Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements and Associated
Risks.
This form 10-Q contains certain statements
that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements
contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”,
“estimate, or “continue” or comparable terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions
generally and in the industries in which we may participate; competition within our chosen industry, including competition from
much larger competitors; technological advances and failure to successfully develop business relationships.
Based on our financial history since inception,
our auditor has expressed substantial doubt as to our ability to continue as a going concern. As reflected in the accompanying
financial statements, as of September 30, 2018, we had an accumulated deficit totaling $3,270,727. This raises substantial doubts
about our ability to continue as a going concern.
Plan of Operation
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.
In lieu of the 95% of common shares originally agreed upon, IHG received 44,400,000 shares of common stock and 1,000,000 shares
of Class A Preferred Stock. 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 bank as at the date of these
financial statements. It currently trades on the OTC QB under the symbol “BEGI”. The Company is a merchant banking
firm seeking to facilitate venture capital to early stage revenue companies. BlackStar intends to offer consulting and regulatory
compliance services to crypto-equity companies and blockchain entrepreneurs for securities, tax, and commodity issues. BlackStar
is conducting ongoing analysis for opportunities in involvement in crypto-related ventures though our newly formed wholly-owned
subsidiary, Crypto Equity Management Corp., (“CEMC”), mainly in the areas of blockchain and distributed ledger technologies
(“DLT”). BlackStar intends to serve businesses in their early corporate lifecycles and may provide funding in
the forms of ventures in which we control the venture until divestiture or spin-off by developing the businesses with capital.
We have only engaged in one transaction as a merchant bank form to date.
Our investment strategy focuses primarily
on ventures with companies that we believe are poised to grow at above-average rates relative to other sectors of the U.S. economy,
which we refer to as "emerging growth companies." Under no circumstances does the company intend to become an investment
company and its activities and its financial statement ratios of assets and cash will be carefully monitored and other activities
reviewed by the Board to prevent being classified or inadvertently becoming an investment company which would be subject to regulation
under the Investment Company Act of 1940.
As a merchant bank, BlackStar intends
to seek to provide access to capital for companies and is specifically seeking out ventures involved in DLT. BlackStar intends
to facilitate funding and management of DLT-involved companies through majority controlled joint ventures through its subsidiary
CEMC. BlackStar, through CEMC, intends to initially control and manage each venture. Potential ventures for both BlackStar
and CEMC will be analyzed using the combined business experience of its executives, with CEMC looking to fill those venture criteria
with companies in crypto-related businesses such as blockchain or DLT technologies. The Company does not intend to develop Investment
Objectives or “criteria” in any manner but will rely on the acumen and experience of its executives.
Recent Updates
–
In
June of 2017, the management of BlackStar began analyzing the crypto industry due in large part to its rapid ascent in popularity.
After significant study and discussions
with multiple vendors and service providers in the digital currency industries, in May of 2018 BlackStar retained Solidgreen Software,
LLC, d/b/a Artuova (“Artuova”) to design a technological plan and an overall estimated cost of implementation of an
equity trading platform called BlackStar Digital Trading Platform (“BDTP”). The
Company plans to build the referenced
digital equity trading platform in order to trade BlackStar common shares as a “registered Digital Equity” only after
the securities have been registered with the SEC. BlackStar intends to assign the contract to CEMC so that CEMC may continue to
handle crypto-related ventures as the operating subsidiary of BlackStar. If successful, BlackStar intends to then consult for other
crypto industry companies and advise on similar trading platform implementation.
Currently, Artuova software engineer
Dr. David Gnabasik is providing the expertise needed to develop the Hyperledger-fabric blockchain solution for CEMC. Dr. Gnabasik
holds a Ph.D. in Computer Science from the University of Colorado Denver, is a computer scientist contractor of Artuova and a former
employee of Colorado Parks and Wildlife, and has previously demonstrated a working blockchain project for managing licenses for
Parks and Wildlife state agencies. Given his experience with blockchain, we believe Dr. Gnabasik and Artuova will be able to construct
the BDTP experience to the Company’s specifications.
The Company plans to design and build
the Peer-to-Peer (“P2P”) BDTP at a cost of $105,000 USD over the next several months. As of September 2018, the following
components of BDTP have been completely designed: data model, reports, web-based user interface, blockchain interface, transaction
logic, and cloud interface. The next phase will involve building the platform, followed by demonstration to regulatory agencies
and potential implementation.
BlackStar has always recognized that
crypto equities must be registered within the existing SEC regulations and guidelines. BlackStar’s aim is to develop BDTP,
a digital equity trading platform, to trade registered BlackStar common shares only. The regulatory challenges presented in implementing
this project come from integration of the existing broker-dealer ecosystem into the platform, approvals/advice of and compliance
with the rules and regulations of the OTC Market Group, SEC, FinCen, IRS, CFTC, anti-money laundering rules, and FINRA for the
functionality of the system, cybersecurity laws, and other state and federal financial and banking laws.
BlackStar and/or its subsidiary CEMC
intend to engage further software developers as needed for blockchain implementation on the BDTP platform. CEMC intends to integrate
BDTP with the existing FINRA and SEC regulated brokerage ecosystem in order to trade BlackStar securities, addressing many of the
regulatory issues by operating within the existing confines of the system. The intent of BDTP is to become a digital market-maker
in the brokerage ecosystem. As intended , the system would operate in the following manner: broker-dealers would invite customers
to participate as users on the BDTP to buy and sell BlackStar equity trades; the broker-dealers comply with all FinCen and Exchange
regulations, KYC and FinCen rules, submit IRS tax reports, etc.; orders, bids, and offers are entered into the BDTP (like a specialist’s
order book) either by broker-dealers or Users through trading software supplied by the broker-dealers; BDTP records all transactions;
and finally, OTC Market Group and the SEC/FINRA have complete and transparent access to the data stored in BDTP, offering FINRA
and the likes a single data interface and consolidated history of transactions. BDTP seamlessly integrates with the order entry
processes, priority rules, and execution procedures of the existing brokerage ecosystem. Although not a profit center, BlackStar
intends to charge a nominal fee per executed trade to cover expenses, and broker-dealers would recover the fee. CEMC plans to implement
the technology based upon the Hyperledger-fabric, an open-source blockchain framework from IBM, and to use the IBM Cloud for transaction
data storage. BDTP would offer a web-based interface for trading transactions as well as an Application Programming Interface (API)
that directly accesses all immutable transactions stored on BDTP. The participating members on the platform would be buying and
selling broker-dealers, OTC Market Group, FINRA, SEC, DTCC, and Clearing House. FINRA and the SEC would serve as Certificate Authorities
in the BDTP permissioned blockchain, restricting the actors who can contribute to the consensus of the system state – only
a restricted set of users would be enabled to have the rights to write or validate the block transactions. The distributed consensus
process satisfies the following purposes: 1) permissioned clients are voted into the network by all existing validators; 2) the
process helps to keep inaccurate or potentially fraudulent transactions out of the database through a chosen computational mechanism;
and 3) all relevant network participants agree that a transaction is valid through the use of a multi-signature consensus algorithm
where a majority of validators must agree that a specific transaction or transaction class is valid. BlackStar and CEMC hope to
build and implement BDTP over the next six months, pending comments/approval by various regulatory agencies. BlackStar and CEMC
would operate and manage the platform and remain responsible for the functionality and security of the platform.
Neither CEMC nor BlackStar intend to
underwrite these entities or entrepreneurial companies, nor do they intend to act as a broker-dealer or investment company, though
we acknowledge the potential requirements to register as such or to claim exemption from registration.
We understand that we may be required
to register as an ATS. Alternatively, we may seek an exemption if we are able to establish a relationship with OTC Market Group
to quote our digital common stock on the OTCQB page alongside the Market Makers. We plan to 1) trade only registered common shares
of BEGI on a blockchain platform; 2) qualify for listing of our digital quote on OTC Markets; and 3) have the SEC, FINRA and BlackStar
deemed the Certificate Authority on the blockchain trading platform.
Neither BlackStar nor CEMC will be trading
in, accepting loan repayments in, or making loans in cryptocurrencies; the intent of the BDTP project is to build a P2P platform
on which to trade registered digital securities of BlackStar. After completion of the BDTP, BlackStar intends to continue its merchant
banking activities and offer consulting to other companies regarding the implementation of similar platforms.
In addition to the services described
above, BlackStar formed a subsidiary nonprofit company, Crypto Industry SRO Inc., on December 31, 2017. Crypto Industry SRO is
in the beginning stages of organizing membership participation in the newly-formed nonprofit. Crypto Industry SRO is planned to
act as a self-regulatory membership organization for the crypto-equity industry and set guidelines and best-practice rules by which
industry members would abide. BlackStar will provide management of this entity under a services contract.
The Company’s success will be
dependent upon the Company’s ability to analyze and manage the opportunities presented.
We intend to expend
funds over the next four quarters as follows:
4
th
Quarter 2018
|
|
· BDTP development
|
· $300,000
|
|
|
· Operations
|
· $50,000
|
|
|
|
|
1
st
Quarter 2019
|
|
· BDTP implementation
|
· $200,000
|
|
|
· Operations
|
· $150,000
|
|
|
|
|
2
nd
Quarter 2019
|
|
· Joint Ventures
|
· $250,000
|
|
|
· Operations
|
· $50,000
|
|
|
|
|
3
rd
Quarter 2019
|
|
· Joint Ventures
|
· $250,000
|
|
|
· Operations
|
· $50,000
|
Our Budget for operations in the next year
is as follows:
BDTP Development
|
|
$500,000
|
Working Capital –Joint Ventures
|
|
$500,000
|
Legal, Audit and Accounting
|
|
$150,000
|
Fees, rent, travel and general & administrative expenses
|
|
$150,000
|
|
|
$1,300,000
|
The Company may change
any or all the budget categories in the execution of its business model. None of the line items are to be considered fixed or unchangeable.
The Company may need substantial additional capital to support its budget. We have not recognized revenues from our operational
activities.
Additional
Risk Factors:
THERE
CAN BE NO CERTAINTY AS TO MARKET ACCEPTANCE OF THE PROPOSED BDTP.
The
Company has no certainty as to whether the market will accept and use the idea of the BDTP, should it become operational, nor is
there any certainty as to how the BDTP translates to profits for the Company. There is no assurance of market acceptance or profitability
of the concept or Company. The BDTP is not yet developed and may never be developed.
THERE
ARE ADDITIONAL RISKS TO INVESTORS HOLDING BLACKSTAR DIGITAL EQUITIES DUE TO THE LACK OF MARKET.
Investors
holding BlackStar Digital Equities may never be able to transfer BlackStar Digital Equities on the platform. BlackStar Digital
Equities (intended to be traded on the BDTP) do not currently exist and may never exist. The warrants for BlackStar Digital Equities
outstanding are not currently exercisable for them, and a secondary trading market may never develop for them. BlackStar Digital
Equities (intended to be traded on the BDTP) do not currently exist and may never exist. The warrants
for
BlackStar Digital Equities outstanding are not currently exercisable for them, and a secondary trading market may never develop
for them.
See
“Risk Factors” in the Company’s 10-K/A Amendment No. 2, filed on September 5, 2018 for additional risks to consider
and further discussion of the proposed BDTP.
Based
on our current cash reserves of approximately $34 as of September 30, 2018, we have the cash for an operational budget of less
than one month. We intend to offer a private placement of stock or Notes to investors in order to achieve $900,000 in funding
in the next six months. We intend to commence this offering in the 4th Quarter of 2018. If we are unable to generate enough revenue
to cover our operational costs, we will need to seek additional sources of funds. Currently, we have
no
committed source
for any funds as of date hereof. No representation is made that any funds will be available when needed. In the event funds
cannot be raised if and when needed, we may not be able to carry out our business plan and could fail in business as a result of
these uncertainties.
The
independent registered public accounting firm’s report on our financial statements as of December 31, 2017, includes a “going
concern” explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.
While
our cash reserves were only $34 as of the end of the 3rd Quarter, our parent company, IHG, has agreed to fund on an interim basis
any shortfall in our cash reserves. We would use our funds to pay legal, accounting, office rent and general and administrative
expense. We have estimated $50,000 for three quarters in 2019 in operational costs which includes ordinary legal, accounting, travel,
general and administrative, audit, rent, telephones and miscellaneous, with $150,000 budgeted for the first quarter of 2019 for
additional legal and regulatory filings as needed.
Results of Operations
For the Three Months Ended September 30,
2018 compared to same period in 2017
During the three months ended September 30,
2018 and 2017, we had no revenue, no cost of revenues, and no gross profit. During the three months ended September 30, 2018, we
recognized a net loss of $(24,563) compared to a net loss of $(66,269) during the three months ended September 30, 2017. The net
loss was due to operating expenses of $24,563. Our operating expenses included $138 in depreciation, $20,139 in legal and professional
fees, $1,000 in filing fees, and $2,495 in general and administrative fees, for a total of $24,563 for the three months ended September
30, 2018. Operating expenses were higher for the quarter ended September 30, 2018 compared to the same quarter in 2017, due mainly
to legal and professional fees, however the warrant expense of $(70,000) in the three months ended September 30, 2017 meant that
the net loss was greater in the third quarter of 2017 than 2018.
For the Nine Months Ended September 30,
2018 compared to same period in 2017
During the nine months ended September 30,
2018 and 2017, we had no revenue, no cost of revenues, and no gross profit. During the nine months ended September 30, 2018, we
recognized a net loss of $(160,774) compared to a net loss of $(89,413) during the nine months ended September 30, 2017. The net
loss in 2018 was attributable to operating expenses of $160,774, including $79,266 in management consulting fees, $415 in depreciation,
$53,615 in legal and professional fees, $10,122 in general and administrative fees, registration expenses of $7,901, and $4,455
in filing fees for a total of $160,774 for the nine months ended September 30, 2018. In the same period in 2017, we incurred $12,500
in registration expenses, $437 in depreciation, $3,800 in filing fees, $39,345 in legal and professional fees, $8,331 in general
and administrative expense, and $70,000 in warrant expense (offset by $45,000 in interest income) for a total of $89,413.
Net loss per share for the nine-month period
in 2018 and 2017 was $0.00 and $0.00 per share, respectively.
Our auditor has expressed substantial doubt
as to whether we will be able to continue to operate as a “going concern” due to the fact that the Company has an accumulated
deficit of $(3,270,727) as of September 30, 2018, compared to an accumulated deficit of $(3,109,953) at December 31, 2017, and
has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going
concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining the adequate capital to
fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease
operations.
Liquidity and Capital Resources
At September 30, 2018, we have total current
assets of $34 in cash. Our total assets of $145,472 consist of $34 in cash, $438 in fixed assets and an accrued note receivable
– related party of $145,000. Current liabilities at September 30, 2018 were $42,846 and consisted of accounts payable of
$19,280, an advance payable to a related party of $5,066, and loan payable to a related party of $18,500. At September 30, 2018,
we had a deficit of ($42,812) in working capital.
On June 14, 2017, the Company received
notice from the holders of warrants as to their intentions to convert 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, Inc. agreed to retire to treasury 16,320,000 shares of the common stock of the Company that it holds. This transaction
produced no financial consequence to the Company.
On April 29, 2018, International Hedge
Group Inc. retired 330,000 shares to treasury simultaneous to the issuance of 330,000 shares purchased in a private placement offering.
Messrs. Harris and Kurczodyna exercised 1,500,000 warrants each in a cashless exercise @ $.05 per share on June 14, 2018 resulting
in 1,444,445 shares of common stock. In addition, Rare Green, Inc., of which Mr. Harris is an officer, exercised 750,000 warrants
in a cashless exercise @ $0.05 per share on June 14, 2018, resulting in 722,222 shares of common stock. At the same time, Patriot
Mtg. Acceptance Corp., of which Mr. Kurczodyna is an officer, exercised 750,000 warrants in a cashless exercise @ $.05 per share
on June 14, 2018, resulting in 722,222 shares of common stock. IHG exercised 1,350,000 warrants on June 14, 2018 resulting in 1,300,000
shares of common stock, which were assigned to non-affiliated individual advisors to the Company. Other shareholders exercised
5,250,000 warrants in a cashless exercise @ $0.05 per share on June 14, 2018 resulting in 5,055,556 shares of common stock. On
June 18, 2018, International Hedge Group, Inc. retired 16,370,370 shares to treasury.
Our Company entered into a Management Consulting
Agreement with our parent company, IHG, on December 1, 2017. The agreement is attached as Exhibit 10.1 to the Form 10-K/A filed
on July 3, 2018. The term of the agreement is until terminated with 30 days prior notice. We agreed to pay IHG $25,000 for services
occurring in 2017, payable as cash, stock, or both upon mutual agreement, of which a portion may be paid to Messrs. Harris and
Kurczodyna, who are both officers and directors of IHG and BlackStar, for services provided to the Company. We will limit expenses
of IHG pursuant to the allocations made in the budget, and all reasonable pre-approved out-of-pocket expenses actually incurred
by IHG on behalf of the Company will be reimbursed. IHG agrees to assist the Company in all filing necessary to be a fully reporting
public company, assist the Company in public relations, evaluate candidates for the portfolio of companies in merchant banking,
establish new contacts for the Company and develop proposals and deals to capture revenues, and assist the Company in their capital
funding strategy.
We do not currently have
any promissory note debt or other bank debt but do have debts of a loan payable to a related party in the amount of $18,500, an
advance payable to a related party of $5,066, and accounts payable of $19,280.
Debt History
:
On July 11, 2011, the Company received $200,000 in the form of cash in exchange for a promissory note bearing interest at the rate
of 6% per annum. The note did not specify that the interest is compounding therefore the Company accrued the expense at a simple
interest rate of 6%. The Company did not receive any notice of default and continued to accrue interest on its books at the rate
of 6% each year. During the month of August 2016, the Company issued 700,000 shares of its common stock in exchange for this indebtedness
along with all accrued interest. On September 23, 2011, the Company received $50,000 in the form of cash as a temporary loan from
a director of the Company. The Company elected to accrue interest at the rate of 6% per annum non-compounding. The Company did
not receive any notice of default and continued to accrue interest on its books at the rate of 6% each year. During the month of
August 2016, the Company agreed to issue 200,000 shares of its common stock in satisfaction for this indebtedness along with all
accrued interest, and authorized the shares conditioned upon receipt of a release.
As at September 30, 2018, our cash balance
was $34 as compared to $34,454 at December 31, 2017. We intend to attempt to raise capital through several sources: a) partner
venture funds, b) private placements of our stock, and/or c) loans from our parent company IHG. We do not anticipate generating
sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to ensure
sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit
facilities.
Our total assets at September 30, 2018
were $145,472 compared to $180,307 as of December 31, 2017.
We do not have terms or committed sources
of capital of any type at this time. If we are able to raise additional capital, we intend to enter into additional joint ventures
and would intend to use the funds repaid from the joint ventures to a) retire debt, and b) fund additional joint ventures with
companies, and c) to provide operational funds.
We have been, and intend to continue,
working toward identifying and obtaining new sources of financing. No assurances can be given that we will be successful in obtaining
additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing
stockholders. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely
include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have
a negative impact on our business, prospects, financial condition, results of operations and cash flows.
If adequate funds are not available,
we may be required to delay, scale back or eliminate portions of our operations or obtain funds through arrangements with strategic
partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such
financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect our ability
to fund our continued operations and our expansion efforts.
We do not anticipate that we will purchase
any significant equipment over the next twelve months.
We do not anticipate any significant
changes in the number of employee unless we significantly increase the size of our operations. We believe that we do not require
the services of additional independent contractors to operate at our current level of activity. However, if our level of operations
increases beyond the level that our current staff can provide, we may need to supplement our staff in this manner.
Financing Activities
During the three months ended September 30,
2018, the Company received $0 from subscription agreements or private placement offerings. The Company received shareholder contributions
in the amount of $0 in the three months ended September 30, 2018.
During the three months ended March
31, 2018, the Company received subscriptions for a total of $105,000 of common stock. During the year ended December 31, 2017,
the Company received $60,000 in shareholder subscriptions to be used in the Company’s regular activities. As of December
31, 2017, the Company has used these proceeds on the Company’s operations and purchases. For the subscriptions totaling $165,000,
the Company issued 330,000 shares of common stock and IHG simultaneously retired to treasury 330,000 shares of common stock.
During the year ended December 31, 2016,
the Company received $200,000 in private placement subscriptions for the Company’s common stock and issued 44,400,000 shares
of common stock and 1,000,000 shares of preferred stock. During the year ended December 31, 2016, the Company issued 1,312,549
to consultants for services rendered and in exchange for debt, with the shares valued at $52,504.
As at the date of the annual report
on Form 10-K the Company had received $200,000 in cash from the Company’s parent IHG.
Investing Activities
Net cash used in investing activities was $0
for the nine-month period. Net cash provided by financing activities was $105,000 for the nine months ended September 30, 2018.
Operating Activities
During the nine months ended September
30, 2018, we used $(139,420) in cash for our net operating activities, compared to $(86,857) used in operating activities for the
same period in 2017. The increased amount of cash used in operating activities is attributable to a larger net loss in the nine
months ended September 30, 2018.
During the year ended December 31, 2017,
the Company used cash in the amount of $113,221 in operating activities, compared to $1,296,670 over the previous year.
Going Concern
We have only a very limited amount of cash
and have incurred operating losses and limited cash flows from operations since inception. As of September 30, 2018 and December
31, 2017, we had accumulated deficit of $3,270,727 and $3,109,953,
respectively and we will require additional
working capital to fund operations through 2018 and beyond. These factors, among others, raise substantial doubt about our ability
to continue as a going concern. Our financial statements included in this Form 10-Q do not include any adjustments related to recoverability
and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable
to continue as a going concern. The audited financial statements included in the Company’s recent annual report on Form 10-K
as amended have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result
if we cease to continue as a going concern.
Based on our financial history since inception,
in their report on the financial statements for the period ended December 31, 2017, our independent registered public accounting
firm has expressed substantial doubt as to our ability to continue as a going concern. There is no assurance that any revenue will
be realized in the future.
There can be no assurance that we will have
adequate capital resources to fund planned operations or that any additional funds will be available to us when needed or at all,
or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital
resources to fund operations, we may be required to delay, scale back or eliminate some or all of our operations, which may have
a material adverse effect on our business, results of operations and ability to operate as a going concern.
Short Term
On a short-term basis, we have not generated
revenues sufficient to cover our growth oriented operations plan. Based on prior history, we may continue to incur losses until
such a time that our revenues are sufficient to cover our operating expenses and growth oriented operations plan. As a result we
may need additional capital in the form of equity or loans, none of which is committed as of this filing.
Capital Resources
We have only common stock as our capital resource,
and our assets, cash and receivables.
We have no material commitments for capital
expenditures within the next year, however, as operations are expanded substantial capital will be needed to pay for expansion
and working capital.
Need for Additional Financing
We do not have capital sufficient to meet our
growth plans. We have made equity and debt offerings in order to support our growth plans, to date, and may do so in the future.
No commitments to provide additional funds
have been made by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be
available to us to allow coverage of our expenses as they may be incurred.
Off Balance Sheet Arrangements
None