UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2022March 31, 2023

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 August 9, 2022,May 5, 2023, there were 285,357,307683,446,845 shares of the registrant’s common stock, $.001$0.001 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 JUNE 30, 2022MARCH 31, 2023

(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, CryptoBlockchain Equity Management Corp (“CEMC”BEMC”). 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, CryptoBlockchain Industry SRO Inc. (“Crypto”BI”) in 2017. Crypto’sBI’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, 20212022 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 sixthree months ended June 30, 2022March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023.

These unaudited consolidated financial statements include BlackStar and its wholly owned subsidiaries: CryptoBlockchain Equity Management Corp. and CryptoBlockchain 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 sixthree months ended June 30, 2022March 31, 2023 and the year ended December 31, 2021,2022, the Company has generated no revenues and has incurred losses. As of June 30, 2022,March 31, 2023, the Company had cash of $232,951,$36,603, working capital deficiency of $659,099$1,057,073 and an accumulated deficit of $8,975,395.$9,492,171. 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’sCompany'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 JUNE 30, 2022MARCH 31, 2023

(Unaudited)

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 June 30, 2022March 31, 2023 and does not expect such pronouncements to have a material impact on the Company’s financial position, operations, or cash flows.

Reclassifications

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

NOTE 4 – INTANGIBLES

Intangibles at March 31, 2023 and December 31, 2022 consist of capitalized costs for the Company’s proprietary software and patents as follows:

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED JUNE 30, 2022MARCH 31, 2023

(Unaudited)

NOTE 4 – INTANGIBLES

Intangibles at 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)DEFICIT

Preferred Stock

The Company has an authorized number of10,000,000 preferred shares, of 10,000,000, with a par value of $0.001 per share. On August 25, 2016, theThe 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

In July 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, the Company has 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.

During the sixthree months ended June 30,March 31, 2023, the Company issued shares of its common stock as follows:

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

During the six months ended June 30, 2021,At March 31, 2023, the Company issued shares of itshas recorded common stock to be issued, valued at $4,500, as follows:

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED JUNE 30, 2022

(Unaudited)

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

additional consideration for loans made to the Company during the period (See Note 8).

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 June 30, 2022,March 31, 2023, 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 sixthree months ended June 30, 2022March 31, 2023 is presented below:

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2023

(Unaudited)

NOTE 7 – CONVERTIBLE NOTES

During the sixthree months ended June 30, 2022,March 31, 2023, the Company had the following transactionstransations 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

●

In January and March 2023, 1800 Diagonal Lending LLC elected to convert, in three tranches, the outstanding principal balance of $23,600 and accured and upaid interest thereon of $2,787 due on their note of May 5, 2022 into 75,643,939 shares of the Company’s common stock at prices of $0.00033 to $0.00036 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 Company’s common stock (at conversion prices of $0.0075 to $0.0088 per share) under the conversion provision and terms of the note agreement.

(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 interst thereon of $3,938 into 21,273,289 shares of the Company���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 convert, 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 19,952,406 shares of the Company’s common stock at conversion prices of $0.0024 to $0.0029 per share under the conversion provision and terms of the note agreement.

(vi) On May 5, 2022, the Company entered 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 theits $33,275 convertible note to the Company dated November 16, 2020 and stated that the outstanding amount due on the note is $133,317.38,$133,317, 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 accurerecorded accrued default interest on the note at the rate of 10%24% per annum.

(x) On April 29, 2022,annum from May 24, 2021 (date of default) to March 31, 2023 based on the Company did not satisfy its obligations for final paymentoriginal loan value of $33,275. At March 31, 2023, the accompanying financial statements reflects an outstanding principalloan balance due to Quick Capital LLC of $473,500$33,275 and accrued interest underof $5,564. The Company and Quick Capital LLC have been in discussions to reach a financing agreement entered into on April 29, 2021 with Adar Alef. Under the termsreasonable and fair settlement of the balance due on 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.agreement.

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, 2022March 31, 2023 and December 31, 20212022 are summarized as follows:

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED JUNE 30, 2022MARCH 31, 2023

(Unaudited)

NOTE 8 – NOTES PAYABLE

In March 2023, the Company borrowed $25,000 from each of two individuals, repayable nine months from date of borrowing with interest at 11% per annum. At maturity, the Company will repay the face amount of each of the loans in cash including interest at 11% and, in addition, will issue 3,750,000 shares of the Company’s common stock to each of the lenders. At maturity each of the lenders have the option to be issued, in leiu of cash payment of the outstanding debt, an additional 3,750,000 shares of the Company’s common stock in full satisfaction of the principal loan amount of $25,000 and related unpaid and accrued interest thereon. The Company has recorded the initial aggregate 7,500,000 common shares to be issued to the two lenders at $4,500, based on the $0.0006 closing trading price of it's common stock as of the date of the loan, as a component of stockholders’ deficit classified as common stock to be issued and is amortizing the $4,500 value of the shares as interest expense over the term of the loans. Amortization for the three months ended March 31, 2023 is $451.

NOTE 89 – 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, the 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 sixthree months ended June 30,March 31, 2023 and 2022 and 2021 the Company recorded related party management fees of $165,274$31,500 and $149,142,$86,613, respectively.

During the six months ended June 30, 2022 and 2021, there were no advances from related parties. At 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 910 – SUBSEQUENT EVENTS

On July 1,In April 2023, 1800 Diagonal Lending LLC elected to make a $4,200 partial conversion of the principal portion of their August 30, 2022 note into 32,307,692 shares of the Abatement Agreement was extended forCompany’s common stock at a conversion price of $0.00013 per share under the conversion provision and terms of the note agreement.

In May 2023, the Company borrowed $50,000 from an unrelated individual, repayable nine months from date of borrowing with interest at 11% per annum. At maturity, the Company will repay the face amount of the loan in cash, including unpaid and accrued interest at 11% and, in addition, will issue 7,500,000 shares of the Company’s common stock to the lender. At maturity the lender has the option to be issued, in lieu of cash payment of the outstanding debt, an additional thirty (30) days through July 31, 2022, upon an additional payment by7,500,000 shares of the CompanyCompany’s common stock as full satisfaction of $25,000 to Adar Alef forthe principal redemption penaltyloan amount of $50,000 and related unpaid and accrued interest.interest thereon.

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 preferred stock as a result of the increase.

The Company has analyzed its operations subsequent to June 30, 2022March 31, 2023 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 June 30, 2022,March 31, 2023, we had an accumulated deficit of $8,975,395$9,492,171 and a working capital deficiency of $659,099.$1,057,073. 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 Pink Sheets 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 blockchain and DLT companies and blockchain entrepreneurs for securities, tax, and commodity issues. BlackStar is conducting ongoing analysis for opportunities in involvement in electronic fungible share-related ventures though our wholly-owned subsidiary, Blockchain Equity Management Corp. (“BEMC”), formerly known as Crypto Equity Management Corp. (“CEMC”), formed in September 2017. CEMCBEMC 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. CEMCBEMC has not established any anticipated time frames or key milestones for CEMCBEMC 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.BEMC BlackStar, through CEMC,BEMC, intends to initially control and manage each venture. Potential ventures for both BlackStar and CEMCBEMC will be analyzed using the combined business experience of its executives, with CEMCBEMC 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 electronic fungibleregistered BlackStar common shares equal to the shares held by DTCCin digital form (DWAC). BlackStar, and intends to use the platform design to provide custom subscription services to other public companies.

BlackStar is currently developing a blockchain-based software platform (“BDTP ^TM”) to trade electronic fungible shares of our common stock equal to the shares held and transferred by DTCC Brokers (DWAC). Once completed, the platform design might enable us to license the technology as a Platform as a Service (“PaaS”) for other publicly traded companies, providing revenue to finance our merchant banking. The completion of our software platform depends on our ability to license it to an existing

Alternative Trading System (“ATS”) or for us to possibly register as an ATS, which we do not intend to do at this time as we would prefer to license our platform to an existing ATS. The platform is not currently operational or in use by anyone. More details regarding the BDTP ^TM can be found in the most recent registration statement on Form S-1, as amended.

Recent Updates

 – Blackstar’s progress in 2022 was focused on pursuing the registration of shares underlying convertible notes, which entailed thoroughly describing many aspects of our new proposed line of business of trading common shares on a blockchain through the broker-dealer ecosystem. 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.companies in 2023. The Company is currently evaluating its options for theCompanies next major step in its main feature. BlackStarsfeature, Blackstar’s Digital Trading Platform (“BDTP”BDTP ^TM”), which will need to be paired with an operating licenseepartner (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 relationshipspartnerships with broker-dealers and existing ATS’s and other strategies to go live with BDTP^TM 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 licensee.partner. BlackStar intends to continue to seek further input from various regulatory agencies and others on the functionality of the BDTP ^TMover the next several6 to 9 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 its outside software developer, Artuova, previously 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. During 2021, BlackStarBlackstar has filed with the USPTOU.S. Patent and Trademark Office (“USPTO”) for patent protection forof its proprietary software.software and, during 2022, also filed with U.S. and foreign trademark offices for protection.

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

Currently in the testing phase, we estimate $30,000$100,000 to finalize the integration of the digital platform into the broker-dealer eco system once the SEC and FINRA clearsclear 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 next six months. We anticipate our overall expansion of services into the blockchain industry within the next twelve months.

Based on our currentAt March 31, 2023 we have cash reserves of approximately $232,951 as of June 30, 2022, we have the cash for an operational budget of approximately six (6) months.$36,603, which enables us to sustain only limited operations. We intend to offer a private placement of commonpreferred 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 fallspring of 2022.2023. 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. We have estimated we will require approximately $100,000 quarterly for operational costs which includes legal, accounting, travel, general and administrative, audit, rent, telephones and miscellaneous. In the year ended December 31, 2022, we received funding through convertible promissory notes totaling $194,750 being received in net cash proceeds. In 2023, we received loans of an aggregate $50,000 from two investors, due nine months from receipt with interest at 11% per annum.

The independent registered public accounting firm’s report on our financial statements as of December 31, 2021,2022, 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 June 30, 2022 compared to same period in 2021

Net loss for the three months ended June 30, 2022March 31, 2023 was $308,733$117,204 as compared to $711,920$516,902 for the three months ended June 30, 2021,March 31, 2022, a decrease of $403,187.$399,698. As explained below, a significant portion of the losses in those periods wasdecrease is predominately attributable to non-cash transactions from the issuance of convertible debt and other financings.

For the three months ended June 30,March 31, 2022, we had significantly lowerhigher 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 $157,508$380,622 for the three months ended June 30,March 31, 2022 as compared to $450,590$28,800 for the same period in 2021.three months ended March 31,2023. For the three months ended June 30,March 31, 2022, the Company recognized $102,446$334,251 for amortization of discount on convertible notes, as compared to $251,507$3,390 for the three months ended June 30, 2021. DuringMarch 31, 2023. The decrease in 2023 is attributable to the three monthsmaturity of loans outstanding loans and convertible debt conversions in the fiscal year ended June 30, 2021, we recognized a loss of $124,745 on notes payable conversionsDecember 31, 2022. Interest expense decreased to $25,410 in 2023 as compared to none$46,371 in the 2022 comparable period. This reduction is due to a change in the Company’s accounting treatment for conversion ofperiod, as loans were converted from debt to equity. The decrease in amortization of discount on convertible notes is attributable to a decrease in debt conversions in 2022 as compared to 2021.

General and administrative expenses in 20222023 were $32,138$12,252 a decrease of $107,388$1,216 from general and administrative expenses of $139,526 in 2021. In 2021, the Company recorded cash and stock payments for fund raising fees as compared to no costs incurred of this nature$13,468 in 2022. General and administrative costs, exclusive of feeswhich were comparable for fund raising,the 2023 to 2022 quarters, were for investor relations, filing fees, transfer agent fees and overhead operational costs which were comparable for the 2022 and 2021 quarterly periods.costs.

In 2022,2023, the Company paid management consulting fees to IHG of $78,661$31,500 as compared to $98,000$86,613 paid in 2021.2022.

Legal and professional fees of $40,426$44,652 for the three months ended June 30, 2022March 31, 2023 increased by $16,622$8,453 from $23,804$36,199 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 feesMarch 31, 2022. Fees for the 20222023 and 20212022 periods were predominately for SEC regulatory and statutory filings, registration statement filings and amendments thereto 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.