UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
WASHINGTON, DC 20549 |
FORM 8-K |
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
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Date of report (Date of earliest event reported): October 1, 2021 |
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BLACKSTAR ENTERPRISE GROUP, INC. |
(Exact name of Registrant as specified in its charter) |
Delaware | 000-55730 | 27-1120628 |
(State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
4450 Arapahoe Ave., Suite 100 |
Boulder, CO 80303 |
(Address of Principal Executive Offices) |
(303) 500-3210 |
(Registrant's Telephone Number, Including Area Code) |
________________________________________ |
(Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
N/A | | N/A | | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
Emerging Growth Company ☒
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 pursuant to Section 13(a) of the Exchange Act. ☐
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
Item 1.01 Entry into a Material Definitive Agreement
Power Up Lending Group Ltd. – October 1, 2021
Convertible Promissory Note:
On October 1, 2021, BlackStar Enterprise Group, Inc. (the “Company” or “we”) and Power Up Lending Group Ltd. (“Holder”) entered into a Convertible Promissory Note totaling $78,750 (“Note 1,” Exhibit 10.1) and a Securities Purchase Agreement (“SPA 1,” Exhibit 10.2), and an Instruction Letter for the Transfer Agent (“TA Letter 1,” Exhibit 10.3) (altogether, the “Transaction Documents”).
The Company executed a 10% Convertible Promissory Note of the Company with Holder, in the principal amount of $78,750 (the “Note 1”), upon the terms and subject to the limitations and conditions set forth in such Note. The Note 1 is attached as Exhibit 10.1. The Holder may convert the outstanding unpaid principal amount of the Note 1 into restricted shares of Common Stock of the Company at a discount of 35% of the Market Price. The lender agreed 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 1. The Company has initially reserved out of its authorized Common Stock 23,954,227 shares of Common Stock for conversion pursuant to the Note 1, as evidenced by the TA Letter 1 attached as Exhibit 10.3.
The Note 1, bearing an interest rate of 10%, dated October 1, 2021 (the “Issue Date”) for $78,750 matures on October 1, 2022. The Note 1 and SPA 1 were closed on October 12, 2021 (the “Closing Date”) and the Company received $75,000 on October 12, 2021, with the remaining $3,750 being retained by the Holder to cover legal and due diligence fees. The Note 1 additionally bears an interest rate of 22% per annum in the Event of Default.
Prepayment. The Company may prepay the Note 1 in whole or in part at any time, up to 180 days after the Issue Date, by paying the principal amount to be prepaid together with premium interest thereon to the date 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 1 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 Notes 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 1 and the number of shares of Common Stock issuable upon the conversion of the portion of this Note 1 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% of the outstanding shares of Common Stock. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended 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 distributions 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 lowest Trading Price (as defined below) for the Common Stock during the twenty (20) 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 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 and interest, the Note 1 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 1, then two times (2x) the Default Amount of the Note 1 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 1, plus accrued and unpaid interest on the unpaid principal amount of the Note 1, plus any default interest and any other amounts owed.
Securities Purchase Agreement:
The Company and the Holder executed the Securities Purchase Agreement (“SPA 1”) 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 United States Securities and Exchange Commission (the “SEC”) under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The SPA 1 outlines the purchase of the Note 1 (the “Securities”), and the Holder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth in the SPA 1 in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Securities.
Transfer Agent Instruction Letter:
Until the Company’s obligations under the Note 1 are paid and performed in full, the Transfer Agent of the Company is authorized to establish a reserve of shares of authorized but unissued Common Stock of the Company in an amount not less than 23,954,227 shares for issuance upon partial or full conversion of the Note 1 in accordance with the terms thereof, and the Transfer Agent shall immediately add shares of Common Stock to the reserved shares as and when requested by Company in writing from time to time.
GS Capital Partners, LLC – October 11, 2021
On October 11, 2021, BlackStar Enterprise Group, Inc. (the “Company” or “we”) and GS Capital Partners, LLC (“Holder”) entered into Convertible Promissory Note totaling $60,000 (“Note 2,” Exhibit 10.4), a Securities Purchase Agreement (“SPA 2,” Exhibit 10.5), and an Instruction Letter for the Transfer Agent (“TA Letter 2,” Exhibit 10.6) (altogether, the “Transaction Documents”).
The Company executed the 10% Convertible Promissory Note of the Company with Holder, in the principal amount of $60,000, upon the terms and subject to the limitations and conditions set forth in such Note 2. The Note 2 is attached as Exhibit 10.4. The Holder may convert the outstanding unpaid principal amount of the Note 2 into restricted shares of Common Stock of the Company at a discount of 50% of the average of the two lowest trading prices of the common stock for the ten (10) prior trading days. The Company has initially reserved out of its authorized Common Stock 13,245,000 shares of Common Stock for conversion pursuant to the Note 2, as evidenced by the Transfer Agent Letter 2 attached as Exhibit 10.6.
The Note 2, bears an interest rate of 10%, dated October 11, 2021 for $60,000 and mature on October 11, 2022. The Note 2 and SPA 2 was closed on October 13, 2021 and the Company received $50,000 on October 13, 2021, with $2,500 in Original Issue Discount, $2,500 being paid to Investors Counsel and $5,000 being paid to Carter, Terry & Company as compensation. The Note 2 additionally bears an interest rate of 24% per annum in the Event of Default. Specific penalties for breaches of various clauses are outlined below.
| Clause breached if: | Penalty: |
| The Company shall not deliver to the Holder the Common Stock within 3 business days of receipt of Notice of Conversion. | $250 per day the shares are not issued beginning on the 4th day after the conversion notice. Increases to $500 per day beginning on the 10th day. |
| The Company shall lose the “bid” price for its stock and a market. | An increase of the outstanding principal amounts by 20%. |
| The Company shall have its Common Stock delisted from an exchange or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 Act reports with the SEC. | Outstanding principal due under this Note 2 shall increase by 50%. |
| The Note 2 is not paid at maturity. | The outstanding principal balance under the Note 2 shall increase by 10%. |
| The Company shall not be “current” in its filings with the SEC. | Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. |
Additionally, at Holders election, if the Company fails for any reason to deliver to the Holder the conversion shares by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows: Failure to Deliver Loss = [(Highest VWAP price for the 30 trading days on or after the day of exercise) x (Number of conversion shares)]. The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third (3rd) business day from the time of the Holder’s written notice to the Company.
The Company may prepay the Note 2 in whole or in part at any time, up to 180 days after funding, by paying the principal amount to be prepaid together with premium interest thereon to the date of prepayment (110% within 60 days; 125% 61-120 days; 135% 121-180 days). After 180 days, Company may not prepay any amount.
The Holders shall not be entitled to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Holder).
Securities Purchase Agreements:
The Company and the Holder executed the Securities Purchase Agreement (“SPA 2”) 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 United States Securities and Exchange Commission (the “SEC”) under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The SPA 2 outlines the purchase of the Note 2 (the “Securities”), and the Holder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth in the SPA 2 in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Securities.
Transfer Agent Instruction Letters:
Until the Company’s obligations under the Note 2 is paid and performed in full, the Transfer Agent of the Company is authorized to establish a reserve of shares of authorized but unissued Common Stock of the Company in an amount not less than 13,245,000 for issuance upon partial or full conversion of the Note 2, in accordance with the terms thereof, and the Transfer Agent shall immediately add shares of Common Stock to the reserved shares as and when requested by Company or Holder in writing from time to time, so long as there are sufficient authorized and unissued shares of the Company not otherwise reserved available to do so.
SECTION 2 – FINANCIAL INFORMATION
Item 2.03 Creation of Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
See the disclosures under Item 1.01 of this Current Report on Form 8-K, incorporated herein by this reference.
SECTION 3 – SECURITIES AND TRADING MARKETS
Item 3.02 Unregistered Sales of Equity Securities
Power Up Lending Group Ltd.
The Company and the Holder executed the Securities Purchase Agreement (“SPA 1”) 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 United States Securities and Exchange Commission (the “SEC”) under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The SPA 1 outlines the purchase of the Note 1 (the “Securities”), and the Holder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth in the SPA 1 in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Securities.
GS Capital Partners, LLC
The Company and the Holder executed the Securities Purchase Agreement (“SPA 2”) 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 United States Securities and Exchange Commission (the “SEC”) under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The SPA 2 outlines the purchase of the Note 2 (the “Securities”), and the Holder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth in the SPA 2 in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Securities.
See the disclosures under Item 1.01 of this Current Report on Form 8-K, incorporated herein by this reference.
SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Exhibits.
The following exhibits are filed with this report on Form 8-K.
| Exhibit Number | | Exhibit |
| 10.1 | | Convertible Promissory Note – Power Up Lending Group Ltd. |
| 10.2 | | Securities Purchase Agreement – Power Up Lending Group Ltd. |
| 10.3 | | Transfer Agent Instruction Letter – Power Up Lending Group Ltd. |
| 10.4 | | Convertible Promissory Note – GS Capital Partners, LLC |
| 10.5 | | Securities Purchase Agreement – GS Capital Partners, LLC |
| 10.6 | | Transfer Agent Instruction Letter – GS Capital Partners, LLC |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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, hereunto duly authorized.
BLACKSTAR ENTERPRISE GROUP, INC.
By: /s/ Joseph Kurczodyna
Joseph Kurczodyna, Chief Financial Officer
Date: October 25, 2021
