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, 2008
 
 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, 11th 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 o No 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 oAccelerated
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 o No x
 
 The
number of shares outstanding of Blackhawk's common stock on
March 24, 2009 was 32,467,484.
  
  TABLE
OF CONTENTS
 
 GENERAL
NOTE
 
 PART
I
 Item
      1.
              Business
              2Item
      1A.
              Risk
      Factors
              9Item
      1B.
              Unresolved
      Staff Comments
              31Item
      2.
              Properties
              31Item
      3.
              Legal
      Proceedings
              31Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              31PART
      IIItem
      5.
              Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchase of Equity Securities
              31Item
      6.
              Selected
      Financial Data
              33Item
      7.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operation
              34Item
      7A.
              Quantitative
      and Qualitative Disclosures about Market Risk
              38Item
      8.
              Financial
      Statements and Supplementary Data
              39Item
      9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              39Item
      9A.
              Controls
      and Procedures
              39Item
      9A(T).
              Controls
      and Procedures
              39Item
      9B.
              Other
      Information
              40PART
      IIIItem
      10.
              Directors,
      Executive Officers of the Registrant
              40Item
      11.
              Executive
      Compensation
              45Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              53Item
      13.
              Certain
      Relationships And Related Transactions
              55Item
      14.
              Principal
      Accounting Fees and Services
              56PART
      IVItem
      15.
              Exhibits
      and Financial Statement Schedules
              57
  
 
 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 ("Exchange Act"), and Section 27A of
the Securities Act of 1933, as amended ("Securities Act"), 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;
  §
              Availability
      of desirable portfolio investment opportunities that meet Blackhawk's
      investment criteria;
 
 §
              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, including risk factors, referenced in this
  Report.
 
 Because
the risk 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 ("SEC"),
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 Report.
 
 Blackhawk
has been and is currently subject to the informational requirements of the
Exchange Act.  In accordance with those requirements, we file reports and
other information with the SEC.  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 SEC,
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, and a private placement of shares of
its Common Stock under Rule 506 under Regulation D of the Securities Act, which
has not closed as of the date of this Report.
 
 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.
  2
  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.
 
 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 third Regulation E Offering, which commenced on November 30,
2007, Concorde sold in 2008 an aggregate of 1,298,112 shares of Common Stock, at
a purchase price of $1.00 per share to nine (9) purchasers for an aggregate
amount of $1,298,112.  Selling commissions were $129,311, which were
paid as follows: (i) $69,311 to Richard J. Kelly, prior selling agent; and (ii)
$60,000 to John W. Loofbourrow Associates, Inc. ("JWL").  Richard
Kelly currently works at JWL.  Blackhawk had retained JWL to act as
placement agent to raise equity capital for Blackhawk pursuant to an agreement
dated April 9, 2008 ("JWL Agreement") which was executed on April 14,
2008.  JWL solicited interest from a limited number of potential
investors who were "accredited investors" in connection with raising equity
capital for Blackhawk in its third Regulation E offering.  In return
for JWL's services, Blackhawk paid JWL a cash fee equal to ten percent (10%) of
the purchase price of securities placed by JWL.  Blackhawk did not
have to reimburse JWL for its expenses.  The JWL Agreement had a term
of sixty (60) days from the date that Blackhawk's Form 1-E (filed with the SEC)
for its third Regulation E offering was available to be sent to prospective
investors and contained customary indemnification and confidentiality
provisions.  The JWL Agreement also provided that for a period of up
to five (5) years from the termination date of the JWL Agreement, if JWL enters
into a selling group in any subsequent securities offerings of Blackhawk, then
JWL shall receive additional financing fees if Blackhawk sells securities to
those investors previously introduced by JWL.  The additional fees
payable to JWL will be at the same rate as any underwriting or placement fees
that are listed in any Blackhawk future offering memorandum or
prospectus.  The JWL Agreement expired on June 18,
2008.  The JWL Agreement was amended on June 30, 2008
("Amendment").  The Amendment acknowledged that the JWL Agreement
expired on June 18, 2008 ("Expiration Date") and that JWL was entitled to
receive financing fees with respect to purchases by investors that purchased
their shares after the Expiration Date, but were introduced to Blackhawk by JWL
before the Expiration Date.  In July 2008, Blackhawk sold $600,000 in
shares of Common Stock from investors, introduced to it by JWL and paid $60,000
in placement fees to JWL.
  4
 
 Pursuant
to Blackhawk's second Regulation E offering, Blackhawk sold and exchanged as of
June 4, 2007 an aggregate of 502,891 shares of 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 Blackhawk, in exchange for
(a) $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 (b) $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 aggregate net cash proceeds from the second Regulation E
offering was $525,001.
  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 of 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 of the Common Stock of Blackhawk in exchange
for the Note.  The stock was 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.
  5
 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 ("Barak"), a New York limited liability company, and an
investment adviser registered under the Investment Advisers Act of 1940, as
amended ("Investment Advisers Act"), to serve as an investment adviser to
Blackhawk and manage its portfolio of 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,
2009.  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.  Barak has been paid fees by Blackhawk
of $14,418 as of December 31, 2008.
 
 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 an
equity offering for which sufficient net proceeds have been raised 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.
 
 MacroMarkets
Investment
  On
January 12, 2009, Blackhawk entered into a Voting Capital Interests Purchase
Agreement ("Purchase Agreement") with MacroMarkets LLC, a Delaware limited
liability company ("MacroMarkets").  Pursuant to the Purchase
Agreement, Blackhawk purchased a five percent (5%) membership interest in
MacroMarkets for $250,000 and Craig A. Zabala, Chairman and President of
Blackhawk, was appointed a non-voting board member of
MacroMarkets.  The Purchase Agreement contains standard
representations, warranties and indemnification provisions.  The
transaction closed on January 12, 2009.
  6
 
 MacroMarkets
is the parent company founded by Robert Shiller, Sam Masucci and Allan Weiss in
2002 to develop financial products and new risk management tools on assets that
are difficult to own and hedge.  Macro Financial, LLC, a FINRA member
broker dealer, is a subsidiary of MacroMarkets that provides sales and marketing
support for Macro Securities Depositor, LLC, Macro Inflation Depositor, LLC and
MacroShares Housing Depositor, LLC, which use proprietary product structures to
deliver performance on commodities, inflation and real estate.
 
 MacroMarkets
holds patents for MacroShares®, an exchange-traded product family whose unique
structure can be applied to asset classes that can be reliably
indexed.  MacroMarkets was a key catalyst in launching the U.S. house
price futures and options markets on the Chicago Mercantile Exchange (CME) in
2006, and with their partners at Fiserv Inc. and Standard & Poors, in
establishing the S&P/Case-Shiller Home Price Indices as the globally
recognized benchmark for U.S. home prices.  Robert Shiller and Chip
Case co-founded Case-Shiller Home Price Indexes based on the fundamental designs
of the S&P 500 equity index.  Sam Masucci, the CEO of
MacroMarkets, and Robert Shiller, the Chief Economist of MacroMarkets, are
currently working on additional products in the real estate market.
  Relationship
With Concorde and Other Matters
  As of the
date of this Form 10-K, Blackhawk has the following affiliated relationships
with Concorde:
  ·
              Concorde
      owns 10,317,681 shares of Common Stock of Blackhawk, representing 31.78%
      of the outstanding shares of Common Stock of
  Blackhawk;
  ·
              Concorde
      has agreed to provide sufficient funds to Blackhawk through January 1,
      2010 if Blackhawk is unable to raise sufficient proceeds from an equity
      offering or offerings and
operations;
  ·
              Concorde
      provides office space and secretarial assistance to Blackhawk for which,
      commencing on January 1, 2009, Blackhawk is paying or accruing to Concorde
      $4,000 per month for such space;
and
  ·
              Craig
      A. Zabala, Chairman, President and Chief Executive Officer of Blackhawk,
      also holds such positions with Concorde and owns 62.42% of Concorde's
      outstanding shares of Common Stock.
  7
  From
inception (April 22, 2004) through December 31, 2008, Blackhawk funded its cash
operating requirements through the sale of its common stock and loans from
Concorde.
  During
2006, Blackhawk borrowed $133,005 from Concorde to fund the formation of
Blackhawk, offering costs for its first two Regulation E offerings 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 second Regulation E offering.  The
balance of borrowings were non-interest bearing and were due on
demand.  The borrowings were approved unanimously by the Board of
Directors of Blackhawk as fair and in the best interest of
Blackhawk.
  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
Blackhawk for advances of $17,500 during the nine months ended September 30,
2007 together with $8,000 of advances made to Blackhawk prior to January 1,
2007.  The advances were used to fund a portion of expenses incurred
by Blackhawk consisting of legal fees and expenses, accounting fees and
expenses, general and administrative expenses.  The Note was repayable
upon demand and does not bear interest.  The Note was convertible into
shares of common stock of Blackhawk at a conversion rate of one share of common
stock per $1.00 of principal amount of Note converted, the price per share in
Blackhawk's second Regulation E offering.  The transaction was
approved by unanimous written consent of the Board of Directors of Blackhawk as
being fair and in the best interests of Blackhawk.  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 Blackhawk's second Regulation E
offering.
  At
December 31, 2008 and 2007, there were no outstanding amounts due to
Concorde.
  For the
year ended December 31, 2008, Blackhawk has a net investment loss of $405,086
and total net assets of $719,976 at December 31, 2008.
  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 Common Stock of Blackhawk.  The Shares are "restricted
securities" as defined in Rule 144 of the Securities Act.  The stock
was issued in the exchange at $.01 per share, the price per share in Blackhawk's
first Regulation E offering.  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.
  8
  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 $171,267.81.  These shares were sold pursuant to Blackhawk's
first Regulation E offering.  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 had 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 had against
Blackhawk in connection with the issuance and agreed that he or she would 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.
  Item 1A.  Risk
Factors
 
 No
Fixed Investment Policy; Limited 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 except for the
MacroMarkets investment described above, which was made in
2009.  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, and in the MacroMarkets
investment.  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.
 
 9
 
 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 three Regulation E offerings only $1,711,731, net of expenses
of $221,218, in equity capital and has borrowed $255,779 from Concorde, the
largest stockholder of Blackhawk of which $255,779 along with $7,391 of accrued
interest was converted into 13,160,791 shares of common stock by
Concorde.  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.
  Fluctuation
in Net Asset Value (NAV) of Common Stock
 
 Blackhawk's net asset value (NAV) of
its common stock as of December 31, 2008 was $719,976 or $.02218 per
share.  The NAV has fluctuated over the past three (3) years and was
negative at the end of 2007 and 2006.  There are material risks
associated with the changes in Blackhawk's NAV and the fact that it has been
negative during such periods.  These risks are: (i) Blackhawk may be
insolvent or bankrupt due to negative NAV; (ii) fluctuations in NAV may not be
reflected in the price of the common stock in the market place and the price of
the common stock may be at a premium or discount to NAV; and (iii) when
Blackhawk purchases assets in a portfolio investment, NAV may reflect this as a
liability and not an asset.
 
 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.
  10
 
 Concorde's
Ownership of Blackhawk Common Stock; Affiliates, Conflicts of
Interest
  As of the
date of this Form 10-K, Concorde owns 10,317,681 shares of Blackhawk Common
Stock, representing 31.78% 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 62.42%
stock ownership of Concorde.  He also owns or controls 2,432,500
shares of Blackhawk Common Stock, representing 7.49% of the outstanding shares
of Blackhawk Common Stock.  Concorde and Zabala may be deemed to
control Blackhawk.  Conflicts of interest may arise between Concorde
and Blackhawk for business and investment opportunities and other
matters.  Any conflicts of interest will be resolved by a board
committee of Blackhawk directors consisting of only independent Blackhawk
directors.
  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.
 
 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;
  11
  §
                  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 making an investment in a specific
entity.  Blackhawk's MacroMarkets investment closed in January
2009.  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.
 
 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.
  12
 
 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 January 1, 2010.  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.
 
 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.
 
 13
 
 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.
 
 Subject to compliance with the BDC
provisions of the Investment Company Act, Blackhawk will invest in Special
Purpose Vehicles ("SPVs") and other entities and vehicles seeking special
strategies in the ETF marketplace.
 
 14
  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 6, 2009, shares
have traded between $.04 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.
 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.
 
 15
  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.
 
 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; (5) material positive or adverse changes
in the investee's business; and (6) the inability to obtain credit.
 
 The
comparables 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.  At times discounts may be 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 comparables method, the
differences among companies in terms of the source and type of revenues, quality
of earnings, and capital structure are carefully considered.
  16
  An
comparables 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 comparables 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 which are
specific to the security.  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.
 
 Regulation
- Business Development Companies ("BDCs")
 
 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 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.
 
 17
  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 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 made the
MacroMarkets investment.
  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.
 18
 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.
  19
 
 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.
 
 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.
 20
 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
 
 The
following discussion is a general summary of the material federal income tax
considerations applicable to Blackhawk and to an investment in common
stock.  This summary does not purport to be a complete description of
the income tax considerations applicable to such an investment.  For
example, it does not describe tax consequences that are assumed to be generally
known by investors or certain considerations that may be relevant to certain
types of holders subject to special treatment under federal income tax laws,
including stockholders subject to the alternative minimum tax, tax-exempt
organizations, insurance companies, regulated investment companies, dealers in
securities, pension plans and trusts, and financial
institutions.  This summary assumes that investors hold Blackhawk
common stock as capital assets (within the meaning of the Internal Revenue Code
of 1986, as amended ("Code")).  The discussion is based upon the Code,
Treasury regulations, and administrative and judicial interpretations, each as
in effect as of the date of this prospectus and all of which are subject to
change, possibly retroactively, which could affect the continuing validity of
this discussion.  Blackhawk has not sought and will not seek any
ruling from the Internal Revenue Service (the "IRS") regarding this
offering.  This summary does not discuss any aspects of U.S. estate or
gift tax or foreign, state or local tax.  It does not discuss the
special treatment under federal income tax laws that could result if Blackhawk
invested in tax-exempt securities or certain other investment assets in which it
does not currently intend to invest.
  A "U.S.
stockholder" generally is a beneficial owner of shares of Blackhawk common stock
who is for federal income tax purposes:
  ·
              a
      citizen or individual resident of the United States including an alien
      individual who is a lawful permanent resident of the United States or
      meets the “substantial presence” test in Code Section 7701
      (b);
  ·
              a
      corporation or other entity taxable as a corporation, for federal income
      tax purposes, created or organized in or under the laws of the United
      States or any political subdivision
thereof;
  ·
              a
      trust over which a court in the U.S. has primary supervision over its
      administration or over which U.S. persons have control;
  or
  ·
              an
      estate, the income of which is subject to federal income taxation
      regardless of its source.
 21
  A
"Non-U.S. stockholder" is a beneficial owner of shares of Blackhawk common stock
that is neither a U.S. stockholder nor a partnership for federal income tax
purposes.
  If a
partnership (including an entity treated as a partnership for U.S. federal
income tax purposes) holds shares of Blackhawk common stock, the tax treatment
of a partner in the partnership will generally depend upon the status of the
partner and the activities of the partnership.  A prospective
stockholder who is a partner of a partnership holding shares of Blackhawk common
stock should consult his, her or its tax advisors with respect to the purchase,
ownership and disposition of shares of Blackhawk common stock.
  Tax
matters are often very complicated and the tax consequences to an investor of an
investment in Blackhawk shares will depend on the facts of his, her or its
particular situation.  Blackhawk encourages investors to consult their
own tax advisors regarding the specific consequences of such an investment,
including tax reporting requirements, the applicability of federal, state, local
and foreign tax laws, eligibility for the benefits of any applicable tax treaty
and the effect of any possible changes in the tax laws.
  Election
to be Taxed as a Regulated Investment Company ("RIC")
  As a
business development company ("BDC"), Blackhawk intends to elect to be treated
as a RIC under Subchapter M of the Code when its Board of Directors determines
this is in the best interests of its shareholders after it acquires
investments.  As a RIC, Blackhawk generally will not have to pay
corporate level taxes on any income or gains that it distributes to its
stockholders as dividends.  To qualify for tax treatment as a RIC,
Blackhawk must, among other requirements, meet certain source of income and
asset diversification requirements (as described below).  In addition,
to obtain the federal income tax benefits allowable to RICs, Blackhawk must
distribute to its stockholders, for each taxable year, at least 90% of its
“investment company taxable income,” which is generally the sum of its net
ordinary income plus the excess, if any, of realized net short term capital
gains over realized net long tern capital losses (the "Annual Distribution
Requirement").
  Taxation
as a Regulated Investment Company
  For any
taxable year in which Blackhawk qualifies as a RIC and satisfies the Annual
Distribution Requirement, it generally will not be subject to federal income tax
on the portion of its investment company taxable income and net capital gain
(i.e., net realized long-term capital gains in excess of net realized short-term
capital losses) that it distributes to stockholders with respect to that
year.  Blackhawk will be subject to federal income tax at the regular
corporate rates on any net ordinary income or capital gain not distributed (or
deemed distributed) to its stockholders.
  As a RIC,
Blackhawk will be subject to a 4% nondeductible federal excise tax on certain
net taxable undistributed income unless it distributes in a timely manner an
amount at least equal to the sum of (1) 98% of its net ordinary income for each
calendar year, (2) 98% of its capital gain net income for the one year period
ending October 31 in that calendar year, and (3) any net income realized, but
not distributed, in the preceding year.  Blackhawk will not be subject
to excise taxes on amounts on which it is required to pay corporate income tax
(such as retained net capital gains).  Blackhawk anticipates that it
would make sufficient distributions each taxable year and/or pay sufficient
corporate income tax to avoid any excise tax liability, although Blackhawk
reserves the right to pay an excise tax rather than make an additional
distribution when circumstances warrant (e.g., the payment of an excise tax
amount that it deems to be de minimis).
 
 22
  To
qualify for tax treatment as a RIC for federal income tax purposes, in addition
to satisfying the Annual Distribution Requirement, Blackhawk must, among other
things:
  ·
              have
      in effect at all times during each taxable year an election to be
      regulated as a BDC under the Investment Company
  Act;
  ·
              derive
      in each taxable year at least 90% of its gross income from (a) dividends,
      interest, payments with respect to certain securities loans, gains from
      the sale of stock or other securities, or other income derived with
      respect to its business of investing in such stock or securities and (b)
      net income derived from an interest in a "qualified publicly traded
      partnership" (all such income "Qualifying Income");
  and
  ·
              diversify
      its holdings so that at the end of each quarter of the taxable year, at
      least 50% of the value of its assets consists of cash, cash equivalents,
      U.S. government securities, securities of other RICs, and other securities
      if such other securities of any one issuer do not represent more than 5%
      of the value of its assets or more than 10% of the outstanding voting
      securities of such issuer; and no more than 25% of the value of its assets
      is invested in the securities, other than U.S. government securities or
      securities of other RICs, of (a) one issuer, (b) securities of two or more
      issuers that are controlled, as determined under applicable tax rules, by
      Blackhawk and that are engaged in the same or similar or related trades or
      businesses or (c) securities of one or more "qualified publicly traded
      partnerships" (the "Diversification
Tests").
  Blackhawk
may be required to recognize taxable income in circumstances in which it does
not receive cash.  For example, if Blackhawk holds debt obligations
that are treated under applicable tax rules as having original issue discount
(such as debt instruments with payment in kind interest or, in certain cases,
increasing interest rates or issued with warrants), Blackhawk must include in
income in each year a portion of the original issue discount that accrues over
the life of the obligation, regardless of whether cash representing such income
is received by it in the same taxable year.  Because any original
issue discount accrued will be included in Blackhawk’s investment company
taxable income for the year of accrual, it may be required to make a
distribution to its stockholders to satisfy the Annual Distribution Requirement,
even though it will not have received any corresponding cash
amount.
 
 23
  Blackhawk
anticipates that it will be authorized to borrow funds and to sell assets to
satisfy the Annual Distribution Requirement and to avoid any excise tax
liability.  However, under the Investment Company Act, Blackhawk is
not currently permitted to make distributions to its stockholders while its debt
obligations and other senior securities are outstanding unless certain "asset
coverage" tests are met.  Moreover, Blackhawk’s ability to dispose of
assets to meet the Annual Distribution Requirement and to avoid any excise tax
liability may be limited by (1) the illiquid nature of Blackhawk’s portfolio, or
(2) other requirements relating to Blackhawk’s tax treatment as a RIC, including
the Diversification Tests.  If Blackhawk disposes of assets to meet
the Annual Distribution Requirements and to avoid any excise tax liability, it
may make such dispositions at times that, from an investment standpoint, are not
advantageous.
  Gain or
loss realized by Blackhawk from the sale or exchange of warrants as well as any
loss attributable to the lapse of such warrants generally will be treated as
capital gain or loss.  Such gain or loss generally will be long-term
or short-term, depending on how long Blackhawk held a particular
warrant.  Blackhawk’s transactions in options, futures contracts,
hedging transactions and forward contracts will be subject to special tax rules,
the effect of which may be to accelerate income to Blackhawk, defer losses,
cause adjustments to the holding periods of investments, convert long-term
capital gains into short-term capital gains, convert short-term capital losses
into long-term capital losses or have other tax consequences.  These
rules could affect the amount, timing and character of distributions to
stockholders.  Blackhawk has not yet determined the extent to which it
might engage in these types of transactions, if at all.
  A RIC is
not permitted to deduct expenses in excess of its "investment company taxable
income" (which is, generally, ordinary income plus net short-term capital gains
in excess of net long-term capital losses).  If Blackhawk’s expenses
in a given year exceed investment company taxable income (e.g., as the result of
large amounts of equity based compensation), it would experience a net operating
loss for that year.  However, a RIC is not permitted to carry forward
net operating losses to subsequent years.  In addition, expenses can
be used only to offset investment company taxable income, not net capital gain
(that is, the excess of net long-term capital gains over the net short-term
capital losses).  Due to these limits on the deductibility of
expenses, Blackhawk may for tax purposes have aggregate taxable income over a
period of several years that it is required to distribute and that is taxable to
its stockholders even if such income is greater than the net income it actually
earned during those years in the aggregate.  Such required
distributions may be made from Blackhawk's cash assets or by liquidation of
investments, if necessary.  Blackhawk may realize gains or losses from
such liquidations.  In the event Blackhawk realizes net capital gains
from such transactions, a stockholder may receive a larger capital gain
distribution than the stockholder would have received in the absence of such
transactions.  Assuming Blackhawk qualifies for tax treatment as a
RIC, its corporate-level federal income tax should be substantially reduced or
eliminated, and, as explained above, a portion of Blackhawk's distributions or
deemed distributions may be characterized as long-term capital gain in the hands
of stockholders.  See "Election to be Taxed as a Regulated Investment
Company" above.
  24
 
 Except as
otherwise provided, the remainder of this discussion assumes that Blackhawk
qualifies for tax treatment as a RIC and has satisfied the Annual Distribution
Requirement.
  Taxation
of U.S. Stockholders
  For
federal income tax purposes, distributions by Blackhawk generally are taxable to
U.S. stockholders as ordinary income or capital gains.  Distributions
of "investment company taxable income" (which is, generally, Blackhawk's
ordinary income plus net realized short-term capital gains in excess of net
realized long-term capital losses) will be taxable as ordinary income to U.S.
stockholders to the extent of Blackhawk's current or accumulated earnings and
profits.  For taxable years beginning before January 1, 2011, to the
extent such distributions are attributable to dividends from U.S. corporations
and certain qualified foreign corporations, such distributions may be designated
by Blackhawk as "qualified dividend income" eligible to be taxed in the hands of
non-corporate stockholders at the rates applicable to long-term capital gains,
provided holding period and other requirements are met at both the stockholder
and company levels.  In this regard, it is anticipated that
distributions generally will not be attributable to dividends and, therefore,
generally will not be qualified dividend income.  Distributions of net
capital gains (which is generally Blackhawk's realized net long-term capital
gains in excess of realized net short-term capital losses) properly designated
by Blackhawk as "capital gain dividends" will be taxable to a U.S. stockholder
as long-term capital gains (currently at a maximum rate of 15% in the case of
individuals, trusts or estates), regardless of the U.S. stockholder's holding
period for his, her or its common stock. Distributions in excess of Blackhawk’s
current and accumulated earnings and profits first will reduce a U.S.
stockholder's adjusted tax basis in such stockholder's common stock and, after
the adjusted basis is reduced to zero, will constitute capital gains to such
U.S. stockholder.
  Blackhawk
may retain some or all of its realized net long-term capital gains in excess of
realized net short-term capital losses and designate the retained net capital
gains as a "deemed distribution."  In that case, among other
consequences, Blackhawk will pay tax on the retained amount, each U.S.
stockholder will be required to include his, her or its share of the deemed
distribution in income as if it had been actually distributed to the U.S.
stockholder, and the U.S. stockholder will be entitled to claim a credit equal
to his, her or its allocable share of the tax paid thereon by
Blackhawk.  The amount of the deemed distribution net of such tax will
be added to the U.S. stockholder's cost basis for his, her or its common
stock.  Since Blackhawk expects to pay tax on any retained net capital
gains at Blackhawk’s regular corporate tax rate, and since that rate is in
excess of the maximum rate currently payable by individuals on long-term capital
gains, the amount of tax that individual stockholders will be treated as having
paid and for which they will receive a credit will exceed the tax they owe on
the retained net capital gain.  Such excess generally may be claimed
as a credit against the U.S. stockholder's other federal income tax obligations
or may be refunded to the extent it exceeds a stockholder's liability for
federal income tax.  A stockholder that is not subject to federal
income tax or otherwise required to file a federal income tax return would be
required to file a federal income tax return on the appropriate form to claim a
refund with respect to the allocable share of the taxes that Blackhawk has
paid.  For federal income tax purposes, the tax basis of shares owned
by a stockholder will be increased by an amount equal to the excess of the
amount of undistributed capital gains included in the stockholder's gross income
and the tax deemed paid by the stockholder as described in this
paragraph.  To utilize the deemed distribution approach, Blackhawk
must provide written notice to its stockholders prior to the expiration of 60
days after the close of the relevant taxable year.  Blackhawk cannot
treat any of its investment company taxable income as a “deemed
distribution.”  Blackhawk may also make actual distributions to it
stockholders of some or all of realized net long-term capital gains in excess of
realized net short-term capital losses.
 
 25
  For
purposes of determining (1) whether the Annual Distribution Requirement is
satisfied for any year, and (2) the amount of capital gain dividends paid for
that year, Blackhawk may, under certain circumstances, elect to treat a dividend
that is paid during the following taxable year as if it had been paid during the
taxable year in question.  If Blackhawk makes such an election, the
U.S. stockholder will still be treated as receiving the dividend in the taxable
year in which the distribution is made.  However, any dividend
declared by Blackhawk in October, November or December of any calendar year,
payable to stockholders of record on a specified date in such a month and
actually paid during January of the following year, will be treated as if it had
been received by Blackhawk's U.S. stockholders on December 31 of the year in
which the dividend was declared.
  A U.S.
stockholder generally will recognize taxable gain or loss if the U.S.
stockholder sells or otherwise disposes of his, her or its shares of Blackhawk
common stock.  Any gain arising from such sale or disposition
generally will be treated as long-term capital gain or loss if the U.S.
stockholder has held his, her or its shares for more than one
year.  Otherwise, it will be classified as short-term capital gain or
loss.  However, any capital loss arising from the sale or disposition
of shares of Blackhawk common stock held for six months or less will be treated
as long-term capital loss to the extent of the amount of capital gain dividends
received, or undistributed capital gain deemed received, with respect to such
shares.  In addition, all or a portion of any loss recognized upon a
disposition of shares of Blackhawk common stock may be disallowed if other
shares of Blackhawk common stock are purchased within 30 days before or after
the disposition.  In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.
  For
taxable years beginning before January 1, 2011, individual U.S. stockholders are
subject to a maximum federal income tax rate of 15% on their net capital gain
(i.e., the excess of realized net long-term capital gain over realized net
short-term capital loss for a taxable year) including any long-term capital gain
derived from an investment in Blackhawk shares.  Such rate is lower
than the maximum rate on ordinary income currently payable by
individuals.  Corporate U.S. stockholders currently are subject to
federal income tax on net capital gain at the maximum 35% rate also applicable
to ordinary income.  Non-corporate stockholders with net capital
losses for a year (i.e., capital losses in excess of capital gains) generally
may deduct up to $3,000 of such losses against their ordinary income each year
($1,500 for married individuals filing separately); any net capital losses of a
non-corporate stockholder in excess of $3,000 ($1,500 for married individuals
filing separately) generally may be carried forward and used in subsequent years
as provided in the Code.  Corporate stockholders generally may not
deduct any net capital losses for a year, but may carry back such losses for
three years or carry forward such losses for five years.
 26
  Distributions
are taxable to stockholders even if they are paid from income or gains earned by
Blackhawk before a stockholder’s investment (and thus were economically included
in the price the stockholder paid).  If an investor purchases shares
of Blackhawk common stock shortly before the record date of a distribution, the
price of the shares will include the value of the distribution and the investor
will be subject to tax on the distribution even though economically, it may
represent a return of his, her or its investment.
  Blackhawk
will send to each of its U.S. stockholders, as promptly as possible after the
end of each calendar year, a notice detailing, on a per share and per
distribution basis, the amounts includible in such U.S. stockholder's taxable
income for such year as ordinary income and as long-term capital
gain.  In addition, the federal tax status of each year's
distributions generally will be reported to the IRS (including the amount of
dividends, if any, eligible for the 15% "qualified dividend income"
rate).  Distributions may also be subject to additional state, local
and foreign taxes depending on a U.S. stockholder’s particular
situation.  Dividends distributed by Blackhawk generally will not be
eligible for the corporate dividends received.
  Blackhawk
may be required to withhold federal income tax ("backup withholding"), currently
at a rate of 28%, from all taxable distributions to any non-corporate U.S.
stockholder (1) who fails to furnish Blackhawk with a correct taxpayer
identification number or a certificate that such stockholder is exempt from
backup withholding, or (2) with respect to whom the IRS notifies Blackhawk that
such stockholder has failed to properly report certain interest and dividend
income to the IRS and to respond to notices to that effect.  An
individual's taxpayer identification number is his or her social security
number.  Any amount withheld under backup withholding is allowed as a
credit against the U.S. stockholder's federal income tax liability, provided
that proper information is provided to the IRS.
  Taxation
of Non-U.S. Stockholders
  Whether
an investment in the shares is appropriate for a non-U.S. stockholder will
depend upon that person’s particular circumstances; non-U.S. stockholders should
consult their tax advisors before investing in Blackhawk common
stock.  In general, dividend distributions (other than certain
distributions derived from net long-term capital gains, certain interest income
and short-term capital gains, as described below) paid by Blackhawk to a
non-U.S. stockholder are subject to withholding of federal income tax at a rate
of 30% (or lower applicable treaty rate) even if they are funded by income or
gains that, if paid to a non-U.S. stockholder directly, would not be subject to
withholding.  If the distributions are effectively connected with a
U.S. trade or business of the non-U.S. stockholder (and, if an income tax treaty
applies, attributable to a permanent establishment in the United States),
Blackhawk will not be required to withhold federal tax if the non-U.S.
stockholder complies with applicable certification and disclosure requirements,
although the distributions will be subject to federal income tax at the rates
applicable to U.S. stockholders.  (Special certification requirements
apply to non-U.S. stockholders that are foreign partnerships or foreign trusts -
such entities are urged to consult their tax advisors.)
 27
  Actual or
deemed distributions of Blackhawk's net capital gain to a non-U.S. stockholder,
and gains realized by a non-U.S. stockholder upon the sale of Blackhawk common
stock, will not be subject to federal withholding tax and generally will not be
subject to federal income tax unless the distributions or gain, as the case may
be, are effectively connected with a U.S. trade or business of the non-U.S.
stockholder (and, if an income tax treaty applies, are attributable to a
permanent establishment maintained by the non-U.S. stockholder in the U.S.), or
in the case of an individual stockholder, the stockholder is present in the U.S.
for a period or periods aggregating 183 days or more during the year of the sale
or capital gain dividend and certain other conditions are met.  If
Blackhawk distributes its net capital gain in the form of deemed rather than
actual distributions, a non-U.S. stockholder will be entitled to a federal
income tax credit or tax refund equal to the stockholder’s allocable share of
the tax Blackhawk paid on the capital gains deemed to have been
distributed.  To obtain the refund, the non-U.S. stockholder must
obtain a U.S. taxpayer identification number and file a federal income tax
return even if the non-U.S. stockholder would not otherwise be required to
obtain a U.S. taxpayer identification number or file a federal income tax
return.  For a corporate non-U.S. stockholder, distributions (both
actual and deemed), and gains realized upon the sale of Blackhawk common stock
that are effectively connected to a U.S. trade or business may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate
(or at a lower rate if provided for by an applicable treaty).
  A
non-U.S. stockholder who is a non-resident alien individual, and who is
otherwise subject to withholding of federal tax, may be subject to information
reporting and backup withholding of federal income tax on dividends unless the
non-U.S. stockholder provides Blackhawk or the dividend paying agent with an IRS
Form W-8BEN (or an acceptable substitute or successor form) or otherwise meets
documentary evidence requirements for establishing that it is a non-U.S.
stockholder or otherwise establishes an exemption from backup
withholding.
  Investment
in the shares may not be appropriate for a non-U.S. stockholder; non-U.S.
persons should consult their tax advisors with respect to the federal income tax
and withholding tax, and state, local and foreign tax consequences of an
investment in the shares.
  Failure
to Qualify as a Regulated Investment Company
  If
Blackhawk fails to qualify for treatment as a RIC (including if Blackhawk's
Board of Directors elects to temporarily or permanently revoke its RIC
election), Blackhawk would be subject to tax on all of its taxable income at
regular corporate rates.  Blackhawk would not be able to deduct
distributions to stockholders, nor would distributions be required to be
made.  Such distributions would be taxable to Blackhawk’s stockholders
as dividend income to the extent of Blackhawk’s current and accumulated earnings
and profits and (if made in a taxable year beginning before January 1, 2011)
provided certain holding period and other requirements were met, could
potentially qualify for treatment as "qualified dividend income" in the hands of
stockholders taxed as individuals eligible for the 15% maximum
rate.  Subject to certain limitations under the Code, corporate
distributees may be eligible for the dividends received deduction with respect
to Blackhawk's dividend distributions.  Distributions in excess of
Blackhawk’s current and accumulated earnings and profits would be treated first
as a return of capital to the extent of the stockholder's tax basis, and any
remaining distributions would be treated as a capital gain.  If
Blackhawk realized a net capital loss for any taxable year, it could carry back
such net capital loss only against capital gain.  Such a net capital
loss for any taxable year could 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.
 
 28
  To
requalify as a RIC in a subsequent taxable year, Blackhawk would be required to
satisfy the RIC qualification requirements for that year and dispose of any
earnings and profits from any year in which it failed to qualify for tax
treatment as a RIC.  Subject to a limited exception applicable to RICs
that qualified as such under Subchapter M of the Code for at least one year
prior to disqualification and that requalify as a RIC no later than the second
year following the nonqualifying year, Blackhawk could be subject to tax on any
unrealized net built-in gains in the assets held by Blackhawk during the period
in which it failed to qualify for tax treatment as a RIC that are recognized
within the subsequent 10 years, unless Blackhawk made a special election to pay
corporate-level tax on such built-in gain at the time of its requalification as
a RIC.
  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.  Blackhawk closed on the MacroMarkets investment in January
2009.
 29
 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.
 
 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.
 30
 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, 2008, 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, 11th Floor,
New York, New York from Concorde, an affiliate of
Blackhawk.  Commencing January 1, 2009, Blackhawk is paying or
accruing $4,000 to Concorde for this space.  Previously, Blackhawk did
not pay Concorde for this space.  The lease is on a month-to-month
basis.
 
 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 2008, the stockholders of Blackhawk, voting by written
consent, voted to approve Blackhawk's Stock Option Plan.  Stockholders
owning 53.25% of the shares of common stock signed written consents approving
the Stock Option Plan.
  PART
II
  Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchasesof Equity
Securities
 
 (a)           Market
Information
  31
  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 for four quarters in 2007 and in 2008 and the first
quarter of 2009 (to February 27, 2009).
  BidHigh
              
              
              Low2009First
      Quarter (through February 27, 2009)
              
              $
              0.25
              
              
              $
              0.062008First
      Quarter
              
              $
              0.36
              
              
              $
              0.06Second
      Quarter
              
              $
              0.19
              
              
              $
              0.10Third
      Quarter
              
              $
              0.17
              
              
              $
              0.06Fourth
      Quarter
              
              $
              0.12
              
              
              $
              0.042007First
      Quarter
              
              $
              0.50
              
              
              $
              0.08Second
      Quarter
              
              $
              0.77
              
              
              $
              0.10Third
      Quarter
              
              $
              0.40
              
              
              $
              0.10Fourth
      Quarter
              
              $
              0.20
              
              
              $
              0.12
 
 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.
  32
  Holders
 
 As of March 20, 2009, the approximate
numbers of holders of the Company's common stock is 211.
 
 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
 
 The Board of Directors and stockholders
of the Company in November 2008 and December 2008, respectively, approved the
Company's Stock Option Plan.  For a description of the Stock Option
Plan, see Item 11 "Executive Compensation--Stock Option Plan"
herein.  There are 3,000,000 shares authorized for issuance under the
Stock Option Plan, and 600,000 options issued and outstanding.  On
February 1, 2009, the Stock Option Committee of the Board of Directors of the
Company issued to Craig A. Zabala, President and Chief Executive Officer of the
Company, options to purchase 600,000 shares at an exercise price of $.40 per
share.  The Options are exercisable beginning February 1, 2009 and
ending February 1, 2019.
 
 Saleof Unregistered
Securities
 
 (a)           Blackhawk
reported the sale of its unregistered securities during 2008 on Current Reports
on Form 8-K.
 
 (b)           Not
applicable.
 
 (c)           Not
applicable.
 
 Item 6. Selected Financial
Data
 
 The
selected financial data presented below for the years ended December 31, 2008,
2007, 2006, 2005 and for the period from inception (April 22, 2004) to December
31, 2004, are derived from the audited financial statements of the
Company.  This data is qualified in its entirety by reference to, and
should be read in conjunction with, Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Company's financial
statements and related notes thereto for the years ended December 31, 2008, 2007
and 2006 (included in this Annual Report), and 2005 and for the period from
inception (April 22, 2004) to December 31, 2004 (not included in this Annual
Report).
 
 33
 
 BLACKHAWK
CAPITAL GROUP BDC, INC.
 SELECTED
FINANCIAL DATA
 Years
Ended December 31, 2008, 2007, 2006, 2005 and
 Period
from Inception (April 22, 2004) through December 31, 2004
 
 Year Ended
              
              
              
              
              
              For
      the Period
                Inception
                (April
      22, 2004)2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              Through
                December 31, 2004Total
      Investment Income
              
              $
              17,613
              
              
              $
              3,263
              
              
              $
              460
              
              
              $
              1,139
              
              
              $
              15Total
      Expenses
              
              
              (422,702
              )
              
              
              (407,179
              )
              
              
              (387,707
              )
              
              
              (46,074
              )
              
              
              (12,530
              )Net
      Investment (Loss)
              
              
              (405,089
              )
              
              
              (403,916
              )
              
              
              (387,247
              )
              
              
              (44,935
              )
              
              
              (12,515
              )Net
      Decrease in Assets Resulting from Operations
              
              
              (411,590
              )
              
              
              (398,703
              )
              
              
              (387,247
              )
              
              
              (44,935
              )
              
              
              (12,515
              )Per
      Share Data:Loss
      Per Common Share,
                Basic
      and Diluted:*
              
              
              (.01284
              )
              
              
              (0.01290
              )
              
              
              (0.01371
              )
              
              
              (0.00220
              )
              
              
              (0.00179
              )As of December 312008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004Total
      Assets
              
              $
              838,078
              
              
              $
              261,023
              
              
              $
              9,637
              
              
              $
              83,399
              
              
              $
              101,235Total
      Liabilities
              
              $
              118,102
              
              
              
              298,258
              
              
              
              306,061
              
              
              
              61,423
              
              
              
              96,953Total
      Net Assets (Liabilities)
              
              $
              719,976
              
              
              
              (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.
 
 
 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 registered under the Investment Company Act
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.
 34
 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
did not make any portfolio investment in 2008 or in prior years. On
January 12, 2009, Blackhawk entered into a Voting Capital Interests Purchase
Agreement ("Purchase Agreement") with MacroMarkets LLC, a Delaware limited
liability company ("MacroMarkets").  Pursuant to the Purchase
Agreement, Blackhawk purchased a five percent (5%) membership interest in
MacroMarkets for $250,000 and Craig A. Zabala, Chairman and President of
Blackhawk, was appointed a non-voting board member of
MacroMarkets.  The Purchase Agreement contains standard
representations, warranties and indemnification provisions.  The
transaction closed on January 12, 2009. Blackhawk used funds from working
capital to make the equity investment.
  Results
of Operations
 
 Investment
Income
 
 For the
year ended December 31, 2008, interest income increased to $17,613 from $3,263
for the year ended December 31, 2007.  The increase was primarily
attributable to higher balances of interest bearing securities.
  For the
year ended December 31, 2007, interest income increased to $3,263 from $460 for
the year ended December 31, 2006 due to interest bearing securities in
2007.  In 2006, the Company did not hold any interest bearing
securities.
 35
  General
and Administrative Expenses
 
 For the
year ended December 31, 2008, expenses increased to $422,702 from $407,179 for
the year ended December 31, 2007.  The increase was primarily
attributable to an increase in professional fees and advisory fees mitigate by a
reduction in interest expense.
  For the
year ended December 31, 2007, expenses increased to $407,179 from $387,707 for
the year ended December 31, 2006.  The increase was primarily
attributable to an increase in professional fees and mitigate by a reduction in
consulting fees, filing fees, and insurance.
  Liquidity
and Capital Resources
 
 From inception (April 22, 2004) through
December 31, 2008, 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 first 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
second 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, 2008 and 2007, Blackhawk did not have any borrowings due to
Concorde.
 
 Pursuant
to the Company's second Regulation E Offering, as of June 4, 2007, the Company
sold and exchanged an aggregate of 502,891 shares of 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.
  36
 
 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.
 
 Pursuant to the Company's third
Regulation E Offering, which commenced on November 30, 2007, Concorde sold an
aggregate of 1,298,112 shares of Common Stock, at a purchase price of $1.00 per
share to nine (9) purchasers for an aggregate amount of $1,298,112 during the
year ended December 31, 2008. Selling commissions were $129,311, which were paid
as follows: (i) $69,311 to Richard J. Kelly, prior selling agent; and (ii)
$60,000 to John W. Loofbourrow Associates, Inc. (“JWL”), prior selling agent.
The Company retained JWL to act as placement agent to raise equity capital for
the Company pursuant to an agreement dated April 9, 2008 ("JWL Agreement") which
was executed on April 14, 2008. JWL solicited interest from a limited number of
potential investors who are "accredited investors" in connection with raising
equity capital for the Company in its third Regulation E offering. In return for
JWL's services, the Company paid JWL a cash fee equal to ten percent (10%) of
the purchase price of any securities placed by JWL. The Company does not have to
reimburse JWL for its expenses. The JWL Agreement had a term of sixty (60) days
from the date that the Company's Form 1-E offering document (filed with the SEC)
was available to be sent to prospective investors and contained customary
indemnification and confidentiality provisions. The JWL Agreement also provided
that for a period of up to five (5) years from the termination date of the JWL
Agreement, if JWL enters into a selling group in any subsequent securities
offerings of the Company, then JWL shall receive additional financing fees if
the Company sells securities to those investors previously introduced by JWL.
The additional fees payable to JWL will be at the same rate as any underwriting
or replacement fees that are listed in any Company future offering circular or
prospectus. The JWL Agreement expired on June 18, 2008. The JWL Agreement was
amended on June 30, 2008 ("Amendment"). The Amendment acknowledged that the JWL
Agreement expired on June 18, 2008 ("Expiration Date") and that JWL is entitled
to receive financing fees with respect to purchases by investors that purchased
their shares after the Expiration Date, but were introduced to the Company by
JWL before the Expiration Date. In July 2008, the Company raised $600,000 and
paid $60,000 in placement fees to JWL.
 
 The net
cash proceeds from the three (3) Regulation E offerings since inception have
been $1,711,731 through December 31, 2008.
 
 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.
  37
 
 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.
 
 Blackhawk
has a net loss of $411,590 for the fiscal year ended December 31, 2008, and had
total net assets of $719,796 at December 31, 2008 and to date has made one
investment in an eligible portfolio company, which is
MacroMarkets.  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 three Regulation E offerings and by loans from
Concorde.  Blackhawk is presently dependent on Concorde to provide
capital and liquidity needs.  Concorde has agreed to provide
sufficient capital to Blackhawk to operate through January 1, 2010.
  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.
 38
 Interest
Rate Risk
 
 This
Section is not applicable.  Blackhawk does not have any
interest-bearing liabilities at this time.
 
 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 one investment to date
in MacroMarkets.
 
 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.
 39
 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,
2008.  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, 2008, 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
 
 During
the three months ended December 31, 2008, 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.
  PART
III
  Item 10. Directors and
Executive Officers of the Registrant
 
 The
following table sets forth information concerning our directors and executive
officers:
 40
 
 Name and Address
              
              Age
              
              Position Held with
  CompanyDr.
      Craig A. Zabala(1)
              
              57
              
              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)
              
              59
              
              Vice
      President1624
      Acton StreetBerkeley,
      California 94702Robert
      J. Francis(3)
              
              38
              
              Director5416
      South 161st
      Street
                Omaha,
      NE 68135Janet
      Buxman Kurihara(3)
              
              50
              
              Director11007
      North Cottontail LaneParker,
      Colorado 80138Randy
      Tejral(3)
              
              53
              
              Director6529
      Pine Ridge RoadElkhorn,
      Nebraska 68022Mick
      Woodwards(1)(3)
              
              50
              
              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.
  41
  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.
 42
  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 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.
 43
 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, 2008 to December 31, 2008, the Board of Directors held four (4) meetings in
person or by teleconference.  During 2008, the Board of Directors also
acted by unanimous written consent four (4) times.
 
 Blackhawk
has a Stock Option Committee but does not have any other board committees,
including an audit committee.
 
 Blackhawk's
Stock Option Committee was formed in January 2009 and consists of Robert J.
Francis and Janet Buxman Kurihara.  The Stock Option Committee
administers the Company's Stock Option Plan.
 
 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
SEC, we believe that all our directors, executive officers and 10% beneficial
owners complied during fiscal 2008 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.
  44
 
 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.
 
 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, 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, 11th Floor,
New York, New York  10005.
  Item 11. Executive
Compensation
 
 Except as
set forth herein, 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.  Other than its Stock
Option Plan described herein, 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.
 45
 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 made only one
portfolio investment (MacroMarkets) and except as noted in the previous
paragraph, has not paid any compensation to its officers and
directors.
 
 Employment
Agreements
 
 We have no employment agreements with
any of our officers or employees other than the Zabala Employment
Agreement.
 
 Zabala
Employment Agreement
  General.  On
January 30, 2009, we entered into an employment agreement with
Zabala.  Up to this point, Zabala had not received any kind of
compensation for the leadership, management and hard work that he provided to
the Company.
 
 For the past five years, in addition to
his responsibilities for the Company as its founder, Chairman, President and
Chief Executive Officer and acting Chief Financial Officer and Chief Compliance
Officer, Zabala has been the founder, Chairman, President, and Chief Executive
Officer of Concorde, Chairman, President, and Chief Executive Officer of
Concorde Europe Inc., Chairman, President, and Chief Executive Officer of
Concorde Europe, Ltd., a company formed under the laws of Wales and England, and
founder, Chairman, President and Chief Executive Officer of DBL Holdings, LLC
(dba Drexel Burnham Lambert).  Zabala is 57 years old. Concorde owns
10,317,681 shares of Company common stock, representing 31.78% of the
outstanding shares of Common Stock.  Zabala controls Concorde through
his 62.42% stock ownership of Concorde.  He also owns or controls
2,432,500 shares of Company common stock, representing 7.49% of the outstanding
shares of the common stock.  Concorde and Zabala may be deemed to
control the Company.
 
 Term.  The
term of the Employment Agreement is three (3) years.  The term will be
automatically renewed for one (1) additional year each year unless ninety (90)
calendar days prior to the end of the term, the Company advises Zabala in
writing that it does not wish to extend the Employment Period for an additional
year.
  Pursuant
to the Employment Agreement, Zabala serves as President and Chief Executive
Officer of the Company, provided that if the Company hires and/or enters into an
employment agreement with any executive who serves as President and Chief
Operating Officer of the Company, Zabala shall resign his position as President,
but would keep his position as Chief Executive Officer.  Zabala also
agrees to serve as acting Chief Financial Officer and acting Chief Compliance
Officer until the Company retains employees for such positions.  The
Employment Agreement also permits Zabala to perform work for Concorde and DBL
Holdings, LLC, affiliates of the Company, provided that such work does not
compete with the business and business opportunities of the
Company.
 46
  Compensation.  Zabala
receives a base annual salary of $60,000 under the Employment
Agreement.  Each year, the Board of Directors may increase the base
salary in its discretion.  In the event that the Company sells a
minimum of $3,000,000 of shares of its common stock in its current private
placement offering (“Offering”) under Rule 506 under Regulation D under the
Securities Act, the Company shall increase Zabala's base salary to $250,000 and
pay him a $50,000 bonus (which bonus may be increased proportionately if the
Company raises more than $3,000,000 in the Offering but the amount of the bonus
shall not be greater than $100,000).  If the minimum amount is not
raised in the Offering, Zabala's base salary remains at $60,000.
  Pursuant to the Employment Agreement,
Zabala is entitled to be granted 600,000 options to purchase shares of Common
Stock at an exercise price of fair market value per share on date of grant as
determined by the Board of Directors pursuant to the requirements of the
Company's Stock Option Plan.  The terms of the options granted to
Zabala are described above.
  Termination.  The
Employment Agreement terminates upon the earliest to occur of (i) Zabala's death
or disability; (ii) cause or non-cause termination of Zabala by the Company;
(iii) a termination by Zabala for “good reason” or Zabala resigns from the
Company without “good reason;” or (iv) Zabala is replaced as President and Chief
Executive Officer of the Company (except if another executive is hired as
President and Chief Operating Officer).
  If Zabala is terminated without cause,
or if he resigns for “good reason,” he would receive accrued salary and bonuses,
if any, to the end of the employment term.  In addition, if Zabala is
terminated without cause or if he resigns for "good reason," the Company must
pay to Concorde rental payments (for rental of space at 14 Wall Street, New
York, New York 10005) of $4,000 per month from April 2004 until the month Zabala
is terminated without cause or resigns for "good reason."  If he is
terminated for cause, he is not entitled to any rights or compensation under the
Employment Agreement, provided that the Company must make the $4,000 monthly
rental payment to its affiliate Concorde described in the preceding
sentence.  If Zabala is terminated in the event of death or
disability, or he resigns without "good reason," he shall only be entitled to
receive accrued and unpaid base salary and benefits through the date of his
employment termination.  If the Company hires a replacement for Zabala
who does not serve as President and Chief Operating Officer, but serves as Chief
Executive Officer, Zabala would be entitled to the benefits above for a
non-cause termination.
  Stock
Option Grant
  General.  On
January 30, 2009, the Stock Option Committee, consisting of independent
directors Janet Buxman Kurihara and Robert J. Francis, approved and administered
the Stock Option Grant to Zabala which had been approved by the Board of
Directors of the Company.  The stockholders of the Company owning
approximately 53.25% of the Company's outstanding shares of Common Stock
subsequently approved the issuance of the options to Zabala by means of written
consent of the stockholders dated January 30, 2009.  The Stock Option
Grant was made pursuant to the Company's Stock Option Plan and the Zabala
Employment Agreement.
  47
  The purpose of the issuance of the
options is to advance the interests of the Company by rewarding Zabala for the
leadership, management and hard work that he has provided to the Company without
any compensation to date, providing Zabala with an additional incentive to exert
his best efforts on behalf of the Company, to increase Zabala’s proprietary
interest in the success of the Company, to reward Zabala’s outstanding
performance and to provide a means to retain Zabala’s service to the
Company.
 
 Terms.  The
following are the terms of the stock option grant to Zabala:
  Number
      of options:
              600,000Underlying
      Security
              600,000
      shares of Common StockExercise
      Price:
              $.40Grant
      Date:
              February
      1, 2009Per
      Share Market Value (as of February 1, 2009)1
              0.22Vesting:
              Fully
      vested upon issuance.Expiration
      Date:
              February
      1, 2019
  (1)
              Shares
      of Common Stock trade very infrequently on the OTC Bulletin Board under
      the symbol BHCG.OB and there can be wide gaps in the bid and ask prices
      for the shares of Common Stock.  Stockholders should be aware of
      these market conditions.
  The Stock Option Committee determined
that after a good faith review of the current and historical bid, ask and sales
prices of the Company’s common stock on the Over The Counter Bulletin Board
market, that the exercise price of the stock options ($.40) is at fair market
value of the shares of Common Stock on the date of grant based upon the trailing
52-week high of $.40 per share as reported on the Over the Counter Bulletin
Board, and that such exercise price is above net asset value per share on grant
date.
  48
 
 No Awards under the Company’s Stock
Option Plan have been granted to any other officer, director, nominee for
election as a director, associate of any director, executive officer or nominee,
or to any employee of the Company.
  Compensation
Committee Interlock and Insider Participation
 
 The Company does not have a
compensation committee.  During the 2008 fiscal year, the Board of
Directors did not hold any meetings to discuss executive officer
compensation.  Thus, no officer of the Company participated in
deliberations of the Board of Directors concerning executive officer
compensation.  In addition, no executive officer of the Company served
as a director or member of the compensation committee of any other
entity.
 
 Compensation
Committee Report
 
 In the absence of a Compensation
Committee, the Board of Directors has reviewed and discussed the compensation
discussion and analysis set forth above. Based on this review and discussion,
the Board of Directors recommended the inclusion of the compensation discussion
and analysis in this Form 10-K.
 
 By the
Board of Directors of Blackhawk Capital Group BDC, Inc.
 
 Craig
      A. Zabala
              Janet
      Buxman Kurihara
              Mick
      WoodwardsRandy
      Tejral
              Robert
      J. Francis
 
 Director
Compensation
 
 Members of the Company's Board of
Directors are not compensated (in cash or equity) for any services provided as
directors.
 
 Stock
Option Plan
 
 General.  The
purpose of the Stock Option Plan is to advance the interests of the Company by
providing to directors and officers of the Company and to other key employees of
the Company who have substantial responsibility for the direction and management
of the Company additional incentives to exert their best efforts on behalf of
the Company, to increase their proprietary interest in the success of the
Company, to reward outstanding performance and to provide a means to attract and
retain persons of outstanding ability to the service of the
Company.
 
 Under the Stock Option Plan, options
(“Awards”) may be granted from time to time to officers, directors and key
employees (“Eligible Persons”), all generally in the Stock Option Committee's
(“Committee’s”) discretion.  The Committee is composed of at least two
non-employee directors, which are responsible for administering the Stock Option
Plan.  Directors Robert J. Francis and Janet Buxman Kurihara serve as
the members of the Committee.  Each Award under the Plan will be
evidenced by a separate written agreement which sets forth the terms and
conditions of the Award.  There is no maximum number of persons
eligible to receive Awards under the Stock Option Plan, nor is there any limit
on the amount of Awards that may be granted to any such person, except as
described below with respect to incentive stock options.  As a
business development company, the Company's Stock Option Plan must be approved
by a required majority, as defined in Section 57(o) of the Investment Company,
of the Board of Directors on the basis that such issuance is in the best
interests of the Company and its stockholders.  Non-employee directors
will be eligible to participate in the Plan upon issuance of an order by the
Securities and Exchange Commission pursuant to Section 61(a)(3)(B)(i)(II) of the
Investment Company Act and then only in accordance with the terms and conditions
of such order.
  49
 
 Number of
Shares.  The Company has reserved 3,000,000 shares of Common
Stock for issuance under the Stock Option Plan, subject to adjustment to protect
against dilution in the event of certain changes in our
capitalization.  Of such shares, 2,500,000 shall be reserved for
incentive stock options.
 
 Administration.  The
Stock Option Plan will be administered by the Committee.  To the
extent necessary to comply with Rule 16b-3 under the Exchange Act, the Committee
will consist solely of two or more non-employee directors, as that term is
defined in Rule 16b-3 under the Exchange Act.  Under the Stock Option
Plan, the Committee will have complete authority to determine the persons to
whom Awards will be granted from time to time, as well as the terms and
conditions of such Awards.  The Committee also will have discretion to
interpret the Stock Option Plan and the Awards granted under the Stock Option
Plan and to make other determinations necessary or advisable for the
administration of the Stock Option Plan.
 
 Stock Option
Terms.  The Committee may grant either incentive stock options
(for purposes of Section 422 of the Internal Revenue Code of 1986, as amended
(the “Code”)), or nonqualified stock options under the Stock Option
Plan.  Except as described below for incentive stock options, the
Committee generally has the discretion to determine the persons to whom stock
options will be granted, the numbers of shares subject to such options, the
exercise prices of such options, the vesting schedules with respect to such
options, the terms of such options, as well as the period, if any, following a
participant's termination of service during which such option may be exercised,
and the circumstances in which all or a portion of an option may become
immediately exercisable or be forfeited.
 
 All rights to exercise options shall
terminate three (3) months after any optionee ceases to be an officer, director
or a key employee of the Company except as otherwise provided by the Committee
in an option agreement, and no options will vest after an optionee's termination
date.  If any officer or key employee is terminated by the Company for
cause, his or her options shall be forfeited
immediately.  Notwithstanding the foregoing, however, where an
optionee's service as a director, officer or key employee of the Company
terminates as a result of the optionee's death or his total and permanent
disability, the optionee or the executors or administrators or legatees or
distributees of the estate, as the case may be, shall have the right, from time
to time within one year after the optionee's total and permanent disability or
death and prior to the expiration of the term of the option, to exercise any
portion of the option not previously exercised, in whole or in part, as provided
in the respective option agreement.
  50
 
 In the discretion of the Committee, the
price due upon exercise of an option may be paid in cash or in shares of our
Common Stock valued at their then current fair market value, or a combination of
both. Shares delivered in payment of such price may be shares acquired by prior
exercises of options or otherwise, in the Committee's
discretion.  Also in the discretion of the Committee, a participant
may exercise an option as to only a part of the shares covered thereby and then,
in an essentially simultaneous transaction, use the shares so acquired in
payment of the exercise price for additional option shares.
 
 Holders of options shall have no rights
as shareholders unless and until such options are exercised and shares are
delivered to such persons in accordance with the Stock Option Plan.
 
 Incentive Stock
Options.  Incentive stock options may be granted only to
persons who are employees (including directors who are also employees but
excluding non-employee directors).  Generally, incentive stock options
must be granted within ten years of the date the Stock Option Plan is adopted,
and the term of any incentive stock option may not exceed ten
years.  Furthermore, the aggregate fair market value of shares of
Common Stock with respect to which any incentive stock options are exercisable
for the first time by a participant during any calendar year, whether such
incentive stock options are granted under the Stock Option Plan or any other
plans we may adopt, may not exceed $100,000.  Furthermore, the
exercise price of incentive stock options must be at least 100% of the fair
market value of the Common Stock at the time the incentive stock option is
granted, except in the case of incentive stock options granted to any individual
who owns more than 10% of the total combined voting power of all classes of our
stock, in which case the exercise price of incentive stock options must be at
least 110% of the fair market value of the Common Stock at the time of
grant.
 
 Changes of Control or Other
Fundamental Change.  The Stock Option Plan provides that upon
certain mergers or other reorganizations to which we are a party that involves
an exchange or conversion or other adjustment of our outstanding Common Stock,
each participant generally shall be entitled upon the exercise of his or her
stock options to receive the number and class of securities or other property to
which such participant would have been entitled in the merger or reorganization
if such participant had exercised such stock option prior to such merger or
reorganization.
 
 The Stock Option Plan also provides
that, upon the occurrence of a change of control, the Committee has the right,
but not the obligation, to accelerate the time at which all or a portion of any
outstanding options may be exercised.
 
 Miscellaneous.  The
Board of Directors generally may amend or terminate the Stock Option Plan or any
provision of the Stock Option Plan at any time.  To the extent
required by the Exchange Act or the Code, however, absent approval by our
stockholders, no amendment may (i) materially alter the group of persons
eligible to participate in the Stock Option Plan; (ii) except as specifically
provided in the Stock Option Plan, increase the number of shares available for
Awards under the Stock Option Plan; (iii) extend the period during which
incentive stock options may be granted; or (iv) decrease the exercise price of
any option granted under the Stock Option Plan. Furthermore, without the consent
of the participant, no amendment to or discontinuance of the Stock Option Plan
or any provision thereof shall adversely affect any Award granted to the
participant under the Stock Option Plan.
  51
 
 Federal Income Tax
Consequences.  The following is a brief description of the
Federal income tax consequences to the participants and the Company of the
issuance and exercise of stock options under the Stock Option
Plan.  All ordinary income recognized by a participant with respect to
Awards under the Stock Option Plan shall be subject to both wage withholding and
employment taxes.  The deduction allowed to us for the ordinary income
recognized by a participant with respect to an Award under the Stock Option Plan
will be limited to amounts that constitute reasonable, ordinary and necessary
business expenses.
 
 Incentive Stock
Options.  In general, no income will result for Federal income
tax purposes upon either the granting or the exercise of any incentive option
issued under the Stock Option Plan.  If certain holding period
requirements (at least two years from the date of grant of the option and at
least one year from the date of exercise of the option) are satisfied prior to a
disposition of stock acquired upon exercise of an incentive option, the excess
of the sales price upon disposition over the option exercise price generally
will be recognized by the participant as a capital gain, and the Company will
not be allowed a business expense deduction.
 
 If the holding period requirements with
respect to incentive options are not met, the participant generally will
recognize, at the time of the disposition of the stock, ordinary income in an
amount equal to the difference between the option price of such stock and the
lower of the fair market value of the stock on the date of exercise and the
amount realized on the sale or exchange.  The difference between the
option price of such stock and the fair market value of the stock on the date of
exercise is a tax preference item for purposes of calculating the alternative
minimum tax on a participant’s federal income tax return.  If the
amount realized on the sale or exchange exceeds the fair market value of the
stock on the date of exercise, then such excess generally will be recognized as
a capital gain.  In the case of a disposition prior to satisfaction of
the holding period requirements which results in the recognition of ordinary
income by the participant, we generally will be entitled to a deduction in the
amount of such ordinary income in the year of the disposition.
 
 If a participant delivers shares of our
Common Stock in payment of the option price, the participant generally will be
treated as having made a like-kind exchange of such shares for an equal number
of the shares so purchased, and no gain or loss will be recognized with respect
to the shares surrendered in payment of said option price.  In such a
case, the participant will have a tax basis in a number of shares received
pursuant to the exercise of the option equal to the number of shares of Common
Stock used to exercise the option and equal to such participants tax basis in
the shares of Common Stock submitted in payment of the option
price.  The remaining shares of Common Stock acquired pursuant to the
exercise of the option will have a tax basis equal to the gain, if any,
recognized on the exercise of the option and any other consideration paid for
such shares on the exercise of the option.
  52
 
 Notwithstanding the foregoing, if a
participant delivers any stock that was previously acquired through the exercise
of an incentive stock option in payment of all or a portion of the option price
of an option, and the holding period requirements described above have not been
satisfied with respect to the shares of stock so delivered, the use of such
stock to pay a portion of the option price will be treated as a disqualifying
disposition of such shares, and the participant generally will recognize
income.
 
 Nonqualified Stock
Options.  The grant of nonqualified stock options under the
Stock Option Plan will not result in any income being taxed to the participant
at the time of the grant or in any tax deduction for us at such
time.  At the time a nonqualified stock option is exercised, the
participant will be treated as having received ordinary income equal to the
excess of the fair market value of the shares of Common Stock acquired as of the
date of exercise over the price paid for such stock.  At that time, we
will be allowed a deduction for Federal income tax purposes equal to the amount
of ordinary income attributable to the participant upon exercise.  The
participant's holding period for the shares of Common Stock acquired will
commence on the date of exercise, and the tax basis of the shares will be the
greater of their fair market value at the time of exercise or the exercise
price.
 
 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 (5%) 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
              
              
              2,432,500
              (1)(2)
              
              
              7.49
              %P.O.
      Box 360Greene
      Street StationNew
      York, New York 10012The
      Concorde Group, Inc.
              
              
              10,317,681
              (3)
              
              
              31.78
              %14
      Wall Street, 11th
      FloorNew
      York, New York 10005
  53
  Robert
      M. Fujii(4)
              
              
              500,000
              
              
              
              1.54
              %1624
      Acton StreetBerkeley,
      California 94702Robert
      J. Francis(4)
                5416
      South 161st
      Street
                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
              
              
              
              4.07
              %4849
      Woodruff Avenue
                Lakewood,
      California 90713Doreen
      McCarthy(5)
                426
      Broome Street
                New
      York, NY 10013
              
              
              2,245,000
              
              
              
              6.91
              %All
      Executive Officers and
              
              
              4,252,769
              
              
              
              11.25
              %Directors
      as a Group (6 Persons)
 
 
 (1)
              Excludes
      10,317,681shares 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.  Also
      includes options to purchase 600,000 shares, which are presently
      exercisable.
 (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.
 54
 (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 31.78% 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 62.42%
stock ownership of Concorde.  He also owns or controls 2,432,500
shares of Blackhawk Common Stock, representing 7.49% 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,
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)
for 107,391 shares of common stock.  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 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, 2008 and 2007,
Blackhawk had no outstanding borrowings due to Concorde.
 
 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 $4,000 per month commencing
January 1, 2009.  Prior to January 1, 2009, the Company did not pay
rent to Concorde for this sublease of space.
 
 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.
  55
 
 See discussion above in Item 11.
Executive Compensation regarding Zabala Employment Agreement.  Mr.
Zabala is a control person of Concorde, Blackhawk’s largest
shareholder.
 
 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.
  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 expected to be billed by Eisner LLP, our independent registered
public accounting firm, for professional services rendered for the audit and
quarterly reviews of our financial statements for fiscal years 2008, 2007 and
2006 were $113,000, $61,219 and 14,223, respectively.
 
 56
  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, 2008 and 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, 2008 and 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.
 
 4.
              ALL
      OTHER FEES
 
 The
aggregate fees billed for the year ended December 31, 2008 and 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 accountants are 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
  10.3
                    Placement
      Agent Agreement dated March 6, 2009 between Registrant and John W.
      Loofbourrow Associates, Inc.
("JWL")
  57
  10.4
                    Amendment
      dated February 17, 2009 to Placement Agent Agreement dated January 16,
      2009 by and among Registrant, JWL and EquitySmith, Inc.
      ("ESI")10.5
                    Placement
      Agent Agreement dated February 13, 2009 between Registrant and
      ESI10.6
                    Placement
      Agent Agreement dated January 16, 2009 by and among Registrant, JWL and
      ESI10.7
                    Subscription
      Agreement and Purchaser Questionnaire dated February 12, 2009 by and
      between Registrant and ESI10.8
                    Subscription
      Agreement and Purchaser Questionnaire dated February 5, 2009 between
      Registrant and ESI10.9
                    Subscription
      Agreement and Purchaser Questionnaire dated January 15, 2009 between
      Registrant and ESI10.10
                    Employment
      Agreement dated January 30, 2009 between Registrant and Craig A. Zabala
      ("Zabala")10.11
                    Stock
      Option Agreement dated February 1, 2009 between Registrant and
      Zabala10.12
                    Registrant
      Stock Option Plan10.13
                    Voting
      Capital Interests Purchase Agreement dated January 12, 2009 between
      Registrant and MacroMarkets LLC10.14
                    Amendment
      No. 1 dated November 26, 2008 to Investment Advisory Management Agreement
      dated October 31, 2006 between Registrant and Barak Asset Management, LLC
      (incorporated by reference to Registrant's Form 8-K filed November 26,
      2008)10.15
                    Amendment
      dated June 30, 2008 to Placement Agent Agreement dated April 9, 2008
      between Registrant and JWL10.16
                    Placement
      Agent Agreement dated April 9, 2008 between Registrant and
    JWL10.17
                    Agreement
      dated February 7, 2008 between Registrant and Richard J.
    Kelly31.1
                    Certification
      by Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley
      Act of 2002
 58
 31.2
                    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
  59
 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. ZabalaChairman,
      President and Chief Executive OfficerDated:
              March
      24, 2009
 
 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:
              March24, 2009
              
              Dated:
              March
      24, 2009/s/ Craig A. Zabala
              
              /s/ Robert J. FrancisCraig
      A. Zabala
              
              Robert
      J. FrancisActing
      Chief Financial Officer
                Principal
      Accounting Officer
              
              DirectorDated:
              March
      24, 2009
              
              Dated:
              March
      24, 2009/s/ Janet Buxman Kurihara
              
              /s/ Randy TejralJanet
      Buxman Kurihara
              
              Randy
      TejralDirector
              
              DirectorDated:
              March
      24, 2009
              
              Dated:
              March
      24, 2009/s/ Mick WoodwardsMick
      WoodwardsDirectorDated:
              March
      24, 2009
  60
 
 BLACKHAWK
CAPITAL GROUP BDC INC.
 
 INDEX TO
FINANCIAL STATEMENTS
 
 REPORTS
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
                F-1
      & F-2STATEMENTS
      OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2008 AND 2007
                F-3SCHEDULE
      OF INVESTMENTS AS OF DECEMBER 31, 2008
                F-4STATEMENTS
      OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND
      2006
                F-5STATEMENTS
      OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND
      2006
                F-6STATEMENTS
      OF STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT) FOR THE YEARS ENDED DECEMBER 31,
      2008, 2007 AND 2006
                F-7STATEMENTS
      OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND
      2006
                F-8NOTES
      TO FINANCIAL STATEMENTS
                F-9
 
 
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 Stockholders
and Board of Directors
 Blackhawk
Capital Group BDC, Inc.
 
 
 We have
audited the accompanying statements of assets and liabilities of Blackhawk
Capital Group BDC, Inc. (the “Company”) as of December 31, 2008 and 2007,
including the schedule of investments as of December 31, 2008 and the related
statements of operations, changes in net assets, stockholders' equity (capital
deficit), cash flows and the financial highlights for each of the years in the
three-year period ended December 2008.  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 audits 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 principles
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, 2008 and 2007, the results of
its operations, the changes in its net assets, stockholders' equity (capital
deficit), its cash flows and financial highlights for each of the years in the
three-year period ended December 31, 2008 in conformity with accounting
principles generally accepted in the United States of America.
 
 
 
 /s/
Eisner LLP
 
 New York,
New York
 
 March 24,
2009
  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 of Blackhawk Capital Group BDC Inc. for the
year ended December 31, 2005 (which statements are not presented herein) 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 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, and 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 LIABILITIES
 
 December
      31,2008
              
              
              2007ASSETSInvestment
      at fair value (cost $654,025 and $242,815)
              
              $
              652,737
              
              
              $
              248,028Cash
      and cash equivalents
              
              
              172,797
              
              
              
              4,450Prepaid
      expenses
              
              
              12,544
              
              
              
              8,545TOTAL
      ASSETS
              
              $
              838,078
              
              
              $
              261,023LIABILITIESAccrued
      expenses
              
              $
              118,102
              
              
              $
              298,258TOTAL
      LIABILITIES
              
              
              118,102
              
              
              
              298,258NET
      ASSETS (LIABILITIES)Common
      stock, par value $.00001 per share1,000,000,000
      shares authorized,32,467,484
      and 31,169,372  shares issuedand
      outstanding in 2008 and 2007, respectively
              
              
              325
              
              
              
              312Additional
      paid-in capital
              
              
              1,974,641
              
              
              
              805,853Accumulated
      net investment loss
              
              
              (1,253,702
              )
              
              
              (848,613
              )Net
      unrealized gain (loss) on investment
              
              
              (1,288
              )
              
              
              5,213TOTAL
      NET ASSETS (LIABILITIES)
              
              
              719,976
              
              
              
              (37,235
              )TOTAL
      LIABILITIES AND NET ASSETS (LIABILITIES)
              
              
              838,078
              
              
              
              261,023NET
      ASSET (LIABILITY) VALUE PER COMMON SHARE
              
              $
              .02218
              
              
              $
              (.00119
              )
   
 
 See notes
to financial statements
 
 F-3
  BLACKHAWK
CAPITAL GROUP BDC INC.
 SCHEDULE
OF INVESTMENTS
 DECEMBER
31, 2008
 
 COMPANY
              INVESTMENT
              INITIAL
                ACQUISITION
                DATE
              PRINCIPAL
                AMOUNT
              COST
              FAIR
                VALUE
              %
      OF
                TOTAL
                ASSETSFederal
      home Loan BK
                5.45%
      due 1/12/09
              Notes
              10/8/08
              50,000
              51,011
              50,075
              6.0%Federal
      National Mortgage
                5%
      due 1/23/09
              Notes
              11/21/08
              50,000
              51,179
              50,145
              6.0%Federal
      National Mortgage
                3.85%
      due 4/14/09
              Notes
              11/22/08
              50,000
              50,286
              50,501
              6.0%Abbott
      Labs (3.5%)
                Due
      2/17/09
              Notes
              11/21/08
              100,000
              101,475
              100,268
              12.0%Boeing
      Capital (4.25%)
                Due
      2/15/09
              Notes
              11/21/08
              100,000
              100,539
              100,141
              11.9%Wal-Mart
      stores
                6.875%
      due 8/10/09
              Notes
              11/21/08
              50,000
              52,513
              51,607
              6.2%General
      Electric Capt Corp
                CP
      due 1/9/09
              Notes
              10/8/08
              150,000
              148,507
              150,000
              17.9%American
      Exp CRT CP
                Due
      4/24/09
              Notes
              10/22/08
              100,000
              98,515
              100,000
              11.9%654,025
              652,737
 
 
 See notes
to financial statements
 
 F-4
 
 BLACKHAWK
CAPITAL GROUP BDC INC.
 
 STATEMENTS
OF OPERATIONS
 
 YEAR
      ENDED DECEMBER 31,2008
              
              
              2007
              
              
              2006INVESTMENT
      INCOME:Interest
      income
              
              $
              17,613
              
              
              $
              3,263
              
              
              $
              460TOTAL
      INVESTMENT INCOME
              
              
              17,613
              
              
              
              3,263
              
              
              
              460EXPENSES:Professional
      fees
              
              
              380,835
              
              
              
              366,147
              
              
              
              315,222Advisory
      fee
              
              
              11,301
              
              
              
              3,117
              
              
              
              -Consulting
      fees
              
              
              -
              
              
              
              -
              
              
              
              21,502Filing
      fees
              
              
              8,726
              
              
              
              8,767
              
              
              
              12,914Insurance
              
              
              20,851
              
              
              
              21,053
              
              
              
              33,360Interest
      expense to affiliate
              
              
              -
              
              
              
              3,266
              
              
              
              4,125Other
              
              
              989
              
              
              
              4,829
              
              
              
              584TOTAL
      EXPENSES
              
              
              422,702
              
              
              
              407,179
              
              
              
              387,707NET
      INVESTMENT LOSS
              
              
              (405,089
              )
              
              
              (403,916
              )
              
              
              (387,247
              )UNREALIZED
      GAIN (LOSS) ON INVESTMENTS
              
              
              (6,501
              )
              
              
              5,213
              
              
              
              -NET
      DECREASE IN ASSETS
                RESULTING
      FROM OPERATIONS
              
              $
              (411,590
              )
              
              $
              (398,703
              )
              
              $
              (387,247
              )LOSS
      PER COMMON SHARE,
                BASIC
      AND DILUTED
              
              $
              (.01284
              )
              
              $
              (0.01290
              )
              
              $
              (0.01371
              )WEIGHTED
      AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
              
              
              32,067,532
              
              
              
              30,896,792
              
              
              
              28,248,018
   
 
 See notes
to financial statements
 
 F-5
 
 BLACKHAWK
CAPITAL GROUP BDC INC.
 
 STATEMENTS
OF CHANGES IN NET ASSETS
  
 YEAR
      ENDED DECEMBER 31,2008
              
              
              2007
              
              
              2006DECREASE
      IN NET ASSETS (LIABILITIES) FROM OPERATIONSNet
      investment loss
              
              $
              (405,089
              )
              
              $
              (403,916
              )
              
              $
              (387,247
              )Unrealized
      gain (loss) on investments
              
              
              (6,501
              )
              
              
              5,213
              
              
              
              -NET
      DECREASE IN NET ASSETS (LIABILITIES)RESULTING
      FROM OPERATIONS
              
              
              (411,590
              )
              
              
              (398,703
              )
              
              
              (387,247
              )CAPITAL
      STOCK TRANSACTIONS:Proceeds
      from common stock sold
              
              
              1,298,112
              
              
              
              525,001
              
              
              
              -Conversion
      of notes and advancesto
      affiliate into common stock
              
              
              -
              
              
              
              132,891
              
              
              
              68,847Offering
      costs
              
              
              (129,311
              )
              
              
              -
              
              
              
              -NET INCREASE IN NET
      ASSETS  (LIABILITIES)FROM
      CAPITAL STOCK TRANSACTIONS
              
              
              1,168,801
              
              
              
              657,892
              
              
              
              68,847TOTAL
      INCREASE  (DECREASE)  IN NET ASSETS
              
              
              757,211
              
              
              
              259,189
              
              
              
              (318,400
              )NET
      ASSETS  (LIABILITIES)– BEGINNING OF YEAR
              
              
              (37,235
              )
              
              
              (296,424
              )
              
              
              21,976NET  ASSETS
      (LIABILITIES)– END OF YEAR
              
              $
              719,976
              
              
              $
              (37,235
              )
              
              $
              (296,424
              )
  
 
 See notes
to financial statements
 
 F-6
 
 BLACKHAWK
CAPITAL GROUP BDC INC.
 STATEMENTS
OF STOCKHOLDERS‘ EQUITY (CAPITAL DEFICIT)
 FOR THE
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
  COMMON
      STOCK
              
              
              
              ADDITIONAL
      PAID-IN
              
              
              
              NET
                  UNREALIZED
                  APPRECIATION
                  ON
              
              
              
              ACCUMULATED
                NET
                INVESTMENTTOTAL
              
              
              
              SHARES
              
              
              
              AMOUNT
              
              
              
              CAPITAL
              
              
              
              INVESTMENT
              
              
              
              LOSSBalance-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
              )Net
      decrease in assets resulting from operations
              
              
              (411,590
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (6,501
              )
              
              
              (405,089
              )Sale
      of stock pursuant to offering plan (at $1.00 per share)
              
              
              1,298,112
              
              
              
              1,298,112
              
              
              
              13
              
              
              
              1,298,099Offering
      costs
              
              
              (129,311
              )
              
              
              
              
              
              
              
              
              
              
              (129,311
              )Balance-December
      31,2008
              
              $
              719,976
              
              
              
              32,467,484
              
              
              $
              325
              
              
              $
              1,974,641
              
              
              $
              (1,288
              )
              
              $
              (1,253,702
              )
   
 See notes
to financial statements
 
 
 F-7
 
 BLACKHAWK
CAPITAL GROUP BDC INC.
 STATEMENTS
OF CASH FLOWS
  
 YEAR
      ENDED DECEMBER 31,2008
              
              
              2007
              
              
              2006CASH
      FLOWS FROM OPERATING
                AND
      INVESTING ACTIVITIES:Net
      investment loss and decrease innet assets resulting from
      operations
              
              $
              (411,590
              )
              
              $
              (398,703
              )
              
              $
              (387,247
              )Unrealized
      (gain) loss on investments
              
              
              6,501
              
              
              
              (5,213
              )Purchase
      of Investments
              
              
              (2,379,209
              )
              
              
              (391,226
              )
              
              
              -Proceeds
      from sale and redemption ofinvestments
              
              
              1,968,000
              
              
              
              151,676Adjustments
      to reconcile net decrease:(Decrease)
      Increase in accrued expensesand
      interest
              
              
              (180,156
              )
              
              
              104,323
              
              
              
              180,525Decrease
      (Increase) in prepaid expenses
              
              
              (4,000
              )
              
              
              455
              
              
              
              (3,478
              )NET
      CASH USED IN OPERATINGAND
      INVESTING ACTIVITIES
              
              
              (1,000,454
              )
              
              
              (538,688
              )
              
              
              (210,200
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Offering
      costs
              
              
              (129,311
              )
              
              
              -
              
              
              
              -Net
      proceeds from the issuance of stock
              
              
              1,298,112
              
              
              
              525,001
              
              
              
              -Proceeds
      from issuance of convertible note toaffiliated
      company
              
              
              
              
              
              
              -
              
              
              
              100,000Advance  from
      affiliated company
              
              
              
              
              
              
              17,500
              
              
              
              33,005Due
      to former stockholder in connectionwith
      common stock rescission
              
              
              
              
              
              
              -
              
              
              
              (45
              )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              1,168,801
              
              
              
              542,501
              
              
              
              132,960NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              168,347
              
              
              
              3,813
              
              
              
              (77,240
              )CASH
      AND CASH EQUIVALENTS – BEGINNING OF YEAR
              
              
              4,450
              
              
              
              637
              
              
              
              77,877CASH
      AND CASH EQUIVALENTS – END OF YEAR
              
              $
              172,797
              
              
              $
              4,450
              
              
              $
              637Non-cash
      financing activities:
                Conversion
      of amount due affiliated company intoCommon
      stock
              
              $
              -
              
              
              $
              132,891
              
              
              $
              68,847
  
 See notes
to financial statements
 
 F-8
 
 BLACKHAWK
CAPITAL GROUP BDC INC.
 
 NOTES TO
FINANCIAL STATEMENTS
 
 DECEMBER
31, 2008
  
 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 had a net loss for the year ended December 31, 2008 of $411,590 and
total net assets of $719,976 as of December 31, 2008. For the year ended
December 31, 2008, the Company raised net cash proceeds of $1,168,801 through a
Regulation E offering under the Securities Act of 1933, as amended ("Securities
Act"). The Company sold 1,298,112 shares of its common stock, $.00001 par value
per share ("Common Stock") at $1.00 purchase price per share for a gross
purchase price of $1,298,112. Out of such proceeds, the Company paid the
following placement fees: (i) $69,311 to Richard J. Kelly; and (ii) $60,000 to
John W. Loofbourrow Associates, Inc. ("JWL"). Prior to such offering, the
Company’s operations have been principally funded by two prior Regulation E
offerings and Concorde Group, Inc. (“Concorde”), a corporation controlled by the
founder and an affiliate of the Company. To the extent that current resources
are not sufficient for the Company to pay its obligations as they become due,
Concorde has agreed to provide sufficient capital to operate through January 1,
2010.
 
 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.
 
 F-9
 
 Cash
and Cash Equivalents
 
 The
Company considers all highly liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents.
 
 Income
Taxes
 
 The
Company accounts for income taxes using the asset and liability method described
in Statement of Financial Accounting Standards (“SFAS”) No. 109, "Accounting For
Income Taxes” (“SFAS 109”), 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.
 
 The
Company adopted the provisions of Financial Accounting Standards Board
interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an
interpretation of SFAS 109 effective January 1, 2007.  There were no
unrecognized tax benefits at December 31, 2007 and December 31,
2008.  The Company recognizes interest and penalties related to
uncertain tax positions in general and administrative
expense.
 
 The tax
years 2005 through 2008 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.
 
 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.  At
December 31, 2008, the Company has no potential shares that could dilute
earnings per share.
  2.
                STOCKHOLDERS’
      EQUITY
 During
2006 amount due to affiliates of $68,847 was converted into 6,884,700 shares of
common stock (at $.01 per share).
 
 During
2007, pursuant to the Company's Regulation E Offering, the Company sold and
exchanged an aggregate of 657,891 shares of common stock, $.00001 par value per
share ("Common Stock"), at a purchase price of $1.00 per share.  The
Company issued to Concorde, an affiliate and the largest stockholder of the
Company, 525,000 shares for $525,001 and 132,891 shares 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.
  F-10
 
 During
2008, pursuant to a Regulation E Offering, the Company sold an aggregate of
1,298,112 shares of Common Stock, at a purchase price of $1.00 per share for
aggregate proceeds of $1,168,801, net of expense of $129,311.
  3.
              INCOME
      TAXES
 
 The net
deferred tax asset in the accompanying balance sheets include the following
amounts of deferred tax assets and liabilities.
 
 Deferred
      Tax Assets
              
              2008
              
              
              2007Capitalized
      Startup Costs
              
              
              564,000
              
              
              $
              382,000Valuation
      Allowance
              
              
              (564,000
              )
              
              
              (382,000
              )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 based on the likelihood of realization.
 
 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 (2008),
$182,000 (2007) and $174,000 (2006) and certain expenses not deductible for tax
purposes.
 
 As of
December 31, 2008, the Company had no net operating loss
carryforward.  All of the startup costs were capitalized for tax
purposes.
 
 4.
              FAIR
      VALUE MEASUREMENT
 
 Effective
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”), for investments measured at fair value on a recurring basis. SFAS
157 accomplishes the following key objectives:
   Ÿ
              Defines fair value as the price
      that would be received to sell an asset or paid to transfer a liability in
      an orderly transaction between market participants at the measurement
      date;Ÿ
              Establishes a three-level
      hierarchy (“Valuation Hierarchy”) for fair value
      measurements;Ÿ
              Requires consideration of the
      Company’s creditworthiness when valuing liabilities;
      andŸ
              Expands disclosures about
      instruments measured at fair
value.
 
 The
Valuation Hierarchy is based upon the transparency of inputs to the valuation of
an asset or liability as of the measurement date. A financial instrument’s
categorization within the Valuation Hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. The three levels of the
Valuation Hierarchy and the distribution of the Company’s financial assets
within it are as follows:
  Ÿ
                Level 1 - inputs to the valuation
      methodology are quoted prices (unadjusted) for identical assets or
      liabilities in active markets.Ÿ
                Level 2 - inputs to the valuation
      methodology include quoted prices for similar assets and liabilities in
      active markets, and inputs that are observable for the asset or liability,
      either directly or indirectly, for substantially the full term of the
      financial instrument.
 
 F-11
  Ÿ
                Level 3 - inputs to the valuation
      methodology are unobservable and significant to the fair value
      measurement.
 As of
December 31, 2008 and 2007, the Company’s investments consisted of securities
classified as level 2 financial assets.
 
 5.
              RELATED
      PARTY TRANSACTIONS
  As of
December 31, 2005, amounts due to Concorde for non-interest bearing advances was
$43,842.
 
 During
2006, the Company borrowed $133,005 from Concorde to fund offering costs for its
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 (the "Note") 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 were 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,
the Board of Directors unanimously voted to allow Concorde to convert amounts
due to Concorde of $68,847 into 6,884,700 shares 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, the Company owed Concorde $8,000 of outstanding non-interest
bearing borrowings and the Note together with accrued interest of
$4,125.  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
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 owed to
Concorde as of December 31, 2006. 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 was
repayable upon demand and did not bear interest and was 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 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
offering.
 
 The
Company shares office space and other administrative functions with Concorde at
no charge to the Company through December 31,2008.  The Board voted to
start paying Concorde monthly rent of $4,000 beginning on January 1,
2009.
 
 6.
              INVESTMENT
      ADVISORY AGREEMENT; CONSULTING
AGREEMENT
 
 Pursuant
to an investment advisory management agreement dated October 31, 2006, Blackhawk
engaged Barak Asset Management, LLC (“Barak”), a Delaware limited liability
company who is 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.  The agreement is for a one-year
term and extendable for one year periods.  The agreement with Barak
was extended and expires on October 31, 2009.  Any one-year extension
of the Barak agreement must be approved by (a) the vote of the Company’s board
of directors, or the vote of a majority of the Company’s outstanding voting
securities, and (b) the vote of the majority of the Company’s independent
directors.
 
 F-12
 
 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, 2008 and 2007, the company incurred fees to Barak in the
amount of $11,301 and $3,117, respectively.
  Blackhawk
has entered into a consulting 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, 2008
and 2007, the Company had not incurred any liability to Mr. Tull.
 
 7.
              ACCRUED
      EXPENSES
 
 Accrued expenses at December 31, 2008,
2007 and 2006 consist principally of legal fees.
 
 8.
              STOCK
      OPTION PLAN
 
 In
December 2008, the stockholders approved the Company's Stock Option Plan ("Stock
Option Plan") which provides for 3,000,000 shares of common stock available for
grant, of which 2,500,000 shall be reserved for incentive stock options, to the
Company's officers, directors and key employees. A grant must be approved by the
stock option committee of the Company (“Committee”).  As of December
31, 2008, no grants have been made under the Stock Option Plan.
 
 The
Committee may grant either incentive stock options (for purposes of Section 422
of the Internal Revenue Code of 1986, as amended), or nonqualified stock
options.  Except as described below for incentive stock options, the
Committee generally has the discretion to determine the persons to whom stock
options will be granted, the number of shares subject to such options, the
exercise prices of such options, the vesting schedules with respect to such
options, the terms of such options, as well as the period, if any, following a
participant's termination of service during which such option may be exercised,
and the circumstances in which all or a portion of an option may become
immediately exercisable or be forfeited.
 
 All
rights to exercise options shall terminate three (3) months after any optionee
ceases to be an officer, director or a key employee of the Company except as
otherwise provided by the Committee in an option agreement, and no options will
vest after an optionee's termination date.  If any officer or key
employee is terminated by the Company for cause, his or her options shall be
forfeited immediately.  Notwithstanding the foregoing, however, where
an optionee's service as a director, officer or key employee of the Company
terminates as a result of the optionee's death or his total and permanent
disability, the optionee or the executors or administrators or distributees of
the estate, as the case may be, shall have the right, from time to time within
one year after the optionee's total and permanent disability or death and prior
to the expiration of the term of the option, to exercise any portion of the
option not previously exercised, in whole or in part, as provided in the
respective option agreement.
  F-13
 
 In the
discretion of the Committee the price due upon exercise of an option may be paid
in cash or in shares of our common stock valued at their then current fair
market value, or a combination of both. Shares delivered in payment of such
price may be shares acquired by prior exercises of options or otherwise, in the
Committee's discretion.  Also in the discretion of the Committee, a
participant may exercise an option as to only a part of the shares covered
thereby and then, in an essentially simultaneous transaction, use the shares so
acquired in payment of the exercise price for additional option
shares.
 
 Holders
of options shall have no rights as shareholders unless and until such options
are exercised and shares are delivered to such persons in accordance with the
Stock Option Plan.
  Incentive
stock options may be granted only to persons who are employees (including
directors who are also employees but excluding non-employee
directors).  Generally, incentive stock options must be granted within
ten years of the date the Stock Option Plan is adopted, and the term of any
incentive stock option may not exceed ten years.  Furthermore, the
aggregate fair market value of shares of Common Stock with respect to which any
incentive stock options are exercisable for the first time by a participant
during any calendar year may not exceed $100,000.  Furthermore, the
exercise price of incentive stock options must be at least 100% of the fair
market value of the Common Stock at the time the incentive stock option is
granted, except in the case of incentive stock options granted to any individual
who owns more than 10% of the total combined voting power of all classes of our
stock, in which case the exercise price of incentive stock options must be at
least 110% of the fair market value of the Common Stock at the time of
grant.
 
 9.
              SUBSEQUENT
      EVENTS
 
 Employment
agreement:
 
 On
January 30, 2009, the Company entered into an Employment Agreement with Craig A.
Zabala ("Zabala"), founder, Chairman, President and Chief Executive Officer, and
acting Chief Financial Officer and Chief Compliance Officer, of the
Company.
 
 The term
of the Employment Agreement is three (3) years (“Employment
Period”).  The term will be automatically renewed for one (1)
additional year each year unless ninety (90) calendar days prior to the end of
the term, the Company advises Zabala in writing that it does not wish to extend
the Employment Period for an additional year.
 
 Pursuant
to the Employment Agreement, Zabala serves as President and Chief Executive
Officer of the Company, provided that if the Company hires and/or enters into an
employment agreement with any executive who serves as President and Chief
Operating Officer of the Company, Zabala shall resign his position as President,
but would keep his position as Chief Executive Officer.  Zabala also
agrees to serve as acting Chief Financial Officer and acting Chief Compliance
Officer until the Company retains employees for such positions.  The
Employment Agreement also permits Zabala to perform work for Concorde and
another affiliate, provided that such work does not compete with the business
and business opportunities of the Company.
 
 Zabala
will receive a base annual salary of $60,000 under the Employment
Agreement.  Each year, the Board of Directors may increase the base
salary in its discretion.  In the event that the Company sells a
minimum of $3,000,000 of shares of its common stock in its current private
placement offering ("Offering") under Rule 506 under Regulation D under the
Securities Act of 1933, as amended (“Securities Act”), the Company shall
increase Zabala's annual base salary to $250,000 and pay him a $50,000 bonus
(which bonus may be increased proportionately if the Company raises more than
$3,000,000 in the Offering but the amount of the bonus shall not be greater than
$100,000).  If the minimum amount is not raised in the Offering,
Zabala's base salary remains at $60,000.
 
 F-14
 
 The
Employment Agreement terminates upon the earliest to occur of (i) Zabala's death
or disability; (ii) cause or non-cause termination of Zabala by the Company;
(iii) a termination by Zabala for "good reason" or Zabala resigns from the
Company without "good reason" or (iv) Zabala is replaced as President and Chief
Executive Officer of the Company (except if another executive is hired as
President and Chief Operating Officer).
 
 If Zabala
is terminated without cause, or if he resigns for "good reason," he would
receive accrued salary and bonuses, if any, to the end of the employment
term.  In addition, if Zabala is terminated without cause or if he
resigns for "good reason," the Company must pay to Concorde rental payments (for
rental of space at 14 Wall Street, New York, New York 10005) of $4,000 per month
from April 2004 until the month Zabala is terminated without cause or resigns
for "good reason."  If he is terminated for cause, he is not entitled
to any rights or compensation under the Employment Agreement, provided that the
Company must make the $4,000 monthly rental payment to its affiliate
Concorde.  If Zabala is terminated in the event of death or
disability, or he resigns without "good reason," he shall only be entitled to
receive accrued and unpaid base salary and benefits through the date of his
employment termination.  If the Company hires a replacement for Zabala
who does not serve as President and Chief Operating Officer, but serves as Chief
Executive Officer, Zabala would be entitled to the benefits above for a
non-cause termination.
  Stock option
grant:
 
 Pursuant
to the Employment Agreement, Zabala was granted 600,000 options to purchase
shares of Common Stock at an exercise price of $0.40 per share (above market
value) which expires on February 1, 2019. The options were fully vested upon
issuance.
 
 Placement Agent
Agreement:
 
 On March
6, 2009, the Company retained John W. Loofbourrow Associates, Inc. ("JWL") to
act as its placement agent to raise equity capital in its private placement
offering ("Offering") under Rule 506 of the Securities Act of 1933, as amended
("Securities Act") for Blackhawk pursuant to a placement agent agreement dated
March 6, 2009 ("Placement Agent Agreement").  JWL will solicit
interest from a limited number of potential investors who are Qualified
Institutional Buyers ("QIBs") as defined under Rule 144A under the Securities
Act and "accredited investors" as defined under Regulation D under the
Securities Act in connection with raising equity capital for Blackhawk in the
Offering.  The minimum amount to be raised by JWL is $3,000,000 and
the maximum amount is $25,000,000.  In return for JWL's services,
Blackhawk will pay a placement agent a cash fee equal to ten percent (10%) of
the purchase price ($5.00 per share) of any securities placed with a prospective
investor by JWL and purchased by the investor.  Blackhawk does not
have to reimburse JWL for its expenses.  The Placement Agent Agreement
commenced on March 6, 2009 and terminates on March 31, 2009 (the
"Term").  The parties may extend the Term by mutual
agreement.
 
 The
Placement Agent Agreement also provides that from March 6, 2009 until March 31,
2009 (the "Period"), JWL shall have the exclusive right on behalf of the Company
to solicit prospective investors who are QIBs and/or accredited investors
regarding the possible sale to such investors of shares.  During the
Period, JWL does not have the right to conduct any other discussions on behalf
of the Company regarding any matter other than the sale of the shares to the
prospective investors.  For purposes of clarification, the Company
during the Period agreed to deal exclusively with JWL concerning the sale of the
shares and discontinue any discussions with respect to any previously received
third party proposals with respect to the sale of such shares.  The
Placement Agent Agreement contains customary indemnification and confidentiality
provisions.  The Placement Agent Agreement also provides that for a
period of one year from the termination date of the Placement Agent Agreement,
if JWL enters into a selling group in any subsequent securities offerings of
Blackhawk, then JWL shall receive additional financing fees if Blackhawk sells
securities to those investors previously introduced by JWL.  The
additional fees payable to JWL will be at the same rate as any underwriting or
placement fees that are listed in any Blackhawk future offering memorandum or
prospectus.
 
 F-15
 
 The
Placement Agent Agreement further provides that Blackhawk shall have the right
to identify investors with which it has affiliations who would be suitable QIBs
and accredited investors for the Offering ("Company-Introduced
Investors").  In the event that Blackhawk decides that these investors
are suitable for the Offering and these investors purchase securities in the
Offering, no fees shall be due to JWL respecting shares purchased by
Company-Introduced Investors.
 
 Investment:
 
 On
January 12, 2009, Blackhawk entered into a Voting Capital Interests Purchase
Agreement ("Purchase Agreement") with MacroMarkets LLC, a Delaware limited
liability company ("MacroMarkets").  Pursuant to the Purchase
Agreement, Blackhawk purchased a five percent (5%) membership interest in
MacroMarkets for $250,000 and Craig A. Zabala, Chairman and Chief Executive
Officer of Blackhawk, was appointed a non-voting board member of
MacroMarkets.  The Purchase Agreement contains standard
representations, warranties and indemnification provisions.  The
transaction closed on January 12, 2009. Blackhawk used funds from working
capital to make the equity investment.
  MacroMarkets
is the parent company founded by Robert Shiller, Sam Masucci and Allan Weiss in
2002 to develop financial products and new risk management tools on assets that
are difficult to own and hedge.  Macro Financial, LLC, a FINRA member
broker dealer, is a subsidiary of MacroMarkets that provides sales and marketing
support for Macro Securities Depositor, LLC, Macro Inflation Depositor, LLC and
Macro Housing Depositor, LLC, which use proprietary product structures to
deliver performance on commodities, inflation and real estate.
 
 10.
              FINANCIAL
      HIGHLIGHTS
 
 The
following is a schedule of financial highlights for the years ended December 31,
2008, 2007, 2006 and 2005 and the period from inception (April 22, 2004) to
December 31, 2004.
  YEAR
      ENDED DECEMBER 31,
              
              
              FROMINCEPTION (APRIL
      22,2004
      TO DECEMBER 31,20042008
              
              
              2007
              
              
              2006
              
              
              2005Per
      Share Data:Net
      asset value – beginning of period
              
              $
              (0.00119
              )
              
              $
              (0.00972
              )
              
              $
              0.00093
              
              
              $
              0.00050
              
              
              $
              0.00001Net
      investment loss *
              
              
              (0.01263
              )
              
              
              (0.01307
              )
              
              
              (0.01371
              )
              
              
              (0.00220
              )
              
              
              (0.00179
              )Issuance
      of common stock
              
              
              1.00000
              
              
              
              1.00000
              
              
              
              0.01000
              
              
              
              0.00417
              
              
              
              0.00796Net
      realized and unrealized gain(loss)**
              
              
              (0.96400
              )
              
              $
              (0.97840
              )
              
              
              (0.00694
              )
              
              
              (0.00154
              )
              
              
              (0.00568
              )Net
      asset (liability) value – end of period
              
              
              0.02218
              
              
              $
              (0.00119
              )
              
              
              (0.00972
              )
              
              
              0.00093
              
              
              
              .00050Total
      return based on net asset value ***
              
              
              (1,061
              %)
              
              
              (135
              %)
              
              
              (1,474
              %)
              
              
              (440
              %)
              
              
              (17,900
              %)Common
      shares outstanding – end of period****
              
              
              32,467,484
              
              
              
              31,169,372
              
              
              
              30,511,481
              
              
              
              23,626,781
              
              
              
              8,591,901Ratio/Supplemental
      Data:Net
      assets (liabilities) – end of period
              
              $
              719,976
              
              
              $
              (37,235
              )
              
              $
              (296,424
              )
              
              $
              21,976
              
              
              $
              4,282Ratio
      of net investment loss to average net assets*****
              
              
              (88
              %)
              
              
              (813
              %)
              
              
              (3,524
              %)
              
              
              (91
              %)
              
              
              (1,212
              %)Ratio
      of operating expenses to average net assets*****
              
              
              91
              %
              
              
              819
              %
              
              
              3,528
              %
              
              
              94
              %
              
              
              1,213
              %
 
 *
                Calculated
      based on weighted average shares outstanding during
  period
 **
              Net
      realized and unrealized gain(loss), per share, which is balancing amounts
      necessary to reconcile the change in net asset value per share with the
      other per share information presented.  This caption used per
      the AICPA Audit and Accounting Guide for investment Companies Section 7.77
      (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-16