter)

4450 Arapahoe Ave., Suite 100, Boulder, CO 80303

(Address of principal executive offices)

(303) 500-3210

(Registrant’s Telephone number)

(Former Address and phone of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the 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 for 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, a 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.

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 to Section 7(a)(2)(B) of the Securities Act. [X] 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of share outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of April 30,August 9, 2022, there were 209,818,602285,357,307 shares of the registrant’s common stock, $.001 par value, issued and outstanding, not including shares reserved for conversion of notes.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31,JUNE 30, 2022

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

BlackStar Enterprise Group, Inc. (the “Company” or “BlackStar”) was incorporated in the State of Delaware on December 18, 2007. On January 25, 2016, International Hedge Group, Inc. (“IHG”) signed an agreement to acquire a 95% interest in the Company. IHG was issued 44,400,000 shares of common stock and 1,000,000 shares of Series A Preferred Stock. IHG is our controlling shareholder and is engaged in providing management services and capital consulting to companies. IHG and BlackStar are currently managed and controlled by two individuals each of whom is a beneficial owner of an additional 9% of the Company’s common stock.

The Company intends to act as a merchant banking firm seeking to facilitate venture capital to early stage revenue companies. BlackStar intends to offer consulting and regulatory compliance services to crypto-equity companies and blockchain entrepreneurs for securities, tax, and commodity issues. BlackStar is conducting ongoing analysis for opportunities in involvement in crypto-related ventures through a wholly-owned subsidiary, Crypto Equity Management Corp (“CEMC”). BlackStar intends to serve businesses in their early corporate lifecycles and may provide funding in the forms of ventures in which they control the venture until divestiture or spin-off by developing the businesses with capital. BlackStar formed a subsidiary nonprofit company, Crypto Industry SRO Inc. (“Crypto”) in 2017. Crypto’s business plan is to act as a self-regulatory membership organization for the crypto-equity industry and set guidelines and best-practice rules by which industry members would abide. BlackStar will provide management of this entity under a services contract.

Basis of presentation

The accompanying unaudited financial statements have been prepared in accordance with United States generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles (US GAAP) for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. These unaudited financial statements are condensed and should be read in conjunction with those financial statements included in the Form 10-K and interim disclosures generally do not repeat those in the annual statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the threesix months ended March 31,June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

These unaudited consolidated financial statements include BlackStar and its wholly owned subsidiaries: Crypto Equity Management Corp. and Crypto Industry SRO Inc., and were prepared from the accounts of the Company in accordance with US GAAP. All significant intercompany transactions and balances have been eliminated on consolidation.

NOTE 2 – GOING CONCERN

The Company'sCompany’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements for the threesix months ended March 31,June 30, 2022 and the year ended December 31, 2021, the Company has generated no revenues and has incurred losses. As of March 31,June 30, 2022, the Company had cash of $426,916,$232,951, working capital deficiency of $504,840$659,099 and an accumulated deficit of $8,666,662.$8,975,395. These conditions raise substantial doubt as to the Company'sCompany’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going
concern. The continuation of the Company as a going concern is dependent upon the ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s planned business. Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31,JUNE 30, 2022

(Unaudited)

NOTE 2 – GOING CONCERN (continued)

concern. The continuation of the Company as a going concern is dependent upon the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's planned business. Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

The Company’s significant estimates include income taxes provision and valuation allowance of deferred tax assets; the fair value of financial instruments; the carrying value and recoverability of long-lived assets, and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from Generally Accepted Accounting Principles (“GAAP”) separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company has elected to adopt the guidance under ASU 2020-06 for the fiscal year commencing January 1, 2022.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial position or results of operations. Management has evaluated accounting standards and interpretations issued but not yet effective as of March 31,June 30, 2022 and does not expect such pronouncements to have a material impact on the Company’s financial position, operations, or cash flows.

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2022

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reclassifications

Certain amounts in the consolidated financial statements for prior year periods have been reclassified to conform with the current year presentation.

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED JUNE 30, 2022

(Unaudited)

NOTE 4 – INTANGIBLES

Intangibles at March 31,June 30, 2022 and December 31, 2021 consist of capitalized costs for the Company’s proprietary software and patents as follows:

NOTE 5 – STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

The Company has an authorized number of preferred shares of 10,000,000, with a par value of $0.001 per share. On August 25, 2016, the Company issued 1,000,000 shares of its Series A Preferred Series stockto IHG in fulfillment of the purchase agreement. These shares are convertible at a ratio of 100 shares of the common stock of the Company for each share of preferred stock of the Company.

Common Stock

During the threesix months ended March 31,June 30, 2022, the Company issued shares of its common stock as follows:

During the threesix months ended March 31,June 30, 2021, the Company issued shares of its common stock as follows:

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31,JUNE 30, 2022

(Unaudited)

NOTE 5 – STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

NOTE 6 – WARRANTS

In April 2019, the Company issued a convertible note for $110,000. Pursuant to the terms of the note agreement, the Company issued warrants to the holder for the purchase 440,000 shares of the Company’s common stock. The warrants are exerecisable at $0.25 per share for a term of 5 years. The $132,953 fair value of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: stock price $0.38; strike price $0.25; volatility 98%; risk free rate 2.25% and term of 5 years. The $132.953 fair value of the warrants was charged to operations when issued during the year ended December 31, 2019. At March 31, 2021,June 30, 2022, the intrinsic value of the outstanding warrants was $0, as the trading price of the Company’s common stock at that date was less than the underlying exercise price of the warrants.

A summary of warrant activity during the threesix months ended March 31,June 30, 2022 is presented below:

NOTE 7 – CONVERTIBLE NOTES

During the threesix months ended March 31,June 30, 2022, the Company had the following transactions related to its convertible note financings:

(i) On February 14, 2022, the Company entered into a financing agreement with Sixth Street Lending LLC to borrow $55,750. The note matures on February 14, 2023, bears interest at 10%, with a default rate of 22%, and is convertible, commencing 180 days after the date of issuance. The conversion price is to be calculated at 65% of the average of the two lowest trading price of the Company’s common stock for the previous fifteen trading days prior to the date of conversion. The lender agrees to limit the amount of stock received to less than 4.99% of the total outstanding common stock. There are no warrants or options attached to this note, and the Company has reserved 47,871,198 shares for conversion. Net proceeds from the loan were $52,000, after legal fees and offering costs of $3,750.

(ii) In February and March 2022, Adar Alef LLC (“Adar Alef”) elected to make a partial conversion of $76,500 principal and $6,296 of accrued and unpaid interest thereon due on their note of April 29, 2021, in three tranches, into an aggregate 21,504,766 shares of the Company’s common stock at prices of $0.0023 to $0.0064 per share under the conversion provision and terms of the note agreement.

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED JUNE 30, 2022

(Unaudited)

NOTE 7 – CONVERTIBLE NOTES (continued)

(iii) In January and February 2022, Power Up elected to convert, in five tranches, the total principal of $103,750 due on their note of July 26, 2021, together with accrued and upaid interest thereon of $5,188, into an aggregate 12,982,155 shares of the

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2022

(Unaudited)

NOTE 7 – CONVERTIBLE NOTES (continued)

Company’s common stock (at conversion prices of $0.0075 to $0.0088 per share) under the conversion provision and terms of the note agreementagreement.

(iv) In February and March 2022, Power Up Lending Group Ltd. (Power Up) elected to convert, in four tranches, the total principal due on their note of July 28, 2021 of $78,750 and accrued and unpaid interestinterst thereon of $3,938 into 21,273,289 shares of the Company’sCompany���s common stock at conversion prices of $0.0029 to $0.0073 per share under the conversion provision and terms of the note agreement.

(v) In March and April 2022, Power Up elected to make a partial conversion of $21,900convert, in three tranches, the total principal due on their note of September 1, 2021 of $53,750 and accrued and unpaid interst thereon of $2,688, into 7,551,72419,952,406 shares of the Company’s common stock at a priceconversion prices of $0.0024 to $0.0029 per share under the conversion provision and terms of the note agreement.

As of March 31,(vi) On May 5, 2022, the Company wasentered into a financing agreement with 1800 Diagonal Lending LLC (formerly Sixth Street Lending LLC) to borrow $55,750. The note matures on May 5, 2023, bears interest at 10%, with a default rate of 22%, and is convertible, commencing 180 days after the date of issuance. The conversion price is to be calculated at 65% of the average of the two lowest trading price of the Company’s common stock for the previous fifteen trading days prior to the date of conversion. The lender agrees to limit the amount of stock received to less than 4.99% of the total outstanding common stock. There are no warrants or options attached to this note, and the Company has reserved 43,537,683 shares for conversion. Net proceeds from the loan were $52,000, after legal fees and offering costs of $3,750.

(vii) In April and May 2022, Power Up elected to convert, in five tranches, the total principal balance of $78,750 and accrued and upaid interest thereon of $3,938 due on their note of October 1, 2021 into 40,260,417 shares of the Company’s common stock at prices of $0.0020 to $0.0024 per share under the conversion provision and terms of the note agreement.

(viii) In June 2022, Sixth Street Lending LLC elected to convert, in three tranches, the total principal of $45,750 due on their note of November 29, 2021, together with accrued and upaid interest thereon of $2,288, into an aggregate 27,899,255 shares of the Company’s common stock (at conversion prices of $0.0016 to $0.0018 per share) under the conversion provision and terms of the note agreement.

(ix) In April 2022, Quick Capital, LLC issued a notice of default on its certainthe $33,275 convertible note dated November 16, 2020 and stated that the outstanding amount due on the note is $133,317.38, the default interest per annum is 24%, and that the conversion price is the lowest trading price during the delinquency period with a 50% discount. The Company has continued to accure interest on the note at the rate of its convertible debt obligations as follows:10% per annum.

(x) On April 29, 2022, the Company did not satisfy its obligations for final payment of outstanding principal of $473,500 and accrued interest under a financing agreement entered into on April 29, 2021 with Adar Alef. Under the terms of the financing agreement, the stated interest rate of the note was 10% with default interest of 24%, and was convertible into common shares of the Company’s common stock at the option of the holder.

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED JUNE 30, 2022

(Unaudited)

NOTE 7 – CONVERTIBLE NOTES (continued)

(xi) On April 27, 2022, the Company entered into an Amendment and Abatement Agreement (“Abatement Agreement”) with SE Holdings and Adar Alef (collectively “the Parties”) to address the Company’s default on the two outstanding convertible notes between the Parties, consisting of the remaining $473,500 principal balance to Adar Alef and face amount $220,000 note with SE Holdings. Under the terms of the Abatement Agreement, the Parties agreed to abate the conversion features under the notes for a period of forty five (45) days from April 15, 2022, with the conversion features resuming no sooner than May 30, 2022. The Company has paid to Adar Alef a total of $50,000 upon execution of the Abatement Agreement for principal, redemption penalty and accrued interest. The remaining principal and accrued interest on the notes to SE Holdings and Adar Alef would be due on May 30, 2022. On May 25, 2022, the Abatement Agreement was extended for an additional thirty (30) days through June 30, 2022, upon an additional payment by the Company of $25,000 to Adar Alef for principal, redemption penalty and accrued interest.

Convertible notes payable at June 30, 2022 and December 31, 2021 are summarized as follows:

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31,JUNE 30, 2022

(Unaudited)

NOTE 7 – CONVERTIBLE NOTES (continued)

Convertible notes payable at March 31, 2022 and December 31, 2021 are summarized as follows:

NOTE 8 – RELATED PARTY TRANSACTIONS

In support of the Company’s efforts and cash requirements, it must rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. The advances are considered temporary in nature and have not been formalized by a promissory note.

IHG, controlling shareholder of the Company, provides management consulting services to the Company. There is no formal written agreement that defines the compensation to be paid. For the threesix months ended March 31,June 30, 2022 and 2021 the Company recorded related party management fees of $86,613$165,274 and $51,142,$149,142, respectively.

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2022

(Unaudited)

NOTE 8 – RELATED PARTY TRANSACTIONS (continued)

During the threesix months ended March 31,June 30, 2022 and 2021, there were no advances from related parties. At March 31,June 30, 2021, a former officer of the Company was owed $18,780, which amount was repaid during the year ended December 31, 2021.

NOTE 9 – SUBSEQUENT EVENTS

In AprilOn July 1, 2022, Power Up elected to convert, in two tranches, the remaining principal balance of $31,850 and accrued and upaid interest thereon of $2,688 due on their note of September 1, 2021 into 12,400,682 shares of the Company’s common stock at prices of $0.0024 to $0.0029 per share under the conversion provision and terms of the note agreement.

In April 2022, Quick Capital, LLC issued a notice of default on the convertible note dated November 16, 2020 and stated that the outstanding amount due on the note is $133,317.38, the default interest per annum is 24%, and that the conversion price is the lowest trading price during the delinquency period with a 50% discount.

In April and May 2022, Power Up elected to convert, in five tranches, the total principal balance of $78,750 and accrued and upaid interest thereon of $3,938 due on their note of October 1, 2021 into 40,260,417 shares of the Company’s common stock at prices of $0.0020 to $0.0024 per share under the conversion provision and terms of the note agreement.

In May 2022, GS Captial Partners LLC elected to make a partial conversion of $3,000 principal and accrued and upaid interest of $133 due on their note of October 11, 2021 into 1,898,679 shares of the Company’s common stock at a price of $0.0017 per share under the conversion provision and terms of the note agreement.

On April 29, 2022, the Company did not satisfy its obligations for final payment of outstanding principal of $473,500 and accured interest under a financing agreement entered into on April 29, 2021 with Adar Alef. Under the terms of the financing agreement, the stated interest rate of the note was 10% with default interest of 24%, and was convertible into common shares of the Company’s common stock at the option of the holder. The Company has accrued default interest of 24% on the outstanding principal amount subsequent to the due date of the note through March 31, 2022.

On April 27, 2022, the Company entered into an Amendment and Abatement Agreement (“Abatement Agreement”) with SE Holdings and Adar Alef (collectively “the Parties”) to address the Company’s default on the two outstanding convertible notes between the Parties. Under the terms of the Abatement Agreement the Parties agreed to abate the conversion features under the notes for a period of fourty five (45) days from April 15, 2022, with the conversion features resuming no sooner than May 30, 2022. The Company has agreed to pay to Adar Alef a total of $50,000 upon execution of the Abatement Agreemet for principal, redemption penalty and accrued interest. The remaining principal and accrued interest on the both of the notes to SE Holdings and Adar Alef will be due on May 30, 2022, unless further extended under the terms of the Abatement Agreement. The notes may bewas extended for an additional thirty (30) days through June 30,July 31, 2022, upon an additional payment by the Company of $25,000 to Adar Alef onfor principal, redemption penalty and accrued interest.

On July 8, 2022, the majority shareholder of BlackStar Enterprise Group, Inc. submitted written consent to the resolution to increase the authorized common stock from 700,000,000 to 2,000,000,000, with an effective date of the Amendment to the Articles of Incorporation of August 5, 2022. Following the increase in authorized shares proposed by the Company’s Board of Directors, we will have 2,000,000,000 shares of authorized common stock and 10,000,000 shares of authorized preferred stock (no change in preferred), with no changes in the shares outstanding of either the common stock or before May 30, 2022.preferred stock as a result of the increase.

The Company has analyzed its operations subsequent to March 31,June 30, 2022 through the date that these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose.

ITEMItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements and Associated Risks.

This Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.

Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. As reflected in the accompanying financial statements, as of March 31,June 30, 2022, we had an accumulated deficit of $(8,666,662)$8,975,395 and a working capital deficiency of $504,840.$659,099. This raises substantial doubts about our ability to continue as a going concern.

Overview

BlackStar Enterprise Group, Inc. (the “Company” or “BlackStar”) intends to act as a merchant bank as of the date of these financial statements. We currently trade on the OTC QBPink under the symbol “BEGI”.“BEGI.” The Company is a merchant banking firm seeking to facilitate venture capital to early-stage revenue companies. BlackStar intends to offer consulting and regulatory compliance services to crypto-equityblockchain and DLT companies and blockchain entrepreneurs for securities, tax, and commodity issues. BlackStar is conducting ongoing analysis for opportunities in involvement in crypto-relatedelectronic fungible share-related ventures though our newly formed wholly-owned subsidiary, Crypto Equity Management Corp., (“CEMC”), mainly formed in September 2017. CEMC is currently non-operational, inactive and has no business or clients at this time. It is intended to offer advisory services as to how to implement use of a custom platform for the areasclient’s equity based off of blockchain and distributed ledger technologies (“DLT”)the BDTP ^TM. CEMC has not established any anticipated time frames or key milestones for CEMC business. BlackStar intends to serve businesses in their early corporate lifecycles and may provide funding in the forms of ventures in which we control the venture until divestiture or spin-off by developing the businesses with capital. We have only engaged in one transaction as a merchant bank form to date.

Our investment strategy focuses primarily on ventures with companies that we believe are poised to grow at above-average rates relative to other sectors of the U.S. economy, which we refer to as "emerging“emerging growth companies."” Under no circumstances does the Company intend to become an investment company and its activities and its financial statement ratios of assets and cash will be carefully monitored and other activities reviewed by its Board of Directors to prevent being classified or inadvertently becoming an investment company which would be subject to regulation under the Investment Company Act of 1940.

As a merchant bank, BlackStar intends to seek to provide access to capital for companies and is specifically seeking out ventures involved in DLT or blockchain. BlackStar intends to facilitate funding and management of DLT-involved companies through majority controlled joint ventures through its subsidiary CEMC. BlackStar, through CEMC, intends to initially control and manage each venture. Potential ventures for both BlackStar and CEMC will be analyzed using the combined business experience of its executives, with CEMC looking to fill those venture criteria with companies in crypto-related businesses such as blockchain or DLT technologies. The Company does not intend to develop Investment Objectives or “criteria” in any manner but will rely on the acumen and experience of its executives. CEMC is currently non-operational, inactive and has no business or clients at this time. It is intended to offer advisory services as to how to implement use of a custom platform for the client’s equity based off of the BDTP ^TM. CEMC has not established any anticipated time frames or key milestones for CEMC business.

BlackStar is currently building a digital equity trading platform in order to trade registered BlackStarelectronic fungible common shares in digital formequal to the shares held by DTCC (DWAC), and. BlackStar intends to use the platform design to provide custom subscription services to other public companies. More details regarding the BDTP ^TM can be found in the most recent registration statement on Form S-1, as amended.

Recent Updates

The Company is finalizing the marketing plan to promote and roll out the three features of its blockchain platform. The Company plans to offer its Private Funding and Corporate Governance Blockchain to individual private companies. The Company is currently evaluating its options for the next major step in its main feature. BlackStar’sBlackStars Digital Trading Platform (“BDTP ^TM”BDTP”) will need to be paired with an operating partnerlicensee (a broker-dealer, clearing firm, and/or registered Alternative Trading System (“ATS”)) to quote the shares prior to implementation. To that end, the Company is exploring licensing and contractual relationships

with broker-dealers and existing ATS’s and other strategies to go live with BDTP in accordance with existing laws and regulations. As of the date of this filing, the core platform of BDTP ^TMis complete and will remain in the testing phase until we obtain an operating partner.licensee. BlackStar intends to continue to seek further input from various regulatory agencies and others on the functionality of the BDTP ^TMover the next several months. The BDTP^TM has been completely designed in terms of the following components: data model, reports, web-based user interface, blockchain interface, transaction logic, cloud interface, and functional demonstration app. The software is complete in demonstrating a proof-of-concept trading ability, while recording activity using an immutable blockchain ledger. Currently, the working model platform is hosted on Amazon’s Quantum Ledger Database. During the year ended December 31, 2021, BlackStar and Artuova successfully completed a production ready and feature-complete user interface for the digital platform which is now in the final stages of quality assurance. BlackStar is actively pursuing relationships with various broker-dealers, clearing firms, and ATS’s to complete the final stages of this multi-year engineering effort. Additionally, duringDuring 2021, BlackStar has filed with the U.S. Patent and Trademark Office (“USPTO”) forUSPTO patent protection offor its proprietary software.

The Company’s success will be dependent upon itsit’s ability to analyze and manage the opportunities presented and is contingent upon successfully raising funds and ultimately the operationalitySEC approval of itsour digital trading platform.

Currently in the demonstrationtesting phase, we estimate $30,000 to be expended over the next three months. This budget will be used to finalize the integration of the digital platform into the broker-dealer ecosystemeco system once the SEC and FINRA clears BlackStar to promote broker dealers and or exchanges. The ability to obtain a licensee may be dependent on our ability to confirm that FINRA and the SEC will allow trading on our platform as described. If this is the case, the Company may alternatively seek to acquire an existing broker-dealer in order to become a FINRA-registered broker-dealer. Once we have secured a licensee broker-dealer, clearing firm, or ATS for the operations of the BDTP ^TM and begun operating the BDTP ^TM, we will seek subscriber companies desiring customized platforms. At that point, we will have the ability to showcase BDTP ^TM’s live operations. The technical platform operations and updates will be managed by Artuova, through our oversight and direction. The software building of additional platforms for subscriber companies may take as little as 48 hours. We have not yet developed our marketing campaign to seek out these customers, but plan to do so after securing our operating licensee, likely within the appropriate ATS and broker-dealer relationships are established.next six months. We anticipate our overall expansion of services into the blockchain industry within the next twelve months.

Based on our current cash reserves of approximately $426,916$232,951 as of March 31,June 30, 2022, we have the cash for an operational budget of approximately twelvesix (6) months. We intend to offer a private placement of common shares to investors in order to achieve at least $5,000,000 in funding in the next year to scale our business plan. We intend to commence this offering in mid-summerfall of 2022. If we are unable to generate enough revenue to cover our operational costs, we will need to seek additional sources of funds. Currently, we have no committed source for any funds as of date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised if and when needed, we may not be able to carry out our business plan and could fail in business as a result of these uncertainties.

The independent registered public accounting firm’s report on our financial statements as of December 31, 2021, includes a “going concern” explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.

On July 8, 2022, the majority shareholder of BlackStar Enterprise Group, Inc., CFO Joseph Kurczodyna, submitted written consent to the resolution to increase the authorized common stock from 700,000,000 to 2,000,000,000, with an effective date of the Amendment to the Articles of Incorporation of August 5, 2022. Following the increase in authorized shares proposed by the Company’s Board of Directors, we will have 2,000,000,000 shares of authorized common stock and 10,000,000 shares of authorized preferred stock (no change in preferred), with no changes in the shares outstanding of either the common stock or preferred stock as a result of the increase. Further information can be found in the Schedule 14C Information Statement filed on July 8, 2022. A copy of the Amendment to the Articles of Incorporation are attached hereto as Exhibit 3(i).8 and incorporated herein by reference.

Results of Operations

For the Three Months Ended March 31,June 30, 2022 compared to same period in 2021

Net loss for the three months ended March 31,June 30, 2022 was $516,902$308,733 as compared to $322,309$711,920 for the three months ended March 31,June 30, 2021, an increasea decrease of $194,593.$403,187. As explained below, mosta significant portion of the losses in those periods was attributable to non-cash transactions from the issuance of convertible debt and other financings.

For the three months ended March 31,June 30, 2022, we had significantly higherlower non-operating (other) expenses, substantially all of which are non-cash, predominately due to amortization of discounts on debt issuance and conversion features of the convertible promissory notes that we have used to finance our continued operations. This resulted in total other expenses of $380,622$157,508 for the three months ended March 31,June 30, 2022 as compared to $193,021$450,590 for the same period in 2021. For the three months ended March 31,June 30, 2022, the Company recognized $313,923$102,446 for amortization of discount on convertible notes, as compared to $98,582$251,507 for the three months ended March 31,June 30, 2021. During the three months ended March 31,June 30, 2021, we recognized a loss of $41,677on$124,745 on notes payable conversions as compared to none in the three months ended March 31, 2022.2022 comparable period. This reduction is due to a change in the Company’s accounting treatment for conversion of debt to equity. The increasedecrease in amortization of discount on convertible notes is attributable to an increasea decrease in debt conversions in 2022 as compared to 2021.

General and administrative expenses in 2022 were $13,468$32,138 a decrease of $42,178$107,388 from general and administrative expenses of $55,646$139,526 in 2021. In 2021, the Company recorded an expense of $35,200 for cash and stock payments for fund raising fees as compared to no costs incurred of this nature in 2022. General and administrative costs, exclusive of fees for fund raising, were for investor relations, filing fees, transfer agent fees and overhead operational costs which were comparable for the 2022 and 2021 quarterly periods.

In 2022, the Company paid management consulting fees to IHG of $86,613$78,661 as compared to $51,142$98,000 paid in 2021.

Legal and professional fees of $40,426 for the three months ended June 30, 2022 increased by $16,622 from $23,804 for the comparable period ended June 30, 2021. In 2022, the Company incurred legal fees for filing of its Registration Statement which were not incurred in 2021. Recurring professional fees for the 2022 and 2021 periods were predominately for SEC regulatory and statutory filings and auditor and related fees for quarterly reviews and annual audits.

For the Six Months Ended June 30, 2022 compared to same period in 2021

Net loss for the six months ended June 30, 2022 was $825,635 as compared to $1,034,229 for the six months ended June 30, 2021, a decrease of $208,594. As explained below, a significant portion of the losses in those periods was attributable to non-cash transactions from the issuance of convertible debt and other financings.

Our operating expenses included $165,274 in related party management consulting fees, $76,625 in legal and professional fees, and $45,605 in general and administrative fees, for a total of $287,504 for the six months ended June 30, 2022. Higher related party management consulting fees and an increase in costs for fund raising increased the total operating expenses in the six months ended June 30, 2021 by $103,114 as compared to the six months ended June 30, 2022. Our net loss from operations was $1,034,229 for the six months ended June 30, 2021 compared to a net loss from operations of $825,635 for the same period ended June 30, 2022.

For the six months ended June 30, 2021, we had significantly higher other expenses, substantially all of which are non-cash, and were predominately due to amortization of discounts on debt issuances and conversion features of the convertible promissory notes that we have used to finance our continued operations. This resulted in net other expenses of $643,611 for the six months ended June 30, 2021 as compared to $538,131 for the same period in 2022. For the six months ended June 30, 2022 the Company recognized $416,369 for amortization of discount on convertible notes, as compared to $350,089 for the six months ended June 30, 2021. This increase was due to increased funding from convertible note issuances for the 2022 period as compared to the 2021 period. During the six months ended June 30, 2021, we recognized a loss of $166,422 on notes payable conversions as compared to none in the 2022 comparable period. This reduction is due to a change in the Company’s accounting treatment for conversion of debt to equity. The increase in amortization of discount on convertible notes is attributable to an increase in debt conversions in 2022 as compared to 2021.

Legal and professional fees of $36,199 for the three months ended March 31, 2022 increased by $13,699 from $22,500 for the comparable period ended March 31, 2021. Fees for the 2022 and 2021 periods were predominately for SEC regulatory and statutory filings and audit and related fees for annual audits.

Liquidity and Capital Resources

At March 31,June 30, 2022, we had a working capital deficit of $504,840$659,099 and cash of $426,916$232,951 as compared to a working capital deficit of $283,414 and cash of $518,539, at December 31, 2021. The decrease in cash and increase in working capital deficit was due primarily to the utilization of available cash for operations and an increase in debt funding from December 31, 2021 as compared to March 31,June 30, 2022, with all new debt issuances maturing within one year from the date of issuance. The Company used new and existing fundings to maintain operating activities and complete software development and patent filings with the USPTO for its digital trading platform. During the threesix months ended March 31,June 30, 2022, we used $142,778$329,832 of cash for operating activities and paid $845$9,634 in investing activities for patent costs. In the comparable 2021 period, operating activities utilized cash of $110,537$251,002 and investing activities for software development and patent costs utilized cash of $11,000.$36,000.

Substantially all of our funding has been from convertible debt financings in 2022 and 2021. The debt instruments were with non-related investment firms, carried an interest rate of 10%, matured six months to one year from date of financing and were convertible into shares of the Company’s common stock at a discount to the trading prices of the common shares of 35% to 40%. During threesix months ended March 31,2022,June 30, 2022, we issued convertible debt with a face value of $55,750,$111,500, receiving cash proceeds, net of financing costs, of $52,000.$104,000. During the threesix months ended March 31,2021,June 30,2021, we issued convertible debt with a face value of $220,000,$917,000, receiving cash proceeds, net of financing costs, of $217,500.$779,500. During the threesix months ended March 31,June 30, 2022, convertible note holders were issued 63,311,934143,872,288 shares of common stock for conversion of $296,321$461,854 face value of debt and related accrued interest and fees in 2022. In the comparable 2021 period, note holders were issued 2,894,2317,468,804 shares of common stock for conversion of $86,827$309,467 face value of debt and related accrued interest and fees.

While management of the Company believes that the Company will be successful in its current and planned activities, there can be no assurance that the Company will be successful in obtaining sufficient revenues from our planned operations and raise sufficient equity, debt capital or strategic relationships to sustain the operations and future business of the Company.

Our ability to create sufficient working capital to sustain us over the next twelve-month period, and beyond, is dependent on our raising additional equity or debt capital, and ultimately to commence revenues form or digital trading platform.

There can be no assurance that sufficient capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.

Availability of Additional Capital

Notwithstanding our success in raising net cash proceeds of $52,000$104,000 and $217,500$779,500 from convertible debt financing in the six-month periods ended March 31,2022June 30, 2022 and 2021, respectively, there can be no assurance that we will continue to be successful in raising capital and have adequate capital resources to fund our operations or that any additional funds will be available to us on favorable terms or in amounts required by us. We estimate that we will need to raise $5,000,000 over the next twelve months to scale up our current plan. The Company feels it has sufficient capital to pay 2022 expenses and implement our platform of blockchain features in third quarter of 2022.

Any additional financings may be dilutive to our stockholders, new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of Common Stock. Debt or equity financing may subject us to restrictive covenants and significant interest costs.

Going Concern

We have only a very limited amount of cash and have incurred operating losses and limited cash flows from operations since inception. As of March 31,June 30, 2022 and December 31, 2021, we had accumulated deficit of $8,666,662$8,975,395 and $8,149,760, respectively and we will require additional working capital to fund operations through 2022 and beyond. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements included in this Form 10-Q do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and

classification of liabilities that might result should we be unable to continue as a going concern. The audited financial statements included in the Company’s recent annual report on Form 10-K have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern.

Our registered independent auditors have issued an opinion on our financial statements as of December 31, 2021 which includes a statement describing our going concern status. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we obtain final SEC approval for our digital trading platform has been approved to begin trading.platform. There is no assurance that any revenue will be realized in the future. Accordingly, we must raise capital from sources other than the actual revenue from issuance of memberships in our digital trading platform.

There can be no assurance that we will have adequate capital resources to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

Off Balance Sheet Arrangements

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer/principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

Management has carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Due to the lack of personnel and outside directors, management acknowledges that there may be deficiencies in these controls and procedures, but Management believes that the current procedures have been effective in disclosing all information required to be disclosed. The Company anticipates that with further resources, the Company will expand both management and the board of directors with additional officers and independent directors in order to provide sufficient disclosure controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended March 31,June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There are no material changes toThe following risk factors asfactor has been updated since previously disclosed in the Company’s Form 10-K for the year ended December 31, 2021.2021 to disclose current OTC Market status.

OUR OTC MARKET STATUS HAS BEEN LOWERED FROM OTCQB TO OTC PINK.

Due to the low trading price of the common stock of the Company, we have been demoted from the OTCQB to OTC PINK for not maintaining the $0.01 bid test. The Company has sought financing through convertible promissory notes in order to develop the BDTP ^TM app; some of the notes have in turn been converted to common stock and then traded on the market in large quantities, lowering the bid prices. The change in status from OTCQB to Pink may make it harder to access investors and financing to continue to fund our operations.

Additionally, OTC Markets has removed the “Shell Risk” label on the Company’s profile, indicating that they believe we now meet certain criteria. We believe that we are not a shell company based on our history of operations and specific software development, the label has been removed from the BEGI profile on OTC Markets. OTC Markets may choose to downgrade our profile if we do not maintain adequate proof that we are not, in fact, a shell company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

For the three months ended March 31,June 30, 2022, the Company had oneno unregistered sales of equity securities. Prior to the filing of this report, the Company entered into no unregistered transactions.