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 June 30, 2021, we had an accumulated deficit totaling ($7,000,422). 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 of the date of these financial statements. We currently trade 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 or blockchain. 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. BlackStar is currently building a digital equity trading platform in order to trade registered BlackStar common shares in digital form (DWAC), and intends to use the platform design to provide custom subscription services to other public companies.

Recent Updates - The Company is finalizing the design and build of the BlackStar Digital Trading Platform ("BDTP"), subject to obtaining sufficient funding. The Company is currently evaluating its options for the next major step in the process - BDTP will need to be paired with a registered Alternative Trading System ("ATS") prior to implementation. To that end, the Company is exploring partnerships with existing ATS's and other strategies to go live with BDTP in accordance with existing laws and regulations. As of the date of this filing, the initial demo of BDTP is complete and BlackStar intends to continue to seek further input from various regulatory agencies and others on the functionality of the BDTP over the next several months. The BDTP has been completely designed in terms of the following components: data model, reports, web-based user interface, blockchain interface, transaction logic, cloud interface, and functional demonstration app. The software is complete in demonstrating a proof-of-concept trading ability, while



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recording activity using an immutable blockchain ledger. Currently, the working model platform is hosted on Amazon's Quantum Ledger Database. In June of 2021, BlackStar and Artuova successfully completed a production ready and feature-complete user interface for the digital platform which is now in the final stages of quality assurance. Blackstar is actively pursuing relationships with various broker-dealer and clearing firms to complete the final stages of this multi-year engineering effort.

The Company's success will be dependent upon the Company's ability to analyze and manage the opportunities presented.

Contingent upon successfully raising funds, we intend to expend funds over the next four quarters as follows:





3rd Quarter 2021   ·     Ventures/BDTP ·     $250,000
                   ·     Operations    ·     $100,000
4th Quarter 2021   ·     Ventures/BDTP ·     $250,000
                   ·     Operations    ·     $100,000
1st Quarter 2022   ·     Ventures/BDTP ·     $250,000
                   ·     Operations    ·     $50,000
2nd Quarter 2022   ·     Ventures/BDTP ·     $250,000
                   ·     Operations    ·     $50,000

Our Budget for operations in the next year is as follows:





BDTP Development and Testing                               $   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 to date.

Based on our current cash reserves of approximately $554,657 as of July 31, 2021, we have the cash for an operational budget of less than six months. We intend to offer a private placement to investors in order to achieve at least $1,000,000 in funding in the next year. We intend to commence this offering in the winter of 2021. 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 additional 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, 2020, 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 $32,987 in December 2020, 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 the first and fourth quarters and $100,000 in the second and third quarters in 2021 in operations costs which includes legal, accounting, travel, general and administrative, audit, rent, telephones and miscellaneous. In early 2018, we completed a private placement of units for $165,000, and in November 2018 we raised $53,000 through a convertible promissory note which increased our working capital. In the year ended December 31, 2019, we received funding through various promissory notes and convertible promissory notes, totaling $280,000 with $236,150 being received in net cash proceeds. In the year ended December 31, 2020, we received funding through promissory notes totaling $25,000, and convertible promissory notes totaling $287,275 with $260,000 being received in net cash proceeds.





Results of Operations

For the Three Months Ended June 30, 2021 compared to same period in 2020

During the three months ended June 30, 2021 and 2020, we had no revenue. For the three months ended June 30, 2021, we recognized a net loss of $711,920 as compared to a net loss of $401,043 for the three months ended June 30, 2020. Our operating expenses included $98,000 in related party management consulting fees, $23,804 in legal and professional fees, and $139,526 in general and administrative fees, for a total of $261,330 for the three months ended June 30, 2021. Higher related party management consulting fees and an increase in costs for fund raising increased the total operating expenses in the three months ended June 30,



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2021 by $173,514 compared to the three months ended June 30, 2020. Our net loss from operations was $261,329 for the three months ended June 30, 2021 compared to net loss from operations of $87,815 for the same period ended June 30, 2020.

For the three months ended June 30, 2021, we had significantly higher other expenses, substantially all of which are non-cash, predominately due to amortization of discounts on debt issuance and conversion features of the convertible promissory notes that we have used to finance our continued operations. This resulted in net other expenses of $450,590 for the three months ended June 30, 2021 a compared to $313,228 for the same period in 2020. For the three months ended June 30, 2020 the Company recognized $26,273 for amortization of discount on convertible notes, as compared to $251,507 for the three months ended June 30, 2021. This increase was due to increased funding from convertible note issuances for the 2021 three month period as compared to the 2020 three month period.

Net loss per share for the 2021 and 2020 three-month periods was $0.01 in each of the periods.

For the Six Months Ended June 30, 2021 compared to same period in 2020

During the six months ended June 30, 2021 and 2020, we had no revenue. For the six months ended June 30, 2021, we recognized a net loss of $1,034,229 compared to a net loss of $505,152 for the six months ended June 30, 2020. Our operating expenses included $149,142 in related party management consulting fees, $46,304 in legal and professional fees, and $195,172 in general and administrative fees, for a total of $390,618 for the six months ended June 30, 2021. Higher related party management consulting fees and an increase in costs for fund raising increased the total operating expenses in the six months ended June 30, 2021 by $122,732 compared to the six months ended June 30, 2020. Our net loss from operations was $1,034,229 for the six months ended June 30, 2021 compared to a net loss from operations of $122,934 for the same period ended June 30, 2020.

For the six months ended June 30, 2021, we had significantly higher other expenses, substantially all of which are non-cash, predominately due to amortization of discounts on debt issuance and conversion features of the convertible promissory notes that we have used to finance our continued operations. This resulted in net other expenses of $643,611 for the six months ended June 30, 2021 as compared to $382,218 for the same period in 2020. For the six months ended June 30, 2020 the Company recognized $59,516 for amortization of discount on convertible notes, as compared to $350,089 for the six months ended June 30, 2021. This increase was due to increased funding from convertible note issuances for the 2021 period as compared to the 2020 period.

Net loss per share for the 2021 and 2020 six-month periods was $0.01 in each of the periods.

Management has evaluated the current business plan, ongoing operations and financial position of the Company as of June 30, 2021, and has determined that there is substantial doubt as to whether the Company will be able to continue to operate as a "going concern". The Company has an accumulated deficit of $7,000,422 as of June 30, 2021, compared to an accumulated deficit of $4,905,754 as of December 31, 2020, 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

As of June 30, 2021, we had total current assets of $519,681 comprised of $505,485 in cash and $14,196 in prepaid expenses, compared to $84,211 total current assets as of December 31, 2020. Our total assets as of June 30, 2021 were $585,681 compared to $94,211 as of December 31, 2020. Current liabilities as of June 30, 2021 were $234,625 compared to $129,062 as of December 31, 2020. Current liabilities as of June 30, 2021 consisted of accounts payable of $11,024, accrued liabilities of $26,542, advances payable to related parties of $18,780, convertible promissory notes of $148,279, net of discounts of $816,996, and notes payable of $30,000. As of June 30, 2021, we had $285,056 in working capital, compared to a negative working capital of of $44,851 as of December 31, 2020.

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.

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



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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 employees 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 six months ended June 30, 2021, the Company had no cash received from equity offerings or shareholder contributions, and we received $779,500 from convertible notes, net of offering costs and original issue discounts; During the six months ended June 30, 2021 and 2020, $142,856 and $87,225, respectively in principal and and interest on convertible notes was converted to common stock





Investing Activities

Net cash used in investing activities was $36,000 for software development for the six-month period ended June 30, 2021, as compared to $0 for the six months ended June 30, 2020.





Operating Activities

During the six months ended June 30, 2021, net cash used in operating activities was $251,002, compared to $97,686 used in operating activities for the same period in 2020. The increased amount of cash used in operating activities is attributable to increases in operating and other expenses, increasing the net loss for the six months ended June 30, 2021.





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 June 30, 2021 and December 31, 2020, we had accumulated deficit of $7,000,422 and $5,966,193, respectively and we will require additional working capital to fund operations through 2021 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 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, 2020, 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.





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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.

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