UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20222023

 

[  ]_]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to ___________

 

Commission file number: 000-55730

 

BLACKSTAR ENTERPRISE GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware 27-1120628
(State of Incorporation) (IRS Employer ID Number)

 

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:

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
N/AN/AN/A

 

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.

Yes[X] No[  ]_]

 

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).

Yes[X] No[  ]_]

 

 
 

 

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.

 

Large accelerated filer[ ]_]Accelerated filer[ ]_]
Non-accelerated filer[X]Smaller reporting company[X]
 Emerging growth company[X]

 

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).

Yes[  ]_] No[X]

 

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

 

As of November 17, 2022,1, 2023, there were 352,797,3041,244,572,435 shares of the registrant’s common stock, $0.001 par value, issued and outstanding, not including shares reserved for conversion of notes.

 

 

  

 

 
 

TABLE OF CONTENTS

 

  Page
 PART 1 – FINANCIAL INFORMATION 
   
Item 1.Financial Statements (Unaudited)3
   
 Consolidated Balance Sheets – December 31, 20212022 and September 30, 202220233
   
 Consolidated Statements of Operations – Three and nine months ended September 30, 20222023 and 202120224
   
 Consolidated Statements of Stockholder’s Deficit – Three and nine months ended September 30, 20222023 and 202120225
   
 Consolidated Statements of Cash Flows – Three and nine –Nine months ended September 30, 20222023 and 202120227
   
 Notes to the Financial Statements8
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1614
   
Item 3.Quantitative and Qualitative Disclosures About Market RiskNot Applicable2018
   
Item 4.Controls and Procedures2018
   
 PART II- OTHER INFORMATION 
   
Item 1.Legal ProceedingsNot Applicable2119
   
Item 1A.Risk FactorsNot Applicable2119
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2219
   
Item 3.Defaults Upon Senior SecuritiesNot Applicable2420
   
Item 4.Mine Safety DisclosureNot Applicable2420
   
Item 5.Other InformationNot Applicable2420
   
Item 6.Exhibits2521
   
 Signatures2622

 

2 
 Table of Contents

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BLACKSTAR ENTERPRISE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
     
  

September 30,

2022

 

December 31,

2021

  (Unaudited) (Audited)
     
ASSETS        
         
Current Assets        
      Cash $98,662  $518,539 
      Prepaid expenses  1,270   5,000 
         
          Total current assets  99,932   523,539 
         
Intangibles  223,741   159,800 
         
Total Assets $323,673  $683,339 
         
         
LIABILITIES & STOCKHOLDERS' DEFICIT        
         
Current liabilities        
      Accounts payable $73,068  $43,042 
      Accrued payables  123,513   74,742 
      Convertible notes payable, net of discounts of        
         $18,001 and $534,856 at 2022 and 2021  762,458   689,169 
         
          Total current liabilities  959,039   806,953 
         
         
Stockholders' Deficit        
     Preferred stock, 10,000,000 shares authorized;        
         $0.001 par value; 1,000,000 shares issued and outstanding  1,000   1,000 
      Common stock, 2,000,000,000 shares authorized; $0.001 par value        
         338,381,981 and 128,689,319 shares issued and outstanding        
         at September 30, 2022 and December 31, 2021  338,382   128,689 
      Additional paid in capital  8,214,976   7,896,457 
      Accumulated deficit  (9,189,724)  (8,149,760)
         
          Total stockholders' deficit  (635,366)  (123,614)
         
Total Liabilities and Stockholders' Deficit $323,673  $683,339 
         
         
         
         
The accompanying notes are an integral part of these consolidated financial statements.

BLACKSTAR ENTERPRISE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2023 AND DECEMBER 31, 2022
     
  2023 2022
  (Unaudited) (Audited)
     
ASSETS        
         
Current Assets        
      Cash $51,099  $62,085 
      Prepaid expenses  6,890   —   
         
          Total current assets  57,989   62,085 
         
Intangibles  314,287   241,685 
         
Total Assets $372,276  $303,770 
         
         
LIABILITIES & STOCKHOLDERS' DEFICIT        
         
Current liabilities        
      Accounts payable $167,000  $97,750 
      Accrued interest payable  233,527   150,691 
      Notes payable  225,000   —   
      Convertible notes payable,  net of discounts of $373        
       and $7,835  at September 30, 2023 and December 31, 2022  681,918   784,939 
         
          Total current liabilities  1,307,445   1,033,380 
         
         
Stockholders' Deficit        
     Preferred stock, 10,000,000 shares authorized;        
        $0.001 par value; 1,000,000 shares issued and outstanding  1,000   1,000 
      Common stock, 2,000,000,000 shares authorized; $0.001 par value        
        1,244,572,435 and 546,495,214 issued and outstanding        
         at September 30, 2023 and December 31, 2022  1,244,572   546,495 
      Additional paid in capital  7,516,510   8,097,862 
      Common stock to be issued  16,325   —   
      Accumulated deficit  (9,713,576)  (9,374,967)
         
          Total stockholders' deficit  (935,169)  (729,610)
         
Total Liabilities and Stockholders' Deficit $372,276  $303,770 
         
         
         

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

 

 Table of Contents 

 

BLACKSTAR ENTERPRISE GROUP, INC.CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
                
 Three months ended Nine months ended Three months ended Nine months ended
 September 30, September 30, September 30, September 30,
 2022 2021 2022 2021 2023 2022 2023 2022
                
                
Revenue $—    $—    $—    $—    $—    $—    $—    $—   
                                
Operating expenses                                
Legal and professional  19,727  $23,572   96,352  $69,876   25,140   19,727   116,028   96,352 
Management consulting - related party  70,028   93,500   235,301   242,642   29,000   70,028   87,250   235,301 
General and administrative  11,434   273,777   57,040   468,950   8,520   11,434   32,555   57,040 
                                
Total operating expenses  101,189   390,849   388,693   781,468   62,660   101,189   235,833   388,693 
                                
                                
Other expense (income)                                
Amortization of discount on convertible notes  56,071   306,396   472,440   656,485   —     56,071   —     472,440 
Amortization of convertible debt issuance costs  6,617   22,152   36,087   46,116   1,060   6,617   7,462   36,087 
Loss on note payable conversions  —     —      .    166,422 
Interest expense  50,452   53,556   142,744   156,691   35,702   50,452   95,314   142,744 
                                
Other expense (income)  113,140   382,104   651,271   1,025,714   36,762   113,140   102,776   651,271 
                                
Net (loss) $(214,329) $(772,953) $(1,039,964) $(1,807,182) $(99,422) $(214,329) $(338,609) $(1,039,964)
                                
Net (loss) per share - basic and diluted                                
 $(0.00) $(0.01) $(0.00) $(0.02) $(0.00) $(0.00) $(0.00) $(0.00)
                                
Weighted average number of common shares                                
outstanding - basic and diluted  227,046,325   121,802,836   291,826,837   113,486,557   1,195,842,088   227,046,325   843,324,617   291,826,837 
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
The accompanying notes are an integral part of these consolidated financial statements.

 

 Table of Contents 

 

 

BLACKSTAR ENTERPRISE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2022
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICITCONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
                                
                                
                                
 Common Stock Preferred Stock         Common Stock Preferred Stock        
 Shares Amount Shares Amount Additional Paid in Capital Common Stock Subject to Cancellation Accumulated Deficit Stockholders' Equity (Deficit) Shares Amount Shares Amount Additional Paid in Capital Common Stock to be Issued Accumulated Deficit Stockholders' Deficit
                                
Balances - June 30, 2021  118,078,138  $118,078   1,000,000  $1,000  $7,482,400  $(250,000) $(7,000,422) $351,056 
Balances - June 30, 2023  1,034,080,127  $1,034,080   1,000,000  $1,000  $7,695,872  $9,000  $(9,614,154) $(874,202)
                                                                
Shares issued for conversion of notes and interest  4,549,245   4,549   —     —     57,116   —     —     61,665   210,492,308   210,492   —     —     (179,362)  —     —     31,130 
Beneficial conversion feature of convertible note  —     —     —     —     236,250   —     —     236,250 
Shares issued subject to cancellation realized  —     —     —     —     —     250,000   —     250,000 
Shares to be issued for loan costs  —     —     —     —     —     4,125   —     4,125 
Shares to be issued to officers/directors  —     —     —     —     —     3,200   —     3,200 
Net loss  —     —     —     —     —     —     (772,953)  (772,953)  —     —     —     —     —     —     (99,422)  (99,422)
                                                                
Balances -September 30, 2021  122,627,383  $122,627   1,000,000  $1,000  $7,775,766  $—    $(7,773,375) $126,018 
Balances - September 30, 2023  1,244,572,435  $1,244,572   1,000,000  $1,000  $7,516,510  $16,325  $(9,713,576) $(935,169)
                                                                
                                                                
                                                                
Balances - June 30, 2022  285,357,307  $285,357   1,000,000  $1,000  $8,201,373  $—    $(8,975,395) $(487,665)  285,357,307  $285,357   1,000,000  $1,000  $8,201,373  $—    $(8,975,395) $(487,665)
                                                                
Shares issued for conversion of notes and interest  53,024,674   53,025   —     —     13,603   —     —     66,628   53,024,674   53,025   —     —     13,603   —     —     66,628 
Net loss  —     —     —     —     —     —     (214,329)  (214,329)  —     —     —     —     —     —     (214,329)  (214,329)
                                                                
Balances -September 30, 2022  338,381,981  $338,382   1,000,000  $1,000  $8,214,976  $—    $(9,189,724) $(635,366)  338,381,981  $338,382   1,000,000  $1,000  $8,214,976  $—    $(9,189,724) $(635,366)
                                                                
                                
                                
                                
                                
                                
                                
                                
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.

 Table of Contents 

 

 

BLACKSTAR ENTERPRISE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2022
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICITCONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
                                
 Common Stock Preferred Stock                        
 Shares Amount Shares Amount Additional Paid in Capital Common Stock Subject to Cancellation Accumulated Deficit Stockholders' Equity (Deficit)                
                 Common Stock Preferred Stock        
Balances - December 31, 2020  101,063,806  $101,063   1,000,000  $1,000  $5,829,279  $—    $(5,966,193) $(34,851)
 Shares Amount Shares Amount Additional Paid in Capital Common Stock to be Issued Accumulated Deficit Stockholders' Deficit
                
Balances - December 31, 2022  546,495,214  $546,495   1,000,000  $1,000  $8,097,862  $—    $(9,374,967) $(729,610)
                                                                
Shares issued for conversion of notes and interest  12,018,049   12,018   —     —     359,114   —     —     371,132   698,077,221   698,077   —     —     (581,352)  —     —     116,725 
Beneficial conversion feature of convertible note  —     —     —     —     1,153,250   —     —     1,153,250 
Shares issued for loan costs  300,000   300   —     —     23,700   —     —     24,000 
Shares issued for financing fees  1,078,862   1,079   —     —     41,923   —     —     43,002 
Shares issued for software development  500,000   500   —     —     19,500   —     —     20,000 
Shares issued subject to cancellation  7,666,666   7,667   —     —     349,000   (356,667)  —     —   
Shares issued subject to cancellation realized  —     —     —     —     —     356,667   —     356,667 
Shares to be issued for loan costs  —     —     —     —     —     13,125   —     13,125 
Shares to be issued to officers/directors  —     —     —     —     —     3,200   —     3,200 
Net loss  —     —     —     —     —     —     (1,807,182)  (1,807,182)  —     —     —     —     —     —     (338,609)  (338,609)
                                                                
Balances - September 30, 2021  122,627,383  $122,627   1,000,000  $1,000  $7,775,766  $—    $(7,773,375) $126,018 
Balances - September 30, 2023  1,244,572,435  $1,244,572   1,000,000  $1,000  $7,516,510  $16,325  $(9,713,576) $(935,169)
                                
                                
                                                                
                                                                
Balances - December 31, 2021  128,689,319  $128,689   1,000,000  $1,000  $7,896,457  $—    $(8,149,760) $(123,614)  128,689,319  $128,689   1,000,000  $1,000  $7,896,457  $—    $(8,149,760) $(123,614)
                                                                
Shares issued for conversion of notes and interest  196,896,962   196,897   —     —     331,315   —     —     528,212   196,896,962   196,897   —     —     331,315   —     —     528,212 
Shares issued for cashless warrant exercise  12,795,700   12,796   —     —     (12,796)  —     —     —     12,795,700   12,796   —     —     (12,796)  —     —     —   
Net loss  —     —     —     —     —     —     (1,039,964)  (1,039,964)  —     —     —     —     —     —     (1,039,964)  (1,039,964)
                                                                
Balances - September 30, 2022  338,381,981  $338,382   1,000,000  $1,000  $8,214,976  $—    $(9,189,724) $(635,366)  338,381,981  $338,382   1,000,000  $1,000  $8,214,976  $—    $(9,189,724) $(635,366)
                                                                
                                                                

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. 

 Table of Contents 

 

BLACKSTAR ENTERPRISE GROUP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
        
 

September 30,

2022

 

September 30,

2021

 2023 2022
Cash Flows From Operating Activities                
Net (loss) $(1,039,964) $(1,807,182) $(338,609) $(1,039,964)
Adjustments to reconcile net loss to net cash used                
in operating activities                
Amortization of convertible note issue costs  36,087   46,116   7,462   36,087 
Amortization of discounts on convertible notes  472,440   656,485   —     472,440 
Amortization of discounts on convertible note interest  19,578   41,812   —     19,578 
Loss on conversion of notes payable  —     166,422 
Interest and loan fees paid in stock  —     423,779 
Interest paid in stock  6,235   —   
Stock based compensation to officers/directors  3,200   —   
Changes in operating assets and liabilities                
Decrease in prepaids  3,730   39,278   —     3,730 
(Decrease) in accounts payable  (22,281)  (17,634)
Increase in accounts payable  24,649   (22,281)
Increase in accrued payables  74,133   56,655   89,078   74,133 
                
Cash used in operating activities  (456,277)  (394,269)  (207,985)  (456,277)
                
Cash Flows From Investing Activities                
Purchase of software  (11,634)  (45,000)  (28,001)  (11,634)
                
Cash used in investing activities  (11,634)  (45,000)  (28,001)  (11,634)
                
Cash Flows From Financing Activities                
Repayments of notes payable  —     —   
Proceeds from notes payable  225,000   —   
Payments on convertible debt  (95,966)  (20,000)  —     (95,966)
Repayments in advances from related party  —     (18,780)
Proceeds from convertible notes, net of offering costs                
and original issue discount  144,000   1,004,500   —     144,000 
                
Net cash provided by financing activities  48,034   965,720   225,000   48,034 
                
Net (decrease) increase in cash  (419,877)  526,451   (10,986)  (419,877)
                
Cash, beginning of period  518,539   32,987   62,085   518,539 
                
Cash, end of period $98,662  $559,438  $51,099  $98,662 
                
        
Supplemental disclosure of non-cash investing                
and financing activities                
                
Beneficial conversion feature initially recorded as debt discount $—    $1,153,250 
Notes payable and interest converted to common stock $528,212  $204,741  $116,725  $528,212 
Common stock issued for software $—    $20,000 
Common stock to be issued to officers/directors $3,200  $—   
Common stock to be issued for loan costs $—    $67,002  $13,125  $—   
Accounts payable for intangibles $70,251  $52,307 
Cashless exercise of common stock warrant $29,430  $—    $—    $29,430 
Accounts payable for intangibles $52,307  $—   
                
Cash paid for interest on debt $10,647  $2,750  $—    $10,647 
                
        
        
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. 

 Table of Contents 

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 20222023

(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 nine months ended September 30, 20222023 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'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 nine months ended September 30, 20222023 and the year ended December 31, 2021,2022, the Company has generated no revenues and has incurred losses. As of September 30, 2022,2023, the Company had cash of $98,662,$51,009, working capital deficiency of $859,107$1,249,456 and an accumulated deficit of $9,189,724.$9,713,576. These conditions raise substantial doubt as to the Company'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.

 Table of Contents 

 

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

(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 September 30, 20222023 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 September 30, 2023 and December 31, 2022 consist of capitalized costs for the Company’s proprietary software and patents as follows:

  2023 2022
 Software  $118,001  $90,000 
 Patents   196,286   151,685 
    $314,287  $241,685 

 

 Table of Contents 

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

NOTE 4 – INTANGIBLES

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

  2022 2021
     
 Software  $90,000  $88,000 
 Patents   133,741   71,800 
           
    $223,741  $159,800 

 

NOTE 5 – STOCKHOLDERS’ EQUITY (DEFICIT)DEFICIT

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, 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.

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 stock to 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 Company’s authorized common stock was increased from 700,000,000 to 2,000,000,000 shares, with an effective date of the Amendment to the Articles of Incorporation of August 5, 2022. There was no change in the shares outstanding of either the common stock or preferred stock as a result of the increase.

During the nine months ended September 30, 2023, the Company issued shares of its common stock as follows:

698,077,221 shares for conversion of $116,725 principal and interest on convertible notes payable.

During the nine months ended September 30, 2022, the Company issued shares of its common stock as follows:

196,896,962 shares for conversion of $528,212 principal and interest on convertible notes payable.
12,795,700 shares for exercise of previously issued warrants at $0.0023 per share. The exercise price was revised to $0.0023 per share from $0.25 per share as per antidilution provision of the warrant agreement. The warrants were exercised on a cashless or “net” basis. Accordingly, we did not receive any proceeds from such exercises. The cashless exercise of such warrants resulted in the cancellation of previously issued warrants to purchase an aggregate of 118,800 shares of common stock.

During the nine months ended

At September 30, 2021,2023, the Company issued shares of itshas recorded common stock to be issued as follows:

12,018,04933,750,000 shares, valued at $13,125, as additional consideration for conversion of $371,132 principal and interest on convertible note payable, and recognized a loss conversion of $166,422.loans made to the Company during the period (See Note 8).
300,0008,000,000 shares, valued at $24,000 ($0.08 per share)$3,200, to a convertible note holder as consideration for the Company’s entering into certain third party transactions which were in default of the convertible promissory note, security purchase agreement and other related documents entered into on November 16, 2020.
1,078,8623 shares valued at $43,002 as consideration for financing fees for loans made to the Company.
500,000 shares valued at $0.04 per share as partial consideration for software development costs.
10 
Table of Contents

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

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

2,666,666 shares valued at $106,667 ($0.04 per share) to a convertible note holder. These shares have been issued as a condition that the Company files a resale registration statement covering the underlying convertible shares. The shares are returnableofficers/directors/advisors to the Company upon the effective date of the registration statement. The resale registration statement was not filed in the period stipulated in the agreement with the note holder, and accordingly the $106,667 value of the shares has been charged to operations during the nine months ended September 30, 2021.
5,000,000 shares valued at $250,000 ($0.05 per share) to a convertible note holder. These shares were issued as a condition that the Company files a resale registration statement covering the underlying convertible shares. The shares are returnable to the Company upon the effective date of the registration statement. The resale registration statement was not filed in the period stipulated in the agreement with the note holder, and accordingly the $250,000 value of the shares has been charged to operations during the nine months ended September 30, 2021.(See Note 9).

 

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 of 440,000 shares of the Company’s common stock. The warrants are exercisable 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 September 30, 2022,2023, 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.

 

10 
Table of Contents

NOTE 6 – WARRANTS (continued)

A summary of warrant activity during the nine months ended September 30, 20222023 is presented below:

  

  

 

Shares

 

 

Weighted Average Exercise Price

 Weighted Average Remaining Contractual Life (Years)
       
 Outstanding and exercisable – December 31, 2021   540,000  $0.31   1.99 
 Exercised   (118,800)        
 Expired   (100,000)        
 Outstanding and exercisable – September 30, 2022   321,200  $0.25   1.57 
  

 

 

 

 

Shares

 

 

Weighted Average Exercise Price

 Weighted Average Remaining Contractual Life (Years)
 Outstanding and exercisable – December 31, 2022   321,200  $0.25   1.57 
 Exercised   —           
 Expired   —           
 Outstanding and exercisable – September 30, 2023   321,200  $0.25   .57 

 

NOTE 7 – CONVERTIBLE NOTES

During the nine months ended September 30, 2022,2023, 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 prices 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

11 1800 Diagonal Lending LLC converted, in three tranches, the outstanding principal balance of $23,600 together with accrued and unpaid 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 conversion prices of $0.00033 to $0.00036 per share under the conversion provision and terms of the note agreement.
Table1800 Diagonal Lending LLC converted the total outstanding principal balance of Contents$43,750 together with accrued and unpaid interest thereon of $2,788 due on their note of August 30, 2022 into 305,250,000 shares of the Company’s common stock at conversion prices of $0.00013 to $0.00026 per share under the conversion provision and terms of the note agreement.
1800 Diagonal Lending LLC converted, in four tranches, $37,200 as partial conversions of the principal portion of their October 31, 2022 note into 210,492,308 shares of the Company’s common stock at conversion prices of $0.00013 to $.0002 per share under the conversion provision and terms of the note agreement.
GS Capital Partners made a $5,933 partial conversion, in two tranches, of the principal portion of their October 11, 2021 note together with accrued and unpaid interest of $1,267 into 59,998,666 shares of the Company’s common stock at a conversion price of $0.00012 per share under the conversion provision and terms of the note agreement.

 

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

NOTE 7 – CONVERTIBLE NOTES (continued)

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.

(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 unpaid 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 interest 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 interest 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 prices 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 unpaid 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 unpaid 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 accruerecorded 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 September 30, 2023 based on the Company did not satisfy its obligations for final paymentoriginal loan value of $33,275. At September 30, 2023, the accompanying financial statements reflects an outstanding principalloan balance due to Quick Capital LLC of $473,500$33,275 and accrued interest underof $9,569. 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.

11 
Table of Contents

NOTE 7 – CONVERTIBLE NOTES (continued)

Convertible notes payable at September 30, 2023 and December 31, 2022 are summarized as follows:

Note Holder Face Amount Interest Rate Due Date September 30, 2023 December 31, 2022
           
GS Capital Partners LLC $60,000   8% October 11, 2022 $33,682  $39,615 
                   
SE Holdings LLC $220,000   10% January 26, 2022 $220,000  $220,000 
                   
Quick Capital LLC $33,275   10% July 16, 2021 $33,275  $33,275 
                   
Adar Alef LLC $550,000   10% April 29, 2022 $377,534  $377,534 
                   
1800 Diagonal Lending LLC $55,750   10% May 5, 2023  —    $23,600 
  $43,750   10% August 30, 2022  —    $43,750 
  $55,000   10% October 31, 2022 $17,800  $55,000 
                   
Discount           $(373) $(7,835)
                   
            $681,918  $784,939 

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 unpaid and accrued 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 lieu 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 the Company’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 nine months ended September 30, 2023 is $3,453.

In May 2023, the Company borrowed $50,000 and $25,000 from two unrelated individuals, repayable nine months from date of borrowings with interest at 11% per annum. At maturity, the Company will repay the face amount of the loans in cash, including unpaid and accrued interest at 11% and, in addition, will issue 7,500,000 and 3,750,000 shares of the Company’s common stock, respectively, to the lenders. At maturity the lenders have the option to be issued, in lieu of cash payment of the outstanding debt, an additional 7,500,000 and 3,750,000 shares of the Company’s common stock, respectively, as full satisfaction of the principal loan amounts and related unpaid and accrued interest thereon. The Company has recorded the initial aggregate 11,250,000 common shares to be issued to the two lenders at $4,500, based on the $0.0004 closing trading price of the Company’s common stock as of the date of the loans, 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 nine months ended September 30, 2023 is $2,283.

 

12 
 Table of Contents 

 

BLACKSTAR ENTERPRISE GROUP, INC.

NOTE 8 – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

NOTE 7 – CONVERTIBLE NOTESPAYABLE (continued)

agreement,

In August 2023, the statedCompany borrowed $50,000 from an unrelated individual, repayable May 1, 2024 with interest rateat 11% per annum. At maturity, the Company will repay the face amount of the note was 10% with defaultloan in cash, including unpaid and accrued interest of 24%,at 11% and, was convertible into commonin addition, will issue 7,500,000 shares of the Company’s common stock atto the lender. At maturity the lender has the option to be issued, in lieu of cash payment of the holder.

(xi) On April 27, 2022, the Company entered intooutstanding debt, an Amendment and Abatement Agreement (“Abatement Agreement”) with SE Holdings and Adar Alef (collectively “the Parties”) to addressadditional 7,500,000 of the Company’s default on the two outstanding convertible notes between the Parties, consistingcommon stock as full satisfaction of the remaining $473,500 principal balance to Adar Alefloan amounts 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.related unpaid and accrued interest thereon. The Company has paidrecorded the 7,500,000 common shares to Adar Alef a total of $50,000 upon executionbe issued to the lender at $2,250, based on the $0.0003 closing trading price of the Abatement AgreementCompany’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 $2.250 value of the shares as interest expense over the term of the loan. Amortization for principal, redemption penalty and accrued interest. The remaining principalthe nine months ended September 30, 2023 is $493.

In September 2023, the Company borrowed $50,000 from an unrelated individual, repayable June 29, 2024 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 on the notes to SE Holdingsat 11% 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.

In July, August and September 2022, the Company made payments to Adar Alef for additional abatements on the notes for thirty-day periods of an aggregate $70,001 for principal reduction of $45,845, accrued interest of $5,818 and redemption penalty of $18,338.

(xii) In August 2022, GS Capital Partners elected to make a partial conversion of $16,000 principal and $1,028 of accrued and unpaid interest thereon due on their note of October 11, 2021 into 14,189,591in addition, will issue 7,500,000 shares of the Company’s common stock at a conversion priceto the lender. At maturity the lender has the option to be issued, in lieu of $0.0012 per share under the conversion provision and termscash payment of the note agreement.

(xiii) On August 30, 2022, the Company entered into a financing agreement with 1800 Diagonal Lending LLC to borrow $43,750. The note matures on August 30, 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 pricesoutstanding debt, an additional 7,500,000 of the Company’s common stock foras full satisfaction of the previous fifteen trading days priorprincipal loan amounts and related unpaid and accrued interest thereon. The Company has recorded the 7,500,000 common shares to be issued to the date of conversion. The lender agrees to limitat $1,875, based on 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 100,000,000 shares for conversion. Net proceeds from the loan were $40,000, after legal fees and offering costs of $3,750.

(xiv) In August and September 2022, 1800 Diagonal Lending LLC elected to make a partial conversion of an aggregate $49,600 principal on their note of February 14, 2022, in three tranches, into an aggregate 38,835,083 shares$0.00025 closing trading price of the Company’s common stock at prices of $0.0009 to $0.0017 per share under the conversion provision and termsas of the note agreement.

date of the loan, as a component of stockholders’ deficit classified as common stock to be issued and is amortizing the $1,875 value of the shares as interest expense over the term of the loan. Amortization for the nine months ended September 30, 2023 is $7.

 

13 
Table of Contents

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

NOTE 7 – CONVERTIBLE NOTES (continued)

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

Note Holder Face Amount Interest Rate Due Date September 30, 2022 December 31, 2021
GS Capital Partners LLC $60,000   8% October 11, 2022 $44,000  $60,000 
                   
Power UP Lending Group Ltd. $103,750   10% July 26, 2022 $—    $103,750 
  $78,750   10% July 28, 2022 $—    $78,750 
  $53,750   10% September 1, 2022 $—    $53,750 
  $78,750   10% October 1, 2022 $—    $78,750 
                   
SE Holdings LLC $220,000   10% January 26, 2022 $220,000  $220,000 
                   
Quick Capital LLC $33,275   10% July 16, 2021 $33,275  $33,275 
                   
Adar Alef LLC $550,000   10% April 29, 2022 $377,534  $550,000 
                   
Sixth Street Lending LLC $45,750   10% November 29, 2022 $—    $45,750 
  $55,750   10% February 14, 2023 $6,150  $—   
                   
1800 Diagonal Lending LLC $55,750   10% May 5, 2023 $55,750  $—   
  $43,750   10% August 30, 2023 $43,750  $—   
                   
Discount           $(18,001) $(534,856)
                   
            $762,458  $689,169 

14 
Table of Contents

BLACKSTAR ENTERPRISE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

NOTE 89 – RELATED PARTY TRANSACTIONS

In support of the Company’s efforts and cash requirements, it must relythe Company has relied 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 nine months ended September 30, 20222023 and 20212022, the Company recorded related party management fees of $87,250 and $235,301, and $242,642, respectively.

During For the ninethree months ended September 30, 2023 and 2022, the Company recorded related party management fees of $29,000 and 2021, there were no advances from related parties.$70,028, respectively.

On July 1, 2023, the Board of Directors approved and authorized the issuance of shares of the Company’s common stock as follows: 1,000,000 shares each to Directors of the Company; 2,000,000 shares each to new officers of the Company; 1,000,000 shares each to new advisors of the Company. During the nine monthsperiod ended September 30, 2021, a former officer2023, the Company issued an aggregate 8,000,000 shares of its common stock to four individuals, valued at $3,200 ($0.0004 per share), based on the trading price of the Company was repaid $18,780 for advances previously made.Company’s common stock as of the date of grant.

NOTE 910 – SUBSEQUENT EVENTS

On October 6, 2022, 1800 Diagonal Lending LLC elected

In November 2023, the Company borrowed $50,000 and $25,000 from each of two unrelated individuals, repayable nine months from date of the notes with interest at 11% per annum. At maturity, the Company will repay the face amount of the loans in cash, including unpaid and accrued interest at 11% and, in addition, will issue 7,500,000 and 3,750,000 of the Company’s common stock, respectively, to make a final conversioneach of $6,150 principalthe lenders. At maturity the lenders have the option to be issued, in lieu of cash payment of the outstanding debts, an additional 7,500,000 and $2,787.50 interest on their note of February 14, 2022 into 14,415,3233,750,000 shares of the Company’s common stock, at a price of $.00062 per share under the conversion provision and termsrespectively, as full satisfaction of the note agreement.principal loan amounts and related unpaid and accrued interest thereon.

On October 31, 2022,November 6, 2023, the Company was notified of a lawsuit filed in Clark County, NV against the Company by GS Capital Partners LLC regarding the unavailability of conversion shares relating to the Promissory Note entered into a financing agreement with 1800 Diagonal Lending LLC to borrow $55,000. The note matures on October 31, 2023, bears interest at 10%, with a default rate11, 2021 and the remaining principal balance of 22%, and is convertible, commencing 180 days after the date of issuance.$33,682. The conversion price is to be calculated at 65% of the average of the two lowest trading prices of the Company’s common stockplaintiff sought specific performance for the previous fifteen trading days prior to the datereserve of conversion.700,000,000 shares, or damages in excess of $15,000, plus interest, costs, and legal fees. 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 423,076,923 shares for conversion. Net proceeds frompaid the loan were $50,750, after legal feesnote in full on November 15, 2023 totaling $51,196.71 in cash and offering costs of $4,250.issued no shares. The Company is attempting to settle the dispute.

The Company has analyzed its operations subsequent to September 30, 20222023 through the date that these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose.

1513 
 Table of Contents 

ITEM 2. 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 September 30, 2022,2023, we had an accumulated deficit of $9,189,724$9,713,576 and a working capital deficiency of $859,107.$1,249,456. 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 DLTcrypto-equity companies and blockchain entrepreneurs for securities, tax, and commodity issues. BlackStar is conducting ongoing analysis for opportunities in involvement in electronic fungible share-relatedcrypto-related ventures though our wholly-owned subsidiary, CryptoBlockchain Equity Management Corp., (“CEMC”BEMC”) formed, mainly in September 2017. CEMCthe areas of blockchain and distributed ledger technologies (“DLT”). BEMC 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 BDTPTM. 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. 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 BDTPTM. CEMCBEMC has not established any anticipated time frames or key milestones for CEMCBEMC business.

 

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

14 
Table of Contents

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

16 
Table of Contents

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 and 2023 was focused on thoroughly planning and 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 theCompany’s next major step in its main feature.feature, BlackStar’s Digital Trading Platform (“BDTP TM”), will needbe to be paired withengage an operating licenseepartner (a broker-dealer, clearing firm, and/or registered Alternative Trading System (“ATS”)) to to host the platform and 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 TM is 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 TM over 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, BlackStar 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. On October 19, 2023, BlackStar received a ‘Notice of Allowance’ from the United States Patent and Trademark Office (USPTO), for a patent application titled “System and Method for Matching Orders and Immutable Blockchain Ledger for all Customer Trading Activity with Settlement into the Broker Dealer Ecosystem.” The technology claimed in the patent application enables trading of common shares of a public company on a blockchain. This revolutionary software is our BDTPTM, a trading platform for electronic fungible shares in book-entry, and compliant at any U.S. Brokerage Firm. The patent has not yet been issued.

 

The Company’s success will be dependent upon its 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 clear 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 September 30, 2023, we have cash reserves of approximately $98,662 as of September 30, 2022, we have the cash for an operational budget of approximately six (6) months.$51,099, which enables us to only sustain 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 winter of 2022.the first quarter 2024. 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 $225,000 from four investors, due nine months from receipt with interest at 11% per annum.

 

15 
Table of Contents

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.

 

Results of Operations

For the Three Months Ended September 30, 20222023 compared to same period in 20212022

Net loss for the three months ended JuneSeptember 30, 20222023 was $214,329$99,422 as compared to $772,953$214,329 for the three months ended JuneSeptember 30, 2021,2022, a decrease of $558,624.$114,907. As discussedexplained 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.

17 
Table of Contents

 

For the three months ended September 30, 2022, we had significantly lowerhigher non-operating (other) expenses as compared to the 2023 period, substantially all of which are non-cash, predominately due to a decrease in 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 $113,140 for the three months ended September 30, 2022 as compared to $382,104$36,762 for the same period in 2021.three months ended September 30, 2023. For the three months ended September 30, 2022, the Company recognized $56,071 for amortization of discount on convertible notes, as compared to $306,396none for the three months ended September 30, 2021.2023. The decrease in amortization of discount on convertible notes2023 is attributable to a decrease inthe maturity of convertible loans outstanding and convertible debt conversions in the 2022 period. Interest expense decreased to $35,702 in 2023 as compared to 2021.$50,452 in the 2022 period, as loans were converted from debt to equity.

 

General and administrative expenses in 20222023 were $11,434$8,520 a decrease of $262,343$2,914 from general and administrative expenses of $273,777 in 2021. In 2021, the Company recorded cash and stock payments for fund raising fees, including the $250,000 value of common shares issued to a convertible note lender, as compared to no costs incurred of this nature$11,434 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, theThe Company paid management consulting fees to IHG of $70,028$29,000 for the three months ended September 30, 2023 as compared to $93,500$70,028 paid in 2021.for the comparable 2022 period.

 

Legal and professional fees of $19,727$25,140 for the three months ended September 30, 2022 decreased2023 increased by $3,845$5,413 from $23,572$19,727 for the 2021 comparable 2022 period. Recurring professional feesFees 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.reviews.

 

For the Nine Months Ended September 30, 20222023 compared to same period in 20212022

 

Net loss for the nine months ended September 30, 20222023 was $1,039,964$338,609 as compared to $1,807,182$1,039,964 for the nine months ended September 30, 2021,2022, a decrease of $767,218.$701,355. As discussedexplained 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 operatingOperating expenses for the nine months ended September 30, 2023 include $87,250 in related party management consulting fees, $116,028 in legal and professional fees, and $32,555 in general and administrative fees, for total operating expenses of $235,833. In the comparable 2022 includedperiod, operating expenses include $235,301 in related party management consulting fees, $96,352 in legal and professional fees, and $57,040 in general and administrative fees, for a total of $388,693. Total operating expenses decreased by $392,775 from$388,693 for the 2021nine months ended September 30, 2022. For the 2022 period, as compared to 2022 predominately due to a decrease in generalthere were higher related party management consulting fees and administrative expenses, which included $411,778 for fund raising costs in 2021 as compared to no costs for fund raising incurredas compared to the 2023 period resulting in the 2022 period. Legal and professional fees increased by $26,475a decrease in 2022total operating expenses of $152,860 for fees incurred for SEC registration and regulatory filings.2023.

 

For the nine months ended September 30, 2022, we had significantly lower otherhigher non-operating (other) expenses as compared to the comparable 2021 period. The decrease2023 period, substantially all of $374,443, from $1,025,714 in 2021 to $651,271 in 2022, is substantiallywhich are non-cash, and predominately due to amortization of discounts on debt issuancesissuance and conversion features of the convertible promissory notes that we have used to finance our continued operations. This resulted in total other expenses of $651,271 for the nine months ended September 30, 2022 as compared to $102,776 for the nine months ended September 30, 2023. For the nine months ended September 30, 2022, the Company recognized $472,440 for amortization of discount on convertible notes, as compared to $656,485none for the comparable 2021 period. This decrease was due to decreased funding from convertible note issuances for the 2022 period as compared to the 2021 period. During the nine months ended September 30, 2021, we recognized a loss2023. The decrease in 2023 is attributable to the maturity of $166,422 on notes payableconvertible loans outstanding and convertible debt conversions in the 2022 period. Interest expense decreased to $95,314 in 2023 as compared to none$142,744 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.

General and administrative expenses in 2023 were $32,555 a decrease of $24,485 from general and administrative expenses of $57,040 in 2022. The increasedecrease in amortization of discount on convertible notesgeneral and administrative costs is attributable to an increase in debt conversions in 2022cost containment efforts by management as

16 
Table of Contents

the Company allocated all available resources to SEC filings and patent prosecution. General and administrative costs included investor relations, filing fees, transfer agent fees and overhead operational costs.

The Company paid management consulting fees to IHG of $87,250 for the nine months ended September 30, 2023 as compared to 2021.$235,301 paid in the comparable 2022 period.

Legal and professional fees of $116,028 for the nine months ended September 30, 2023 increased by $19,676 from $96,352 for the comparable 2022 period. Fees for the 2023 and 2022 periods were predominately for SEC regulatory and statutory filings, registration statement filings and amendments thereto and auditor related fees for annual audits and quarterly reviews.

 

Liquidity and Capital Resources

 

At September 30, 2022,2023, we had a working capital deficit of $859,107$1,249,456 and cash of $98,662$51,099 as compared to a working capital deficit of $283,414$971,295 and cash of $518,539,$62,085, at December 31, 2021.2022. 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$225,000 of loans received in the nine months ended September 30, 2022, with all new debt issuances maturing within one year from the date of issuance.2023. The Company used new and existing fundings to maintain operating activities and complete software development and patent filings withof amendments to the USPTO for its digital trading platform.Company’s Registration Statement on Form S-1. During the nine months ended September 30, 2022,2023, we used $456,277$207,985 of cash for operating activities and paid $11,634$28,001 in investing activities for software development and patent costs. In the comparable 20212022 period, operating activities utilized cash of $394,269$456,277 and investing activities for software development and patent costs utilized cash of $45,000.$11,634.

18 
Table of Contents

 

Substantially all of our funding in 2023 and 2022 has been from notes and convertible debt financings infrom non-related investment firms and individuals. During the nine months ended September 30, 2023, we borrowed $225,000 from four individuals, due nine months from issuance with interest at 11%. During the nine months ended September 30, 2022, and 2021.we issued convertible debt with a face value of $155,250, receiving cash proceeds, net of financing costs, of $144,000. The convertible 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 nine months ended September 30, 2022, we issued convertible debt with a face value of $155,250, receiving cash proceeds, net of financing costs, of $144,000. During the nine months ended September 30,2021, we issued convertible debt with a face value of $1,183,250, receiving cash proceeds, net of financing costs, of $1,004,500. During the nine months ended September 30, 2023, note holders were issued 698,077,221 shares of common stock for conversion of $116,725 face value of debt and related accrued interest. In the comparable 2022 period, convertible note holders were issued 196,896,962 shares of common stock for conversion of $528,2123 face value of debt and related accrued interest. In the comparable 2021 period, note holders were issued 12,018,049 shares of common stock for conversion of $371,132$528,212 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 previous success in fund raising net cash proceeds of $144,000from notes and $1,004,500 from convertible debt financing in the nine-month periods ended September 30, 2022 and 2021, respectively,financings 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 capitalreceived $225,000 in debt financing during the nine months ended September 30, 2023 which enabled us to pay 2022 expenses and implement our platformsustain operations in the first three quarters of blockchain features in fourth quarter of 2022.2023.

 

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.common stock. Debt or equity financing may subject us to restrictive covenants and significant interest costs.

17 
Table of Contents

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 September 30, 20222023 and December 31, 2021,2022, we had accumulated deficit of $9,189,724$9,713,576 and $8,149,760,$9,374,967, respectively, and we will require additional working capital to fund operations through 20222023 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, 20212022 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. 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

19 
Table of Contents

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 September 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

2018 
 Table of Contents 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.Subsequent to the end of the period covered in this filing, on November 6, 2023, the Company was notified of a lawsuit filed in Clark County, NV against the Company by GS Capital Partners LLC regarding the unavailability of conversion shares relating to the Promissory Note entered into on October 11, 2021 and the remaining principal balance of $33,682. The plaintiff sought specific performance for the reserve of 700,000,000 shares, or damages in excess of $15,000, plus interest, costs, and legal fees. The Company has paid the note in full on November 15, 2023 totaling $51,196.71 in cash and issued no shares. The Company is attempting to settle the dispute.

 

ITEM 1A. RISK FACTORS

 

The following risk factor has been updated since previously disclosedincluded in the Company’s Form 10-Kperiodic report for the yearprior quarter ended December 31, 2021 to disclose current OTC Market status.

THERE CAN BE NO CERTAINTY AS TO MARKET ACCEPTANCE OF THE PROPOSED BDTP TM.June 30, 2023, is incorporated herein by reference.

 

The Company has no certainty as to whether the market will accept our proposed business concept and use the idea of the BDTP TM, should it become operational, nor is there any certainty as to how the BDTP TM translates to profits for the Company. There is no assurance of market acceptance or profitability of the concept or Company. The BDTP TM is not yet functional and may neverfollowing additional risk factor shall be functional.

THERE ARE ADDITIONAL RISKS TO INVESTORS HOLDING BLACKSTAR DIGITAL SHARES DUE TO THE LACK OF MARKET.added:

 

Investors holding electronic fungible shares may never be able to transfer them on the platform, however they will be able to transfer them through traditional avenues such as Market Makers. Electronic fungible shares are not currently traded on the BDTP TM and may never be. The warrants for the legacy “BlackStar Digital Equity” outstanding are exercisable for shares of common stock.A LAWSUIT WAS FILED AGAINST THE COMPANY ON NOVEMBER 6, 2023.

 

BLACKSTAR DIGITAL FUNGIBLE SHARES AND DIGITAL SHARES IN GENERAL MAY BE SUBJECT TO UNIQUE RISKS NOT ASSOCIATED WITH PAPER CERTIFICATED SHARES.

On November 6, 2023, GS Capital Partners LLC filed a lawsuit against the Company in Nevada regarding the unavailability of conversion shares relating to the Promissory Note entered into on October 11, 2021 and the remaining principal balance of $33,682. The digital formplaintiff is seeking specific performance for the reserve of BlackStar common stock (BlackStar Electronic Fungible Shares when traded on BDTP TM)700,000,000 shares, or damages in excess of $15,000, plus interest, costs, and digital or electronic shareslegal fees. The lawsuit increases the company’s financial and administrative burdens and is a risk to the Company’s capital. Although the Company is attempting to settle the dispute by paying the note in generalfull, there is no guarantee that this will settle the matter in its entirety. The Company may be subjectneed to timing delays, electronic transfer errors, electronic systems outages, and cybersecurity threats. BlackStar Electronic Fungible Shares carryincrease the same risks as electronic fungible shares from DTCC that have been DWAC and placed in Broker Dealers accounts for customers. The intended functionality of the BlackStar Digital Trading Platform TM is to encrypt the buy/sell orders (including all transaction and customer information) placed by broker dealers and customers, in order to provide additional security and ease of access over the existing systems, but not all risks can be mitigated due to unforeseen future threats and/or disruptions, transmission errors, and electronic systems issues. Electronic fungibleauthorized shares of common stock including BlackStar Electronic Fungible Shares, hold the same rights as paper certificated shares of common stock and are fungible. Digital equity would be the electronic fungible shares on account. The difference in the two is the mode of sale or transfer; however, the transfer agent maintains records of all shareholder activity, regardless of the form. While electronic fungible shares are now commonplace, there is still risk involved with electronic transmission of information and that transmission may be compromised. The record-keeping requirements of transfer agents, broker dealers, and issuers remain unchanged with electronic fungible shares, however, the risk of error or omission cannot be ruled out.

INSURANCE WILL NOT BE OBTAINED FOR OUR ELECTRONIC FUNGIBLE SHARES WHICH POSES RISKS.

We do not intend to attempt to obtain any insurance at this time for shares in electronic fungible form, so there will be no insurance for covering liability in the event of losses from the form or mode of transfer of Electronic Fungible Shares

THE OPERABILITY OF OUR PLATFORM DEPENDS ON OUR ABILITY TO ENTER INTO A LICENSE AGREEMENT WITH A BROKER DEALER OR AN ALTERNATIVE TRADING SYSTEM.

Our plan to operate the BlackStar Digital Trading Platform TM relies on our ability to enter into a license agreement with a broker dealer or an alternative trading system (“ATS”). The BDTP TM operates as an encrypted platform for the transmission of customer information, dollar amount, number of shares, and account number to be sent over a secured network to/from the broker dealer and/or customer. Whether we license the platform to a broker dealer or an ATS, we

21 
Table of Contents

will rely on the licensee to comply with all relevant laws, rules and regulations including, but not limited to, FINRA and/or SEC registration, the Customer Protection Rule (Rule 15c3-3 of the Securities Exchange Act of 1934, as amended), the Exchange Act requirements for books, records and financial reporting, and the Securities Investor Protection Act of 1970 (“SIPA”), as applicable. The duties of settlement, safekeeping, and reporting of customers’ assets will remain with the traditional custodians – the Broker Dealers retained by customers for their own account. The BDTP TM will provide encrypted transmission of order information, as discussed above. Once established, any disruption in our relationship with a broker dealer or ATS may cause a temporary or permanent service disruption of BDTP TM, unless and until we are able to reestablish a new licensee. If we are unable at any time to establish the necessary relationship, BDTP TM may never become functional. If we are unable to license BDTP TM to an ATS in this way, we may reevaluate whether we may apply for ATS status.

THERE CURRENTLY IS A LIMITED LIQUID TRADING MARKET FOR OUR COMMON STOCK AND WE CANNOT ASSURE INVESTORS THAT A ROBUST TRADING MARKET WILL EVER DEVELOP OR BE SUSTAINED FOR OUR COMMON STOCK.

To date, there has been a limited trading market for our common stock on the OTC Pink Market. We cannot predict how liquid the market for our common stock may become. A lack of an active market may impair investor’s ability to sell their shares at the time they wish to sell them or at a price they consider reasonable. The lack of an active trading market may impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using our common stock as consideration. For companies where securities are traded in the OTC Pink Market, it is generally more difficult to obtain accurate quotations, to obtain coverage for significant news events (because major media channels generally do not publish presses releases about such contingencies) and to obtain needed capital.

OUR STOCK WILL, IN ALL LIKELIHOOD, BE THINLY TRADED AND AS A RESULT YOU MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF YOU NEED TO LIQUIDATE YOUR SHARES.

The shares of our common stock may be thinly traded and even more so as our shares trade on OTC Pink. We are a small company which is relatively unknown to stock analysts, stock brokers, institutional stockholders and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early-stage company such as ours or purchase or recommend the purchase of any of our securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our securities is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on Securities price. We cannot give you any assurance that a broader or more active public trading market for our common securities will develop or be sustained, or that any trading levels will be sustained. Due to these conditions, we can give stockholders no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their securities.

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 developaccommodate any judgments or settlements, and the BDTP TM app; someCompany could be exposed to further risks 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 OTC Pink will 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.lawsuits for similar issues.

 

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

 

ForOn July 1, 2023, the three months ended September 30, 2022,Board of Directors approved and authorized the Company had one unregistered saleissuance of equity securities. Prior to the filing of this report, the Company also entered into one unregistered transaction. Additionally, for the three months ended June 30, 2022, the Company had one unregistered sale of equity securities that was disclosed in the Financial Statements and Notes

22 
Table of Contents

thereto in the Form 10-Q, but the documents were not attached as exhibits to said Form 10-Q; details of the transaction and the documents are included below.

On May 5, 2022, the Company entered into a financing agreement with 1800 Diagonal Lending LLC (formerly Sixth Street Lending LLC) (“Holder”) 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 pricesshares of the Company’s common stock for the previous fifteen trading days prioras follows: 1,000,000 shares each to the date of conversion. The lender agrees to limit the amount of stock received to less than 4.99%Directors of the total outstanding common stock. There are no warrants or options attachedCompany; 2,000,000 shares each to this note, andnew officers of the Company; 1,000,000 shares each to new advisors of the Company. During the period ended September 30, 2023, the Company has reserved 43,537,683issued an aggregate 8,000,000 shares for conversion. Net proceeds fromof its common stock to four individuals, valued at $3,200 ($0.0004 per share), based on the loan were $52,000, after legal fees and offering costs of $3,750.

On August 30, 2022, the Company entered into a financing agreement with 1800 Diagonal Lending LLC (“Holder”) to borrow $43,750. The note matures on August 30, 2023, bears interest at 10%, with a default rate of 22%, and is convertible, commencing 180 days after the date of issuance. The conversiontrading price is to be calculated at 65% of the average of the two lowest trading prices of the Company’s common stock for the previous fifteen trading days prior toas of the date of conversion.grant. The lender agreesshares were issued for services rendered and the issuance was made by us in reliance upon Section 4(a)(2) of the Act and under an exemption of Rule 506(b) of Regulation D, or any other such exemptions as the transaction may qualify. The officers and directors are well known to limitus and our management, through pre-existing business relationships. The individuals were provided access to all material information and all information necessary to verify such information and were afforded access to our management in connection with the issuance. All purchasers of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to us. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.

In August 2023, the Company borrowed $50,000 from an unrelated individual, repayable May 1, 2024 with interest at 11% per annum. At maturity, the Company will repay the face 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 100,000,000 shares for conversion. Net proceeds from the loan were $40,000, after legal feesin cash, including unpaid and offering costs of $3,750.

On October 31, 2022, the Company entered into a financing agreement with 1800 Diagonal Lending LLC (“Holder”) to borrow $55,000. The note matures on October 31, 2023, bearsaccrued interest at 10%, with a default rate of 22%,11% 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 pricesin addition, will issue 7,500,000 shares of the Company’s common stock for the previous fifteen trading days prior to the date of conversion. Thelender. At maturity the lender agrees to limithas 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 423,076,923 shares for conversion. Net proceeds from the loan were $50,750, after legal fees and offering costs of $4,250.

The following terms are applicable to all three of the above promissory notes.

Prepayment. The Company may prepay the Note in whole or in part at any time, up to 180 days after the Issue Date, by paying the principal amountoption to be prepaid together with premium interest thereon to the dateissued, in lieu of prepayment (120% 1-60 days; 125% 61-90 days; 130% 91-120 days; 135% 121-180 days). After 180 days from the Issue Date, the Company may submit an Optional Prepayment Notice to the Holder. Upon receipt by the Holder of the Optional Prepayment Notice post Prepayment Periods, the prepayment shall be subject to the Holder’s and the Company’s agreement with respect to the applicable Prepayment Percentage.

No Beneficial Ownership. The Holder shall not be entitled to convert any portion of the Note in excess of that portion upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained in the Note and the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99%cash payment of the outstanding shares of Common Stock. For the purposesdebt, an additional 7,500,000 of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d)Company’s common stock as full satisfaction of the Securities Exchange Act of 1934, as amendedprincipal loan amounts and Regulations 13D-G thereunder. The beneficial ownership limitations on conversion as set forth may NOT be waived by the Holder.

Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributionsrelated unpaid and similar events). The "Variable Conversion Price" shall mean 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%). “Market Price” means the average of the two (2) lowest Trading Prices (as defined below) for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the

23 
Table of Contents

Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as reasonably determined by the Borrower. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

Amounts Due in Events of Default. Upon the failure to pay principal andaccrued interest the Note shall become immediately due and payable. Upon the failure to issue conversion shares when Holder exercises said right, or other events of default outlined in the Note, then two times (2x) the Default Amount of the Note will become due and payable immediately. Any other form of default will entitle the Holder to an immediate payment of one hundred fifty percent (150%) of the Default Amount, being the outstanding principal amount of the Note, plus accrued and unpaid interest on the unpaid principal amount of the Note, plus any default interest and any other amounts owed.

Copies of the promissory notes, securities purchase agreements, and transfer agent letters can be found attached hereto as Exhibits 10.1, 10.2, and 10.3 for May 5, 2022, Exhibits 10.4, 10.5, and 10.6 for August 30, 2022, and Exhibits 10.7, 10.8, and 10.9 for October 31, 2022.thereon. The Company and the holderholders executed the securities purchase agreementsagreement in accordance with and in reliance upon the exemption from securities registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The Company intends to use the funds to continue limited operations, including finding a broker-dealer and/or ATS to host the BDTP TM, legal and professional fees, consulting fees, and general and administrative expenses. A substantially similar form of the note is attached as Exhibit 10.1 to the Current Report on Form 8-K filed on June 10, 2019, but with the terms mentioned herein.

19 
Table of Contents

In September 2023, the Company borrowed $50,000 from an unrelated individual, repayable June 29, 2024 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 7,500,000 of the Company’s common stock as full satisfaction of the principal loan amounts and related unpaid and accrued interest thereon. The Company and the holders executed the agreement in accordance with and in reliance upon the exemption from securities registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The Company intends to use the funds to continue limited operations, including finding a broker-dealer and/or ATS to host the BDTP TM, legal and professional fees, consulting fees, and general and administrative expenses. A substantially similar form of the note is attached as Exhibit 10.1 to the Current Report on Form 8-K filed on June 10, 2019, but with the terms mentioned herein.

In November 2023, the Company borrowed $50,000 and $25,000 from each of two unrelated individuals, repayable nine months from date of the notes with interest at 11% per annum. At maturity, the Company will repay the face amount of the loans in cash, including unpaid and accrued interest at 11% and, in addition, will issue 7,500,000 and 3,750,000 of the Company’s common stock, respectively, to each of the lenders. At maturity the lenders have the option to be issued, in lieu of cash payment of the outstanding debts, an additional 7,500,000 and 3,750,000 shares of the Company’s common stock, respectively, as full satisfaction of the principal loan amounts and related unpaid and accrued interest thereon. The Company and the holders executed the agreement in accordance with and in reliance upon the exemption from securities registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The Company intends to use the funds to continue limited operations, including finding a broker-dealer and/or ATS to host the BDTP TM, legal and professional fees, consulting fees, and general and administrative expenses. A substantially similar form of the note is attached as Exhibit 10.1 to the Current Report on Form 8-K filed on June 10, 2019, but with the terms mentioned herein.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

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 continues to accrue, and that the conversion price is the lowest trading price during the delinquency period with a 50% discount. As interest is accruing daily, the Company is exploring its options for resolving the default. The Company has not yet resolved this default.

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.Not Applicable.

 

ITEM 4. MINE SAFETY DISCLOSURE

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

2420 
 Table of Contents 

 

ITEM 6. EXHIBITS

 

Exhibits. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

 

10.1Convertible Promissory Note – May 5, 2022
10.2Securities Purchase Agreement – May 5, 2022
10.3Transfer Agent Instruction Letter – May 5, 2022
10.4Convertible Promissory Note – August 30, 2022
10.5Securities Purchase Agreement – August 30, 2022
10.6Transfer Agent Instruction Letter – August 30, 2022
10.7Convertible Promissory Note – October 31, 2022
10.8Securities Purchase Agreement – October 31, 2022
10.9Transfer Agent Instruction Letter – October 31, 2022
31.1Certification of Chief Executive Officer Pursuant to Rule 13a–14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31.2Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
32.1Certification of Chief Executive Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2Certification of Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as an Inline XBRL document and included in Exhibit 101)

  

2521 
 Table of Contents 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 BLACKSTAR ENTERPRISE GROUP, INC.
                      (Registrant)
   
Dated: November 21, 202219, 2023By:/s/ John Noble HarrisJoseph E. Kurczodyna
  John Noble HarrisJoseph E. Kurczodyna
  (Chief Executive Officer, Principal Executive
  

Principal Executive Officer)

   
Dated: November 21, 202219, 2023By:/s/ Joseph E. Kurczodyna
  Joseph E. Kurczodyna
  (Chief Financial Officer, Principal Accounting
  Principal Accounting Officer)
   

 

2622 

 

  

 

NONE 0.00 0.00 0.00 0.00 1195842088 227046325 291826837 843324617 false --12-31 Q3 0001483646 begi:CommonStockForConversionMember 2021-09-30true iso4217:USD xbrli:shares