NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(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”). The Company changed its name to Blackstar Energy Group, Inc., a Colorado corporation, in 2010 and was
active in the energy industry for several years, subsequently becoming inactive until 2016 when new management and capital were
introduced.
On January 25, 2016, International
Hedge Group, Inc. (“IHG”) signed an agreement to acquire a 95% interest in the Company, and in August 2016 the name
was changed to BlackStar Enterprise Group, Inc. In lieu of the 95% of common shares originally agreed upon, IHG received 44,400,000
shares of common stock, of which IHG currently owns 4,792,702 due to anti-dilutive cancellation of shares by management (approximately
10% of outstanding common stock), and 1,000,000 of Class A Preferred Stock. IHG is our controlling shareholder and is engaged in
providing management services and capital consulting to companies. IHG and BlackStar are currently managed and controlled by two
individuals each of whom is a beneficial owner of an additional 9% of the Company’s common stock
The Company intends to act as a
merchant banking firm seeking to facilitate venture capital to early stage revenue companies. BlackStar intends to offer consulting
and regulatory compliance services to crypto-equity companies and blockchain entrepreneurs for securities, tax, and commodity issues.
BlackStar is conducting ongoing analysis for opportunities in involvement in crypto-related ventures through a wholly-owned subsidiary,
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. BlackStar formed a subsidiary nonprofit company, Crypto Industry SRO Inc. (“Crypto”) in 2017.
Crypto business plan is to act as a self-regulatory membership organization for the crypto-equity industry and set guidelines and
best-practice rules by which industry members would abide. BlackStar will provide management of this entity under a services contract.
Basis of presentation
The accompanying 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, 2019 included in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission. These unaudited financial statements are condensed
and should be read in conjunction with those financial statements included in the Form 10-K and interim disclosures generally do
not repeat those in the annual statements. 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 nine months ended September 30, 2020
are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
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 nine months ended September 30, 2020 and the year ended
December 31, 2019, the Company has generated no revenues and has incurred losses. As of September 30, 2020, the Company had cash
of $23,006, negative working capital of ($303,804) and an accumulated deficit of ($5,331,546). 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
NOTE 2 – GOING CONCERN
(continued)
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
Accounting policies refer to specific
accounting principles and the methods of applying those principles to fairly present the Company’s financial position and
results of operations in accordance with generally accepted accounting principles. The policies discussed below include those that
management has determined to be the most appropriate in preparing the Company’s financial statements and are not discussed
in a separate footnote.
Principles of Consolidation
The accompanying consolidated financial
statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and reflect
our accounts and operations and those of our subsidiaries and include the accounts of BlackStar Enterprise Group, Inc. and its
wholly owned subsidiaries, Crypto Equity Management Corp (“CEMC”) and Crypto Industry SRO Inc . All significant intercompany
accounts and transactions have been eliminated in consolidation.
Cash and cash equivalents
The Company considers all cash
on hand, cash accounts not subject to withdrawal restrictions or penalties and all highly liquid investments with an original maturity
of three months or less as cash equivalents. Accounts at each institution are insured by the Federal Deposit Insurance Corporation
(“FDIC”) up to $250,000. At September 30, 2020 and December 31, 2019, the Company had no deposits in excess of the
FDIC insured limits.
Revenue recognition
The Company recognizes revenue
under ASC 606, using the following five-step model, which requires that we: (1) identify a contract with the customer, (2) identify
the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance
obligations and (5) recognize revenue as performance obligations are satisfied. The Company currently has no sources of revenue.
Basic and Diluted Loss per Share
The Company computes loss per share
in accordance with Accounting Standards Update (“ASU”), Earnings per Share (Topic 260) which requires presentation
of both basic and diluted earnings per share on the face of the statement of operations. Basic EPS would exclude any dilutive effects
of options, warrants, and convertible securities but does include the restricted shares of common stock issued. Diluted EPS reflects
the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common
stock. Basic EPS calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding
during the year. Diluted EPS calculations are determined by dividing net income by the weighted average number of common shares
and dilutive common share equivalents outstanding. Under current Company policy the majority stockholder International Hedge Group
has and intends to surrender an equivalent number of common shares each time shares are sold or converted from other instruments.
As a result, the EPS is the same for basic and diluted shares.
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Income Taxes
The Company accounts for income
taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized
for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
The Company maintains a valuation
allowance with respect to 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
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
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.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined
as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive
income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation
adjustments in investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our inception,
there have been no differences between our Comprehensive loss and net loss. Our comprehensive loss was identical to our net loss
for the nine months ended September 30, 2020 and 2019.
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Original Issue Discount
For certain convertible debt issued, the
Company provides the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing
the face amount of the note and is amortized to interest expense over the life of the debt.
Derivative Financial Instruments
Fair value accounting as required by ASC
815 – Derivatives and Hedging, requires bifurcation of embedded derivative instruments such as certain convertible features
in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate
fair value, the Company uses the Black-Scholes option pricing model. In assessing the convertible debt instruments, management
determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion
feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its
evaluation process of these instruments as derivative financial instruments.
Recent pronouncements
Management has evaluated accounting
standards and interpretations issued but not yet effective as of September 30, 2020 and does not expect such pronouncements to
have a material impact on the Company’s financial position, operations, or cash flows.
Reclassifications
Certain amounts in
the consolidated financial statements for prior year periods have been reclassified to conform with the current year periods presentation.
NOTE 4 – STOCKHOLDERS’
DEFICIT
Preferred Stock
The Company has an authorized number
of preferred shares of 10,000,000, 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. 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 September 30, 2020 there are
1,000,000 preferred series A shares issued and outstanding.
Common Stock
As of December 31, 2019, the authorized
number of common shares of the Company was 200,000,000, with a par value of $0.001 per share, On March 10, 2020, the Company’s
shareholders voted to increase the Company’s authorized common shares to 700,000,000.
As of September 30, 2020, and December
31, 2019, the total number of common shares outstanding was 74,639,153 and 48,003,443, respectively. The number of shares outstanding
at September 30, 2020 was reduced by 150,000 in order to reflect that shares previously reported as outstanding as of December
31, 2019, but yet to be issued by the Company were, in fact, issued from the block of shares that were returned to treasury by
IHG. The share quantity was deemed by management to be
NOTE 4 – STOCKHOLDERS’
DEFICIT (continued)
not material therefore not requiring
an amendment of the Form 10-K for the year ended December 31, 2019 that was previously filed.
During the nine months ended September
30, 2020, the Company issued shares of its common stock as follows:
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·
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26,235,710 shares for conversion of $129,703 principal, interest
and fees on convertible notes payable, and recognized a loss on note payable conversions of $574,715.
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150,000 shares, valued at $3,000 ($0.02 per share) as consideration
for extension of notes originally dated April 29, 2019, as extended, for an additional six months through October 29, 2020.
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400,000 shares valued at $8,000 ($0.02 per share) as partial consideration
for an aggregate $25,000 of loans made to the Company on May 18, 2020.
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NOTE 5 – WARRANTS
A summary of warrant activity during
the nine months ended September 30, 2020 is presented below:
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Shares
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Weighted Average Exercise Price
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Weighted Average Remaining Contractual Life (Years)
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Outstanding and exercisable – December 31, 2019
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540,000
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$
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.31
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3.99
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Granted
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—
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Exercised
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—
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Expired
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—
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|
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|
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Outstanding and exercisable – September 30, 2020
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540,000
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$
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.31
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3.24
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NOTE 6 – CONVERTIBLE NOTES
AUCTUS FUND
On April 26, 2019, the Company
entered into a financing arrangement with Auctus Fund LLC. The face value of the note is $110,000 at an interest rate of 12% and
the maturity date is January 26, 2020. As of January 26, 2020, the Company is in default with the payments required by the note
and is therefore subject to a default rate of 24%. At the time of the disbursement the Company received $97,250 net cash proceeds,
as there was a deduction from proceeds to the Company of $2,750 for legal fees related to the issuance of the promissory note and
a deduction of $10,000 as prepaid interest to the lender of which $1,111 was expensed. The repayment is a lump sum payment on the
due date or is convertible into Company common stock at the discretion of the lender. The conversion, if chosen, will be at 50%
of the two lowest trading days in the previous ten-day period prior to the date of conversion. This represents a discount of fifty
percent (50%). The number of shares to be issued in the conversion will be calculated as follows: the average price of the two
lowest trading days of the preceding the days will be multiplied by 0.50 ((to arrive at the discount factor) and then the resulting
price will be divided into the principal and accrued interest resulting in the number of shares due. The lender agrees to limit
the amount of stock received to less than 4.99% of the total outstanding common stock. There are also 440,000 warrants attached
to this note with an exercise price of $0.25 and a life of 5 years.
NOTE 6 – CONVERTIBLE NOTES
(continued)
The Company has recorded the conversion
feature as a Beneficial Conversion Feature. The fair value of $110,000 for the expense portion of the note is being amortized over
the term of the note. This fair value has been determined based on the current trading prices of the Company’s common stock.
Management has determined that this treatment is appropriate given the uncertain nature of the value of the Company and its stock,
and there will be no revaluations until the note is paid or redeemed for stock.
The Company has accounted for the
value of the warrants using the Black-Scholes model with a stock price of $0.38, volatility of 98%, risk free rate of 2.25% and
a life of 5 years. Within these parameters the Company has recorded a warrant expense of $132,593.
During the nine months ended September
30, 2020, the lender converted an aggregate $33,939 of principal, interest and fees on the note into 11,830,995 shares of common
stock of the Company. The Company has recognized a loss on conversion of $156,345, based on the difference between the trading
price and the value of the debt converted.
GS CAPITAL PARTNERS
On November 1, 2019 the Company
entered into a financing arrangement with GS Capital Partners LLC. The face value of the note is $70,000 at an interest rate of
10% and the maturity date is November 1, 2020. At the time of the disbursement the Company received $54,450 net cash proceeds,
as there was a deduction from proceeds to the Company of $3,500 for legal fees related to the issuance of the promissory note,
$6,000 as prepaid interest and $6,050 as a note placement expense. The repayment is a lump sum payment on the due date or is convertible
into Company common stock at the discretion of the lender. The conversion, if chosen, will be at 50% of the two lowest trading
days in the previous ten-day period prior to the date of conversion. This represents a discount of fifty percent (50%). The number
of shares to be issued in the conversion will be calculated as follows: the average price of the two lowest trading days of the
preceding the days will be multiplied by 0.50 (to arrive at the discount factor) and then the resulting price will be divided into
the principal and accrued interest resulting in the number of shares due. 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.
The Company has recorded the conversion
feature as a Beneficial Conversion Feature. The fair value of $38,032 for the expense portion of the note is being amortized over
the term of the note. This fair value has been determined based on the current trading prices of the Company’s common stock.
Management has determined that this treatment is appropriate given the uncertain nature of the value of the Company and its stock,
and there will be no revaluations until the note is paid or redeemed for stock.
During the nine months ended September
30, 2020, the lender converted an aggregate $21,107 of principal and interest on the note into 2,329,031 shares of common stock
of the Company. The Company has recognized a loss on conversion of $118,635, based on the difference between the trading price
and the value of the debt converted.
ADAR ALEF
On November 4, 2019 the
Company entered into a financing arrangement with Adar Alef, LLC. The face value of the note is $70,000 at an interest rate
of 10% and the maturity date is November 1, 2020. At the time of the disbursement the Company received $54,450 net cash
proceeds, as there was a deduction from proceeds to the Company of $3,500 for legal fees related to the issuance of the
promissory note, $6,000 as prepaid interest and $6,050 as a note placement expense. The repayment is a lump sum payment on
the due date or is convertible into Company common stock at the discretion of the lender. The conversion, if chosen, will be
at 50% of the two lowest trading days in the previous ten-day period prior to the date of
NOTE 6 – CONVERTIBLE NOTES
(continued)
conversion. This represents a discount
of fifty percent (50%). The number of shares to be issued in the conversion will be calculated as follows: the average price of
the two lowest trading days of the preceding the days will be multiplied by 0.50 (to
arrive at the discount factor)
and then the resulting price will be divided into the principal and accrued interest resulting in the number of shares due. 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.
The Company has recorded the conversion
feature as a Beneficial Conversion Feature. The fair value of $38,040 for the expense portion of the note is being amortized over
the term of the note. This fair value has been determined based on the current trading prices of the Company’s common stock.
Management has determined that this treatment is appropriate given the uncertain nature of the value of the Company and its stock,
and there will be no revaluations until the note is paid or redeemed for stock.
During the nine months ended September
30, 2020, the lender converted the total of principal and interest due on the note of $74,656 into 12,075,684 shares of common
stock of the Company. The Company has recognized a loss on conversion of $299,735, based on the difference between the trading
price and the value of the debt converted.
POWER UP LENDING GROUP
On May 21, 2020, the Company entered
into a financing agreement with Power Up (“Power UP”) to borrow $103,000 with a due date of May 21, 2021. The note
bears interest at 10%, with a default rate of 22%, and is convertible, commencing 180 days after the date of issuance. The conversion
price is to be calculated at 61% of the lowest trading price 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. The Company has reserved 63,319,672 shares for conversion.
Net proceeds from the loan were $100,000, after legal fees and offering costs of $3,000. These fees and costs are being amortized
over the term of the note. The Company has recorded the conversion feature as a Beneficial Conversion Feature. The fair value of
$103,000 for the expense portion of the note is being amortized over the term of the note. This fair value has been determined
based on the trading price of the Company’s common stock as of the date of the note. Management has determined that this
treatment is appropriate given the uncertain nature of the value of the Company and its stock, and there will be no revaluations
until the note is paid or redeemed for stock.
On July 24, 2020, the Company entered
into a financing agreement with Power Up to borrow $43,000 with a due date of July 24, 2021. The note bears interest at 10%, with
a default rate of 22%, and is convertible, commencing 180 days after the date of issuance. The conversion price is to be calculated
at 61% of the lowest trading price 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. The Company has reserved 41,876,318 shares for conversion. Net proceeds from the loan
were $40,000, after legal fees and offering costs of $3,000. These fees and costs are being amortized over the term of the note.
The Company has recorded the conversion feature as a Beneficial Conversion Feature. The fair value of $43,000 for the expense portion
of the note is being amortized over the term of the note. This fair value has been determined based on the trading price of the
Company’s common stock as of the date of the note. Management has determined that this treatment is appropriate given the
uncertain nature of the value of the Company and its stock, and there will be no revaluations until the note is paid or redeemed
for stock.
NOTE 6 – CONVERTIBLE NOTES
(continued)
On September 24, 2020, the Company
enter into a financing agreement with Power Up to borrow $53,000. Initial funding was made by Power Up on October 8, 2020, and
as a result no liability has been recorded as of September 30, 2020. (See Note 9).
NOTE 7 – NOTES PAYABLE
On April 24, 2019, the Company
was loaned $20,000 from an unrelated individual. The note was due October 24, 2019 with an interest rate of 11%. In addition, the
individual received 100,000 shares of restricted common stock. These shares were valued at $30,000 which represents the trading
price as of the date indicated and were recorded to interest expense. On December 13, 2019, the Company negotiated a six-month
extension with the lender and paid $1,100 cash for accrued interest and issued 100,000 shares of common stock as an additional
inducement for the extension. The stock was valued at $0.027 per share per the loan agreement, resulting in $2,700 of interest
expense based on the stock’s closing price on that date. On April 24, 2020, the lender agreed to a second six-month extension
through October 24, 2020. As consideration for entering into the extension, the Company agreed to pay the lender accrued interest
on the note of $1,100 and to issue 100,000 shares of the Company’s common stock, valued at $0.02 per share, the closing price
of the stock as of the extension agreement date. The $2,000 value of the shares was recorded as interest expense and included in
Common Stock to be Issued. As of June 30, 2020, the interest due had not been paid nor had the shares of common stock been issued.
On April 29, 2019, the Company
was loaned $10,000 from an unrelated individual. The note was due on October 29, 2019 with an interest rate of 11%. In addition,
the individual received 50,000 shares of restricted common stock. These shares were valued at $19,000 which represents the trading
price as of the date indicated and recorded to interest expense. On December 13, 2019, the Company negotiated a six-month extension
with the lender and paid $550 cash for accrued interest and issued 50,000 shares of common stock as an additional inducement for
the extension. The stock was valued at $0.027 per share per the loan agreement, resulting in $1,350 of interest expense based on
the stock’s closing price on that date. On April 29, 2020, the lender agreed to a second six-month extension through October
29, 2020. As consideration for entering into the extension, the Company agreed to pay the lender accrued interest on the note of
$550 and to issue 50,000 shares of the Company’s common stock, valued at $0.02 per share, the closing price of the stock
as of the extension agreement date. The $1,000 value of the shares was recorded as interest expense and included in Common Stock
to be Issued. As of June 30, 2020, the interest due had not been paid nor had the shares of common stock been issued.
On May 18, 2020, the Company entered
into loan agreements with two unrelated individuals, who are current note holders in the aggregate amount of $30,000. Each of the
new loans is for $12,500, an aggregate $25,000. The notes are due November 18, 2020 with interest at 11%. The notes may be prepaid
at any time but in the event of the prepayment the full amount of principal and interest will required to be paid. In the event
that the Company is unable to make payment on the due date the default interest rate will continue at 11% but the Company is obligated
to issue 500,000 shares of its common stock to each lender. As additional consideration for entering into the loans, each individual
shall be issued 200,000 shares of common stock, an aggregate 400,000 shares. The shares are valued at $0.02 per share, the closing
price of the Company’s common stock as of the date of the loan. The $8,000 value ascribed to the shares has been capitalized
as prepaid interest and is being amortized over the six-month term of the loans.
NOTE 8 – RELATED PARTY
TRANSACTIONS
In support of the Company’s
efforts and cash requirements, it must rely on advances from related parties until such time that the Company can support its
operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written
commitment for continued support by shareholders. The advances are considered temporary in nature and have not been formalized
by a promissory note.
NOTE 8 – RELATED PARTY
TRANSACTIONS (continued)
IHG, controlling shareholder of
the Company, provides management consulting services to the Company. There is no formal written agreement that defines the compensation
to be paid. For the nine months ended September 30, 2020 and 2019 the Company recorded related party management fees of $59,510
and $72,830 respectively. For the three months ended September 30, 2020 and 2019 the Company recorded related party management
fees of $33,500 and $16,400 respectively.
During the nine months ended September
30, 2020 there were no advances from related parties, and the Company repaid $22,590 to its parent company, International Hedge
Group, Inc. At September 30, 2020, an officer of the Company, was owed $480; and a former officer of the Company, was owed $18,780.
NOTE 9 – SUBSEQUENT EVENTS
On October 5, 2020, the Company
issued 199,222 shares of its common stock, valued at $0.0257 per share, as consideration for financing services rendered to the
Company in 2019. At September 30, 2020, the value of the shares issued of $5,120 was included in accrued liabilities.
On October 5, 2020, the Company
issued 3,697,000 shares of common stock, valued at $0.00513 per share, as consideration for conversion of note principal, interest
and loan fees in the aggregate amount of $18,966. The conversion notice was dated September 29, 2020, but the Company was notified
of the conversion and the shares issued on October 5, 2020, so the Company has chosen to treat the conversion as occurring in the
subsequent period.
On October 8, 2020, the Company
received the proceeds from a financing agreement entered into with Power Up Lending Group on September 24, 2020 to borrow $53,000.
The note bears interest at 10%, with a default rate of 22%, and is convertible, commencing 180 days after the date of issuance.
The conversion price is to be calculated at 61% of the lowest trading price 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 25,429,828
shares for conversion. Net proceeds from the loan were $50,000, after legal fees and offering costs of $3,000.
On October 28, 2020, the Company
issued 3,918,900 shares of common stock, valued at $0.009 per share, as consideration for conversion of note principal, interest
and loan fees in the aggregate amount of $35,270.
The Company has analyzed its operations
subsequent to September 30, 2020 through the date these financial statements were issued and has determined that it does not have
any additional material subsequent events to disclose.