UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










FORM
10-K





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





For the
Fiscal Year Ended December 31, 2009








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)  880
      Third Avenue, 12th
      Floor, New York, New York
              
              10022(Address
      of principal executive offices)
              
              (Zip
      Code)





(646)
833-1030


(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 Securities Exchange Act of 1934.  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 xNo o





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and most such
files).  Yes o  No x





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 aggregate market value of the
registrant's common stock, $0.00001 par value per share, held by non-affiliates
of the registrant on June 30, 2009, the last business day of the registrant's
most recently completed second fiscal quarter, was approximately $2,112,764
(based on $.13, the closing ask price of the registrant's common stock on that
date -- no sales of shares were made on that date).  Shares of the
registrant's common stock held by each officer and director and each person who
owns 5% or more of the outstanding common stock of the registrant are not
included in that amount, because such persons may be deemed to be affiliates of
the registrant.  This determination of affiliate status is not
necessarily a conclusive determination for other purposes.  As of
March 30, 2010, 32,467,484 shares of the registrant's common stock, $0.00001 par
value per share, were issued and outstanding.









TABLE
OF CONTENTS





GENERAL
NOTE





PART
I


Item
      1.
            Business
            
            
            2Item
      1A.
            Risk
      Factors
            
            
            11Item
      1B.
            Unresolved
      Staff Comments
            
            
            34Item
      2.
            Properties
            
            
            34Item
      3.
            Legal
      Proceedings
            
            
            35Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            
            
            35PART
      IIItem
      5.
            Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchase of Equity Securities
            
            
            35Item
      6.
            Selected
      Financial Data
            
            
            37Item
      7.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operation
            
            
            37Item
      7A.
            Quantitative
      and Qualitative Disclosures about Market Risk
            
            
            42Item
      8.
            Financial
      Statements and Supplementary Data
            
            
            42Item
      9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            
            
            42Item
      9A.
            Controls
      and Procedures
            
            
            42Item
      9A(T).
            Controls
      and Procedures
            
            
            43Item
      9B.
            Other
      Information
            
            
            44PART
      IIIItem
      10.
            Directors,
      Executive Officers and Corporate Governance
            
            
            44Item
      11.
            Executive
      Compensation
            
            
            49Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            
            61Item
      13.
            Certain
      Relationships And Related Transactions and Director
      Independence
            
            
            62Item
      14.
            Principal
      Accounting Fees and Services
            
            
            64PART
      IVItem
      15.
            Exhibits
      and Financial Statement Schedules
            
            
            65










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.




1





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 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, conducting a private placement
under Rule 506 under Regulation D of the Securities Act and four (4) offerings
under Regulation E of the Securities Act, and making the MacroMarkets investment
(see "MacroMarkets Investment" herein).





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 ("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.





2009
Capital Raising Efforts





The Company retained placement agents
to raise equity capital in its private placement offering ("Offering") under
Rule 506 of the Securities Act which commenced on March 9, 2009 pursuant to
placement agent agreements with John W. Loofbourrow Associates, Inc., Direct
Access Partners, LLC, Lombardi & Co., Bentley Securities Corporation and
Growthink Securities, Inc., respectively, dated July 8, July 20, July 27, August
3, and August 21, 2009, respectively ("Placement Agent
Agreements").  All five of these agreements contain nearly identical
terms.  The Placement Agents solicited 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 in the Offering.  There was no minimum amount to be
raised by the Placement Agents for the Offering and the maximum amount was
$250,000,000.  In return for the Placement Agent services, Blackhawk
agreed to pay a Placement Agent a five percent (5%) placement fee for securities
placed.  The Placement Agent Agreements commenced on the date of the
agreement or, in the case of Bentley Securities Corporation, the day immediately
thereafter, and terminated on the earliest to occur of: (i) ten calendar days
after written notice is given to the Company by the Placement Agent of a
potential investor purchasing at least 50,000,000 shares that will close on the
purchase of the shares within five calendar days of the date of such written
notice; (ii) 180 calendar days from the date of the agreement or, in the case of
Bentley Securities Corporation, the day immediately thereafter; (iii) the date
of closing and funding by an investor of a subscription agreement for a minimum
of 50,000,000 shares; or (iv) ten calendar days after written notice is given to
the Placement Agent by the Company that the Offering will be closed at the sole
discretion of the Company (the "Term"), provided further that with respect to
Bentley Securities Corporation, its placement agent agreement also terminated
upon ten (10) days written notice by either party under the agreement and such
termination right is included as a new (v) within the definition of
"Term."




4





The
Placement Agent Agreements contain customary indemnification and confidentiality
provisions.  With the exception of the Bentley Securities
Corporation Placement Agent Agreement, the Company's indemnification
obligations under each agreement is limited to $25,000.  The Placement
Agent Agreements also provide that for a period of one year (two years for the
agreement with Growthink Securities, Inc.) from the termination date of the
Placement Agent Agreements, if a Placement Agent enters into a selling group in
any subsequent securities offerings of Blackhawk, then the Placement Agent shall
receive additional financing fees if Blackhawk sells securities to those
investors previously introduced by the Placement Agent.  The
additional fees payable to the Placement Agent will be at the same rate as any
underwriting or placement fees that are listed in any Blackhawk future offering
memorandum or prospectus.





On
December 14, 2009, the Company determined to terminate its private placement
offering under Rule 506 of Regulation D of the Securities Act, which commenced
on August 25, 2009, because no shares were sold in the Offering.





On
December 14, 2009, Blackhawk entered into an amendment ("Amendment") of its
Placement Agent Agreement with Growthink Securities, Inc.  On December
15, 2009, the Company entered into an Amendment of its Placement Agent Agreement
with Bentley Securities Corporation and an Amendment of its Placement Agent
Agreement with Direct Access Partners, LLC.  The purpose of each
Amendment was to clarify that: (a) the term "Offering" in each Placement Agent
Agreement also included the Company's offering of up to 1,000,000 shares (5.00
per share) pursuant to Regulation E (the "Regulation E Offering") under the
Investment Company Act and the Securities Act; (b) the term "Offering Materials"
includes the Company's Form 1-Es and Offering Circulars to be filed with the
Securities and Exchange Commission, and distributed to prospective investors,
for the Regulation E Offering; and (c) Section 2 of each Placement Agent
Agreement provides that the Placement Agent receive a ten percent (10%)
placement agent fee for shares sold in the Regulation E
Offering.  Growthink Securities declined to participate in the
Regulation E Offering.





On
January 21, 2010, the Company announced that due to adverse market conditions it
had not sold any shares of Common Stock in the Regulation E offering and that it
was terminating its Regulation E offering.





The
Company entered into a consultation agreement dated August 21, 2009 ("Consulting
Agreement") with GrowThink, Incorporated, a Delaware corporation and affiliate
of Growthink Securities, Inc. ("Consultant").  Pursuant to the
Consulting Agreement, Consultant agreed to provide to the Company research,
analysis and data relating to business development company ("BDC") and hedge
fund investments, and include coverage and analysis of similar BDC's and hedge
funds, as well as data on targeted investments and other
services.  The Company paid Consultant $25,000 upon execution of the
Consulting Agreement and agreed to pay it $25,000 every sixty (60) days
thereafter unless either party terminates the agreement upon seven (7) days
notice.  The term of the Consulting Agreement was sixty (60) days, and
thereafter for a total of eight (8) months.  It is automatically
renewed thereafter in sixty (60) day increments until terminated in writing by
either party upon seven (7) calendar days advance written notice.  To
date, the Company has only paid the Consultant $25,000 and does not believe that
it owes any additional money to the Consultant because the Consultant failed to
perform work under the Consulting Agreement.  In October 2009, the
Company advised the Consultant that it was terminating the Consulting Agreement
because of the Consultant's failure to perform under it.




5





Pre-2009
Capital Transactions





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").  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) 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 share purchases by investors 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.




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.




6




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 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.




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."




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.




7




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,
2010.  Barak will manage assets of Blackhawk on a non-exclusive basis
consistent with Blackhawk's BDC investment guidelines and policies and
consistent with the BDC provisions under the Investment Company Act of
1940.  Barak was paid fees by Blackhawk of $16,738 for its work in
2009.





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.




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.




8




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;




·
            Provided
      Concorde has sufficient funds available, it will provide funds to
      Blackhawk through January 1, 2011 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 has been invoiced by
      Concorde $4,000 per month for such sublease of space; Blackhawk paid
      Concorde $48,000 under this arrangement as of December 31, 2009;
      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.




From
inception (April 22, 2004) through December 31, 2009, 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.




9




At
December 31, 2009 and 2008, there were no outstanding amounts due to
Concorde.




For the
year ended December 31, 2009, Blackhawk has a decrease in net assets resulting
from operations of $986,472 and total net liabilities of $134,496.




On June
21, 2006, Blackhawk entered into an Exchange Agreement ("Exchange Agreement")
with Concorde, 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.




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.




10




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 January
2009.  Blackhawk has invested the net proceeds from its second and
third Regulation E Offerings received to date in cash equivalents, investments
with maturity dates of less than one year, and in the MacroMarkets
investment.  During 2009 Blackhawk was unable to sell any of its
shares in a private placement offering under Rule 506 under the Securities Act
and a fourth Regulation E Offering.  We seek to assist our investee
companies and their management teams in devising realistic business strategies
and obtaining necessary financing.





There
Is Substantial Doubt About Our Ability To Continue As A Going
Concern





Our
independent public accounting firm has issued an opinion on our financial
statements that states that the financial statements were prepared assuming we
will continue as a going concern and further states that our inability to raise
equity capital, or if Concorde is unable to provide sufficient capital to the
Company to sustain our operations, raises substantial doubt about our ability to
continue as a going concern.  If we fail to raise equity capital or
obtain sufficient funds from Concorde, we would not be able to continue as a
going concern and could potentially be forced to seek relief through a filing
under the U.S. Bankruptcy Code.





Investors
May Lose Their Entire Investment In Any Offering





Investing
in the common shares of the Company is highly risky.  The Company
cannot assure an investor that it will raise adequate
capital.  Investors may lose all of any investment in such common
shares.





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.




11





A
Failure on Our Part to Maintain Our Status as a 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 had 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.  On May 29, 2007, Blackhawk issued a convertible note in the
principal amount of $25,500 to Concorde.  This amount was converted
into shares of Common Stock in Blackhawk's second Regulation E Offering at the
exchange rate of $1.00 per share (25,500 shares).  We can provide you
with no assurance that we will be able to raise money in future equity offerings
given difficult market conditions.  During 2009 Blackhawk was unable
to sell any shares of Common Stock in its private placement offering and fourth
Regulation E Offering. 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, 2009 was ($134,496) or ($0.00414) per
share.  The NAV has fluctuated over the past four (4) years and was
negative at the end of 2009, 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





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.




12





Our
Ability to Enter into Transactions With our Affiliates will be
Restricted





We will be prohibited under the
Investment Company Act from participating in certain transactions with certain
of our affiliates without the prior approval of a majority of the independent
members of our Board of Directors and, in some cases, the SEC.  Any
person that owns, directly or indirectly, five percent (5%) or more of our
outstanding voting securities will be our affiliate for purposes of the
Investment Company Act and we will generally be prohibited from buying or
selling any securities from or to such affiliate, absent the prior approval of
our Board of Directors.  The Investment Company Act also prohibits
certain "joint" transactions with certain of our affiliates, which could include
investments in the same portfolio company (whether at the same or different
times), without prior approval of our Board of Directors and, in some cases, the
SEC.  If a person acquires more than 25% of our voting securities, we
will be prohibited from buying or selling any security from or to such person or
certain of that person's affiliates, or entering into prohibited joint
transactions with such persons, absent the prior approval of the
SEC.  Similar restrictions limit our ability to transact business with
our officers or directors or their affiliates.





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.  The Investment Company Act regulates affiliate
transactions.  See "Our Ability to Enter into Transactions With Our
Affiliates will be Restricted" above.  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.




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.




13





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;





§
            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.




14





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.




15





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, 2011 if it has the wherewithal to
fund such operations.  However, there can be no assurance that
Concorde would be able to lend money to Blackhawk.  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.





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.




16





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.





Market
Illiquidity





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





Market
Price for Common Stock





Shares of Common Stock trade very
infrequently on the OTC Bulletin Board under the symbol
BHCG.OB.  During the period from January 2007 to March 25, 2010,
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.




17





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 that 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 have
both reasonable knowledge of all the relevant facts.





A fair
value hierarchy consists of three levels that are used to prioritize inputs
to fair value techniques:





·
            Level
      1 - inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.




·
            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.




·
            Level
      3 - inputs to the valuation methodology are unobservable and significant
      to the fair value measurement.




To
increase objectivity in valuing its assets, Blackhawk also intends to use
external measures of value such as public markets or significant third-party
transactions whenever possible.  Neither a long-term workout value nor
an immediate liquidation value will be used, and no increment of value will be
included for changes that may take place in the future.  Certain
members of Blackhawk's Board of Directors may hold positions in some of
Blackhawk's investee companies and certain members of the Board of Directors may
hold offices or director positions with some of Blackhawk's investee
companies.





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




18





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





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





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





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




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




19





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





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





Regulations
governing our operation as a BDC affect our ability to raise additional
capital.





Under the
provisions of the Investment Company Act, Blackhawk will be permitted to issue
senior securities in amounts such that its asset coverage ratio equals at least
200% of gross assets less all liabilities and indebtedness not represented by
senior securities, after each issuance of senior securities.  If the
value of its assets declines, Blackhawk may be unable to satisfy this
test.  Then, Blackhawk may be required to sell a portion of its
investments and, depending on the nature of its leverage, repay a portion of its
indebtedness at a time when such sales may be disadvantageous.  Also,
as a result of issuing senior securities, Blackhawk would be exposed to typical
risks associated with leverage, including an increased risk of
loss.  If preferred stock is issued, the preferred stock would rank
"senior" to common stock, preferred stockholders would have separate voting
rights and might have rights, preferences, or privileges more favorable than
those of common stockholders, and the issuance of preferred stock could have the
effect of delaying, deferring, or preventing a transaction or a change of
control that might involve a premium price for holders of common
stock.





Blackhawk
generally is not able to issue and sell common stock at a price below net asset
value per share.  It may, however, sell common stock, or warrants,
options or rights to acquire common stock, at a price below the then-current net
asset value per share of common stock if the Board of Directors determines that
such sale is in the best interests of Blackhawk and its stockholders, and
stockholders approve such sale.




20





Regulation
- 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.





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, 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.




21





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





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





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





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





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




22





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.





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.




23





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





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





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.




24





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.




25





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 March 30, 2010 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 any
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.




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.




26




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).




27




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.




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.




28




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.




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.




29




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.




30




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.




31




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.)




32




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.




33




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.




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, 2009, Blackhawk had two (2) 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 NY 10005 from Concorde, an affiliate of
Blackhawk.  Commencing January 1, 2009, Blackhawk is paying or
accruing $4,000 to Concorde for this space.  Prior to January 1, 2009,
Blackhawk did not pay Concorde for the sublease of space.  Blackhawk
owes Concorde $48,000 for such rental payments as of December 31,
2009.  The sub-lease is on a month-to-month basis.




34





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 2009, there were no matters submitted to stockholders for
a vote.




PART
II





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





(a)           Market
Information





The common stock of Blackhawk is not
listed on any principal United States market or exchange.  It trades
on the OTC Bulletin Board under the symbol "BHCG.OB."  The stock was
added to the OTC Bulletin Board effective August 23, 2006.  The stock
first started trading on the OTC Bulletin Board on January 24, 2007 as reported
by BigCharts.com.  However, the common stock trades infrequently and
sporadically and thus there is not an established public trading market for the
common stock.  Listed below is the range of high and low bid
quotations as reported by OTC Bulletin Board, Historical Research Reports for
four quarters in 2008 and in 2009 and the first quarter of 2010 (to March 25,
2010).





BidHigh
            
            
            Low2010First
      Quarter (through March 25, 2010)
            
            $
            0.10
            
            
            $
            0.042009First
      Quarter
            
            $
            0.35
            
            
            $
            0.08Second
      Quarter
            
            $
            0.22
            
            
            $
            0.09Third
      Quarter
            
            $
            0.14
            
            
            $
            0.05Fourth
      Quarter
            
            $
            0.10
            
            
            $
            0.042008First
      Quarter
            
            $
            0.36
            
            
            $
            0.06Second
      Quarter
            
            $
            0.19
            
            
            $
            0.10Third
      Quarter
            
            $
            0.17
            
            
            $
            0.06Fourth
      Quarter
            
            $
            0.12
            
            
            $
            0.04




35




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





Holders





As of March 25, 2010, the approximate
numbers of holders of the Company's common stock was eighty-seven (87)
holders.





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.  As of the date of this filing, none of these
options have been exercised.





Saleof Unregistered
Securities





(a)           Blackhawk
did not sell any unregistered securities during 2009.





(b)           Not
applicable.




36





(c)           Not
applicable.





Item 6. Selected Financial
Data





The
selected financial data presented below for the years ended December 31, 2009,
2008, 2007, 2006, and 2005 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, 2009, 2008
and 2007 (included in this Annual Report), and 2006 and 2005 (not included in
this Annual Report).





BLACKHAWK
CAPITAL GROUP BDC, INC.


SELECTED
FINANCIAL DATA


Years
Ended December 31, 2009, 2008, 2007, 2006, 2005





Year
      Ended2009
            
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005Total
      Investment Income
            
            $
            6,101
            
            
            $
            17,613
            
            
            $
            3,263
            
            
            $
            460
            
            
            $
            1,139Total
      Expenses
            
            
            (992,634
            )
            
            
            (422,702
            )
            
            
            (407,179
            )
            
            
            (387,707
            )
            
            
            (46,074
            )Net
      Investment (Loss)
            
            
            (986,533
            )
            
            
            (405,089
            )
            
            
            (403,916
            )
            
            
            (387,247
            )
            
            
            (44,935
            )Net
      Decrease in Assets Resulting from Operations
            
            
            (986,472
            )
            
            
            (411,590
            )
            
            
            (398,703
            )
            
            
            (387,247
            )
            
            
            (44,935
            )Per
      Share Data:Loss
      Per Common Share,
              Basic
      and Diluted:*
            
            
            (0.03038
            )
            
            
            (0.01284
            )
            
            
            (0.01290
            )
            
            
            (0.01371
            )
            
            
            (0.00220
            )As of December
      31Total
      Assets
            
            $
            402,116
            
            
            $
            838,078
            
            
            $
            261,023
            
            
            $
            9,637
            
            
            $
            83,399Total
      Liabilities
            
            
            536,612
            
            
            $
            118,102
            
            
            
            298,258
            
            
            
            306,061
            
            
            
            61,423Total
      Net Assets (Liabilities)
            
            
            (134,496
            )
            
            $
            719,976
            
            
            
            (37,235
            )
            
            
            (296,424
            )
            
            
            21,976Other
      Data:Total
      Return Per Share Based on Net Asset Value**
            
            
            (119
            %)
            
            
            (1,061
            %)
            
            
            (135
            %)
            
            
            (1,474
            %)
            
            
            (440
            %)







*
            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.




37





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 offers managerial assistance to
developing companies.





Accounting
Policies





Basis
of Presentation





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




Use
of Estimates in the Preparation of Financial Statements





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





Portfolio
and Investment Activity





On
January 12, 2009, Blackhawk entered into a Voting Capital Interests Purchase
Agreement ("Purchase Agreement") with MacroMarkets LLC, a Delaware limited
liability company ("MacroMarkets"), its first portfolio
investment.  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, 2009, interest income decreased to $6,101 from $17,613
for the year ended December 31, 2008 due to a reduced amount of interest bearing
securities owned by Blackhawk in 2009.




For the
year end 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.




38




General
and Administrative Expenses





For the
year ended December 31, 2009, expenses increased to $992,634 from $422,702 for
the year ended December 31, 2008.  The increase was primarily
attributable to an increase in professional fees and compensation
expense.




For the
year end 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.




Liquidity
and Capital Resources





From inception (April 22, 2004) through
December 31, 2009, 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, 2009 and 2008, 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.




39





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.





During
the year ended December 31, 2009, the Company conducted the following offerings
for the sale of its shares of Common Stock:  (a) a private placement
offering under Rule 506 under Regulation D of the Securities Act to "accredited
investors" and "qualified institutional buyers" or QIBs to raise a maximum of
$250,000,000, and (b) a fourth offering under Regulation E under the Securities
Act to raise a maximum of $5,000,000.  Due to adverse market
conditions for raising equity capital, the Company did not sell any shares of
Common Stock in either offering and consequently terminated each
offering.




40




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




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





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





Blackhawk had a decrease in net
assets resulting from operations for the year ended December 31, 2009 of
$986,472 and total net liabilities of $134,496 as of December 31, 2009 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 although there can be no assurance it will raise such equity capital
on terms acceptable to the Company at all.  Blackhawk was unable to
raise equity capital in two offerings of its Common Stock in
2009.  Since inception, Blackhawk's operations have been principally
funded by three Regulation E offerings and by loans from
Concorde.  Concorde has agreed to provide sufficient capital to
Blackhawk to operate through January 1, 2011 if Concorde has capital to provide
to or lend to Blackhawk.




41




Our independent public accounting firm
has issued an opinion on our financial statements that states that the financial
statements were prepared assuming we will continue as a going concern and
further states that our inability to raise equity capital, or if Concorde is
unable to provide sufficient capital to the Company to sustain our operations,
raises substantial doubt about our ability to continue as a going
concern.  If we fail to raise equity capital or obtain sufficient
funds from Concorde, we would not be able to continue as a going concern and
could potentially be forced to seek relief through a filing under the U.S.
Bankruptcy Code.




Item 7A. Quantitative and
Qualitative Disclosures about Market Risk





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





Interest
Rate Risk





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





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.




42





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.





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,
2009.  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, 2009, 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.




43





Changes
in Internal Control Over Financial Reporting





During the three months ended December
31, 2009, 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,Executive Officersand Corporate
Governance





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





Name and Address
            
            Age
            
            Position Held with
  CompanyDr.
      Craig A. Zabala(1)
            
            58
            
            President,
      Chief ExecutiveP.O.
      Box 377
            
            
            
            Officer,
      Acting ChiefCanal
      Street Station
            
            
            
            Financial
      Officer, ActingNew
      York, New York 10013
            
            
            
            Chief
      Compliance Officer,
              Secretary,
      ChairmanRobert
      M. Fujii(2)(3)
            
            60
            
            Vice
      President1624
      Acton StreetBerkeley,
      California 94702Robert
      J. Francis(3)
            
            39
            
            Director5416
      South 161st
      Street
              Omaha,
      NE 68135Janet
      Buxman Kurihara(3)
            
            51
            
            Director11007
      North Cottontail LaneParker,
      Colorado 80138Randy
      Tejral(3)
            
            54
            
            Director6529
      Pine Ridge RoadElkhorn,
      Nebraska 68022Mick
      Woodwards(1)(3)
            
            51
            
            Director4849
      Woodruff AvenueLakewood,
      California 90713




(1)
            Control
      person as defined in Section 2(a)(1) of the Investment Company
      Act.




44




(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
Founder, Chairman, President and Chief Executive Officer of Blackhawk founded on
April 22, 2004.





Dr. Zabala is also Managing Director of
787 Capital Group LLC, a financial services company, since February 1, 2010;
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 (d/b/a Drexel Burnham Lambert) founded May 9, 2000.  Since June
15, 2007, Dr. Zabala has been a Registered Representative at Torsiello
Securities, Inc., New York, New York.  Torsiello Securities is a
Financial Industry Regulatory Authority ("FINRA") member broker
dealer.





From 1998 to 2002, he was a 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 Gold Reservations of America, Inc., Sherman Oaks,
California.




45





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. Haas
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 a 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 post-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 completing a MSc degree in finance
with focus on globalization at the Center for Financial and Management Studies,
School of Oriental and African Studies, University of London, United
Kingdom.





Dr. Zabala holds the General Securities
Registered Representative (Series 7), Uniform State Securities Agent (Series
63), Investment Advisor Representative (Series 65), and Investment Banking
Representative (Series 79) securities licenses.





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.




46





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.





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, 2009 to December 31, 2009, the Board of Directors held four (4) meetings in
person or by teleconference.  During 2009, the Board of Directors also
acted by unanimous written consent nine (9) times.




47





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.  The Stock Option Committee acted by unanimous written
consent one (1)time.





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 2009 with the reporting requirements of Section
16(a) of the Exchange Act.





Limitations
of Liability and Indemnification of Directors and Officers





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





We have
been advised that it is the position of the SEC 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;




48




§
            full,
      fair, accurate, timely, and understandable disclosure in reports and
      documents that Blackhawk files with, or submits to, the SEC 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., 880
Third Avenue, 12th Floor, New York, NY  10022.





Item 11. Executive
Compensation





Except as
set forth herein with respect to the Zabala Employment Agreement, 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.





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.





Compensation Discussion and
Analysis




The
Company's principal executive officer is Craig A. Zabala, who serves as
President, CEO and Acting Chief Financial Officer and Acting Chief Compliance
Officer.




49




The
Company does not have a Compensation Committee or similar
committee.  The determination of Mr. Zabala's compensation is made by
the Board of Directors and pursuant to his employment agreement.  See
"Zabala Employment Agreement" herein.




Introduction




This
Compensation Discussion and Analysis is designed to provide shareholders with an
understanding of the Company's compensation philosophy and objectives and the
analysis that we performed in setting executive compensation.  It
discusses the Board's compensation actions with respect to Dr. Zabala, the only
salaried employee of the Company.




Objectives




For the
Company's success and enhancement of long-term stockholder value, the Company
depends on the management and abilities of its President.  The Board's
compensation objectives are to provide an important oversight function of
compensation and appropriate levels of compensation, reward above average
performance, recognize individual initiative and achievement, assist the Company
in attracting and retaining qualified management to contribute to its success
and motivate the President to enhance stockholder value.




Key Elements of
Compensation




·
            Base
      Salary - Base salaries should meet the objectives of attracting and
      retaining executive officers needed to successfully manage the Company's
      business.  Actual individual salary amounts are not determined
      by formulas, but instead reflect the Board's judgment with respect to
      responsibility, performance, experience, historical compensation,
      equitable considerations and other factors, including any retention
      concerns.  The Company set Dr. Zabala's base salary in his
      employment agreement at a low level with increases based upon his success
      in raising equity capital for the
Company.




·
            Bonus
      - The Company may pay annual bonuses to executive officers to motivate
      them to achieve the Company principal business and investment goals and to
      bring total compensation to competitive levels.  The bonus is
      based on a qualitative consideration of individual and company
      performance.  The Board considers a variety of factors in
      establishing bonuses, including performance, exceeding budgets, peer
      review and commitment to the Company.  The bonus for Dr. Zabala
      in his employment agreement is also based upon a closing of an equity
      raise.




·
            Common
      Stock - We believe that equity ownership by management aligns management's
      interests with increasing stockholder value.  The Company has a
      stock option plan adopted in 2009 pursuant to which executives are awarded
      stock options.  Dr. Zabala was awarded options to purchase
      600,000 shares at $.40 per share pursuant to his employment
      agreement.




50




Compensation
Determinations




Salary and
Bonus




The Board
determined that the salary accrued to the President during the 2009 fiscal year
was at a level that was in the best interests of shareholders.  In
making its determination, the Board considered whether the salary payable to Dr.
Zabala by the Company pursuant to his employment agreement was consistent with
the compensation philosophies described above.




Establishing Compensation
Levels




When
making compensation decisions for executive officers, the Board of Directors
takes many factors into account, including the individual's role and
responsibilities, performance, tenure, and experience; the overall performance
of the Company; the recommendations of the Board; the individual's historical
compensation; and comparison to other executive officers of the
Company.  The Company does not utilize any benchmarking or performance
targets to set its compensation levels.




The Board
considers:  (a) responsibilities and duties of the President set forth
in his employment agreement; (b) President's success in raising equity capital,
identifying investments and closing on investments; (c) work with SEC filings;
(d) the fact that the President performs all management functions for the
Company; (e) compensation in relation to the size of the Company and its
investments and their performance; (f) the performance of the Company's assets;
and (g) the assets, liabilities and financial performance of the
Company.




Evaluating
Performance




The Board
evaluates the performance of the President on an annual basis.  The
Board also seeks the input of the President in connection with his performance
evaluation; however, the President is not present when the Board meets to
evaluate his performance and determine his compensation.




CEO
Performance




The Board
of Directors uses discretion in its evaluation of individual performance and
considers the following factors, among others, in approving any bonus to the
President: the President's management, raising of equity or debt capital for the
Company strategic planning, business development and investment
returns.




Change of Control and
Termination Benefits




The
Company has an employment agreement with Dr. Zabala which provides for
termination benefits.  See "Zabala Employment Agreement"
below.




51




Profit Sharing
Plan




The
Company does not have a profit sharing plan.




Conclusion




The Board
of Directors recognizes the important contributions Dr. Zabala has made to the
Company in 2009 -- principally, his efforts trying to raise equity capital for
the Company through private placements and a Regulation E Offering, closing the
MacroMarkets investment (the Company's first investment) and looking for other
investments for the Company, establishing relationships with placement agents
and investment bankers, working with  the Company's investment adviser
and managing the operations of the Company.




The
Company's compensation philosophy is to incentivize its management and reward
them for performance linked to long-term shareholder value.  Based
upon these factors, the Board of Directors reviewed Dr. Zabala's employment
agreement and determined he was not entitled to an increased salary (above
$60,000 per annum) and a bonus principally because no equity offering was closed
in 2009.




By the
Board of Directors of Blackhawk Capital Group BDC, Inc.





Craig
      A. Zabala
            Janet
      Buxman Kurihara
            Mick
      WoodwardsRandy
      Tejral
            Robert
      J. Francis





Summary Compensation
Table




The
following table sets forth information with respect to the compensation paid,
earned and accrued for the 2009, 2008 and 2007 fiscal years to each named
executive officer, and to each officer of the Company with aggregate
compensation in excess of $100,000.




Name
      and Principal Position
            
            Year
            
            Salary
            
            
            Bonus
            
            
            All
      Other Compensation
            
            
            TotalCraig
      A. Zabala,
              President,
      CEO, Acting Chief Financial Officer and Compliance Officer and
      Director
            
            2009
            
            $
            60,000
            
            
            $
            0
            
            
            $
            0
            
            
            $
            60,0002008
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            02007
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0




52




Stock Option
Plan




2009 Grants of Plan-Based
Awards




The
following table sets forth certain information with respect to each grant of an
award made to a named executive officer in 2009 under our stock option
plan.




Name
            
            Grant
      Date
            
            All
      Other Stock Awards: Number of Securities Underlying
Options
            
            
            Exercise
      or Base Price of Option Awards
            
            
            Grant
      Date Fair Value of Stock and Option AwardsCraig
      A. Zabala
            
            2/1/2009
            
            
            600,000
            
            
            $
            .40
            
            
            $
            132,000





Outstanding Equity Awards at
Fiscal Year End




Name
            
            Number
      of Securities Underlying Unexercised Unearned Options:
              #
              Exercisable
            
            
            Number
      of Securities Underlying Unexercised Unearned Options:
              #
              Unexercisable
            
            
            Option
      Exercise Price
              ($)
            
            Option
      Expiration DateCraig
      A. Zabala
            
            
            600,000
            
            
            
            0
            
            
            $
            .40
            
            2/1/2019





Option Exercises and Stock
Vested




No
options were exercised in 2009 and no stock awards were made in
2009.




Pension
Benefits




The
Company does not provide any tax-qualified defined benefit plan or supplemental
executive retirement plan, or similar plan that provides for specified
retirement payments or benefits.




Employment
Agreements




We have no employment agreements other
than the Zabala Employment Agreement.




53





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 58 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.




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.




54




As of December 31, 2009, the Company
owes Zabala $60,000 in accrued and unpaid salary under the terms of the
Employment Agreement.  The Company was unable to pay Zabala's salary
payments during 2009.




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 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.





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.




55





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.




No Awards under the Company’s Stock
Option Plan (other than the Award to Zabala) were made in 2009 or 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 2009 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.




56





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.





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.




57





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.





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.




58





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.





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.




59





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.





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.




60





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. ZabalaP.O.
      Box 377Canal
      Street StationNew
      York, New York 10013
            
            
            2,432,500
            (1)(2)
            
            
            7.36
            %The
      Concorde Group, Inc.400
      Park Avenue, 14th
      FloorNew
      York, New York 10022
            
            
            10,317,681
            (3)
            
            
            31.78
            %Robert
      M. Fujii(4)1624
      Acton StreetBerkeley,
      California 94702
            
            
            500,000
            
            
            
            1.54
            %Robert
      J. Francis(4)
              5416
      South 161st
      Street
              Omaha,
      Nebraska 68135
            
            
            0
            
            
            
            0
            %Janet
      Buxman Kurihara(4)11007
      North Cottontail LaneParker,
      Colorado 80138
            
            
            0
            
            
            
            0
            %Randy
      Tejral(4)
              6529
      Pine Ridge Road
              Elkhorn,
      Nebraska 68022
            
            
            0
            
            
            
            0
            %Mick
      Woodwards(4)4849
      Woodruff Avenue
              Lakewood,
      California 90713
            
            
            1,320,269
            
            
            
            4.07
            %Doreen
      McCarthy(5)
              426
      Broome Street
              New
      York, NY 10013
            
            
            2,245,000
            
            
            
            6.91
            %All
      Executive Officers andDirectors
      as a Group (6 Persons)
            
            
            4,252,769
            
            
            
            12.86
            %




(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.




61




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




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




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




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





Item 13. Certain
Relationships and Related Transactions, and DirectorIndependence





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 7.36% 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.




62





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, 2009 and 2008,
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 and services.  As of
December 31, 2009, Blackhawk owed Concorde $48,000 under such
arrangement.





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.





See discussion above in Item 11.
Executive Compensation regarding the Zabala Employment Agreement.  Mr.
Zabala is a control person of Concorde, Blackhawk’s largest
shareholder.




63




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.  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, Company stock ownership, affiliations and family and other
relationships and on discussions with directors.  Blackhawk does not
have any audit, compensation, nominating or governance committee of the Board of
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 2009, 2008, 2007
and 2006 were $115,000, $113,000, $61,219 and $14,223,
respectively.





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





2.
            AUDIT-RELATED
      FEES





The
aggregate fees billed during the period of December 31, 2009 and December 31,
2008 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.




64





3.
            TAX
      FEES





The
aggregate fees billed for the period ended December 31, 2009 and December 31,
2008 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, 2009 and December 31, 2008
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





10.18
            
            Amendment
      dated December 14, 2009 to Private Placement Agreement dated August 21,
      2009 between Registrant and Growthink Securities, Inc.10.19
            
            Amendment
      dated December 15, 2009 to Private Placement Agreement dated August 3,
      2009 between Registrant and Bentley Securities
  Corporation10.20
            
            Amendment
      dated December 15, 2009 to Private Placement Agreement dated July 20, 2009
      between Registrant and Direct Access Partners, LLC31.1
            
            Certification
      by Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley
      Act of 200231.2
            
            Certification
      by Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley
      Act of 2002




65




32.1
            
            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




66




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)Dated:
       March30,
      2010
              BY:
              /s/ Craig A. ZabalaCraig
      A. ZabalaChairman,
      President and Chief Executive Officer





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:
       March26,
      2010
            
            Dated:
       March26,
      2010/s/ Craig A. Zabala
            
            /s/ Robert J. FrancisCraig
      A. Zabala
            
            Robert
      J. FrancisActing
      Chief Financial Officer
              Principal
      Accounting Officer
            
            DirectorDated:
       March26,
      2010
            
            Dated:
       March26,
      2010/s/ Janet Buxman Kurihara
            
            /s/ Randy TejralJanet
      Buxman Kurihara
            
            Randy
      TejralDirector
            
            DirectorDated:
       March26,
      2010
            
            Dated:
       March26,
      2010/s/ Mick WoodwardsMick
      WoodwardsDirectorDated:
       March26,
      2010




67




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, 2009 AND 2008
            
            F-3SCHEDULE
      OF INVESTMENTS AS OF DECEMBER 31, 2009
            
            F-4STATEMENTS
      OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND
      2007
            
            F-5STATEMENTS
      OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND
      2007
            
            F-6STATEMENTS
      OF STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT) FOR THE YEARS ENDED DECEMBER 31,
      2009, 2008 AND 2007
            
            F-7STATEMENTS
      OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND
      2007
            
            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, 2009 and 2008,
including the schedule of investments as of December 31, 2009, and the related
statements of operations, changes in net assets, stockholders' equity (capital
deficit), and cash flows for each of the years in the three-year period ended
December 31, 2009 and the financial highlights for each of the years in the
four-year period ended December 31, 2009.  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, 2009 and 2008, the results of
its operations, the changes in its net assets, and its cash flows for each
of the years in the three-year period ended December 31, 2009 and the financial
highlights for each of the years in the four-year period ended December 31, 2009
in conformity with accounting principles generally accepted in the United States
of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1, the Company
has liabilities in excess of assets at December 31, 2009 and may not be able to
fund operating expenses without additional capital and/or
loans.  These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.  Management’s plans in regard
to these matters is also described in Note 1.  The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





/s/
Eisner LLP


New York,
New York


March 30,
2010




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 then ended.  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 then ended December 31, 2005 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,-----2009
              
              
              2008ASSETSInvestments
      at fair value (cost $326,350 and $654,025)
              
              $
              325,123
              
              
              $
              652,737Cash
      and cash equivalents
              
              
              59,715
              
              
              
              172,797Prepaid
      expenses
              
              
              17,278
              
              
              
              12,544TOTAL
      ASSETS
              
              $
              402,116
              
              
              $
              838,078LIABILITIESAccrued
      expenses
              
              $
              536,612
              
              
              $
              118,102TOTAL
      LIABILITIES
              
              
              536,612
              
              
              
              118,102NET
      (LIABILITIES) ASSETSCommon
      stock, par value $.00001 per share1,000,000,000
      shares authorized,32,467,484
      shares issued and outstanding in 2009, 2008,
                respectively
              
              
              325
              
              
              
              325Additional
      paid-in capital
              
              
              2,106,641
              
              
              
              1,974,641Accumulated
      net investment loss
              
              
              (2,240,235
              )
              
              
              (1,253,702
              )Net
      unrealized loss on investment
              
              
              (1,227
              )
              
              
              (1,288
              )TOTAL
      NET (LIABILITIES) ASSETS
              
              
              (134,496
              )
              
              
              719,976TOTAL
      LIABILITIES AND NET(LIABILITIES) ASSETS
              
              $
              402,116
              
              
              $
              838,078NET
      (LIABILITY) ASSET VALUE PER COMMON SHARE
              
              $
              (0.00414
              )
              
              $
              0.02218




See notes
to financial statements




F-3





BLACKHAWK
CAPITAL GROUP BDC INC.


SCHEDULE
OF INVESTMENTS


DECEMBER
31, 2009





COMPANY
              
              INVESTMENT
              
              INITIAL
                ACQUISITION
                DATE
              
              PRINCIPAL
                AMOUNT/
                NUMBER
                OF
      UNITS
              
              
              COST
              
              
              FAIR
                VALUE
              
              
              %
      OF
                TOTAL
                ASSETSMacroMarkets
      LLC
              
              CapitalInterest
              
              1/21/09
              
              
              624,432
              
              
              $
              250,000
              
              
              $
              250,000
              
              
              
              62.17Caterpillar
      Fin. 4.15% due
                1/15/10
              
              Notes
              
              10/13/09
              
              $
              25,000
              
              
              
              25,495
              
              
              
              25,024
              
              
              
              6.22Citigroup
      4.125% due
                2/22/10
              
              Notes
              
              10/13/09
              
              $
              25,000
              
              
              
              25,421
              
              
              
              25,100
              
              
              
              6.24Protective
      Life 4.05% due
                1/15/10
              
              Notes
              
              10/13/09
              
              $
              25,000
              
              
              
              25,434
              
              
              
              24,999
              
              
              
              6.22$
              326,350
              
              
              $
              325,123




See notes
to financial statements


F-4





BLACKHAWK
CAPITAL GROUP BDC INC.





STATEMENTS
OF OPERATIONS





YEAR
      ENDED DECEMBER 31,2009
              
              
              2008
              
              
              2007INVESTMENT
      INCOME:Interest
      income
              
              $
              6,101
              
              
              $
              17,613
              
              
              $
              3,263Total
      Investment Income
              
              
              6,101
              
              
              
              17,613
              
              
              
              3,263EXPENSES:Compensation
              
              
              232,222
              
              
              
              -
              
              
              
              -Professional
      fees
              
              
              607,540
              
              
              
              380,835
              
              
              
              366,147Advisory
      fee
              
              
              16,738
              
              
              
              11,301
              
              
              
              3,117Consulting
      fees
              
              
              25,000
              
              
              
              -
              
              
              
              -Rent-related
      party
              
              
              48,000
              
              
              
              -
              
              
              
              -Filing
      fees
              
              
              22,543
              
              
              
              8,726
              
              
              
              8,767Insurance
              
              
              34,292
              
              
              
              20,851
              
              
              
              21,053Interest
      expense to affiliate
              
              
              -
              
              
              
              -
              
              
              
              3,266Other
              
              
              6,299
              
              
              
              989
              
              
              
              4,829TOTAL
      EXPENSES
              
              
              992,634
              
              
              
              422,702
              
              
              
              407,179NET
      INVESTMENT LOSS
              
              
              (986,533
              )
              
              
              (405,089
              )
              
              
              (403,916
              )UNREALIZED
      GAIN (LOSS) ON INVESTMENTS
              
              
              61
              
              
              
              (6,501
              )
              
              
              5,213NET
      DECREASE IN ASSETSRESULTING
      FROM OPERATIONS
              
              $
              (986,472
              )
              
              $
              (411,590
              )
              
              $
              (398,703
              )LOSS
      PER COMMON SHARE,BASIC
      AND DILUTED
              
              $
              (0.03038
              )
              
              $
              (0.01284
              )
              
              $
              (0.01290
              )WEIGHTED
      AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
              
              
              32,467,484
              
              
              
              32,067,532
              
              
              
              30,896,792





See notes
to financial statements




F-5




BLACKHAWK
CAPITAL GROUP BDC INC.





STATEMENTS
OF CHANGES IN NET ASSETS




--YEAR
      ENDED DECEMBER 31, --2009
              
              
              2008
              
              
              2007NET
      DECREASE IN ASSETS FROM OPERATIONSNet
      investment loss
              
              $
              (986,533
              )
              
              $
              (405,089
              )
              
              $
              (403,916
              )Unrealized
      gain (loss) on investments
              
              
              61
              
              
              
              (6,501
              )
              
              
              5,213NET
      DECREASE IN ASSETSRESULTING
      FROM OPERATIONS
              
              
              (986,472
              )
              
              
              (411,590
              )
              
              
              (398,703
              )CAPITAL
      STOCK TRANSACTIONS:Proceeds
      from common stock sold
              
              
              -
              
              
              
              1,298,112
              
              
              
              525,001Conversion
      of notes and advancesto
      affiliate into common stock
              
              
              -
              
              
              
              -
              
              
              
              132,891Offering
      costs
              
              
              -
              
              
              
              (129,311
              )
              
              
              -Stock
      based compensation
              
              
              132,000
              
              
              
              -
              
              
              
              -NET INCREASE IN
      ASSETSFROM
      CAPITAL STOCK TRANSACTIONS
              
              
              132,000
              
              
              
              1,168,801
              
              
              
              657,892TOTAL
      (DECREASE) INCREASE IN NET ASSETS
              
              
              (854,472
              )
              
              
              757,211
              
              
              
              259,189NET
      ASSETS (LIABILITIES) – BEGINNING OF YEAR
              
              
              719,976
              
              
              
              (37,235
              )
              
              
              (296,424
              )NET
      (LIABILITIES) ASSETS – END OF YEAR
              
              $
              (134,496
              )
              
              $
              719,976
              
              
              $
              (37,235
              )




See notes
to financial statements




F-6





BLACKHAWK
CAPITAL GROUP BDC INC.


STATEMENTS
OF NET (LIABILITIES) ASSETS


FOR THE
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007





-------COMMON
      STOCK--------
              
              
              ADDITIONAL
                PAID-IN
              
              
              NET
                UNREALIZED
                APPRECIATION
                ON
              
              
              ACCUMULATED
                NET
                INVESTMENTTOTAL
              
              
              SHARES
              
              
              AMOUNT
              
              
              CAPITAL
              
              
              INVESTMENT
              
              
              LOSSBalance
      –
                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
              
              
              
              1,298,099
              
              
              
              -
              
              
              
              -Offering
      costs
              
              
              (129,311
              )
              
              
              -
              
              
              
              -
              
              
              
              (129,311
              )
              
              
              -
              
              
              
              -Balance-December
      31,2008
              
              
              719,976
              
              
              
              32,467,484
              
              
              
              325
              
              
              
              1,974,641
              
              
              
              (1,288
              )
              
              
              (1,253,702
              )Net
      decrease in assets resulting from operations
              
              
              (986,472
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              61
              
              
              
              (986,533
              )Stock-based
      compensation
              
              
              132,000
              
              
              
              -
              
              
              
              -
              
              
              
              132,000
              
              
              
              -
              
              
              
              -Balance
      - December 31, 2009
              
              $
              (134,496
              )
              
              
              32,467,484
              
              
              $
              325
              
              
              $
              2,106,641
              
              
              $
              (1,227
              )
              
              $
              (2,240,235
              )





See notes
to financial statements




F-7





BLACKHAWK
CAPITAL GROUP BDC INC.


STATEMENTS
OF CASH FLOWS




YEAR
      ENDED DECEMBER 31,2009
              
              
              2008
              
              
              2007CASH
      FLOWS FROM OPERATING
                AND
      INVESTING ACTIVITIES:Net
      decrease in assets resulting from operations
              
              $
              (986,472
              )
              
              $
              (411,590
              )
              
              $
              (398,703
              )Adjustments
      to reconcile net decrease in assets to net cash used in operating and
      investing activities:Unrealized
      (gain) loss on investments
              
              
              (61
              )
              
              
              6,501
              
              
              
              (5,213
              )Stock
      Based Compensation
              
              
              132,000Change
      in:Increase
      (decrease) in accrued expenses
              
              
              418,510
              
              
              
              (180,156
              )
              
              
              104,323(Decrease)
      increase in prepaid expenses
              
              
              (4,734
              )
              
              
              (4,000
              )
              
              
              455Purchase
      of Investments
              
              
              (326,350
              )
              
              
              (2,379,209
              )
              
              
              (391,226
              )Proceeds from sale
      and redemption ofinvestments
              
              
              654,025
              
              
              
              1,968,000
              
              
              
              151,676NET
      CASH USED INOPERATING
      AND INVESTING ACTIVITIES
              
              
              (113,082
              )
              
              
              (1,000,454
              )
              
              
              (538,688
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Offering
      costs
              
              
              -
              
              
              
              (129,311
              )
              
              
              -Proceeds
      from the issuance of stock
              
              
              -
              
              
              
              1,298,112
              
              
              
              525,001Advance  from
      affiliated company
              
              
              -
              
              
              
              -
              
              
              
              17,500NET
      CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              -
              
              
              
              1,168,801
              
              
              
              542,501NET
      (DECREASE) INCREASE IN CASH
              
              
              (113,082
              )
              
              
              168,347
              
              
              
              3,813CASH
      AND EQUIVALENTS – BEGINNING OF YEAR
              
              
              172,797
              
              
              
              4,450
              
              
              
              637CASH
      AND EQUIVALENTS – END OF YEAR
              
              $
              59,715
              
              
              $
              172,797
              
              
              $
              4,450Non-cash
      financing activities:Conversion
      of amount due affiliated company intoCommon
      stock
              
              $
              -
              
              
              $
              -
              
              
              $
              132,891




See notes
to financial statements




F-8




BLACKHAWK
CAPITAL GROUP BDC INC.





NOTES TO
FINANCIAL STATEMENTS





DECEMBER
31, 2009




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 is able to acquire
interests in small private businesses, as well as non-dividend paying public
companies.





Blackhawk
attempts 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 offers 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 FASB Accounting Standards codification Topic 946, Financial
Services - Investment Companies and pursuant to the requirements for reporting
on Form 10-K and Regulation S-X.





The
Company had a decrease in net assets resulting from operations for the year
ended December 31, 2009 of $986,472 and total net liabilities of $134,496 as of
December 31, 2009.  Since inception, the Company's operations have
been principally funded by Regulation E offerings and The Concorde Group, Inc.
("Concorde"), a corporation controlled by the founder and an affiliate of the
Company.  The Company is currently trying to raise equity capital,
although there can be no assurance such offering will be
successful.  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 the Company to subsidize operational expenses
to operate through January 1, 2011 to the extent that Concorde has such capital
available and may lend it to Blackhawk.  If the Company is unable to
raise equity capital or if Concorde is unable to provide sufficient capital to
the Company to fund its operational expenses, it would have an adverse impact on
liquidity and operations.  Such uncertainty raises substantial doubt
about the Company's ability to continue as a going concern.  The
financial statements do not reflect any adjustment that might result from the
outcome of this uncertainty.





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 recognizes deferred tax assets and liabilities based on the differences
between the financial statement carrying amount and the tax basis of assets and
liabilities.  The Company regularly reviews its deferred tax assets
for recoverability and establishes a valuation allowance when it is not more
likely than not that such assets will be realized.





As of
December 31, 2009, net deferred tax assets aggregated approximately $958,000,
which was fully reserved based on the likelihood of realization.





The
Company may recognize the tax benefit from an uncertain tax position only if it
is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the
position.  The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate
settlement.  As of December 31, 2009 and December 31, 2008, the
Company has not recorded any unrecognized tax benefits.  The Company's
policy is to recognize accrued interest and penalties in general and
administrative expense.





The tax
years 2006 through 2009 remain open to examination by the major tax
jurisdictions to which the Company is subject.





Revenue
recognition





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




·
            Interest income is recorded on
      the accrual basis.




·
            Realized gains or losses on
      investments are recorded on a trade date basis using the specific
      identification method.





Investments





The
Company's investments are carried at fair value.





Net loss per common share





Basic
earnings (loss) per share is computed solely on the weighted average number of
common shares outstanding during the period.  Diluted earnings (loss)
per share reflects all potential dilution of common stock as
applicable.




F-10





The
following table provides Basic and diluted earnings (loss) per share for the
years ended December 31, 2009 and 2008 and 2007:





Net Loss
            
            
            Weighted
              Average Shares
            
            
            Basic and Diluted Loss Per
      shareYear
      Ended December 31, 2009$
            (986,472
            )
            
            
            32,467,484
            
            
            $
            (0.03038
            )Net Loss
            
            
            Weighted
              Average Shares
            
            
            Basic and Diluted Loss Per
      shareYear
      Ended December 31, 2008$
            (411,590
            )
            
            
            32,067,532
            
            
            $
            (0.01284
            )Net Loss
            
            
            Weighted
              Average Shares
            
            
            Basic and Diluted Loss Per
      shareYear
      Ended December 31, 2007$
            (398,703
            )
            
            
            30,896,792
            
            
            $
            (0.01290
            )





For the
year ended December 31, 2009, 600,000 shares attributable to stock options were
excluded from the calculation of diluted loss per share because the effect was
anti-dilutive.  There were no potential dilutive securities
outstanding in 2008 and 2007.





2.           STOCKHOLDERS’
EQUITY





During
2007, pursuant to a 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 $525,500 shares for $525,001.  In addition, the Company issued
to Concorde, an affiliate and the largest stockholder of the Company, 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.





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.





During
2009, the Company did not sell any shares of its Common Stock or any other
equity security.




F-11





3.           INCOME
TAXES





The net
deferred tax asset in the accompanying table include the following amounts of
deferred tax assets and liabilities:





Deferred Tax Assets
            
            2009
            
            
            2008Capitalized
      Startup Costs
            
            $
            594,000
            
            
            $
            564,000Net
      Operating Loss
            
            
            364,000
            
            
            
            -958,000
            
            
            
            564,000Valuation
      Allowance
            
            
            (958,000
            )
            
            
            (564,000
            )Net
      Deferred Tax Asset
            
            $
            -
            
            
            $
            -





The
deferred tax assets represent the benefit of its capitalized startup costs and
the net operating loss carry forward.  The net operating loss will expire
by 2029.  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 $394,000 (2009),
$182,000 (2008), and $182,000 (2007) and certain expenses not deductible for tax
purposes.





4.           FAIR
VALUE MEASUREMENT





The
Company carries its investments at fair value.  Fair value is an
estimate of the exit price, representing the amount that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants (i.e., the exit price at the measurement
date).  Fair value measurements are not adjusted for transaction
costs.  A fair value hierarchy consists of three levels that are used
to prioritize inputs to fair value techniques:




·
            Level 1 - inputs to the valuation
      methodology are quoted prices (unadjusted) for identical assets or
      liabilities in active markets.·
            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.·
            Level 3 - inputs to the valuation
      methodology are unobservable and significant to the fair value
      measurement.





Investments
whose values are based on quoted market prices in active markets, and whose
values are therefore classified as Level 1, consist of active listed
equities.





Investments
that trade in markets that are not considered to be active, but whose values are
based on quoted market prices, dealer quotations or valuations provided by
alternative pricing sources supported by observable inputs are classified as
Level 2.  These generally include certain U.S. government obligations
and investment-grade corporate bonds.





Investments
whose values are classified as Level 3 have significant unobservable inputs, as
they may trade infrequently or not at all.  Investments whose values
are classified as Level 3 generally include private investments.  When
observable prices are not available for these securities, the Company uses one
or more valuation techniques (e.g., the market approach or the income approach)
for which sufficient and reliable data is available.





Within
Level 3 of the fair value hierarchy, the use of the market approach generally
consists of using comparable market transactions, while the use of the income
approach generally consists of the net present value of estimated future cash
flows, adjusted as appropriate for liquidity, credit, market and/or other risk
factors.




F-12





The
inputs used by the Company in estimating the value of investments classified as
Level 3 may include the original transaction price, quoted prices for similar
securities or assets in active markets, completed or pending third-party
transactions in the underlying investment or comparable issuers, and changes in
financial ratios or cash flows.


The
values assigned to investments are based on available information and do not
necessarily represent amounts that might be realized if a ready market existed
and such differences could be material.  Furthermore, the ultimate
realization of such amounts depends on future events and circumstances and
therefore valuation estimates may differ from the values realized upon
disposition of individual positions.




The
carrying values and estimated fair values of the Company's financial instruments
for the periods presented are as follows:





Carrying Value
            
            
            Quote
      Prices in
              Active
      Markets
              (Level 1)
            
            
            Significant
      Other Observable Inputs
              (Level 2)
            
            
            Significant
      Unobservable Inputs
              (Level 3)December
      31, 2009:Financial
      AssetsNotes
            
            $
            75,123
            
            
            
            
            
            $
            75,123Membership
      Interest
              in
      LLC
            
            
            250,000
            
            
            
            
            
            
            -
            
            
            $
            250,000Total
      Financial
              Assets
            
            $
            325,123
            
            
            
            
            
            $
            75,123
            
            
            $
            250,000December
      31, 2008:Financial
      AssetsNotes
            
            $
            652,737
            
            
            
            -
            
            
            $
            652,737
            
            
            
            -Total
      Financial
              Assets
            
            $
            652,737
            
            
            
            -
            
            
            $
            652,737
            
            
            
            -





The
following table presents additional information about assets measured at fair
value using Level 3 inputs for the year ended December 31, 2009:





Membership Interest In LLCBalance
      as of January 1, 2009
            
            $
            -Purchases
            
            
            250,000Balance
      as of December 31, 2009
            
            $
            250,000





There was
no change in the unrealized gain/(losses) in earnings of the Company's Level 3
assets still held at December 31, 2009.





In the
normal course of its business, the Company’s investments may be subject to the
following risks:





Market
risk represents the potential loss that can be caused by increases or decreases
in the fair value of investments.




F-13





Interest
rate risk is the risk that the fair value or future cash flows of fixed income
or rate sensitive investments will increase or decrease because of changes in
interest rates.  Generally the value of fixed income securities will
change inversely with changes in interest rates.  As interest rates
rise, the fair value of fixed income securities tends to
decrease.  Conversely, as interest rates fall, the fair value of fixed
income securities tends to increase.  This risk is generally greater
for long-term securities than for short-term securities.





Credit
risk represents the potential loss that would occur if counterparties fail to
perform pursuant to the terms of their obligations.  In addition to
its investments, the Company is subject to credit risk to the extent a custodian
or broker with whom it conducts business is unable to fulfill contractual
obligations.





Liquidity
risk is the risk that the Company will not be able to raise funds to fulfill its
obligations, including inability to sell investments quickly or at close to fair
value.




5.           RELATED
PARTY TRANSACTIONS





At
December 31, 2006, the Company owed Concorde $8,000 of outstanding non-interest
bearing borrowings and a demand convertible note in the principal amount of
$100,000 bearing interest at 8.25% per annum.  The note was
convertible after November 1, 2006 into common stock of the Company at a price
of $11.00 per share or the price per share of the Company’s next Regulation E
offering.





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.  On June 4, 2007, pursuant to the
terms of the notes, Concorde converted the $125,500 principal amount of the
notes plus accrued interest of $7,391 into 132,891 shares of Common Stock at
$1.00 of principal amount of note converted, the price per share in the
Company's Regulation E offering.





Through
December 31, 2008, the Company shared office space and other administrative
functions with Concorde at no charge to the Company.  Commencing
January 1, 2009, Concorde charged the Company monthly rent of
$4,000.  Rent expense for the year ended December 31, 2009 amounted to
$48,000.





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 was for a one-year
term and extendable for one year periods.  The agreement with Barak
was extended and expires on October 31, 2010.  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-14





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 are billed and payable quarterly (or a prorated period
when applicable).





For the
year ended December 31, 2009 and 2008, the Company incurred fees to Barak in the
amount of $16,738 and $11,301, respectively.





7.           ACCRUED
EXPENSES





Accrued expenses at December 31, 2009
and 2008 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, 2009, one grant has 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.





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.




F-15





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.
            STOCK-BASED
      COMPENSATION





The
Company accounts for stock-based payments by recording stock-based compensation
expense in the statement of operations over the vesting period based on the fair
value of the award at the grant date.





The
following table summarizes activity under the Company's stock option plans for
the year ended December 31, 2009:





Shares
      Under
              Options
            
            
            Weighted
      Average Exercise
Price
            
            
            Remaining
      Contractual Life (In
      Years)
            
            
            Aggregate
      IntrinsicValueOutstanding
      at beginning of period
            
            
            -
            
            
            
            -Grants
            
            
            600,000
            
            
            $
            0.40Exercised
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -Outstanding
      at end of period
            
            
            600,000
            
            
            $
            0.40
            
            
            
            9.08
            
            
            
            -Exercisable
      at end of period
            
            
            600,000
            
            
            $
            0.40
            
            
            
            9.08
            
            
            
            -





The
aggregate intrinsic value is calculated as the difference between the exercise
price of the underlying awards and the closing price of the Company's common
stock.  As of December 31, 2009, there were no options outstanding to
purchase shares with an exercise price below the quoted price of the Company's
common stock.




F-16





The fair
value of stock options was determined at the date of grant and is charged to
compensation expense over the vesting period of the options.  The fair
value of options at date of grant was estimated using the Black-Scholes option
pricing model utilizing the following assumptions:





Year Ended
              December 31,
              2009Risk-free
      interest rate
            
            
            1.88
            %Expected
      option life in years
            
            
            5Expected
      stock price volatility
            
            
            200
            %Expected
      dividend yield
            
            
            0
            %





The
risk-free interest rate for periods within the contractual life of the option is
based on the U.S. Treasury yield curve in effect at the time of the
grant.  The expected life was determined using the simplified method
of the Company does not have sufficient historical stock option exercise
experience on which to base the expected term.  Expected volatilities
are based on historical volatility of the Company' common stock.  The
Company has not paid any dividends in the past and does not expect to pay any in
the near future.





The
weighted average fair value at the date of grant for options granted during the
year ended December 31, 2009 was $0.22.  The Company recorded $132,000
of compensation expense for the year ended December 31,
2009.  Estimated unrecognized stock-based compensation relating to
stock options as of December 30, 2009 is $0.





10.           OTHER





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.  As of December 31, 2009, the
Company owed Mr. Zabala $60,000 under his Employment Agreement.




F-17





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 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
Agreements:





The
Company retained placement agents to raise equity capital in a private placement
offering the ("Offering") under Rule 506 of the Securities Act pursuant to
placement agent agreements with John W. Loofbourrow Associates, Inc., Direct
Access Partners, LLC, Lombardi & Co., Bentley Securities Corporation and
Growthink Securities, Inc., respectively, dated July 8, July 20, July 27, August
3, and August 21, 2009, respectively ("Placement Agent
Agreements").  All five of these agreements contain nearly identical
terms.  The Placement Agents solicited 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 in the Offering.  There was no minimum amount to be
raised by the Placement Agents for the Offering and the maximum amount was
$250,000,000.  In return for the Placement Agent services, Blackhawk
agreed to pay a Placement Agent a five percent (5%) placement fee for securities
placed.  The Placement Agent Agreements commenced on the date of the
agreement or, in the case of Bentley Securities Corporation, the day immediately
thereafter, and terminated on the earliest to occur of: (i) ten calendar days
after written notice is given to the Company by the Placement Agent of a
potential investor purchasing at least 50,000,000 shares that will close on the
purchase of the shares within five calendar days of the date of such written
notice; (ii) 180 calendar days from the date of the agreement or, in the case of
Bentley Securities Corporation, the day immediately thereafter; (iii) the date
of closing and funding by an investor of a subscription agreement for a minimum
of 50,000,000 shares; or (iv) ten calendar days after written notice is given to
the Placement Agent by the Company that the Offering will be closed at the sole
discretion of the Company (the "Term"), provided further that with respect to
Bentley Securities Corporation, its placement agent agreement also terminated
upon ten (10) days written notice by either party under the agreement and such
termination right is included as a new (v) within the definition of
"Term."





The
Placement Agent Agreements contain customary indemnification and confidentiality
provisions.  With the exception of the Bentley Securities Corporation
Placement Agent Agreement, the Company's indemnification obligations under each
agreement is limited to $25,000.  The Placement Agent Agreements also
provide that for a period of one year (two years for the agreement with
Growthink Securities, Inc.) from the termination date of the Placement Agent
Agreements, if a Placement Agent enters into a selling group in any subsequent
securities offerings of Blackhawk, then the Placement Agent shall receive
additional financing fees if Blackhawk sells securities to those investors
previously introduced by the Placement Agent.  The additional fees
payable to the Placement Agent will be at the same rate as any underwriting or
placement fees that are listed in any Blackhawk future offering memorandum or
prospectus.




F-18





On
December 14, 2009, the Company determined to terminate the offerings because no
shares were sold.  As a result, the Company determined to raise up to
$5,000,000 (1,000,000 shares of Common Stock at an offering price of $5.00 per
share) pursuant to Regulation E under the Investment Company Act and the
Securities Act.





On
December 14, 2009, Blackhawk entered into an amendment ("Amendment") of its
Placement Agent Agreement with Growthink Securities, Inc.  On December
15, 2009, the Company entered into an Amendment of its Placement Agent Agreement
with Bentley Securities Corporation and an Amendment of its Placement Agent
Agreement with Direct Access Partners, LLC.  The purpose of each
Amendment was to clarify, among other things, that: (a) the term "Offering" in
each Placement Agent Agreement also included the Company's offering of up to
1,000,000 shares (5.00 per share) pursuant to Regulation E (the "Regulation E
Offering") under the Investment Company Act and the Securities Act, and (b) that
the Placement Agent receive a ten percent (10%) placement agent fee for shares
sold in the Regulation E Offering.  Growthink Securities declined to
participate in the Regulation E Offering.





On
January 21, 2010, the Company announced that due to adverse market conditions it
had not sold any shares of Common Stock in the Regulation E offering and that it
was terminating its Regulation E offering.





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").  MacroMarkets develops financial
products and new risk management tools on assets that are difficult to own and
hedge.  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.




F-19




11.           FINANCIAL
HIGHLIGHTS





The
following is a schedule of financial highlights for the years ended December 31,
2009, 2008, 2007, 2006 and 2005.





YEAR
      ENDED DECEMBER 31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005Per
      Share Data:Net
      asset value – beginning of period
              
              $
              0.02218
              
              
              $
              (0.00119
              )
              
              $
              (0.00972
              )
              
              $
              0.00093
              
              
              $
              0.00050Net
      investment loss *
              
              
              (0.03039
              )
              
              
              (0.01263
              )
              
              
              (0.01307
              )
              
              
              (0.01371
              )
              
              
              (0.00220
              )Issuance
      of common stock
              
              
              -
              
              
              
              1.00000
              
              
              
              1.00000
              
              
              
              0.01000
              
              
              
              0.00417Net
      realized and unrealizedgain(loss)**
              
              
              0.00407
              
              
              
              (0.96400
              )
              
              
              (0.97840
              )
              
              
              (0.00694
              )
              
              
              (0.00154
              )Net
      (liability) asset value – end of period
              
              $
              (0.00414
              )
              
              $
              0.02218
              
              
              $
              (0.00119
              )
              
              $
              (0.00972
              )
              
              $
              0.00093Total
      return based on net asset value
              
              
              (119
              %)
              
              
              (1,061
              %)
              
              
              (135
              %)
              
              
              (1,474
              %)
              
              
              (440
              %)Common
      shares outstanding – end of period***
              
              
              32,467,484
              
              
              
              32,467,484
              
              
              
              31,169,372
              
              
              
              30,511,481
              
              
              
              23,626,781Ratio/Supplemental
      Data:Net
      (liabilities) assets – end of period
              
              
              (134,496
              )
              
              $
              719,976
              
              
              $
              (37,235
              )
              
              $
              (296,424
              )
              
              $
              21,976Ratio
      of net investment loss to average net assets
              
              
              (334
              %)
              
              
              (88
              %)
              
              
              (813
              %)
              
              
              (3,524
              %)
              
              
              (91
              %)Ratio
      of operating expenses to average net assets
              
              
              (336
              %)
              
              
              91
              %
              
              
              819
              %
              
              
              3,528
              %
              
              
              94
              %





*
            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.





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





F-20