NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND
BASIS OF PRESENTATION
BlackStar Enterprise Group, Inc. (the Company”
or “BlackStar”) was incorporated in the State of Delaware on December 18, 2007 as NPI08, Inc. (“NPI08”).
In January 2010, NPI08 acquired an ownership interest in Black Star Energy Group, Inc., a Colorado Corporation. BlackStar Energy
then merged into NPI08, with NPI08 being the surviving entity. Concurrently, NPI08 changed its name to BlackStar Energy Group,
Inc. On January 25, 2016, International Hedge Group, Inc. signed an agreement to acquire a 95% interest in the Company. The name
was changed to BlackStar Enterprise Group, Inc. in August of 2016.
The Company is a Delaware corporation organized
for the purpose of engaging in any lawful business. The Company intends to act as a merchant banking firm seeking to facilitate
venture capital to early stage revenue companies. BlackStar intends to offer consulting and regulatory compliance services to crypto-equity
companies and blockchain entrepreneurs for securities, tax, and commodity issues. BlackStar is conducting ongoing analysis for
opportunities in involvement in crypto-related ventures through a wholly-owned subsidiary, Crypto Equity Management Corp (“CEMC”).
BlackStar intends to serve businesses in their early corporate lifecycles and may provide funding in the forms of ventures in which
they control the venture until divestiture or spin-off by developing the businesses with capital. The Company currently trades
on the OTC QB under the symbol “BEGI”.
The Company’s fiscal year end is December
31
st
. The Company’s financial statements are presented on the accrual basis of accounting.
Basis of presentation – Unaudited
Financial Statements
The accompanying unaudited financial statements
have been prepared in accordance with United States generally accepted accounting principles for financial information and with
the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting
principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information
disclosed in the notes to the financial statements for the year ended December 31, 2017 included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission. These unaudited financial statements should be read in conjunction
with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for
a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended
June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.
NOTE 2 – GOING CONCERN
The
Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the financial statements for the six months ended June
30, 2018 and the years ended December 31, 2017 and 2016, the Company has generated no revenues and has incurred losses. These conditions
raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.
The
continuation of the Company as a going concern is dependent upon the ability to raise equity or debt financing, and the attainment
of profitable operations from the Company's planned business. Management cannot provide any assurances that the Company will be
successful in accomplishing any of its plans.
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Cash and cash equivalents
The Company considers all cash on hand, cash
accounts not subject to withdrawal restrictions or penalties and all highly liquid investments with an original maturity of three
months or less as cash equivalents.
Revenue recognition
The Company has realized minimal revenues from
operations. The Company recognizes revenues when the sale and/or distribution of products is complete, risk of loss and title to
the products have transferred to the customer, there is persuasive evidence of an agreement, acceptance has been approved by the
customer, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related
receivable is probable. Net sales will be comprised of gross revenues less expected returns, trade discounts, and customer allowances
that will include costs associated with off-invoice markdowns and other price reductions, as well as trade promotions and coupons.
The incentive costs will be recognized at the later of the date on which the Company recognized the related revenue or the date
on which the Company offers the incentive.
Basic and Diluted Loss per Share
The Company computes loss per share in accordance
with “ASC-260,” “Earnings per Share” which requires presentation of both basic and diluted earnings per
share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders
by the weighted average number of outstanding common share during the period. Diluted loss per share gives effect to all dilutive
potential common shares outstanding during the period. Diluted loss per share excludes all potential common shares if their effect
is anti-dilutive.
Income Taxes
The Company accounts for income taxes pursuant
to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
The Company maintains a valuation allowance
with respect to deferred tax asset. Blackstar Enterprise Group establishes a valuation allowance based upon the potential likelihood
of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations
for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within
the carry-forward period under Federal tax laws.
Changes in circumstances, such as the Company
generating taxable income, could cause a change in judgment about the reliability of the related deferred tax asset. Any change
in the valuation allowance will be included in income in the year of the change estimate.
Carrying Value, Recoverability and Impairment
of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17
of FASB Accounting Standards Codification for its long-lived assets. The Company’s long –lived assets are reviewed
for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of
its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group
of assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on
the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the assets expected
future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but
the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived
assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some
examples of important indicators that may trigger an impairment review; (i) significant under-performance or losses of assets relative
to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the
Company’s overall strategy with respect to the manner of use of the acquired assets or changes in the Company’s overall
business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant
decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired
assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
The impairment charges, if any, are included
in operating expenses in the accompanying statements of operations.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases
its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources.
The Company’s significant estimates include
income taxes provision and valuation allowance of deferred tax assets; the fair value of financial instruments; the carrying value
and recoverability of long-lived assets, and the assumption that the Company will continue as a going concern. Those significant
accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates
or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management regularly reviews its estimates
utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.
After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those
estimates.
Fair value of Financial Instruments
The estimated fair values of financial instruments
were determined by management using available market information and appropriate valuation methodologies. The carrying amounts
of financial instruments including cash approximate their fair value because of their short maturities.
Long Lived Assets
In accordance with ASC 350 the Company regularly
reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances both internally
and externally that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized
by the Company if the carrying amount of a long-lived asset exceeds its fair value.
Stock-based Compensation
The Company accounts for stock-based compensation
issued to employees based on FASB accounting standard for Share Based Payment. It requires an entity to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited
exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for
the award – the requisite service period (usually the vesting period). It requires that the compensation cost relating to
share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the
equity or liability instruments issued. The scope of the FASB accounting standard includes a wide range of share-based compensation
arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee
share purchase plans. The Company currently has no stock-based compensation plan in place.
Recent pronouncements
Management has evaluated accounting standards
and interpretations issued but not yet effective as of June 30,2018, and, does not expect such pronouncements to have a material
impact on the Company’s financial position, operations, or cash flows.
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
During the quarter ended September 30, 2016,
the Company purchased certain office equipment for a total of $1,659. This equipment is being depreciated over a three-year life
and the Company has recorded a depreciation expense of $138 for the current quarter.
NOTE 5 – NOTE RECEIVABLE
During the month of October 2016, the Company
identified a target company in which management felt it would be beneficial to invest. The target company was looking for an aggregate
investment of $2,500,000, of which the Company agreed to provide $500,000 and provide assistance in raising the remaining $2,000,000.
The terms of this investment are the note shall
bear an interest rate of 12% and the lender (Company) shall receive 2 shares of Series B Convertible Preferred stock for each one
dollar ($1.00) loaned to the target company. Payments on the note shall commence at such time the target company is generating
gross revenues. The payment shall consist of 15% of the gross revenues ratably apportioned among the then existing note holders.
Said payments to be applied first to accrued interest and then to the outstanding principal. Notwithstanding the aforementioned
payment schedule the entire note becomes due and payable on February 1, 2019. Commencing not later than February 1, 2019, the target
company shall pay a 15% dividend to the holders of the Series B Convertible Preferred stock until such time as each holder of the
Series B Convertible Preferred stock has received an amount equivalent to their original loan. At such time the Series B Convertible
Preferred stock shall be converted into common stock of the target company at the rate of one share of common stock for each share
of Convertible stock.
During the month of January 2017, the Company
advanced the second tranche of these funds.
On September 27, 2017, the Company entered
into an Agreement to Settle Debt (the “Agreement”) with International Hedge Group, Inc. (“IHG”). the majority
stockholder of the Company. Under the Agreement, IHG agreed to compromise and settle the Principal Amount under the verbal working
capital loan agreement of BEGI, as of November 2016, in the amount of $400,000, by assignment, without recourse, of the MeshWorks
Media Corp, Promissory Notes together with all collateral agreements. Upon signing of the Agreement, a promissory note was delivered
for the difference from IHG to BEGI in the amount of $145,000 for BEGI return of principal of $100,000 and all of the accrued interest
to date under the MeshWorks Media Corp. notes, payable in twelve months with interest of 1% per quarter on the last day of each
quarter until paid. The assignment of the MeshWorks Media Corp. Promissory Note and the note from IHG to BEGI in the amount of
$145,000 is full and complete payment and consideration for the transaction referenced hereinabove. A copy of the Agreement is
available from the Company or by accessing the form 8-K filed by the Company with the Securities and Exchange Commission on September
27, 2017.
NOTE 6 – STOCKHOLDER’S DEFICIT
The total number of common shares authorized
that may be issued by the Company is 200,000,000 shares with a par value of $0.001 per share. The Company is authorized to issue
10,000,000 shares of preferred stock with a par value of $0.001 per share.
On August 25, 2016 the Company issued 1,000,000
shares of its preferred series A stock to IHG in fulfillment of the purchase agreement. As at June 30, 2018 there are 1,000,000
preferred series A shares issued and outstanding. These shares are convertible at a ratio of 100 shares of the common stock of
the Company for each share of preferred stock of the Company.
As at June 30, 2018 the total number of common
shares outstanding was 52,000,000. The Company has an ongoing program of private placements to raise funds to support the operations.
During the period ended March 31, 2016, the Company entered into a purchase agreement with International Hedge Group, Inc. (“IHG”)
whereby certain existing stockholders would surrender their stock and IHG would acquire a 95% working interest in the Company.
During the quarter ended September 30,
2016, the Company issued 1,322,579 shares of its common stock to satisfy certain accounts payable and notes payable plus
accrued interest. The stock was valued at $0.04 per share which valued the total debt relief at $52,903. The debts discharged
in these transactions were valued at $335,072. These transactions were with unrelated parties giving the Company a net gain
of $282,569 as gain on debt relief.
During the quarter ended September 30, 2016,
the Company issued 34,000,000 warrants for the purchase of its common stock at $0.05 per share. Using the Black-Scholes valuation
model the Company assigned a value of $1,360,000 to these warrants. The Company recorded an expense of $1,328,000 on the operating
statement for the quarter ended September 30, 2016. The Company also used 800,000 of these warrants to satisfy an account payable
to a service provider. The value of the debt discharged in this transaction was $20,253. This transaction was with an unrelated
party giving the Company a net loss of $11,747 on the debt relief. Total net gain on all debt relief transactions was $270,822.
During the quarter ended September 30, 2017,
the Company sold 100,000 shares of its common stock at a price of $0.30. Each of the shares sold had a warrant to purchase one
additional share for $0.60 with an exercise period of 5 years. Using the Black-Scholes valuation model the Company assigned a value
of $70,000 to these warrants. The Company recorded an expense of $70,000 on the operating statement for the quarter ended September
30, 2017. Concurrently, with the sale of these shares, International Hedge Group, the majority stockholder of the Company, surrendered
100,000 of its shares.
In December of 2017 the Company began a private
placement program to raise additional funds for the operations of the Company. At the end of December 2017, the Company had received
$60,000 in subscriptions for this offering. During the quarter ended March 31, 2018, the Company had received an additional $105,000
in subscriptions. During the quarter ended
June 30, 2018 the Company issued 333,000 shares of its common stock for the amounts
subscribed. At the same time IHG surrendered 330,000 of its common stock holdings. The offering is explained in greater detail
in the footnote:
PRIVATE OFFERING.
Super Majority Voting Rights.
The record
Holders of the Class A Preferred Convertible Stock shall have the right to vote on any matter with holders of Common Stock and
may vote as required on any action, which Delaware law provides may or must be approved by vote or consent of the holders of the
specific Class of voting preferred shares and the holders of common shares. The Record Holders of the Class A Preferred Shares
shall have the right to vote on any matter with holders of common stock voting together as one (1) class. The Record Holders of
the Class A Preferred Shares shall have that number of votes (identical in every other respect to the voting rights of the holders
of other Class of voting preferred shares and the holders of common stock entitled to vote at any Regula or Special Meeting of
the Shareholders) equal to that number of common shares which is not less than60% of the vote required to approve any action, which
Delaware law provides may or must be approved by vote or consent of the holders of other Class of voting preferred shares and the
holders of common shares or the holders of other securities entitled to vote, if any.
NOTE 7 – WARRANTS
At the time of the issuance of stocks referenced
in Note 8 the Company issued 34,000,000 warrants to purchase the Company’s common stock at an exercise price of $0.05 These
warrants have an exercise price of $0.05 per share and an expiration date that is three years from the date of issuance. The warrants
were issued to the existing shareholders of International Hedge Group. There are 15 stockholders in IHG and 6 of these represent
owners of greater than 5% of IHG stock. These 6 stockholders received 57.35% of the warrants issued. 800,000 of these warrants
were issued to satisfy outstanding accounts payable. The payable amounted to $20,253 and the warrants were valued at $32,000 giving
rise to a loss of $11,747 on the settlement of debt.
Using the Black-Scholes valuation model a value
of $1,328,000 is assigned to these warrants. The parameters used in the Black-Scholes model were as follows: stock price $0.04;
strike price $0.05; volatility 172%; risk free rate 1.75% and time to expiration of 3 years. This expense is recorded on the books
of the Company as “Warrant expense” with an offsetting entry in the Stockholder’s Deficit section as “Additional
paid in capital – Warrants.”
On June 14, 2017, the Company received notice
from the holders of 17,000,000 warrants as to their intentions to convert the warrants into shares of common stock of the Company.
The Company instructed the transfer agent to proceed with the issuance of 16,320,000 shares of the common stock of the Company.
This exercise was carried out as a “cashless exercise” which meant that the actual exercise resulted in no cash being
received by the Company. The number of shares of common stock to be issued in exchange for the warrants was calculated by using
the closing price of the stock on the last trading day prior to the exchange which was $1.25. The value of the warrant was subtracted
from the trading price which was then multiplied by the number of warrants being exercised. This result was then divided by the
last trading price to determine the number of shares to be issued. At the same time that these warrants were exercised International
Hedge Group agreed to surrender 16,320,000 shares of the common stock of the Company that it holds. This transaction produced no
financial consequence to the Company.
On July 3, 2017, in consideration for $30,000,
BEGI sold 100,000 units, each unit consisting of one share of restricted common stock and one warrant to purchase common stock,
in accordance with and in reliance upon the exemption from securities registration for offers and sales to accredited investors
afforded, inter alia, by Rule 506 under Regulation D as promulgated by the United States Securities and Exchange Commission (the
“SEC”) under the 1933 act, and/or Section 4(a)(2) of the 1933 Act.
On June 14, 2018 the Company received notice
from the holders of the remaining 17,000,000 warrants as to their intentions to convert the warrants into shares of common stock
of the Company. As mentioned above, the exercise is a “cashless transaction.” The closing price of the stock on the
last trading day prior to the exchange was $1.35. By using the same methodology as cited above the number of shares was calculated
to be 16,370,370. These shares were issued by the transfer agent on June 18, 2018 and concurrently the transfer agent cancelled
16,370,370 of the shares held by IHG.
As at June 30, 2018 the Company has not received
any further notifications with respect to any exercise of any outstanding warrants.
Warrant Table
|
|
Date
|
|
Issue Life
|
|
Shares Under Warrant
|
|
Exercise Price
|
|
Remaining Life
|
Balance at
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Granted
|
|
|
August 30, 2016
|
|
|
|
3.00
|
|
|
|
34,000,000
|
|
|
$
|
0.05
|
|
|
|
1.16
|
|
Exercised
|
|
|
June 14, 2017
|
|
|
|
|
|
|
|
17,000,000
|
|
|
|
0
|
|
|
|
0
|
|
Issued
|
|
|
July 5, 2017
|
|
|
|
5.00
|
|
|
|
100,000
|
|
|
$
|
0.60
|
|
|
|
4.02
|
|
Exercised
|
|
|
June 14, 2018
|
|
|
|
|
|
|
|
17,000,000
|
|
|
|
0
|
|
|
|
0
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Balance at
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
0.60
|
|
|
|
4.02
|
|
NOTE 8 – INCOME TAXES
A reconciliation of the provision for income
taxes at the United States federal statutory rate of 21% and a Colorado state rate of 5% compared to the Company’s income
tax expense as reported is as follows:
Income tax valuation allowance
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
Net loss before income taxes
|
|
$
|
(135,690
|
)
|
|
$
|
(116,138
|
)
|
|
$
|
(1,154,285
|
)
|
Adjustments to net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant expense
|
|
|
—
|
|
|
|
—
|
|
|
|
1,328,000
|
|
Gain on exchange of debt for stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(270,822
|
)
|
Net taxable income (loss)
|
|
|
(135,690
|
)
|
|
|
(116,138
|
)
|
|
|
(92,107
|
)
|
Income tax rate
|
|
|
26
|
%
|
|
|
26
|
%
|
|
|
26
|
%
|
Income tax recovery
|
|
|
35,280
|
|
|
|
30,200
|
|
|
|
23,950
|
|
Valuation allowance change
|
|
|
(35,280
|
)
|
|
|
(30,200
|
)
|
|
|
(23,950
|
)
|
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The significant components of deferred income
tax assets at June 30, 2018, December 31, 2017 and 2015 are as follows:
Components of deferred income tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
Net operating loss carryforward
|
|
$
|
343,935
|
|
|
$
|
208,245
|
|
|
$
|
92,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(343,935
|
)
|
|
|
(208,245
|
)
|
|
|
(92,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
As of June 30, 2018, the Company has no unrecognized
income tax benefits. Based on management’s understanding of IRC Sec 383 the substantial change in ownership and change in
business activities precludes any carryforward of the accumulated net operating losses. The Company’s policy for classifying
interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or
penalties have been recorded during the years ended December 31, 2016 and 2014, and no interest or penalties have been accrued
as of June 30, 2018. As of December 31, 2017, the Company did not have any amounts recorded pertaining to uncertain tax positions.
As at June 30, 2018 the Company is current
with federal and state income tax filings for 2017, 2016 and 2015 The Company is currently not under examination by the Internal
Revenue Service or any other taxing authorities. The Company has not recorded any liability for an uncertain tax position related
to the lack of return filings since the Company records show a
continuing pattern of losses for the periods in question. Since
penalties are commonly assessed based on tax amounts owed management has deemed in unnecessary to record any liability.
NOTE 9 – LOAN PAYABLE
As of the quarter ended September 30, 2017
International Hedge Group, the holder of a majority of the common stock and all of the preferred stock of the Company has advanced
a total of $440,500 to the Company. During the quarter ended September 30, 2017 the Company made repayments in the amount of $22,000.
On September 27, 2017 the Company entered into an Agreement with International Hedge Group to effect an exchange of this Loan Payable
in the amount of $400,000 and a Note Receivable in the amount of $145,000 for the Note Receivable and accrued interest from MeshWorks
Media Corp. in the amount of $545,000. Further details can be seen in Note 5 of these financial statements.
This loan is not secured, bears no interest,
is not documented in writing and is payable on demand of the lender.
NOTE 10 – OTHER EVENT
On September 30, 2017, the Company formed a
wholly-owned subsidiary corporation, Crypto Equity Management Corp (“CEMC”) in the state of Colorado. The Company intends
to use CEMC to pursue business opportunities in cryptocurrency sphere.
On December 31, 2017 the Company formed another
wholly-owned subsidiary corporation, Crypto Industry SRO, Inc.in the state of Colorado. This corporation was formed and registered
as a “Not for Profit” corporation and will also be used by the Company to further its purposes in the cryptocurrency
sphere.
NOTE 11 – PRIVATE OFFERING
In December of 2017 the Company initiated a
private offering to raise additional funds. A summary of this offering is as follows:
The offering is a maximum of 1,000,000 units
at $0.50 per unit. Each unit consists of 1 common share of BlackStar Enterprise Group, Inc. (BlackStar), 1 warrant exercisable
into 1 Coin of BlackStar, (coins effective upon a registration statement) and 1 right to purchase 1 share of Crypto Equity Management
Corp. at $10.00 per share. The units offered hereby are not registered and the underlying stock and coin will be restricted under
Rule 144 as to resale unless made effective by registration with the SEC, or another exemption is made available under the Securities
Act of 1933. The Company reserves the right to accept an additional 1,000,000 units.
The receipt of ongoing purchases of this private
offering are reflected in the Equity section of the balance sheet and on the Statement of Stockholder’s Equity as “Stock
subscriptions received. Management deems this method of reporting to be an accurate reflection of the terms of the offering. The
initial tranche of this offering in the amount of $165,000 was completed on April 29, 2018 with the issuance of 330,000 shares
of common stock of the Company. Further tranches will be addressed on an ongoing basis by the Company with stock being issued accordingly.
The offering is scheduled to terminate upon meeting the offering maximum or the termination date of December 29, 2018, whichever
comes first.
Management intends that the BlackStar Coin
be treated as a SAFE (Simple Agreement for Future Equity) contract. The terms and conditions of this contract are yet to be determined
by the Company. It is considered to be a derivative equity instrument that, at present, has no value due to not being defined by
any terms or conditions. Management hereby declares that the BlackStar Coin in not intended to be a crypto currency as commonly
understood since it will, at some future time, be convertible into common shares of the Company.
Management has researched and has found no
definitive means for valuing the “BlackStar Coin”. First; the coin is not yet in existence, second; it is considered
a tier 3 asset which relies on secondary sources of valuation which, at this time are not viable. The Internal Revenue Service
in their Notice 2014-21 states “Virtual currency that has an equivalent value in real currency, or that acts as a substitute
for real currency, is referred to as ‘convertible’ virtual currency.”
The essence of the Notice 2014-21 is that the
Internal Revenue Service deems that a virtual currency transaction is subject to the United States income tax laws in much the
same manner as the “barter clubs” in the past. This means that the holder must necessarily maintain records of the
acquisition costs in USD and the fair market value of the goods or services acquired by the expenditure of the virtual currency.
With this information the taxpayer calculates a gain or a loss on the transaction in the normal manner.
The Accounting Standards Board has convened
a committee to investigate and promulgate reporting requirements with respect to the virtual currency situation. As of the date
of these financial statements there has been no such pronouncement made.
Given that the coins have not been issued and
that there is no stock issued in Crypto Equity Management Corp, causing the warrants for such stock to have no value per the Black-Scholes
valuation model, management has determined that the full exercise price of $0.50 be applied to the shares of BlackStar Enterprise
Group, Inc. using the capital stock and paid in capital reporting as is customarily reported.
NOTE 12 – GENERAL AND ADMINISTRATIVE
EXPENSES
Components of General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Continuing education
|
|
|
—
|
|
|
|
—
|
|
|
|
370
|
|
|
|
—
|
|
Consulting expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,275
|
|
Investor relations
|
|
|
—
|
|
|
|
829
|
|
|
|
800
|
|
|
|
829
|
|
Meals and entertainment
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
|
|
292
|
|
Office expense
|
|
|
101
|
|
|
|
58
|
|
|
|
474
|
|
|
|
58
|
|
Rent expense
|
|
|
355
|
|
|
|
340
|
|
|
|
711
|
|
|
|
862
|
|
Transfer Agent
|
|
|
1,061
|
|
|
|
214
|
|
|
|
3,987
|
|
|
|
920
|
|
Travel expense
|
|
|
—
|
|
|
|
—
|
|
|
|
203
|
|
|
|
|
|
Utilities
|
|
|
267
|
|
|
|
248
|
|
|
|
536
|
|
|
|
757
|
|
Website
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
450
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,784
|
|
|
$
|
1,717
|
|
|
$
|
7,081
|
|
|
$
|
5,443
|
|
NOTE 13 - SUBSEQUENT EVENTS
As of August 10, 2018, there have been no events
that would require additional disclosure to these financial statements.