As filed with the U.S.Securities and Exchange Commission on April 20 , 2023
Registration No.333-257978
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
AMENDMENT NO.8
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BLACKSTAR ENTERPRISE GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or jurisdiction of incorporation or organization)
6799
(Primary Standard Industrial Classification Code Number)
27-1120628
(I.R.S.Employer
Identification No.)
4450 Arapahoe Ave., Suite 100, Boulder, CO 80303/ Phone (303) 500-3210
(Address and telephone number of principal executive offices)
Joseph E.Kurczodyna, Acting Chief Executive Officer
4450 Arapahoe Ave., Suite 100, Boulder, CO 80303/ Phone (303) 500-3210
(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
Christen Lambert, Attorney at Law
2920 Forestville Rd.Ste.
100 PMB 1155, Raleigh, NC 27616 / Phone (919) 473-9130
Approximate date of commencement of proposed sale to the public: As soon as possible after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.[X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [___] Accelerated filer [___] Non-accelerated filer [_X_] Smaller reporting company [_X_] Emerging growth company [_X_]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
[___]
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities To Be Registered Amount To Be Registered (1) Proposed Maximum Offering Price Per Share (2) Proposed Maximum Aggregate Offering Price Amount of Registration Fee (3) Shares of Common Stock Underlying Convertible Notes, $0.001 par value 46,000,000 $0.0004 $18,400 $2.03 (4)
(1) In accordance with Rule 416 under the Securities Act of 1933, as amended (the “ Securities Act ”), this registration statement shall be deemed to cover an indeterminate number of additional shares to be offered or issued from stock splits, stock dividends or similar transactions with respect to the shares being registered.This amount represents a good faith estimate of the shares of common stock underlying convertible notes issued by the registrant in private placements, with such amount equal to the maximum number of shares issuable upon conversion of such notes, assuming for purposes hereof that (x) such notes are convertible at $0.02 per share, and (y) interest on such note accrues at 10% per annum until the maturity dates of the convertible notes, without taking into account the limitations on the conversion of such notes (as provided for therein).
(2) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933 (“the Securities Act”) based on the average of the 5-day average of the high and low prices of the common stock on April 13 , 2023 as reported on the OTC Pink.(3) Based on the average price per share of $0.0004 for BlackStar Enterprise Group, Inc.’s common stock on April 13 , 2023 as reported by the OTC Markets Group.The fee is calculated by multiplying the aggregate offering amount by 0.0001102, pursuant to Section 6(b) of the Securities Act of 1933.(4) $172.64 previously paid, based on the 5-day average of the high and low prices of the common stock on July 12, 2021 ($0.0344), which was higher than the 5-day average of the high and low prices of the common stock on April 13 , 2023 ( $0.0004 ).
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
ii
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED APRIL 20 , 2023
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective.This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
BLACKSTAR ENTERPRISE GROUP, INC.
46,000,000 Shares of Common Stock Underlying Convertible Notes
This Prospectus relates to the resale from time to time of an aggregate of up to 46,000,000 shares of common stock par value $0.001 per share, (the “Common Shares”) of BlackStar Enterprise Group, Inc., a Delaware corporation, by the Selling Shareholders (each a “Selling Shareholder”, and collectively, the “Selling Shareholders”), underlying, and pursuant to the conversion of convertible notes (the “Notes”) which were acquired from the Company pursuant to subscription agreements for an aggregate purchase price of $803,275.This amount represents a good faith estimate of the shares of common stock underlying convertible notes issued by the registrant in private placements, with such amount equal to the maximum number of shares issuable upon conversion of such notes, assuming for purposes hereof that (x) such notes are convertible at $0.02 per share, and (y) interest on such note accrues at 10% per annum until the maturity dates of the convertible notes, without taking into account the limitations on the conversion of such notes (as provided for therein).The 46,000,000 shares being registered includes 1,386,459, 9,016,394, and 27,500,000 shares, respectively, that may be issued pursuant to the conversion of the principal amount of the Notes, as well as 110,917, 1,100,000, and 2,750,000 additional shares that may be issued pursuant to the conversion of accrued interest over the term of the Notes, assuming a conversion price of $0.024, $0.0244, and $0.02 per share, respectively, 300,000 shares issued to cure a default, and 3,836,230 additional shares to cover any differences in conversion price.The Selling Shareholders have informed us that they are not “underwriters” within the meaning of the Securities Act.
The Securities and Exchange Commission (“SEC”) may take the view that, under certain circumstances, any broker-dealers or agents that participate with the Selling Shareholders in the distribution of the Common Shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).Commissions, discounts or concessions received by any such broker-dealer or agent may be deemed to be underwriting commissions under the Securities Act.The Selling Shareholders may sell Common Shares underlying the Notes from time to time in the principal market on which the Registrant’s Common Stock is Quote: d and traded at the prevailing market price or in negotiated transactions.
We will not receive any of the proceeds from the sale of those Common Shares being sold by the Selling Shareholders.We did, however, receive net proceeds of approximately $803,275 pursuant to the sale of the Notes to the Selling Shareholders.We will pay the expenses of registering these Common Shares underlying the Notes.
Pursuant to registration rights granted to the Selling Shareholders, we are obligated to register the Common Shares underlying the Notes.We will not receive any proceeds from the sale of the Common Shares by the Selling Shareholders.
Our selling shareholders plan to sell common shares at market prices for so long as our Company is Quote: d on OTC Pink and as the market may dictate from time to time.
There is a limited market for the common stock, which has been trading on the OTC Pink (“BEGI”) at an average of $0.0004 in the past 5 days as of April 13 , 2023.
Title Price Per Share Common Stock $0.0004
The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(c).The average trading price in the 5 days prior to this amended registration statement on April 13 , 2023 was $0.0004 (less than the original calculation), so no additional fee was required.
iii
The Selling Shareholders are offering the Common Shares underlying the Notes.The Selling Shareholders may sell all or a portion of these Common Shares from time to time in market transactions through any market on which the Common Stock is then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale.
The Selling Shareholders will receive all proceeds from such sales of the Common Shares.
For additional information on the methods of sale, you should refer to the section entitled “Plan of Distribution.”
In aggregate, the Selling Shareholders may sell up to 46,000,000 Common Shares under this Prospectus, which includes 37,902,853 shares to be issued upon conversion of the principal amount of convertible notes, as well as 3,960,917 additional shares that may be issued based on 10% interest per annum until the maturity date of the convertible notes, assuming a conversion price of $0.02 per share, 300,000 shares issued to cure a default, and 3,836,230 additional shares to cover any differences in conversion price and interest accruals.We are obligated to file a supplemental registration statement or registration statements in order to register all of the Common Shares, in the event that the conversion price is lower than $0.02 per share due to adjustments as is further described in this Registration Statement, resulting in additional shares being issued that have not been registered pursuant to this Registration Statement.
We have one class of authorized common stock and the Company has also issued warrants for common stock.Outstanding shares of common stock represent approximately 40% of the voting power of our outstanding capital stock at the time of this registration, and outstanding shares of Class A Super Majority Voting Preferred Stock held by, or subject to voting control by, our parent company, International Hedge Group, Inc., the estate of our former CEO, John Noble Harris, and our interim CEO and CFO, Joseph Kurczodyna, represent approximately 60% of the voting power of our outstanding capital stock at the time of this registration statement.
This offering involves a high degree of risk; see “RISK FACTORS” beginning on page 8 to read about factors you should consider before buying shares of the common stock.
These securities have not been approved or disapproved by the Securities and Exchange Commission (the “SEC”) or any state or provincial securities commission, nor has the SEC or any state or provincial securities commission passed upon the accuracy or adequacy of this prospectus.Any representation to the contrary is a criminal offense.
This offering will be on a delayed and continuous basis for sales of selling shareholders’ shares.
The selling shareholders are not paying any of the offering expenses and we will not receive any of the proceeds from the sale of the shares by the selling shareholders.(See “Description of Securities – Shares”).
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the date that the registration statement relating to these securities, which has been filed with the Securities and Exchange Commission, becomes effective.This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
The date of this Prospectus is April 20 , 2023.
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TABLE OF CONTENTS
PART I – INFORMATION REQUIRED IN PROSPECTUS Page No.ITEM 1.Front of Registration Statement and Outside Front Cover Page of Prospectus ITEM 2.Prospectus Cover Page ITEM 3.Prospectus Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges 2 ITEM 4.Use of Proceeds 2 1 ITEM 5.
Determination of Offering Price 2 1 ITEM 6.Dilution 21 ITEM 7.Selling Security Holders 2 2 ITEM 8.Plan of Distribution 23 ITEM 9.Description of Securities 2 4 ITEM 10.Interest of Named Experts and Counsel 2 8 ITEM 11.Information with Respect to the Registrant 2 8 a.
Description of Business 27 b.Description of Property 4 7 c.Legal Proceedings 47 d.Market for Common Equity and Related Stockholder Matters 4 8 e.
Financial Statements 4 9 f.Selected Financial Data 50 g.Supplementary Financial Information 50 h.Management’s Discussion and Analysis of Financial Condition and Results of Operations 50 i.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 5 4 j.
Quantitative and Qualitative Disclosures About Market Risk 5 4 k.Directors and Executive Officers 5 4 l.Executive and Directors Compensation 5 7 m.Security Ownership of Certain Beneficial Owners and Management 6 0 n.Certain Relationships, Related Transactions, Promoters And Control Persons 6 3 ITEM 11 A.
Material Changes 6 4 ITEM 12.Incorporation of Certain Information by Reference 6 4 ITEM 12 A.
Disclosure of Commission Position on Indemnification for Securities Act Liabilities 6 5 PART II – INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13.Other Expenses of Issuance and Distribution 6 6 ITEM 14.Indemnification of Directors and Officers 6 6 ITEM 15.Recent Sales of Unregistered Securities 6 6 ITEM 16.
Exhibits and Financial Statement Schedules 72 ITEM 17.Undertakings 73 Signatures 74
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ITEM 3.PROSPECTUS SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHARGES
Please read this prospectus carefully.It describes our business, our financial condition and results of operations.
We have prepared this prospectus so that you will have the information necessary to make an informed investment decision.
You should rely only on information contained in this prospectus.We have not authorized any other person to provide you with different information.This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted.The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus.
This summary does not contain all the information that you should consider before investing in the common stock.You should carefully read the entire prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Financial Statements, before making an investment decision.In this Prospectus, the terms “BlackStar,” “Company,” “we,” “us,” and “our,” refer to BlackStar Enterprise Group, Inc.
COMPANY OVERVIEW
GENERAL
BlackStar Enterprise Group, Inc.is incorporated in the State of Delaware with operations located in Boulder, Colorado.
We are engaged in Merchant Banking and Finance and intend to expand our services into the blockchain industry.
International Hedge Group, Inc.(“IHG”), our parent company, owns 4,792,702 shares of common stock (3.01%) and 1,000,000 of Class A Supermajority Voting Preferred Stock (100%); Class A Preferred has that number of votes equal to that number of common shares which is not less than 60% of the vote required to approve any action and has the right to convert all of the Class A Preferred Convertible Stock (1,000,000 shares) into shares of Common Stock of the Company, on the basis of 100 common shares for each share of Class A Preferred Stock.IHG is our controlling shareholder and is engaged in providing management services to companies, and, on occasion, capital consulting.IHG’s strategy in investing in BlackStar Enterprise Group, Inc.is to own a controlling interest in a publicly Quote: d 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 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)
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HISTORY
Our Company, BlackStar Enterprise Group, Inc., 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 $1,819,530 over a three-year period.Our Company was inactive until 2016 when new management and capital were introduced.
DESCRIPTION OF BUSINESS
Current Business
We are based in Boulder, Colorado and are engaged in Merchant Banking and Finance in the United States.BlackStar’s venue is private early-stage companies throughout various industries that, in our judgement, exhibit a potential for sustained growth.We are a publicly traded specialized merchant banking firm, facilitating joint venture capital to early stage revenue companies.We are actively seeking opportunities for discussion with revenue generating enterprises and emerging companies for financing.
We have recognized net losses of ($ 1,225,207 ) in the year ended December 31, 202 2 .We have relied solely on sales of our securities, convertible note financing, and private loans to fund our operations.
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.blackstarenterprisegroup.com, and such website is not incorporated into or a part of this filing.
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 client’s equity based off of the BDTP TM .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.
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As to the BEMC business model, the primary factor for its development is dependent upon whether the BDTP TM achieves regulatory approval by the SEC for the platform and an ATS arrangement has been achieved and approved as necessary by the SEC.
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 SEC’s 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, 202 2 , 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 $1,000,000,000 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 company’s 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 company’s auditor to attest to, and report on, management’s 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 our 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
4 Table of Contents 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.
Implications of Being an Emerging Growth Company
As a company with less than $1,235,000,000 of revenue during our last fiscal year, we qualify as an emerging growth company as defined in the JOBS Act, and we may remain an emerging growth company for up to five years from the date of the first sale in this offering.However, if certain events occur prior to the end of such five-year period, including if we become a large accelerated filer, our annual gross revenue exceeds $1,235,000,000, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not emerging growth companies.In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company.
Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity interests.However, we have irrevocably elected not to avail ourselves of the extended transition period for complying with new or revised accounting standards, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Summary of Financial Information
The following tables set forth, for the periods and as of the dates indicated, our summary financial data.The statements of operations for the years ended December 31 , 2022 and 2021 , and the balance sheet data as of December 31 , 2022 are derived from our audited financial statements included elsewhere in this prospectus .The audited financial statements include, in the opinion of management, all adjustments consisting of only normal recurring adjustments, that management considers necessary for the fair presentation of the financial information set forth in those statements.You should read the following information together with the more detailed information contained in “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.Our historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.You should read the following information together with the more detailed information contained in “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.Our historical results are not indicative of the results to be expected in the future.
December 31, 202 2 202 1 Total Assets $ 303,770 $ 683,339 Current Liabilities $ 1,033,380 $ 806,953 Long-term Liabilities $ — $ — Stockholders’ Equity (Deficit) $ (729,610 ) $ (123,614 )
December 31, 2022
(Audited)
December 31, 2021
(Audited)
Revenues $ 0 $ 0 Net Loss $ (1,225,207 ) $ (2,183,567 )
At December 31 , 2022, the accumulated deficit was $( 9,374,967 ).
At December 31, 2021, the accumulated deficit was $(8,149,760).We anticipate that we will operate in a deficit position and continue to sustain net losses for the foreseeable future.
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PRIVATE PLACEMENT OF CONVERTIBLE NOTES WITH REGISTRATION RIGHTS
The following convertible promissory notes and corresponding securities purchase agreements are those that contain registration rights and those which underlying shares are being registered for resale in this registration statement.
On November 20, 2020, BlackStar Enterprise Group, Inc.and Quick Capital, LLC.entered into a convertible promissory note totaling $33,275 and a securities purchase agreement.
The note bears interest at 10%, with a default rate of 24%, and is convertible into shares of the Company’s common stock.The conversion price is to be calculated at 60% of the 2 lowest trading prices of the Company’s 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 12,000,000 shares for conversion.Net proceeds from the loan were $25,000, after legal fees and offering costs of $8,275.Details of the promissory note and securities purchase agreement can be found in the Form 8-K and exhibits filed on November 27, 2020.The Company and the holder executed the securities purchase 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 filed a Form D with the Securities and Exchange Commission on November 27, 2020.
On January 28, 2021 BlackStar Enterprise Group, Inc.and SE Holdings, LLC entered into a convertible promissory note totaling $220,000 and a securities purchase agreement.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 price of the Company’s 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 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.Details of the promissory note and securities purchase agreement can be found in the Form 8-K and exhibits filed on February 4, 2021.The Company and the holder executed the securities purchase 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 filed a Form D with the Securities and Exchange Commission on February 4, 2021.
On April 29, 2021 BlackStar Enterprise Group, Inc.and Adar Alef, LLC entered into a convertible promissory note totaling $550,000 and a securities purchase agreement.The Company initially reserved out of its authorized Common Stock 86,105,000 shares of Common Stock for conversion pursuant to the note.The note 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 Company’s 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.The Company received the net proceeds from the loan of $462,000, after original issue discount, legal fees and offering costs of $88,000.
Copies of the promissory note, securities purchase agreement, and transfer agent letter can be found in the Form 10-Q and exhibits filed on May 17, 2021.
The Company and the holder executed the securities purchase 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 filed a Form D with the Securities and Exchange Commission on June 1, 2021 .
The Lender or Investor will instruct the Borrower through instruction to the Transfer Agent to either:
A.Electronically transmit the Common Stock pursuant to the Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC”).
Lender or Investor will supply 1) Name of Prime Broker and 2) Account Number.B.The Lender or Investor hereby request that the Borrower issue a certificate or certificates for the number of shares of Common Stock which numbers are based on the Holders calculation attached hereto in the name(s) specified.
6 Table of Contents The Company has entered into several other convertible note and promissory note financing arrangements over the past several years and all arrangements are discussed further in Item 11 herein.
The Offering
We are registering 46,000,000 shares of common stock underlying convertible notes for sale on behalf of selling shareholders (the “Resale Shares”).The shares registered herein are common shares and if placed in a Broker Dealer account by the shareholder, they will be DWAC by DTCC (electronic fungible form); otherwise, the shareholder may hold the shares upon conversion in certificated form.
Our common stock will be transferable immediately upon the effectiveness of the Registration Statement.(See “Description of Securities”)
Common shares outstanding before this registration statement 1 653,139,153 Maximum common shares being offered by our selling shareholders 46,000,000 Maximum common shares outstanding after this offering 697,139,153
1) There are additionally warrants outstanding for the purchase of 321,200 shares of common stock, not included in this figure.
We will not receive any proceeds from the sale of our securities offered by the selling stockholders under this prospectus.Al the shares sold under this prospectus will be sold or otherwise disposed of for the account of the selling stockholders, or their pledgees, assignees or successors-in-interest.See “Use of Proceeds” beginning on page 19 of this prospectus.
We are authorized to issue 2,000,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock.
Our current shareholders, officers and directors collectively own 651,139,153 shares of common stock and 1,000,000 shares of preferred stock as of this date, with warrants outstanding for 321,200 shares of common stock.
Currently there is a limited public trading market for our stock on OTC Pink under the symbol “BEGI.”
Forward Looking Statements
This prospectus contains various forward-looking statements that are based on our beliefs as well as assumptions made by and information currently available to us.
When used in this prospectus, “believe,” “expect,” “anticipate,” “estimate,” and similar expressions are intended to identify forward-looking statements.These statements may include statements regarding seeking business opportunities, payment of operating expenses, and the like, and are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from projections or estimates.Factors which could cause actual results to differ materially are discussed at length under the heading “Risk Factors”.Should one or more of the enumerated risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.
Investors should not place undue reliance on forward-looking statements, all of which speak only as of the date made.
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RISK FACTORS
RISK FACTORS RELATED TO OUR BUSINESS
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.
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 company’s 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
8 Table of Contents 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 PART-TIME MANAGEMENT FOR OUR SUCCESS WHICH IS A RISK TO OUR INVESTORS.
Our lack of full-time management may be an impediment to our business achievement.Without 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 , 2022, 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.
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 $ 62,085 as of December 31 , 2022.
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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.
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.
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 attorney’s 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 person’s 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.
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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.
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 Company’s operations from being efficient, and may impair the business progress and growth, which is a risk to any investor.
RISK FACTORS OF THE COMPANY
THERE CAN BE NO CERTAINTY AS TO MARKET ACCEPTANCE OF THE PROPOSED BDTP TM .
The Company has no certainty as to whether the market will accept our proposed business concept and use the idea of the BDTP TM , should it become operational, nor is there any certainty as to how the BDTP TM translates to profits for the Company.There is no assurance of market acceptance or profitability of the concept or Company.The BDTP TM is not yet functional and may never be functional.
THERE CURRENTLY IS A LIMITED LIQUID TRADING MARKET FOR OUR COMMON STOCK AND WE CANNOT ASSURE INVESTORS THAT A ROBUST TRADING MARKET WILL EVER DEVELOP OR BE SUSTAINED FOR OUR COMMON STOCK.
To date, there has been a limited trading market for our common stock on the OTC Pink Market.
We cannot predict how liquid the market for our common stock may become.A lack of an active market may impair investor’s ability to sell their shares at the time they wish to sell them or at a price they consider reasonable.The lack of an active trading market may impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using our common stock as consideration.For companies where securities are traded in the OTC Pink Market, it is generally more difficult to obtain accurate quotations, to obtain coverage for significant news events (because major media channels generally do not publish presses releases about such contingencies) and to obtain needed capital.
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.
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.
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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.
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.
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.
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.
12 Table of Contents 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.
RISK FACTORS RELATING TO OUR BUSINESS
WE HAVE INCURRED SIGNIFICANT LOSSES AND ANTICIPATE FUTURE LOSSES.
As of December 31 , 2022, we had an accumulated deficit of $( 9,374,967 ).
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 202 2 , 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, such as the recent outbreak of coronavirus (COVID-19), 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 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.
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BECAUSE INSIDERS CONTROL OUR ACTIVITIES, THAT MAY CAUSE US TO ACT IN A MANNER THAT IS MOST BENEFICIAL TO THEM AND NOT TO OUTSIDE SHAREHOLDERS WHICH COULD CAUSE US NOT TO TAKE ACTIONS THAT OUTSIDE INVESTORS MIGHT VIEW FAVORABLY
Our executive officers, directors, and holders of 5% or more of our issued and outstanding common stock, including International Hedge Group, Inc., beneficially own approximately 2.44% of our issued and outstanding common stock, in addition to the Super Majority Voting Class A Preferred Stock.As a result, they effectively control all matters requiring director and stockholder approval, including the election of directors, the approval of significant corporate transactions, such as mergers and related party transaction.These insiders also have the ability to delay or perhaps even block, by their ownership of our stock, an unsolicited tender offer.
This concentration of ownership could have the effect of delaying, deterring or preventing a change in control of our company that you might view favorably.
OUR OFFICERS AND DIRECTORS HAVE THE ABILITY TO EFFECTIVELY CONTROL SUBSTANTIALLY ALL ACTIONS TAKEN BY STOCKHOLDERS.
Mr.Kurczodyna, an officer and director of the Company and of our parent, International Hedge Group, Inc.(“IHG”), controls approximately 1.53% of our issued and outstanding common stock and 100% of our issued and outstanding preferred shares through IHG plus his own holdings; he has significant influence over all actions taken by our stockholders, including the election of directors, based on the BlackStar Super Majority Voting Class A Preferred Stock held by IHG.On December 18, 2020, the IHG shareholders voted to issue 1,000,000 IHG Class A Preferred shares to Mr.Kurczodyna as compensation for services provided to IHG, giving Mr.Kurczodyna supermajority voting rights over IHG and the ability 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 is a significant increase to the control of IHG by Mr.
Kurczodyna, which effectively means that Mr.
Kurczodyna has control of BlackStar through IHG’s ownership of BlackStar Super Majority Voting Class A Preferred Stock.Mr.LaPointe owns 0.06% of the issued and outstanding common stock.
Such concentration of ownership could also have the effect of delaying, deterring, or preventing a change in control that might otherwise be beneficial to stockholders and may also discourage the market for our stock due to the concentration.
WE MAY DEPEND UPON OUTSIDE ADVISORS, WHO MAY NOT BE AVAILABLE ON REASONABLE TERMS AND AS NEEDED.
To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors.Our Board, without any input from stockholders , will make the selection of any such advisors.Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to us.In the event we consider it necessary to hire outside advisors, we may elect to hire persons who are affiliates, if they are able to provide the required services.
RISKS RELATING TO OUR VENTURE INVESTMENTS
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 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.
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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 company’s 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.
RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK
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 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
15 Table of Contents assurance that a broader or more active public trading market for our common securities will develop or be sustained, or that any trading levels will be sustained.Due to these conditions, we can give stockholders no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their securities.
OUR 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 company’s 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.
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 wouldn’t 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 spouse’s 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 purchaser’s 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
16 Table of Contents 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.
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
17 Table of Contents 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 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.
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.
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.
OUR OTC MARKET STATUS HAS BEEN LOWERED FROM OTCQB TO OTC Pink.
Due to the low trading price of the common stock of the Company, we have been demoted from the OTCQB to OTC Pink for not maintaining the $0.01 bid test.The Company has sought financing through convertible promissory notes in order to develop the BDTP TM app; some of the notes have in turn been converted to common stock and then traded on the market in large quantities, lowering the bid prices.The change in status from OTCQB to OTC Pink will make it harder to access investors and financing to continue to fund our operations.
Additionally, OTC Markets has removed the “Shell Risk” label on the Company’s profile, indicating that they believe we now meet certain criteria.We believe that we are not a shell company based on our history of operations and specific software development, the label has been removed from the BEGI profile on OTC Markets.OTC Markets may choose to downgrade our profile if we do not maintain adequate proof that we are not, in fact, a shell company.
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 BDTP TM ) 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.
18 Table of Contents 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.
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 BDTP TM operates as an encrypted platform for the transmission of customer information, dollar amount, number of shares, and account number to be sent over a secured network to/from the broker dealer and/or customer.Whether we license the platform to a broker dealer or an ATS, we will rely on the licensee to comply with all relevant laws, rules and regulations including, but not limited to, FINRA and/or SEC registration, the Customer Protection Rule (Rule 15c3-3 of the Securities Exchange Act of 1934, as amended), the Exchange Act requirements for books, records and financial reporting, and the Securities Investor Protection Act of 1970 (“SIPA”), as applicable.The duties of settlement, safekeeping, and reporting of customers’ assets will remain with the traditional custodians – the Broker Dealers retained by customers for their own account.The BDTP TM will provide encrypted transmission of order information, as discussed above.
Once established, any disruption in our relationship with a broker dealer or ATS may cause a temporary or permanent service disruption of BDTP TM , unless and until we are able to reestablish a new licensee.If we are unable at any time to establish the necessary relationship, BDTP TM may never become functional.
If we are unable to license BDTP TM to an ATS in this way, we may reevaluate whether we may apply for ATS status.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.
We plan to rely upon trademarks, copyright and trade secret protection (and possibly also patents in the future), 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.
INTELLECTUAL PROPERTY RIGHTS CLAIMS MAY ADVERSELY AFFECT THE DISTRIBUTE 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 technology’s 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.
19 Table of Contents 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.
OUR INTERACTIONS WITH A BLOCKCHAIN MAY EXPOSE US TO SDN OR BLOCKED PERSONS OR CAUSE US TO VIOLATE PROVISIONS OF LAW THAT DID NOT CONTEMPLATE DISTRIBUTE LEDGER TECHNOLOGY.
If our BDTP TM becomes operational, we may be required to comply with the Office of Financial Assets Control (“OFAC”) of the U.S.Department of Treasury’s 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 OFAC’s 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 OCCURING ON MULTIPLE EXCHANGES MEANS THAT THERE MAY BE DISCREPANCIES IN TRADING PRICES OF COMMON STOCK.
The trading market operating on the BDTP TM , 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 BDTP TM , 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 blockchain’s 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
20 Table of Contents volatility in the crypto asset markets, the Company could nonetheless potentially be harmed as a result of our proximity to crypto asset markets.
ITEM 4.USE OF PROCEEDS
This prospectus relates to the resale of up to 46,000,000 common shares underlying the Notes purchased by the Selling Shareholders, including 1,386,459, 9,016,394, and 27,500,000 shares, respectively, that may be issued pursuant to the conversion of the principal amount of the Notes, as well as 110,917, 1,100,000, and 2,750,000 additional shares that may be issued pursuant to the conversion of accrued interest over the term of the Notes, assuming a conversion price of $0.024, $0.0244, and $0.02 per share, respectively, 300,000 shares issued to cure a default, and 3,836,230 additional shares to cover any differences in conversion price.The Company received approximately $664,500 in net proceeds pursuant to the sale of the Notes.
We will not receive any proceeds from the sales of Common Shares underlying the Notes by the Selling Shareholders.We will pay the cost of registering the shares offered by this Prospectus.The proceeds from the sale of the Notes will be used for working capital and general corporate expenses.
We may seek additional financing from other sources to support our ongoing operations.If we secure additional equity funding, future investors in our common stock may be diluted.No plans for additional financing are currently being contemplated by the company, and in all events, there can be no assurance that additional financing would be available to use when wanted or needed and, if available, on terms acceptable to us.
The monies we have raised thus far from private placements and/or convertible note financing is anticipated to be sufficient to pay all expenses of this registration statement, which is estimated to be $47,000.
ITEM 5.DETERMINATION OF OFFERING PRICE
We have a limited established market for our common stock as Quote: d on the OTC Pink under the symbol “BEGI.”
Our selling shareholders plan to sell shares at such market prices as the market may dictate from time to time or in private transactions.
Title Per Share Common Stock $ 0.0004 *
* 5-day average closing price preceding filing of this Registration Statement.
As of April 13 , 2023 and December 31, 202 2 , there were 651,139,153 and 546,495,214 shares of common stock issued and outstanding, respectively.
The market share price likely bears no relationship to any criteria of goodwill value, asset value, market price or any other measure of value.
ITEM 6.
DILUTION
DILUTION OF OWNERSHIP INTERESTS WILL OCCUR BECAUSE OF THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK AND OUR PREFERRED STOCK.
We are registering an aggregate of 46,000,000 shares of common stock to be issued in connection with Securities Purchase Agreements and the conversion of certain of our outstanding convertible notes.The sale of such shares could depress the market price of our common stock.The sale of these shares into the public market by the selling shareholders could depress the market price of our common stock.If we raise additional capital subsequent to this registration statement through the issuance of equity or convertible debt securities, the percentage ownership of our Company held by existing shareholders will be reduced and those shareholders may experience significant dilution.In addition, we may also have to issue securities that may have rights, preferences and privileges senior to our common stock.In the event we seek to raise additional capital through the issuance of debt or its equivalents, this will result in increased interest expense.
21 Table of Contents Assuming the Noteholders convert the maximum amount of principal and interest under the convertible notes, existing stockholders could experience substantial dilution upon the issuance of common stock.
The following table is an example of the number of shares that could be issued at various prices assuming the Noteholders convert the maximum amount of principal and interest under each convertible note.These examples assume issuances at market prices of $0.04, the closing price of our shares on July 8, 2021, and at a percentage discount per share as listed.
Market Price Discount to Market Price Price per Share (1) Number of Shares Issuable (2) Shares Outstanding (3) Percent of Outstanding Shares (4) $ 0.04 40 % $ 0.024 1,797,376 651,139,153 0.27 % $ 0.04 39 % $ 0.0244 10,116,394 651,139,153 1.55 % $ 0.04 50 % $ 0.02 30,250,000 651,139,153 4.64 %
(1) Represents discounted purchase prices of the July 8, 2021, closing price of $0.04.(2) Represents the number of shares issuable under the convertible notes if the conversion price on the date of conversion was the indicated price per share.(3) Based on 651,139,153 shares of common stock outstanding as of April 13 , 2023.
(4) Percentage of the number of shares issuable under the convertible notes out of the total current outstanding shares of common stock (not including those in the conversions), without considering any contractual restriction on the number of shares the selling stockholder may own at any point in time or other restrictions on the number of shares we may issue.
ITEM 7.SELLING SECURITY HOLDERS
The Common Shares being offered by the Selling Shareholders are those underlying the Notes previously issued to the Selling Shareholders.
For additional information regarding the issuances of those Notes and the underlying Common Shares, see “Private Placement of Convertible Notes” above.We are registering the Common Shares underlying the Notes in order to permit the Selling Shareholders to offer the Common Shares for resale from time to time.Except for the ownership of the Notes and therefore the underlying Common Shares, the Selling Shareholders have not had any material relationship with us within the past three years.
The table below lists the Selling Shareholders and other information regarding the beneficial ownership of the Notes held by each of the Selling Shareholders.
The second column lists the number of Common Shares beneficially owned by each Selling Stockholder, based on Common Shares underlying the Notes, as of July 8, 2021, assuming conver.
