Filed 2025-11-25 · Period ending 2024-12-31 · 66,170 words · SEC EDGAR
← BEGI Profile · BEGI JSON API
# BLACKSTAR ENTERPRISE GROUP, INC. (BEGI) — 10-K
**Filed:** 2025-11-25
**Period ending:** 2024-12-31
**Accession:** 0001065949-25-000042
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1483646/000106594925000042/)
**Origin leaf:** d78b7df8350d9e284e81547384bf6131bf6c8e0a0937fa42750962ab1ece130d
**Words:** 66,170
---
**UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**Washington, D.C. 20549**
**FORM 10-K**
(Mark One)
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 | |
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________to _____________ | |
**000-55730**
Commission file number
| BlackStar Enterprise Group, Inc. | |
| (Exact name of registrant as specified in its charter) | |
| Delaware | | 27-1120628 | |
| State or other jurisdiction of incorporation or organization | | (I.R.S. Employer Identification No.) | |
| | | | |
| 4450 Arapahoe Ave., Suite 100 Boulder, CO | | 80303 | |
| (Address of principal executive offices) | | (Zip Code) | |
**(303) 500-3210**
Registrants telephone number, including
area code
Securities registered pursuant to Section 12(g)
of the Act:
**Common**
Title of each class
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
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 preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
No
| | |
| | |
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of 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
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 | | Smaller reporting company | | |
| | 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.
Indicate
by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those
error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b).
The aggregate market value of our common shares
of voting stock held by non-affiliates of our Company at December 31, 2024, computed by reference to the price at which the common
equity was last sold ($0.0019), as of the last business day of the registrants most recently completed second fiscal quarter
(June 30, 2024), was $3,494,302.
As of November 25, 2025, there were
2,254,894,873 common shares, $0.001 par value, issued and outstanding.
| | |
| | |
**TABLE OF CONTENTS**
|
|
|
|
|
PAGE |
| |
|
Item 1. |
Business. |
|
|
3 |
| |
|
Item 1A. |
Risk Factors. |
|
|
25 |
| |
|
Item 1B. |
Unresolved Staff Comments. |
|
|
44 |
| |
|
Item 1C. |
Cybersecurity |
|
|
44 |
| |
|
Item 2. |
Properties. |
|
|
45 |
| |
|
Item 3. |
Legal Proceedings. |
|
|
46 |
| |
|
Item 4. |
Mine Safety Disclosure. |
|
|
47 |
| |
|
Item 5. |
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
|
|
47 |
| |
|
Item 6. |
Reserved. |
|
|
57 |
| |
|
Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations. |
|
|
57 |
| |
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk. |
|
|
61 |
| |
|
Item 8. |
Financial Statements and Supplementary Data. |
|
|
62 |
| |
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
|
|
63 |
| |
|
Item 9A. |
Controls and Procedures. |
|
|
63 |
| |
|
Item 9B. |
Other Information. |
|
|
65 |
| |
|
Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
|
|
65 |
| |
|
Item 10. |
Directors, Executive Officers and Corporate Governance. |
|
|
65 |
| |
|
Item 11. |
Executive Compensation. |
|
|
68 |
| |
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
|
|
71 |
| |
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence. |
|
|
74 |
| |
|
Item 14. |
Principal Accountant Fees and Services. |
|
|
74 |
| |
|
Item 15. |
Exhibits, Financial Statement Schedules. |
|
|
75 |
| |
|
Item 16. |
Form 10-K Summary |
|
|
76 |
| |
|
SIGNATURES |
|
|
77 |
| |
| 2 | |
| | Table of Contents | |
**PART I**
**FORWARD LOOKING STATEMENTS**
This Form 10-K contains forward-looking statements.
Forward-looking statements are projections of events, revenues, income, future economic performance or managements plans
and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential, or continue or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks
in the section entitled Risk Factors and the risks set out below, any of which may cause our or our industrys
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and
not in limitation:
|
|
the uncertainty of profitability based upon our history of losses; | |
|
|
risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern; | |
|
|
risks related to our operations and | |
|
|
other risks and uncertainties related to our business plan and business strategy. | |
This list is not an exhaustive list of the
factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, and readers
should not place undue reliance on our forward-looking statements. Forward looking statements are made based on managements
beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements
if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United
States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references
to common stock refer to the common shares in our capital stock.
**ITEM 1. BUSINESS.**
**GENERAL**
The following is a summary of some of the information
contained in this document. Unless the context requires otherwise, references in this document to our Company, us,
we, our, BlackStar, or the Company are to BlackStar Enterprise Group, Inc.
**DESCRIPTION OF BUSINESS**
We are based in Boulder, Colorado
and are engaged in Merchant Banking and Finance in the United States. Since 2018 we have also been developing a
blockchain-based software platform to trade electronic fungible shares of our common stock. Once completed, the platform
design might enable us to license the technology as a Platform as a Service (PaaS) for other publicly traded
companies, providing revenue to finance our merchant banking. The completion of our software platform depends on our ability
to license it to an existing Alternative Trading System (ATS) or for us to possibly register as an ATS, which
we do not intend to do at this time as we would prefer to license our platform to an existing ATS. The platform is not
currently operational or in use by anyone. We have recognized net losses of $1,514,839 for the year ended December 31, 2024.
We have relied solely on sales of our securities, convertible note financing, and private loans to fund our operations.
| 3 | |
| | Table of Contents | |
The Company intends to raise additional
funds in order to fund operations of the merchant bank, and to expand its services into the blockchain industry. To fund ongoing
operations, we may raise funds in the future, which are not yet committed.
**Reports to Security Holders**
We are subject to the reporting requirements
of Section 12(g) of the Exchange Act, and as such, we intend to file all required disclosures.
You may read and copy any materials
we file with the SEC in the SECs Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC
maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC, which can be found at http://www.sec.gov.
**Jumpstart Our Business Startups Act**
We qualify as an emerging growth
company as defined in Section 101 of the Jumpstart our Business Startups Act (JOBS Act) as we did not have
more than $1,235,000,000 in annual gross revenue and did not have such amount as of December 31, 2024, our last fiscal year.
We may lose our status as an emerging
growth company on the last day of our fiscal year during which (i) our annual gross revenue exceeds $1,235,000,000 or (ii) we issue
more than $1,235,000,000 in non-convertible debt in a three-year period. We will lose our status as an emerging growth company
if at any time we are deemed to be a large accelerated filer. We will lose our status as an emerging growth company on the last
day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an
effective registration statement.
As an emerging growth company, we may
take advantage of specified reduced reporting and other burdens that are otherwise applicable to generally reporting companies.
These provisions include:
|
|
- |
A requirement to have only two years of audited financial statement and only two years of related Management Discussion and Analysis Disclosures: | |
|
|
- |
Reduced disclosure about the emerging growth companys executive compensation arrangements; and | |
|
|
- |
No non-binding advisory votes on executive compensation or golden parachute arrangements. | |
As an emerging growth company, we are
exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934.
Such sections are provided below:
Section 404(b) of the Sarbanes-Oxley
Act of 2002 requires a public companys auditor to attest to, and report on, managements assessment of its internal
controls.
Sections 14A(a) and (b) of the Securities
and Exchange Act, implemented by Section 951 of the Dodd-Frank Act, require companies to hold shareholder advisory votes on executive
compensation and golden parachute compensation.
We have already taken advantage of these
reduced reporting burdens in this Form 10-K, which are also available to us as a smaller reporting company as defined under Rule
12b-2 of the Securities Exchange Act of 1934, as amended (the Exchange Act).
As long as we qualify as an emerging
growth company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and
Section 14A(a) and (b) of the Securities Exchange Act of 1934.
In addition, Section 107 of the JOBS
Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act of 1933, as amended (the Securities Act) for complying with new or revised accounting standards.
We are choosing to irrevocably opt out of the extended transition period for complying with new or revised accounting standards
under Section 102(b)(2) of the JOBS Act.
| 4 | |
| | Table of Contents | |
**HISTORY**
Our Company, BlackStar Enterprise Group, Inc.,
(BlackStar, we, our) was originally formed on December 17, 2007 as NPI08, Inc. in the
State of Delaware. Our name was changed in 2010 to BlackStar Energy Group, Inc. In August of 2016, our name was changed to BlackStar
Enterprise Group, Inc.
Our Company was divested from Kingsley
Capital, Inc. in a bankruptcy proceeding in 2008, in which Kingsley was the debtor. Our Company attempted to start up in the energy
business in 2010 without success, resulting in losses totaling $1,819,530 over a three-year period. Our Company was inactive until
2016 when new management and capital were introduced.
*Definitions*
As used throughout this Report, capitalized
terms used but not defined herein shall have the meanings assigned to such terms in the filing. The following terms shall have
the meanings set forth below, unless the context clearly indicates otherwise:
BlackStar Digital
Trading Platform TM (BDTPTM): a digital Electronic Fungible Shares trading platform enabling
the trading of BlackStar common shares in electronic fungible form. (The BDTPTM has not been approved by any
regulatory agency or broker dealer and is not currently operational.)
BlackStar Electronic
Fungible Shares (BEFS): a digitally evidenced share, also known as an electronic share, (see Digital Share
see below) of BlackStar common stock holding the same characteristics as securities evidenced by a paper certificate which
has been transmitted electronically and protected by cryptographic protocols on BDTPTM. Digital equity shares are the
electronic fungible shares on account. Electronic Fungible Shares are the same class of common stock as, and are
identical to, paper certificated and book-entry shares of common stock; BEFS merely describes the format of the share of common
stock.
Blockchain:
a disintermediating technology, where each transaction is cryptographically signed, and always appended to an immutable ledger,
visible to all participants, and distributed across boundaries of trust. Once a ledger transaction has received a sufficient level
of validation, cryptography ensures that it can never be replaced or reversed. Transactions are secure, authenticated, and verifiable.
Blockchain Equity
Trading (BET TM): computer software platforms, including the BDTPTM, for the trading of
only one SEC regulated security on an immutable blockchain, and for the analysis, monitoring, storing, and tracking of financial
investments on an immutable blockchain. The Company will subscribe the platform to individual public companies for the exclusive
exchange of cash for free-trading shares of one public company, creating an individual spot market.
Blockchain First
TM: financial services software for managing the trading of stocks or equities on an immutable blockchain that prevents
the disruption of order flow of customer trades.
Digital Shares:
common shares holding the same characteristics as securities evidenced by a paper certificate but are recorded via electronic book-entry
through the Deposit and Withdrawal at Custodian (DWAC) system in digital form and are protected by cryptographic
protocols, sometimes also referred to as an electronic share, an electronic fungible share, or an electronic fungible common share
in this document. Digital shares are the same class of common stock as, and are identical to, paper certificated and book-entry
shares of common stock; digital share merely describes the format of the share of common stock.
Internet Digital
Offering (IDO): financial services software for managing and hosting indications of interest for potential initial
or secondary future offerings on an immutable blockchain.
| 5 | |
| | Table of Contents | |
****
**CORPORATE STRUCTURE**
Our corporate structure is as follows:
|
INTERNATIONAL HEDGE GROUP, INC.
(Parent Company a Colorado corporation) | |
|
|
| |
|
BLACKSTAR ENTERPRISE GROUP, INC.
(a Delaware corporation)
| |
|
|
|
|
|
|
| |
|
Blockchain Equity Management Corp.*
(a Colorado corporation) |
Blockchain
Equity SRO, Inc. * (a Colorado non-profit
corporation) | |
|
|
|
|
|
|
| |
* These companies currently have
no separate transactional or operating activity.
**COMPANY OVERVIEW**
****
We are based in Boulder, Colorado and are engaged
in Merchant Banking and Finance in the United States. BlackStars venue is private early-stage companies throughout various
industries that, in our judgement, exhibit a potential for sustained growth. We are a publicly traded specialized merchant banking
firm, facilitating joint venture capital to early-stage revenue companies. We are actively seeking opportunities for discussion
with revenue generating enterprises and emerging companies for financing.
*Proposed New Line of Business*
Since 2018, we have also been developing a
blockchain-based software platform to trade electronic fungible shares of our common stock. Once completed, the platform design
might enable us to license the technology as a Platform as a Service (PaaS) for other publicly traded companies,
providing revenue to finance our merchant banking. The completion of our software platform depends on our ability to license it
to an existing Alternative Trading System (ATS) or for us to possibly register as an ATS, which we do not intend
to do at this time as we would prefer to license our platform to an existing ATS. The platform is not currently operational or
in use by anyone.
References throughout this registration statement
to digital shares and similar terms refers to the typical way securities are held and traded and is the same as DTCC
eligible book entry securities. We are not attempting to tokenize securities, but intend our concept to use distributed
ledger technology to execute and record securities transactions with higher efficiency and lower cost, which is essentially a back-office
function.
Our software platform is in the final stages
of software development and is working to initiate platform operations but will need further funding to fund operations of the
merchant bank and to expand its services to licensees. To fund ongoing operations, we may raise funds in the future, which are
not yet committed.
BlackStar also
intends to offer consulting and regulatory compliance services to companies desiring to issue digital shares and blockchain entrepreneurs
for securities, tax, and commodity issues. BlackStar is conducting ongoing analysis for opportunities in involvement in digital
share related ventures though our wholly-owned subsidiary, Blockchain Equity Management Corp. (BEMC) formed in September
2017. 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 clients equity based off of the BDTPTM.
BEMC has not established any anticipated time frames or key milestones for BEMC business. In addition to the services described
above, on December 31, 2017, BlackStar formed a subsidiary nonprofit company, Blockchain Equity SRO, Inc., a self-regulatory membership
organization for the digital share industry. Further details about the business plan for BEMC, the operating subsidiary of BlackStar,
and Blockchain Equity SRO can be found in the Current Business section below.
As to the BEMC business model, the primary
factor for its development is dependent upon whether the BDTPTM achieves regulatory
approval by the SEC for the platform and an ATS arrangement has been achieved and approved as necessary by the SEC.
| 6 | |
| | Table of Contents | |
In addition to the services described above,
on December 31, 2017, BlackStar formed a subsidiary nonprofit company, Blockchain Equity SRO, Inc., formerly known as Crypto Industry
SRO Inc., a self-regulatory membership organization for the digital share industry. Further details about the business plan for
BEMC, the operating subsidiary of BlackStar, and Blockchain Equity SRO can be found in the Current Business section
below.
The Company intends to raise additional funds
in order to fund operations of the merchant bank, and to expand its services into the blockchain industry. To fund ongoing operations,
we may raise funds in the future, which are not yet committed.
International Hedge Group, Inc. (IHG),
our parent company, contracted to acquire 95% of our outstanding stock in January 2016 and closed on the purchase in summer of
2016. In lieu of the 95% of common shares originally agreed upon, IHG received 44,400,000 shares of common stock and 1,000,000
of Class A Preferred Stock. IHG is our controlling shareholder and is engaged in providing management services to companies, and,
on occasion, capital consulting. IHGs strategy in investing in BlackStar Enterprise Group, Inc. is to own a controlling
interest in a publicly quoted company which has the mission to engage in funding of start-up and developed business ventures using
its stock for private placement or public offerings. IHG and BlackStar are currently managed and controlled by the same individuals,
but IHG and BlackStar may each seek its funding from different and as yet, undetermined sources, with funding structures of different
natures.
Our principal executive offices are located
at 4450 Arapahoe Ave., Suite 100, Boulder, CO 80303 and our office telephone number is (303) 500-3210. We maintain a website at
www.blackstareg.com, and such website is not incorporated into or a part of this filing.
**CURRENT BUSINESS MERCHANT
BANKING**
Our Company, BlackStar Enterprise Group, Inc.
(OTC Expert Market: BEGI) is a publicly traded merchant banking firm seeking to facilitate venture capital to early-stage revenue
companies. 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 and we did not control that venture.
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 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 the Board to prevent being classified or inadvertently becoming an investment company which would be subject
to regulation under the Investment Company Act of 1940.
**Services**
****
As BlackStar focuses its merchant banking efforts
on the DLT industry, BlackStar intends to seek investments through joint ventures in private or public emerging commercial-stage
businesses within the blockchain ecosystem. BlackStar also intends to offer consulting and compliance services to member companies
and blockchain entrepreneurs on securities and commodity futures.
The Company will seek targeted joint ventures
in the sector, primarily focusing on distributed ledger security features and technology, and the global equity trading arena.
BlackStar, through BEMC, will seek to initially control and manage each venture into which it enters. While remaining compliant
with current SEC disclosure and reporting guidelines, BlackStar is conducting an in-depth analysis into the Companys involvement
in DLT related ventures.
BlackStar Enterprise Group intends to leverage
its experience in the traditional world of public finance, including experience with securities, options, and SEC registration
and compliance, into working with select organizations supporting the development and implementation of new technologies in the
electronic share and DLT world. To facilitate this process, BlackStar plans to establish an advisory board in its subsidiary, Blockchain
Equity SRO, Inc., with applicable technical and practical experience.
| 7 | |
| | Table of Contents | |
The Companys success will be dependent
upon the Companys ability to analyze and manage the opportunities presented.
BlackStars Operating Principles:
- Provide alternative joint venture funding
for entrepreneurs;
- Require GAAP and SEC accounting compliance
for portfolio ventures;
- Require competent and efficient legal representation;
- Require qualified managers for portfolio ventures,
and in some cases, help staff the client company while avoiding recruiting costs or attempts to bring in high-price executives.
We seek venture investments in private, or
public emerging commercial-stage businesses with perceived strong growth prospects within certain industry sectors. Companies that
we work with may engage in consulting agreements with our parent company, International Hedge Group, Inc. (IHG),
to add additional monitoring as to their financial situations. We seek to invest up to $1million per company in business
ventures. We may provide off-balance sheet financing to venture companies, through joint ventures or limited liability companies
under structures we cannot now predict.
Our success will be dependent upon our abilities
to analyze and manage the lending opportunities presented to us.
****
Our management may earn shares of our Company
under our Stock Option and Award Plan as incentives on the basis of achievement. All are accountable to each other, as well as
the shareholders, and bonus awards are intended based upon individual performance, as well as team cooperation, and enterprise
building.
**INVESTMENT OBJECTIVES**
CAPITAL APPRECIATION. Our primary investment
objective is to provide our shareholders with long-term capital appreciation by investing primarily in business ventures in which
we maintain majority control with selective private companies. We believe that a typical new business venture will have a five-year
window. Our investment objective is to restrict our investments to emerging growth companies we believe offer special opportunities
and meet our growth criteria, and we intend to reduce the risks associated with investments in startups. Our goal is to provide
mezzanine and expansion capital to companies through legally formed joint venture entities through which we control in order to
develop a comprehensive growth strategy, possibly involving a consolidation of similarly situated businesses or a geographic expansion
of existing product or service offerings. We are currently exploring options for investments in companies involved in the electronic
share and blockchain (DLT) technology industry.
CAPITAL PRESERVATION. A second investment objective
is to preserve investor capital through risk management and monitoring the management of our loan portfolio. Among the risk management
techniques which we expect to employ are: (i) limiting our investments in very early-stage companies, (ii) holding majority ventures
interests in venture companies that have a positive cash flow; (iii) co-investing in venture companies with other professional
venture capital. Many ventures will not provide any gain, and some will be complete losses. BlackStar, through BEMC, will initially
control and manage each venture it enters into in the electronic share and blockchain technology industry.
OUR APPROACH COMPARED TO TRADITIONAL SOURCES
OF VENTURE FINANCING
Emerging companies traditionally seek financing
for growth from three primary sources: small private placements, independent private venture capital funds and corporate strategic
investors. Each of these sources has advantages but also notable disadvantages for the emerging company. Small Private Placements
are often underfunded and untimely. Venture capital funds generally are established for a limited term and their primary goal is
to maximize their financial return within a short time frame, often two years or less with severe terms for extensions or additional
funding. A venture capital fund often seeks to liquidate its investment in the emerging companyby encouraging either an early
initial public offering or a sale. This often can jeopardize an emerging companys chances for success especially if its
business has not been fully developed or its intellectual property fully safeguarded prior to its debut into the market.
| 8 | |
| | Table of Contents | |
Corporate strategic investors are typically
large corporations that invest in emerging companies to gain access to a promising product or technology without incurring the
initial cost of development or the diversion of managerial time and attention necessary to develop new products or technologies.
Often these investments involve both financing support to the emerging company and an arrangement under which the strategic investor
obtains the right to use, and intellectual property ownership of, the products or technology of the emerging company. While strategic
investors are generally able to provide business development support, the rationale behind the investment of a strategic investor
may be incompatible with the development of the emerging company. Strategic investors often discourage the emerging company from
becoming a public company, selling to competitors of the strategic investor or from retaining the intellectual property rights
to products developed jointly with the strategic investor.
We may be limited in our ability to fund ventures
because we may not be successful in raising additional funds to fund ventures or growth. Through the public market for our common
stock, we hope to have access to additional equity capital that may be needed for growing our ventures. We hope to offer to fill
this opportunity on selected ventures.
We believe that our advantage over a strategic
investor is that our interests are more closely aligned with those of the emerging company. An initial public offering of the emerging
company, our venture, often required to raise the additional capital investment necessary to fully develop a venture companys
product or technology, would also benefit us by creating repayment of our loan, and possibly in certain instances, an equity position.
OUR VENTURE POLICIES
We may invest in ventures which do not have
any annual revenue, if we have determined that an investment may make such company have growth capital.
Although we may seek to venture into companies
with existing positive EBITDA (earnings before interest, income taxes, depreciation and amortization), we may also consider turnaround
situations where we can clearly identify the source(s) of financial distress and see a possible solution. Through our investment,
or through co-investment with other private equity funding sources we will seek to achieve performance improvements.
In the shorter term, we do not anticipate paying
any dividends or making other distributions, but this may change in the future. We may not always achieve a return on our venture
investment.
In selecting venture investments for our venture,
we will endeavor to meet our guidelines, as established by our Board which include the following concepts. We may, however, make
investments that do not conform to one or more of these guidelines when deemed appropriate by our Board of Directors. Such investments
might be made if we believe that a failure to conform in one area is offset by exceptional strength in another or is compensated
for by a higher yield, favorable warrant issuance or other attractive terms or features.
VENTURE CRITERIA
STAGE OF DEVELOPMENT CRITERIA. We are a special
situations company. We will primarily look for opportunities with a core business which we believe will provide us with a return
of investment and on investment within a moderate period of time, typically targeting about thirty-six to sixty months. Our objective
is to invest in emerging corporations which meet our requirements as well as qualitative potential that we look for in each opportunity.
In addition, we will look to invest in ventures with corporations. In some instances, we may relax our quantitative requirements
with the view to assist such venture companies in developing a strategic business plan which may include merger or acquisition
of other private operating businesses which may be synergistic to the existing business of the public corporation. We may invest
in ventures with companies in any of the following stages. We will always have majority control and Board control of our venture
subsidiaries.
The stages of development are defined as follows:
- Seed capital companies represent the earliest
stage of development. These companies have raised relatively modest equity capital to prove a concept and qualify for start-up
capital. Their activities generally are limited to product development, scientific and market research, recruiting a management
team and developing a
- business plan. These companies likely do not
have financial support from either venture capitalists or larger companies making strategic investments.
| 9 | |
| | Table of Contents | |
- Start-up stage companies are completing or
have recently completed product development and initial marketing but have not sold their products commercially. Generally, such
firms have made market studies, assembled key management, developed a business plan and are ready to commence operations.
- Expansion stage companies have initiated or
are about to initiate full-scale operations and sales but may not be showing a profit.
- Mezzanine stage companies are approaching
or have attained break even or profitability and are continuing to expand. An acquisition or initial public offering may be imminent.
QUALITATIVE CRITERIA. All potential ventures
will first be evaluated and assessed based on their relative stage of development and the quality of an investment in such venture
company based on the above criteria. Once our management team has determined that a potential venture satisfies the above criteria
and is suitable for investment, it will then be evaluated using the multi-step process described below. After completion of the
process, receipt and review of all internal and outside reports and evaluations of the potential venture company, the Board will
consider the potential venture terms. If the Board approves the investment, we will then create appropriate legal documents to
reflect our venture and any management service contracts between the venture and our company.
We intend to follow the steps set forth below
in our venture process:
(1) BUSINESS PLAN/ASSESSMENT. Business
plan description and complete resumes of management from all entrepreneurs. Members of our management team will meet with the best
of these entrepreneurs, attempting to identify key traits that have been associated with entrepreneurial success in the past, such
as high energy, a must-win attitude, intellectual brilliance, high personal integrity, relevant experience, a strong work ethic,
and the ability to prioritize and focus. A business plan submitted for evaluation to us should contain the following information:
|
| Overview of the business
concept as well as the companys strategic focus and direction. | |
|
| Discussion of competition
including a discussion of specialized expertise, intellectual property, patents, and/or other unique advantages held by either
the company or its competitors. | |
|
| Sources and uses of cash
with respect to investment capital sought. | |
|
| Pro forma financial projections
for at least the current year and two subsequent years including expected capital requirements from the time of the investment
capital received through the two subsequent years. | |
|
| Operating plan including
current and projected staffing, equipment, and space requirements. | |
|
| Discussion of minimum
dollar proceeds necessary in order to implement the business plan. | |
|
| Marketing plan. | |
|
| Discussion of conflicts
of interest with investors together with steps being taken by the venture company to mitigate such conflicts of interest and to
protect against future conflicts of interest. | |
|
| Resumes for all key officers/managers. | |
(2) EVALUATE POTENTIAL MARKET. We
have developed relationships with consultants, who represent a valuable source of information about a target investments
market. We will call upon these contacts as well as create new ones in the markets of each company seeking funding. As we evaluate
markets, we must become confident that the company can attain a competitive market position over time.
| 10 | |
| | Table of Contents | |
(3) EXAMINE STRUCTURE OF BUSINESS
MODEL. We will examine the structure upon which the business plan is built. The Board has indicated a distinct bias toward business
models calling for high gross margins and relatively low capital intensiveness. Such businesses have the potential for higher internally
sustainable growth rates than average and superior return on equity invested. In addition, we will require, whenever possible,
implementation of the following policies into the articles, bylaws or operating agreements of its venture companies:
|
| There can be only one
class of common shares, all with equal voting rights, and all distributions of capital or earnings can only be made to all members
based upon their percentage interest without preference; | |
|
| Compensation of the key
officers/managers and their affiliates, including, but not limited to, all salary, bonuses, commissions and/or fees, shall be limited
based upon the success of the venture company in reaching predetermined milestones; and | |
|
| The primary responsibility
of the management/officers of the entity is to serve as fiduciaries charged with serving the best interests of the stockholders/members
even when such interests may be in conflict with the management, officers or other employees of the entity. | |
(4) CHECK REFERENCES. We will require
that each entrepreneur supply a list of references in order that we may get a better sense of the entrepreneurs past experience,
strengths, weaknesses, and work habits. We make it a point to get references outside of this list as well, in order to avoid only
cherry-picked references. We believe that these checks are important to develop a more complete and accurate picture
of the team.
(5) CALL CUSTOMERS AND SUPPLIERS.
We intend to call a number of current and/or prospective customers and suppliers to get a sense of how they view the targeted investment
including its products and the market.
(6) EVALUATE PRODUCTS/TECHNOLOGY.
As part of our analysis, we will evaluate the target ventures current products, development pipeline and underlying technology.
To evaluate technology, we will not rely on in-house expertise alone, but will contact and hire appropriate specialists and consultants.
(7) EVALUATE RISKS/REWARDS. Evaluate
the pro-forma financials, the likelihood of an exit after a 6 month to 24 month holding period.
(8) NEGOTIATE VENTURE TERMS. When
deciding on making a venture investment, we will draw up a term sheet for negotiation, and terms will be agreed upon.
(9) FINANCIALS AND CORPORATE INFORMATION.
We will, after formation of the
venture subsidiary, control all accounting and financials as a subsidiary of our Company.
RESERVES. We intend to retain reserves after
the venture investment in order to have sufficient funds for equity-oriented follow-on investments in venture companies. We intend
to sell additional common stock to meet the funding requirements for any follow-on venture investments. If such sales are successful,
we expect to have cash reserves. In order to enhance the rate of return on these reserves and increase the amounts ultimately available
for investments and our operating costs, we plan to engage in a reserve management strategy.
AVERAGE INVESTMENT. The amount of funds committed
to a venture will vary depending on the funds available to us, the quality and completeness of the venture management team, the
perceived business opportunity, the capital required compared to existing capital, and the potential return. Although the venture
or investment amounts will vary considerably, we expect that the venture (excluding follow-on investments) will be between $250,000
and $500,000.
****
| 11 | |
| | Table of Contents | |
****
**INDUSTRY ANALYSIS AND HISTORY**
Barriers to Entry in the Merchant Banking
Industry
There is one major barrier to entry into the
Merchant Banking Industry which is capital. We have very limited capital with which to compete in this industry. Many other competitors
have been in the business for many years and have very large capital resources and an established reputation. Our barriers to entry
are, in addition to lack of capital, lack of reputation, lack of recognition, part-time management, lack of financial history to
raise money, and lack of equity in our company upon which to base a capital raise.
Competitive Factors Impacting Our Ability
to Gain Market Share
Our competition enjoys advantages which may
prevent us from achieving a market share due to our competitors known reputations, large funding abilities, competent management,
and capital resources all of which will impede our abilities to achieve market share.
Competitive Factors in the Industry
There are numerous entities, investments banks,
merchant banks, hedge funds, private equity, commercial banks and private investors which will compete for the same business in
which we intend to engage. We will be at a significant disadvantage to all of these other competitors for the foreseeable future.
All of our competitors should be considered to be far better capitalized than we are.
Competitive Position in the Industry
We are an insignificant participant in the
merchant banking industry and cannot be expected to obtain a market share even discernable percentage wise. Without a large infusion
of capital, we will remain a very small participant in the industry.
Merchant Banking
The term merchant banking is generally understood
to mean negotiated private equity investment or financing through alternative methods by financial institutions in loans, convertible
debt or off-balance sheet vehicles, or through unregistered securities of either privately or publicly held companies. Both investment
banks, commercial banks, and other companies engage in merchant banking, and the type of security in which they invest is diverse.
They may invest in securities with an equity participation feature; these may be convertible preferred stock or subordinated debt
with conversion privileges or warrants. Other investment bank services include raising capital from outside sources, advising on
mergers and acquisitions, and providing bridge loans while bond financing is being raised in a leveraged buyout (LBO) and are also
typically offered by financial institutions or broker dealers engaged in the merchant bank industry. One which is often omitted
is the provision of experienced management by the merchant to commercialize ideas, or technology.
Merchant banking has been an occasionally lucrative
but a highly risky endeavor for the small number of bank holding companies and banks that have engaged in it under existing law,
and for private equity investors. Banking law legislation has expanded the merchant-banking activity that is permissible to commercial
banks and has spurred interest in this specialty on the part of some institutions. However, limitations exist that have scared
many banks away from the markets after the Lehman collapse and the resulting fallout with JP Morgan, Bank of America and the big
bank Wall Street bailout. Although for much of the past half-century commercial banks have been permitted (subject to certain restrictions)
to engage in merchant banking activities, their continued role is limited by the conservatism of the regulators and their Boards.
Evolution of Modern Era Merchant Banking
Many banks entered merchant banking in the
1960s to take advantage of the economies of scope produced when private equity investing is added to other bank services, particularly
commercial lending. As lenders to small and
| 12 | |
| | Table of Contents | |
medium-sized companies, banks become knowledgeable
about individual firms products and prospects and consequently are natural providers of direct private equity investment
to these firms.
In the middle to late 1980s, the decision to
enter merchant banking was thrust on other banks and bank holding companies by unforeseen events. In those years, as a result of
the LDC (less-developed-country) debt crisis, many banks received private equity from developing nations in return for their defaulted
loans. At that time, many of these banks set up merchant-banking subsidiaries to try to extract some value from this private equity.
Also, at about that time, most commercial banks
began refocusing their private equity investments to middle-market and public companies (often low-tech, already profitable companies)
and, rather than providing seed capital, financed expansion or changes in capital structure and ownership. Most particularly, they
took equity positions in LBOs, takeovers, or recapitalizations or provided subordinated debt in the form of bridge loans to facilitate
the transaction. Often, they did both. Commercial banks financed much of the LBO activity of the 1980s.
Then, in the mid-1990s, major commercial banks
began once again focusing on venture capital, where they had substantial expertise from their previous exposure to this kind of
investment. Some of these recent venture-capital investments have been spectacularly successful. For example, the Internet search
engine Lycos was a 1998 investment of Chase Manhattans venture-capital arm.
We do not compete in the area of these merchant
banks, or even large or mid-market banks. We are an insignificant participant in the total market and our focus is on small investments,
which larger banks may rule out.
Historical Track Records
Our Company has no historical track record,
and we should be deemed a pure start-up of earning or operating with all of the risks of an unproven company (see Risk Factors).
IHG, our parent company, also may enter into
management consulting agreements with companies for which we provide funding to attempt to guide the companies in the complex business
world for the purpose of protecting and enhancing the venture investments made by us.
**COMPETITION, MARKETS, REGULATION AND TAXATION**
Competition
There are a large number of companies and individuals
engaged in the Merchant Banking and Finance industry; accordingly, there is a high degree of competition. Almost all of the companies
and individuals so engaged have substantially greater technical and financial resources than we do. We are attempting to create
a novel solution in the BDTPTM that we may use as a model, potentially enabling us to generate ongoing revenue that
we can then use for Merchant Banking.
We are an insignificant participant among the
firms which engage in the funding of business opportunities. There are many established venture capital and financial concerns
that have significantly greater financial and personnel resources and technical expertise than we have. In view of our limited
financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared
to our competitors.
Investment Company Act 1940
Although we will be subject to regulation under
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, we believe we will not be subject to regulation
under the Investment Company Act of 1940 (the 1940 Act) insofar as we will not be engaged in the business of investing
or trading in securities within the definitions and parameters which would make us subject to the 1940 Act. In the
event we engage in business activities that result in us holding investment interests in a number of entities, we might become
subject to regulation under the 1940 Act. In such event, we would be required to register as an Investment Company and incur significant
registration and compliance costs. 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
| 13 | |
| | Table of Contents | |
by the Board 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 fundamental concept, the 1940 Act requires
registration of companies that invest and manage funds to invest for others and trade in securities of other companies. Those companies
that cross a threshold of 40% of assets in cash and stock in other companies may be required to register. Investment companies
may issue face amount certificates, be a Unit Investment Trust, or be a mutual fund. We intend to do several things to remain outside
of the 1940 Act: a) we will not trade in securities of other companies or manage investments for others, b) we intend to remain
primarily in the merchant bank lending business recognized as exempt under Sections 3(c)(4) and (5) of the 1940 Act, c) we intend
to carefully monitor our ratios of cash and securities to total assets to avoid crossing the 1940 Act threshold, d) we intend to
hold loans comprising 60% to 70% of our assets at any time, e) we intend to maintain secured loans to companies as our primary
business, f) we do not intend to issue face amount certificates, g) we do not intend to distribute profits and dividends to our
shareholders on an annual or shorter basis, if ever, h) we do not pass through profits and losses to our shareholders on a tax
basis, i) smaller secured loans will be our primary business and our primary profit center, which we intend will account for more
than 50% of our revenues; j) we will not issue Units in investment trusts, k) we will not act as a mutual fund, and l) we will
not invest funds on behalf of others.
We have obtained no formal determination from
the SEC as to our status under the 1940 Act and, consequently, any violation of the 1940 Act would subject us to material adverse
consequences. We believe that, currently, we are exempt under Regulation 3(c)(4) and (5) of the 1940 Act.
Markets.
Our market is highly competitive and constantly
changing. Commercial success is frequently dependent on capital availability, the effectiveness and sufficiency of which are very
difficult to predict accurately. It is one of the principal economic risks of mezzanine and expansion stage funding companies like
ours.
Governmental Regulation.
*Federal Regulations.*
We are subject to regulations by securities
laws as a public company. We do not intend to become an investment company under the Investment Company Act of 1940, but if we
exceed certain thresholds of certain assets or our business operations cease to fall within certain exemptions, we might inadvertently
become subject to the Act.
*Compliance with Environmental Laws and Regulations.*
We are not involved in operations with environmental
considerations for our business.
*State Regulations.*
Certain states may require that we obtain a
Lenders License prior to making a loan in that state. We intend to address this on an as needed basis.
Title to Properties.
Not applicable.
**OFF BALANCE SHEET ARRANGEMENTS**
****
We do not have any off-balance sheet arrangements.
**NUMBER OF PERSONS EMPLOYED**
As of December 31, 2024, we have no full-time
employees and 2 independent consultants who act as our officers and directors on a part-time basis of up to 40 hours per week.
| 14 | |
| | Table of Contents | |
**PROPOSED NEW LINES OF BUSINESS**
****
*The matters discussed below contain
certain forward-looking information and relate to analyses, business plans, business opportunities, management intentions and other
information, available as of the date hereof, but is not yet fully determinable. These statements also relate to our contemplated
future prospects, developments and business strategies. Although we believe that our plans, intentions and expectations reflected
in or suggested by the matters discussed below are reasonable, we cannot assure you that such plans, intentions or expectations
will be achieved. Important factors that could cause actual plans, intentions or expectations to differ materially from our plans,
intentions or expectations include, but are not limited to, the risks and uncertainties included under Risk Factors
in this document. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our
actual plans, intentions or expectations may vary materially from those discussed below. Given these uncertainties, users of the
information included below are cautioned not to place undue reliance on such information.*
**
**BlackStar Digital Trading Platform TM**
**
*Background*
Under the Securities Act of 1933, the offer
and sale of securities must be registered unless an exemption from registration is available. Title III of the Jumpstart Our Business
Startups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides an exemption from registration for certain crowdfunding
transactions. In 2015, the SEC adopted Regulation Crowdfunding to implement the requirements of Title III. Under the rules, eligible
companies were allowed to raise capital using Regulation Crowdfunding starting in May 2016. The landscape of new rules and regulations
made Regulation Crowdfunding extremely difficult for companies to effectively raise money. Companies were limited to how much they
could raise, solicitation rules across state lines for accredited and non-accredited investors is complicated, liquidity issues
arise with no public trading market for private securities, high transaction costs, and the amount one could invest.
The Bitcoin started trading on its blockchain
in 2011 and by 2017, coinciding with the failure of crowdfunding, coins and tokens were underwritten
on a blockchain to fund global projects and start-up companies. The blockchain offered issuers a platform to fund and investors
the freedom to trade with few limitations or regulations. Investors opened wallets rather than a trading account
with a registered broker-dealer. Investors made their own decisions, there were no minimum amounts, there were no trading hours,
and there were no commissions. Investors could trade new ideas with a coin or currency connected to
the company through a wallet. The cryptocurrency innovation was based on a new distributed ledger design using a
blockchain. The many tokens and coins created and promoted on the blockchain were founded in a totally
unregulated environment. As a result, there have been many fraudulent offerings that ran afoul of existing SEC registration
requirements, there have been thefts of coins and tokens, collapses of the tokens/coins,
bankruptcies and closures of brokers and traders in the cryptocurrency environment, all with enormous losses to investors. The
SEC has used enforcement actions of existing laws to regulate this new industry. This has created the need to create blockchain
innovations under existing SEC rules.
In June 2017, the management of BlackStar began
analyzing the crypto industry due, in large part, to its rapid ascent in popularity. BlackStar realized that the public blockchain
trading of these faux currencies plagiarized the U.S. securities market and reduced the ability to fund and trade small companies
and new issues. BlackStar noted the lack of specific regulation and is attempting to design a new system based within the existing
rules of the SEC and FINRA.
| 15 | |
| | Table of Contents | |
Our Company has examined numerous exchanges
or platforms for trading and believed that, among other things, they lacked essential regulatory compliance practices.
This research and managements securities and compliance background lead the Company to create a platform that contains the
essentials for full regulatory compliance including:
Know-Your-Customer (KYC);
Anti-Money Laundering (AML);
IRS tax reporting; and
SEC compliance.
In July 2020, the Company determined that similar
products and services (although not identical to the BDTP platform) have needed to register or have been required to register
as an ATS in accordance with Regulation ATS, which is the regulatory framework for alternative trading systems (ATS).
An ATS is an SEC-regulated trading venue which serves as an alternative to trading at a public exchange. The basic function of
a broker-operated ATS is an electronic manifestation of a previously manual trading process, when trading desks would first try
to execute trades internally before sending the order to a public exchange, although this is a small portion of all US stock market
transactions. The vast majority of trades still occur at exchanges and electronic communication networks (ECNs).
Under the existing regulatory framework, an
ATS is a trading system that meets the definition of exchange under federal securities laws but is not required to
register as a national securities exchange if the ATS operates under the exemption provided under Exchange Act Rule 3a1-1(a). To
operate under this exemption, an ATS must comply with the requirements set forth in Rules 300-303 of Regulation ATS. To comply
with Regulation ATS, an ATS must, among other things, register as a broker-dealer and file an initial operation report with the
SEC on Form ATS before commencing operations. Thereafter, an ATS must file amendments to Form ATS to provide notice of any changes
to its operations and must file a cessation of operation report on Form ATS if it ceases operations. Form ATS is not an application
and the SEC does not approve an ATS before it begins operation. Form ATS is, instead, a notice to the SEC. As of September 30,
2022, the SEC lists 33 ATSs that trade National Market System (NMS) stocks.
As a result, in lieu of expending the money
and resources to become an ATS at this time, the Company is seeking to license the BDTP platform to an existing ATS, broker-dealer,
and/or clearing firm to host the BDTP platform so that it may comply with existing rules and regulations. If we are unable
to license it to an entity in this way, we may reevaluate whether to seek compliance with Regulation ATS as a standalone ATS. See
the section below entitled *Licensing the BDTP Platform With An Existing Trading System* for additional
information.
**
*Overview of the BDTP Platform*
BlackStar intends the BDTP to be a tool
for trading securities within the existing FINRA and SEC regulated brokerage ecosystem, addressing many of the regulatory issues
by operating within the existing confines of the system. For example, customers will continue to use brokerage accounts and broker-dealers
and the transfer agent will continue to maintain the shareholder records. In addition, the BDTP platform is intended to
seamlessly integrate with the order entry processes, priority rules, and execution procedures of the existing brokerage ecosystem.
All custodial duties are intended to remain the same because the BDTP will pass encrypted customer and account information
and buy/sell orders to the relevant parties. As currently contemplated and as a brief summary, the BDTP platform is expected
to operate in the following manner:
Blockchain First TM: Financial services
software for managing the trading of stocks or equities on a Distributed Ledger that prevents the disruption of order flow of customer
trades.
| 16 | |
| | Table of Contents | |
*
*** THE BROKER DEALER SUBMITS THE
CERTIFICATES TO THE TRANSFER AGENT AND THE TRANSFER AGENT VERIFIES OWNERSHIP. THEN THE BROKER DEALERS POSITION IS EITHER
DEBITED OR CREDITED DEPENDING UPON WHETHER IT WAS A DEPOSIT OR WITHDRAWAL.
BlackStar has built the technology based upon
the Quantum Ledger Database, a blockchain framework from Amazon Web Services (AWS), and to use the AWS Cloud for
transaction data storage. The BDTP would offer a web-based interface for trading transactions as well as an Application
Programming Interface (API) that directly accesses all transactions stored on the BDTP. In June 2020, BlackStar and Artuova,
a custom software development company, successfully completed a production ready user interface for the BDTP platform, which
is feature-complete. As of September 21, 2022, the core platform and its software is complete and is in the testing phase. The
BDTP platform 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. BlackStar intends to continue to seek
further input from various regulatory agencies and others on the functionality of the BDTP over the next several months.
It will remain in the testing phase until we license the BDTP platform to a broker-dealer, clearing firm, and/or ATS. The
BDTP platform is not designed to support transactions in any tokens, faux currencies, coins, crypto or any crypto related
assets. The SEC and FINRA would have complete and transparent access to the data recorded by the BDTPTM, offering a
single data interface and consolidated history of transactions; the SEC and FINRA wouldonlybecome Certificate
Holders if they approve and agree to participate in viewing the data, and only if the platform is approved at a future date. BlackStar
hopes that this increased transparency will mitigate many of the risks of investing in OTC Markets quoted stocks and restore investor
confidence in trading shares of OTC companies.
We believe that the BDTP platform is
compatible with the Depository Trust Companys (DTC) Deposit and Withdrawal at Custodian (DWAC) service, which provides participants
with the ability to make electronic book-entry deposits and withdrawals of eligible securities into and out of their DTC book-entry
accounts using a Fast Automated Securities Transfer service (FAST) transfer agent as the distribution point. We have designed our
technology to be
| 17 | |
| | Table of Contents | |
fully compatible with the DWAC system
i.e. shares of stock in uncertificated (book-entry) form can be moved into or out of the DWAC system just as with certificated
shares of stock through a companys existing transfer agent and existing broker-dealers.
We further believe that blockchain technology
is compatible with the DWAC system because it does not contradict or counter the system, but rather provides an alternative for
the customer to execute trades without markups/markdowns and at very low costs. DTC is market-neutral, which means it accepts transactions
from multiple exchanges and trading platforms on a nondiscriminatory basis. It currently supports more than 50 exchanges and trading
platforms, including the New York Stock Exchange (NYSE), Nasdaq, and the OTC Markets. This is the design of the BDTP platform.
The BDTP platform is simply another trading platform, which uses blockchain technology and is designed to execute its trades
through an existing ATS with the broker-dealer responsible for clearing and processing the transactions as it does for any transactions
that occur on an existing ATS. The execution of a trade on the blockchain through an ATS will be reported back to the broker-dealer
for clearing and settlement. Upon execution of a trade on the blockchain through an ATS, the ATS will publicly report the last
price, volume, change and current bid-offer ladder to the broker-dealer that sent the order. The clearing of the trade will be
the responsibility of the broker-dealer that introduces their customer to trade on the BDTP platform.
In addition, trading on private blockchain
technology is compatible with the existing trading system because it can be programmed to follow the same protocols and rules as
every other approved trading system. A broker-dealer will double-encrypt the customer data and send it to the BDTP platform,
while freezing the data in the customer's account. There is no difference in how orders are currently sent to market makers or
exchanges, but the benefit of BDTP platform is that there are additional security features, including a prohibition on short
selling, and customer execution of their own order. The ATS or broker dealer hosting the quotes (the Host) will connect
to the blockchain trading engine data and the blockchain execution engine data through a secure line, where the Host will have
access to all the data sent to and from the blockchain in order to report the quotes. The Host will be responsible for all activity
on the blockchain as a broker dealer. The final connectivity of the Host to the blockchain, along with their roles and responsibilities,
will need regulatory review and approval once a Host partner is selected.
The core platform has been designed for initial
use with BlackStar common stock and is thus the BlackStar Digital Trading Platform (BDTP). Our BlackStar Electronic Fungible
Shares (BEFS) are proposed to be the initially traded securities on the blockchain on the BDTP platform and the rights and
privileges to each shareholder of the BEFS is the same as certificated shares of common stock of BlackStar. BEFS are the same class
of common stock as, and are identical to, paper certificated and book-entry shares of common stock; BEFS merely describes the format
of the share of common stock. If the BDTP platform is approved for trading by the SEC and FINRA, the BEFS (those shares
of common stock trading through the platform) would not differ as to its rights and privileges under state law from the authorized
common stock of BlackStar. Please note that the Company is not submitting the BDTPTM for any SEC approval in this registration
statement. DTCC has for decades held electronic shares under its agency with broker-dealers for street name
shares, without any problems under state law, including the Delaware General Corporation Law. The BEFS would be no different from
DTCC held shares in book-entry form, except that the BEFS will be traded in blockchain transactions using an existing ATS rather
than being traded on an exchange. Under current SEC and FINRA regulations, any shares that are uncertificated form would still
be required to be deposited through a FINRA registered broker-dealer. Any FINRA broker dealer that accepts deposits can be used.
The BEFS are not tokens or crypto
tokens. A token is generally understood to be a unit of value that blockchain-based organizations or projects
develop on top of existing blockchain networks. While they often share compatibility with the cryptocurrencies of that network,
they are a wholly different digital asset class. Tokens allow developers to create a cryptocurrency without needing
to build a blockchain for that cryptocurrency. As cryptocurrencies, crypto tokens are often assets with value as
are a myriad of other intangible assets with value. Tokens can typically be transferred, traded, bought, and sold,
and they are stored in blockchain wallets. A blockchain wallet is a program or hardware device that is used to store cryptocurrency.
Transactions with a crypto token are processed on the blockchain that it uses. For example, if it is an ERC-20 token built on Ethereum,
then the Ethereum blockchain will handle all transactions for that token.
In addition to their role as a currency, tokens
can serve many other purposes such as (1) governance tokens*which gives the holder voting rights in a cryptocurrency
project. Token holders are able to make and vote on proposals that help determine the future of that specific cryptocurrency; (2)
*decentralized finance (DeFi)*refers to alternative
| 18 | |
| | Table of Contents | |
financial systems built on blockchain technology.
For example, instead of getting a loan from a lender, a holder can put up tokens as collateral and get a loan from a DeFi platform.
Each DeFi platform has its own token that it uses as its official currency; (3) *crypto rewards*holders receive crypto
rewards as an incentive, which are usually paid out as crypto tokens; and (4) *non-fungible tokens (NFT)*denotes ownership
of a digital asset. The ownership information is stored in the token. NFTs can be used to show who owns a unique digital image,
a GIF, or a character in an online game.
In contrast, the BEFS are simply uncertificated
shares of stock of BlackStar, which are commonly referred to as a book-entry shares in DTC and transfer agent parlance
or, as we refer to them, electronic fungible shares. Shares held in uncertificated book-entry form have the same
rights and privileges as shares held in certificate form. The BEFS simply flow in and out of the existing trading system, exchanges,
or OTC Markets through DTC and broker-dealers in uncertificated book-entry form. Only for the period of time that the broker-dealer
holds the shares for the customer are the shares residing in a blockchain recognized format and traded via our BDTP platform
in a blockchain recorded transaction or series of transactions. A blockchain is simply a digital ledger that stores information
in blocks that are linked. This information can be transaction records or full-fledged programs that operate on the blockchain,
which are called smart contracts. For example, as transactions are confirmed, they would be grouped into a block, and that block
would then be added to the blockchain. The BDTP platform only uses the blockchain *as a medium* for the low cost, efficient,
and transparent way to trade securities with a minimum of mark ups, mark downs and shorting, and with lowered costs of execution.
Using BlackStars concept Blockchain First, cash and shares of stock owned by customers are recorded
directly to the blockchain. The BEFS are simply held in uncertificated book-entry form and represent an equity ownership interest
in a corporation (BlackStar) rather than serving as a distinct currency or another purpose such as a governance right, consumer
reward or character in an online game. In addition, the price of a token is often aligned to the blockchain it is
traded on (Bitcoin or Ethereum) while the price of a share of stock such as the BEFS is aligned with the value of the underlying
company. We are not seeking to create tokens, but rather to have a system which allows the trading of well recognized
corporate shares established under state law.
The BDTP platform is not currently operational
for any securities and any such securities must first be registered with the SEC under the Securities Act or have an available
exemption from registration.
*Frequently Asked Questions regarding Proposed
BDTP platform*
- Are the shares traded on the BDTP platform
a different class of common stock?
The shares that may be traded on the BDTPTM
Platform in the future, if approvals were granted, would also be normal shares of common stock, of the same and only
class of common stock as owned by existing shareholders. To use the BDTP platform, the shares of the shareholder must be
in an electronic share format, accomplished via the standard DWAC procedure. The ownership and voting rights of all shareholders
of common stock are identical and the Company only has one class of common stock authorized.
- Do the common shares need to be exchanged
for electronic fungible shares to use the platform?
The BDTPTM, once approved and operational,
currently contemplates executing orders for common shares in an electronic fungible form, also known as a digital share. There
is no exchange of shares needed; however, the shareholder would need to have their shareholdings in an electronic form, accomplished
via the DWAC process through a broker dealer and the transfer agent.
- Will the BEFS traded on the proposed BDTPTM
trade at different prices than the OTC Expert Market?
Because it is a distinct market from the OTC
Expert Market, where the common shares are currently quoted, there is a possibility that the prices reflected for the common shares
will differ across the trading markets. BDTPTM, for instance, only accepts free trading securities (of BlackStar common
stock) for cash and prohibits shorting. As a result, there could be a difference in price from one market to the next due to different
liquidity in the markets as there are arbitrage opportunities in both separate trading venues.
| 19 | |
| | Table of Contents | |
- Are the BEFS crypto assets or tokens?
The proposed BDTPTM is designed
to trade existing shares of common stock (in an electronic form) and NOT crypto assets, cryptocurrency, or tokens. We are not attempting
to tokenize securities, but instead our concept is to use Distributed Ledger Technology (a private blockchain) to
execute, and record transactions with higher efficiency and lower cost, which is essentially a back-office function. The use of
a blockchain to record transactions does not make shares of common stock traded on the platform crypto assets. The
Company does not operate in the crypto asset market nor is it proposing to do so with the BDTPTM.
**
*Additional Features of the BDTP Platform*
The BDTP platform will contain three
features: (1) the main trading feature as discussed above, (2) an indication of interest feature for future offerings, and (3)
a corporate governance feature.
The indication of interest feature, known as
the Internet Digital Offering or IDO, is expected to record indications of interest for potential, initial or secondary
future offerings proposed by the public or private company that subscribes to our customized platform. If allowed under SEC regulations,
the funding of private and public companies on a blockchain platform may represent a fairer distribution of securities with a permanent
record of solicitation. The distributive ledger technology on a blockchain would enable companies to gauge interest on a first
come, first served basis. The IDO feature is only for use in self-underwriting situations and includes a method of facilitating
a public or private offering for a company on an immutable blockchain. This may consist of the subscriber company uploading a preliminary
prospectus to the platform if they are interested in raising capital, collecting a list of company shareholders, and collecting
a list of non-company shareholders who have met at least a minimum threshold for potential interest in investing in the company,
then prioritizing potential investors meeting the set requirements by the recorded timestamp and distributing the offering materials
to them at the appropriate time in compliance with existing securities rules and regulations. Our blockchain-based system may give
companies a tool to self-underwrite under the current rules if approved by theSEC and FINRA.
The final feature would record corporate governance
information about a public company on an immutable blockchain. This may include a method of preparing for and complying with a
financial statement audit, recording general corporate matters, recording financial and accounting matters, recording tax filing
matters, on the immutable blockchain at least every 30 days to three months, wherein each recording comprises a time stamp of receipt
and cannot be subsequently manipulated or changed, creating a permanent record from inception. The permanent record-keeping of
a blockchain based system, we believe, lowers the cost, time and risk to the securities attorney and auditor when preparing an
offering document.We currently expect that the corporate governance and indication of interest features can be made available
to regulators in real-time.
**
*Licensing the BDTP Platform with
An Existing Trading System*
The BDTP platform is designed to be
licensed to any company, together with an existing ATS arrangement to execute and process trades, for implementation by the licensee.
These electronic fungible shares will trade on the BDTP platform exactly as shares of stock currently trade on OTC Markets,
without markup or markdown in true spot transactions. Any company will be able to license and use our system or platform
to trade electronic fungible shares.
We currently intend to seek a contractual arrangement
such as a license with an existing ATS for a quoting service, similar to the current listing of our common stock with OTC Markets
Group. At this time, no ATS has committed to an arrangement. We intend to continue having discussions with various ATSs
until we have secured an arrangement that will allow the BDTP platform to operate.
We have spoken to broker-dealers and clearing
firms throughout the development process but have yet to secure a contractual relationship. We will continue to seek out this licensee
and have increased our efforts to reach out to various broker-dealers since completing the demonstration platform and hope to secure
a licensee within the next three to six months. The ability to obtain a licensee may be dependent on our ability to confirm that
FINRA and the SEC will allow trading on the BDTP platform as described. If this is the case, the Company may alternatively
seek to acquire an existing broker-dealer in order to become a registered broker-dealer. Once we have secured a licensee
| 20 | |
| | Table of Contents | |
broker-dealer, clearing firm, or ATS for the
operations of the BDTP platform, we will seek subscriber companies desiring customized platforms.
Once the BDTP platform is live and formal
arrangements have been finalized with an existing ATS to execute and reports trades, the Company intends to license the platform
to other publicly traded companies as a subscription service with a company specific customizable interface operation through a
substantially similar license with the existing ATS. This subscription service, BlackStars Blockchain Equity Trading
or BET, would enable each subscribing company to have access to their own trading platform, based upon our core platform,
where shares of their common stock could be traded. 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 a few
business days. We have not yet developed our marketing campaign to seek out these customers, but plan to do so after securing a
license with an existing ATS. We anticipate our overall expansion of services into the blockchain industry within the next twelve
months.
The initiation of operations of the BDTP
platform will be dependent on the exact arrangement that we enter into and the regulatory approvals that may be required (see Regulatory
Challenges below).
*BDTP Patents*
On December 26, 2023, the United States Patent
and Trademark Office (USPTO) issued the first in a series of patents to the Company for different components and technology of
the BDTP platform, which enables trading of common shares of a public company on a blockchain.
The table below shows the patents issued to
date.
|
Patent Number |
Issue Date |
Title | |
|
US-11854080-B2 |
12/26/2023 |
System and method for matching orders and immutable blockchain ledger for all customer trading activity with settlement into the broker dealer ecosystem | |
|
US-11966974-B2 |
4/23/2024 |
System and method for preparing for a SEC financial statement audit by recording corporate governance information on an immutable blockchain | |
|
US-12079872-B2 |
9/3/2024 |
Systems and methods for using a digital trading platform to trade securities on a blockchain | |
|
US-12086880-B2 |
9/10/2024 |
System and method for facilitating a public offering on an immutable blockchain provided to eligible qualified investors based upon priority of interest | |
|
US-12112380-B2 |
10/8/2024 |
Systems and methods for the regulated trading of registered equities with the securities and exchange commission on an immutable blockchain with settlement into the broker dealer ecosystem | |
|
US-12131383-B2 |
10/29/2024 |
Systems and methods for the trading of registered equities on an immutable blockchain with settlement into the broker dealer ecosystem | |
|
US-12248987-B2 |
3/11/2025 |
Systems and methods for trading derivatives purchased on a blockchain on a digital trading platform that integrates with the traditional broker-dealer ecosystem | |
|
US-12288257-B2 |
4/29/2025 |
Systems and methods for preparing for an audit by recording corporate governance information on an immutable blockchain | |
Further patents related to various features
of the platform may be applied for and/or issued in the future.
**
*Existing Financing*
We currently have no committed source for funding
our operations but have entered into convertible promissory notes and loans to continue operations in the interim. Financing from
the past two fiscal years are summarized here. On January 9, 2025, the Company entered into a financing agreement with 1800 Diagonal
Lending LLC to borrow $49,200. The note matures on October 30, 2025, bears interest at 12%, with a default rate of 22%, and is
convertible,
| 21 | |
| | Table of Contents | |
commencing 180 days after the date of issuance,
into common shares of the Company. The conversion price is to be calculated at 61% of the average of the lowest trading price of
the Companys common stock for the previous ten 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 114,000,000 shares of common stock for conversion. Net proceeds from the loan were $40,000,
after legal fees and borrowing costs of $9,200.
In October 2025, the Company commenced a
$1 million fractional unit offering, in increments of $5,000, consisting of Common and Preferred Securities under a term
sheet to certain accredited investors, who had advanced monies to the Company over a period of 5 months in the 2025 fiscal
year.. The Company has received an aggregate $384,208 consideration from four lenders consisting of $236,662 cash and
conversion of $125,000 in outstanding notes and related accrued interest of $22,646.
In 2024, the Company borrowed $274,000 from
unrelated individuals pursuant to promissory notes accruing at 11% per annum and in various maturity periods of three months to
one year. The Company agreed to issue to the note holders an aggregate 53,525,000 shares of common stock for loan consideration,
extended loan maturity to existing note holders, and/or full satisfaction of the loans and interest. The Company may issue up to
42,275,000 additional shares of common stock at the option of note holders for full satisfaction of the loans at maturity.
In 2023, we received loans of an aggregate
$400,000 from four investors, due nine months from receipt with interest at 11% per annum.
Based on our current cash reserves
of approximately $3,642 as of December 31, 2024, and our receipt in January 2025 of $40,000 in loans and in April through
June 2025 of $236,562 of advances from accredited investors for subscription agreements pursuant to a term sheet in October 2025,
we estimate that we will have cash for an operational budget of approximately six (6) months.We intend to continue to
offer a private placement of preferred shares to select accredited investors in order to achieve at least $5,000,000 in
funding in the next year to scale our business plan. 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.
****
**Blockchain Equity Management Corp.**
**
BlackStar is
conducting a continuing analysis for the Companys involvement in Distributed Ledger Technology (DLT) related
ventures. To pursue that end, the Company formed a subsidiary, Blockchain Equity Management Corp. (BEMC), formerly
known as Crypto Equity Management Corp., on September 30, 2017. The name change occurred on February 3, 2023 in order to align
the subsidiary more closely with our proposed business plan. As a merchant bank, BlackStar intends to seek to provide access to
capital for companies and is specifically seeking out ventures involved in DLT. BlackStar recognizes the similarities in the rapidly
evolving DLT ecosystem today compared to the Dot Com era in the 90s, which present both challenges and opportunities. BlackStar
intends to facilitate funding and management of DLT involved companies through majority controlled joint ventures BEMC. BlackStar,
through BEMC, intends to initially control and manage each venture. Potential ventures for both BlackStar and BEMC will be analyzed
using the combined business experience of its executives, with BEMC looking to fill those venture criteria with companies in digital
share 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. 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 clients equity based off of the BDTPTM.
BEMC has not established any anticipated time frames or key milestones for BEMC business.
In addition,
BlackStar intends to offer consulting and regulatory compliance services to blockchain and
DLT companies and blockchain entrepreneurs for securities, tax, and commodity issues. BlackStar is conducting ongoing analysis
for opportunities in involvement in electronic fungible share-related ventures though BEMC, mainly in the areas of blockchain and
distributed ledger technologies. Our long-term plan for provision of services is to finance the operations of BEMC through the
successful production of the BDTPTM platform and subsequent subscription of the platforms design as a service.
As a subsidiary of BlackStar, BEMC additionally intends to offer consulting and
| 22 | |
| | Table of Contents | |
regulatory compliance services to digital share
related entities and blockchain entrepreneurs for securities, tax, and commodity issues. Our Company has always operated under
the assumption that cryptocurrencies and tokens are securities and regulated under the existing law, SEC rules and
other financial regulations. Due to significant experience of our management in the U.S. securities and commodities industry, we
felt that we had regulatory compliance backgrounds that could be useful in assisting with regulatory compliance for former cryptocurrency
offerors and token offerors. Management believes that there may be other companies offering unregistered securities in digital
form with possible violations of securities and other laws including FinCen regulation, CFTC rules, exchange rules, AML, and tax
laws. The concept of BEMC as a subsidiary of BlackStar is to provide compliance services for the multitude of laws that are applicable
to digital securities. Currently in the testing and completion phase, BlackStar intends to build trading platforms for subscriber
companies based on the BDTPTM model and offer the platforms through a subscription service called BlackStar Blockchain
Equity Trading (BET TM), generating ongoing revenue for the Company.
Neither BEMC nor BlackStar intend to underwrite
these entities or entrepreneurial companies, nor do we intend to act as broker-dealers or investment companies, though we acknowledge
the potential requirements to register as such or to claim exemption from registration.
Blockchain Equity Management Corp. is not currently
operational, nor has it been since inception. The specific type and nature of services to be provided by BEMC may change based
on whether the BDTPTM platform is able to ever begin services.
**Blockchain Equity SRO, Inc.**
****
In addition to the services described above,
on December 31, 2017, BlackStar formed a subsidiary nonprofit company, Crypto Industry SRO Inc., now known as Blockchain Equity
SRO, Inc., a self-regulatory membership organization for the digital share industry. The name change was completed on February
3, 2023. It is not yet functioning in any capacity at this time.
**Regulatory Challenges of our Business
Concept (BDTPTM)**
**
BlackStar has always recognized that digital
equities must be registered or otherwise have an exemption from registration within the existing SEC regulations and guidelines.
BlackStars aim is to develop BDTPTM, a digital share trading platform, to trade free-trading BlackStar common
stock only. The regulatory challenges presented come from integration of the platform into the existing broker-dealer ecosystem,
approvals/advice of and compliance with the rules and regulations of OTC Markets Group, SEC, FinCen, IRS, anti-money laundering
rules, or FINRA. These rules encompass the functionality of the system, cybersecurity laws, and state and federal financial laws.
No assurance can be given that such regulatory approvals will be obtained in a timely manner or at all.
**SEC Approval**
Our first regulatory challenge is seeking the
approval of the Securities and Exchange Commission (SEC) of our concept for a security that could be traded on the
BDTPTM because the SEC has not yet adopted rules or regulations specific to the digital securities industry nor any
regulations involving blockchain or distributed ledger transactions. The SEC has chosen to enforce its existing anti-fraud laws
and the registration rules and regulations. Accordingly, we must work through an undefined SEC approval process for our proposed
system. We anticipate many comments and questions from the SEC during any approval process for the BDTPTM platform.
We anticipate that could take one to three years to complete the approval process for the BDTPTM platform.
The SEC may adopt new rules and regulations
relating to our digital based concept for trading and securities, which rules and regulations are impossible to predict at this
time. Any new rules and regulations could make our concept for digital trading and securities difficult to bring into compliance
with new rules and regulations resulting in our inability to achieve commercialization and revenues. Such events could result in
costly delays in achieving regulatory approval, resulting in increased legal, administrative, and accounting costs and delays,
or denial of revenues from our concept.
We anticipate initiating formal discussions
with the SEC and its relevant divisions and offices, including the Division of Trading and Markets, within the next six months
with respect to providing a detailed demonstration of how the
| 23 | |
| | Table of Contents | |
system works within the broker dealer ecosystem,
and seeking the approval or clearance of our BEFS being eligible to be traded on our BDTP platform. We believe it may take
between six to nine months to address SEC comments and questions, and there is no assurance that we will be successful in our BEFS
being approved or cleared for trading on our BDTPTM platform.
We have no way of knowing at this date what
new rules and regulations the SEC or any other regulatory body may adopt which could impact the structure and the timing of approval
or clearance of any uncertificated shares on our BDTPTM platform in the future and there is a significant potential
impact of any future adoption of new rules and regulations, which could delay our attempt to trade uncertificated shares on our
BDTPTM platform.
**FINRA**
Our next regulatory challenge is that our concept
requires implementation by a broker dealer registered with FINRA. We do not anticipate registering our company as a broker
dealer, but instead would contract with a broker dealer to act as our agent/intermediary for our concept, thereby alleviating our
Company of all regulatory compliance issues of a broker dealer.
As with the SEC, the broker dealer may be challenged
due to the fact FINRA has no developed rules and regulations involving digital trading of shares specifically. FINRA has, however,
chosen to raise disclosure requirements and to conduct heightened examinations for broker dealers as to any involvement in the
digital industry, with intent to bring enforcement actions for violations of SEC regulations or FINRA rules, and disciplinary actions
against broker dealers for any such violations. As a direct result, it may be difficult to find a broker dealer willing to be in
vanguard of the digital trading and securities industry involving our concept even if we are able to achieve SEC approval
for our digital trading platform. Although we will continue to pursue both formal and informal discussions with both the SEC and
a FINRA regulated broker dealer concurrently, we do not believe it would be constructive to commence substantive negotiations with
a FINRA regulated broker dealer until we have substantially completed the SEC approval process. Once we believe we have substantially
completed the SEC approval process, we believe it may take an additional six to twelve months to reach agreement with a FINRA regulated
broker dealer.
We do not believe that FINRA is a major regulatory
hurdle because upon registration as a Registered Security FINRA broker dealers can choose to trade it or not. FINRA
cannot directly regulate the security. It can regulate any ATS as to FINRA Rules if it is also FINRA registered (due to the requirement
of a Broker Dealer license), but that depends primarily on SEC regulation of the ATS.
**SEC Alternative Trading
System**
The final significant
regulatory challenge involves the Alternative Trading System (ATS) as defined under 17 CFR 242.300.
We understand the SEC position on digital securities to be that digital assets are required to be traded through an ATS, with which
we agree. An ATS must comply with many control, regulatory, reporting, securities, inspection, procedural, and disclosure requirements.
The SEC, however, has not yet proposed regulations for ATS trading of digital securities and is treating ATS applications under
existing regulations.
We do not intend to attempt to register
as an ATS but rather will seek to contract with an existing ATS to license our platform (if approved by regulatory agencies) for
the ATS use and management. Our platform will operate just as any other software platform used for trading by an ATS or broker/dealer.
We believe this is ultimately the best solution from a regulatory standpoint to have the existing ATS manage those requirements
for compliance with SEC and FINRA rules and regulations.
It could take one year to eighteen months to
prove the concept to an existing ATS and then to properly integrate operations into the ATS monitoring and regulatory systems.
The ATS would need to obtain SEC approval to add the BDTPTM platform to its existing trading platform which could take
one year to eighteen months.
We cannot at this time anticipate every regulatory
action of the digital security industry in the future. No proposals for regulation have even reached published proposal stage.
New regulations of the digital securities industry could render our business either impossible due to the nature of regulations,
or uneconomical, which would doom our concept.
| 24 | |
| | Table of Contents | |
We do not have any time frame for achieving
any of the regulatory challenges although we believe that it may take between one to three years before the BDTPTM platform
is operational with all required regulatory approvals.
The SEC may place additional oversight focus
on broker-dealers in the following areas due to the digital nature of the securities: safekeeping of funds and operations that
are unique to the safety and custody of Digital Asset Securities; broker-dealers and any affiliated entities compliance
with registration requirements; adequate AML procedures, controls, and documentation regarding Digital Asset Securities; disclosure
and due diligence obligations related to the offering of Digital Asset Securities; review of the existence and disclosures of conflicts
of interest and the compliance policies and procedures to address them (e.g. broker-dealers may operate in multiple capacities,
including as trading platforms or proprietary traders of Digital Asset Securities on their own and other platforms); and review
of FINRA-member broker-dealer compliance processes in connection with the evaluation, approval, and monitoring of outside business
activities related to digital assets. Many of these compliance issues will remain if we license with a broker-dealer instead of
acquiring one.
*Volatility of Cryptocurrencies and Tax Implications
*Neither BlackStar nor BEMC will be trading in, accepting loan repayments in, or making loans in cryptocurrencies; the
intent was to build a platform on which to trade digital securities of BlackStar on a private blockchain.
*Cybersecurity Implications of DLT *Transactions on the distributed ledger fabric are protected by public-key X.509 certificates. The protection of PII data is
the responsibility of each brokerage dealer. Any blockchain code used will be placed in a public repository after having been certified
by an independent cybersecurity audit. Further, BEMC bases the operational requirements and cyber-security framework in part on
the following publications the Distributed Ledger Technology: Implications of Blockchain for the Securities Industry
published by FINRA, and the European Union Agency for Network and Information Security (ENISA) report entitled Distributed
Ledger Technology & Cybersecurity.
****
****
**ITEM 1A. RISK FACTORS.**
FORWARD LOOKING STATEMENTS
THIS DOCUMENT INCLUDES FORWARD-LOOKING STATEMENTS,
INCLUDING, WITHOUT LIMITATION, STATEMENTS RELATING TO BLACKSTARS PLANS, STRATEGIES, OBJECTIVES, EXPECTATIONS, INTENTIONS
AND ADEQUACY OF RESOURCES. THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS THAT
MAY CAUSE OUR COMPANYS ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE
OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: OUR
ABILITY OF TO IMPLEMENT OUR BUSINESS STRATEGY; ABILITY TO OBTAIN ADDITIONAL FINANCING; BLACKSTARS LIMITED OPERATING HISTORY;
UNKNOWN LIABILITIES ASSOCIATED WITH FUTURE ACQUISITIONS; ABILITY TO MANAGE GROWTH; SIGNIFICANT COMPETITION; ABILITY TO ATTRACT
AND RETAIN TALENTED EMPLOYEES; AND FUTURE GOVERNMENT REGULATIONS; AND OTHER FACTORS DESCRIBED IN THIS FILING OR IN OTHER OF BLACKSTARS
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. BLACKSTAR IS UNDER NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
**Risk Factor Summary**
Our business is subject to numerous risks and
uncertainties, and the following is a summary of key risk factors when considering an investment. This summary should be read together
with the more detailed description of each risk factor contained in the subheadings further below and should not be relied upon
as an exhaustive summary of the material risks facing our business:
| 25 | |
| | Table of Contents | |
*Risk Factors Relating to Our Company*
|
| Our success will depend,
to a large degree, on the expertise and experience of the members of our management team. | |
|
| Our operations as a merchant
bank may affect our ability to, and the manner in which, we raise additional capital, which may expose us to risks. | |
|
| We may engage in business
activities that could result in us holding investment interests in a number of entities which could subject us to regulation under
the Investment Company Act of 1940. | |
|
| We are dependent upon
our limited management for our success which is a risk to our investors. | |
|
| We have a limited amount
of funds available for investment in ventures and as a result our ventures may lack diversification. | |
|
| We have a lack of revenue
history and stockholders cannot view our past performance since we have a limited operating history. | |
|
| We are not diversified,
and we will be dependent on only one business, merchant banking. | |
|
| We can give no assurance
of success or profitability to our stockholders. | |
|
| We may have a shortage
of working capital in the future which could jeopardize our ability to carry out our business plan. | |
|
| We will need additional
financing for which we have no commitments, and this may jeopardize execution of our business plan. | |
|
| Our officers and directors
may have conflicts of interests as to corporate opportunities which we may not be able or allowed to participate in and may receive
compensation from our parent company. | |
|
| We have agreed to indemnification
of officers and directors as is provided by Delaware statutes. | |
|
| Our directors
liability to us and stockholders is limited. | |
|
| A lawsuit was filed against
the company on November 6, 2023. | |
|
| We may not realize returns
on our investments in ventures for several years. Thus, an investment in shares of our common stock is only appropriate for investors
who do not need short-term liquidity in their money. | |
|
| Illiquid nature of our
investments. | |
|
| Failure to comply with
anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences. | |
|
| Our reported financial
results may be materially and adversely affected by changes in accounting principles generally accepted in the United States. | |
|
| Continued compliance
with regulatory and accounting requirements will be challenging and will require significant resources. | |
|
| If we are unable to maintain
effective disclosure controls and internal controls over financial reporting, investors may lose confidence in the accuracy and
completeness of our financial reports, and the market price of our stock may be affected. | |
|
| Increased attention on
environmental, social and governance ("ESG") matters may have a negative impact on our business, impose additional costs
on us, and expose us to additional risks. | |
|
| Our Company is currently
quoted on the Expert Market on the OTC Markets platform; quotations in Expert Market securities are restricted from public viewing
and only broker-dealers and professional or sophisticated investors are permitted to view quotations in Expert Market securities. | |
*Risk Factors Relating to Our Business*
|
| We have incurred significant
losses and anticipate future losses. | |
|
| Our existing financial
resources are insufficient to meet our ongoing operating expenses. | |
|
| Unfavorable conditions
in our industry or the global economy or reduced access to lending markets could harm our business. | |
|
| There can be no certainty
as to market acceptance of the proposed BDTPTM. | |
|
| We may fail to meet the
evolving needs of our markets, fail to identify new products, services, or technologies, or fail to compete successfully in our
target markets, adversely impacting our revenue and financial results. | |
| 26 | |
| | Table of Contents | |
|
| System security and data
protection breaches, as well as cyber-attacks, could disrupt our operations, reduce our expected revenue and increase our expenses,
which could adversely affect our stock price and damage our reputation. | |
|
| An article published
on April 17, 2023 by cointelegraph.com may expose us to liability for violations of Section 5 of the Securities Act. | |
*Risks Relating to Our Venture Investments*
**
|
| We have not identified
any other ventures in which we may invest in a venture. | |
|
| Competition for loans
and investments. | |
|
| Risks of competition
for our venture companies. | |
|
| Risks of our need for
additional capital to fund our venture companies. | |
|
| Our venture portfolio
is and may continue to be concentrated in a limited number of venture companies and industries, which will subject us to a risk
of significant loss if any of these companies fail or by a downturn in the particular industry. | |
|
| We intend to control
all of our ventures. | |
|
| We may not realize gains
from our ventures. | |
|
| The inability of our
venture companies to commercialize their technologies or create or develop commercially viable products or businesses would have
a negative impact on our investment returns. | |
|
| The inability of our
venture companies to adequately execute their growth or expansion strategies would have a negative impact on our loan or investment
returns. | |
|
| Our venture companies
will likely have significant competition from more established companies as well as innovative early-stage companies. | |
|
| Our investment returns
will depend on the success of our ventures and, ultimately, the abilities of their key personnel. | |
|
| Some of our venture companies
may need additional capital, which may not be readily available. | |
*Risk Factors Related to Our Platform and
Blockchain/Distributed Ledger Technology*
- The operability of our platform depends on
our ability to enter into a license agreement with a broker dealer or an alternative trading system.
- If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position could be harmed.
- Intellectual property rights claims may adversely
affect the distributed ledger technology.
- We may depend on third parties to provide
execution of our trading platform, internet, telecommunication and fiber optic network connectivity to our data center, and any
delays or disruptions in service could adversely affect an investment in us.
- Our interactions with a blockchain may expose
us to SDN or blocked persons or cause us to violate provisions of law that did notcontemplate distributed ledger technology.
- The possibility of trading occurring on multiple
exchanges means that there may be discrepancies in trading prices of common stock.
- The possibility of regulatory developments
related to crypto assets and crypto asset markets may pose an unintended risk to our proposed business.
- The Company may face reputational harm, loss
of financing, stock price volatility, and/or low demand for services by proximity to the crypto asset market.
*Risks Relating to Ownership of BlackStar Enterprise Group, Inc.
Common Stock*
|
| We may in the future
issue more shares which could cause a loss of control by our present management and current stockholders. | |
|
| We have authorized and
designated a Class A Preferred Super Majority Voting Convertible Stock, which have voting rights of 60% of our common stock at
all times. | |
|
| A limited public market
exists for our common stock at this time, and there is no assurance of a future market. | |
| 27 | |
| | Table of Contents | |
|
| 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. | |
|
| 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. | |
|
| Our common stock may
be volatile, which substantially increases the risk that you may not be able to sell your securities at or above the price that
you may pay for the security. | |
|
| The regulation of penny
stocks by the SEC and FINRA may discourage the tradability of our securities. | |
|
| We will pay no foreseeable
dividends in the future. | |
|
| Rule 144 sales in the
future may have a depressive effect on our stock price. | |
|
| Our stockholders may
suffer dilution due to issuances of shares for various considerations. | |
|
| We are a reporting company. | |
|
| We have not identified
any other ventures in which we may invest in a venture. | |
|
| Our OTC Market status
was lowered from OTC Pink to OTC Expert Market. | |
|
| BlackStar Electronic
Fungible Shares and digital shares in general may be subject to unique risks not associated with paper certificated shares. | |
|
| Insurance will not be
obtained for our electronic fungible shares which poses risks. | |
**RISK FACTORS RELATING TO OUR COMPANY**
OUR SUCCESS WILL DEPEND, TO A LARGE DEGREE,
ON THE EXPERTISE AND EXPERIENCE OF THE MEMBERS OF OUR MANAGEMENT TEAM.
We will rely exclusively on the skills and
expertise of our management team in conducting our business. Our management team has experience in identifying, evaluating and
acquiring prospective businesses for which we may ultimately provide loans, but there is no assurance our managements assessments
will be successful in placing loans which are repaid with interest. Accordingly, there is only a limited basis upon which to evaluate
our prospects for achieving our intended business objectives.
We will be wholly dependent for the selection,
structuring, closing and monitoring of all of our investments on the diligence and skill of our management team, under the supervision
of our Board of Directors. There can be no assurance that we will attain our investment objective. The management team will have
primary responsibility for the selection of companies to which we will loan or finance, the terms of such loans and the monitoring
of such investments after they are made. However, not all of the management team will devote all of their time to managing us.
These factors may affect our returns.
We have limited resources and limited operating
history.
OUR OPERATIONS AS A MERCHANT BANK MAY AFFECT
OUR ABILITY TO, AND THE MANNER IN WHICH, WE RAISE ADDITIONAL CAPITAL, WHICH MAY EXPOSE US TO RISKS.
Our business will require a substantial amount
of capital. We may acquire additional capital from the issuance of senior securities, including borrowings or other indebtedness,
or the issuance of additional shares of our common stock. However, we may not be able to raise additional capital in the future
on favorable terms or at all. We may issue debt securities, other evidences of indebtedness or preferred stock, and we may borrow
money from banks or other financial institutions, which we refer to collectively as senior securities. If the value
of our businesses declines, we may be unable to satisfy loan requirements. If that happens, we may be required to liquidate a portion
of our ventures and repay a portion of our indebtedness at a time when such sales may be disadvantageous. As a result of issuing
senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. If
we issue preferred stock, the preferred stock would rank "senior" to common stock in our capital structure, preferred
stockholders would have separate voting rights and might have rights, preferences, or privileges more favorable than those of our
common stockholders. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable
for, our common stock, then the percentage ownership of our stockholders at that time will decrease.
| 28 | |
| | Table of Contents | |
WE MAY ENGAGE IN BUSINESS ACTIVITIES THAT COULD
RESULT IN US HOLDING INVESTMENT INTERESTS IN A NUMBER OF ENTITIES WHICH COULD SUBJECT US TO REGULATION UNDER THE INVESTMENT COMPANY
ACT OF 1940.
Although we will be subject to regulation under
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, we believe we will not be subject to regulation
under the Investment Company Act of 1940 (the "1940 Act") insofar as we will not be engaged in the business of investing
or trading in securities within the definitions and parameters which would make us subject to the 1940 Act, or holding
unconsolidated minority interests in multiple companies and cash which might fall within the holding company definitions.
In the event we engage in business activities that result in us holding investment interests in a number of nonconsolidated entities,
we might become subject to regulation under the 1940 Act. In such event, we would be required to register as an Investment Company
and incur significant registration and compliance costs. Additionally, the 1940 Act requires that a number of structural safeguards,
such as an independent board of directors and a separate investment adviser whose contract must be approved by a majority of the
companys shareholders, be put in place within such companies. The 1940 Act also imposes significant disclosure and reporting
requirements beyond those found in the Securities Act and the Exchange Act of 1934, as amended (the Exchange Act). Likewise, the
1940 Act contains its own anti-fraud provisions and private remedies, and it strictly limits investments made by one investment
company in another to prevent pyramiding of investment companies, leading to consolidated investment companies acting in the interest
of other investment companies rather than in the interest of securities holders. The labeling of the Company as an investment company
could significantly impair our business plan and operations and have a material adverse effect on our financial condition. Compliance
with the 1940 Act is prohibitively expensive for small companies, in our estimation, and even if it meant divestiture of assets,
we would intend to avoid being classified as an Investment Company.
WE ARE DEPENDENT UPON OUR LIMITED MANAGEMENT
FOR OUR SUCCESS WHICH IS A RISK TO OUR INVESTORS.
We currently have one full-time manager, our
CEO Joe Kurczodyna. Our lack of full-time management may be an impediment to our business achievement. Without additional full-time
officers, we may not have sufficient devoted time and effort to find successful loan prospects, additional capital, or manage our
loan portfolio, which could impair our ability to succeed in our business plan and could cause investment in our Company to lose
value.
WE HAVE A LIMITED AMOUNT OF FUNDS AVAILABLE
FOR INVESTMENT IN VENTURES AND AS A RESULT OUR VENTURES MAY LACK DIVERSIFICATION.
Based on the amount of our existing available
funds, it is unlikely that we will be able to commit our funds to loans to large number of ventures. We intend to operate as a
diversified merchant bank. Prospective investors should understand that our venture investments are not, and in the future may
not be, substantially diversified. We may not achieve the same level of diversification as larger entities engaged in similar activities.
Therefore, our assets may be subject to greater risk of loss than if they were more widely diversified. The loss of one or more
of our limited number of investments could have a material adverse effect on our financial condition.
WE HAVE A LACK OF REVENUE HISTORY AND STOCKHOLDERS
CANNOT VIEW OUR PAST PERFORMANCE SINCE WE HAVE A LIMITED OPERATING HISTORY.
**
We were incorporated on December 17, 2007 for
the purpose of engaging in any lawful business and have adopted a plan as a small and micro-cap market merchant banking company.
During the period of inception through December 31, 2024, we have not recognized revenues. We are not profitable. We must be regarded
as a new venture with all of the unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject.
WE ARE NOT DIVERSIFIED, AND WE WILL BE DEPENDENT
ON ONLY ONE BUSINESS, MERCHANT BANKING.
Because of the limited financial resources
that we have, it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities
into more than one area will subject us to economic fluctuations within the merchant banking industry and therefore increase the
risks associated with our operations due to lack of diversification.
| 29 | |
| | Table of Contents | |
WE CAN GIVE NO ASSURANCE OF SUCCESS OR PROFITABILITY
TO OUR STOCKHOLDERS.
There is no assurance that we will ever operate
profitably. There is no assurance that we will generate revenues or profits, or that the market price of our common stock will
be increased thereby.
WE MAY HAVE A SHORTAGE OF WORKING CAPITAL IN
THE FUTURE WHICH COULD JEOPARDIZE OUR ABILITY TO CARRY OUT OUR BUSINESS PLAN.
Our capital needs consist primarily of expenses
related to general and administrative, legal and accounting, and software development and could exceed $500,000 in the next twelve
months. Such funds are not currently committed, and we have cash of approximately $3,642 as of December 31, 2024.
WE WILL NEED ADDITIONAL FINANCING FOR WHICH
WE HAVE NO COMMITMENTS, AND THIS MAY JEOPARDIZE EXECUTION OF OUR BUSINESS PLAN.
We have limited funds, and such funds may not
be adequate to carry out our business plan in the small and micro-cap market merchant banking industry. Our ultimate success depends
upon our ability to raise additional capital. We are investigating the availability, sources, and terms that might govern the acquisition
of additional capital.
We have no commitment at this time for additional
capital. If we need additional capital, we have no assurance that funds will be available from any source or, if available, that
they can be obtained on terms acceptable to us. If not available, our operations will be limited to those that can be financed
with our modest capital.
OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS
OF INTERESTS AS TO CORPORATE OPPORTUNITIES WHICH WE MAY NOT BE ABLE OR ALLOWED TO PARTICIPATE IN AND MAY RECEIVE COMPENSATION FROM
OUR PARENT COMPANY.
Presently there is no requirement contained
in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors of our business to disclose to us business
opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to us to
disclose to us any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise.
Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director
of another company. We have no intention of merging with or acquiring a business opportunity from any affiliate or officer or director.
Our current officers and directors also currently serve our parent company, International Hedge Group, Inc., which may have consulting
agreements with some of our venture companies and as such is a direct conflict and such officers and directors may be paid by such
parent. We intend to diversify and/or expand our Board of Directors in the future.
WE HAVE AGREED TO INDEMNIFICATION OF OFFICERS
AND DIRECTORS AS IS PROVIDED BY DELAWARE STATUTES.
Delaware General Corporation Laws provide for
the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorneys fees
and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities
our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such
persons promise to repay us therefore if it is ultimately determined that any such person shall not have been entitled to
indemnification. This indemnification policy could result in substantial expenditures by us that we will be unable to recoup.
**
OUR DIRECTORS LIABILITY TO US AND STOCKHOLDERS
IS LIMITED
Delaware General Corporation Laws exclude personal
liability of our directors and our stockholders for monetary damages for breach of fiduciary duty except in certain specified circumstances.
Accordingly, we will have a much more limited right of action against our directors that otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state securities laws.
| 30 | |
| | Table of Contents | |
We have no full-time employees which may impede
our ability to carry on our business. Our officers are independent consultants who devote up to 40 hours per week to Company business.
The lack of full-time employees may very well prevent the Companys operations from being efficient, and may impair the business
progress and growth, which is a risk to any investor.
A LAWSUIT WAS FILED
AGAINST THE COMPANY ON NOVEMBER 6, 2023.
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. At the outset of the case,
a temporary restraining order was entered preventing the Company from trading any shares. As currently postured, Plaintiff seeks
specific performance (a mandatory injunction) requiring the conversion of approximately 257,000,000 shares and possibly additional
recovery of legal fees and interest. The lawsuit increases the Companys financial and administrative burdens and is a risk
to the Companys capital.
On February 27, 2024,
the Company, through its attorneys, filed an answer to Plaintiffs complaint and counterclaims against Plaintiff. In addition
to denying many of the allegations laid out in the lawsuit, the Company invokes several affirmative defenses that bar Plaintiffs
recovery in the action and alleges that Plaintiff breached the terms of the agreement, including, but not limited to, obtaining
the conversion of BlackStars stock after the Promissory Note was fully paid off.
Amongst other claims,
the Company alleges that the Plaintiff acted in bad faith and in violation of usury laws by recovering an estimated $600,000 dollars
in BlackStar stock off of a $60,000 promissory note, estimated at a roughly 170% interest rate. The Company seeks a judgment in
its favor and against Plaintiff, compensatory damages in an amount to be proven at trial, declaratory relief voiding the agreement
as illegal under Section 29(b) of the Securities Act, punitive damages in an amount to be proven at trial, interest on all damages,
and attorneys fees. The Company awaits a response to the counterclaims.
The risks of continued
litigation on this matter are as follows: the Company may need to increase the authorized shares of common stock in order to accommodate
any continued conversions, judgments, or settlements, and the Company could be exposed to further risks of lawsuits for similar
issues. The Company will also expend additional resources in the ongoing litigation and any potential resolutions outside the above-reference
conversions to common stock (which were already contemplated in the original convertible promissory note), negatively impacting
its financial position.
WE MAY NOT REALIZE RETURNS ON OUR INVESTMENTS
IN VENTURES FOR SEVERAL YEARS. THUS, AN INVESTMENT IN SHARES OF OUR COMMON STOCK IS ONLY APPROPRIATE FOR INVESTORS WHO DO NOT NEED
SHORT TERM LIQUIDITY IN THEIR MONEY.
We intend to make loans as quickly as possible
consistent with our business objectives in those investments that meet our criteria. However, it is likely that a significant period
of time will be required before we are able to achieve repayment and any additional value from warrants or stock conversions that
we hold in an eligible venture company.
ILLIQUID NATURE OF OUR INVESTMENTS.
We anticipate that substantially all of our
ventures (other than short-term investments) will consist of controlling interests in ventures that at the time of acquisition
are unmarketable, illiquid and for which no ready market will exist, if such a market does in fact exist. Our venture investments
are intended to be in companies in which we will have controlling interest and will be privately negotiated transactions. There
is not anticipated to be any market for the ventures until such until such have developed successful businesses.
Because of the illiquid nature of our venture
investments, a substantial portion of our assets will be carried on our books adjusted for accrued losses, depreciation and impairment
which could in some cases result in a write off. This value will not necessarily reflect the amount which could be realized upon
a sale, or payoff in the future.
| 31 | |
| | Table of Contents | |
FAILURE TO COMPLY WITH ANTI-BRIBERY, ANTI-CORRUPTION,
AND ANTI-MONEY LAUNDERING LAWS COULD SUBJECT US TO PENALTIES AND OTHER ADVERSE CONSEQUENCES.
We are subject to the Foreign Corrupt Practices
Act ("FCPA") and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions. From time
to time, we may leverage third parties to help conduct our businesses abroad. We and our third-party intermediaries may have direct
or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held
liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives,
contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures
to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation
of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable
anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage,
investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. government
contracts, all of which may have an adverse effect on our reputation, our business, results of operations and financial condition.
OUR REPORTED FINANCIAL RESULTS MAY BE MATERIALLY
AND ADVERSELY AFFECTED BY CHANGES IN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES.
Generally accepted accounting principles in
the United Sates are subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC, and various
bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could
have a significant effect on our reported financial results and could materially and adversely affect the transactions completed
before the announcement of a change. Additionally, the adoption of new or revised accounting principles may require that we make
significant changes to our systems, processes and controls.
CONTINUED COMPLIANCE WITH REGULATORY AND ACCOUNTING
REQUIREMENTS WILL BE CHALLENGING AND WILL REQUIRE SIGNIFICANT RESOURCES.
We spend a significant amount of management
time and external resources to comply with changing laws, regulations and standards relating to corporate governance and public
disclosure, including evolving SEC rules and regulations, Nasdaq Market rules, the Dodd-Frank Wall Street Reform and Consumer Protection
Act and the Sarbanes-Oxley Act of 2002, which requires managements annual review and evaluation of internal control over
financial reporting. Failure to comply with these laws and rules could lead to investigation by regulatory authorities, de-listing
from the Nasdaq Market, or penalties imposed on us.
IF WE ARE UNABLE TO MAINTAIN EFFECTIVE DISCLOSURE
CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING, INVESTORS MAY LOSE CONFIDENCE IN THE ACCURACY AND COMPLETENESS OF OUR
FINANCIAL REPORTS, AND THE MARKET PRICE OF OUR STOCK MAY BE AFFECTED.
If we are unable to maintain effective disclosure
controls and internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our
financial reports. Additionally, if any new internal control procedures which may be adopted or our existing internal control procedures
are deemed inadequate, or if we identify material weaknesses in our disclosure controls or internal controls over financial reporting
in the future, we will be unable to assert that our internal controls are effective. If we are unable to do so, or if our auditors
are unable to attest to the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness
of our financial reports, which could have an adverse effect on the price of our common stock.
INCREASED ATTENTION ON ENVIRONMENTAL, SOCIAL
AND GOVERNANCE ("ESG") MATTERS MAY HAVE A NEGATIVE IMPACT ON OUR BUSINESS, IMPOSE ADDITIONAL COSTS ON US, AND EXPOSE
US TO ADDITIONAL RISKS.
Companies are facing increasing attention from
investors, customers, partners, consumers and other stakeholders relating to ESG matters, including environmental stewardship,
social responsibility, diversity and inclusion, racial justice and workplace conduct. In addition, organizations that provide information
to investors on corporate
| 32 | |
| | Table of Contents | |
governance and related matters have developed
ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform
their investment and voting decisions. Unfavorable ESG ratings may lead to negative investor sentiment toward the Company, which
could have a negative impact on our stock price and our access to and costs of capital.
OUR COMPANY IS CURRENTLY QUOTED ON THE EXPERT
MARKET ON THE OTC MARKETS PLATFORM.
Our stock quote is not currently visible on
OTC Markets. The market for our stock is uncertain at this time. Quotations in Expert Market securities are restricted from public
viewing and only broker-dealers and professional or sophisticated investors are permitted to view quotations in Expert Market securities.
Our securities could be particularly illiquid due to being quoted on this market and that if we remain on the Expert Market it
could impede our operations, fundraising, and ability to defend our intellectual property rights.
Our stock is not eligible for proprietary broker-dealer
quotations. All quotes in this stock reflect unsolicited customer orders. Unsolicited-Only stocks have a higher risk of wider spreads,
increased volatility, and price dislocations. Investors may have difficulty selling this stock. An initial review by a broker-dealer
under SEC Rule15c2-11 is required for brokers to publish competing quotes and provide continuous market making.
OTC Markets Group has discontinued the public
display of quotes for our common stock because our filings are delinquent.
****
**RISK FACTORS RELATING TO OUR BUSINESS**
WE HAVE INCURRED SIGNIFICANT LOSSES AND ANTICIPATE
FUTURE LOSSES.
As of December 31, 2024, we had an accumulated
deficit of $11,806,894.
Future losses are likely to occur until we
are able to receive returns on our loans and investments since we have no other sources of income to meet our operating expenses.
As a result of these, among other factors, we received from our registered independent public accountants in their report for the
financial statements for the years ended December 31, 2014 through 2024, an explanatory paragraph stating that there is substantial
doubt about our ability to continue as a going concern.
OUR EXISTING FINANCIAL RESOURCES ARE INSUFFICIENT
TO MEET OUR ONGOING OPERATING EXPENSES.
We have no sources of income at this time and
insufficient assets to meet our ongoing operating expenses. In the short term, unless we are able to raise additional debt and,
or, equity we shall be unable to meet our ongoing operating expenses. On a longer-term basis, we intend to merge with another entity
with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders.
There can be no assurance that these events will be successfully completed.
Unfavorable
conditions in our industry or the global economy or reduCED ACCESS TO LENDING MARKETS could harm our business.
Our results of operations may vary based on
the impact of changes in our industry or the global economy on us or our potential customers. Current or future economic uncertainties
or downturns could adversely affect our business and results of operations. Negative conditions in the general economy both in
the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit
market fluctuations, political turmoil, natural catastrophes, warfare, public health issues, and terrorist attacks on the United
States, Europe, the Asia Pacific region, or elsewhere, could cause a decrease in business investments or decrease access to financing
which would harm our business. To the extent that our platform is perceived by potential customers as too costly, or difficult
to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in general technology spending.
Also, we may have competitors, many of whom may be larger and have greater financial resources than we
| 33 | |
| | Table of Contents | |
do and may respond to market conditions by
attempting to lure away our customers. We cannot predict the timing, strength, or duration of any economic slowdown, instability,
or recovery, generally or within any particular industry.
THERE CAN BE NO CERTAINTY AS TO MARKET ACCEPTANCE
OF THE PROPOSED BDTPTM.
The Company has no certainty as to whether
the market will accept our proposed business concept and use the idea of the BDTPTM, should it become operational, nor
is there any certainty as to how the BDTPTM translates to profits for the Company. There is no assurance of market acceptance
or profitability of the concept or Company. The BDTPTM is not yet functional and may never be functional.
WE MAY FAIL TO MEET THE EVOLVING NEEDS OF OUR
MARKETS, FAIL TO IDENTIFY NEW PRODUCTS, SERVICES, OR TECHNOLOGIES, OR FAIL TO COMPETE SUCCESSFULLY IN OUR TARGET MARKETS, ADVERSELY
IMPACTING OUR REVENUE AND FINANCIAL RESULTS.
We design, develop and market our blockchain-based
trading platform, BDTPTM. Our success depends to a significant extent on our ability to meet the evolving needs of these
markets and to enhance our existing products, solutions and technologies. In addition, our success depends on our ability to identify
emerging industry trends and to develop new products, solutions, and technologies. Our existing markets and products and new markets
and products may require a considerable investment of technical, financial, compliance, sales and marketing resources. We cannot
assure you that our strategic direction will result in innovative products and technologies that provide value to our customers
and partners. If we fail to anticipate the changing needs of our target markets and emerging technology trends, or adapt that strategy
as market conditions evolve, in a timely manner to exploit potential market opportunities our business will be harmed. In addition,
if demand for products and solutions from these markets is below our expectations, if we fail to achieve consumer or market acceptance
of them or if we are not able to develop these products and solutions in a cost effective or efficient manner, we may not realize
benefits from our strategy. Our target markets remain extremely competitive, and we expect competition to intensify as current
competitors expand their product and/or service offerings, industry standards continue to evolve and new competitors enter these
markets. If we are unable to successfully compete in our target markets, demand for our products, solutions and technologies could
decrease, which would cause our revenue to decline and our financial results to suffer.
SYSTEM SECURITY AND DATA PROTECTION BREACHES,
AS WELL AS CYBER-ATTACKS, COULD DISRUPT OUR OPERATIONS, REDUCE OUR EXPECTED REVENUE AND INCREASE OUR EXPENSES, WHICH COULD ADVERSELY
AFFECT OUR STOCK PRICE AND DAMAGE OUR REPUTATION.
Security breaches, computer malware and cyber-attacks
have become more prevalent and sophisticated in recent years. These attacks have occurred on our systems in the past and are expected
to occur in the future. Experienced computer programmers, hackers and employees may be able to penetrate our security controls
and misappropriate or compromise our confidential information, or that of our employees or third parties. These attacks may create
system disruptions or cause shutdowns. For portions of our IT infrastructure, including business management and communication software
products, we rely on products and services provided by third parties. These providers may also experience breaches and attacks
to their products which may impact our systems. Data security breaches may also result from non-technical means, such as actions
by an employee with access to our systems.
Actual or perceived breaches of our security
measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or
confidential data about us, our partners, our customers or third parties could expose the parties affected to a risk of loss, or
misuse of this information, resulting in litigation and potential liability, damage to our brand and reputation or other harm to
our business. Our efforts to prevent and overcome these challenges could increase our expenses and may not be successful. We may
experience interruptions, delays, cessation of service and loss of existing or potential customers. Such disruptions could adversely
impact our ability to fulfill orders and interrupt other critical functions. Delayed sales, lower margins or lost customers as
a result of these disruptions could adversely affect our financial results, stock price and reputation.
| 34 | |
| | Table of Contents | |
AN ARTICLE PUBLISHED ON APRIL 17, 2023 BY COINTELEGRAPH.COM
MAY EXPOSE US TO LIABILITY FOR VIOLATIONS OF SECTION 5 OF THE SECURITIES ACT.
On April 17, 2023, cointelegraph.com published
an article by Ana Paula Pereira making various statements which were erroneous about BlackStar and our platform. When the publication
of the article came to the attention of the Company, management felt that it was necessary to issue a press release (see the [Current
Report on Form 8-K](https://www.sec.gov/Archives/edgar/data/1483646/000106594923000038/ex99.htm)) correcting the article such that the public and existing security holders received factual information
and were not misled by the article. In responding to the article, the Company made statements about this Registration Statement,
which was not yet effective, in order to remove any confusion that the article may have caused and to reinforce that it was NOT
effective; the Company also clarified that the SEC was not approving the BDTPTM platform and that this Registration
Statement is a resale registration for common shares underlying convertible notes for select noteholders. While the Company believes
that the article and the Companys response do not constitute offers or sales of securities in the absence of an effective
registration statement, the Company cannot eliminate the possibility that it may have liability for a violation of the Securities
Act of 1933 (the 33 Act). Violations of the registration provisions of Section 5 of the 33 Act give
a purchaser of securities a one-year right to rescind the transaction, pursuant to Sections 12(a)(1) and 13 of the Act, as against
any seller of the securities who has violated Section 5. In the event that there is a finding of a violation of Section
5 of the 33 Act, certain investors may have a right of rescission. Section 5 allows purchasers to sue sellers for offering
or selling a non-exempt security without registering it. If the purchaser can prove a direct link between the purchaser and the
seller, and the suit is within the statute of limitations, the purchaser may obtainrescissionwith interest, ordamagesif
the investor sold his securities for less than he purchased them.
In addition to the civil liability from lawsuits
brought by investors, the Company and management could face civil or criminal action brought by the federal or state government,
depending on the nature of the violation. Criminal liability under Section 5 subjects the defendant to not more than $10,000 in
fines and not more than five years imprisonment. Any lawsuits, judgments, penalties, or orders against the Company or its management
could have a significant impact on the Company, may prevent or delay it from pursuing the proposed business plan, and would likely
have a negative effect on the stock price.
****
**RISKS RELATING TO OUR VENTURE INVESTMENTS**
WE HAVE NOT IDENTIFIED ANY OTHER VENTURES IN
WHICH WE MAY INVEST IN A VENTURE.
We have only loaned money to one company, Meshworks
Media Corporation, (and that loan has been assigned) and it may take time to find other ventures, none of which are identified
as of the date of this filing.
COMPETITION FOR LOANS AND INVESTMENTS.
We expect to encounter competition from other
entities having similar business objectives, some of whom may have greater resources than us. Historically, the primary competition
for venture capital investments has been from venture capital funds and corporations, venture capital affiliates of large industrial
and financial companies, small business investment companies, and wealthy individuals. Additional competition is anticipated from
foreign investors and from large industrial and financial companies investing directly rather than through venture capital affiliates.
Virtually all of our competitors will have a competitive advantage and are much larger. The need to compete for loans or investment
opportunities may make it necessary for us to offer venture companies more attractive transaction terms than otherwise might be
the case. We anticipate being a co-investor with other venture capital groups, and these relationships with other groups may expand
our access to business opportunities.
RISKS OF COMPETITION FOR OUR VENTURE COMPANIES.
Most emerging markets are highly competitive.
We anticipate that nearly all our venture companies will compete against firms with greater financial resources, more extensive
development, manufacturing, marketing, and service capabilities, and a larger number of qualified managerial and technical personnel.
RISKS OF OUR NEED FOR ADDITIONAL CAPITAL TO
FUND OUR VENTURE COMPANIES.
We expect that most venture companies will
require additional financing to satisfy their working capital requirements. The amount of additional financing needed will depend
upon the maturity and objectives of the particular opportunity.
| 35 | |
| | Table of Contents | |
Each round of venture financing (whether from
us or other investors) is typically intended to provide a venture company with enough capital to reach the next major valuation
milestone. If the funds provided are not sufficient, a company may have to raise additional capital at a price or at terms unfavorable
to the existing investors, including our Company. This additional financing or the availability of any form of equity or debt capital
is generally a function of capital market conditions that are beyond our control or any venture company. Our management team may
not be able to predict accurately the future capital requirements necessary for success of our Company or venture companies. Additional
funds may not be available from any source.
OUR VENTURE PORTFOLIO IS AND MAY CONTINUE TO
BE CONCENTRATED IN A LIMITED NUMBER OF VENTURE COMPANIES AND INDUSTRIES, WHICH WILL SUBJECT US TO A RISK OF SIGNIFICANT LOSS IF
ANY OF THESE COMPANIES FAIL OR BY A DOWNTURN IN THE PARTICULAR INDUSTRY.
Our venture is and may continue to be concentrated
in a limited number of venture companies and industries. We do not have fixed guidelines for diversification, and since we are
targeting some specific industries, our venture investments could continue to be, concentrated in relatively few industries. As
a result, the aggregate returns we realize may be significantly adversely affected if our venture investments perform poorly or
if we need to write down the value of any one investment. Additionally, a downturn in any particular industry in which we are invested
could also significantly impact the aggregate returns we realize.
WE INTEND TO CONTROL ALL OF OUR VENTURES.
We will control all of our venture companies,
and we will maintain financial supervision until divestiture, spin-off or liquidation.
WE MAY NOT REALIZE GAINS FROM OUR VENTURES.
Our goal is ultimately to dispose of our control
interests we receive from our venture companies to attempt to realize gains upon our disposition of such interests by sale, for
cash spin-off, or liquidation. However, any interests we hold may not appreciate in value and, in fact, may decline in value. Accordingly,
we may not be able to realize gains from any venture interests, and any gains that we do realize on the disposition of any venture
interests may not be sufficient to offset any other losses we experience.
THE INABILITY OF OUR VENTURE COMPANIES TO COMMERCIALIZE
THEIR TECHNOLOGIES OR CREATE OR DEVELOP COMMERCIALLY VIABLE PRODUCTS OR BUSINESSES WOULD HAVE A NEGATIVE IMPACT ON OUR INVESTMENT
RETURNS.
The possibility that our venture companies
will not be able to commercialize their technology, products or business concepts presents significant risks to the value of our
ventures. Additionally, although some of our venture companies may already have a commercially successful product or product line
when we invest, technology related products and services often have a more limited market or life span than have products in other
industries. Thus, the ultimate success of these venture companies often depends on their ability to continually innovate in increasingly
competitive markets. Their inability to do so could affect our investment return. We cannot assure you that any of our venture
companies will successfully acquire or develop any new technologies, or that the intellectual property the companies currently
hold will remain viable. Even if our venture companies are able to develop commercially viable products, the market for new products
and services is highly competitive and rapidly changing. Neither our venture companies nor we have any control over the pace of
technology development. Commercial success is difficult to predict, and the marketing efforts of our venture companies may not
be successful.
THE INABILITY OF OUR VENTURE COMPANIES TO ADEQUATELY
EXECUTE THEIR GROWTH OR EXPANSION STRATEGIES WOULD HAVE A NEGATIVE IMPACT ON OUR LOAN OR INVESTMENT RETURNS.
The possibility that our venture companies
will not be able to fully carry out or execute on their expansion or growth plans presents significant risk. Our venture investments
success in our subsidiary companies will ultimately depend on the success of our ventures. If the intended expansion or growth
plan that was one of the main reasons we had originally formed the venture does not come to fruition or is otherwise impeded, the
value of the venture may
| 36 | |
| | Table of Contents | |
negatively reflect this information, making
our investment not profitable or may subject us to a substantial loss. In such case, we may incur an entire loss of our investment.
OUR VENTURE COMPANIES WILL LIKELY HAVE SIGNIFICANT
COMPETITION FROM MORE ESTABLISHED COMPANIES AS WELL AS INNOVATIVE EARLY-STAGE COMPANIES.
Emerging growth companies often face significant
competition, both from early-stage companies and from more established companies. Early-stage competitors may have strategic capabilities
such as an innovative management team or an ability to react quickly to changing market conditions, while more established companies
may possess significantly more experience and greater financial resources than our venture companies. These factors could affect
our investment returns.
OUR INVESTMENT RETURNS WILL DEPEND ON THE SUCCESS
OF OUR VENTURES AND, ULTIMATELY, THE ABILITIES OF THEIR KEY PERSONNEL.
Our success will depend upon the success of
our ventures. Their success, in turn, will depend in large part upon the abilities of their key personnel. The day-to-day operations
of our ventures will remain the responsibility of their key personnel. The loss of one or a few key managers can hinder or delay
a companys implementation of its business plan. Our ventures may not be able to attract qualified managers and personnel.
Any inability to do so may negatively impact our financial picture.
SOME OF OUR VENTURE COMPANIES MAY NEED ADDITIONAL
CAPITAL, WHICH MAY NOT BE READILY AVAILABLE.
Ventures in which we may make investments will
often require substantial additional financing to fully execute their growth strategies. Each round of venture financing is typically
intended to provide a company with only enough capital to reach the next stage of development, or in the case of our financings,
the turn-around stage or offering stage which might provide us with a liquidity event. We cannot predict the circumstances or market
conditions under which our ventures may seek additional capital. It is possible that one or more of our ventures will not be able
to raise additional financing or may be able to do so at a price or on terms which are unfavorable to us, either of which could
negatively impact our success. A likely economic downturn due to the recent pandemic known as coronavirus (COVID-19) may also cause
lasting damage to the markets and potential ventures, from capital access and lack of investment issues to staffing and supply
chain issues.
**RISK FACTORS RELATED TO**
**OUR PLATFORM AND BLOCKCHAIN/DISTRIBUTED LEDGER
TECHNOLOGY**
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 BDTPTM 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 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
BDTPTM 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 BDTPTM, unless
and until we are able to reestablish a new licensee. If we are unable at any time to establish the necessary relationship, BDTPTM
may never become functional. If we are unable to license BDTPTM to an ATS in this way, we may reevaluate whether we
may apply for ATS status.
| 37 | |
| | Table of Contents | |
IF WE ARE UNABLE TO PROTECT THE CONFIDENTIALITY
OF OUR TRADE SECRETS AND OUR INTELLECTUAL PROPERTY, OUR BUSINESS AND COMPETITIVE POSITION COULD BE HARMED.
We plan to rely upon trademarks, copyrights,
trade secret protection and patents, as well as non-disclosure agreements and invention assignment agreements with employees, consultants
and third parties, to protect all confidential and proprietary information. Significant elements of our intended products and services
are based on unpatented trade secrets and know-how that are not publicly disclosed. In addition to contractual measures, we try
to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures
may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide
adequate protection for our proprietary information. The security measures may not prevent an employee or consultant from misappropriating
our trade secrets and providing them to a competitor, and the recourse we take against such misconduct may not provide an adequate
remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can
be difficult, expensive and time consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed
by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our
trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor,
our competitive position could be harmed.
We believe the protection of our intellectual
property is critical to our success. We seek to protect our intellectual property rights by relying on applicable laws and regulations
in the United States and internationally, as well as a variety of administrative procedures. Effective protection may not be available
in every country in which our products and services may be made available, and contractual measures and other steps we have taken
to protect our intellectual property may not prevent third party infringement or misappropriation or deter independent development
of similar intellectual property rights by others. Intellectual property protection is very expensive to maintain and may require
litigation. We likely need to protect our intellectual property rights and other proprietary rights in an increasing number of
jurisdictions, at great expense. We may license in the future certain of our proprietary rights, such as trademarks or copyrighted
material, to others, which could diminish the value of our proprietary rights or harm our reputation. Any failure to adequately
protect or enforce our intellectual property rights, or significant costs incurred in doing so, could materially harm our business.
As the number of products in the blockchain
industry increases and the functionality of these products further overlap, and as we acquire technology, we may become increasingly
subject to infringement claims, including patent, copyright, and trademark claims. It may be necessary to litigate the validity
and scope of the patent and other intellectual property rights of others, through time-consuming, costly litigation and potentially
disrupting our business, or requiring us to pay substantial judgments or settlements.
INTELLECTUAL PROPERTY RIGHTS CLAIMS MAY ADVERSELY
AFFECT THE DISTRIBUTED LEDGER TECHNOLOGY.
Third parties may assert intellectual property
claims relating to their source code, including Distributed Ledger Technology. Regardless of the merit of any intellectual property
or other legal action, any threatened action that reduces confidence in distributed ledger technologys long-term viability
may adversely affect an investment in us. Additionally, a meritorious intellectual property claim could prevent us, our ventures,
and other end-users from accessing the distributed ledger technology. As a result, an intellectual property claim against us could
adversely affect an investment in us.
WE MAY DEPEND ON THIRD PARTIES TO PROVIDE EXECUTION
OF OUR TRADING PLATFORM, INTERNET, TELECOMMUNICATION AND FIBER OPTIC NETWORK CONNECTIVITY TO OUR DATA CENTER, AND ANY DELAYS OR
DISRUPTIONS IN SERVICE COULD ADVERSELY AFFECT AN INVESTMENT IN US.
We may rely on third-party service providers.
In particular, we will depend on third parties to provide real time quotation and trading execution with our trading platform,
Internet, telecommunication, and fiber optic network connectivity to our servers in our data center, and we have no control over
the reliability of the services provided by these suppliers. We may in the future experience difficulties due to service failures
unrelated to our systems and services.
| 38 | |
| | Table of Contents | |
OUR INTERACTIONS WITH A BLOCKCHAIN MAY EXPOSE
US TO SDN OR BLOCKED PERSONS OR CAUSE US TO VIOLATE PROVISIONS OF LAW THAT DID NOTCONTEMPLATE DISTRIBUTE LEDGER TECHNOLOGY.
If our BDTPTM becomes operational,
we may be required to comply with the Office of Financial Assets Control (OFAC) of the U.S. Department of Treasurys
sanction program and not conduct business with persons named on its specially designated nationals (SDN) list. We
anticipate that we will not to our knowledge engage in transactions with persons named on OFACs SDN list, as the sales of
shares occurring with the use of the platform will be required to comply with existing rules and regulations applicable to the
information required to transfer securities. Moreover, federal law prohibits any U.S. person from knowingly or unknowingly possessing
any visual depiction commonly known as child pornography. Recent media reports have suggested that persons have imbedded such depictions
on one or more blockchains. Because our business requires us to download and retain one or more blockchains to effectuate our ongoing
business, it is possible that such digital ledgers contain prohibited depictions without our knowledge or consent. To the extent
government enforcement authorities literally enforce these and other laws and regulations that are impacted by decentralized distributed
ledger technology, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines
and penalties, all of which could harm our reputation and affect the value of our common stock.
THE POSSIBILITY OF TRADING OCCURRING ON MULTIPLE
EXCHANGES MEANS THAT THERE MAY BE DISCREPANCIES IN TRADING PRICES OF COMMON STOCK.
The trading market operating on the BDTPTM,
once operational, is distinct and separate from the OTC market on which the common shares currently trade, which could cause discrepancies
between the trading prices of common shares between the two venues, whether resulting from different liquidity in the markets or
otherwise. If approved for trading, shareholders may take advantage of any discrepancies between the trading prices and trade shares
of common stock where it is beneficial to them.
****
THE POSSIBILITY OF REGULATORY DEVELOPMENTS
RELATED TO CRYPTO ASSETS AND CRYPTO ASSET MARKETS MAY POSE AN UNINTENDED RISK TO OUR PROPOSED BUSINESS.
The Company does not believe that any pending
crypto legislation or regulation is likely to affect the business, financial condition, or results of operations at this stage.
In the event that our proposed business plans, including BDTPTM, fall into the definitions of any future crypto legislation
or regulation, the Company will evaluate the operations to ensure compliance with any new rules or laws. The Company has worked
to create the proposed business plan within the confines of the existing rules, regulations, and laws. If, however, abundant operational
changes are necessary for compliance, there may be material effects on the business.
THE COMPANY MAY FACE REPUTATIONAL HARM, LOSS
OF FINANCING, STOCK PRICE VOLATILITY, AND/OR LOW DEMAND FOR SERVICES BY PROXIMITY TO THE CRYPTO ASSET MARKET.
The Company does not operate in the crypto
asset markets, does not have crypto asset holdings, and is not proposing to participate in the crypto asset industry, including
crypto securities, crypto currencies, and tokens. The use of a blockchain in our proposed platform often gets conflated with crypto
asset markets due to blockchains use in those industries as well. Although the Company does not believe that any reputational
harm, loss of financing, stock price volatility, risk of legal proceedings, and/or low demand for our services will occur as a
result of disruptions to and volatility in the crypto asset markets, the Company could nonetheless potentially be harmed as a result
of our proximity to crypto asset markets.
| 39 | |
| | Table of Contents | |
****
**RISKS RELATING TO OWNERSHIP OF**
**BLACKSTAR ENTERPRISE GROUP, INC. COMMON STOCK**
WE MAY IN THE FUTURE ISSUE MORE SHARES WHICH
COULD CAUSE A LOSS OF CONTROL BY OUR PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS.
We may issue further shares as consideration
for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority
of the voting power and equity of our Company. The result of such an issuance would be those new stockholders and management would
control our Company, and persons unknown could replace our management at this time. Such an occurrence would result in a greatly
reduced percentage of ownership of our Company by our current stockholders, which could present significant risks to stockholders.
WE HAVE AUTHORIZED AND DESIGNATED A CLASS A
PREFERRED SUPER MAJORITY VOTING CONVERTIBLE STOCK, WHICH HAVE VOTING RIGHTS OF 60% OF OUR COMMON STOCK AT ALL TIMES.
Class A Preferred Super Majority Voting Convertible
Stock (the Class A Preferred Stock), of which 1,000,000 shares of preferred stock have been authorized for the Class
A out of 10,000,000 total preferred shares authorized, and which have super majority voting rights (60%) over common stock voting
at all times. At this time, all shares of the Class A Preferred Stock have been issued to International Hedge Group, Inc. which
is controlled by Mr. Kurczodyna, an officer and director.
A LIMITED PUBLIC MARKET EXISTS FOR OUR COMMON
STOCK AT THIS TIME, AND THERE IS NO ASSURANCE OF A FUTURE MARKET.
There is a limited public market for our common
stock, and no assurance can be given that a market will continue or that a shareholder ever will be able to liquidate his investment
without considerable delay, if at all. If a market should continue, the price may be highly volatile. Factors such as those discussed
in the Risk Factors section may have a significant impact upon the market price of the shares offered hereby. Due
to the low price of our securities, many brokerage firms may not be willing to effect transactions in our securities. Even if a
purchaser finds a broker willing to effect a transaction in our shares, the combination of brokerage commissions, state transfer
taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the
use of our shares as collateral for any loans.
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 the Expert Market operated by OTC. The shares of our common stock were previously quoted
on OTC Pink, and subsequent to filing all delinquent quarterly and annual reports with the SEC, we anticipate moving back to 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.
| 40 | |
| | Table of Contents | |
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.
Prior to being lowered to the Expert Market,
there had been a limited trading market for our common stock on the OTC Pink Market. The OTC Expert Market is a significantly more
limited market than Pink, and quotation on the OTC Expert Market will likely result in a less liquid market for existing and potential
holders of the Companys common stock to trade such securities and could further depress the trading price of the shares.
The Company can provide no assurance that its securities will continue to trade on this market, whether broker-dealers will continue
to provide public quotes of its securities on this market, or whether the trading volume of our shares will be sufficient to provide
for an efficient trading market for existing and potential holders of our shares.
Trading on the OTC Expert Market could also
harm the Companys ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and
may result in the loss of confidence in the Companys financial stability by suppliers, customers and employees. Investors
would likely find it more difficult to dispose of, or to obtain accurate market quotations for, the common shares. We cannot predict
how liquid the market for our common stock may become. A lack of an active market may impair an investors 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 or Expert 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 COMMON STOCK MAY BE VOLATILE, WHICH SUBSTANTIALLY
INCREASES THE RISK THAT YOU MAY NOT BE ABLE TO SELL YOUR SECURITIES AT OR ABOVE THE PRICE THAT YOU MAY PAY FOR THE SECURITY.
****
Because of the possible price volatility, you
may not be able to sell your shares of common stock when you desire to do so. The inability to sell your securities in a rapidly
declining market may substantially increase your risk of loss because of such illiquidity and because the price for our securities
may suffer greater declines because of our price volatility.
The price of our common stock that will prevail
in the market after this offering may be higher or lower than the price you may pay. Certain factors, some of which are beyond
our control, that may cause our share price to fluctuate significantly include, but are not limited to the following:
- Variations in our quarterly operating results;
- Loss of a key relationship or failure to complete significant transactions;
- Additions or departures of key personnel;
- Fluctuations in stock market price and volume;
- Changes to the Distributed Ledger Technology industry; and
- Regulatory developments, particularly those affecting digital shares.
Additionally, in recent years the stock market
in general, has experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate
to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our
stock price, regardless of our operating performance. In the past, class action litigation often has been brought against companies
following periods of volatility in the market price of those companys common stock. If we become involved in this type of
litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could
have a further negative effect on your investment in our stock.
| 41 | |
| | Table of Contents | |
THE REGULATION OF PENNY STOCKS BY THE SEC AND
FINRA MAY DISCOURAGE THE TRADABILITY OF OUR SECURITIES.
We are a penny stock company,
as our stock price is less than $5.00 per share. If we are able to obtain an exchange listing for our stock, we cannot make an
assurance that we will be able to maintain a stock price greater than $5.00 per share and if the share price was to fall to such
prices, that we wouldnt be subject to the Penny Stocks rules. None of our securities currently trade in any market and,
if ever available for trading, will be subject to a Securities and Exchange Commission rule that imposes special sales practice
requirements upon broker-dealers who sell such securities to persons other than established customers or accredited stockholders.
For purposes of the rule, the phrase accredited stockholders means, in general terms, institutions with assets in
excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000
(or that, when combined with a spouses income, exceeds $300,000). For transactions covered by the rule, the broker-dealer
must make a special suitability determination for the purchaser and receive the purchasers written agreement to the transaction
prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will
affect the ability of purchasers in this offering to sell their securities in any market that might develop therefore because it
imposes additional regulatory burdens on penny stock transactions.
In addition, the Securities and Exchange Commission
has adopted a number of rules to regulate penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4,
15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute penny
stocks within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect
the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
Stockholders should be aware that, according
to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter
or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
(iii) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor
losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect
to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive
within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
Inventory in penny stocks have limited remedies
in the event of violations of penny stock rules. While the courts are always available to seek remedies for fraud against us, most,
if not all, brokerages require their customers to sign mandatory arbitration agreements in conjunctions with opening trading accounts.
Such arbitration may be through an independent arbiter. Stockholders may file a complaint with FINRA against the broker allegedly
at fault, and FINRA may be the arbiter, under FINRA rules. Arbitration rules generally limit discovery and provide more expedient
adjudication, but also provide limited remedies in damages usually only the actual economic loss in the account. Stockholders should
understand that if a fraud case is filed an against a company in the courts it may be vigorously defended and may take years and
great legal expenses and costs to pursue, which may not be economically feasible for small stockholders.
That absent arbitration agreements, specific
legal remedies available to stockholders of penny stocks include the following:
|
- | If a penny stock is sold to the investor in violation of the requirements
listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund
of the investment. | |
|
- | If a penny stock is sold to the investor in a fraudulent manner,
the investor may be able to sue the persons and firms that committed the fraud for damages. | |
| 42 | |
| | Table of Contents | |
The fact that we are a penny stock company
will cause many brokers to refuse to handle transactions in the stocks, and may discourage trading activity and volume, or result
in wide disparities between bid and ask prices. These may cause stockholders significant illiquidity of the stock at a price at
which they may wish to sell or in the opportunity to complete a sale. Stockholders will have no effective legal remedies for these
illiquidity issues.
**
WE WILL PAY NO FORESEEABLE DIVIDENDS IN THE
FUTURE.
We have not paid dividends on our common stock
and do not ever anticipate paying such dividends in the foreseeable future. Stockholders whose investment criteria are dependent
on dividends should not invest in our common stock.
****
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE
EFFECT ON OUR STOCK PRICE.
All of the outstanding shares of common stock
are held by our present officers, directors, and affiliate stockholders as "restricted securities" within the meaning
of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an
effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the
Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted
securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares
that does not exceed the greater of 1.0% of a company's outstanding common stock or the average weekly trading volume during the
four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a non-affiliate
after the owner has held the restricted securities for a period of two years. A sale under Rule 144 or under any other exemption
from the Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have
a depressive effect upon the price of the common stock in any market that may develop.
**
OUR STOCKHOLDERS MAY SUFFER CURRENT OR FUTURE
DILUTION DUE TO ISSUANCES OF SHARES FOR VARIOUS CONSIDERATIONS IN THE FUTURE.
There may be substantial dilution to BlackStar
Enterprise Group, Inc. stockholders as a result of future decisions of the Board to issue shares without shareholder approval for
cash, services, or acquisitions.
Significant dilution has already occurred related
to the conversion of shares from the convertible promissory notes discussed herein. Dilution is likely to continue for as long
as the notes are due.
WE ARE A REPORTING COMPANY.
We are subject to the reporting requirements
under the Securities and Exchange Act of 1934, Section 13a, due to the effectiveness of our Registration Statement on Form 10 under
Section 12(g) which became effective on or about February 27, 2017. As a result, stockholders will have access to the information
required to be reported by publicly held companies under the Exchange Act and the regulations thereunder. As a result, we will
be subject to legal and accounting expenses that private companies are not subject to and this could affect our ability to generate
operating income.
OUR OTC MARKET STATUS WAS LOWERED FROM OTC
PINK TO EXPERT MARKET.
Due to the delinquency of the SEC filings of
the Company, we were demoted from the OTC Pink to the Expert Market in 2025. The Company has sought financing through convertible
promissory notes in order to develop the BDTPTM app; some of the notes have in turn been converted to common stock and
then traded on the market in large quantities, lowering the bid prices. The change in status from OTC Pink to Expert Market will
make it harder to access investors and financing to continue to fund our operations.
OTC Markets may choose to downgrade our profile
further if we do not maintain adequate proof that we are not, in fact, a shell company.
| 43 | |
| | Table of Contents | |
BLACKSTAR ELECTRONIC FUNGIBLE SHARES AND DIGITAL
SHARES IN GENERAL MAY BE SUBJECT TO UNIQUE RISKS NOT ASSOCIATED WITH PAPER CERTIFICATED SHARES.
The digital form of BlackStar common stock
(BlackStar Electronic Fungible Shares when traded on BDTPTM) and digital or electronic shares in general may be subject
to timing delays, electronic transfer errors, electronic systems outages, and cybersecurity threats. BlackStar Electronic Fungible
Shares carry 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 fungible shares of common stock, including BlackStar Electronic
Fungible Shares, are the same class of common stock and hold the same rights as paper certificated shares of common stock; the
only difference is the format. Digital shares 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.
**ITEM 1B. UNRESOLVED STAFF COMMENTS.**
NONE.
**ITEM 1C. CYBERSECURITY**
We place the utmost importance on the security
of our systems and the data we will handle once BDTPTM is operational. We plan to implement a comprehensive process
for identifying, assessing, and managing material risks from cybersecurity threats as part of our broader risk management system
and processes.
To identify and assess risks from cybersecurity
threats, we will evaluate a variety of developments including threat intelligence, vulnerabilities of third parties, including
any auditors or consultants who advise on our cybersecurity systems, evolving regulatory requirements, and observed cybersecurity
incidents, among others. We will regularly conduct risk assessments to evaluate the maturity and effectiveness of our systems and
processes in addressing cybersecurity threats and to identify any areas for remediation and opportunities for enhancements. The
results of such assessments will be evaluated by management and reported to our board of directors, and we will continue to adjust
our cybersecurity policies, standards, processes, and practices as necessary.
Our Board is responsible for the oversight
of risks from cybersecurity threats and directly oversees our cybersecurity policies and practices, internal controls regarding
information security, and compliance with legal and regulatory requirements regarding cybersecurity risks. The Board receives regular
reports and updates on cybersecurity matters from our management, including developments on existing and new cybersecurity risks
and how management is addressing and/or mitigating such risks, cybersecurity and data privacy incidents (if any), the status of
key information security initiatives, vulnerability assessments, as well as on existing and emerging threat landscapes. Additionally,
on at least an annual basis, the Board reviews and discusses with management our policies and programs with respect to cybersecurity
threats.
We do not have a dedicated security team, but
our Chief Executive Officer monitors the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents
in accordance with our incident response and recovery plans. Threats and incidents that are identified as potentially significant
are promptly reported to the Board.
| 44 | |
| | Table of Contents | |
While risks from cybersecurity threats, including
as a result of any previous cybersecurity incidents, have not materially affected and are not reasonably likely to materially affect
our Company, including our business strategy, results of operations, or financial condition, we cannot provide assurance that they
will not be materially affected in the future by such risks or any future material incidents. See Risk Factors in
Part I, Item 1A of this Annual Report on Form 10-K for further information regarding cybersecurity risks.
**ITEM 2. PROPERTIES.**
DESCRIPTION OF PROPERTIES/ASSETS
Real Estate - None
Oil and Gas Properties
- None
Patents See below
Trademarks - BlackStar Digital Trading Platform TM,
BDTPTM, B. E. T. TM, Blockchain First TM
****
Our executive offices
are located in Boulder, Colorado. We do not own any real property but lease office space. We believe that substantially all of
our property and equipment is in good condition, subject to normal wear and tear, and that our facilities have sufficient capacity
to meet the current needs of our business.
PATENTS, TRADE NAMES,
TRADEMARKS AND COPYRIGHTS
|
Patent Number |
Issue Date |
Title | |
|
US-11854080-B2 |
12/26/2023 |
System and method for matching orders and immutable blockchain ledger for all customer trading activity with settlement into the broker dealer ecosystem | |
|
US-11966974-B2 |
4/23/2024 |
System and method for preparing for a SEC financial statement audit by recording corporate governance information on an immutable blockchain | |
|
US-12079872-B2 |
9/3/2024 |
Systems and methods for using a digital trading platform to trade securities on a blockchain | |
|
US-12086880-B2 |
9/10/2024 |
System and method for facilitating a public offering on an immutable blockchain provided to eligible qualified investors based upon priority of interest | |
|
US-12112380-B2 |
10/8/2024 |
Systems and methods for the regulated trading of registered equities with the securities and exchange commission on an immutable blockchain with settlement into the broker dealer ecosystem | |
|
US-12131383-B2 |
10/29/2024 |
Systems and methods for the trading of registered equities on an immutable blockchain with settlement into the broker dealer ecosystem | |
|
US-12248987-B2 |
3/11/2025 |
Systems and methods for trading derivatives purchased on a blockchain on a digital trading platform that integrates with the traditional broker-dealer ecosystem | |
|
US-12288257-B2 |
4/29/2025 |
Systems and methods for preparing for an audit by recording corporate governance information on an immutable blockchain | |
|
Trademark Number |
Notice of Allowance Date |
Trademark | |
|
97074941 |
Live/Pending 11/22/2022 |
Blockchain First | |
|
97128229 |
Live/Pending 11/22/2022 |
B. E. T. | |
|
97128224 |
Live/Pending 4/25/2023 |
Blackstar Digital Trading Platform | |
|
97128228 |
Live/Pending 11/22/2022 |
B.D.T.P. | |
| 45 | |
| | Table of Contents | |
Either directly or
through our subsidiaries, we may have rights in various patents, trade names, trademarks, copyrights and other intellectual property
necessary to conduct our business. Our services may use the intellectual property of others, including licensed software. We may
occasionally license any future intellectual property to others as we deem appropriate.
We regard the protection
of our intellectual property, including our trademarks, patents, copyrights, domain names, trade dress and trade secrets as critical
to our success. We aggressively protect our intellectual property rights by relying on federal, state and common law rights in
the U.S. and internationally, as well as a variety of administrative procedures. We also rely on contractual restrictions to protect
our proprietary rights in products and services. We routinely enter into confidentiality and invention assignment agreements with
our employees and contractors and nondisclosure agreements with parties with whom we conduct business to limit access to and disclosure
of our proprietary information.
We pursue the registration
of our domain names, trademarks and service marks in the U.S. Additionally, we have filed U.S. patent applications covering certain
aspects of our proprietary technology. Effective trademark, copyright, patent, domain name, trade dress and trade secret protection
is typically expensive to maintain and may require litigation. We must protect our intellectual property rights and other proprietary
rights in an increasing number of jurisdictions, a process that is expensive and time consuming and may not be successful.
We have registered
our core brands as trademarks and domain names in the U.S. If we are unable to register or protect our trademarks or domain names,
we could be adversely affected in any jurisdiction in which our trademarks or domain names are not registered or protected. We
may license, in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to others.
**ITEM 3. LEGAL PROCEEDINGS.**
On November 6, 2023, the Company was
notified of a lawsuit filed in Clark County, NV against the Company by GS Capital 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.
Shortly after the Plaintiff filed the lawsuit, BlackStar repaid the remaining principal balance. At the outset of the case, a
temporary restraining order was entered and required the transfer of 257,000,000 shares of BlackStars stock to the
Plaintiff to be sold on the open market, which occurred in Q1 and Q2 of 2024. BlackStar has appealed the temporary
restraining order to the Nevada Supreme Court and seeks the return of the 257,000,000, among other damages. While the appeal
is pending, the Company, through its attorneys, filed an answer to Plaintiffs complaint and counterclaims against
Plaintiff on February 27, 2024. In addition to denying many of the allegations laid out in the lawsuit, the Company invokes
several affirmative defenses that bar Plaintiffs recovery in the action and alleges that Plaintiff breached the terms
of the agreement, including, but not limited to, obtaining the conversion of BlackStars stock after the Promissory
Note was fully paid off. Amongst other claims, the Company alleges that the Plaintiff acted in bad faith and in violation of
usury laws by recovering an estimated $600,000 dollars in BlackStar stock off of a $60,000 promissory note, estimated at a
roughly 170% interest rate. The Company seeks a judgment in its favor and against Plaintiff, compensatory damages in an
amount to be proven at trial, declaratory relief voiding the agreement as illegal under Section 29(b) of the Securities Act,
punitive damages in an amount to be proven at trial, interest on all damages, and attorneys fees. As a result of
the counterclaims, there can be no reasonable estimate of any contingencies as of June 30, 2024. At an April 22, 2024
hearing, the Plaintiffs motion to dismiss our counterclaims was denied, and again on July 18, 2024 the Court refused
to dismiss BlackStars counterclaims against Plaintiff. BlackStar intends to pursue those counterclaims for securities
violations. BlackStar and the Plaintiff have agreed to a stay of the trial court proceedings while the appeal of the
temporary restraining order is resolved, likely in late 2025 or early 2026.
On October 30, 2024, the Company entered into
a Settlement Agreement with Continuation Capital, Inc. (CCI) for the purchase of $861,539.26 of debt owed to BlackStars
creditors (for more details, see the [Form
8-K](https://www.sec.gov/Archives/edgar/data/1483646/000106594924000119/blackstar8k1152024.htm) filed November 5, 2024 and incorporated herein by reference). The Settlement Agreement was approved in Florida State court
in compliance with the terms of Section 3(a)(10) of the Securities Act of 1933, as amended. Under the terms of the Settlement Agreement
and Stipulation, CCI agreed to purchase the bona fide and outstanding and unpaid creditor claims in exchange for shares of BlackStars
common stock. If satisfied in full, pursuant to the Settlement Agreement, the Company will reduce its debt obligations in
exchange for the issuance of shares of Companys common stock to CCI. The shares will be issued at a discount of 42.5% off
the market price (the lowest closing sale price for twenty
| 46 | |
| | Table of Contents | |
(20) trading days), in one or more tranches,
pursuant to the terms of section 3(a)(l0) of the Securities Act of 1933, as amended. Upon closing, the Company issued to CCI 60,200,000
freely trading shares, valued at $138,640 based on the trading price of the Companys common stock as of the date of the
Settlement Agreement, as a fee for entering into the Settlement Agreement, pursuant to Section 3(a)(10) of the Securities Act.
In November 2024, the Company issued to CCI an additional 13,377,926 shares of common stock for CCIs payment of $10,000
to certain creditors of the Company. BlackStar and CCI have since terminated the debt purchase relationship. CCI received free-trading
shares and sold those shares prior to fulfilling any debt obligations, and such obligations have returned to BlackStar.
The Company increased the authorized shares
of common stock to 6,000,000,000 on February 10, 2025 in order to accommodate continued conversions, judgments, or settlements;
the Company may need to increase again in the future or it could be exposed to further risks of lawsuits for similar issues. More
details of the increase to the authorized shares of common stock can be found in the [Schedule
14C Information Statement](https://www.sec.gov/Archives/edgar/data/1483646/000106594924000137/begidef14c.htm) filed on December 17, 2024 and incorporated herein by reference. The Company will also expend additional
resources in the ongoing litigation and any potential resolutions outside the above-reference conversions to common stock (which
were already contemplated in the original convertible promissory note), negatively impacting its financial position.
**ITEM 4. MINE SAFETY DISCLOSURE.**
****
Not applicable.
****
**PART II**
**ITEM 5. MARKET FOR REGISTRANTS COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.**
Our common stock is currently quoted on the
OTC Expert Market and was previously quoted on OTC Pink under the symbol BEGI. Because we are quoted on OTC Expert
Market, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices
than might otherwise be obtained if they were listed on a national securities exchange. Our stock quote is not currently visible
on OTC Markets. The market for our stock is uncertain at this time.
International
Hedge Group, Inc. (IHG), our parent company, is our controlling shareholder and is engaged in providing management
services to companies, and, on occasion, capital consulting. IHGs strategy in investing in BlackStar Enterprise Group, Inc.
is to own a controlling interest in a publicly quoted company which has the legal ability and mission to do loan-based funding
of start-up and developed business ventures using its stock for private placement or public offerings. Through anti-dilutive measures,
IHG now owns less than 1% of common shares of BlackStar for the year ended December 31, 2024. IHG and BlackStar are managed and
controlled by the same individuals, but IHG may seek its funding from different and as yet, undetermined sources, with funding
structures of different natures. IHG, through its holding of 100% of the Class A Preferred Stock of BlackStar, has voting control
over BlackStar. Mr. Kurczodyna, through his preferred shares in IHG, has voting control of IHG.
On December
18, 2020, IHG filed an amendment to their articles of incorporation designating 1,000,000 of their 20,000,000 authorized preferred
shares to be Class A Preferred Stock and setting forth the Convertible Super Majority Voting Privileges. The IHG Board of Directors
authorized a vote by the disinterested shareholders and a majority of shareholders voted in favor of issuing the 1,000,000 IHG
Class A Preferred shares to Mr. Kurczodyna as compensation for services provided to IHG. The holders of the IHG Class A shall have
that number of votes equal to that number of IHG common shares which is not less than 60% of the vote required to approve any action,
and the holders of IHG Class A Preferred may choose to convert the IHG Class A Preferred Stock into shares of IHG common stock
at the rate of one (1) IHG Class A Preferred for two-hundred ten (210) IHG common shares. This was a significant increase to the
control of IHG by Mr. Kurczodyna and he has control of BlackStar Enterprise Group, Inc. through his IHG interest.
| 47 | |
| | Table of Contents | |
The following tables set forth the high and
low bid quotations for our common stock as reported on the OTCQB/OTC Pink for the periods indicated.
|
Fiscal 2024 |
|
Low |
|
|
High |
| |
|
First Quarter ended March 31, 2024 |
|
$ |
0.001 |
|
|
$ |
0.004 |
| |
|
Second Quarter ended June 30, 2024 |
|
$ |
0.002 |
|
|
$ |
0.004 |
| |
|
Third Quarter ended September 30, 2024 |
|
$ |
0.002 |
|
|
$ |
0.003 |
| |
|
Fourth Quarter ended December 31, 2024 |
|
$ |
0.001 |
|
|
$ |
0.003 |
| |
|
|
|
|
|
|
|
| |
|
Fiscal 2023 |
|
Low |
|
|
High |
| |
|
First Quarter ended March 31, 2023 |
|
$ |
0.000 |
|
|
$ |
0.001 |
| |
|
Second Quarter ended June 30, 2023 |
|
$ |
0.000 |
|
|
$ |
0.001 |
| |
|
Third Quarter ended September 30, 2023 |
|
$ |
0.000 |
|
|
$ |
0.001 |
| |
|
Fourth Quarter ended December 31, 2023 |
|
$ |
0.000 |
|
|
$ |
0.013 |
| |
|
Fiscal 2022 |
|
Low |
|
|
High |
| |
|
First Quarter ended March 31, 2022 |
|
$ |
0.004 |
|
|
$ |
0.022 |
| |
|
Second Quarter ended June 30, 2022 * |
|
$ |
0.002 |
|
|
$ |
0.011 |
| |
|
Third Quarter ended September 30, 2022 |
|
$ |
0.001 |
|
|
$ |
0.004 |
| |
|
Fourth Quarter ended December 31, 2022 |
|
$ |
0.001 |
|
|
$ |
0.002 |
| |
*** The shares moved from the OTCQB to the OTC Pink Market on June
30, 2022.**
****
**Holders**
As of December 31, 2024, there were approximately
363 record holders of 1,854,894,873 shares of our common stock. The Company has also reserved out of its authorized Common Stock
approximately 136,904,785 shares of Common Stock for conversion pursuant to the convertible promissory notes as of April 30, 2025.
**Dividends**
As of the filing of this Form 10-K, we have
not paid any dividends to stockholders. There are no restrictions which would limit our ability to pay dividends on common equity
or that are likely to do so in the future. The Delaware General Corporation Laws, however, do prohibit us from declaring dividends
where, after giving effect to the distribution of the dividend; we would not be able to pay our debts as they become due in the
usual course of business; or our total assets would be less than the sum of the total liabilities plus the amount that would be
needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.
****
**DESCRIPTION OF SECURITIES**
****
**Common
Stock**
The total number of common shares authorized
to be issued by the Company as of December 31, 2024 is 2,000,000,000 common shares with a par value of $0.001 per share. The Company
is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share. A total of 1,854,894,873 common
shares are issued and outstanding as of December 31, 2024 and 1,000,000 preferred shares are issued and outstanding as of December
31, 2024. There are no warrants to purchase shares of common stock outstanding as of December 31, 2024.
On February 10, 2025, the Company increased
the authorized shares of common stock to 6,000,000,000 with a par value of $0.001 per share. More details of the increase to the
authorized shares of common stock can be found in the [Schedule
14C Information Statement](https://www.sec.gov/Archives/edgar/data/1483646/000106594924000137/begidef14c.htm) filed on December 17, 2024 and incorporated herein by reference.
| 48 | |
| | Table of Contents | |
Common Shares
All common shares are equal to each other with
respect to voting, liquidation, and dividend rights. Special shareholders meetings may be called by the officers or director,
or upon the request of holders of at least one-tenth (1/10th) of the outstanding shares. Holders of shares are entitled to one
vote at any shareholders meeting for each share they own as of the record date fixed by the board of directors. There is
a quorum requirement for shareholders meetings of one-third of the votes entitled to be cast on the matter by the voting
group. Holders of shares are entitled to receive such dividends as may be declared by the board of directors out of funds legally
available therefore, and upon liquidation are entitled to participate pro rata in a distribution of assets available for such a
distribution to shareholders. Other than as described in the Preferred shares section below, there are no conversion,
pre-emptive or other subscription rights or privileges with respect to any shares. Reference is made to our [Certificate
of Incorporation](https://www.sec.gov/Archives/edgar/data/1483646/000106594916000542/ex3i.1.htm), as amended, and our [Bylaws](https://www.sec.gov/Archives/edgar/data/1483646/000106594916000542/ex3.2.htm),
both as filed with the Form 10 on December 29, 2016 and incorporated herein by reference, as well as to the applicable statutes
of the State of Delaware for a more complete description of the rights and liabilities of holders of shares. It should be noted
that the board of directors without notice to the shareholders may amend the Bylaws. Our shares do not have cumulative voting rights,
which means that the holders of more than fifty percent (50%) of the shares voting for election of directors may elect all the
directors if they choose to do so. In such event, the holders of the remaining shares aggregating less than fifty percent (50%)
of the shares voting for election of directors may not be able to elect any director.
Our common stock is currently
quoted on the OTC Expert Market under the symbol BEGI. Because we are quoted on the OTC Expert Market, our securities
may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be
obtained if they were listed on a national securities exchange. Our stock quote is not currently visible on OTC Markets. The market
for our stock is uncertain at this time.
Preferred shares
As of December 31, 2024, we had authorized
ten million (10,000,000) shares of Preferred Stock, of which certain shares had been designated as Class A Preferred Stock.
**Class A Convertible Preferred Stock**
The Certificate of Incorporation of the Company
authorizes the issuance of up to ten million (10,000,000) shares of Preferred Stock, $0.001 par value per share (herein, Preferred
Stock or Preferred Shares), and expressly vests in the Board of Directors of the Company the authority provided
therein to issue any or all of the Preferred Shares in one (1) or more Class or classes and by resolution or resolutions to establish
the designation and number and to fix the relative rights and preferences of each Class to be issued. The Board authorized One
Million (1,000,000) of the Ten Million (10,000,000) authorized shares of Preferred Stock of the Company to be designated Class
A Preferred Convertible Stock, $0.001 par value per share, and shall possess the rights and preferences set forth below:
Rank. The Class A Preferred Convertible
Stock shall rank: (i) senior to any other class or Class of outstanding Preferred Shares or Class of capital stock of the Company;
(ii) prior to all of the Companys Common Stock, (Common Stock); and (iii) prior to any other class or Class
of capital stock of the Company hereafter created Junior Securities); and in each case as to distributions of assets
upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (all such distributions being referred
to collectively as Distributions).
Dividends. The Class A Preferred Convertible
Stock shall bear no dividends, except that in the event dividends are declared for common stock, the same rate of dividend per
share shall be due and payable to the Class A Preferred shareholders on the same terms.
Liquidation / Merger Preference.
(a)So
long as a majority of the shares of Class A Preferred authorized are outstanding, the Company will not, without the written consent
of the holders of at least 51% of the Companys outstanding Class A Preferred, either directly or by amendment, merger, consolidation,
or otherwise: (i) liquidate, dissolve or wind-up the affairs of the Company, or effect any Liquidation Event; (ii)amend,
alter, or repeal any provision of the Certificate of Incorporation
| 49 | |
| | Table of Contents | |
or Bylaws in a manner adverse to the Class
A Preferred (iii)create or authorize the creation of, or issue any other security convertible into or exercisable for, any
equity security, having rights, preferences or privileges senior to the Class A Preferred, or (iv) purchase or redeem or pay any
dividend on any capital stock prior to the Class A Preferred, other than stock repurchased from former employees or consultants
in connection with the cessation of their employment/services.
(b)In
the event of any liquidation, merger, dissolution or winding up of the Company, either voluntary or involuntary, the holders of
shares of Class A Preferred Convertible Stock (each a Holder and collectively the Holders) shall be
entitled to receive, prior in preference to any distribution to Junior Securities, an amount per share equal to $.01 plus any allocable
and due dividends per share.
(c)Upon
the completion of the distribution required to Class A holders, if assets remain in the Company, they shall be distributed to holders
of Junior Securities in accordance with the Companys Certificate of Incorporation including any duly adopted Certificate(s)
of Designation.
Conversion Rights:
****
The Holders of the Class A Preferred Convertible
Stock shall, individually and collectively, have the right to convert all of their Class A Preferred Convertible Stock, in one
transaction, by electing, in writing, to convert the 1,000,000 shares of Class A Preferred Stock into shares of Common Stock of
the Company, on the basis of 100 common shares for each share of Class A Preferred Stock, subject to adjustment. ****
Adjustment to Conversion Rate. The conversion
price will be subject to adjustments for stock dividends, splits, combinations and similar events and to Adjustment Due to Merger,
Consolidation, Etc*.*If, prior to the conversion of all Class A Preferred Convertible Stock, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities
of the Company or another entity or there is a sale of all or substantially all the Companys assets, then the Holders of
Class A Preferred Convertible Stock shall thereafter have the right to receive upon conversion of Class A Preferred Convertible
Stock, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities and/or other assets (New Assets) which the Holder would
have been entitled to receive in such transaction had the Class A Preferred Convertible Stock been convertible into New Assets
from the date hereof, at the market price of such New Assets on the date of conversion, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Holders of the Class A Preferred Convertible Stock to the end that
the provisions hereof (including, without limitation, provisions for the adjustment of the conversion price and of the number of
shares of Common Stock issuable or New Assets deliverable upon conversion of the Class A Preferred Convertible Stock) shall thereafter
be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the exercise here.
Redemption by Company. The Company may,
at its sole discretion redeem all or any portion of the Class A Preferred Convertible Stock by paying in cash by wire transfer
the stated value of US $50.00 per share, plus all accrued and unpaid dividends on the Class A Preferred Convertible Stock to be
redeemed, to the Holder pursuant to the Holders written instructions. The Holders may convert Class A Preferred Convertible
Stock into Common Stock of the Company until such cash has been transmitted to the Holder, at which time conversion rights shall
cease and the Holder shall surrender all redeemed Class A Preferred Certificates to the Company for cancellation.
Super Majority Voting Rights. The record
Holders of the Class A Preferred Convertible Stock shall have the right to vote on any matter with holders of Common Stock and
may vote as required on any action, which Delaware law provides may or must be approved by vote or consent of the holders of the
specific Class of voting preferred shares and the holders of common shares. The Record Holders of the Class A Preferred Shares
shall have the right to vote on any matter with holders of common stock voting together as one (1) class. The Record Holders of
the Class A Preferred Shares shall have that number of votes (identical in every other respect to the voting rights of the holders
of other Class of voting preferred shares and the holders of common stock entitled to vote at any Regular or Special Meeting of
the Shareholders) equal to that number of common shares which is not less than 60% of the vote required to approve any action,
which Delaware law provides may or must be approved by vote or consent of the holders of
| 50 | |
| | Table of Contents | |
other Class of voting preferred shares and
the holders of common shares or the holders of other securities entitled to vote, if any.
In 2016, BlackStar entered into an agreement
whereby BlackStars parent, International Hedge Group, Inc., acquired 44,400,000 shares of common stock, 1,000,000 shares
of our Class A Preferred Super Majority Voting Convertible Stock, and 34,000,000 warrants to purchase common stock @ $0.05 per
share expiring in 3 years (cashless) for capital infusion of $200,000. Joseph E. Kurczodyna owns the controlling interest of International
Hedge Group, Inc., which in turn controls the voting stock of BlackStar.
As part of managements ongoing anti-dilutive
strategy, 7,289,891 shares of IHG were cancelled as of December 31, 2019.On March 12, 2020, the Company increased its authorized
shares to 700,000,000, par value $0.001. On December 18, 2020, Mr. Kurczodyna became the controlling shareholder of IHG through
the issuance of preferred super majority voting shares in IHG. On July 8, 2022, the majority shareholder of the Company submitted
written consent to the resolution to increase the authorized common stock from 700,000,000 to 2,000,000,000, par value $0.001,
with an effective date of August 5, 2022.
There were 1,854,894,873 shares of common stock
outstanding, no warrants issued for common stock, and 1,000,000 Class A Preferred Shares outstanding (owned by International Hedge
Group, Inc.) as of December 31, 2024.
**Options & Warrants**
Effective December 1, 2016, our Stock Option
and Award Plan (the Stock Incentive Plan) was approved by our Board of Directors. Under the Stock Incentive Plan,
the Board of Directors may grant options or purchase rights to purchase common stock to officers, employees, and other persons
who provide services to us or any related company. The participants to whom awards are granted, the type of awards granted, the
number of shares covered for each award, and the purchase or exercise price, conditions and other terms of each award are determined
by the Board of Directors, except that the term of the options shall not exceed 10 years. A total of 10 million shares of our common
stock are subject to the Stock Incentive Plan and may be either a qualified or non-qualified stock option. The shares issued for
the Stock Incentive Plan may be either treasury or authorized and unissued shares. As of December 31, 2024, we have granted no
stock options to purchase any shares of our common stock under the Plan.
As of December 31, 2024, there are no warrants
outstanding.
**Transfer Agent**
The transfer agent for our securities is EQ
Shareowner Services, formerly known as Corporate Stock Transfer, with offices at 3200 Cherry Creek South Drive, Suite 430, Denver,
Colorado 80209, Phone (303) 282-4800.
****
**Securities Authorized for Issuance Under
Equity Compensation Plans.**
None.
**Recent Sales of Unregistered Securities.**
****
We have sold securities in the past two fiscal
years without registering the securities under the Securities Act of 1933 as shown in the following summaries, including transactions
occurring to the date of this filing:
**2025**
On January 9, 2025, the Company entered into
a financing agreement with 1800 Diagonal Lending LLC (1800 Diagonal) to borrow $49,200. The note matures on October
30, 2025, bears interest at 12%, with a default rate of 22%, and is convertible, commencing 180 days after the date of issuance,
into common shares of the Company. The conversion price is to be calculated at 61% of the average of the lowest trading price of
the Companys common stock for the previous ten 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 114,000,000 shares of common stock for conversion. Net proceeds from the loan were
| 51 | |
| | Table of Contents | |
$40,000, after legal fees and borrowing costs
of $9,200. 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 BDTPTM, legal and professional fees, consulting
fees, and general and administrative expenses.
On May 29, 2025, the Board of Directors authorized
and approved the issuance of an aggregate 400,000,000 shares of the common stock to officers/directors/advisors/consultants to
the Company for services rendered at a value of $0.0004 per share, based on the daily closing trading price of the Companys
common stock, including 200,000,000 shares to the Companys Chief Execution Officer/Director and 25,000,000 to an independent
director. The shares 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 us 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
October 2025, the Company commenced a $1 million fractional unit offering, in increments of $5,000, consisting of Common and Preferred
Securities under a term sheet to certain accredited investors, who had advanced monies to the Company over a period of 5 months
in the 2025 fiscal year. The Company has received an aggregate $384,208 consideration from four lenders consisting of $236,562
cash and conversion of $125,000 in outstanding notes and related accrued interest of $22,646, all of which is converted by the
documents into the fractional units set forth above. The Fractional Units were offered at $5,000 per one twentieth of one Unit
consist of 7,500,000 shares of common stock and 5,000 shares of Series B Preferred Stock which participates in 1/20th
of 1% of an assigned royalty of licensing fees for life of patents and licenses of BlackStar. (for each share of Series B Preferred
Stock -0.0025%). The Company will issue 576,312,092 shares of common stock and 384,208 shares of Preferred Series B stock to the
investors.
**2024**
On January 25, 2024, the Company entered into
note agreements with two unrelated individuals as follows:
- $100,000 from an unrelated individual, repayable
one year from date of the note with interest at 11% per annum; and agreed to issue as additional consideration to the lender 15,000,000
shares of the Companys common stock. At maturity the lender has the option to be issued, in lieu of cash payment of the
outstanding debt, an additional 15,000,000 shares of the Companys common stock as full satisfaction of the principal loan
amount 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 BDTPTM,
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.
- $14,000 from an unrelated individual, repayable
90 days from date of the note with interest at 11%. At maturity the lender has the option to be issued, in lieu of cash payment
of the outstanding debt, 7,000 shares of the Companys common stock as full satisfaction of the principal loan amount 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,
| 52 | |
| | Table of Contents | |
- 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 BDTPTM, 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 2024, GS Capital filed notices of conversion
and were issued, in three tranches, 195,620,499 shares of the Companys common stock at a price of $0.00006 per share on
their note of October 11, 2021. (See Item 3. Legal Proceedings for additional information related to GS Capital Partners).
In February 2024, the Company and each of the
holders of two loans of $50,000 and $25,000 agreed to extend the maturity of the notes from February 2024 for a period of ten (10)
months to December 2024 with interest continuing to be accrued at 11%. The Company agreed to issue 7,500,000 shares of common stock
to the $50,000 note holder (valued at $12,000 ($0.0016 per share)) and 3,750,000 shares of common stock to the $25,000 note holder
(valued at $7,125 ($0.0019 per share)) as consideration for extending the notes. The Company will value the shares to be issued
based on the per share closing trading prices of the Companys common stock as of the date of extensions.
In April 2024, the Company borrowed $25,000
from an unrelated individual, repayable twelve months from date of the note with interest at 11% per annum. As consideration for
entering into the loan agreement, the Company has agreed to issue 3,750,000 of the Companys common stock to the lender.
At maturity, the Company will repay the face amount of the loan in cash, including unpaid and accrued interest at 11% and, the
lender has the option to be issued, in lieu of cash payment of the outstanding debt, an additional 3,750,000 shares of the Companys
common stock as full satisfaction of the principal loan amount 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 BDTPTM, legal and professional fees, consulting fees, and general and administrative
expenses.
In July 2024, the Company borrowed $25,000
from each of two unrelated individuals (an aggregate $50,000), as follows:
|
| $25,000 repayable nine months from date of the note 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, has
agreed to issue as additional consideration 11,275,000 shares of the Companys common stock to of the lender. At maturity
the lender has the option to be issued, in lieu of cash payment of the outstanding debts, an additional 11,275,000 shares of the
Companys 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 BDTPTM, legal and professional fees, consulting fees, and general and
administrative expenses. | |
|
| $25,000 repayable three months from date of the note 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%, or has the option to
be issued, in lieu of cash payment of the outstanding debts, 12,500,000 shares of the Companys common stock as full satisfaction
of the principal loan amounts and related unpaid and accrued interest thereon. In October 2024, the lender converted the aggregate
outstanding principal and accrued interest balance of $26,318 into 12,500,000 shares of the Companys common stock. 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 BDTPTM, legal and professional fees, consulting fees, and general and administrative
expenses. | |
| 53 | |
| | Table of Contents | |
In November 2024, the Company borrowed $25,000
from an unrelated individual, repayable nine months from date of the note 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, has agreed to issue
as additional consideration 3,750,000 shares of the Companys common stock to of the lender. At maturity the lender has the
option to be issued, in lieu of cash payment of the outstanding debts, an additional 3,750,000 shares of the Companys 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 BDTPTM, legal and professional fees, consulting fees, and general and administrative expenses.
In December 2024, the Company borrowed $10,000
from an unrelated individual, repayable nine months from date of the note 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, has agreed to issue
as additional consideration 1,000,000 shares of the Companys common stock to of the lender. At maturity the lender has the
option to be issued, in lieu of cash payment of the outstanding debts, an additional 1,000,000 shares of the Companys 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 BDTPTM, legal and professional fees, consulting fees, and general and administrative expenses.
**2023**
****
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 each of the loans in cash including interest at 11% and an additional 3,750,000 shares of the Companys common
stock to each of the lenders; or will issue each of the lenders 7,500,000 shares of the Companys common stock in full satisfaction
of the principal loan amount of $25,000 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.
In May 2023, the Company borrowed $50,000 from
an unrelated individual, repayable nine months from date of borrowing with interest at 11% per annum. At maturity, the Company
will repay the face amount of the loan in cash, including unpaid and accrued interest at 11% and, in addition, will issue 7,500,000
shares of the Companys 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 shares of the Companys common stock as full satisfaction of the principal
loan amount of $50,000 and related unpaid and accrued interest thereon. In February 2024, the Company and the note holder agreed
to extend the maturity of the notes to December 2024. 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 BDTPTM,
legal and professional fees, consulting fees, and general and administrative expenses.
In May 2023, the Company borrowed $25,000 from
an unrelated individual, repayable nine months from date of borrowing with interest at 11% per annum. At maturity, the Company
will repay the face amount of the loan in cash, including unpaid and accrued interest at 11% and, in addition, will issue 3,750,000
shares of the Companys 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 3,750,000 shares of the Companys common stock as full satisfaction of the principal
loan amount of $25,000 and related unpaid and accrued interest thereon. In February 2024, the Company and the note holder agreed
to extend the maturity of the notes to December 2024. 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
| 54 | |
| | Table of Contents | |
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 BDTPTM, legal
and professional fees, consulting fees, and general and administrative expenses.
On July 1, 2023, the Board of Directors approved
and authorized the issuance of shares of the Companys 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
period ended September 30, 2023, 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 Companys common stock as of the date of grant. The shares
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 us 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 the loan in cash, including unpaid and accrued interest at 11% and, in addition, will issue 7,500,000 shares of the Companys
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 Companys 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 BDTPTM, 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 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 Companys
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 Companys 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 BDTPTM, 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 $25,000
from an unrelated individual, repayable November 13, 2026 with interest at 5.5% per annum. At maturity, the Company will repay
the face amount of the loans in cash, including unpaid and accrued interest at 5.5% and, in addition, issued 7,500,000 of the Companys
common stock, to the lender. At maturity the lender has the option to be issued, in lieu of cash payment of the outstanding debts,
an additional 7,500,000 shares of the Companys 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 BDTPTM, legal and professional
fees, consulting fees, and general and administrative expenses. A substantially
| 55 | |
| | Table of Contents | |
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 May 17, 2025 and August 17, 2024, with interest at 5.5% and 11% per
annum, respectively. 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 Companys 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 Companys 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 BDTPTM, 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.
****
**Exemption from Registration Claimed**
Sales and issuances by us of the unregistered
securities listed above were made by us in reliance upon Rule 506 of Regulation D to the individuals listed above. All of the individuals
and/or entities listed above that purchased the unregistered securities were all known to us and our management, through pre-existing
business relationships, as long-standing business associates, friends, and employees. All purchasers were provided access to all
material information, which they requested, and all information necessary to verify such information and were afforded access to
our management in connection with their purchases. 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. Each purchaser made written representation under Rule 506 of Regulation D, including net worth and sophistication.
We required written representation that each purchaser who was not an accredited investor, either alone or with his purchaser representative,
had such knowledge and experience in financial and business matters that he/she was capable of evaluating the merits and risks
of the prospective investment, and the issuer reasonably believed (based on written representations) immediately prior to making
any sale that the purchaser came within this description.
**Shares or Warrants Issued for Compensation
or Services**
On May 29, 2025, the Board of Directors authorized
and approved the issuance of an aggregate 400,000,000 shares of the common stock to officers/directors/advisors/consultants to
the Company for services rendered at a value of $0.0004 per share, based on the daily closing trading price of the Companys
common stock, including 200,000,000 shares to the Companys Chief Execution Officer/Director and 25,000,000 to an independent
director.
During the year ended December 31, 2024, the
Company issued 17,000,000 shares of its common stock to officers/directors/advisors of the Company for services, valued at $18,500;
of which 8,000,000 shares, valued at $3,200, was charged to operations during the year ended December 31, 2023; and issued 4,500,000
shares of its common stock for consulting services, valued at $7,650 ($0.0017 per share), to individuals related to the Chief Executive
Officer of the Company.
During the year ended December 31, 2023, the Company issued 25,000,000 shares of its common stock, valued at $100,000,
as partial consideration for entering into a media consulting contract.
****
**Exemption from Registration Claimed**
All of the sales by us of the unregistered
securities listed immediately above were made by us in reliance upon Section 4(a)(2) of the Act. All of the individuals and/or
entities listed above that purchased the unregistered securities were all known to us and our management, through pre-existing
business relationships, as long-standing business associates, friends, and employees. All purchasers were provided access to all
material information, which they requested, and
| 56 | |
| | Table of Contents | |
all information necessary to verify such information
and were afforded access to our management in connection with their purchases. 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.
ISSUER PURCHASES OF EQUITY SECURITIES
We did not repurchase any shares of our common
stock during the year ended December 31, 2024.
**ITEM 6. RESERVED.**
Not applicable.
****
**ITEM 7. MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**
**Forward-Looking Statements and
Associated Risks.**
*This Form 10-K 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-K 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.*
*The following plan of operation provides
information which management believes is relevant to an assessment and understanding of our results of operations and financial
condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number
of forward-looking statements that reflect our current views with respect to future events and financial performance. Certain statements
that the Company may make from time to time, including all statements contained in this report that are not statements of historical
fact, constitute forward-looking statements. Forward-looking statements may be identified by words such as plans,
expects, believes, anticipates, estimates, projects, will,
should, and other words of similar meaning used in conjunction with, among other things, discussions of future operations,
financial performance, product development and new product launches, market position and expenditures. You should not place undue
certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from our predictions.*
**
The following Managements Discussion
and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help you understand our historical
results of operations during the periods presented and our financial condition for the years ended December 31, 2024 and 2023.
This MD&A should be read in conjunction with our financial statements as of December 31, 2024 and 2023. See section entitled
Forward-Looking Statements above.
**
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 December 31, 2024, we had an accumulated deficit totaling $11,806,894. 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 are currently quoted
on the OTC Expert Markets and were previously quoted on OTC
| 57 | |
| | Table of Contents | |
Pink under the symbol BEGI. The
Company is a merchant banking firm seeking to facilitate venture capital to early-stage revenue companies. BlackStar intends to
offer consulting and regulatory compliance services to crypto-equity companies and blockchain entrepreneurs for securities, tax,
and commodity issues. BlackStar is conducting ongoing analysis for opportunities in involvement in crypto-related ventures though
our wholly-owned subsidiary, Blockchain Equity Management Corp., (BEMC), mainly in the areas of blockchain and distributed
ledger technologies (DLT). 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 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
BEMC. BlackStar, through BEMC, intends to initially control and manage each venture. Potential ventures for both BlackStar and
BEMC will be analyzed using the combined business experience of its executives, with BEMC 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. BlackStar is currently
building a digital equity trading platform in order to trade registered BlackStar common shares in digital form (DWAC), and intends
to use the platform design to provide custom subscription services to other public companies.
****
**Recent Updates**BlackStars
progress in 2024 was focused on strengthening our intellectual property portfolio for our new proposed line of business of trading
common shares on a blockchain through the broker-dealer ecosystem. The Company is continuing to strategize on how to secure a host
ATS or Broker Dealer to enable live trading on the Companys blockchain platform. The Company plans to offer its Private
Funding and Corporate Governance Blockchain to individual private companies in 2026. The Companys next major step in its
main feature, BlackStars Digital Trading Platform (BDTPTM), will be to engage an operating partner
(a broker-dealer, clearing firm, and/or registered Alternative Trading System (ATS)) to host the platform prior to
implementation. To that end, the Company is exploring partnerships with broker-dealers and existing ATSs and other strategies
to go live with BDTPTM in accordance with existing laws and regulations. As of the date of this filing, the core platform
of BDTPTM is complete and will remain in the testing phase until we obtain an operating partner. BlackStar intends to
continue to seek further input from various regulatory agencies and others on the functionality of the BDTPTM. The BDTPTM
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 Amazons Quantum Ledger Database. During 2021, BlackStar and Artuova successfully completed a production ready and feature-complete
user interface for the digital platform which is now in the final stages of quality assurance. In 2023, BlackStar and Artuova completed
a production-ready and feature-complete user interface for our Corporate Governance feature on a blockchain. BlackStar is actively
pursuing relationships with various broker-dealers, clearing firms, and ATSs to complete the final stages, while considering
applying for a Broker Dealer or ATS license. During 2021-2022, BlackStar filed with the U.S. Patent and Trademark Office (USPTO)
for patent protection of its proprietary software. During 2022, BlackStar also filed with U.S. and foreign trademark offices for
protection. On December 26, 2023, the USPTO issued the first of eight patents over the next year and a half to BlackStar for technology
related to the BDTPTM.
The Companys success will be dependent
upon its ability to analyze and manage the opportunities presented and is contingent upon successfully raising funds and ultimately
regulatory allowance of our digital trading platform.
Currently in the testing phase, we estimate
$100,000 to finalize the integration of the digital platform into the broker-dealer eco system. The ability to obtain a licensee
may be dependent on our ability to confirm that FINRA and the
| 58 | |
| | Table of Contents | |
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 BDTPTM
and begun operating the BDTPTM, we will seek subscriber companies desiring customized platforms. At that point, we will
have the ability to showcase BDTPTMs 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, anticipated within the next twelve months. We anticipate our Corporate Governance platform to be subscribed
to by US corporations in 2026, with overall expansion of services into the blockchain industry within the next twelve months.
Based on our current cash reserves of approximately
$3,642 as of December 31, 2024, and our receipt in January 2025 of $40,000 in loans and in April through June 2025 of $236,562
of advances from accredited investors for subscription agreements pursuant to a term sheet in October 2025, we
estimate that we will have cash for an operational budget of approximately six (6) months.We intend to continue to offer
a private placement of preferred shares to select accredited investors in order to achieve at least $5,000,000 in funding in the
next year to scale our business plan. If we are unable to generate enough revenue****to cover our operational costs, we
will need to seek additional sources of funds.Currently, we have no committed source for any funds as of date hereof. No
representation is made that any funds will be available when needed.In the event funds cannot be raised if and when needed,
we may not be able to carry out our business plan and could fail in business as a result of these uncertainties.
The independent registered public accounting
firms report on our financial statements as of December 31, 2024, includes a going concern explanatory paragraph
that describes substantial doubt about our ability to continue as a going concern.
We have estimated $100,000 for each of the
first three quarters of 2025 and $150,000 in the fourth quarter of 2025 for operational costs which includes legal, accounting,
travel, general and administrative, audit, rent, telephones and miscellaneous. In the year ended December 31, 2024, we received
funding through promissory notes totaling $274,000 being received in net cash proceeds. Thus far in 2025, we received proceeds
of an aggregate $348,812 from convertible promissory notes and private placements.
****
**Results of Operations**
Net loss for the year ended December 31, 2024
was $1,514,839 as compared to $917,088 for the year ended December 31, 2023, an increase of $597,751. As explained below, most
of the loss in 2024 was attributable to high operating expenses with no revenue.
In 2023, legal and professional fees were $236,715,
as compared to $840,471 in 2024, a difference of $603,756. Much more of the focus in 2024 was on patent filings and the legal fees
associated with those filings were greater than in 2023.
General and administrative expenses in 2024
were $93,476, a decrease of $68,819 from general and administrative expenses of $162,295 in 2023. General and administrative costs
in 2023 included fees of $111,000 for a media consulting firm which were not incurred in 2024.
Interest expense increased by $103,534 to
$322,748 in 2024 as compared to $219,214 in 2023. The increase was primarily attributable to a net increase in
non-convertible debt of $235,000, consisting of new loans of $274,000 and previous loans aggregating $39,000 having been
satisfied.
In 2024, the Company issued 60,200,000 shares
of its common stock, valued at $138,460, to CCI as consideration for entering into a settlement agreement with CCI for the purchase
by CCI of approximately $860,000 of payables owed to creditors.
In 2024, the Company paid related party management
consulting fees to IHG of $112,694 as compared to $128,000 paid in 2023.
| 59 | |
| | Table of Contents | |
**Liquidity and Capital Resources**
As of December 31, 2024, we had a working
capital deficit of $2,698,902 and cash of $3,642,
as compared to a working capital deficit of $1,406,957and
cash of $33,550 as of December 31, 2023. The increase in working capital deficit was due primarily to the increase in trade and
accrued payables during 2024 as compared to 2023, with an increase of $961,181from
2023 to 2024. The Company used new and existing fundings to maintain operating activities and complete patent filings with the
USPTO for its digital trading platform. During 2024, the Company used $270,807of
cash for operating activities as compared to $340,712of
cash for operating activities used in 2023, which includes an increase in accounts payable of $752,884 and $103,472as
of December 31, 2024 and 2023, respectively. In 2024, we paid $33,101in
investing activities for software development and patent costs as compared to $40,001 paid in 2023.
In 2024, we received $274,000 in non-convertible
debt financing from non-related individuals, of which $274,000 is due within one year of issuance with interest at 11% per annum.
As consideration for entering the note agreements in 2024, the Company agreed to issue to note holders an aggregate 73,025,000
shares of its common stock. The Company may issue up to 42,275,000 additional shares of common stock at the option of note holders
for full satisfaction of the loans at maturity. In 2023, we received $400,000 in non-convertible debt financing from non-related
individuals, of which $325,000 is due within one year of issuance with interest at 11% per annum, and $75,000 is due from 2025
to 2026 with interest at 5.5% per annum. As consideration for entering the note agreements in 2023, the Company issued to note
holders an aggregate 71,250,000 shares of its common stock, valued at $266,063. In 2024, note holders were issued 195,620,499 shares
of common stock for conversion of $11,737 face value of debt and related accrued interest; in 2023, note holders were issued 845,162,311
shares of common stock for conversion of $200,432 face value of debt and related accrued interest. We had a net increase in liquidity
from financings of $274,000 in 2024 and $352,178 in 2023. In 2023, we issued 56,788,923 ($.00062 per share) shares of common stock
to warrant holders in a cashless exercise of warrants, and issued, as partial consideration, 25,000,000 shares of its common stock
(valued at $100,000) to a media consulting firm for investor relations services under a six-month agreement through May 2024.
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 commence revenues from our digital trading platform.
There can be no assurance that sufficient capital
will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through
bank loans, lines of credit or any other sources.
**Availability of Additional Capital**
Notwithstanding our success in raising net
cash proceeds of $274,000 from traditional loans in 2024 and $400,000 from traditional loans in 2023, 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 will need to raise sufficient capital to pay expenses
and implement our platform of blockchain features in the first quarter of 2026.
In January 2025, the Company received cash
proceeds of $40,000 in a traditional loan with a face value of $49,200.
In October 2025, the Company commenced a $1 million
fractional unit offering, in increments of $5,000, consisting of Common and Preferred Securities under a term sheet to certain
accredited investors, who had advanced monies to the Company over a period of 5 months in the 2025 fiscal year. The Company has
received an aggregate $384,208 consideration from four lenders consisting of $236,562 cash and conversion of $125,000 in outstanding
notes and related accrued interest of $22,646, all of which is converted by the documents into the fractional units set forth above.
The Fractional Units were offered at $5,000 per one
| 60 | |
| | Table of Contents | |
twentieth of one Unit consist of 7,500,000 shares of
common stock and 5,000 shares of Series B Preferred Stock which participates in 1/20th of 1% of an assigned royalty
of licensing fees for life of patents and licenses of BlackStar. (for each share of Series B Preferred Stock -0.0025%). The Company
will issue 576,312,092 shares of common stock and 384,208 shares of Preferred Series B stock to the investors.
Any additional financing may be dilutive to
our stockholders, new equity securities may have rights, preferences, or privileges senior to those of existing holders of our
shares of Common Stock. Debt or equity financing may subject us to restrictive covenants and significant interest costs.
****
**Going Concern Consideration**
Our registered independent auditors have issued
an opinion on our financial statements as of December 31, 2024, 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 our digital trading platform is operational. Accordingly, we must raise capital from sources
other than the actual revenue from issuance of memberships in our digital trading platform.
**Off-Balance Sheet Arrangements**
As of December 31, 2024 and 2023, we did not
have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act
of 1934.
**Contractual Obligations and Commitments**
We have no material commitments for capital
expenditures within the next year, however, as operations are expanded substantial capital will be needed to pay for expansion
and working capital.
We have made equity and debt offerings in order
to support our growth plans, to date, and may do so in the future.
There are no commitments to provide additional
funds by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available
to us to allow coverage of our expenses as they may be incurred. The principals of the Company have extensive investment banking
backgrounds and have used their resources since the 2016 inception of their management of BlackStar.
**Critical Accounting Policies**
Our significant accounting policies are
described in the Note 3 to our financial statements as of December 31, 2024 and 2023 and are included elsewhere in this
report, and includes disclosures of the fair value of equity issuances as being considered a critical accounting
estimate.
****
**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.**
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.
****
| 61 | |
| | Table of Contents | |
****
**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.**
**BLACKSTAR ENTERPRISE GROUP, INC.**
**FINANCIAL STATEMENTS**
**For the years ended December 31, 2024 and
2023**
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 05525) |
|
|
F-1 |
| |
|
|
|
|
|
| |
|
BALANCE SHEETS |
|
|
F-3 |
| |
|
|
|
|
|
| |
|
STATEMENTS OF OPERATIONS |
|
|
F-4 |
| |
|
|
|
|
|
| |
|
STATEMENTS OF STOCKHOLDERS DEFICIENCY |
|
|
F-5 |
| |
|
|
|
|
|
| |
|
STATEMENTS OF CASH FLOWS |
|
|
F-6 |
| |
|
|
|
|
|
| |
|
NOTES TO FINANCIAL STATEMENTS |
|
|
F-7 |
| |
| 62 | |
| | Table of Contents | |
****
*****
**REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To
the Board of Directors and Shareholders of Blackstar Enterprise Group, Inc.
**Opinion
on the Financial Statements**
We
have audited the accompanying consolidated balance sheets of Blackstar Enterprise Group, Inc. (the Company) as of
December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders deficit, and cash flows
for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial
statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2024, and 2023 and the results of its operations and its cash flows for each of the years in the two-year
period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
**Going
Concern**
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has generated no revenue, has continual net losses, negative working capital
and an accumulated deficit. These factors, among others, raise substantial doubt about the Companys ability to continue
as a going concern. Managements plans in regard to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
**Basis
for Opinion**
These
financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on
the Companys financial statements based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provides a reasonable basis for our opinion.
****
****
| F-1 | |
| | |
****
**Emphasis
of a Matter Restatement of Previously Issued Financial Statements**
As
discussed in Note 12 to the financial statements, the Company has restated its previously issued financial statements for the
year ended December 31, 2023, to correct an error in the recognition of debt-related transactions. The financial statements for
the year ended December 31, 2023 were previously audited by other auditors. Our opinion on the financial statements as of December
31, 2024 and 2023 is not modified with respect to this matter.
**Emphasis
of a Matter Litigation Uncertainty**
As
discussed in Note 11 to the financial statements, the Company is currently a defendant in several lawsuits that are subject to
significant uncertainties. The ultimate resolution of these matters cannot presently be determined, and no provision for any liability
that may result has been made in the financial statements. Our opinion is not modified with respect to this matter.
**Critical
Audit Matters**
Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required
to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit
matters.
| Fruci & Associates II, PLLC PCAOB ID #05525 We have served as the Companys auditor since 2024. Spokane, Washington | |
| November 21, 2025 | | |
| F-2 | |
| | Table of Contents | |
|
BLACKSTAR ENTERPRISE GROUP, INC. | |
|
CONSOLIDATED BALANCE SHEETS | |
|
DECEMBER 31, 2024 AND 2023 | |
|
| |
| |
| |
|
| |
2024 | |
2023 | |
|
| |
| |
(Restated Note 12) | |
|
| |
| |
| |
|
ASSETS | |
| |
|
| |
| |
| |
|
Current Assets | |
| |
| |
|
Cash | |
$ | 3,642 | | |
$ | 33,550 | | |
|
| |
| | | |
| | | |
|
Total current assets | |
| 3,642 | | |
| 33,550 | | |
|
| |
| | | |
| | | |
|
Intangibles, net of amortization of $6,990 (2024) | |
| 394,763 | | |
| 348,652 | | |
|
| |
| | | |
| | | |
|
Total Assets | |
$ | 398,405 | | |
$ | 382,202 | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
LIABILITIES & STOCKHOLDERS' DEFICIT | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Current liabilities | |
| | | |
| | | |
|
Accounts payable | |
$ | 1,031,072 | | |
$ | 268,188 | | |
|
Accrued payables | |
| 500,317 | | |
| 302,020 | | |
|
Notes payable, net of discount-$22,924 (2024) and $38,780 (2023) | |
| 587,076 | | |
| 286,220 | | |
|
Convertible notes payable | |
| 584,079 | | |
| 584,079 | | |
|
| |
| | | |
| | | |
|
Total current liabilities | |
| 2,702,544 | | |
| 1,440,507 | | |
|
| |
| | | |
| | | |
|
Notes payable, net of discount -$1,293 (2024) and $39,860 (2023) | |
| 23,707 | | |
| 35,140 | | |
|
| |
| | | |
| | | |
|
Total Liabilities | |
| 2,726,251 | | |
| 1,475,647 | | |
|
| |
| | | |
| | | |
|
Commitments & Contingencies | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
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- 6 billion (2024) & 2 billion (2023) shares authorized; $0.001 par value | |
| | | |
| | | |
|
1,854,894,873 (2004) and 1,544,696,448(2003) shares issued and outstanding | |
| | | |
| | | |
|
atDecember 31, 2024 and 2023 | |
| 1,854,895 | | |
| 1,544,696 | | |
|
Additional paid in capital | |
| 7,576,378 | | |
| 7,649,714 | | |
|
Common stock to be issued | |
| 46,775 | | |
| 3,200 | | |
|
Accumulated deficit | |
| (11,806,894 | ) | |
| (10,292,055 | ) | |
|
| |
| | | |
| | | |
|
Total stockholders' deficit | |
| (2,327,846 | ) | |
| (1,093,445 | ) | |
|
| |
| | | |
| | | |
|
Total Liabilities and Stockholders' Deficit | |
$ | 398,405 | | |
$ | 382,202 | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
The accompanying notes are an integral part of these consolidated financial statements. | |
| F-3 | |
| | Table of Contents | |
|
BLACKSTAR ENTERPRISE GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS | |
|
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 | |
|
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| 2024 | | |
| 2023 | | |
|
| |
| | | |
| (Restated Note 12) | | |
|
| |
| | | |
| | | |
|
Revenue | |
$ | | | |
$ | | | |
|
| |
| | | |
| | | |
|
Operating expenses | |
| | | |
| | | |
|
Legal and professional | |
| 840,471 | | |
| 236,715 | | |
|
Management consulting - related party | |
| 112,694 | | |
| 128,000 | | |
|
General and administrative | |
| 93,476 | | |
| 162,295 | | |
|
| |
| . | | |
| . | | |
|
Total operating expenses | |
| 1,046,641 | | |
| 527,010 | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Other expense (income) | |
| | | |
| | | |
|
Interest expense | |
| 322,748 | | |
| 219,214 | | |
|
Settlement agreement fee | |
| 138,460 | | |
| | | |
|
Amortization of intangibles | |
| 6,990 | | |
| | | |
|
Amortization of convertible debt issuance costs | |
| | | |
| 28,547 | | |
|
Loss on debt extinguishment | |
| | | |
| 142,317 | | |
|
| |
| | | |
| | | |
|
Other expense (income) | |
| 468,198 | | |
| 390,078 | | |
|
| |
| | | |
| | | |
|
Net (loss) | |
$ | (1,514,839 | ) | |
$ | (917,088 | ) | |
|
| |
| | | |
| | | |
|
Net(loss) per share - basic and diluted | |
$ | (0.001 | ) | |
$ | (0.001 | ) | |
|
| |
| | | |
| | | |
|
Weighted average number of common shares | |
| | | |
| | | |
|
outstanding - basic and diluted | |
| 1,739,629,870 | | |
| 968,688,871 | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
The accompanying notes are an integral part of these consolidated financial statements. | |
****
| F-4 | |
| | Table of Contents | |
****
|
BLACKSTAR ENTERPRISE GROUP, INC. | |
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT | |
|
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2024 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
Common Stock | |
Preferred Stock | |
| |
| |
| |
| |
|
| |
Amount | |
| |
Amount | |
Additional Paid | |
Common Stock to be Issued | |
Accumulated | |
Stockholders' | |
| |
|
| |
Shares | |
($0.001Par) | |
Shares | |
($0.001Par) | |
in Capital | |
Issued | |
Deficit | |
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 | |
| 845,162,311 | | |
| 845,162 | | |
| | | |
| | | |
| (569,835 | ) | |
| | | |
| | | |
| 275,327 | | |
|
Sharesissued for loan costs | |
| 71,250,000 | | |
| 71,250 | | |
| | | |
| | | |
| 103,476 | | |
| | | |
| | | |
| 174,726 | | |
|
Shares issued for cashless warrant exercise | |
| 56,788,923 | | |
| 56,789 | | |
| | | |
| | | |
| (56,789 | ) | |
| | | |
| | | |
| | | |
|
Shares issued for media consulting | |
| 25,000,000 | | |
| 25,000 | | |
| | | |
| | | |
| 75,000 | | |
| | | |
| | | |
| 100,000 | | |
|
Shares to be issued to officers/directors | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 3,200 | | |
| | | |
| 3,200 | | |
|
Net loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (917,088 | ) | |
| (917,088 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balances - December 31, 2023 (restated Note 12) | |
| 1,544,696,448 | | |
| 1,544,696 | | |
| 1,000,000 | | |
| 1,000 | | |
| 7,649,714 | | |
| 3,200 | | |
| (10,292,055 | ) | |
| (1,093,445 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Shares issued to officers, advisors & directors | |
| 17,000,000 | | |
| 17,000 | | |
| | | |
| | | |
| 1,500 | | |
| (3,200 | ) | |
| | | |
| 15,300 | | |
|
Shares issued for convertible debt extinguishment | |
| 195,620,499 | | |
| 195,621 | | |
| | | |
| | | |
| (183,884 | ) | |
| | | |
| | | |
| 11,737 | | |
|
Shares issued for non-convertible debt extinguishment | |
| 19,500,000 | | |
| 19,500 | | |
| | | |
| | | |
| 31,016 | | |
| | | |
| | | |
| 50,516 | | |
|
Shares issued for consulting services-related | |
| 4,500,000 | | |
| 4,500 | | |
| | | |
| | | |
| 3,150 | | |
| | | |
| | | |
| 7,650 | | |
|
Shares issued for creditor settlement agreement fees | |
| 60,200,000 | | |
| 60,200 | | |
| | | |
| | | |
| 78,260 | | |
| | | |
| | | |
| 138,460 | | |
|
Shares issued for accounts payable extinguishment | |
| 13,377,926 | | |
| 13,378 | | |
| | | |
| | | |
| (3,378 | ) | |
| | | |
| | | |
| 10,000 | | |
|
Shares to be issued for loan extension | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 4,500 | | |
| | | |
| 4,500 | | |
|
Shares to be issued for loan costs | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 42,275 | | |
| | | |
| 42,275 | | |
|
Net loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,514,839 | ) | |
| (1,514,839 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balances - December 31, 2024 | |
| 1,854,894,873 | | |
$ | 1,854,895 | | |
| 1,000,000 | | |
$ | 1,000 | | |
$ | 7,576,378 | | |
$ | 46,775 | | |
$ | (11,806,894 | ) | |
$ | (2,327,846 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
The accompanying notes are an integral part of these consolidated financial statements. | |
| F-5 | |
| | Table of Contents | |
|
BLACKSTAR ENTERPRISE GROUP, INC. | |
|
CONSOLIDATEDSTATEMENTS OF CASH FLOWS | |
|
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 | |
|
| |
| |
| |
|
| |
2024 | |
2023 | |
|
| |
| |
(Restated Note 12) | |
|
| |
| |
| |
|
Cash Flows From Operating Activities | |
| |
| |
|
Net (loss) | |
$ | (1,514,839 | ) | |
$ | (917,088 | ) | |
|
| |
| | | |
| | | |
|
Adjustments to reconcile net loss to net cash used | |
| | | |
| | | |
|
in operating activities | |
| | | |
| | | |
|
Amortization of note issue costs | |
| 109,957 | | |
| 28,547 | | |
|
Stock based compensation | |
| 22,950 | | |
| 3,200 | | |
|
Stock issued for services | |
| 138,460 | | |
| 100,000 | | |
|
Amortization of intangibles | |
| 6,990 | | |
| | | |
|
Interest paid in stock | |
| 11,737 | | |
| | | |
|
(Gain)/loss on debt settlements/extinguishments | |
| | | |
| 150,935 | | |
|
Changes in operating assets and liabilities | |
| | | |
| | | |
|
Increase in accounts payable | |
| 752,884 | | |
| 103,472 | | |
|
Increasein accrued payables | |
| 201,054 | | |
| 190,222 | | |
|
| |
| | | |
| | | |
|
Cash used in operating activities | |
| (270,807 | ) | |
| (340,712 | ) | |
|
| |
| | | |
| | | |
|
Cash Flows From Investing Activities | |
| | | |
| | | |
|
Software and patent costs | |
| (33,101 | ) | |
| (40,001 | ) | |
|
| |
| | | |
| | | |
|
Cash used in investing activities | |
| (33,101 | ) | |
| (40,001 | ) | |
|
| |
| | | |
| | | |
|
Cash Flows From Financing Activities | |
| | | |
| | | |
|
Cash proceeds from notes | |
| 274,000 | | |
| 400,000 | | |
|
Repayments of notes payable | |
| | | |
| (47,822 | ) | |
|
| |
| | | |
| | | |
|
Net cash provided by financing activities | |
| 274,000 | | |
| 352,178 | | |
|
| |
| | | |
| | | |
|
Net (decrease) in cash | |
| (29,908 | ) | |
| (28,535 | ) | |
|
| |
| | | |
| | | |
|
Cash, beginning of period | |
| 33,550 | | |
| 62,085 | | |
|
| |
| | | |
| | | |
|
Cash, end of period | |
$ | 3,642 | | |
$ | 33,550 | | |
|
| |
| | | |
| | | |
|
Supplemental disclosure of non-cash investing | |
| | | |
| | | |
|
and financing activities | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Notes payable and interest converted to common stock | |
$ | 41,757 | | |
$ | 200,432 | | |
|
Common stock issued for accounts payable settlement for shares | |
$ | 10,000 | | |
$ | | | |
|
Cashless exercise of common stock warrant | |
$ | | | |
$ | 56,789 | | |
|
Common stock issued for loan costs | |
$ | | | |
$ | 279,539 | | |
|
| |
| | | |
| | | |
|
Cash paid for interest on debt | |
$ | | | |
$ | 20,606 | | |
|
| |
| | | |
| | | |
|
Cash paid for income taxes | |
$ | | | |
$ | | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
The accompanying notes are an integral part of these consolidated financial statements. | |
| F-6 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**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 Companys 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,
Blockchain Equity Management Corp (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, Blockchain Industry SRO Inc. (BI) in
2017. BIs 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 consolidated
financial statements include BlackStar and its wholly owned subsidiaries: Blockchain Equity Management Corp. and Blockchain Industry
SRO Inc., both of which are non-operating with no material transactions, and were prepared from the accounts of the Company in
accordance with accounting principles generally accepted in the United States of America (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 years ended December 31, 2024 and 2023, the Company
has generated no revenues and has incurred losses. As of December 31, 2024, the Company had cash of $3,642, negative working capital
of $2,698,902 and an accumulated deficit of $11,806,894. 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. The Company intends to raise additional
funds in order to fund operations of the merchant bank, and to expand its services into the blockchain industry, and intends to
continue to offer a private placement of preferred shares to select accredited investors. Management cannot provide any assurances
that the Company will be successful in raising additional funds and/or accomplishing any of its plans.
| F-7 | |
| | Table of Contents | |
****
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 3 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES**
Accounting policies refer to specific
accounting principles and the methods of applying those principles to fairly present the Companys financial position and
results of operations in accordance with generally accepted accounting principles. The policies discussed below include those that
management has determined to be the most appropriate in preparing the Companys financial statements and are not discussed
in a separate footnote.
**Cash and Cash Equivalents**
The Company considers all cash
on hand, cash accounts not subject to withdrawal restrictions or penalties and all highly liquid investments with an original maturity
of three months or less as cash equivalents. Accounts at each institution are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000. At December 31, 2024 and 2023, the Company had no deposits in excess of the FDIC insured limits.
**Revenue Recognition**
The Company recognizes revenue
under ASC 606, using the following five-step model, which requires that we: (1) identify a contract with the customer, (2) identify
the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance
obligations and (5) recognize revenue as performance obligations are satisfied. The Company currently has no sources of revenue.
**Intangible Assets**
Intangible
assets subject to amortization include costs incurred by the Company to develop certain patents and developed software. These costs
are amortized on a straight-line basis over the estimated economic life of the intangible asset. The Company reviews intangible
assets for impairment when the circumstances warrant. During the year ended December 31, 2024, the Company commenced amortizing
capitalized patent costs over the estimated economic life of the patents of twenty (20) years. At December 31, 2024, capitalized
software costs are still in the development stage and are not yet subject to amortization; the Company has not determined an economic
useful life of the software.
**Basic and Diluted Loss per Share**
The
Company computes loss per share in accordance with Accounting Standards Update (ASU), Earnings per Share (Topic 260)
which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic EPS
would exclude any dilutive effects of options, warrants, and convertible securities but does include the restricted shares of common
stock issued. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock
were exercised or converted to common stock. Basic EPS calculations are determined by dividing net income by the weighted average
number of shares of common stock outstanding during the year. Diluted EPS calculations are determined by dividing net income by
the weighted average number of common shares and dilutive common share equivalents outstanding. Under current Company policy the
majority stockholder International Hedge Group has and intends to surrender an equivalent number of common shares each time shares
are sold or converted from other instruments. As a result, the EPS is the same for basic and diluted shares. At December 31, 2024
and 2023, there were potentially dilutive securities convertible into shares of common stock comprised of (i) warrants
convertible into0 and 11,703,000shares, respectively, and (ii) convertible notes into1,586,283,000 and 219,245,000
shares, respectively.
| F-8 | |
| | Table of Contents | |
****
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 3 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)**
**Income Taxes**
The Company accounts for income
taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized
for deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their
tax bases. The Company maintains a valuation allowance with respect to its deferred tax asset. The valuation allowance is established
based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Companys financial
position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence
of sufficient taxable income within the carry-forward period under Federal tax laws. Changes in circumstances, such as the Company
generating taxable income, could cause a change in judgment about the reliability of the related deferred tax asset. Any change
in the valuation allowance will be included in income in the year of the change estimate.
**Carrying Value, Recoverability
and Impairment of Long-Lived Assets**
The Company has adopted paragraph
360-10-35-17 of FASB Accounting Standards Codification for its long-lived assets. The Companys long lived assets
are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability
of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or
group of assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based
on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the assets expected
future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but
the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived
assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following
to be some examples of important indicators that may trigger an impairment review; (i) significant under-performance or losses
of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use
of assets or in the Companys overall strategy with respect to the manner of use of the acquired assets or changes in the
Companys overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures;
(v) a significant decline in the Companys stock price for a sustained period of time; and (vi) regulatory changes. The Company
evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such
events.
The impairment charges, if any,
are included in operating expenses in the accompanying statements of operations.
**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.
| F-9 | |
| | Table of Contents | |
****
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 3 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)**
The Companys 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.
**Fair Value of Financial Instruments**
The estimated fair values of financial
instruments were determined by management using available market information and appropriate valuation methodologies. The carrying
amounts of financial instruments including cash approximate their fair value because of their short maturities.
Fair Value Measurements*
The Company measures fair value under a framework
that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements)
and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used
in measuring fair value are:
Level 1: Inputs to the valuation methodology
are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2: Inputs to the valuation methodology
include:
|
| Quoted prices for similar
assets or liabilities in active markets; | |
|
| Quoted prices for identical
or similar assets or liabilities in inactive markets; | |
|
| Inputs other than quoted
prices that are observable for the asset or liability; | |
|
| Inputs that are derived
principally from or corroborated by observable market data by correlation or other means. | |
If the asset or liability has a specified (contractual)
term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3: Inputs to the valuation methodology
are unobservable and significant to the fair value measurement.
The assets or liabilitys fair value
measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value
measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
When the Company changes its valuation inputs
for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors,
it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company
recognizes these transfers at the end of the reporting period that the transfers occur. For the years ended December 31. 2024 and
2023, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.
| F-10 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
As of December 31, 2024, no assets or liabilities
were required to be measured at fair value on a recurring basis.
**Long Lived Assets**
In accordance with ASC 350 the
Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances
both internally and externally that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment
loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
**Stock-based Compensation**
The Company accounts for stock-based
compensation issued to employees based on Financial Accounting Standards Board (FASB) accounting standard for Share
Based Payment. It requires an entity to measure the cost of employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during
which an employee is required to provide service in exchange for the award the requisite service period (usually the vesting
period). It requires that the compensation cost relating to share-based payment transactions be recognized in financial statements.
That cost will be measured based on the fair value of the equity or liability instruments issued. The scope of the FASB accounting
standard includes a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based
awards, share appreciation rights, and employee share purchase plans. The Company currently has no stock-based compensation plan
in place.
**Original Issue Discount**
For certain convertible debt issued,
the Company provides the debt holder with an original issue discount. The original issue discount is recorded as a debt discount,
reducing the face amount of the note and is amortized to interest expense over the life of the debt.
**Derivative Financial Instruments**
Fair value accounting as required by ASC
815 Derivatives and Hedging, requires bifurcation of embedded derivative instruments such as certain convertible features
in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate
fair value, the Company uses the Black-Scholes option pricing model. In assessing the convertible debt instruments, management
determines if the convertible debt host instrument is conventional
| F-11 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
**NOTE 3 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)**
convertible debt and further if
there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt,
the Company will continue its evaluation process of these instruments as derivative financial instruments.
**Segment Reporting**
The Company operates in a single
reportable segment, consistent with how management evaluates operations. The chief operating decision maker (CODM), identified
as the Chief Executive Officer, reviews consolidated operating results for resource allocation and performance assessment.Segment
profit or loss is measured on a consolidated net income basis, which aligns with GAAP. The policy includes significant expenses
reviewed by the CODM and qualitative details about other operating items contributing to segment profit or loss.Entity-wide
disclosures on products/services, geographic areas, and major customers are also provided per ASC 280 requirements.
**Recent Accounting Pronouncements**
In 2020, FASB issued ASU 2020-06
which simplifies how entities account for certain financial instruments with characteristics of liabilities and equity, effective
for fiscal years beginning after December 15, 2021. The Company adopted the guidance provided in ASU 2020-06 effective with its
fiscal year ending December 31, 2022. There was no material impact upon adoption on the Companys financial position or results
of operations.
In 2025, FASB issued ASU 2025-05which
provides a practical expedient for estimating expected credit losseson current accounts receivable and contract assets, effective
for fiscal years beginning after December 15, 2025. The Company is assessing the potential impact of ASU 2025-05, and does not
believe that adoption would have a material impact on its financial position or results of operations.
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
December 31, 2024 and does not expect such pronouncements to have a material impact on the Companys financial position,
operations, or cash flows.
**NOTE 4 INTANGIBLES**
Intangibles at December 31, 2024
and 2023 consist of capitalized costs for the Companys proprietary software and patents as follows:
|
|
|
2024 |
|
2023 | |
|
|
|
|
|
| |
|
|
Software |
|
|
$ |
193,102 |
|
|
$ |
140,001 |
| |
|
|
Patents |
|
|
|
208,651 |
|
|
|
208,651 |
| |
|
|
Accumulated amortization |
|
|
|
(6,990 |
) |
|
|
-- |
| |
|
|
|
|
|
$ |
394,763 |
|
|
$ |
348,652 |
| |
Amortization expense for capitalized
patent costs was $6,990 and $0 for the years ended December 31, 2024 and 2023, respectively. Estimated amortization expense for
capitalized patents cost is $10,400 for each of the years in the five-year period ended December 31, 2029.
| F-12 | |
| | Table of Contents | |
****
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 5 STOCKHOLDERS
DEFICIT**
**Preferred Stock**
The Company has authorized 10,000,000
preferred shares, with a par value of $0.001 per share. The 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 December 2024, the Companys
Board of Directors authorized an increase in the Companys common stock from 2,000,000,000 to 6,000,000,000 shares, with
an effective date of the Amendment to the Articles of Incorporation of February 10, 2025. There was no change in the shares outstanding
of either the common stock or preferred stock as a result of the increase.
During the year ended December
31, 2024, the Company issued shares of its common stock as follows:
- 195,620,499 shares as consideration for
conversion of principal and interest on convertible notes payable valued at $11,737. (See Note 7)
- 17,000,000 shares to officers/directors/advisors
of the Company for services, valued at $18,500; of which 8,000,000 shares, valued at $3,200, was charged to operations during the
year ended December 31, 2023.
- 19,500,000 shares for conversion of principal
and accrued interest in the amount of $50,516 on non-convertible notes.
- 4,500,000 shares for consulting services,
valued at $7,650 ($0.0017 per share), to individuals related to the Chief Executive Officer of the Company.
- 60,200,000 shares as consideration for
entering into a settlement agreement with Continuation Capital, Inc. (CCI) for the purchase of $861,539.26 of debt
owed to BlackStars creditors. The shares were valued at $138,640, based on the trading price of the Companys common
stock as of the date of the agreement (See Note 11).
- 13,377,926 shares to CCI as consideration
for payment of $10,000 to creditors of the Company pursuant to the settlement agreement.
During the year ended December
31, 2023, the Company issued shares of its common stock as follows:
- 845,162,311 shares for conversion of
$275,327 principal and interest on convertible note payable.
- 71,250,000 shares valued at $174,726
as consideration for financing fees for loans made to the Company.
- 25,000,000 shares valued at $100,000
($0.004 per share) as partial consideration for a media consulting contract.
- 56,788,923 shares for exercise of previously
issued warrants at $0.0128 per share. The exercise price was revised to $0.00062 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, the Company
did not receive any proceeds from the warrant exercise. The cashless exercise of the warrants resulted in the cancellation of previously
issued warrants to purchase an aggregate of 148,000 shares of common stock.
****
| F-13 | |
| | Table of Contents | |
****
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 5 STOCKHOLDERS
DEFICIT (continued)**
**Common Stock to be issued**
On July 1, 2023, the Board of Directors
approved a plan for the issuance of shares of the Companys 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. The Board
authorized, as of July 1, 2023, the issuance of an aggregate 8,000,000 shares of its common stock under the approved plan to four
individuals, valued at $3,200 ($0.0004 per share), based on the trading price of the Companys common stock as of the date
of grant. As of December 31, 2023, the shares had not been issued and the Company charged $3,200 to operations as stock-based compensation
expense and recorded the shares to be issued as common stock to be issued. The shares were subsequently issued during the year
ended December 31, 2024.
At December 31, 2024, the Company
has recorded common stock to be issued as follows:
- 11,250,000 shares, valued at $4,500,
as consideration for extension of loans previously made to the Company. The Company has recorded the shares to be issued to the
lenders at a discount to debt, based on the closing trading price of the Companys common stock as of the date of the loan
extensions, and is amortizing the discount to interest expense over the term of the extensions.
- 37,525,00,000 shares valued at $42,275
as consideration for loan costs on new loans. The Company has recorded the shares to be issued to the lenders at a discount to
debt, based on the closing trading price of the Companys common stock as of the date of the loans, and is amortizing the
discount to interest expense over the term of the loans.(See Note 8).
**NOTE 6 WARRANTS**
In April 2019, the Company issued
a convertible note for $110,000. Pursuant to the terms of the note agreement, the Company issued warrants to the holder for the
purchase of 440,000 shares of the Companys common stock. The warrants were 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 Company recognized a warrant
expense of $132,593 at the time of grant of the warrants. At December 31, 2023, the intrinsic value of the outstanding warrants
was $0, as the trading price of the Companys common stock at that date was less than the underlying exercise price of the
warrants. The shares issued for exercise of the 100,000 warrants in 2023 were adjusted to an exercise price of $0.00062 per share
pursuant to the antidilution protection provisions of the warrant agreement, and the warrant holder received 56,788,923 shares
of common stock under a cashless exercise.
| F-14 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 6 WARRANTS (continued)**
A summary of warrant activity during the years
ended December 31, 2023 and 2024, adjusted to reflect the antidilution protection provisions of the warrant agreement, is presented
below:
| | | Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (Years) | |
| | Outstanding and exercisable December 31, 2022 | | | | 129,516,129 | | | $ | 0000625 | | | | 1.32 | | |
| | Exercised | | | | (59,679,657 | ) | | | | | | | | | |
| | Expired | | | | | | | | | | | | | | |
| | Outstanding and exercisable December 31, 2023 | | | | 69,836,472 | | | $ | 0.00062 | | | | .33 | | |
| | Exercised | | | | | | | | | | | | | | |
| | Expired | | | | (69,836,472 | ) | | | | | | | | | |
| | Outstanding and exercisable December 31, 2024 | | | | | | | | | | | | | | |
****
**NOTE 7 CONVERTIBLE NOTES**
****
**GS CAPITAL PARTNERS**
On October 11, 2021, the Company
entered into a financing agreement with GS Capital Partners LLC (GS Capital) to borrow $60,000. The note matured
on October 11, 2022, bears interest at 8%, with a default rate of 24%, and is convertible at the option of the holder, at any time
after 180 days of the date of issuance. The conversion price is to be calculated at 60% of the lowest trading price of the Companys
common stock for the previous 20 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 the note. There are no warrants
or options attached to this note. The Company received net proceeds from the loan of $50,000, after legal and financing fees of
$10,000. In August and October 2022, GS Capital made a partial conversion of $20,385 principal and $1,446 of accrued and unpaid
interest on the note into 27,531,479 shares of the Companys common stock at a conversion prices of $0.0012 to $0.00036 per
share; in June 2023 made a $5,933 partial conversion, in two tranches, of the principal and accrued interest of $1,267 into 59,998,666
shares of the Companys common stock at a conversion price of $0.00012 per share; and in November 2023, issued a notice of
conversion for a partial conversion of $2,860 principal and $865 of accrued and unpaid interest on the note into 62,084,333 shares
of the Companys common stock at a conversion price of $0.00006 per share. In November 2023, the Company made a cash payment
of $51,197 to GS Capital as full satisfaction of the Companys obligations under the note agreement, recording the payment
to principal of $30,822 and accrued interest of $20,375.
In January 2024, GS Capital filed
notices of conversion and were issued in three tranches 195,620,499 shares of the Companys common stock at a price of $0.00006
per share on their note of October 11, 2021. (See Note 5)
**SE HOLDINGS LLC**
On January 26, 2021, the Company
entered into a financing agreement with SE Holdings LLC to borrow $220,000. The note bears interest at 10%, with a default rate
of 24%, and is convertible, at any time after the date of issuance. The conversion price is to be calculated at 50% of the average
of the three lowest trading prices of the Companys common stock for the previous twenty trading days prior to the date of
conversion. The lender agrees to limit the amount of stock received to less
| F-15 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
**NOTE 7 CONVERTIBLE
NOTES (continued)**
than 4.99% of the total outstanding common stock. There
are no warrants or options attached to this note, and the Company has reserved 44,000,000 shares for conversion. Net proceeds from
the loan were $177,500, after original issue discount of $20,000 and legal fees and offering costs of $22,500. The Company recorded
the conversion feature as a beneficial conversion feature. The fair value of $220,000 for the expense portion of the note was amortized
over the original term of the note. This fair value has been determined based on the trading price of the Companys common
stock as of the date of the note. Management has determined that this treatment is appropriate given the uncertain nature of the
value of the Company and its stock, and there will be no revaluations until the note is paid or redeemed for stock. The Company
has recorded interest on the note at the default rate of 24% from the maturity date of the note through December 31, 2024.
**ADAR ALEF, LLC**
On April 29, 2021, the
Company entered into a financing agreement with Adar Alef, LLC (Adar Alef) to borrow $550,000. The note matured
on April 29, 2022. bears interest at 10%, with a default rate of 24%, and is convertible at the option of the holder, at any
time after the date of issuance. The conversion price is to be calculated at 50% of the average of the three lowest closing
bid prices of the Companys common stock for the previous 20 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 86,105,000 shares for conversion The Company received the net
proceeds from the loan of $462,000, after original issue discount, legal fees and offering costs of $88,000. In February and
March 2022, Adar Alef elected to make a partial conversion of $76,500 principal and $6,296 of accrued and unpaid interest
thereon due on the note, in three tranches, into an aggregate 21,504,766 shares of the Companys common stock at prices
of $0.0023 to $0.0064 per share under the conversion provision and terms of the note agreement.
On April 27, 2022, the Company
entered into an Amendment and Abatement Agreement (Abatement Agreement) with SE Holdings and Adar Alef (collectively
the Parties) to address the Companys default on the two outstanding convertible notes between the Parties,
consisting of the remaining $473,500 principal balance to Adar Alef and face amount $220,000 note with SE Holdings. Under the terms
of the Abatement Agreement, the Parties agreed to abate the conversion features under the notes for a period of forty-five (45)
days from April 15, 2022, with the conversion features resuming no sooner than May 30, 2022. The Company has paid to Adar Alef
a total of $50,000 upon execution of the Abatement Agreement for principal, redemption penalty and accrued interest. The remaining
principal and accrued interest on the notes to SE Holdings and Adar Alef would be due on May 30, 2022. On May 25, 2022, the Abatement
Agreement was extended for an additional thirty (30) days through June 30, 2022, upon an additional payment by the Company of $25,000
to Adar Alef for principal, redemption penalty and accrued interest. 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.
In November 2023, Adar Alef issued
a notice of conversion for a partial conversion of $13,455 principal into 62,100,000 shares of the Companys common stock
at a price of $0.0002167 per share under the conversion provision and terms of the note agreement. The Company has recorded interest
on the note at the default rate of 24% from the maturity date of the note through December 31, 2024.
| F-16 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
**NOTE 7 CONVERTIBLE
NOTES (continued)**
Convertible notes payable at December 31, 2024
and 2023 are summarized as follows:
| Note Holder | | Face Amount | | Interest Rate | | Original Due Date | | 2024 | | 2023 | |
| | | | | | | | | | | | |
| SE Holdings LLC | | $ | 220,000 | | | | Stated 10 Default 24 | % % | | Jan 26, 2022 | | $ | 220,000 | | | $ | 220,000 | | |
| | | | | | | | | | | | | | | | | | | | |
| Adar Alef LLC | | $ | 550,000 | | | | Stated 10 Default 24 | % % | | April 29, 2022 | | $ | 364,079 | | | $ | 364,079 | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | $ | 584,079 | | | $ | 584,079 | | |
On January 23, 2024, the managing member
of SE Holdings, LLC, individually, and Adar Alef, LLC, also managed by the same individual, as the entity, settled charges with
the SEC ordering them, in part, to surrender for cancellation all remaining shares of the Company they obtained through conversion
of notes, as well as conversion rights under any remaining convertible notes. The Company is evaluating what this means for the
remaining outstanding conversion rights under the two convertible promissory notes held by SE Holdings, LLC ($220,000) and Adar
Alef, LLC (original face amount of $550,000), and for the current holdings of Adar Alef, LLC (5,000,000 shares of common stock
of BlackStar). The Company is of the opinion that the notes are no longer convertible, but continues to classify the notes as
convertible until final determination and settlement amongst the parties is made.
****
**NOTE 8 NOTES PAYABLE**
**Year ended December 31, 2024**
In January 2024, the Company borrowed
$100,000 from an unrelated individual, repayable January 25, 2025 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, has agreed to issue as
additional consideration 15,000,000 shares of the Companys 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 15,000,000 shares of the Companys common stock
as full satisfaction of the principal loan amounts and related unpaid and accrued interest thereon. The Company has recorded the
$19,355 value of shares to be issued to the lender for loan consideration as a discount to debt, and is amortizing the discount
to interest expense over the term of the note.
In January 2024, the Company borrowed
$14,000 from an unrelated individual, repayable April 25, 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%, or at option of the lender, will issue 7,000,000
shares of the Companys common stock in lieu of cash payment of the outstanding debt as full satisfaction of the principal
loan amounts and related unpaid and accrued interest thereon. In October 2024, the lender converted the aggregate outstanding principal
and accrued interest balance of $15,439 into 7,000,000 shares of the Companys common stock.
In February 2024, the Company
and each of the holders of two loans of $50,000 and $25,000 agreed to extend the maturity of the notes from February 2024 for
a period of ten (10) months to December 2024 with interest continuing to be accrued at 11%. The Company agreed to issue 7,500,000
shares of common stock to the $50,000 note holder and 3,750,000 shares of common stock to the $25,000 note holder as consideration
for extending the notes. The Company valued the shares to be issued at $4,500.
| F-17 | |
| | Table of Contents | |
****
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 8 NOTES PAYABLE
(continued)**
In April 2024, the Company borrowed $25,000
and $50,000 from each of two unrelated individuals, repayable one year 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,
has agreed to issue as additional consideration 3,750,000 and 7,500,000 shares of the Companys 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 3,750,000 and 7,500,000 shares of the Companys common stock, respectively, as full satisfaction of the principal
loan amounts and related unpaid and accrued interest thereon. The Company has recorded the $13,270 value of shares to be issued
to the lenders for loan consideration as a discount to debt, and is amortizing the discount to interest expense over the terms
of the notes.
In July 2024, the Company borrowed $25,000
from each of two unrelated individuals (an aggregate $50,000), as follows:
- $25,000, repayable nine months from date
of the note 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, has agreed to issue as additional consideration 11,275,000 shares of the Companys
common stock to of the lender. At maturity the lender has the option to be issued, in lieu of cash payment of the outstanding debts,
an additional 11,275,000 shares of the Companys common stock as full satisfaction of the principal loan amounts and related
unpaid and accrued interest thereon. The Company recorded the $9,885 value of shares to be issued to the lender for loan consideration
as a discount to debt, and is amortizing the discount to interest expense over the term of the note.
- $25,000, repayable three months from
date of the note 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%, or has the option to be issued, in lieu of cash payment of the outstanding debts, 12,500,000
shares of the Companys common stock as full satisfaction of the principal loan amounts and related unpaid and accrued interest
thereon. In October 2024, the lender converted the aggregate outstanding principal and accrued interest balance of $26,318 into
12,500,000 shares of the Companys common stock.
In November 2024, the Company borrowed
$25,000 from an unrelated individual, repayable nine months from date of the note 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, has
agreed to issue as additional consideration 3,750,000 shares of the Companys common stock to of the lender. At maturity
the lender has the option to be issued, in lieu of cash payment of the outstanding debts, an additional 3,750,000 shares of the
Companys common stock as full satisfaction of the principal loan amounts and related unpaid and accrued interest thereon.
The Company has recorded the $4,079 value of shares to be issued to the lender for loan consideration as a discount to debt, and
is amortizing the discount to interest expense over the term of the note.
In December 2024, the Company borrowed
$10,000 from an unrelated individual, repayable nine months from date of the note 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, has
agreed to issue as additional consideration 1,000,000 shares of the Companys common stock to of the lender. At maturity
the lender has the option to be issued, in lieu of cash payment of the outstanding debts, an additional 1,000,000 shares of the
Companys common stock as full satisfaction of the principal loan amounts and related unpaid and accrued interest thereon.
The Company has recorded the $4,444 value of shares to be issued to the lender for loan consideration as a discount to debt, and
is amortizing the discount to interest expense over the term of the note.
****
| F-18 | |
| | Table of Contents | |
****
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 8 NOTES PAYABLE
(continued)**
As of December 31, 2024, $325,000 of the
Companys outstanding notes payable were past their maturity date. The Company is accruing interest on these notes at the
default interest rates stipulated in the note agreements, and is in discussions with the note holders for extension or other potential
manners of settlement of the notes.
**Year ended December 31, 2023**
In March 2023, the Company borrowed
$25,000 from each of two individuals (an aggregate $50,000), repayable nine months from date of borrowing with interest at 11%
per annum. At maturity, the Company agreed to repay the face amount of each of the loans in cash, including unpaid and accrued
interest at 11% and, in addition, issued 3,750,000 shares of the Companys common stock to each of the lenders. At maturity
each of the lenders had the option to be issued, in lieu of cash payment of the outstanding debt, an additional 3,750,000 shares
of the Companys common stock in full satisfaction of the principal loan amount of $25,000 and related unpaid and accrued
interest thereon. The Company recorded the initial aggregate 7,500,000 common shares issued to the two lenders at $4,500, based
on the $0.0006 closing trading price of the Companys common stock as of the date of the loan, as a prepaid expense and amortized
the value of the shares as interest expense over the term of the loans. At maturity in December 2023, the Company and the loan
holders agreed to extend the maturity of the notes to September 2024 with interest at 11%, and issued an additional 3,750,000 shares
of the Companys common stock to each of the note holders as consideration for extending the notes. The Company has recorded
a $84,750 loss on extinguishment for the 7,500,000 shares issued for the debt modification.
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 Companys 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 Companys common stock, respectively, as full satisfaction of the principal loan amounts and related unpaid
and accrued interest thereon. In February 2024, the Company and the note holders agreed to extend the maturity of the notes to
December 2024.
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 the loan in cash, including unpaid and accrued interest at 11% and, in addition, will issue 7,500,000 shares
of the Companys 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 Companys common stock as full satisfaction of the principal loan
amounts and related unpaid and accrued interest thereon.
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 Companys 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 Companys common stock as full satisfaction of the principal loan
amounts and related unpaid and accrued interest thereon.
On November 6, 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 Companys 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 Companys common stock as full satisfaction of the principal loan amounts and related unpaid
and accrued interest thereon.
| F-19 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
**NOTE 8 NOTES PAYABLE
(continued)**
On November 13, 2023, the Company
borrowed $25,000 from an unrelated individual, repayable November 13, 2026 with interest at 5.5% per annum. At maturity, the Company
will repay the face amount of the loans in cash, including unpaid and accrued interest at 5.5% and, in addition, issued 7,500,000
of the Companys common stock, to the lender. At maturity the lender has the option to be issued, in lieu of cash payment
of the outstanding debts, an additional 7,500,000 shares of the Companys common stock as full satisfaction of the principal
loan amounts and related unpaid and accrued interest thereon.
On November 17, 2023, the Company
borrowed $50,000 and $25,000 from each of two unrelated individuals, repayable May 17, 2025 with interest at 5.5% per annum and
August 17, 2024 with interest at 11% per annum, respectively. At maturity, the Company will repay the face amount of the loans
in cash, including unpaid and accrued interest and, in addition, issued 7,500,000 and 3,750,000 of the Companys 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 Companys common stock, respectively, as full satisfaction of
the principal loan amounts and related unpaid and accrued interest thereon.
Notes payable at December 31, 2024 and 2023
are summarized as follows:
|
|
|
Face Amount |
|
Interest Rate |
|
Due Date |
|
2024 |
|
2023 | |
|
Current notes payable |
|
$ |
25,000 |
|
|
|
11 |
% |
|
Sept 1, 2024 |
|
$ |
25,000 |
|
|
$ |
25,000 |
| |
|
|
|
$ |
50,000 |
|
|
|
11 |
% |
|
May 1, 2024 |
|
$ |
50,000 |
|
|
$ |
50,000 |
| |
|
|
|
$ |
50,000 |
|
|
|
11 |
% |
|
Jun 29, 2024 |
|
$ |
50,000 |
|
|
$ |
50,000 |
| |
|
|
|
$ |
25,000 |
|
|
|
11 |
% |
|
Sept 1, 2024 |
|
$ |
25,000 |
|
|
$ |
25,000 |
| |
|
|
|
$ |
100,000 |
|
|
|
11 |
% |
|
Feb 25, 2025 |
|
$ |
100,000 |
|
|
|
|
| |
|
|
|
$ |
50,000 |
|
|
|
11 |
% |
|
Dec 9, 2024 |
|
$ |
50,000 |
|
|
$ |
50,000 |
| |
|
|
|
$ |
25,000 |
|
|
|
11 |
% |
|
Dec 18, 2024 |
|
$ |
25,000 |
|
|
$ |
25,000 |
| |
|
|
|
$ |
25,000 |
|
|
|
11 |
% |
|
Aug 17, 2024 |
|
$ |
25,000 |
|
|
$ |
25,000 |
| |
|
|
|
$ |
50,000 |
|
|
|
11 |
% |
|
Aug 6, 2024 |
|
$ |
50,000 |
|
|
$ |
50,000 |
| |
|
|
|
$ |
25,000 |
|
|
|
11 |
% |
|
Aug 8, 2024 |
|
$ |
25,000 |
|
|
$ |
25,000 |
| |
|
|
|
$ |
50,000 |
|
|
|
5.5 |
% |
|
May 17, 2025 |
|
$ |
50,000 |
|
|
|
|
| |
|
|
|
$ |
25,000 |
|
|
|
11 |
% |
|
April 2, 2025 |
|
$ |
25,000 |
|
|
|
|
| |
|
|
|
$ |
50,000 |
|
|
|
11 |
% |
|
April 19, 2025 |
|
$ |
50,000 |
|
|
|
|
| |
|
|
|
$ |
25,000 |
|
|
|
11 |
% |
|
April 15, 2025 |
|
$ |
25,000 |
|
|
|
|
| |
|
|
|
$ |
10,000 |
|
|
|
11 |
% |
|
September 16, 2025 |
|
$ |
10,000 |
|
|
|
|
| |
|
|
|
$ |
25,000 |
|
|
|
11 |
% |
|
August 19, 2025 |
|
$ |
25,000 |
|
|
|
|
| |
|
Note discount |
|
|
|
|
|
|
|
|
|
|
|
$ |
(22,924 |
) |
|
$ |
(38,780 |
) | |
|
Total current notes payable |
|
|
|
|
|
|
|
|
|
|
|
$ |
587,076 |
|
|
$ |
286,220 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Long-term notes payable |
|
$ |
25,000 |
|
|
|
5.5 |
% |
|
Nov 13, 2026 |
|
$ |
25,000 |
|
|
$ |
25,000 |
| |
|
|
|
$ |
50,000 |
|
|
|
5.5 |
% |
|
May 17, 2025 |
|
|
|
|
|
$ |
50,000 |
| |
|
Note discount |
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,293 |
) |
|
$ |
(39,860 |
) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total long-term notes payable |
|
|
|
|
|
|
|
|
|
|
|
$ |
23,707 |
|
|
$ |
35,140 |
| |
****
| F-20 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
**NOTE 9 - INCOME TAXES**
A reconciliation of the provision for
income taxes at the United States federal statutory rate of 21% and a Colorado state rate of 5% compared to the Companys
income tax expense as reported at December 31, 2024 and 2023 is as follows:
|
| |
Income tax valuation allowance | |
|
| |
| |
| |
|
| |
2024 | |
2023 | |
|
| |
| |
| |
|
Net loss before income taxes | |
$ | (1,514,839 | ) | |
$ | (917,088 | ) | |
|
Adjustments to net loss | |
| | | |
| | | |
|
Convertible note expense | |
| 109,956 | | |
| 28,547 | | |
|
Net taxable income (loss) | |
| (1,404,883 | ) | |
| (888,541 | ) | |
|
Income tax rate | |
| 26 | % | |
| 26 | % | |
|
Income tax recovery | |
| 365,270 | | |
| 231,021 | | |
|
Valuation allowance change | |
| (365,270 | ) | |
| (231,021 | ) | |
|
Provision for income taxes | |
$ | | | |
$ | | | |
|
| |
| | | |
| | | |
The significant components of deferred income
tax assets at December 31, 2024 and 2023 are as follows:
|
| |
Components of deferred income tax assets | |
|
| |
| |
| |
|
| |
2024 | |
2023 | |
|
| |
| |
| |
|
Net operating loss carryforward | |
$ | 5,534,349 | | |
$ | 4,129,466 | | |
|
| |
| | | |
| | | |
|
Valuation allowance | |
| (5,534,349 | ) | |
| (4,129,466 | ) | |
|
| |
| | | |
| | | |
|
Net deferred income tax asset | |
$ | | | |
$ | | | |
|
| |
| | | |
| | | |
****
**NOTE 10 RELATED PARTY
TRANSACTIONS**
In support of the Companys
efforts and cash requirements, it must rely on advances from related parties until such time that the Company can support its operations
or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment
for continued support by shareholders. The advances are considered temporary in nature and have not been formalized by a promissory
note. There were no advances from related parties during the years ended December 31, 2024 and 2023.
IHG, controlling shareholder of
the Company, provides management consulting services to the Company. There is no formal written agreement that defines the compensation
to be paid. For the years ended December 31, 2024 and 2023 the Company paid related party management fees to IHG of $112,694 and
$128,000, respectively.
| F-21 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 10 RELATED PARTY
TRANSACTIONS (continued)**
During the year ended December 31, 2024,
the Company issued 17,000,000 shares of its common stock to officers/directors/advisors of the Company for services, valued at
$18,500; of which 8,000,000 shares, valued at $3,200, was charged to operations during the year ended December 31, 2023; and issued
4,500,000 shares of its common stock for consulting services, valued at $7,650 ($0.0017 per share), to individuals related to the
Chief Executive Officer of the Company.
**NOTE 11 - COMMITMENTS AND CONTINGENCIES**
(i) On November 6, 2023, the Company
was notified of a lawsuit filed in Clark County, NV against the Company by GS Capital 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. Shortly
after the Plaintiff filed the lawsuit, BlackStar repaid the remaining principal balance. At the outset of the case, a temporary
restraining order was entered and required the transfer of 257,000,000 shares of BlackStars stock to the Plaintiff to be
sold on the open market, which occurred in Q1 and Q2 of 2024. BlackStar has appealed the temporary restraining order to the Nevada
Supreme Court and seeks the return of the 257,000,000 shares, among other damages. While the appeal is pending, the Company, through
its attorneys, filed an answer to Plaintiffs complaint and counterclaims against Plaintiff on February 27, 2024. In addition
to denying many of the allegations laid out in the lawsuit, the Company invokes several affirmative defenses that bar Plaintiffs
recovery in the action and alleges that Plaintiff breached the terms of the agreement, including, but not limited to, obtaining
the conversion of BlackStars stock after the Promissory Note was fully paid off. Amongst other claims, the Company alleges
that the Plaintiff acted in bad faith and in violation of usury laws by recovering an estimated $600,000 dollars in BlackStar stock
off of a $60,000 promissory note, estimated at a roughly 170% interest rate. The Company seeks a judgment in its favor and against
Plaintiff, compensatory damages in an amount to be proven at trial, declaratory relief voiding the agreement as illegal under Section
29(b) of the Securities Act, punitive damages in an amount to be proven at trial, interest on all damages, and attorneys
fees. As a result of the counterclaims, there can be no reasonable estimate of any contingencies as of June 30, 2024. At an April
22, 2024 hearing, the Plaintiffs motion to dismiss our counterclaims was denied, and again on July 18, 2024 the Court refused
to dismiss BlackStars counterclaims against Plaintiff. BlackStar intends to pursue those counterclaims for securities violations.
BlackStar and the Plaintiff have agreed to a stay of the trial court proceedings while the appeal of the temporary restraining
order is resolved, likely in late 2025 or early 2026. The Company is unable to reasonably estimate any potential loss from this
matter, and is of the opinion that it will prevail in this action.
(ii) On October 30, 2024, the Company
entered into a Settlement Agreement with Continuation Capital, Inc. (CCI) for the purchase of $861,539.26 of debt
owed to BlackStars creditors. The Settlement Agreement was approved in Florida State court in compliance with the terms
of Section 3(a)(10) of the Securities Act of 1933, as amended.Under the terms of the Settlement Agreement and Stipulation,
CCI agreed to purchase the bona fide and outstanding and unpaid creditor claims in exchange for shares of BlackStars common
stock. If satisfied in full, pursuant to the Settlement Agreement, the Company will reduce its debt obligations in exchange for
the issuance of shares of Companys common stock to CCI. The shares will be issued at a discount of 42.5% off the market
price (the lowest closing sale price for twenty (20) trading days), in one or more tranches, pursuant to the terms of section 3(a)(l0)
of the Securities Act of 1933, as amended. Upon closing, the Company issued to CCI 60,200,000 freely trading shares, valued at
$138,640, based on the trading price of the Companys common stock as of the date of the Settlement Agreement, as a fee for
entering into the Settlement Agreement, pursuant to Section 3(a)(10) of the Securities Act. In November 2024, the Company issued
to CCI an additional 13,377,926 shares of common stock for CCIs payment of $10,000 to certain creditors of the Company.
At December 31, 2024 and 2023, there were
no legal proceedings against the Company, other than the matter with GS Capital mentioned above.
| F-22 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 12 RESTATEMENT OF FINANCIAL
STATEMENTS**
The December 31, 2023 financial
statements have been restated from the previously issued 2023 financial statements for revisions and corrections to
accounting errors relating loan modification, to the calculation and amortization of debt discount to notes payable and for
the recording of previously unrecorded trade accounts payable and accrued interest on debt.
|
| |
As Previously Reported 2023 | |
Restated 2023 | |
Effect of Change | |
|
| |
| |
| |
| |
|
Balance Sheet | |
| |
| |
| |
|
Total assets | |
$ | 382,202 | | |
$ | 382,202 | | |
$ | | | |
|
Accounts payable | |
$ | 358,001 | | |
$ | 268,188 | | |
| (89,813 | ) | |
|
Accrued payables | |
| 247,020 | | |
| 302,020 | | |
| 55,000 | | |
|
Notes payable | |
| 325,000 | | |
| 286,220 | | |
| (38,780 | ) | |
|
Convertible notes payable | |
| 584,079 | | |
| 584,079 | | |
| | | |
|
Total current liabilities | |
| 1,514,100 | | |
| 1,440,507 | | |
| (73,593 | ) | |
|
Notes payable- long term | |
| 75,000 | | |
| 35,140 | | |
| (39,860 | ) | |
|
Preferred stock | |
| 1,000 | | |
| 1,000 | | |
| | | |
|
Common stock | |
| 1,544,696 | | |
| 1,544,696 | | |
| | | |
|
Additional paid in capital | |
| 7,666,156 | | |
| 7,649,714 | | |
| (16,442 | ) | |
|
Common stock to be issued | |
| 3,200 | | |
| 3,200 | | |
| | | |
|
Accumulated deficit | |
| (10,421,950 | ) | |
| (10,292,055 | ) | |
| 129,895 | | |
|
Total stockholders deficit | |
| (1,206,898 | ) | |
| (1,093,445 | ) | |
| 113,453 | | |
|
Total liabilities and stockholders deficit | |
$ | 382,202 | | |
$ | 382,202 | | |
$ | | | |
|
| |
| | | |
| | | |
| | | |
|
Statement of Operations | |
| | | |
| | | |
| | | |
|
Operating expenses | |
$ | 616,824 | | |
$ | 527,010 | | |
$ | (89,814 | ) | |
|
Interest expense | |
| 496,157 | | |
| 219,214 | | |
| (276,943 | ) | |
|
Amortization of debt issue costs | |
| 7,835 | | |
| 28,547 | | |
| 20,712 | | |
|
Loss on debt extinguishment | |
| (73,833 | ) | |
| 142,317 | | |
| 216,150 | | |
|
Net Loss | |
$ | (1,046,983 | ) | |
$ | (917,088 | ) | |
$ | 129,895 | | |
|
| |
| | | |
| | | |
| | | |
|
Statement of Cash Flows | |
| | | |
| | | |
| | | |
|
Net loss | |
$ | (1,046,983 | ) | |
$ | (917,088 | ) | |
$ | 129,895 | | |
|
Amortization of note issue costs | |
| 7,835 | | |
| 28,547 | | |
| 20,712 | | |
|
Stock based compensation | |
| 3,200 | | |
| 3,200 | | |
| | | |
|
Stock issued for consulting agreement | |
| 100,000 | | |
| 100,000 | | |
| | | |
|
Stock issued for loan costs | |
| 266,063 | | |
| 279,539 | | |
| 13,476 | | |
|
Debt extinguishment | |
| (73,833 | ) | |
| (203,103 | ) | |
| (129,270 | ) | |
|
Default provisions on convertible debt | |
| 74,499 | | |
| 74,499 | | |
| | | |
|
Accounts payable | |
| 193,285 | | |
| 103,472 | | |
| (89,813 | ) | |
|
Accrued payables | |
| 135,222 | | |
| 190,222 | | |
| 55,000 | | |
|
Operating activities | |
| (340,712 | ) | |
| (340,712 | ) | |
| | | |
|
Investing activities | |
| (40,001 | ) | |
| (40,001 | ) | |
| | | |
|
Financing activities | |
| 352,178 | | |
| 352,178 | | |
| | | |
|
Decrease in cash | |
$ | (28,535 | ) | |
$ | (28,535 | ) | |
$ | | | |
| F-23 | |
| | Table of Contents | |
**BLACKSTAR ENTERPRISE GROUP, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**YEARS ENDED DECEMBER 31, 2024 AND 2023**
****
**NOTE 13 SUBSEQUENT EVENTS**
****
On January 9, 2025, the Company entered into
a financing agreement with 1800 Diagonal Lending LLC (1800 Diagonal) to borrow $49,200. The note matures on October
30, 2025, bears interest at 12%, with a default rate of 22%, and is convertible, commencing 180 days after the date of issuance,
into common shares of the Company. The conversion price is to be calculated at 61% of the average of the lowest trading price of
the Companys common stock for the previous ten 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 114,000,000 shares of common stock for conversion. Net proceeds from the loan were $40,000,
after legal fees and borrowing costs of $9,200.
On May 29, 2025, the Board of Directors authorized
and approved the issuance of an aggregate 400,000,000 shares of the common stock to officers/directors/advisors/consultants to
the Company for services rendered at a value of $0.0004 per share, based on the daily closing trading price of the Companys
common stock, including 200,000,000 shares to the Companys Chief Executive Officer/Director and 25,000,000 to an independent
Director.
In October 2025, the Company commenced a $1
million fractional unit offering, in increments of $5,000, consisting of Common and Preferred Securities under a term sheet to
certain accredited investors, who had advanced monies to the Company over a period of 5 months in the 2025 fiscal year. The Company
has received an aggregate $384,208 consideration from four lenders consisting of $236,562 cash and conversion of $125,000 in outstanding
notes and related accrued interest of $22,646, all of which is converted by the documents into the fractional units set forth
above. The Fractional Units were offered at $5,000 per one twentieth of one Unit consist of 7,500,000 shares of common stock and
5,000 shares of Series B Preferred Stock which participates in 1/20th of 1% of an assigned royalty of licensing fees
for life of patents and licenses of BlackStar. (for each share of Series B Preferred Stock -0.0025%). The Company will issue 576,312,092
shares of common stock and 384,208 shares of Preferred Series B stock to the investors, none of which have been issued as of the
date of these financial statements.
The Company has analyzed its operations subsequent
to December 31, 2024 through the date that these financial statements were issued, and has determined that it does not have any
additional material subsequent events to disclose.
| F-24 | |
| | Table of Contents | |
**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**
On May 3, 2024, the Board of Directors of Blackstar
Enterprise Group, Inc. approved the dismissal of BF Borgers CPA PC (BF Borgers) as the Companys independent
registered public accounting firm. On May 3, 2024, the Securities and Exchange Commission (the SEC) announced that
it had settled charges against Borgers that it failed to conduct audits in accordance with the standards of the Public Company
Accounting Oversight Board (the PCAOB). As part of the settlement, Borgers agreed to a permanent ban on appearing
or practicing before the SEC. As a result of Borgers settlement with the SEC, the Company dismissed Borgers as its independent
accountant.
On June 3, 2024, the Board of Directors of
Blackstar Enterprise Group, Inc. approved the appointment of Fruci & Associates II, PLLC (Fruci) as the Companys
new independent registered public accounting firm, effective immediately, to perform independent review and audit services for
the fiscal years ending December 31, 2024, effective immediately, including a reaudit of the fiscal years ending December 31, 2022
and 2023, following the dismissal of BF Borgers CPA PC as the Companys independent registered public accounting firm.
**ITEM 9A. CONTROLS AND PROCEDURES.**
EVALUATION OF DISCLOSURE CONTROLS & 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 and principal financial officer as appropriate, to allow
timely decisions regarding required disclosure.
In connection with this annual report, as required
by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design
and operation of our company's disclosure controls and procedures. Under the supervision of our Board of Directors, our Chief Executive
Officer and Chief Financial Officer, acting as our principal executive officer and principal financial officer respectively, we
conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on
the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework (2013), our management concluded
that our internal control over financial reporting was not effective as of December 31, 2024. Subject to the inherent limitations
noted in this Part II, Item 9A as of December 31, 2024, our disclosure controls and procedures were not effective due to the existence
of material weaknesses in our internal controls over financial reporting as discussed below. It is management's responsibility
to establish and maintain adequate internal control over financial reporting.
This annual report does not include an attestation
report of our independent registered public accounting firm regarding our internal control over financial reporting. Managements
report on internal control over financial reporting was not subject to attestation by our independent registered public accounting
firm pursuant to the rules of the SEC because we are neither an accelerated filer nor a larger accelerated filer.
We have implemented a framework used by management
to evaluate the effectiveness of our internal control over financial reporting, which incorporates a quarterly review by our Board
of Directors of the recording of transactions and whether questions of accuracy and authorization may arise as the accounting may
be reviewed by our auditors.
Our Management's assessment of the effectiveness
of internal controls over financial reporting as of the end of the most recent fiscal year, including a statement as to whether
or not internal control over financial reporting is effective is contained in the section immediately following this paragraph.
| 63 | |
| | Table of Contents | |
MANAGEMENTS REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
It is Managements responsibility to
establish and maintain adequate internal control over financial reporting. The matters involving internal controls and procedures
that our Companys management considered to be material weaknesses and may have been ineffective under the standards of the
Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors
on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls
and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and
procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure
requirements; and (4) ineffective controls over period end financial disclosure and reporting processes.
Management has assessed the effectiveness of
its internal controls over financial reporting at the end of the most recent fiscal year and has determined several weaknesses
and has determined that its internal controls have not been effective due, in part, to lack of full-time financial accounting professionals.
Management believes that the material weaknesses
and ineffectiveness set forth in items (2), (3) and (4) above did not have an effect on our Companys financial results.
However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on our
Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls
and procedures may result in our Company's financial statements for the future years being subject to error and inaccurate if controls,
procedures, and professional financial officers are not maintained.
We are committed to improving our financial
organization. As part of this commitment, we intend to create a position to segregate duties consistent with control objectives
and intend to increase our personnel resources and technical accounting expertise within the accounting function when funds are
available to our Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit
committee of our Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment
and monitoring of required internal controls and procedures; and ii) preparing and implementing sufficient written policies and
checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application
of US GAAP and SEC disclosure requirements.
Management believes that the appointment of
one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning
audit committee and a lack of a majority of outside directors on our Companys Board. In addition, management believes that
preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient
written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP
and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further,
management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation
of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training
needed to support our Company if personnel turn over issues within the department occur. This coupled with the appointment of additional
outside directors will greatly decrease any control and procedure issues our Company may encounter in the future.
Due to insufficient funds during the year ended
December 31, 2024, the Company has been unable to implement many of the remedies to the ineffective oversight. The Company will
continue to implement the changes as laid out above as soon as funds are available to the Company.
We will continue to monitor and evaluate the
effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and
are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
| 64 | |
| | Table of Contents | |
****
**ITEM 9B. OTHER INFORMATION.**
Rule 10b5-1 Trading Plans
During the year ended December 31, 2024, none
of our directors or officers adopted, materially modified, or terminated any contract, instruction, or written plan for the purchase
or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange
Act or any non-Rule 10b5-1 trading arrangement.
**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS.**
****
Not applicable.
**PART III**
**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE.**
The following table sets forth information
as to persons who currently serve as our directors or executive officers, including their ages as of December 31, 2024.
|
Name |
|
Age |
|
Position | |
|
Joseph E. Kurczodyna |
|
71 |
|
Acting Chief Executive Officer, Chief Financial Officer and Director | |
|
Robert LaPointe, Jr. |
|
75 |
|
Director | |
Our officers are elected by the board of directors
at the first meeting after each annual meeting of our stockholders and hold office until their successors are duly elected and
qualified under our bylaws.
The directors named above will serve until
the next annual meeting of our stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders'
meeting. Officers will hold their positions at the pleasure of the board of directors absent any employment agreement. There is
no arrangement or understanding between our directors and officers and any other person pursuant to which any director or officer
was or is to be selected as a director or officer.
**BIOGRAPHICAL INFORMATION**
**Joseph E. Kurczodyna, Chief Executive Officer,
Chief Financial Officer and Director**
Working with various Commodity and Stock brokerage
firms in Chicago and Denver Mr. Kurczodyna began his career in 1977 trading Bonds and T-Bill futures. In the 1980s, he focused
on underwriting early-stage companies. As a principle with Mills Financial, a registered Broker Dealer with the SEC and NASD, he
underwrote and syndicated the Western International Gold & Silver (WIGS) in 1984. In 1991, Mr. Kurczodyna purchased Mills Financial
and was the firms President and General Principle. While leading Mills Financial, he underwrote and funded several private
placements and IPOs. In 1998, Mills was the lead underwriter for United Financial Mortgage Corp. (UFMC), which was eventually
listed on the American Stock Exchange. From 2004 to 2009, Mr. Kurczodyna was the CEO of Capital Merchant Bank LLC, an independent
investment banker. From 2006-2008 he acted as the CFO and Director of OnMedia International. In 2009, Mr. Kurczodyna founded Patriot
Mortgage Acceptance Corp., a private mortgage company. In 2014, Mr. Kurczodyna was one of the founders of International Hedge Group
Inc. (IHG). In 2016, IHG acquired 44,400,000 shares of common stock and 1,000,000 Class A Preferred shares in BlackStar Enterprise
Group Inc. As of December 31, 2020, IHG owned 4,792,702 shares of common stock and 1,000,000 Class A Preferred shares in BlackStar
Enterprise Group Inc., and Mr. Kurczodyna became the controlling shareholder of IHG by issuance of super majority voting preferred
shares.
| 65 | |
| | Table of Contents | |
****
**Robert LaPointe, Jr., Director as of November
22, 2022**
Mr. LaPointe began his career as an aerospace
engineer with Ball Aerospace in 1988, where he remained until his retirement in 2016, though he continues to work there part time.
Mr. LaPointe also served as vice presidentof a small company, Dataflow Technologies, that designed data acquisition systems
for energy monitoring in buildings from 1982 to 1988. Throughout his career, Mr. LaPointe also did nuclear research, was in chemical
operations at Syntex Corp for production of pharmaceuticals, and has a background in ranching, farming, and construction. Mr. LaPointe
brings to the Company experience in both large and small corporations and his strengths include scientific research and technology.
Mr. LaPointe holds Bachelor of Science in Chemistry and Physiology (Colorado State University), and a Master of Science in Electrical
Engineering (University of Idaho), and is an Army veteran of the Vietnam war.
CONFLICTS OF INTEREST GENERAL
There can be no assurance that management will
resolve all conflicts of interest in favor of the Company.
Our directors and officers are, or may become,
in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety
of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity,
involved in participation with such other entities. Consequently, there are potential inherent conflicts of interest in their acting
as officers and directors of the Company. Insofar as the officers and directors are engaged in other business activities, management
anticipates it will devote approximately 30-40 hours per week to the Company's affairs.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement contained in our Articles
of Incorporation, Bylaws, or minutes which requires officers and directors of our Company to disclose business opportunities which
come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to our company to disclose to
it any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded
from this duty would be opportunities which the person learns about through his involvement as an officer and director of another
company. We have no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate
or any client of any such person.
Our Board of Directors has adopted a policy
that the Company will not seek a fund of any entity in which any officer or director serves as an officer or director or in which
they or their family members own or hold a controlling ownership interest. Although the Board of Directors could elect to change
this policy, the Board of Directors has no present intention to do so.
The members of the Board and management are
also the Board and Management of our parent, International Hedge Group, Inc. (IHG) and have ownership and compensation
through IHG. IHG may be engaged by client borrowers of our Company to provide consulting services, and such poses a risk of financial
conflict to our Company.
We expect that the selection of a business
opportunity will be complex. Due to general economic conditions, rapid technological advances being made in some industries and
shortages of available capital, we believe that there are numerous firms seeking the benefits of an issuer who has complied with
the 1934 Act. Such benefits may include facilitating or improving the terms on which additional equity financing may be sought,
providing liquidity for incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions
of applicable statutes) for all stockholders and other factors. Potentially, available business opportunities may occur in many
different industries and at various stages of development, all of which will make the task of comparative investigation and analysis
of such business opportunities extremely difficult and complex. We have, and will continue to have, essentially no assets to provide
the owners of business opportunities. However, we will be able to offer owners of acquisition candidates the opportunity to acquire
a controlling ownership interest in an issuer who has complied with the 1934 Act without incurring the cost and time required to
conduct an initial public offering.
COMMITTEES OF THE BOARD OF DIRECTORS
We are managed under the direction of its board
of directors.
| 66 | |
| | Table of Contents | |
EXECUTIVE COMMITTEE
We do not have an executive committee, at this
time.
AUDIT COMMITTEE
We have formed a non-independent audit committee
in October 2016 to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the compliance
by the Company with legal and regulatory requirements and (3) the independence and performance of the Companys internal
and external auditors. Joe Kurczodyna, as Chairman, and John Harris acted as the initial members of the Audit Committee, however
it is now the board of directors serving in this role.
The functions of the audit committee are to
review the scope of the audit procedures employed by our independent auditors, to review with the independent auditors our accounting
practices and policies and recommend to whom reports should be submitted, to review with the independent auditors their final audit
reports, to review with our internal and independent auditors our overall accounting and financial controls, to be available to
the independent auditors during the year for consultation, to approve the audit fee charged by the independent auditors, to report
to the board of directors with respect to such matters and to recommend the selection of the independent auditors.
In the absence of a separate audit committee,
our board of directors functions as audit committee and performs some of the same functions of an audit committee, such as recommending
a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors
independence, the financial statements and their audit report; and reviewing management's administration of the system of internal
accounting control.
ANNUAL MEETING
The annual meeting of stockholders is anticipated
in the Fall of 2024 and will include the election of directors. The annual meeting will be held at our principal office or at such
other place as permitted by the laws of the State of Delaware and on such date as may be fixed from time to time by resolution
of our board of directors.
PREVIOUS "BLANK CHECK" OR "SHELL"
COMPANY INVOLVEMENT
No members of our management have been involved
in previous "blank-check" or "shell" companies.
Involvement in Legal Proceedings
No Executive Officer or Director of our Company
has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding that is
currently pending.
No Executive Officer or Director of our Company
is the subject of any pending legal proceedings.
No Executive Officer or Director of our Company
is involved in any bankruptcy petition by or against any business in which they are a general partner or executive officer at this
time or within two years of any involvement as a general partner, executive officer, or Director of any business.
****
****
****
****
****
| 67 | |
| | Table of Contents | |
**ITEM 11. EXECUTIVE COMPENSATION.**
**Summary of Executives and Director Compensation
Table**
The following table sets forth the compensation
paid to our officers from the years ended December 31, 2024, 2023, and 2022.
**SUMMARY EXECUTIVES COMPENSATION TABLE**
**In Dollars**
****
|
Name & Position | |
Year | |
Contract Payments ($) (See Footnotes) | |
Bonus ($) | |
Stock awards ($) | |
Option awards ($) | |
Non-equity incentive plan compensation ($) | |
Non-qualified deferred compensation earnings ($) | |
All other compensation ($) | |
Total ($) | |
|
Joseph E. Kurczodyna, CEO, CFO (3) | |
| 2024 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 112,694 | | |
| (5 | ) | |
$ | 112,694 | | |
| (5 | ) | |
|
| |
| 2023 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 128,000 | | |
| (4 | ) | |
$ | 128,000 | | |
| (4 | ) | |
|
| |
| 2022 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 294,401 | | |
| (2 | ) | |
$ | 294,401 | | |
| (2 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
John Noble Harris, CEO (1) | |
| 2022 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 294,401 | | |
| (2 | ) | |
$ | 294,401 | | |
| (2 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
All Current Executive Officers | |
| 2024 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 112,694 | | |
| (5 | ) | |
$ | 112,694 | | |
| (5 | ) | |
___________
****
|
|
(1) |
Mr. Harris resigned as an officer and director effective November 22, 2022. Mr. Kurczodyna was appointedCEO on the same date, but was an existing officer for the entirety of 2022. | |
****
|
|
(2) |
Management collectively, through IHG, was paid consulting fees of $294,401 for the year ended December 31, 2022. | |
|
|
|
| |
|
|
(3) |
Mr. Harris resigned as an officer and director effective November 22, 2022. Mr. Kurczodyna was appointed CEO on the same date, but was an existing officer for the entirety of 2022. | |
|
|
|
| |
|
|
(4) |
Management collectively, through IHG, was paid consulting fees of $128,000 for the year ended December 31, 2023. | |
|
|
|
| |
|
|
(5) |
Management collectively, through IHG, was paid consulting fees of $112,694 for the year ended December 31, 2024. | |
****
*Management fees as of December 31, 2024*
IHG, controlling shareholder of the Company,
provides management consulting services to the Company. There is no formal written agreement that defines the compensation to be
paid. For the year ended December 31, 2024, the Company recorded related party management fees of $112,694.
**Employment Contracts and Termination of
Employment and Change-in-Control Arrangements**
There are no employment contracts, compensatory
plans or arrangements, including payments to be received from us,
| 68 | |
| | Table of Contents | |
with respect to any of our directors or executive
officers which would in any way result in payments to any such person because of his or her resignation, retirement or other termination
of employment with us. These agreements do not provide for payments to be made as a result of any change in control of us, or a
change in the person's responsibilities following such a change in control. Our Company entered into a Management Consulting Agreement
with our parent company, IHG, on December 1, 2017. The agreement is attached as [Exhibit
10.1](https://www.sec.gov/Archives/edgar/data/1483646/000106594918000096/ex10_1.htm) to the Amend. No. 1 to the Form 10-K for the year ended December 31, 2017. The term of the agreement is until terminated
with 30 days prior notice. We agreed to pay IHG $25,000 for services occurring in 2017, payable as cash, stock, or both upon mutual
agreement. We will limit expenses of IHG pursuant to the allocations made in the budget, and all reasonable pre-approved out-of-pocket
expenses actually incurred by IHG on behalf of the Company will be reimbursed. IHG agreed to assist the Company in all filing necessary
to be a fully reporting public company, assist the Company in public relations, evaluate candidates for the portfolio of companies
in merchant banking, establish new contacts for the Company and develop proposals and deals to capture revenues, and assist the
Company in their capital funding strategy. IHG have continued to consult for the Company and for their services, they have been
paid $112,694 and $128,000 for the years ended December 31, 2024 and 2023, respectively.
****
**Compensation Committee Interlocks and Insider
Participation**
Our board of directors in our entirety acts
as the compensation committee for BlackStar Enterprise Group, Inc.
**DIRECTOR COMPENSATION**
The following table sets forth certain information
concerning compensation paid to our directors for services as directors, but not including compensation for services as officers
reported in the Summary Executives Compensation Table during the years ended December 31, 2024, 2023, and
2022.
|
Name | |
Year | |
Fees earned or paid in cash ($) | |
Stock awards ($) | |
Option awards ($) | |
Non-equity incentive plan compensation ($) | |
Non-qualified deferred compensation earnings ($) | |
All other compensation ($) | |
Total ($) | |
|
Joseph E. Kurczodyna, | |
| 2024 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
|
Director | |
| 2023 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
|
| |
| 2022 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Robert LaPointe, Jr. Director (1) | |
| 2024 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
|
| |
| 2023 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
|
| |
| 2022 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
John Noble Harris, Director (2) | |
| 2022 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
All Current Directors | |
| 2024 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
$ | 0 | | |
**_______**
|
|
(1) |
Mr. LaPointe was elected director effective November 22, 2022. | |
|
|
(2) |
Mr. Harris resigned as an officer and director effective November 22, 2022. | |
The term of office for each Director is one
(1) year, or until his/her successor is elected at our annual meeting and qualified. The term of office for each of our Officers
is at the pleasure of the Board of Directors.
The Board of Directors has no nominating, auditing
committee or a compensation committee. Therefore, the selection of person or election to the Board of Directors was neither independently
made nor negotiated at arm's length.
At this time, our Directors do not receive
cash compensation for serving as members of our Board of Directors. On
| 69 | |
| | Table of Contents | |
July 1, 2023, the Board of Directors approved
a plan for the issuance of shares of the Companys 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. The Board authorized,
as of July 1, 2023, the issuance of an aggregate 8,000,000 shares of its common stock under the approved plan to four individuals,
valued at $3,200 ($0.0004 per share), based on the trading price of the Companys common stock as of the date of grant. As
of December 31, 2023, the shares have not been issued and the Company has charged $3,200 as stock based compensation expense and
recorded the shares to be issued as common stock to be issued on the accompanying financial statements.
During the year ended December 31, 2024, the
Company issued 17,000,000 shares of its common stock to officers/directors/advisors of the Company for services, valued at $18,500;
of which 8,000,000 shares, valued at $3,200, was charged to operations during the year ended December 31, 2023; and issued 4,500,000
shares of its common stock for consulting services, valued at $7,650 ($0.0017 per share), to individuals related to the Chief Executive
Officer of the Company.
**Limitation on Liability and Indemnification**
We are a Delaware corporation. The Delaware
General Corporation Laws (DGCL) provides that the articles of incorporation of a Delaware corporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or our stockholders for monetary damages for breach of fiduciary
duty as a director, except that any such provision may not eliminate or limit the liability of a director (i) for any breach of
the directors duty of loyalty to the corporation or our stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) acts specified in Section 78 (concerning unlawful distributions),
or (iv) any transaction from which a director directly or indirectly derived an improper personal benefit. Our articles of incorporation
contain a provision eliminating the personal liability of directors to our company or our stockholders for monetary damages
to the fullest extent provided by the DGCL.
The DGCL provides that a Delaware corporation
must indemnify a person who was wholly successful, on the merits or otherwise, in defense of any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal (a Proceeding),
in which he or she was a party because the person is or was a director, against reasonable expenses incurred by him or her in connection
with the Proceeding, unless such indemnity is limited by the corporations articles of incorporation. Our articles of incorporation
do not contain any such limitation.
The DGCL provides that a Delaware corporation
may indemnify a person made a party to a Proceeding because the person is or was a director against any obligation incurred with
respect to a Proceeding to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee
benefit plan) or reasonable expenses incurred in the Proceeding if the person conducted himself or herself in good faith and the
person reasonably believed, in the case of conduct in an official capacity with the corporation, that the persons conduct
was in the corporations best interests and, in all other cases, his or her conduct was at least not opposed to the corporations
best interests and, with respect to any criminal proceedings, the person had no reasonable cause to believe that his or her conduct
was unlawful. Our articles of incorporation and bylaws allow for such indemnification. A corporation may not indemnify a director
in connection with any Proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation
or, in connection with any other Proceeding charging that the director derived an improper personal benefit, whether or not involving
actions in an official capacity, in which Proceeding the director was judged liable on the basis that he or she derived an improper
personal benefit. Any indemnification permitted in connection with a Proceeding by or in the right of the corporation is limited
to reasonable expenses incurred in connection with such Proceeding.
The DGCL, unless otherwise provided in the
articles of incorporation, a Delaware corporation may indemnify an officer, employee, fiduciary, or agent of the corporation to
the same extent as a director and may indemnify such a person who is not a director to a greater extent, if not inconsistent with
public policy and if provided for by our bylaws, general or specific action of our board of directors or stockholders, or contract.
Our articles of incorporation provide for indemnification of our directors, officers, employees, fiduciaries and agents to the
full extent permitted by Delaware law.
Our articles of incorporation also provide
that we may purchase and maintain insurance on behalf of any person who
| 70 | |
| | Table of Contents | |
is or was a director or officer of our company
or who is or was serving at our request as a director, officer or agent of another enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not we would
have the power to indemnify him or her against such liability.
****
**EQUITY COMPENSATION PLAN INFORMATION**
****
**Key Employees Stock Compensation Plan**
****
Effective December 1, 2016, our Stock Option
and Award Plan (the "Stock Incentive Plan") was approved by our Board of Directors. Under the Stock Incentive Plan, the
Board of Directors may grant options or purchase rights to purchase common stock to officers, employees, and other persons who
provide services to us or any related company. The participants to whom awards are granted, the type of awards granted, the number
of shares covered for each award, and the purchase or exercise price, conditions and other terms of each award are determined by
the Board of Directors, except that the term of the options shall not exceed 10 years. A total of 10 million shares of our common
stock are subject to the Stock Incentive Plan and may be either a qualified or non-qualified stock option. The shares issued for
the Stock Incentive Plan may be either treasury or authorized and unissued shares. As of December 31, 2024, we have granted no
stock options to purchase any shares of our common stock under the Plan.
****
**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.**
The following table sets forth information
with respect to the beneficial ownership of our outstanding common stock by:
|
|
|
each person who is known by us to be the beneficial owner of five percent (5%) or more of our common stock; | |
|
|
|
our executive officers, and each director as identified in the Management Executive Compensation section; and | |
|
|
|
all of our directors and executive officers as a group. | |
Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.
Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible within 60
days of the date of this document into shares of our common stock are deemed to be outstanding and to be beneficially owned by
the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of the
person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
The information below is based on the number
of shares of our common stock that we believe was beneficially owned by each person or entity as of December 31, 2024.
****
****
****
****
**(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)**
| 71 | |
| | Table of Contents | |
**OFFICERS AND DIRECTORS**
****
|
Title of Class |
|
Name of Beneficial Owner (1) |
|
Amount and Nature of Beneficial Owner |
|
Percent of Class Outstanding (2)(4)(5) |
|
Number of Shares & Warrants if fully exercised |
|
Percent of Class including Warrants | |
|
Common Stock |
|
Joseph E. Kurczodyna,
Chief Executive Officer, Chief Financial Officer and Director (3)(4)(5) |
|
|
9,119,369 |
|
|
|
0.49 |
% |
|
|
9,119,369 |
|
|
|
0.49 |
% | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Class A Preferred Convertible Stock |
|
Joseph E. Kurczodyna,
Chief Executive Officer, Chief Financial Officer and Director (3)(4)(5) |
|
|
1,000,000 |
|
|
|
100 |
% |
|
|
N/A |
|
|
|
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Common Stock |
|
Robert LaPointe, Jr., Director (6) |
|
|
2,342,593 |
|
|
|
0.13 |
% |
|
|
2,342,593 |
|
|
|
0.13 |
% | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Common Shares |
|
All Directors and Executive Officers as a Group (2 persons) |
|
|
11,461,962 |
|
|
|
0.62 |
% |
|
|
11,461,962 |
|
|
|
0.62 |
% | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Preferred Shares |
|
All Directors and Executive Officers as a Group (2 persons) |
|
|
1,000,000 |
|
|
|
100 |
% |
|
|
N/A |
|
|
|
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
(1) |
The address of each person listed above, unless otherwise indicated, is c/o BlackStar Enterprise Group, Inc., 4450 Arapahoe Ave., Suite 100, Boulder, CO 80303. | |
|
|
(2) |
Based upon 1,854,894,873 common shares issued and outstanding on a fully diluted basis. (Does not include conversion rights of Class A Preferred Super Majority Voting Convertible Stock held by International Hedge Group, Inc., or any shares reserved under convertible notes). | |
|
|
(3) |
Mr. Kurczodyna owns shares of and controls International Hedge Group, Inc. and is deemed a beneficial owner. | |
|
|
(4) |
International Hedge Group, Inc. (IHG) controls voting of the BlackStar Class A Super Majority Voting Preferred stock which votes 60% of the common at all times. Mr. Kurczodyna has control of IHG through his ownership of IHG Class A Super Majority Voting Preferred shares. | |
|
|
(5) |
Including other affiliate companies of Mr. Kurczodyna. Mr. Kurczodyna owns 2,884,445 shares personally and 1,442,222 through an affiliated company, for a total of 4,326,667 (0.23%), not including ownership in IHG. Mr. Kurczodyna additionally has control of IHG through IHG Class A Super Majority Voting Preferred shares. | |
|
|
(6) |
Mr. LaPointe was elected a director of the Company effective November 22, 2022. | |
****
| 72 | |
| | Table of Contents | |
****
**GREATER THAN 5% STOCKHOLDERS**
|
Title of Class | |
Name of Beneficial Owner (1) | |
Amount and Nature of Beneficial Owner | |
Percent of Class Outstanding (2)(4)(5) | |
Number of Shares & Warrants if fully exercised | |
Percent of Class including Warrants | |
|
Common Stock | |
International Hedge Group, Inc. (4) | |
| 4,792,702 | | |
| 0.26 | % | |
| 4,792,702 | | |
| 0.26 | % | |
|
Class A Preferred Convertible Stock | |
International Hedge Group, Inc. (4) | |
| 1,000,000 | | |
| 100 | % | |
| N/A | | |
| N/A | | |
|
Common Stock | |
Estate of John Noble Harris, Former Chief Executive Officer and Director (3)(4)(6) | |
| 9,119,369 | | |
| 0.49 | % | |
| 9,119,369 | | |
| 0.49 | % | |
|
Class A Preferred Convertible Stock | |
Estate of John Noble Harris, Former Chief Executive Officer and Director (3)(4)(6) | |
| 1,000,000 | | |
| 100 | % | |
| N/A | | |
| N/A | | |
|
Common Stock | |
Joseph E. Kurczodyna, Chief Executive Officer, Chief Financial Officer and Director (3)(4) | |
| 9,119,369 | | |
| 0.49 | % | |
| 9,119,369 | | |
| 0.49 | % | |
|
Class A Preferred Convertible Stock | |
Joseph E. Kurczodyna, Chief Executive Officer, Chief Financial Officer and Director (3)(4) | |
| 1,000,000 | | |
| 100 | % | |
| N/A | | |
| N/A | | |
|
Total Common | |
| |
| 13,446,036 | | |
| 0.72 | % | |
| 13,446,036 | | |
| 0.72 | % | |
|
Total Class A Preferred Convertible Stock | |
| |
| 1,000,000 | | |
| 100 | % | |
| 1,000,000 | | |
| 100 | % | |
_________________
|
|
(1) |
The address of each person listed above, unless otherwise indicated, is c/o BlackStar Enterprise Group, Inc., 4450 Arapahoe Ave., Suite 100, Boulder, CO 80303. | |
|
|
(2) |
Based upon 1,854,894,873 shares issued and outstanding on a fully diluted basis. (Does not include conversion rights of Class A Preferred Super Majority Voting Convertible Stock held by International Hedge Group, Inc., or any shares reserved under convertible notes). | |
|
|
(3) |
The estate of Mr. Harris and Mr. Kurczodyna are an entity and individual owning and controlling International Hedge Group, Inc. and deemed beneficial owners. Mr. Harris passed away on December 15, 2022. | |
|
|
(4) |
International Hedge Group, Inc. (IHG), the estate of Mr. Harris, and Mr. Kurczodyna are shown collectively as they jointly own IHG. IHG also controls voting of the BlackStar Class A Super Majority Voting Preferred stock which votes 60% of the common at all times. Mr. Kurczodyna additionally has control of IHG through IHG Class A Super Majority Voting Preferred shares. | |
|
|
(5) |
Including other affiliate companies of the estate of Mr. Harris and Mr. Kurczodyna. The estate of Mr. Harris owns 2,884,445 shares and 1,442,222 through an affiliated company, for a total of 4,326,667 (0.23%), not including ownership in IHG. Mr. Kurczodyna owns 2,884,445 shares personally and 1,442,222 through an affiliated company, for a total of 4,326,667 (0.23%), not including ownership in IHG. Mr. Kurczodyna additionally has control of IHG through IHG Class A Super Majority Voting Preferred shares. | |
|
|
(6) |
Mr. Harris resigned as an officer and director of the Company as of November 22, 2022. | |
Rule 13d-3 under the Securities Exchange Act
of 1934 governs the determination of beneficial ownership of securities. That rule provides that a beneficial owner of a security
includes any person who directly or indirectly has or shares voting power and/or investment power with respect to such security.
Rule 13d-3 also provides that a beneficial owner
| 73 | |
| | Table of Contents | |
of a security includes any person who has the
right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant
or conversion of a security. Any securities not outstanding which are subject to such options, warrants or conversion privileges
are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person.
Those securities are not deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person.
Included in this table are only those derivative securities with exercise prices that we believe have a reasonable likelihood of
being in the money within the next sixty days. Please note that all convertible notes outstanding contain provisions
prohibiting the holders from converting if their ownership would become greater than 4.99%.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR
END
****
We adopted a Stock Option and Award Plan on
December 1, 2016. We have authorized 10,000,000 shares of common stock to be available for the Plan. We have granted no options
exercisable for shares of our common stock under the Plan.
**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.**
We have not entered into any transaction in
past two years, nor are there any proposed transactions in which any of the founders, directors, executive officers, shareholders
or any members of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.
**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**
We were billed fees for professional services
by our principal independent accountants of approximately $20,800 and $47,500 for the audit of our annual financial statements
and for the review of our unaudited quarterly financial statements for the fiscal years ended December 31, 2024 and 2023, respectively.
During the fiscal years ended December 31,
2024 and 2023, we did not incur any other fees for professional services rendered by our principal independent accountants for
all other non-audit services which may include, but not limited to, tax-related services, actuarial services or valuation services.
| 74 | |
| | Table of Contents | |
**PART IV**
**ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.**
The following exhibits are incorporated into
this Form 10-K Annual Report:
|
Exhibit No. |
|
Description | |
|
3(i).1 |
|
Certificate of Incorporation of NPI08, Inc. filed December 17, 2007 [1] | |
|
3(i).2 |
|
Certificate of Amendment of BlackStar Energy Group, Inc. name change to BlackStar Enterprise Group, Inc. filed July 14, 2016 [1] | |
|
3(i).3 |
|
Certificate of Amendment filed August 25, 2016 [1] | |
|
3(i).4 |
|
Certificate of Correction filed August 25, 2016 [1] | |
|
3(i).5 |
|
Articles of Incorporation for Crypto Equity Management Corp. [2] | |
|
3(i).6 |
|
Articles of Incorporation for Crypto Industry SRO Inc. [3] | |
|
3(i).7 |
|
Certificate of Amendment filed March 12, 2020 [6] | |
|
3(i).8 |
|
Articles of Amendment - Blockchain Equity Management Corp. [7] | |
|
3(i).9 |
|
Articles of Amendment Blockchain Equity SRO Inc. [7] | |
|
3(i).10 |
|
Certificate of Amendment filed February 10, 2025 | |
|
3(ii).1 |
|
Bylaws of BlackStar Enterprise Group, Inc. [1] | |
|
10.1 |
|
Management Consulting Agreement BlackStar Enterprise Group, Inc. and International Hedge Group, Inc., December 1, 2017 [4] | |
|
10.2 |
|
Warrant to Purchase Digital Shares of Common Stock BlackStar Enterprise Group, Inc. [4] | |
|
10.3 |
|
Warrant to Purchase Shares of Common Stock Crypto Equity Management Corp. [4] | |
|
10.4 |
|
Agreement with Solidgreen Software, LLC [5] | |
|
10.5 |
|
SAFE for BlackStar Digital Equities [5] | |
|
21.1 |
|
Subsidiaries | |
|
31.1 |
|
Certification of Chief Executive Officer Pursuant to Rule 13a14(a) or 15d-14(a) of the Securities Exchange Act of 1934 | |
|
31.2 |
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 | |
|
32.1 |
|
Certification of Chief Executive Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
|
32.2 |
|
Certification of Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
|
101.INS |
|
Inline XBRL 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.SCH |
|
XBRL Taxonomy Extension Schema Document | |
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document | |
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document | |
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document | |
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document | |
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained within Exhibit 101) | |
____________________________
|
[1] |
Incorporated by reference from the exhibits included in the Companys Registration Statement No. 000-55730 on Form 10-12g filed with the Securities and Exchange Commission (www.sec.gov), dated December 28, 2016, as amended. | |
|
[2] |
Incorporated by reference from the exhibits included in the Companys Form 8-K filed with the Securities and Exchange Commission (www.sec.gov), dated October 10, 2017. | |
|
[3] |
Incorporated by reference from the exhibits included in the Companys Form 8-K filed with the Securities and Exchange Commission (www.sec.gov), dated March 1, 2018. | |
|
[4] |
Incorporated by reference from the exhibits included in the Companys Form 10-K/A filed with the Securities and Exchange Commission (www.sec.gov), dated July 3, 2018. | |
|
[5] |
Incorporated by reference from the exhibits included in the Companys Form 10-K/A-2 filed with the Securities and Exchange Commission (www.sec.gov), dated September 5, 2018. | |
|
[6] |
Incorporated by reference from the exhibits included in the Companys Form 10-K filed with the Securities and Exchange Commission (www.sec.gov), dated May 12, 2020. | |
|
[7] |
Incorporated by reference from the exhibits included in the Companys Form S-1/A filed with the Securities and Exchange Commission (www.sec.gov), dated May February 13, 2023. | |
| 75 | |
| | Table of Contents | |
**ITEM 16. FORM 10-K SUMMARY**
Not Applicable.
| 76 | |
| | Table of Contents | |
**SIGNATURES**
Pursuant to the requirements of Section 13
or 15(d) of the Securities and 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.**
|
|
|
| |
|
/s/
Joseph E. Kurczodyna |
|
November 25, 2025 | |
|
Joseph E. Kurczodyna |
|
| |
|
(Chief Executive Officer/ Principal Executive Officer) |
|
| |
|
|
|
| |
|
|
|
| |
|
/s/
Joseph E. Kurczodyna |
|
November 25, 2025 | |
|
Joseph E. Kurczodyna |
|
| |
|
(Chief Financial Officer/Principal Financial Officer/Principal Accounting Officer) |
|
| |
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
****
|
|
|
| |
|
|
|
| |
|
/s/ Joseph
E. Kurczodyna |
|
November 25, 2025 | |
|
Joseph E. Kurczodyna, Director |
|
| |
|
|
|
| |
|
|
|
| |
|
/s/ Robert
LaPointe |
|
November 25, 2025 | |
|
Robert LaPointe, Jr., Director |
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
| |
****
****
| 77 | |
****
****
.