**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





FORM
      10-K





x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      Fiscal Year Ended December 31, 2007





o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      transition period from ____________ to ____________







Commission
      File Number: 814-00678







**BLACKHAWK
                CAPITAL GROUP BDC, INC.**(Exact
                Name of Registrant as specified in its charter)Delaware
            20-1031329(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                Number)





**14
      Wall Street, 11** **th** **Floor, New York, New York 10005**


(Address
      of principal executive offices) (Zip Code)




**(212)
      566-8300**


(Registrant's
      telephone number, including area code)







Securities
      registered pursuant to Section 12(b) of the Act: None





Securities
      registered pursuant to Section 12(g) of the Act: Common Stock, par value
      $0.00001 per share





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No
x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes oNo
x





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days: Yes x No
o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      definition of "accelerated filer and large accelerated filer" in Rule 12b-2
      of
      the Exchange Act. (Check one):





Large
      accelerated filer o **** Accelerated
      filer o


Non-accelerated
      filer (Do not check if a smaller reporting company) x


Smaller
      reporting company o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).


Yes
x   No
o





The
      number of shares outstanding of Blackhawk's common stock on March 28, 2008
      was
      31,867,484.









**TABLE
      OF CONTENTS**





Page**GENERAL
                NOTE****PART
              I**Item
                1.
            Business
            2Item
                1A.
            Risk
                Factors
            6Item
                1B.
            Unresolved
                Staff Comments
            19Item
                2.
            Properties
            19Item
                3.
            Legal
                Proceedings
            20Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            20**PART
              II**Item
                5.
            Market
                for Registrant's Common Equity, Related Stockholder Matters and Issuer
                Purchase of Equity Securities
            20Item
                6.
            Selected
                Financial Data
            22Item
                7.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operation
            24Item
                7A.
            Quantitative
                and Qualitative Disclosures about Market Risk
            27Item
                8.
            Financial
                Statements and Supplementary Data
            28Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            28Item
                9A.
            Controls
                and Procedures
            28Item
                9A(T).
            Controls
                and Procedures
            28Item
                9B.
            Other
                Information
            29**PART
              III**Item
                10.
            Directors,
                Executive Officers of the Registrant
            30Item
                11.
            Executive
                Compensation
            34Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            35Item
                13.
            Certain
                Relationships And Related Transactions
            35Item
                14.
            Principal
                Accounting Fees and Services
            37**PART
                IV**Item
                15.
            Exhibits
                and Financial Statement Schedules
            38










**PART
      I**





**Forward
      Looking Statements**





The
      matters discussed in this section and in certain other sections of this Form
      10-K contain forward-looking statements within the meaning of Section 21D of
      the
      Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
      Act of 1933, as amended, that involve risks and uncertainties. All statements
      other than statements of historical information provided herein may be deemed
      to
      be forward-looking statements. Without limiting the foregoing, the words "may",
      "will", "could", "should", "intends", "thinks", "believes", "anticipates",
      "estimates", "plans", "expects", or the negative of such terms and similar
      expressions are intended to identify assumptions and uncertainties which could
      cause actual results to differ materially from those expressed in them. Any
      forward-looking statements are qualified in their entirety by reference to
      the
      factors discussed throughout this report. The following cautionary statements
      identify important factors that could cause Blackhawk Capital Group BDC, Inc.
      ("Blackhawk," "we" or "Company") actual results to differ materially from those
      projected in the forward-looking statements made in this Report. Among the
      key
      factors that have a direct bearing on Blackhawk's results of operations
      include:





·
            General
                economic and business conditions; the existence or absence of adverse
                publicity; changes in, or failure to comply with, government regulations;
                changes in marketing and technology; changes in political, social
                and
                economic conditions;





·
            Success
                of operating initiatives; changes in business strategy or development
                plans; management of growth;





·
            Availability,
                terms and deployment of capital;





·
            Legal,
                administrative and accounting
                expenses;





·
            Dependence
                on senior management; business abilities and judgment of personnel;
                availability of qualified personnel; labor and employee benefit
                costs;





·
            Development
                risks; risks relating to the availability of financing,
                and





·
            Other
                factors referenced in this Report.





Because
      the risks factors referred to above could cause actual results or outcomes
      to
      differ materially from those expressed in any forward-looking statements made
      by
      Blackhawk, you should not place undue reliance on any such forward-looking
      statements. Other factors may be described from time to time in Blackhawk's
      other filings with the Securities and Exchange Commission, news releases and
      other communications. Further, any forward-looking statement speaks only as
      of
      the date on which it is made and Blackhawk undertakes no obligation to update
      any forward-looking statement or statements to reflect events or circumstances
      after the date on which such statement is made or to reflect the occurrence
      of
      unanticipated events. New factors emerge from time to time, and it is not
      possible for Blackhawk to predict which will arise. In addition, Blackhawk
      cannot assess the impact of each factor on Blackhawk's business or the extent
      to
      which any factor, or combination of factors, may cause actual results to differ
      materially from those contained in any forward-looking statements.










Subsequent
      written and oral forward-looking statements attributable to Blackhawk or persons
      acting on its behalf are expressly qualified in their entirety by the cautionary
      statements set forth above and contained elsewhere in this Annual Report on
      Form
      10-K.





Blackhawk
      has been and is currently subject to the informational requirements of the
      Securities Exchange Act of 1934, as amended. In accordance with those
      requirements, we file reports and other information with the Securities and
      Exchange Commission. Such reports and other information can be inspected and
      copied at the public reference facilities maintained by the SEC. Please call
      the
      SEC at 1-800-SEC-0330 for more information on the operation of its public
      reference rooms. The SEC also maintains a Web site that contains reports, proxy
      and information statements and other materials that are filed through the SEC's
      Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. This Web
      Site
      can be accessed at http://www.sec.gov. Our reports, registration statements,
      proxy and information statements and other information that we file
      electronically with the SEC are available on this site.





**Item
      1. Business**





On
      September 20, 2004, Blackhawk filed a Form N-54A Notification with the
      Securities and Exchange Commission, electing to become a Business Development
      Company pursuant to Section 54 of the Investment Company Act.





Blackhawk
      was incorporated on April 22, 2004 under the laws of the State of Delaware
      to
      engage in any lawful corporate undertaking. Blackhawk's operations to date
      have
      been limited to issuing shares to its original shareholders, organizational
      and
      administrative activities, and conducting three (3) offerings under Regulation
      E
      of the Securities Act.





Blackhawk
      will attempt to locate and negotiate with eligible portfolio companies for
      Blackhawk to invest in, lend funds to, acquire an interest in and/or possibly
      manage. Blackhawk intends to offer managerial assistance to eligible portfolio
      companies in which it invests.





In
      addition to the broad investment strategy to be pursued by Blackhawk discussed
      herein, Blackhawk also intends to develop a strategy to invest in special
      purpose vehicles developing products and seeking exemptive relief to issue
      securities registered under the Investment Company Act and Securities Act
      identified with the Exchange Traded Funds ("ETFs") industry. Blackhawk may
      only
      invest in these entities if they are not investment companies under the
      Investment Company Act or investment advisers registered under the Investment
      Advisers Act. The investment strategy will be in compliance with, and consistent
      with, the BDC provisions of the Investment Company Act. Additionally, Blackhawk
      would seek to invest in ETF distribution companies focusing on the expanding
      ETF
      broker models that are not associated with the traditional mutual fund industry.
      Finally, Blackhawk plans to invest in companies that invest in specialized
      ETF
      focused companies seeking to establish alliance or acquisitions in traditional
      unit investment trusts, closed-end funds and traditional mutual fund companies
      that use commissions, loads and annual revenue sharing to achieve their current
      distribution goals. Blackhawk does not intend to invest directly in ETFs.




2





Blackhawk
      would seek to invest in companies seeking broad and generic ETF exemptive relief
      for specific asset classes such as equity, debt, commodities, currency and
      other
      asset classes. The Blackhawk investments would include index and active based
      investment strategies.





All
      of
      the above investment categories are subject to the investment restrictions
      in
      the BDC provisions of the Investment Company Act applicable to Blackhawk,
      including without limitation that Blackhawk not invest in an "investment
      company" registered under the Investment Company Act.





As
      a
      business development company or BDC, Blackhawk is able to raise money to acquire
      interests in small private businesses, as well as larger private companies,
      and
      distressed public companies as defined under the BDC provisions of the
      Investment Company Act. We intend to seek equity positions and on going
      relationships with companies offering sustainable and profitable growth. We
      do
      not intend to limit our acquisitions to a single line of business or
      industry.





All
      acquisitions will be designed to enhance shareholder value through capital
      appreciation and dividend payments.





Consistent
      with Section 58 of the Investment Company Act, we may not, unless authorized
      by
      the vote of a majority of our outstanding common stock, change the nature of
      our
      business so as to cease to be, or to withdraw our election as, a business
      development company. In addition, as a BDC, we will not make any significant
      material changes in our investment guidelines and policies without obtaining
      the
      approval of our Board of Directors.





Blackhawk
      may invest in a variety of securities, including bonds, convertible debentures,
      preferred stock and common stock. We have not set a policy as to what proportion
      of our assets may be invested in any type of security, nor have we set a policy
      regarding a potential concentration in any particular industry or group of
      industries.




3





Blackhawk
      will seek to render significant managerial assistance to and/or control of
      eligible companies. While we do not currently intend to invest as part of a
      group, we have not set any policy to that effect, and may determine to so invest
      in the future without seeking shareholder approval. We have not yet set a policy
      with respect to any assets that are not required to be invested in eligible
      portfolio companies or other companies qualifying under Section 55 of the
      Investment Company Act.





Consistent
      with its objective of long-term capital appreciation, Blackhawk will consult
      with its investees with respect to obtaining capital and offer managerial
      assistance to selected businesses that, in the opinion of our management, have
      a
      significant potential for growth.





In
      addition to acquiring investment positions in new and developing companies,
      Blackhawk may also occasionally invest in more mature privately and
      publicly-held companies, some of which may be experiencing financial
      difficulties, but which, Blackhawk believes, have potential for further
      development or revitalization, and which, in the long-term, could experience
      growth and achieve profitability.





On
      behalf
      of Blackhawk, Network 1 Financial Securities, Inc. ("Network 1") submitted
      an
      application on Form 211 on July 5, 2006 to the National Association of
      Securities Dealers, Inc. ("NASD") to initiate quotations in the OTC Bulletin
      Board Service for Blackhawk's common stock, par value $.00001 per share ("Common
      Stock"). On August 22, 2006, the NASD issued a letter to Network 1 stating
      that
      unpriced quotations could begin on the OTC Bulletin Board on Blackhawk's Common
      Stock and that if Network 1 decides to enter a priced quotation (bid or offer)
      in the Common Stock in any quotation medium, Network 1 must supplement its
      filing with the Form 211. This supplemental filing must include the basis and
      factors for Network 1's priced quotation and be received by the NASD three
      days
      before the priced entry appears in a quotations medium. The symbol for the
      Common Stock is "BHCG."




Pursuant
      to Blackhawk's second Regulation E Offering, Blackhawk sold as of June 4, 2007
      an aggregate of 502,891 shares of common stock, $.00001 par value per share
      ("Common Stock"), at a purchase price of $1.00 per share, to four (4) accredited
      investors for an aggregate amount of $502,891. The sale consisted of the
      following: (1) 370,000 shares sold to three (3) accredited investors for the
      purchase price of $1.00 per share, or an aggregate of $370,000; and (ii) the
      issuance of 132,891 to Concorde, an affiliate and the largest stockholder of
      Blackhawk, in exchange for (x) $107,391 in a convertible note (consisting of
      $100,000 in principal and $7,391 in accrued and unpaid interest) owed by
      Blackhawk to Concorde and issued on August 1, 2006 and (y) $25,500 in a
      convertible note owed by Blackhawk to Concorde and issued on May 29, 2007.
      The
      conversion price for both of these notes was $1.00 per share of Common Stock.
      In
      June and July 2007, Blackhawk sold an additional 150,000 and 5,000,
      respectively, shares of its Common Stock for an aggregate of $155,000 in cash
      in
      its second Regulation E offering. The second offering was terminated on November
      15, 2007. The net cash proceeds from the second Regulation E offering was
      $525,001.




4




On
      June
      21, 2006, Blackhawk entered into an Exchange Agreement ("Exchange Agreement")
      with The Concorde Group, Inc. ("Concorde"), the largest stockholder and
      affiliate of Blackhawk, pursuant to which a non-interest bearing promissory
      note
      (the "Note") issued by Blackhawk on May 3, 2006 to Concorde in the principal
      amount of $68,847 was exchanged for 6,884,700 shares ("Shares") of the common
      stock, par value $.00001 per share ("Common Stock") of Blackhawk. The Shares
      are
      "restricted securities" as defined in Rule 144 of the Securities Act. Pursuant
      to the Exchange Agreement, Concorde acquired 6,884,700 shares ("Shares") of
      the
      Common Stock of Blackhawk in exchange for the Note. The stock has issued in
      the
      exchange at $.01 per share. This exchange took place pursuant to Section 3(a)(9)
      of the Securities Act as an exchange by an issuer with an existing security
      holder where no commission or other remuneration was paid or given to Concorde
      or any other party for soliciting such exchange. This transaction was approved
      by all of the directors of Blackhawk pursuant to action by unanimous written
      consent as fair and in the best interests of Blackhawk and its stockholders.




Blackhawk
      became aware that certain of its state blue-sky filings were not correctly
      made
      in connection with its first Regulation E offering made in 2004 and 2005. To
      rectify this, Blackhawk made a rescission offer to its stockholders with respect
      to their shares of Common Stock and filed such offer with each applicable State.
      Before making the rescission offer, legal counsel for Blackhawk notified each
      applicable state's securities commission of Blackhawk's intention and submitted
      Blackhawk's proposed rescission offer letter for comments and approval. To
      date,
      all stockholders have either rejected the rescission offer or the thirty (30)
      day period which they were given to either accept or reject the rescission
      offer
      has expired. Blackhawk also has made post-rescission offer filings which were
      requested by each applicable state.




Blackhawk
      has engaged Barak Asset Management, LLC, a New York limited liability company
      ("Barak"), and an investment adviser registered under the Investment Advisers
      Act of 1940, as amended, to serve as an investment adviser to Blackhawk and
      manage its portfolio of investments at such time as when the Company has
      portfolio investments. Barak was formed by Sharon Highland in 2006. From 2002
      to
      2006, Ms. Highland was Director of Product Development and Management in the
      Private Client Group for managed accounts, open and closed-end funds at
      BlackRock. From 1997 to 2002, she was Senior Vice President and Head of Wrap
      Fee
      Investments at PIMCO Allianz. Barak’s engagement is pursuant to an investment
      advisory management agreement dated October 31, 2006, with a one-year term
      (extendable for one year periods) subject to Blackhawk's right to terminate
      upon
      sixty (60) days notice, and has fees ranging from 0.50% to 1.80% of assets
      managed. The term of this agreement was extended to October 31, 2008. Barak
      will
      manage assets of Blackhawk on a non-exclusive basis consistent with Blackhawk's
      business development company (“BDC”) investment guidelines and policies and
      consistent with the BDC provisions under the Investment Company Act of 1940.
      As
      of the date of this Form 10-K, Barak has been paid fees of $3,117 by
      Blackhawk.





Blackhawk
      has entered into an agreement dated September 12, 2006 with Robert S. Tull,
      Jr.
      for a three-year term (the "Agreement"). Mr. Tull is Managing Director of Macro
      Securities. Prior to this, from 2000 to 2005, he was Vice President of New
      Product Development at the American Stock Exchange. Before this, he was Managing
      Director and Chief Operating Officer at Deutsche Bank USA. Prior to joining
      Deutsche Bank, Mr. Tull spent 14 years at Morgan Stanley. Under the Agreement,
      Mr. Tull will consult with the Blackhawk Board of Directors on investments
      and
      have the following duties: consulting Blackhawk's Board of Directors on
      investment decisions and strategies, consulting on investment diversification
      in
      the strategies and consulting on investment opportunities. Pursuant to the
      Agreement, the Blackhawk Board of Directors will determine Mr. Tull's
      compensation when it closes its third Regulation E offering and has sufficient
      proceeds to compensate Mr. Tull. Mr. Tull is not a registered investment
      adviser. As of the date of this Form 10-K, the Company has not incurred any
      liability to Mr. Tull.




5





**Item
      1A. Risk Factors**





***No
      Fixed Investment Policy; No Investments to Date***





We
      have
      no fixed policy as to the business or industry group in which we may invest
      or
      as to the amount or type of securities or assets that we may acquire. To date,
      we have not made any investments in a portfolio company. Blackhawk has invested
      the net proceeds from its second and third Regulation E Offerings received
      to
      date in cash equivalents and in investments with maturity dates of less than
      one
      year. We seek to assist our investee companies and their management teams in
      devising realistic business strategies and obtaining necessary financing.





***Management's
      Lack of BDC Experience***





Management
      of the Company, including Craig A. Zabala, Chairman of the Board, President
      and
      Chief Executive Officer, and acting Chief Compliance Officer and Chief Financial
      Officer of the Company, have no experience in BDC investing and no BDC
      operations experience. There is no guarantee that management of the Company
      will
      be able to meet the regulatory requirements under the Investment Company Act
      applicable to BDCs on behalf of the Company.





***A
      Failure on Our Part to Maintain Our Status as a Business Development Company
      ("BDC") Would Significantly Reduce Our Operating
      Flexibility***





If
      we do
      not continue to qualify as a BDC, we might be regulated as a non-BDC closed-end
      investment company under the Investment Company Act, which would significantly
      decrease our operating flexibility.





***Our
      Ability to Grow Will Depend on Our Ability to Raise
      Capital***





Blackhawk
      has raised in its first two Regulation E offerings only $537,930, net of
      expenses of $91,907, in equity capital and has borrowed $255,779 from Concorde,
      the largest stockholder of Blackhawk ("Concorde") of which $255,779 along with
      $7,391 of accrued interest was converted into 13,160,791 shares of common stock
      by Concorde. On May 29, 2007, Blackhawk borrowed $25,500 from Concorde. This
      amount was converted into shares of Common Stock in Blackhawk's second
      Regulation E Offering at the exchange rate of $1.00 per share (25,500 shares).
      We will need to periodically access the equity markets to raise cash to fund
      new
      investments. An inability to successfully access the equity markets could limit
      our ability to grow our business and fully execute our business strategy. We
      cannot assure you that we will be able to raise adequate capital in the
      future.




6





***Blackhawk
      Not Having Sufficient Funds For Expenses of Regulatory*** ***Compliance
      Under Investment Company Act of 1940***





If
      Blackhawk does not raise sufficient net proceeds in its common stock offerings
      or operations, or is unable to borrow sufficient funds from its controlling
      shareholder Concorde, it may not have sufficient funds for paying for the
      expenses of regulatory compliance under the Investment Company Act of 1940.





***Reliance
      on Strong Management Teams of Investee Companies***





Blackhawk
      believes that it will be most likely to succeed in its investment strategies
      if
      its prospective investee companies have strong management teams. Generally,
      Blackhawk intends to focus as much or more on finding and supporting business
      executives who have the ability, entrepreneurial motivation and experience
      required to build independent companies with a significant potential for growth,
      as it will on identifying, selecting and financing investment opportunities
      based on promising ideas, products or marketing strategies. Consistent with
      this
      belief, Blackhawk believes it will be able to provide investee companies with
      managerial assistance. For example, we intend to encourage our investee
      companies to afford their management teams opportunities for meaningful equity
      participation and assist them in planning means to accomplish this result.





***Start-up
      Operations; No Cash Dividend Payments to Date; Possibility of Substantial
      Losses***





Blackhawk
      has never paid cash dividends nor does it have any present intent to do so.





Business
      development is by nature a high-risk activity that often results in substantial
      losses. The companies in which Blackhawk intends to invest often lack effective
      management, face operating problems and have incurred substantial losses.
      Potential investees include established businesses which may be experiencing
      severe financial or operating difficulties or may, in the opinion of their
      management, be managed ineffectively and yet have the potential for substantial
      growth or for reorganization into separate independent companies.




7





Blackhawk
      will attempt to reduce the level of its investment risks through one or more
      of
      the following factors:





·
            carefully
                investigating potential investees;





·
            financing
                only what it believes to be practical business opportunities, as
                contrasted to research projects;





·
            selecting
                effective, entrepreneurial management for its
                investees;





·
            providing
                managerial assistance and support to investees in areas, where the
                need is
                apparent;





·
            obtaining,
                alone or with others, actual or working control of its
                investees;





·
            supporting
                the investees in obtaining necessary financing, and, where feasible,
                arranging major contracts, joint ventures or mergers and acquisitions;
                and





·
            where
                possible, maintaining sufficient capital resources to make follow-on
                investments where necessary, appropriate and
                feasible.





***The
      proposed operations of Blackhawk are speculative***





The
      success of the proposed business plan of Blackhawk will depend to a great extent
      on the operations, financial condition and management of the identified target
      companies. While investments in entities having established operating histories
      are preferred, there can be no assurance that Blackhawk will be successful
      in
      locating candidates meeting such criteria. The decision to invest in a company
      will likely be made without detailed feasibility studies, independent analysis,
      market surveys or similar information which, if Blackhawk had more funds
      available to it, would be desirable. In the event Blackhawk completes one or
      more stock acquisitions, the success of its operations will be dependent upon
      management of those target companies and numerous other factors beyond the
      control of Blackhawk. There is no assurance that Blackhawk can identify a target
      company to invest in, or that such investments will be successful.





***There
      is no agreement for any stock acquisitions and no minimum requirements for
      any
      stock acquisitions***





As
      of the
      date of this Form 10-K, Blackhawk has no current arrangement, agreement or
      understanding with respect to engaging in an investment in a specific entity.
      There can be no assurance that Blackhawk will be successful in identifying
      and
      evaluating suitable business opportunities or in concluding an investment.
      No
      particular industry or specific business within an industry has been selected
      for a target company. Blackhawk has not established a specific length of
      operating history or a specified level of earnings, assets, net worth or other
      criteria, which it will require a target company to have achieved, or without
      which Blackhawk would not consider an investment. Accordingly, Blackhawk may
      invest in a company which has no significant operating history, losses, limited
      or no potential for immediate earnings, limited assets, negative net worth
      or
      other negative characteristics. There is no assurance that Blackhawk will be
      able to negotiate an investment on terms favorable to Blackhawk.




8





***Reporting
      requirements may delay or preclude investments***





Pursuant
      to the requirements of Section 13 of the Exchange Act, Blackhawk is required
      to
      provide certain information about significant acquisitions including audited
      financial statements of the acquired company. These audited financial statements
      normally must be furnished within 75 days following the effective date of a
      stock acquisition. Obtaining audited financial statements are the economic
      responsibility of the target company. The additional time and costs that may
      be
      incurred by some potential target companies to prepare such financial statements
      may significantly delay or essentially preclude consummation of an otherwise
      desirable investment by Blackhawk. Acquisition prospects that do not have or
      are
      unable to obtain the required audited statements may not be appropriate for
      investment so long as the reporting requirements of the Exchange Act are
      applicable. Notwithstanding a target company's agreement to obtain audited
      financial statements within the required time frame, such audited financial
      statements may not be available to Blackhawk at the time of effecting an
      investment in such target company. In cases where audited financial statements
      are unavailable, Blackhawk will have to rely upon information that has not
      been
      verified by outside auditors in making its decision to engage in a transaction
      with the business entity. This risk increases the prospect that an investment
      with such a target company might prove to be an unfavorable one for
      Blackhawk.





***We
      May Change Our Investment Policies Without Further Shareholder
      Approval***





Although
      we are limited by the Investment Company Act with respect to the percentage
      of
      our assets that must be invested in qualified investee companies, we are not
      limited with respect to the minimum standard that any investee company must
      meet, nor the industries in which those investee companies must operate. We
      may
      make investments without shareholder approval and such investments may deviate
      significantly from our historic operations. Any change in our investment policy
      or selection of investments could adversely affect our stock price, liquidity,
      and the ability of our shareholders to sell their stock. Any investment made
      by
      Blackhawk must be consistent with the BDC provisions of the Investment Company
      Act.





***Our
      Investments May Not Generate Sufficient Income to Cover Our
      Operations***





We
      intend
      to make investments into qualified companies that will provide the greatest
      overall return on our investment. However, certain of those investments may
      fail, in which case we will not receive any return on our investment. In
      addition, our investments may not generate income, either in the immediate
      future, or at all. As a result, we may have to sell additional stock, or borrow
      money, to cover our operating expenses. In the past, Blackhawk has borrowed
      money from its largest stockholder, Concorde, to fund its operating expenses
      and
      Concorde has agreed to fund operating expenses through December 31, 2008.
      However, there can be no assurance that Concorde will continue to lend money
      to
      Blackhawk after such date. The effect of such actions could cause our stock
      price to decline or, if we are not successful in raising additional capital,
      we
      could cease to continue as a going concern.




9





***Regulatory
      Oversight; Compliance Requirements***





As
      a
      business development company, Blackhawk is subject to the provisions of Sections
      55 through 65 of the Investment Company Act, and certain additional provisions
      of that Act made applicable to business development companies by Section 59
      of
      that Act. Under these regulations, Blackhawk's investment policies are defined
      and subject to certain limitations. Furthermore, under Section 58 of that Act,
      Blackhawk may not withdraw its election to be so regulated without the consent
      of the holders of a majority of its issued and outstanding voting
      securities.





Blackhawk
      has no fixed policy as to any particular business or industry group in which
      it
      may invest or as to the amount or type of securities or assets that it may
      acquire. Blackhawk may in the future invest in assets that are not qualifying
      assets as defined by Section 55 of the Investment Company Act; however, no
      such
      additional assets have been identified as of the date of this Form 10-K, and
      Blackhawk does not intend to fall below the 70% requirement as set forth in
      Section 55 of that Act.





Blackhawk
      seeks to achieve its objectives in accordance with the following general
      policies:





·
            Blackhawk
                intends to acquire securities through negotiated private placement
                transactions directly from the investee company, its affiliates,
                or third
                parties, or through open market
                transactions.





·
            Blackhawk
                will attempt to acquire, if possible and consistent with Blackhawk's
                capital resources, a large or controlling interest in its investees
                through purchases of equity securities, including warrants, options,
                and
                other rights to acquire such securities combined, if appropriate,
                with
                debt securities, including demand notes, term loans and guarantees,
                or
                debt instruments or preferred stock, convertible into, or with warrants
                to
                purchase additional equity
                securities.




·
            Blackhawk
                may make additional or "follow-on" investments in its investees,
                when
                appropriate to sustain the investees or to enhance or protect Blackhawk’s
                existing investment.





·
            Blackhawk
                will determine the length of time it will retain its investment by
                evaluating the facts and circumstances of each investee and Blackhawk’s
                relationship with such investee. Blackhawk may retain its investments
                for
                a relatively long period, sometimes as long as five to ten years,
                with the
                result that its rate of portfolio turnover may be low. Investments
                may be
                retained until, in the sole opinion of Blackhawk, the investee company
                has
                a demonstrated record of successful operations and there is a meaningful
                public market for its securities which reflects the investment value
                Blackhawk sought (or such a market can be readily established) or
                until
                Blackhawk, in its sole discretion, decides that its investment is
                not
                likely to result in future long-term capital
                appreciation.




10




Subject
      to compliance with the BDC provisions of the Investment Company Act, Blackhawk
      will invest in SPVs and other entities and vehicles seeking special strategies
      in the ETF marketplace.





***Market
      Illiquidity***





At
      the
      time of sale of Blackhawk’s portfolio securities, there may not be a market of
      sufficient stability to allow Blackhawk to sell its entire position, potentially
      resulting in Blackhawk not being able to sell such securities at prevailing
      market prices or at the prices at which Blackhawk may have valued its position
      in the investee's securities.





***Market
      Price for Common Stock***





Shares
      of
      Common Stock trade very infrequently on the OTC Bulletin Board under the symbol
      BHCG.OB. During the period from January 2007 to March 25, 2008, shares have
      traded between $.095 and $1.00, with little trading volume.


The
      shares do not trade frequently and there can be wide gaps in the bid and ask
      prices for the shares of Common Stock. Investors should be aware of these market
      conditions.





***Difficulty
      in Valuing Investments and Portfolio Performance***





***Valuation-Policy
      Guidelines***





Blackhawk's
      Board of Directors is responsible for the valuation of Blackhawk’s assets in
      accordance with its approved guidelines. Blackhawk's Board of Directors is
      responsible for recommending overall valuation guidelines and the valuation
      of
      the specific investments.





There
      is
      a range of values which are reasonable for an investment at any particular
      time.
      Fair value is generally defined as the price at which the investment in question
      could change hands, the “exit price”, assuming that both parties to the
      transaction are under no unusual pressure to buy or sell and both have
      reasonable knowledge of all the relevant facts. Statement of Financial
      Accounting Standards No. 157, “Fair Value Measurements,” further classifies that
      the exchange price is the price in an orderly transaction between market
      participants to sell the asset or transfer the liability in the market in which
      the reporting entity would transact for the asset or liability, that is, the
      principal or most advantageous market for the asset or liability. The
      transaction to sell the asset or transfer the liability is a hypothetical
      transaction at the measurement date, considered from the perspective of a market
      participant that holds the asset or owes the liability. Therefore, the
      definition focuses on the price that would be received to sell the asset or
      paid
      to transfer the liability (an exit price), not the price that would be paid
      to
      acquire the asset or received to assume the liability (an entry price). To
      increase objectivity in valuing the securities, Blackhawk intends to use
      external measures of value such as public markets or significant third-party
      transactions whenever possible. Neither a long-term workout value nor an
      immediate liquidation value will be used, and no increment of value will be
      included for changes which may take place in the future. Certain members of
      Blackhawk's Board of Directors may hold positions in some of Blackhawk's
      investee companies and certain members of the Board of Directors may hold
      officer or director positions with some of Blackhawk's investee
      companies.




11





Valuations
      assume that, in the ordinary course of its business, Blackhawk will eventually
      sell its position in the private or public market or may distribute its larger
      positions to its stockholders. Accordingly, no premiums will be placed on
      investments to reflect the ability of Blackhawk to sell block positions or
      control of companies, either by itself or in conjunction with other
      investors.





In
      fact,
      in certain circumstances, Blackhawk may have to sell the securities it owns
      of
      its investees in the open market at discounts to market prices at the time
      of
      sale, due to the large position it may hold relative to the average daily
      trading volume.





Blackhawk
      intends to use four basic methods of valuation for its investments and there
      are
      variations within each of these methods. Blackhawk's Board of Directors, in
      its
      sole discretion, has determined that Blackhawk's four basic valuation methods
      constitute fair value. As an investee evolves, its progress may sometime require
      changes in Blackhawk's method of valuing the investee's securities. Blackhawk's
      investment will be separated into its component parts (such as debt, preferred
      stock, common stock or warrants), and each component will be valued separately
      to arrive at a total value. Blackhawk believes that a mixture of valuation
      methods is often essential to represent a fair value of Blackhawk's investment
      position in any particular investee. For example, one method may be appropriate
      for the equity securities of a company while another method may be appropriate
      for the senior securities of the same company. In various instances of
      valuation, the board of directors of Blackhawk may modify the valuation methods
      mentioned below based on the Board of Directors best judgment in any particular
      situation.





The
      cost
      method values an investment based on its original cost to Blackhawk, adjusted
      for the amortization of original issue discount, accrued interest and certain
      capitalized expenditures of Blackhawk. While the cost method is the simplest
      method of valuation, it is often the most unreliable because it is applied
      in
      the early stages of an investee's development and is often not directly tied
      to
      objective measurements. All investments are carried at cost until significant
      positive or adverse events subsequent to the date of the original investment
      warrant a change to another method. Some examples of such events are: (1) a
      major recapitalization; (2) a major refinancing; (3) a significant third-party
      transaction; (4) the development of a meaningful public market for the
      investee's common stock; and (5) material positive or adverse changes in the
      investee's business.




12





The
      appraisal method is used to value an investment position based upon a careful
      analysis of the best available outside information when there is no established
      public or private market in the investee company's securities and it is no
      longer appropriate to use the cost method. Comparisons are made using factors
      (such as earnings, sales or net worth) that influence the market value of
      similar public companies or that are used in the pricing of private transactions
      of comparable companies. Major discounts, usually 50%, are taken when private
      companies are appraised by comparing private companies to similar public
      companies. Liquidation value may be used when an investee company is performing
      substantially below plan and its continuation as an operating entity is in
      doubt. Under the appraisal method, the differences among companies in terms
      of
      the source and type of revenues, quality of earnings, and capital structure
      are
      carefully considered.





An
      appraisal method value can be defined as the price at which the investment
      in
      question could change hands, assuming that both parties to the transaction
      are
      under no unusual pressure to buy or to sell, and both have reasonable knowledge
      of all the relevant facts. In the case of start-up companies where the entire
      assets may consist of only one or more of the following: (1) a marketing plan,
      (2) management or (3) a pilot operation, an evaluation may be established by
      capitalizing the amount of the investment that could reasonably be obtained
      for
      a predetermined percentage of the ownership in the particular company.
      Valuations under the appraisal method are considered to be more subjective
      than
      the cost, public market or private market methods.





The
      private market method uses third-party transactions (actual or proposed) in
      the
      investee's securities as the basis for valuation. This method is considered
      to
      be an objective measure of value since it depends upon the judgment of a
      sophisticated, independent investor. Actual firm offers are used as well as
      historical transactions, provided that any offer used was seriously considered
      and well documented.





The
      public market method is the preferred method of valuation when there is an
      established public market for the investee's securities, since that market
      provides the most objective basis for valuation. In determining whether the
      public market is sufficiently established for valuation purposes, we intend
      to
      examine the trading volumes, the number of stockholders and the number of market
      makers. Under the public market method, as well as under the other valuation
      methods, we may discount investment positions that are subject to significant
      legal, contractual or practical restrictions. When an investee's securities
      are
      valued under the public market method, common stock equivalents such as
      presently exercisable warrants or options are valued based on the difference
      between the exercise price and the market value, subject to management and
      board
      discretion, of the underlying common stock.




13





***Regulation
      - Business Development Companies***





The
      following is a summary description of the Investment Company Act, as applied
      to
      business development companies. This description is qualified in its entirety
      by
      reference to the full text of the Investment Company Act and the rules
      promulgated thereunder by the United States Securities and Exchange Commission
      (the "SEC").





The
      Small
      Business Investment Incentive Act of 1980 became law on October 21, 1980. This
      law modified the provisions of the Investment Company Act, that are applicable
      to a company, such as Blackhawk, which elects to be treated as a "business
      development company." Blackhawk elected to be treated as a business development
      company on September 20, 2004. Blackhawk may not withdraw its election without
      first obtaining the approval of holders of a majority of its outstanding voting
      securities.





A
      business development company must be operated for the purpose of investing
      in
      the securities of certain present and former "eligible portfolio companies"
      and
      certain bankrupt or insolvent companies and must make available significant
      managerial assistance to its investee companies. An eligible portfolio company
      generally is a United States company that is not an investment company (except
      for wholly-owned SBIC's licensed by the U.S. Small Business Administration)
      and
      (1) does not have a class of securities included in the Federal Reserve Board's
      over-the-counter margin list, (2) is actively controlled by the business
      development company and has an affiliate of the business development company
      on
      its board of directors, or (3) meets such other criteria as may be established
      by the SEC. Control, under the Investment Company Act, as amended, is presumed
      to exist where the business development company, and its affiliates or related
      parties, own 25% or more of the issued and outstanding voting securities of
      the
      investee. The SEC recently adopted new rules expanding certain definitions
      of
      eligible portfolio companies. The SEC also reproposed for comment a rule that
      would expand the definition of eligible portfolio company to include certain
      publicly traded companies.





The
      Investment Company Act prohibits or restricts a registrant from investing in
      certain types of companies, such as brokerage firms, insurance companies,
      investment banking firms and investment companies. Moreover, the Investment
      Company Act limits the type of assets that Blackhawk may acquire to "qualifying
      assets" and certain other assets necessary for its operations (such as office
      furniture, equipment and facilities) if, at the time of the acquisition, less
      than 70% of the value of Blackhawk's assets consists of qualifying assets.
      The
      effect of this regulation is to require that at least 70% of a business
      development company's assets be maintained in qualifying assets. Qualifying
      assets include: (1) securities of companies that were eligible portfolio
      companies at the time Blackhawk acquired their securities; (2) securities of
      bankrupt or insolvent companies that are not otherwise eligible portfolio
      companies; (3) securities acquired as follow-on investments in companies that
      were eligible at the time of Blackhawk's initial acquisition of their securities
      but are no longer eligible, provided that Blackhawk has maintained a substantial
      portion of its initial investment in those companies; (4) securities received
      in
      exchange for or distributed on or with respect to any of the foregoing; and
      (5)
      cash items, government securities and high-quality, short-term debt. The
      Investment Company Act also places restrictions on the nature of the
      transactions in which, and the persons from whom, securities can be purchased
      in
      order for the securities to be considered to be qualifying assets. As of the
      date of this Form 10-K, Blackhawk has not yet made any portfolio
      investments.




14





Blackhawk
      is permitted by the Investment Company Act, under specified conditions, to
      issue
      multiple classes of senior debt and preferred stock, if its asset coverage,
      as
      defined in the Investment Company Act, is at least 200% after the issuance
      of
      the debt or the preferred stock. Blackhawk currently has no policy regarding
      issuing of multiple classes of senior debt.





Blackhawk
      may issue, in limited amounts, warrants, options and rights to purchase its
      securities to its directors, officers and employees (and provide loans to such
      persons for the exercise thereof) in connection with an executive compensation
      plan, if certain conditions are met. These conditions include the authorization
      of such issuance by a majority of Blackhawk's voting securities (as defined
      below) and the approval by a majority of the independent members of the board
      of
      directors and by a majority of the directors who have no financial interest
      in
      the transaction. The issuance of options, warrants or rights to directors who
      are not also officers requires the prior approval of the SEC.





As
      defined in the Investment Company Act, the term "majority of a registrant 's
      issued and outstanding voting securities" means the vote of (a) 67% or more
      of a
      registrant 's issued and outstanding common stock present at a meeting, if
      the
      holders of more than 50% of the issued and outstanding common stock are present
      or represented by proxy, or (b) more than 50% of a registrant's outstanding
      common stock, whichever is less.





Blackhawk
      may sell its securities at a price that is below the prevailing net asset value
      per share only upon the approval of the policy by the holders of a majority
      of
      its issued and outstanding voting securities, including a majority of the voting
      securities held by non-affiliated persons, at its last annual meeting or within
      one year prior to the transaction. In addition, Blackhawk may repurchase its
      common stock, subject to the restrictions of the Investment Company
      Act.





In
      accordance with the Investment Company Act, a majority of the members of
      Blackhawk's Board of Directors must not be "interested persons" of Blackhawk,
      as
      that term is defined in the Investment Company Act. Generally, "interested
      persons" of Blackhawk include all affiliated persons of Blackhawk and members
      of
      their immediate families, any "interested person" of an underwriter or of an
      "investment advisor" to Blackhawk, any person who has acted as legal counsel
      to
      Blackhawk within the last two fiscal years, or any broker or dealer, or
      affiliate of a broker or dealer.





Most
      of
      the transactions involving Blackhawk and its affiliates (as well as affiliates
      of those affiliates) which were prohibited without the prior approval of the
      SEC
      under the Investment Company Act, prior to its amendment by the Small Business
      Investment Incentive Act now require the prior approval of a majority of
      Blackhawk's independent directors and a majority of the directors having no
      financial interest in the transactions. The effect of this amendment is that
      Blackhawk may engage in certain affiliated transactions that would be
      prohibited, absent prior SEC approval in the case of investment companies,
      which
      are not business development companies. However, transactions involving certain
      closely affiliated persons of Blackhawk, including its directors, officers
      and
      employees, still require the prior approval of the SEC. In general, "affiliated
      persons" of a person include: (a) any person who owns, controls or holds with
      power to vote, more than five percent of Blackhawk's issued and outstanding
      common stock, (b) any director, executive officer or general partner of that
      person, (c) any person who directly or indirectly controls, is controlled by,
      or
      is under common control with that person, and (d) any person five percent or
      more of whose outstanding voting securities are directly or indirectly owned,
      controlled or held with power to vote, by such other person. Such persons
      generally must obtain the prior approval of a majority of Blackhawk's
      independent directors and, in some situations, the prior approval of the SEC,
      before engaging in certain transactions involving Blackhawk or any company
      controlled by Blackhawk. In accordance with the Investment Company Act, a
      majority of the members of Blackhawk's board of directors are not interested
      persons as defined in the Act. The Investment Company Act generally does not
      restrict transactions between Blackhawk and its investee companies.




15





Finally,
      notwithstanding restrictions imposed under federal securities laws, it is
      anticipated that Blackhawk will acquire securities of investee companies
      pursuant to stock purchase agreements or other agreements that may further
      limit
      Blackhawk's ability to distribute, sell or transfer such securities. And as a
      practical matter, even if such transfers are legally or contractually
      permissible, there may be no market, or a very limited market, for such
      securities. Economic conditions may also make the price and terms of a sale
      or
      transfer transactions unattractive.





***Other
      Securities Law Considerations***





In
      addition to the above-described provisions of the Investment Company Act, there
      are a number of other provisions of the federal securities laws that affect
      Blackhawk's operations. For example, restrictions imposed by the federal
      securities laws, in addition to possible contractual provisions, may adversely
      affect the ability of Blackhawk to sell or otherwise to distribute or dispose
      of
      its portfolio securities.





Most
      if
      not all securities which Blackhawk acquires as venture capital investments
      will
      be "restricted securities" within the meaning of the Securities Act and will
      not
      be permitted to be resold without compliance with the Securities Act. Thus,
      Blackhawk will not be permitted to resell portfolio securities unless a
      registration statement has been declared effective by the SEC with respect
      to
      such securities or Blackhawk is able to rely on an available exemption from
      such
      registration requirements. In most cases Blackhawk will endeavor to obtain
      from
      its investee companies "registration rights," pursuant to which Blackhawk will
      be able to demand that an investee company register the securities owned by
      Blackhawk at the expense of the investee company. Even if the investee company
      bears this expense, however, the registration of any securities owned by
      Blackhawk is likely to be a time-consuming process, and Blackhawk always bears
      the risk, because of these delays, that it will be unable to resell such
      securities, or that it will not be able to obtain an attractive price for such
      securities.




16





At
      times
      Blackhawk will not register portfolio securities for sale but will seek to
      sell
      and sometimes seek an exemption from registration. The most likely exemption
      available to Blackhawk is section 4(1) of the Securities Act, which, in effect,
      exempts sales of securities by any person other than an issuer, an underwriter
      or dealer. This exemption will likely be available to permit a private sale
      of
      portfolio securities and in some cases a public sale, if the provisions of
      Rule
      144 under the Securities Act, are complied with. Among other things, Rule 144
      generally requires that securities be sold in "broker transactions," and imposes
      a six-month holding period prior to any resale of restricted securities by
      a
      non-affiliate.





Blackhawk
      may elect to distribute in-kind securities of investee companies to its
      stockholders. Prior to any such distribution, Blackhawk expects that it will
      need to file, or cause the issuers of such distributed securities, to file,
      a
      registration statement or, in the alternative, an information statement, which
      when declared effective by the SEC, will permit the distribution of such
      securities and also permit distributee stockholders of Blackhawk to sell such
      distributed securities.





***Federal
      Income Tax Matters***





For
      federal and state income tax purposes, Blackhawk is taxed at regular corporate
      rates on ordinary income and realized gain. It is not entitled to the special
      tax treatment available to more regulated investment companies, although
      Blackhawk plans to conduct its affairs, if possible, to minimize or eliminate
      federal and state income taxes. Distributions of cash or property by Blackhawk
      to its stockholders will be taxable as ordinary income only to the extent that
      Blackhawk has current or accumulated earnings and profits.





Regular
      "C" corporations are currently taxed at a 35% rate on long-term capital gains
      under the Internal Revenue Code of 1986, as amended. A corporation generally
      may
      offset capital loss only against capital gain. Generally, if Blackhawk realizes
      a net capital loss for any taxable year, it can carry back such net capital
      loss
      only against capital gain. Such a net capital loss for any taxable year can
      generally be carried back to each of the three preceding taxable years, and
      then
      any unused portion thereof may be carried over into the subsequent taxable
      years
      for a period of five years. The above only addresses capital loss carryovers,
      and not net operating losses. If Blackhawk elects regulated investment company
      (RIC) treatment, the capital loss carryover period is 8 years, not 5, and there
      is no carry back period. Alternative minimum tax rate for corporations is at
      20%, but that can only result in an increase of tax, not a
      decrease.




17





***Future
      Distributions***





Blackhawk
      does not currently intend to pay cash dividends. Blackhawk's current dividend
      policy is to make in-kind distributions of its larger investment positions
      to
      its stockholders when Blackhawk's board of directors deems such distributions
      appropriate. Because Blackhawk does not intend to make cash distributions,
      stockholders would need to sell securities distributed in-kind, when and if
      distributed, in order to realize a return on their investment.





An
      in-kind distribution will be made only when, in the judgment of Blackhawk’s
      board of directors, it is in the best interest of Blackhawk's stockholders
      to do
      so. The board of directors will review, among other things, the investment
      quality and marketability of the securities considered for distribution; the
      impact of a distribution of the investee's securities on the investee's
      customers, joint venture associates, other investors, financial institutions
      and
      management; tax consequences and the market effects of an initial or broader
      distribution of such securities. Securities of Blackhawk's larger investment
      positions in more mature investee companies with established public markets
      are
      most likely to be considered for distribution. It is possible that Blackhawk
      may
      make an in-kind distribution of securities that are substantially liquid
      irrespective of the distributee's stockholder rights to sell such securities.
      Any such in-kind distribution would require stockholder approval only if the
      distribution represents substantially all of Blackhawk's assets. It is possible
      that Blackhawk may make an in-kind distribution of securities that have
      appreciated or depreciated from the time of purchase depending upon the
      particular distribution. Blackhawk has not established a policy as to the
      frequency or size of distributions and indeed there can be no assurance that
      any
      distributions will be made. As of the date of this Form 10-K, no investments
      or
      distributions have been made.





***Managerial
      Assistance***





Blackhawk
      believes that providing managerial assistance to its investees is critical
      to
      its business development activities. "Making available significant managerial
      assistance" as defined in the Investment Company Act, with respect to a business
      development company such as Blackhawk means (a) any arrangement whereby a
      business development company, through its directors, officers, employees or
      general partners, offers to provide, and, if accepted, does so provide,
      significant guidance and counsel concerning the management, operations, or
      business objectives and policies of a portfolio company; or (b) the exercise
      by
      a business development company of a controlling influence over the management
      or
      policies of a portfolio company by the business development company acting
      individually or as a part of a group acting together which controls such
      portfolio company. Blackhawk is required by the Investment Company Act to make
      significant managerial assistance available at least with respect to investee
      companies that Blackhawk will treat as qualifying assets for purposes of the
      70%
      test. The nature, timing and amount of managerial assistance provided by
      Blackhawk varies depending upon the particular requirements of each investee
      company.





18




Blackhawk
      may be involved with its investees in recruiting management, product planning,
      marketing and advertising and the development of financial plans, operating
      strategies and corporate goals. In this connection, Blackhawk may assist clients
      in developing and utilizing accounting procedures to record efficiently and
      accurately, transactions in books of account which will facilitate asset and
      cost control and the ready determination of results of operations. Blackhawk
      may
      also seek capital for its investees from other potential investors and
      occasionally subordinates its own investment to those of other investors. Where
      possible, Blackhawk may introduce its investees to potential suppliers,
      customers and joint venture partners and assists its investees in establishing
      relationships with commercial and investment bankers and other professionals,
      including management consultants, recruiters, legal counsel and independent
      accountants. Blackhawk also assists with joint ventures, acquisitions and
      mergers.





In
      connection with its managerial assistance, Blackhawk may be represented by
      one
      or more of its officers or directors who are members of the board of directors
      of an investee. As an investment matures and the investee develops management
      depth and experience, Blackhawk's role will become progressively less active.
      However, when Blackhawk owns or, on a pro forma basis, could acquire a
      substantial proportion of a more mature investee company's equity, Blackhawk
      may
      remain active in, and may frequently be involved in, the planning of major
      transactions by the investee. Blackhawk's goal is to assist each investee
      company in establishing its own independent and effective board of directors
      and
      management.





***Competition***





Blackhawk
      is subject to substantial competition from business development companies,
      venture capital firms, new product development companies, marketing companies
      and diversified manufacturers, most of whom are larger than Blackhawk and have
      significantly larger net worth, financial and personnel resources than does
      Blackhawk. In addition, Blackhawk competes with companies and individuals
      engaged in the business of providing management consulting
      services.





***Employees***





As
      of
      December 31, Blackhawk had two employees.





**Item
      1B. Unresolved Staff Comments**





This
      Section is not applicable.




**Item
      2. Properties**





Blackhawk
      subleases office space at 14 Wall Street, 11 th Floor,
      New York, New York from Concorde, an affiliate of Blackhawk, at no cost to
      Blackhawk. The lease is on a month-to-month basis. Concorde intends to set
      the
      lease cost to market rates once Blackhawk has raised sufficient net proceeds
      in
      its Regulation E offerings.





19




**Item
      3. Legal Proceedings**





Blackhawk
      is not a party in any legal proceedings. Blackhawk knows of no material legal
      proceedings pending or threatened, or judgments entered against any of its
      directors or officers in their capacity as such.





**Item
      4. Submission of Matters to a Vote of Security Holders**





During
      the fourth quarter of 2007, the stockholders of Blackhawk, voting by written
      consent, voted to extend the investment advisory agreement between Blackhawk
      and
      Barak Asset Management, LLC one year to October 31, 2008 ("Extension").
      Stockholders owning 55.98% of the shares of common stock signed written consents
      dated November 20, 2007 approving the Extension.




**PART
      II**







**Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities**





**(a)**  **Market
      Information**





The
      common stock of Blackhawk is not listed on any principal United States market
      or
      exchange. It trades on the OTC Bulletin Board under the symbol "BHCG.OB." The
      stock was added to the OTC Bulletin Board effective August 23, 2006. The stock
      first started trading on the OTC Bulletin Board on January 24, 2007 as reported
      by BigCharts.com. However, the common stock trades infrequently and sporadically
      and thus there is not an established public trading market for the common stock.
      Listed below is the range of high and low bid quotations as reported by OTC
      Bulletin Board, Historical Research Reports (dated March 26, 2008), for four
      quarters in 2007 and the first quarter of 2008 (to February 29, 2008).





20





**BID****HIGH**
            
            **LOW****2007**First
                Quarter
            
            $
            .50
            
            $
            .08Second
                Quarter
            
            $
            .77
            
            $
            .10Third
                Quarter
            
            $
            .40
            
            $
            .10Fourth
                Quarter
            
            $
            .20
            
            $
            .12**2008**First
                Quarter (through February 29, 2008)
            
            $
            .36
            
            $
            .12





Such
      over-the counter market quotations reflect inter-dealer prices, without retail
      mark-up, mark-down or commission and may not necessarily represent actual
      transactions.





**Holders**





As
      of
      March 26, 2008, the approximate numbers of holders of the Company's common
      stock
      is 92.





**Dividends**





Blackhawk
      has paid no cash or other dividends on its common stock and for the foreseeable
      future has no plans to pay cash or other dividends.





**Securities
      Authorized for Issuance Under Equity Compensation
      Plans**





Blackhawk
      does not have any equity compensation plans, or individual compensation
      arrangements with any employee, officer or director.





**Sale
      of Unregistered Securities**





Blackhawk
      reported the sale of its unregistered securities during 2007 on Current Reports
      on Form 8-K.





**(b)**  Not
      applicable.





**(c)**  Not
      applicable.




21





**Item
      6. Selected Financial Data**





The
      following selected financial and other data for the years ended December 31,
      2007, December 31, 2006, December 31, 2005 and for the period from inception
      (April 22, 2004) to December 31, 2004 are derived from our financial statements
      which have been audited for the year December 31, 2005 and from inception (April
      22, 2004) to December 31, 2004, by Paritz & Company, P.A. an independent
      registered public accounting firm whose report for 2005 is included with this
      Annual Report, and for the years ended December 31, 2007 and December 31, 2006,
      by Eisner LLP, an independent registered public accounting firm whose report
      thereon is included with this Annual Report. The data should be read in
      conjunction with our financial statements and notes thereto and “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations,” which
      are included elsewhere in this Annual Report.





22


**BLACKHAWK
      CAPITAL GROUP BDC, INC.**


**SELECTED
      FINANCIAL DATA**


**Years
      Ended December 31, 2007, December 31, 2006, December 31, 2005
      and**


**Period
      from Inception (April 22, 2004) through December 31, 2004**





Year
                Ended
              December
                31,
              2007
            
            Year
                Ended
              December
                31,
              2006
            
            Year
                Ended
              December
                31, 2005
            
            For
                the Period
              Inception
              (April
                22, 2004)
              Through
              December
                31, 2004Total
                Investment Income
            
            $
            3,263
            
            $
            460
            
            $
            1,139
            
            $
            15Total
                Expenses
            
            
            (407,179
            )
            
            (387,707
            )
            
            (46,074
            )
            
            (12,530
            )NetInvestment
                (Loss)
            
            
            (403,916
            )
            
            (387,247
            )
            
            (44,935
            )
            
            (12,515
            )Net
                Decrease in Assets Resulting from Operations
            
            
            (398,703
            )
            
            (387,247
            )
            
            (44,935
            )
            
            (12,515
            )Per
                Share Data:Loss
                Per Common Share,
              Basic
                and Diluted:*
            
            
            (0.01290
            )
            
            (0.01371
            )
            
            (0.00220
            )
            
            (0.00179
            )Cash
                Dividend Declared
            
            
            
            
            
            0
            
            
            0
            
            
            0Total
                Assets
            
            $
            261,023
            
            $
            9,637
            
            $
            83,399
            
            $
            101,235Total
                Liabilities
            
            
            298,258
            
            
            306,061
            
            
            61,423
            
            
            96,953Total
                Net Assets (Liabilities)
            
            
            (37,235
            )
            
            (296,424
            )
            
            21,976
            
            
            4,282Other
                Data:Total
                Return Per Share Based on Net Asset Value**
            
            
            (135
            %)
            
            (1,474
            %)
            
            (440
            %)
            
            (17,900
            %)







*
      Calculated based on weighted average shares outstanding.




**
      Total
      returns for periods of less than one year are not annualized.





23





**Item
      7. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations**





The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with the Company's financial statements
      and the notes thereto.





***Overview***





Blackhawk
      is a business development company formed to engage in the business of investing
      primarily in small to mid-sized companies. The Company also intends to provide
      managerial assistance to developing companies.





***Accounting
      Policies***





***Basis
      of Presentation***





The
      financial statements have been prepared in accordance with the presentation
      requirements of the AICPA Auditing and Accounting Guide for Investment
      Companies.




***Use
      of Estimates in the Preparation of Financial
      Statements***





The
      preparation of financial statements in conformity with generally accepted
      accounting principles accepted in the United States of America ("GAAP") requires
      management to make estimates and assumptions that affect the reported amounts
      of
      actual and contingent assets and liabilities and disclosure of contingent assets
      and liabilities at the date of the financial statements and the reported amounts
      of income or loss and expenses during the reporting period. Actual results
      could
      differ from those estimates. Significant estimates include the valuation of
      investments.





***Portfolio
      and Investment Activity***





Blackhawk
      has not made any portfolio investment since its inception.





***Results
      of Operations***





***Sales
      Revenues***





From
      January 1, 2005 through December 31, 2005, we had $0 revenues. We had a net
      loss
      of $44,935 for that same period.





From
      January 1, 2006 through December 31, 2006, we had $0 revenues. We had a net
      loss
      of $387,247 for that same period.





From
      January 1, 2007 through December 31, 2007, we had $0 revenues. We had a net
      loss
      of $398,703 for that same period.




24





***General
      and Administrative Expenses***





From
      January 1, 2005 through December 31, 2005, general and administrative expenses
      were $46,074.





From
      January 1, 2006 through December 31, 2006, general and administrative expenses
      were $ 387,707.





From
      January 1, 2007 through December 31, 2007, general and administrative expenses
      were $407,179.





***Other
      Income (Expenses)***





For
      the
      period January 1, 2005 through December 31, 2005, the Company achieved other
      income of $1,139.





For
      the
      period January 1, 2006 through December 31, 2006, the Company achieved other
      income of $460.





For
      the
      period January 1, 2007 through December 31, 2007, the Company achieved other
      income of $3,263.





***Liquidity
      and Capital Resources***





From
      inception (April 22, 2004) through December 31, 2007, Blackhawk funded its
      cash
      operating requirements through the sale of its common stock and loans from
      an
      affiliated company, Concorde.





In
      2004,
      Blackhawk received $65 from the founders and $16,647, net of costs of $4,272,
      from the sale of stock under its Regulation E offering.





In
      2005,
      Blackhawk received $1,282, net of costs of $87,635, from the sale of stock
      under
      its Regulation E offering.





During
      2004, 2005 and 2006, Blackhawk borrowed $91,908, $13,281 and $133,005
      respectively, from Concorde to fund the formation of Blackhawk, offering costs
      for the offering plan and operating expenses. Of the amount borrowed in 2006,
      $100,000 was evidenced by a demand convertible note bearing interest at 8.25%
      per annum convertible after November 1, 2006 into common stock of Blackhawk
      at a
      price of $1.00 per share or the price per share of Blackhawk's next Regulation
      E
      offering. The balance of borrowings were non-interest bearing and are due on
      demand. The borrowings were approved unanimously by the Board of Directors
      of
      Blackhawk as fair and in the best interest of Blackhawk.





At
      December 31, 2007 and 2006 outstanding non-interest bearing borrowings due
      to
      Concorde amounted to $0 and $8,000, respectively.




25





Pursuant
      to the Company's second Regulation E Offering, as of June 4, 2007, the Company
      sold an aggregate of 502,891 shares of common stock, $.00001 par value per
      share
      ("Common Stock"), at a purchase price of $1.00 per share, to four (4) accredited
      investors for an aggregate amount of $502,891. The sale consisted of the
      following: (1) 370,000 shares sold to three (3) accredited investors for the
      purchase price of $1.00 per share, or an aggregate of $370,000; and (ii) the
      issuance of 132,891 to Concorde, an affiliate and the largest stockholder of
      the
      Company, in exchange for (x) $107,391 in a convertible note (consisting of
      $100,000 in principal and $7,391 in accrued and unpaid interest) owed by the
      Company to Concorde and issued on August 1, 2006 and (y) $25,500 in a
      convertible note owed by the Company to Concorde and issued on May 29, 2007.
      The
      conversion price for both of these notes was $1.00 per share of Common
      Stock.





In
      June
      and July 2007, the Company sold an additional 150,000 and 5,000, respectively,
      shares of its Common Stock for an aggregate of $155,000 in cash in the second
      Regulation E offering. The Offering Circular was amended on August 30, 2007
      to
      keep the offering open until October 15, 2007. On October 16, 2007, the Company
      extended the offering until November 15, 2007. The net cash proceeds from the
      second Regulation E offering have been $525,001 through October 31, 2007. No
      sales of shares of Common Stock in the second Regulation E offering were made
      by
      the Company from August-December 2007.





On
      June
      21, 2006, Blackhawk entered into an Exchange Agreement ("Exchange Agreement")
      with Concorde, the largest stockholder and affiliate of Blackhawk, pursuant
      to
      which a promissory note (the "Note") issued by Blackhawk on May 3, 2006 to
      Concorde in the principal amount of $68,847 was exchanged for 6,884,700 shares
      ("Shares") of the common stock, par value $.00001 per share ("Common Stock")
      of
      Blackhawk. The Shares are "restricted securities" as defined in Rule 144 of
      the
      Securities Act. Pursuant to the Exchange Agreement, Concorde acquired 6,884,700
      shares ("Shares") of the Common Stock of Blackhawk in exchange for the Note.
      The
      stock has issued in the exchange at $.01 per share. This exchange took place
      pursuant to Section 3(a)(9) of the Securities Act as an exchange by an issuer
      with an existing security holder where no commission or other remuneration
      was
      paid or given to Concorde or any other party for soliciting such exchange.
      This
      transaction was approved by all of the directors of Blackhawk pursuant to action
      by unanimous written consent as fair and in the best interests of Blackhawk
      and
      its stockholders.




Concorde
      converted a portion of amount due from Blackhawk totalling $61,432 into
      6,143,200 shares of Common Stock at the offering price of $.01 per share in
      2005.





On
      April
      23, 2004, Blackhawk issued 8,500,000 shares of Series A preferred stock and
      11,000,000 shares of common stock to its founders at $.00001 per share for
      a
      total of $195. Between September 27, 2004 and December 31, 2005, Blackhawk
      sold
      17,126,781 shares of its common stock at $.01 per share for a total of $171,268,
      which includes 6,143,200 shares issued to Concorde paid for by reducing a
      portion of amounts owing to Concorde of $61,432. These shares were sold pursuant
      to an offering under Regulation E under the Securities Act. On November 9,
      2005,
      the board of directors rescinded the issuance of shares of preferred stock
      to
      Concorde. Blackhawk refunded
      to Concorde the $85 that Concorde paid for the shares. Concorde waived any
      rights it may have against Blackhawk in connection with the issuance and stated
      that it will not assert any claim against Blackhawk. On November 12, 2005,
      certain investors returned 4,500,000 shares of common stock and were refunded
      $45 on March 22, 2006. Each investor waived any rights he or she may have
      against Blackhawk in connection with the issuance and stated that he or she
      will
      not assert any claim against Blackhawk. On November 29, 2005, Blackhawk amended
      its Certificate of Incorporation in the State of Delaware to eliminate the
      right
      to issue preferred shares. As of November 29, 2005, all outstanding shares
      are
      common shares.




26





Blackhawk has a
      net loss for the year ended December
      31, 2007, liabilities in excess of assets at December 31, 2007 and has not
      yet
      invested in eligible companies. Blackhawk intends to raise capital through
      another proposed offering and access the equity markets to raise cash to fund
      investments. Since inception, Blackhawk's operations have been principally
      funded by Concorde. Blackhawk is presently dependent on Concorde to provide
      capital and liquidity needs. Concorde has agreed to provide sufficient capital
      to operate through December 31, 2008.




***Subsequent
      Events***




Pursuant
      to the Company's third Regulation E offering which commenced on November 30,
      2007, as of March 24, 2008, the Company sold an aggregate of 698,112 shares
      of
      common stock to five purchasers at a purchase price of $1.00 per share for
      an
      aggregate of $698,112. Selling commissions of $69,311 were paid to Richard
      J.
      Kelly, prior selling agent for the Company, out of the $698,112, netting
      $628,801 to the Company. The Offering is open until November 28, 2008. Sales
      of
      additional shares in the Offering was suspended on March 24, 2008 after the
      Company received a comment letter from the SEC on its Form 1-E/A for the
      Offering on file with the SEC; the Company will resume the Offering after it
      files a response letter and amended Form 1-E/A with the SEC. The Company
      received another $100,000 from an investor for the purchase of shares which
      the
      Company is holding in escrow; the Company plans on closing on this money out
      of
      escrow when it complies with the SEC matters described above.




**Item
      7A. Quantitative and Qualitative Disclosures about Market
      Risk**





We
      are
      subject to financial market risks, including changes in interest rates and
      the
      valuation of investments.





***Interest
      Rate Risk***





This
      Section is not applicable. Blackhawk does not have any interest-bearing
      liabilities at this time.




27





***Portfolio
      Valuation***





Blackhawk
      intends to use the U.S. Private Equity Valuation Guidelines ("Guidelines")
      to
      provide its managers with a framework for valuing investments in portfolio
      companies at fair value and to provide greater consistency within the private
      equity industry with regard to valuation. These Guidelines are intended to
      assist managers in their estimation of fair value and are intended to be
      consistent with GAAP. Blackhawk has made no investments to date.





**Item
      8. Financial Statements and Supplementary Data**





The
      response to this is enclosed in a separate section of this report, see page
      F-1.





**Item
      9. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      9A. Controls and Procedures**





There
      have not been any significant changes in Blackhawk's internal control over
      financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
      under the Exchange Act) that have materially affected, or are reasonably likely
      to materially affect, Blackhawk's internal control over financial reporting.





**Item
      9A(T). Controls and Procedures**





***Management
      Report on Internal Control Over Financial Reporting***





The
      management of Blackhawk is responsible for establishing and maintaining adequate
      internal control over financial reporting. Blackhawk's internal control system
      is a process designed to provide reasonable assurance to management and the
      board of directors regarding the preparation and fair presentation of published
      financial statements.





Blackhawk's
      internal control over financial reporting includes policies and procedures
      that
      pertain to the maintenance of records that, in reasonable detail, accurately
      and
      fairly reflect transactions and dispositions of assets; provide reasonable
      assurances that transactions are recorded as necessary to permit preparation
      of
      financial statements in accordance with U.S. GAAP and that receipts and
      expenditures are being made only in accordance with authorizations of management
      and the board of directors of Blackhawk; and provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use or
      disposition of Blackhawk's assets that could have a material effect on Blackhawk
      financial statements.




28





All
      internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective can
      provide only reasonable assurance with respect to financial statement
      preparation and presentation. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions or that the degree of compliance
      with the policies or procedures may deteriorate.





Management
      assessed the effectiveness of Blackhawk's internal control over financial
      reporting as of December 31, 2007. In making this assessment, management used
      the criteria set forth by the Committee of Sponsoring Organizations of the
      Treadway Commission in Internal Control-Integrated Framework. Based on our
      assessment management believes that, as of December 31, 2007, Blackhawk's
      internal control over financial reporting is
      ineffective for two reasons: (1) Blackhawk has a material weakness in its
      internal controls due to a lack of segregation of duties, and (2) Blackhawk
      lacks the resources to hire additional personnel to perform this function until
      it raises additional capital.





This
      annual report does not include an attestation report of Blackhawk's independent
      registered public accounting firm, Eisner LLP, regarding internal control over
      financial reporting. Management's report was not subject to attestation by
      Blackhawk's independent registered public accounting firm pursuant to temporary
      rules of the Securities and Exchange Commission that permit the Company to
      provide only management's report in this annual report.





***Changes
      in Internal Control Over Financial Reporting***





There
      have been no significant changes in our internal control or in other factors
      that could significantly affect those controls subsequent to our evaluation,
      including any corrective actions with regard to significant deficiencies and
      material weaknesses.





**Item
      9B. Other Information**





This
      Section is not applicable.




29




**PART
      III**




**Item
      10. Directors and Executive Officers of the Registrant**





The
      following table sets forth information concerning our directors and executive
      officers:





Name
                and Address
            
            Age
            
            Position
                Held with CompanyDr.
                Craig A. Zabala(1)
            
            56
            
            President,
                Chief ExecutiveP.O.
                Box 360
            
            
            
            Officer,
                Acting ChiefGreene
                Street Station
            
            
            
            Financial
                Officer, ActingNew
                York, New York 10012
            
            
            
            Chief
                Compliance Officer,
              Secretary,
                ChairmanRobert
                M. Fujii(2)(3)
            
            58
            
            Vice
                President1624
                Acton StreetBerkeley,
                California 94702Robert
                J. Francis(3)
            
            37
            
            Director5416
                South 161stStreet
              Omaha,
                NE 68135Janet
                Buxman Kurihara(3)
            
            49
            
            Director11007
                North Cottontail LaneParker,
                Colorado 80138Randy
                Tejral(3)
            
            52
            
            Director6529
                Pine Ridge RoadElkhorn,
                Nebraska 68022Mick
                Woodwards(1)(3)
            
            49
            
            Director4849
                Woodruff AvenueLakewood,
                California 90713




(1)
              Control
                  person as defined in Section 2(a)(1) of the Investment Company
                  Act.
  (2)
              Resigned
                  as Chief Financial Officer on March 17, 2006; assumed the position
                  of Vice
                  President on March 24, 2006.
  (3)
              Minority
                  shareholder of The Concorde Group,
                  Inc.




The
      following is a brief summary of the background of each executive officer and
      director:





**Dr.
      Craig A. Zabala** is the
      Founder, Chairman, President, and Chief Executive Officer of The Concorde Group,
      Inc., a financial services holding company, since February 1998; Chairman,
      President, and Chief Executive Officer of Concorde Europe Inc. founded September
      12, 2002; Chairman, President, and Chief Executive Officer of Concorde Europe,
      Ltd., a company formed under the Laws of Wales and England, founded April 18,
      2001; Founder, Chairman, President and Chief Executive Officer of DBL Holdings,
      LLC (dba Drexel Burnham Lambert) founded May 9, 2000; and Founder, Chairman,
      President and Chief Executive Officer of Blackhawk Capital Group BDC, Inc.
      (OTCBB: BHCG) founded April 22, 2004.




30




From
      1998
      to 2002, he was Scholar in Residence and Visiting Lecturer at the Zicklin School
      of Business and the Department of Finance, Graduate School, Baruch College,
      City
      University of New York, where he taught an MBA course on Entrepreneurial
      Strategy and a course on Special Topics in Investment Banking for the M.S.
      degree in Finance. Additionally, Dr. Zabala was on the editorial board of Global
      Focus, an academic journal on international business, economics, and social
      policy at the Zicklin School of Business.




From
      2002
      to 2003, he was a Registered Representative and an Investment Advisor with
      Brean
      Murray & Co., Inc. in New York City. From 1999 to 2001, Dr. Zabala was
      Senior Vice President of Merchant Banking and Investment Advisor with Trautman,
      Wasserman & Company, a merchant bank and broker dealer in New York City
      under a joint venture with Concorde. Prior to this, from 1997 to 1998, Dr.
      Zabala was Vice President and Investment Advisor, Private Client Group, Merrill
      Lynch & Co., New York City. From 1996 to 1997, Dr. Zabala was an investment
      banker at Baird Patrick & Company, Inc., New York City. Prior to this, from
      1994 to 1995, Dr. Zabala was an Acting Chief Financial Officer and Investment
      Banker at Gilman Securities, Inc. in New York City. From 1992 through April
      1996, Dr. Zabala was Vice Chairman of the Board of Directors of Golf
      Reservations of America, Inc., Sherman Oaks, California.




From
      1991
      to 1993, Dr. Zabala was a Visiting Scholar and Visiting Lecturer, teaching
      the
      following courses, Entrepreneurship, Venture Capital and Applied Finance, at
      the
      Walter A. Hass School of Business, University of California at Berkeley. From
      1990 to 1991, he was a Visiting Fellow at the School of Industrial and Business
      Studies, University of Warwick, Coventry, England. From 1989 to 1990, he was
      Vice President of Corporate Finance at D.H. Blair and Company. From 1986 to
      1990, he served as Assistant Professor of Management at the School of
      Management, Rensselaer Polytechnic Institute, in Troy, New York.




Dr.
      Zabala was a Doctoral Fellow conferred by the U.S. Senate (1979 to 1981) and
      an
      Economist at the U.S. Department of Labor (1979 to 1982) and an Economist at
      the
      U.S. Department of Commerce (1982 to 1986) in Washington, D.C. During part
      of
      his career in Washington, D.C., he was also employed full-time as an autoworker
      from 1976 to 1983 at the General Motors Assembly Division, General Motors
      Corporation, Van Nuys, California, where he worked and also carried out research
      on production relations for his doctoral research on the U.S. automobile
      industry.




Dr.
      Zabala received his A.B., magna cum laude, Pi Gamma Mu and Phi Beta Kappa,
      in
      1974, and Chancellor Fellow conferred by the Graduate Division (1974 to 1983)
      leading to the M.A. in 1977 and Ph.D. in 1983 from the University of California,
      Los Angeles, and was also a Postdoctoral Scholar in 1986 at the University
      of
      California, Los Angeles. He also pursued graduate studies in production theory
      and econometrics in the Department of Economics, The George Washington
      University, Washington, D.C., from 1980 to 1984. He is currently pursuing a
      MSc
      degree in finance with a focus on globalization at the Center for Financial
      and
      Management Studies, School of Oriental and African Studies, University of
      London, United Kingdom since 2003.




31




**Robert
      M. Fujii** is a
      Vice President at Blackhawk. He also holds positions as Chief Financial Officer
      of The Concorde Group, Inc. and Acting Chief Financial Officer of Concorde
      Commercial Finance, LLC. Mr. Fujii was previously a financial consultant for
      Craig A. Zabala & Company, a business consulting company in New York City.
      From 1992 to 1993, Mr. Fujii worked as a financial analyst for Nichirei Foods
      America sales office in San Francisco. From 1979 to 1992, Mr. Fujii worked
      as
      the Supervisor of Budgets and General Accounting for Varian Associates, Inc.,
      a
      manufacturer of scientific measuring instruments, located in Walnut Creek,
      California. He received his BA in Biochemistry in 1971 from the University
      of
      California at Berkeley and an MBA in International Business and Finance from
      the
      Haas School of Business, University of California at Berkeley in 1993.





**Robert
      J. Francis** is the
      founder and Vice President of Omaha Telecom, LLC, a telecommunications
      construction and service company in Omaha, Nebraska. Mr. Francis has been a
      director of Blackhawk since March 2005.





**Janet
      Buxman Kurihara** has been
      a director of Blackhawk since August 2004. Ms. Kurihara was regional director
      at
      Telenisus Corp., a network security and data storage company from 2000-2001.
      From January 2001 to October 2001, she was regional director at Riptechi Inc.,
      a
      network security company. From October 2001 to March 2003, she owned Definitive
      Market Consultants, a consulting company. Since March 2003, Ms. Kurihara has
      been a senior manager of new product development and product strategy at
      Qwest.





**Randy
      Tejral** is
      retired and is a private investor in residential real estate. Mr. Tejral was
      the
      founder and President of Tejral Masonry, Inc., a masonry construction firm
      in
      Omaha, Nebraska. Mr. Tejral has been a director of Blackhawk since March 2005.





**Mick
      Woodwards** has been
      a director of Blackhawk since August 2004. Since November 1993, Mr. Woodwards
      has been owner of Lakewood Rent-All, a party rental firm in Lakewood,
      California.





Except
      as
      indicated above, none of our directors holds any directorships in companies
      with
      a class of securities registered pursuant to Section 12 of the Securities
      Exchange Act or subject to the requirements of Section 15(d) of such Act or
      any
      company registered as an investment company under the Investment Company
      Act.





There
      are
      no family relationships among any of our directors or executive
      officers.




32





***Board
      Composition***





Blackhawk's
      Board of Directors consists of five directors. At each annual meeting of its
      stockholders, all of its directors are elected to serve from the time of
      election and qualification until the next annual meeting following election.
      In
      addition, Blackhawk's bylaws provide that the maximum authorized number of
      directors may be changed by resolution of the stockholders or by resolution
      of
      the board of directors.





***Meetings
      and Committees of the Board of Directors***





Our
      Board
      of Directors conducts its business through meetings of the Board and by acting
      pursuant to unanimous written consent without a meeting. From January 1, 2007
      to
      December 31, 2007, the Board of Directors held four (4) meetings in person
      or by
      teleconference. During 2007, the Board of Directors also acted by unanimous
      written consent seven (7) times.





Blackhawk
      does not have any board committees, including an audit committee.





Blackhawk
      does not have a nominating committee or committee performing similar functions.
      Blackhawk's Board of Directors believes that it is appropriate for Blackhawk
      not
      to have such a committee because of the costs associated with such process
      and
      that Blackhawk has not yet raised sufficient capital or made its first portfolio
      investment. All directors participate in the consideration of director nominees.





Blackhawk
      does not have any procedures by which security holders may recommend nominees
      to
      its board of directors.





***Section
      16(a) Beneficial Ownership Reporting Compliance***





Based
      upon a review of filings with the Securities and Exchange Commission, we believe
      that all our directors, executive officers and 10% beneficial owners complied
      during fiscal 2007 with the reporting requirements of Section 16(a) of the
      Exchange Act.





***Limitations
      of Liability and Indemnification of Directors and
      Officers***





Our
      bylaws limit the liability of directors and officers to the maximum extent
      permitted by Delaware law. We will indemnify any person who was or is a party,
      or is threatened to be made a party to, an action, suit or proceeding, whether
      civil, criminal, administrative or investigative, if that person is or was
      a
      director, officer, employee or agent of ours or serves or served any other
      enterprise at our request.





We
      have
      been advised that it is the position of the Commission that insofar as the
      indemnification provisions referenced above may be invoked to disclaim liability
      for damages arising under the Securities Act, these provisions are against
      public policy as expressed in the Securities Act and are, therefore,
      unenforceable.




33





***Code
      of Ethics***





Blackhawk
      has adopted a Code of Ethics under Rule 17j-1 of the Investment Company Act
      that
      applies to its principal executive officer, principal financial officer,
      principal accounting officer or controller, or persons performing similar
      functions. For purposes of this item, the term code of ethics means written
      standards that are reasonably designed to deter wrongdoing and to
      promote:





·
            honest
                and ethical conduct, including the ethical handling of actual or
                apparent
                conflicts of interest between personal and professional
                relationships;





·
            full,
                fair, accurate, timely, and understandable disclosure in reports
                and
                documents that Blackhawk files with, or submits to, the Commission
                and in
                other public communications made by the
                issuer;





·
            compliance
                with applicable governmental laws, rules and
                regulations;





·
            the
                prompt internal reporting of violations of the code to the board
                of
                directors or another appropriate person or persons;
                and





·
            accountability
                for adherence to the code.





The
      Board
      of Directors voted by unanimous written consent on August 17, 2006 to amend
      and
      restate the Code of Ethics to include additional compliance provisions
      applicable to Blackhawk's directors, officers and employees recommended by
      a
      consulting firm specializing in SEC compliance matters for business development
      companies registered under the Investment Company Act of 1940, as amended,
      such
      as Blackhawk. The Company does not have an audit committee.





Blackhawk
      hereby undertakes to provide to any person without charge, upon request, a
      copy
      of such code of ethics. Such request may be made in writing to the Chairman
      of
      the Board of Directors at Blackhawk Capital Group BDC, Inc., 14 Wall Street,
      11 th Floor,
      New York, New York 10005.




**Item
      11. Executive Compensation**





Since
      its
      inception (April 2004), Blackhawk has not paid any compensation to its executive
      officers or directors, except to Brad Silver, a former officer and director
      of
      Blackhawk who resigned on December 8, 2005, was paid $12,000 in consulting
      fees
      to assist Blackhawk in extraordinary administration duties during fiscal year
      2005. Blackhawk does not presently have and never has had any stock option
      plans, equity incentive or award plans, pension or retirement plans,
      non-qualified deferred compensation plans, director compensation plans, or
      any
      other similar plan.





Blackhawk's
      Board of Directors does not have a standing compensation committee or committee
      performing similar functions. It is the view of the Board of Directors that
      it
      is inappropriate for Blackhawk to have such a committee because Blackhawk to
      date has not raised sufficient capital, has not made its first portfolio
      investment and except as noted in the previous paragraph, has not paid any
      compensation to its officers and directors.




34





**Item
      12. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**





The
      following table sets forth each person known by Blackhawk to be the beneficial
      owner of five percent or more of the common stock of Blackhawk, all directors
      and executive officers individually and all directors and executive officers
      of
      Blackhawk as a group. Except as noted, each person has sole voting and
      investment power with respect to the shares shown.





Name
                and Address
              of
                Beneficial Owner
            
            Amount
                of Beneficial
              Ownership
            
            Percentage
              of
                ClassDr.
                Craig A. Zabala
            
            
            1,832,500
            (1)(2)
            
            5.75
            %P.O.
                Box 360Greene
                Street StationNew
                York, New York 10012The
                Concorde Group, Inc.
            
            
            10,317,681
            (3)
            
            32.38
            %14
                Wall Street, 11thFloorNew
                York, New York 10005Robert
                M. Fujii(4)
            
            
            500,000
            
            
            1.57
            %1624
                Acton StreetBerkeley,
                California 94702Robert
                J. Francis(4)
              5416
                South 161stStreet
              Omaha,
                Nebraska 68135
            
            
            0
            
            
            0
            %Janet
                Buxman Kurihara(4)
            
            
            0
            
            
            0
            %11007
                North Cottontail LaneParker,
                Colorado 80138Randy
                Tejral(4)
              6529
                Pine Ridge Road
              Elkhorn,
                Nebraska 68022
            
            
            0
            
            
            0
            %Mick
                Woodwards(4)
            
            
            1,320,269
            
            
            4.14
            %4849
                Woodruff Avenue
              Lakewood,
                California 90713Doreen
                McCarthy(5)
              426
                Broome Street
              New
                York, NY 10013
            
            
            2,245,000
            
            
            7.04
            %All
                Executive Officers and
            
            
            3,652,769
            
            
            11.46
            %Directors
                as a Group (6 Persons)







(1)
            Excludes
                10,317,681****shares
                of common stock and held by The Concorde Group, Inc. of which Dr.
                Zabala
                is the control person. Includes 100,000 shares held in Uniform Transfer
                to
                Minors accounts for Dr. Zabala's two nieces.




(2)
            Dr.
                Craig A. Zabala may be deemed to be a control person of Blackhawk
                as
                defined in Section 2(a)(1) of the Investment Company Act of 1940,
                as
                amended.




(3)
            Dr.
                Craig A. Zabala is an officer, director and controlling stockholder
                of The
                Concorde Group, Inc.




(4)
            The
                individual listed is a less than one percent (1%) shareholder of
                The
                Concorde Group, Inc.




(5)
            An
                aggregate of 165,000 shares are held in UTMA accounts for Ms. McCarthy's
                nieces, nephews and close family friends.





**Item
      13. Certain Relationships and Related Transactions**





Concorde
      owns 10,317,681 shares
      of Blackhawk Common Stock, representing 33% of the outstanding shares of Common
      Stock. Craig A. Zabala, Chairman and President of Concorde, is also Chairman
      and
      President of Blackhawk, and controls Concorde through his 73% stock ownership
      of
      Concorde. He also owns or controls 1,832,500 shares of Blackhawk Common Stock,
      representing 5.86% of the outstanding shares of Blackhawk Common Stock. Concorde
      and Zabala may be deemed to control Blackhawk.





During
      2004, 2005 and 2006, the Company borrowed $91,908, $13,281 and $133,005,
      respectively, from Concorde to fund the formation of Blackhawk, offering costs
      for the offering plan and operating expenses. Of the amount borrowed in 2006,
      $100,000 was evidenced by a demand convertible note bearing interest at 8.25%
      per annum convertible after November 1, 2006 into common stock of the company
      at
      a price of $1.00 per share. The balance of borrowings were non-interest bearing
      and are due on demand. The borrowings were approved unanimously by the board
      of
      directors of Blackhawk as fair and in the best interest of
      Blackhawk.




35




In
      2007,
      2006 and 2005, the Board of Directors unanimously voted to allow Concorde to
      convert amounts due to Concorde of $68,847 (evidenced by a non-interest bearing
      promissory note due on demand) and $61,432, respectively into 6,884,700 and
      6,143,200 shares respectively of common stock at $.01 per share, which was
      the
      offering price set forth in Blackhawk’s Form 1-E and its Offering Circular for
      its first Regulation E offering, which the Board of Directors approved
      unanimously and determined was in the fair and best interest of Blackhawk.





At
      December 31, 2007 and 2006, outstanding non-interest bearing borrowings due
      to
      Concorde amount to $0 and $8,000, respectively.





Blackhawk
      paid a consulting fee of $12,000 to a former vice president and stockholder
      of
      the Company during the year ended December 31, 2005.





The
      Company shares office space and other administrative functions with Concorde
      at
      no charge to the Company. The Company expects to pay fair market value for
      such
      services on a prospective basis following the close of its next offering. At
      December 31, 2006, the Company owed Concorde $100,000 which was evidenced by
      a
      demand convertible note bearing interest at 8.25% per annum convertible after
      November 1, 2006 into common stock of the Company at a price of $1.00 per share,
      or the price per share of the Company’s Regulation E Offering. On June 4, 2007
      Concorde converted the note (including accrued interest of $7,391) into 107,391
      shares of common stock.





On
      May
      29, 2007, Blackhawk issued a convertible note in the principal amount of $25,500
      ("Note") to Concorde. The Note evidenced a loan from Concorde to the Company
      for
      advances of $17,500 during the nine months ended September 30, 2007 together
      with $8,000 of advances made to the Company prior to January 1, 2007. The
      advances were used to fund a portion of expenses incurred by the Company
      consisting of legal fees and expenses, accounting fees and expenses, general
      and
      administrative expenses. The Note is repayable upon demand and does not bear
      interest. The Note is convertible into shares of common stock of the Company
      at
      a conversion rate of one share of common stock per $1.00 of principal amount
      of
      Note converted, the price per share in the Company's second Regulation E
      offering. The transaction was approved by unanimous written consent by the
      Board
      of Directors of the Company as being fair and in the best interests of the
      Company. On June 4, 2007, pursuant to the terms of the Note, Concorde converted
      the $25,500 principal amount of the Note into 25,500 shares of Common Stock
      at
      $1.00 of principal amount of Note converted, the price per share in the
      Company's second Regulation
      E offering.





***Review,
      Approval or Ratification of Transactions with Related
      Persons***





Blackhawk
      has a Code of Ethics which governs, in part, review, approval and ratification
      of transactions between Blackhawk and an affiliated party. Blackhawk also
      complies with the provisions of the Investment Company Act applicable to
      transactions by a business development company and an affiliated or related
      party. All affiliated transactions must be approved by all of the independent
      directors of Blackhawk and be fair and reasonable to Blackhawk and its
      stockholders.




36




***Director
      Independence***





The
      Board
      of Directors has determined that all of the directors except Craig A. Zabala
      and
      Mick Woodwards are "independent" under NASDAQ Corporate Governance Listing
      Standards, as well as in the assessment of the Board of Directors. Blackhawk
      does not have any audit, compensation, nominating or governance committee of
      the
      Board of Directors. The Board of Directors based this determination on a review
      of the responses of the directors and executive officers to oral questions
      regarding employment and compensation history, affiliations and family and
      other
      relationships and on discussions with directors.





**Item
      14. Principal Accountant Fees and Services**





1.
            AUDIT
                FEES





The
      aggregate fees billed by Eisner LLP for professional services rendered for
      the
      audit of our financial statements for fiscal year 2007 and 2006 were $61,219
      and
      14,223, respectively.





The
      aggregate fees billed by Paritz & Company, P.A. for professional services
      rendered for the audit of our financial statements for fiscal year 2005 were
      $3,915.





2.
            AUDIT-RELATED
                FEES





The
      aggregate fees billed during the period of December 31, 2007 for assurance
      and
      related services by Eisner LLP that are reasonably related to the performance
      of
      the audit or review of Blackhawk's financial statements was $0.





The
      aggregate fees billed during the year ended December 31, 2005 for assurance
      and
      related services by Paritz & Company, P.A. that are reasonably related to
      the performance of the audit or review of Blackhawk's financial statements
      was
      $0.





3.
            TAX
                FEES





The
      aggregate fees billed for the period ended December 31, 2007 for professional
      services rendered by Eisner LLP for tax compliance, tax advice and tax planning
      was $0.





The
      aggregate fees billed for the year ended December 31, 2005 for professional
      services rendered by Paritz & Company, P.A. for tax compliance, tax advice,
      and tax planning was $0.




37





4.
            ALL
                OTHER FEES





The
      aggregate fees billed for the year ended December 31, 2007 by Eisner LLP other
      than services reported above was $0.





The
      aggregate fees billed for the fiscal year ended December 31, 2005 for products
      and services provided by Paritz & Company, P.A., other than the services
      reported above was $0.





5.
            PRE-APPROVAL
                POLICIES AND PROCEDURES





Before
      the accountant is engaged by Blackhawk to render audit or non-audit services,
      the engagement is nominated and approved by Blackhawk's board of
      directors.





**Item
      15. Exhibits and Financial Statement Schedules**





(a)
            Exhibits





31.1
            
            Certification
                by Chief Executive Officer Pursuant to Section 302 of the Sarbanes
                Oxley
                Act of 200231.2
            
            Certification
                by Chief Financial Officer Pursuant to Section 302 of the Sarbanes
                Oxley
                Act of 200232.1
            
            Certification
                by Chief Executive Officer Pursuant to Section 906 of the Sarbanes
                Oxley
                Act of 200232.2
            
            Certification
                by Chief Financial Officer Pursuant to Section 906 of the Sarbanes
                Oxley
                Act of 2002





38


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant had duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.


**BLACKHAWK
                CAPITAL GROUP BDC, INC.**
              (Registrant)BY:
            /s/
                Craig A. ZabalaCraig
                A. Zabala
                Chairman,
                  President and Chief Executive Officer
                
                Dated:March
                  28, 2008




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the Registrant and in the capacities and on
      the
      dates indicated.





/s/
                Craig A. Zabala
            
            /s/
                Robert M. FujiiCraig
                A. Zabala
            
            Robert
                M. FujiiChairman,
                President and
              Chief
                Executive Officer
            
            Vice
                PresidentDated:March
                28, 2008
            
            Dated:March
                28, 2008/s/
                Craig A. Zabala
            
            /s/
                Robert J. FrancisCraig
                A. Zabala
            
            Robert
                J. FrancisActing
                Chief Financial Officer
              Principal
                Accounting Officer
            
            DirectorDated:March
                28, 2008
            
            Dated:March
                28, 2008/s/
                Janet Buxman Kurihara
            
            /s/
                Randy TejralJanet
                Buxman Kurihara
            
            Randy
                TejralDirector
            
            DirectorDated:March
                28, 2008
            
            Dated:March
                28, 2008/s/
                Mick WoodwardsMick
                WoodwardsDirectorDated:March
                28, 2008





39




BLACKHAWK
      CAPITAL GROUP BDC INC.





INDEX
      TO
      FINANCIAL STATEMENTS








REPORTS
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNT FIRMS
            
            
            F-1
                & F-2STATEMENTS
                OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2007 AND 2006
            
            
            F-3SCHEDULE
                OF INVESTMENTS AS OF DECEMBER 31, 2007
            
            
            F-4STATEMENTS
                OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
            
            
            F-5STATEMENTS
                OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006
                AND
                2005
            
            
            F-6STATEMENTS
                OF STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT) FOR THE YEARS ENDED DECEMBER 31,
                2007 2006 AND 2005
            
            
            F-7STATEMENTS
                OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND
                2005
            
            
            F-8NOTES
                TO FINANCIAL STATEMENTS
            
            
            F-9











**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**


Shareholders
      and Board of Directors


Blackhawk
      Capital Group BDC, Inc.





We
      have
      audited the accompanying statement of assets and liabilities of Blackhawk
      Capital Group BDC, Inc. (the “Company”) as of December 31, 2007 and 2006,
      including the schedule of investments as of December 31, 2007 and the related
      statements of operations, changes in net assets, capital deficit, cash flows
      and
      the financial highlights for each of the years in the two year period ended
      December 2007. These financial statements and financial highlights are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements and financial highlights based on our
      audits.





We
      conducted our audits in accordance with the standards of Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. We were not engaged to perform
      an
      audit of the Company’s internal control over financial reporting. Our audits
      include consideration of internal control over financial reporting as a basis
      for designing audit procedures that are appropriate in the circumstances, but
      not for the purpose of expressing an opinion on the effectiveness of the
      Company’s internal control over financial reporting. Accordingly, we express no
      such opinion. An audit also includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements, assessing
      the accounting principle used and significant estimates made by management,
      and
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements and financial highlights referred to above
      present fairly, in all material respects, the financial position of Blackhawk
      Capital Group BDC, Inc. as of December 31, 2007 and 2006, the results of
      its operations, the changes in its net assets, its cash flows and financial
      highlights for each of the years in the two year period ended December 2007
      in
      conformity with accounting principles generally accepted in the United States
      of
      America.







/s/
      Eisner LLP





New
      York,
      New York





March
      26,
      2008




F-1








**Paritz
                & Company, P.A.**
            15
                Warren Street, Suite 25
              Hackensack,
                New Jersey 07601
              (201)342-7753
              Fax:
                (201) 342-7598
              E-Mail:
                paritz @paritz.comCertified
                Public Accountants





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Board
      of
      Directors


**Blackhawk
      Capital Group BDC Inc.**


New
      York,
      New York





We
      have
      audited the accompanying statements of operations, changes in net assets,
      stockholders’ equity and cash flows for the year ended December 31, 2005 and the
      financial highlights for the year ended December 31, 2005 and for the period
      from inception (April 22, 2004) to December 31, 2004. These financial statements
      and financial highlights are the responsibility of the Company's management.
      Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements and financial highlights referred to above
      present fairly, in all material respects, **Blackhawk
      Capital Group BDC Inc.** ’s
      results of operations , its cash flows changes in stockholders’ equity and the
      changes in its net assets for the year ended December 31, 2005 and its financial
      highlights for the year ended December 31, 2005 and for the period from
      inception (April 22, 2004) to December 31, 2004 in conformity with accounting
      principles generally accepted in the United States of America.





***Paritz
        & Company, P.A.***


Hackensack,
      New Jersey


March
      27,
      2006




F-2




**BLACKHAWK
      CAPITAL GROUP BDC INC.**


STATEMENTS
                OF ASSETS AND LIABILITIESDecember
                31,2007
            
            2006**MONEY
                MARKET****ASSETS:**Investment
                at fair value (cost $242,815)
            
            $
            248,028
            
            $
            -Cash
            
            
            4,450
            
            
            637****Prepaid
                insurance
            
            
            8,545
            
            
            9,000**TOTAL
                ASSETS**
            
            
            **261,023**
            
            
            **9,637****LIABILITIES**Convertible
                note payable to affiliated company,
              including
                interest of $4,125
            
            $
            -
            
            $
            104,125Due
                to affiliated company
            
            
            -
            
            
            8,000Accrued
                expenses
            
            
            298,258
            
            
            193,936**TOTAL
                LIABILITIES**
            
            
            **298,258**
            
            
            **306,061****NET
                ASSETS (LIABILITIES)**Common
                stock, par value $.00001 per share1,000,000,000
                shares authorized,31,169,372
                and 30,511,481 shares issuedand
                outstanding in 2007 and 2006, respectively
            
            
            312
            
            
            305Additional
                paid-in capital
            
            
            805,853
            
            
            147,968Accumulated
                net investment loss
            
            
            (848,613
            )
            
            (444,697
            )Net
                unrealized gain on investment
            
            
            5,213
            
            
            **-****TOTAL
                NET (LIABILITIES)**
            
            
            **(37,235**
            **)**
            
            **(296,424**
            **)****TOTAL
                LIABILITIES AND NET (LIABILITIES)**
            
            
            **261,023**
            
            **$**
            **9,637****NET
                (LIABILITIES) PER COMMON SHARE**
            
            **$**
            **(.00119**
            **)**
            **$**
            **(.00972**
            **)**





See
      notes
      to financial statements




F-3




**BLACKHAWK
      CAPITAL GROUP BDC INC.**


SCHEDULE
                OF INVESTMENTSDECEMBER
                31, 2007**COMPANY**
            
            **INVESTMENT**
            
            **INITIAL**
              **ACQUISITION**
              **DATE**
            
            **PRINCIPAL**
              **AMOUNT**
            
            **COST**
            
            **FAIR**
              **VALUE**
            
            **%
                OF**
              **TOTAL**
              **ASSETS**General
                Electric
              Capital
                Company 0%
              Due
                2/29/08
            
            
            Commercial
              paper
            
            
            6/7/07
            
            $
            168,000
            
            $
            161,917
            
            $
            168,000
            
            
            64.4
            %Federal
                Home Line Bank
              5%
                due 1/28/08
            
            
            Notes
            
            
            11/2/07
            
            $
            20,000
            
            
            20,293
            
            
            20,012
            
            
            7.7
            %Caterpillar
                Financial
              5.75%
                due 3/15/08
            
            
            Notes
            
            
            11/2/07
            
            $
            35,000
            
            
            35,323
            
            
            35,033
            
            
            13.4
            %Lehman
                Brother Holdings
              4%
                Due 1/22/08
            
            
            Notes
            
            
            11/2/07
            
            $
            25,000
            
            
            25,282
            
            
            24,983
            
            
            9.6
            %242,815
            
            
            248,028
            
            
            95.0%




See
      notes
      to financial statements




F-4




**BLACKHAWK
      CAPITAL GROUP BDC INC.**


STATEMENTS
                OF OPERATIONSYEAR
                ENDED DECEMBER 31,2007
            
            
            2006
            
            
            2005**INVESTMENT
                INCOME:**Interest
                income
            
            $
            3,263
            
            $
            460
            
            $
            1,139**TOTAL
                INVESTMENT INCOME**
            
            
            **3,263**
            
            
            **460**
            
            
            **1,139****EXPENSES:**Professional
                fees
            
            
            366,147
            
            
            315,222
            
            
            19,171Advisory
                fee
            
            
            3,117
            
            
            -
            
            
            -Consulting
                fees to (affiliate in 2005)
            
            
            -
            
            
            21,502
            
            
            12,000Filing
                fees
            
            
            8,767
            
            
            12,914
            
            
            8,848Insurance
            
            
            21,053
            
            
            33,360
            
            
            5,145Interest
                expense to affiliate
            
            
            3,266
            
            
            4,125
            
            
            -Other
            
            
            4,829
            
            
            584
            
            
            910**TOTAL
                EXPENSES**
            
            
            **407,179**
            
            
            **387,707**
            
            
            **46,074****NET
                INVESTMENT (LOSS)**
            
            **$**
            **(403,916**
            **)**
            **$**
            **(387,247**
            **)**
            **$**
            **(44,935**
            **)****UNREALIZED
                GAIN ON INVESTMENTS**
            
            
            **5,213**
            
            
            -
            
            
            **-****NET
                DECREASE IN ASSETS****RESULTING
                FROM OPERATIONS**
            
            
            **(398,703**
            **)**
            **$**
            **(387,247**
            **)**
            **$**
            **(44,935**
            **)****LOSS
                PER COMMON SHARE,****BASIC
                AND DILUTED**
            
            **$**
            **(0.01290**
            **)**
            **$**
            **(0.01371**
            **)**
            **$**
            **(0.00220**
            **)****WEIGHTED
                AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED**
            
            
            **30,896,792**
            
            
            **28,248,018**
            
            
            **20,436,775**





See
      notes
      to financial statements




F-5




**BLACKHAWK
      CAPITAL GROUP BDC INC.**


STATEMENTS
                OF CHANGES IN NET ASSETSYEAR
                ENDED DECEMBER 31,2007
            
            2006
            
            2005**DECREASE
                IN NET ASSETS (LIABILITIES) FROM OPERATIONS**Net
                investment loss
            
            $
            (403,916
            )
            $
            (387,247
            )
            $
            (44,935
            )Unrealized
                gain on investments
            
            
            5,213
            
            
            -
            
            
            -**NET
                DECREASE IN NET ASSETS (LIABILITIES)****RESULTING
                FROM OPERATIONS**
            
            
            **(398,703**
            **)**
            
            **(387,247**
            **)**
            
            **(44,935**
            **)****CAPITAL
                STOCK TRANSACTIONS:**Proceeds
                from common stock sold
            
            
            525,001
            
            
            -
            
            
            88,917Conversion
                of notes and advancesto
                affiliate into common stock
            
            
            132,891
            
            
            68,847
            
            
            61,432Offering
                costs
            
            
            
            
            
            -
            
            
            (87,635
            )Rescission
                of preferred stock - founder
            
            
            
            
            
            -
            
            
            (85
            )**NET
                INCREASE IN NET ASSETS (LIABILITIES)****FROM
                CAPITAL STOCK TRANSACTIONS**
            
            
            **657,892**
            
            
            **68,847**
            
            
            **62,629****TOTAL
                INCREASE (DECREASE) IN NET ASSETS**
            
            
            **259,189**
            
            
            **(318,400**
            **)**
            
            **17,694****NET
                ASSETS (LIABILITIES)- BEGINNING OF YEAR**
            
            
            **(296,424**
            **)**
            
            **21,976**
            
            
            **4,282****NET
                ASSETS (LIABILITIES) END OF YEAR**
            
            **$**
            **(37,235**
            **)**
            **$**
            **(296,424**
            **)**
            **$**
            **21,976**





See
      notes
      to financial statements




F-6




**BLACKHAWK
      CAPITAL GROUP BDC INC.**


STATEMENTS
      OF STOCKHOLDERS‘ EQUITY (CAPITAL DEFICIT)


FOR
      THE
      YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005




COMMON
                  STOCK
              
              PREFERRED
                  STOCK
              
              ADDITIONAL
                PAID-IN
              
              NET
                UNREALIZED
                APPRECIATION
                ON
              
              ACCUMULATED
                NET
                INVESTMENTTOTAL
              
              SHARES
              
              AMOUNT
              
              SHARES
              
              AMOUNT
              
              CAPITAL
              
              INVESTMENT
              
              LOSSBalance-
                  December 31, 2004
              
              $
              4,282
              
              
              8,591,901
              
              $
              86
              
              
              8,500,000
              
              $
              85
              
              $
              16,626
              
              $
              -
              
              $
              (12,515
              )Sale
                  of stock pursuant tooffering plan (at $.01 per
                share)
              
              
              88,917
              
              
              8,891,680
              
              
              89
              
              
              -
              
              
              -
              
              
              88,828
              
              
              -
              
              
              -Conversion
                  of a portion
                of
                  amount owed to affiliate
                (at
                  $.01 per share)
              
              
              61,432
              
              
              6,143,200
              
              
              61
              
              
              -
              
              
              -
              
              
              61,371
              
              
              -
              
              
              -Rescinded
                  preferred stock from founder (at $0.00001 per share)
              
              
              (85
              )
              
              -
              
              
              -
              
              
              (8,500,000
              )
              
              (85
              )
              
              -
              
              
              -
              
              
              -Offering
                  costs
              
              
              (87,635
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (87,635
              )
              
              -
              
              
              -Net
                  decrease in assets resulting from operations
              
              
              (44,935
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (44,935
              )Balance-December
                  31, 2005
              
              
              21,976
              
              
              23,626,781
              
              
              236
              
              
              
              
              
              
              
              
              79,190
              
              
              -
              
              
              (57,450
              )Net
                  decrease in assets resulting from operations
              
              
              (387,247
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (387,247
              )Conversion
                  of a portion
                of
                  amount owed to affiliate
                (at
                  $.01 per share)
              
              
              68,847
              
              
              6,884,700
              
              
              69
              
              
              -
              
              
              -
              
              
              68,778
              
              
              -
              
              
              -Balance
                  - December 31, 2006
              
              
              (296,424
              )
              
              30,511,481
              
              
              305
              
              
              -
              
              
              -
              
              
              147,968
              
              
              -
              
              
              (444,697
              )Net
                  decrease in assets resulting from operations
              
              
              (398,703
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              5,213
              
              
              (403,916
              )Sale
                  of stock pursuant to offering plan (at $1.00 per share)
              
              
              525,001
              
              
              525,000
              
              
              6
              
              
              -
              
              
              -
              
              
              524,995
              
              
              -
              
              
              -Conversion
                  of amount owed to affiliate
                (at
                  $1.00 per share)
              
              
              132,891
              
              
              132,891
              
              
              1
              
              
              -
              
              
              -
              
              
              132,890
              
              
              -
              
              
              -Balance-December
                  31,2007
              
              $
              (37,235
              )
              
              31,169,372
              
              $
              312
              
              
              -
              
              $
              -
              
              $
              805,853
              
              $
              5,213
              
              $
              (848,613
              )




See
      notes
      to financial statements




F-7





**BLACKHAWK
      CAPITAL GROUP BDC INC.**


STATEMENTS
                OF CASH FLOWSYEAR
                ENDED DECEMBER 31,2007
            
            2006
            
            2005**CASH
                FLOWS FROM OPERATING****AND
                INVESTING ACTIVITIES:******Net
                investment loss and decrease in****net assets resulting from operations
            
            $
            (398,703
            )
            $
            (387,247
            )
            $
            (44,935
            )Unrealized
                gain on investments
            
            
            (5,213
            )Purchase
                of Investments
            
            
            (391,226
            )
            
            -
            
            
            -****Proceeds
                from sale and redemption of investments
            
            
            151,676****Adjustments
                to reconcile net decrease:****Increase
                in accrued expenses and interest
            
            
            104,323
            
            
            180,525
            
            
            12,536**(**Decrease)
                Increase in prepaid expenses
            
            
            455
            
            
            (3,478
            )
            
            (5,522
            )**NET
                CASH USED IN OPERATING****AND
                INVESTING ACTIVITIES**
            
            
            **(538,688**
            **)**
            
            **(210,200**
            **)**
            
            **(37,921**
            **)****CASH
                FLOWS FROM FINANCING ACTIVITIES:**Offering
                costs
            
            
            -
            
            
            -
            
            
            -Deferred
                offering costs
            
            
            -
            
            
            -
            
            
            -Net
                proceeds from the issuance of stock
            
            
            525,001
            
            
            -
            
            
            88,917Proceeds
                from issuance of convertible note to affiliated company
            
            
            -
            
            
            100,000
            
            
            -Advance
                from affiliated company
            
            
            17,500
            
            
            33,005
            
            
            13,281Due
                to former stockholder in connection
              with
                common stock rescission
            
            
            -
            
            
            (45
            )
            
            -**NET
                CASH PROVIDED BY FINANCING ACTIVITIES**
            
            
            **542,501**
            
            
            **132,960**
            
            
            **102,198****NET
                INCREASE (DECREASE) IN CASH**
            
            
            **3,813**
            
            
            **(77,240**
            **)**
            
            **64,277****CASH
                - BEGINNING OF YEAR**
            
            
            **637**
            
            
            **77,877**
            
            
            **13,600****CASH
                - END OF YEAR**
            
            **$**
            **4,450**
            
            **$**
            **637**
            
            **$**
            **77,877****Non-cash
                financing activities:**Conversion
                of amount due affiliated company into Common stock
            
            **$**
            132,891
            
            $
            68,847
            
            $
            61,432Rescinded
                preferred stock
            
            **$**
            -
            
            $
            -
            
            $
            85Deferred
                offering costs charged to
              additional
                paid-in capital
            
            **$**
            -
            
            $
            -
            
            $
            87,635




See
        notes
        to financial statements
  F-8


**BLACKHAWK
      CAPITAL GROUP BDC INC.**





NOTES
      TO
      FINANCIAL STATEMENTS





DECEMBER
      31, 2007




**1**
            **SIGNIFICANT
                ACCOUNTING POLICIES**





***Business
      description***





Blackhawk
      Capital Group BDC Inc. (“The Company” or “Blackhawk”) was incorporated in the
      State of Delaware on April 22, 2004.





On
      September 20, 2004 the Company filed a Form N-54A, Notification with the
      Securities and Exchange Commission (“SEC”) electing to become a Business
      Development Company pursuant to Section 54(a) of the Investment Company Act
      of
      1940. As a business development company, Blackhawk will be able to acquire
      interests in small private businesses, as well as non-dividend paying public
      companies.





Blackhawk
      will attempt to locate and negotiate with eligible portfolio companies for
      Blackhawk to invest in, lend funds to, acquire an interest in and/or possibly
      manage. Blackhawk will offer managerial assistance to eligible portfolio
      companies in which it invests.





***Basis
      of presentation***





The
      financial statements have been prepared in accordance with the presentation
      requirements of the AICPA Audit and Accounting Guide for Investment
      Companies.





The
      Company has a net loss for the year ended December 31, 2007 of $398,703 and
      liabilities in excess of assets of ($37,235) as of December 31, 2007. For the
      year ended December 31, 2007, the Company raised net cash proceeds of $525,001
      through a Regulation E offering under the Securities Act of 1933, as amended
      (“Securities Act”) which commenced on November 16, 2006. Prior to such offering,
      the Company’s operations have been principally funded by The Concorde Group Inc.
      (“Concorde”), a corporation controlling Blackhawk and controlled by the founder
      and an affiliate of the Company. The Company is presently dependent on Concorde
      to provide capital and liquidity needs. Concorde has agreed to provide
      sufficient capital to operate through January 1, 2009.





***Uses
      of estimates in the preparation of financial
      statements***





The
      preparation of financial statements in conformity with generally accepted
      accounting principles accepted in the United States of America (“GAAP”) requires
      management to make estimates and assumptions that affect the 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 net revenue
      and
      expenses during each reporting period. Actual results could differ from those
      estimates.





**Income
      Taxes**




The
      Company accounts for income taxes using the asset and liability method described
      in SFAS No. 109, "Accounting For Income Taxes," the objective of which is to
      establish deferred tax assets and liabilities for the temporary differences
      between the financial reporting and the tax bases of the Company's assets and
      liabilities at enacted tax rates expected to be in effect when such amounts
      are
      realized or settled. A valuation allowance related to deferred tax assets is
      recorded when it is more likely than not that some portion or all of the
      deferred tax assets will not be realized.




F-9





The
      Company adopted the provisions of Financial Accounting Standards Board
      interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an
      interpretation of FASB Statement No. 109 (“SFAS 109”) effective January 1,
      2007.  As a result of the implementation of FIN 48, the Company
      recognized no adjustment for uncertain tax provisions.  At the
      adoption date of January 1, 2007, the Company had a deferred tax asset which
      was
      fully reserved by a valuation allowance to reduce the deferred tax asset to
      the
      amount that is more likely than not to be realized.





The
      Company recognizes interest and penalties related to uncertain tax positions
      in
      general and administrative expense.  As of December 31, 2007, the
      Company has not recorded any provisions for accrued interest and penalties
      related to uncertain tax positions.





The
      tax
      years 2004 through 2007 remain open to examination by the major tax
      jurisdictions to which we are subject.





***Revenue
      recognition***





·
            Unrealized
                gain and losses resulting from the change in the valuation of investments
                are reflected in the statement of
                operations.




·
            Interest
                income is recorded on the accrual
                basis.




·
            Realized
                gains or losses on investments are recorded on a trade date
                basis.





***Investments***





The
      Company's investments are carried at fair value.





***New
      accounting pronouncement***





In
      September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
      No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value
      and
      establishes a framework for measuring fair value. It also expands the
      disclosures about the use of fair value to measure assets and liabilities.
      SFAS
      157 is effective the first fiscal year beginning after November 15, 2007 which
      for the company is January 1, 2008. The adoption of SFAS 157 will not have
      a
      material impact on the Company’s financial statements.





***Net
      loss per common share***





Basic
      and
      diluted loss per common share is calculated by dividing net loss by the weighted
      average number of outstanding common shares during the period. The Company
      has
      no potential shares that could dilute earnings per share in the
      future.





**2**  **STOCKHOLDERS’
      EQUITY**





The
      Company is authorized to issue 1,000,000,000 shares of common stock and, at
      December 31, 2004, was authorized to issue 15,000,000 shares of preferred stock,
      both with a par value of $.00001 per share. Shortly after formation, the Company
      sold 6,500,000 shares of common stock and 8,500,000 shares of preferred stock,
      net of 4,500,000 shares of common stock issued and subsequently rescinded,
      as
      discussed below, to its founders for an aggregate of $150.





Pursuant
      to an offering circular dated September 15, 2004, the Company commenced an
      offering to sell a minimum of 750,000 and a maximum of 45,000,000 shares of
      common stock at $.01 per share. During 2005 and 2004, the Company sold 8,891,680
      and 2,091,091 shares, respectively, for aggregate gross proceeds of $88,917
      and
      $20,919, respectively.




F-10





Holders
      of shares of common stock are entitled to one vote for each share on all matters
      to be voted on by the stockholders. Holders of common stock do not have
      cumulative voting rights.





The
      Board
      of Directors was authorized to provide for the issuance of shares of preferred
      stock in series and to establish the number of shares to be included in each
      such series, and to fix the designation, powers, preferences and rights of
      the
      shares of each such series and the qualifications, limitations or restrictions
      thereof without any further vote or action by the stockholders. Any shares
      of
      preferred stock so issued would have priority over the common stock with respect
      to dividend or liquidation rights. The preferred stock had super voting rights
      entitling each share to 100 votes and had priority over the common stock with
      respect to dividend or liquidation rights.





On
      November 9, 2005 the Board of Directors rescinded the issuance of shares of
      preferred formation stock to The Concorde Group Inc. The Company refunded to
      Concorde the $85 that Concorde paid for the shares. Concorde waived any rights
      it may have against Blackhawk in connection with the issuance and stated that
      it
      will not assert any claim against the Company. On November 12, 2005 certain
      investors returned 4,500,000 shares of common stock and refunded $45 to the
      investors in 2006. Each investor waived any rights he or she may have against
      Blackhawk in connection with the issuance and stated that he or she will not
      assert any claim against the Company. On November 29, 2005, Blackhawk amended
      the Certificate of Incorporation in the State of Delaware to eliminate the
      right
      to issue preferred shares. As of November 29, 2005 all shares are to be common
      shares.





During
      2006 and 2005 amount due to affiliates of $68,847 and $61,432 was converted
      into
      6,884,700 and 6,143,200 shares of common stock (at $.01 per share),
      respectively.





Pursuant
      to the Company's Regulation E Offering, as of June 4, 2007, the Company sold
      an
      aggregate of 502,891 shares of common stock, $.00001 par value per share
      ("Common Stock"), at a purchase price of $1.00 per share, to four (4) accredited
      investors for an aggregate amount of $502,891. The sale consisted of the
      following: (i) 370,000 shares sold to three (3) accredited investors for the
      purchase price of $1.00 per share, or an aggregate of $370,000; and (ii) the
      issuance of 132,891 shares to Concorde, an affiliate and the largest stockholder
      of the Company, in exchange for (x) $107,391 in a convertible note (consisting
      of $100,000 in principal and $7,391 in accrued and unpaid interest) owed by
      the
      Company to Concorde and issued on August 1, 2006 and (y) $25,500 in a
      convertible note owed by the Company to Concorde and issued on May 29, 2007.
      The
      conversion price for both of these notes was $1.00 per share of Common
      Stock.





In
      June
      and July 2007, the Company sold an additional 150,000 and 5,000, respectively,
      shares of its Common Stock for an aggregate of $155,000 in cash in the
      Regulation E offering. The Offering Circular was amended on August 30, 2007
      to
      keep the offering open until October 15, 2007. On October 16, 2007, the Company
      extended the offering until November 15, 2007. The net cash proceeds from the
      Regulation E offering have been $525,001 through October 31, 2007. No sales
      of
      shares of Common Stock in the Regulation E offering were made by the Company
      from August -December 2007.





**3**  **INCOME
      TAXES**





The
      net
      deferred tax asset in the accompanying balance sheets include the following
      amounts of deferred tax assets and liabilities.




F-11




Deferred
                Tax Assets
            
            2007
            
            2006Capitalized
                Startup Costs
            
            $
            382,000
            
            $
            200,000Valuation
                Allowance
            
            
            (382,000
            )
            
            (200,000
            )Net
                Deferred Tax Asset
            
            $
            -
            
            $
            -




The
      deferred tax assets represent the benefit of its capitalized startup
      costs. The Company has provided a full valuation allowance for such
      deferred tax assets due to uncertainty to realize such benefits in the
      future.





The
      difference between the statutory tax rate of 34% and the company's effective
      tax
      rate is due to the increase in the valuation allowance of $182,000 (2007) and
      $174,000 (2006) and certain expenses not deductible for tax
      purposes.





As
      of
      December 31, 2007, the Company had no net operating loss carryforward. All
      of
      the startup costs were capitalized for tax purposes.





**4**  **RELATED
      PARTY TRANSACTIONS**





During
      2004, 2005 and 2006 the company borrowed $91,908, $13,281 and $133,005,
      respectively, from Concorde to fund the formation of Blackhawk, offering costs
      for the offering plan and operating expenses. Of the amount borrowed in 2006,
      $100,000 was evidenced by a demand convertible note bearing interest at 8.25%
      per annum convertible after November 1, 2006 into common stock of the company
      at
      a price of $1.00 per share or the price per share of the Company’s next
      Regulation E offering. The balance of borrowings were non-interest bearing
      and
      are due on demand. The borrowings were approved unanimously by the Board of
      directors of Blackhawk as fair and in the best interest of
      Blackhawk.





In
      2006
      and 2005, the Board of Directors unanimously voted to allow Concorde to convert
      amounts due to Concorde of $68,847 (evidenced by a non-interest bearing
      promissory note due on demand) and $61,432, respectively into 6,884,700 and
      6,143,200 shares respectively of common stock at $.01 per share, which was
      the
      offering price set forth in Blackhawk’s Form 1-E and its Offering Circular,
      which the Board of Directors approved unanimously and determined was in the
      fair
      and best interest of Blackhawk.





At
      December 31, 2006, outstanding non-interest bearing borrowings due to Concorde
      amount to $ 8,000.





The
      Company owed Concorde $100,000 plus accrued interest of $4,125  which
      was
      evidenced by a demand convertible note bearing interest at 8.25% per annum
      convertible after November 1, 2006 into common stock of the Company at a price
      of $1.00 per share, or the price per share of the Company’s Regulation E
      Offering. On June 4, 2007 Concorde converted the note (including accrued
      interest of $7,391) into 107,391 shares of common stock.





On
      May
      29, 2007, Blackhawk issued a convertible note in the principal amount of $25,500
      ("Note") to Concorde. The Note evidenced a loan from Concorde to the Company
      for
      advances of $17,500 during 2007 together with $8,000 of the advances referred
      to
      above made to the Company prior to January 1, 2007. The advances were used
      to
      fund a portion of expenses incurred by the Company consisting of legal fees
      and
      expenses, accounting fees and expenses, general and administrative expenses.
      The
      Note is repayable upon demand and does not bear interest. The Note is
      convertible into shares ("Shares") of common stock of the Company at a
      conversion rate of one share of common stock per $1.00 of principal amount
      of
      Note converted, the price per share in the Company's Regulation E offering.
      The
      transaction was approved by unanimous written consent by the Board of Directors
      of the Company as being fair and in the best interests of the Company. On June
      4, 2007, pursuant to the terms of the Note, Concorde converted the $25,500
      principal amount of the Note into 25,500 shares of Common Stock at $1.00 of
      principal amount of Note converted, the price per share in the Company's
      Regulation E offe ring.




F-12





Blackhawk
      paid a consulting fee of $12,000 to a former vice president and stockholder
      of
      the Company during the year ended December 31, 2005.





The
      Company shares office space and other administrative functions with Concorde
      at
      no charge to the Company. The Company expects to pay fair market value for
      such
      services on a prospective basis following the close of its next
      offering.


**5.**  **INVESTMENT
        ADVISORY AGREEMENT; CONSULTING AGREEMENT**


Blackhawk
      has engaged Barak Asset Management, LLC, a Delaware limited liability company
      (“Barak”) and an investment adviser registered under the Investment Advisers Act
      of 1940 (“Advisers Act”), to serve as an investment adviser to Blackhawk and
      manage its portfolio of investments.





Investment
      advisory fees are calculated based upon the average cash value of assets at
      the
      end of each quarter including the value of any withdrawals from the assets
      made
      during that quarter ranging from 0.50% to 1.80% of assets managed. Fees shall
      be
      billed and payable quarterly (or a prorated period, when
      applicable)





For
      the
      year ended December 31, 2007, the Company incurred fees to Barak in the amount
      of $3,117.





Blackhawk
      has entered into an agreement dated September 12, 2006 with Robert S. Tull,
      Jr.
      for a three-year term (the "Agreement"). Under the Agreement, Mr. Tull will
      consult with the Blackhawk Board of Directors on investments and have the
      following duties: consulting Blackhawk's Board of Directors on investment
      decisions and strategies, consulting on investment diversification in the
      strategies and consulting on investment opportunities. Pursuant to the
      Agreement, the Blackhawk Board of Directors will determine Mr. Tull's
      compensation when it closes its third Regulation E offering and has sufficient
      proceeds to compensate Mr. Tull. Mr. Tull is not a registered investment
      adviser. As of December 31, 2007, the Company has not incurred any liability
      to
      Mr. Tull.




**6**  **ACCRUED
      EXPENSES**





Accrued
      expenses at December 31, 2006 and 2005 consist principally of legal expense.





**7**  **SUBSEQUENT
      EVENTS**





Pursuant
      to the Company’s third Regulation E offering which commenced on November 30,
      2007, as of March 24, 2008, the Company sold an aggregate of 698,112 shares
      of
      common stock to five purchasers at a purchase price of $1.00 per share for
      an
      aggregate of $698,112. Selling commissions of $69,311 were paid to Richard
      J.
      Kelly, prior selling agent for the Company, out of the $698,112, netting
      $628,801 to the Company. The Offering is open until November 28, 2008. Sales
      of
      additional shares in the Offering was suspended on March 24, 2008 after the
      Company received a comment letter from the SEC on its Form 1-E/A for the
      Offering on file with the SEC; the Company will resume the Offering after it
      files a response letter and amended Form 1-E/A with the SEC. The Company
      received another $100,000 from an investor for the purchase of shares which
      the
      Company is holding in escrow; the Company plans on closing on this money out
      of
      escrow when it complies with the SEC matters described above.




F-13





**8**  **FINANCIAL
      HIGHLIGHTS**





The
      following is a schedule of financial highlights for the years ended December
      31,
      2007, 2006 and 2005 and the period from inception (April 22, 2004) to December
      31, 2004.


YEAR
                  ENDED DECEMBER 31,**2007**
              
              **2006**
              
              **2005**
              
              FROM
                INCEPTION
                (APRIL
                  22,
                2004)
                  TO
                DECEMBER
                  31,
                2004**Per
                  Share Data:**Net
                     asset value - beginning of period
              
              $
              (0.00972
              )
              $
              0.00093
              
              $
              0.00050
              
              $
              0.00001Net
                  investment loss *
              
              
              (0.01307
              )
              
              (0.01371
              )
              
              (0.00220
              )
              
              (0.00179
              )Issuance
                  of common stock
              
              
              1.00000
              
              
              0.01000
              
              
              0.00417
              
              
              0.00796Net
                  realized and unrealized gain(loss)**
              
              $
              (0.97840
              )
              
              (0.00694
              )
              
              (0.00154
              )
              
              (0.00568
              )Net
                  asset (liability) value - end of period
              
              $
              (0.00119
              )
              
              (0.00972
              )
              
              0.00093
              
              
              .00050**Total
                  return based on net asset value *****
              
              
              (135
              %)
              
              (1,474
              %)
              
              (440
              %)
              
              (17,900
              %)Common
                  shares outstanding - end of period****
              
              
              31,169,372
              
              
              30,511,481
              
              
              23,626,781
              
              
              8,591,901**Ratio/Supplemental
                  Data**:Net
                  assets (liabilities) - end of period
              
              
              (37,235
              )
              $
              (296,424
              )
              $
              21,976
              
              $
              4,282Ratio
                  of net investment loss to average net assets*****
              
              
              (813
              %)
              
              (3,524
              %)
              
              (91
              %)
              
              (1,212
              %)Ratio
                  of operating expenses to average net assets*****
              
              
              819
              %
              
              3,528
              %
              
              94
              %
              
              1,213
              %





*
            Calculated
                based on average shares outstanding during
                period





**
                Net
                    realized and unrealized gain(loss) represents the dilutive effect
                    of share
                    issuance. This caption used per the AICPA Audit and Accounting
                    Guide for
                    investment Companies Section 7.74
                    (c)





***
            Total
                returns for periods of less than one year are not
                annualized





****
            Common
                shares outstanding are reduced by rescinded
                shares





*****
            Annualized
                for periods less than one year




F-14