| OMB                APPROVAL                     |
|------------------------------------------------------|
|                                                      |
| OMB                Number:                           | 3235-0070 |
| Expires:                                             | January                31, 2008 |
| Estimated                average burden              |
| hours                per response...192.00  |

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**_________________________**

**FORM      10-Q**

| **x ** | **QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------|

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

**_________________________**

**BLACKHAWK      CAPITAL GROUP BDC, INC.**

| Delaware                                                                                     |   | 20-1031329                                                         |
|----------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| (State                or other jurisdiction of incorporation                or organization) |   | (I.R.S.                Employer Identification                No.) |

|  **14                  Wall Street, 11th Floor, New York,** |   |                  **NY                  10005** |
|------------------------------------------------------------------|--------|-----------------------------------------------------|
|  (Address                  of principal executive offices)  |   |  (Zip                  Code)                   |

**(212)      566-8300**

**_________________________**

| Class                                           |   | Outstanding                on August 10, 2007 |
|-------------------------------------------------|--------|-----------------------------------------------|
| Common                Stock, $0.00001 par value |   | 31,169,372                                    |

| SEC              1296              (12-05) | **Potential                persons who are to respond to the collection of information contained                in                this form are not required to respond unless the form displays a                currently                valid OMB control number.** |
|--------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**BLACKHAWK      CAPITAL GROUP BDC, INC.**

**INDEX**

|                              |   |                                                                                                                                                                                           | **Page**  |
|-----------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
| **PART                I. **  |   | ** FINANCIAL                INFORMATION**                                                                                                                                                 |           |
|  Item                1.      |   | Financial                Statements.                                                                                                                                                           |           |
|                              |   |                                                                                                                                                                                           |           |
|                              |        | Condensed                Statements of Assets and Liabilities as of June 30, 2007 (unaudited)                and                December 31, 2006                                              | 1              |
|                              |   |                                                                                                                                                                                           |           |
|                              |   | Condensed                Statement of Investments as of June 30, 2007 (unaudited)                                                                                                              | 2              |
|                              |   |                                                                                                                                                                                           |           |
|                              |   | Condensed                Statements of Operations for the three and six months ended June                30,                2007                (unaudited) and June 30, 2006 (unaudited)      | 3              |
|                              |   |                                                                                                                                                                                           |           |
|                              |   | Condensed                Statements of Changes in Net Assets (Liabilities) for the six months                ended                June 30, 2007 (unaudited) and year ended December 31, 2006   | 4              |
|                              |   |                                                                                                                                                                                           |           |
|                              |   | Condensed                Statement of Stockholders' Equity (Capital Deficit) for the six months                ended                June 30, 2007 (unaudited) and year ended December 31, 2006 | 5              |
|                              |   |                                                                                                                                                                                           |           |
|                              |   | Condensed                Statements of Cash Flows for the six months ended June 30, 2007                (unaudited)                and June 30, 2006 (unaudited)                               | 6              |
|                              |   |                                                                                                                                                                                           |           |
|                              |   | Notes                to Condensed Financial Statements                                                                                                                                         | 7              |
|                              |   |                                                                                                                                                                                           |           |
|  Item                2.      |   | Management’s                Discussion and Analysis of Financial Condition and Results                of Operations.                                                                     | 10             |
|                              |   |                                                                                                                                                                                           |           |
|  Item                3.      |   | Quantitative                and Qualitative Disclosures about Market Risk.                                                                                                                     | 13             |
|                              |   |                                                                                                                                                                                           |           |
|  Item                4.      |   | Controls                and Procedures.                                                                                                                                                        | 14             |
|                              |   |                                                                                                                                                                                           |           |
|                              |   |
| ** PART                II.** |   | **OTHER                INFORMATION**                                                                                                                                                           | 14             |
|                              |   |                                                                                                                                                                                           |           |
|  Item                1.      |   | Legal                Proceedings.                                                                                                                                                              | 14             |
|                              |   |                                                                                                                                                                                           |           |
| Item                1A.           |   | Risk                Factors                                                                                                                                                                    | 14             |
|                              |   |                                                                                                                                                                                           |           |
|  Item                2.      |   | Unregistered                Sales of Equity Securities and Use of Proceeds.                                                                                                                    | 14             |
|                              |   |                                                                                                                                                                                           |           |
| Item                3.       |   | Defaults                upon Senior Securities.                                                                                                                                                | 15             |
|                              |   |                                                                                                                                                                                           |           |
|  Item                4.      |   | Submission                of Matters to a Vote of Security Holders.                                                                                                                            | 15             |
|                              |   |                                                                                                                                                                                           |           |
|  Item                5.      |   | Other                Information.                                                                                                                                                              | 15             |
|                              |   |                                                                                                                                                                                           |           |
| Item                6.            |   | Exhibits.                                                                                                                                                                                      | 15             |

----

**BLACKHAWK      CAPITAL GROUP BDC INC.**

|                                                                                                                                                                                                                          |   | JUNE 30, 2007 (Unaudited) |        | DECEMBER 31, 2006 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-------------|-----------------------------|--------|
| **ASSETS:**                                                                                                                                                                                                                   |   |                                     |        |                        |   |
| Investments,                at fair value (cost $211,917)                                                                                                                                                                     |   | $                                        | 217,989     |                        | $      | - |   |
| Cash                and cash equivalents                                                                                                                                                                                      |   |                                     | 154,717     |                        |   | 637 |   |
| Prepaid                insurance                                                                                                                                                                                              |   |                                     | 18,653      |                        |   | 9,000 |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
| **TOTAL                ASSETS**                                                                                                                                                                                               |   | **$**                                    | **391,359** |                        | **$**  | **9,637** |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
| **LIABILITIES**                                                                                                                                                                                                               |   |                                     |        |                        |   |   |   |
| Convertible                loan payable, including interest of $4,125                                                                                                                                                         |   | $                                        | -           |                        | $      | 104,125 |   |
| Due                to affiliated company                                                                                                                                                                                      |   |                                     | -           |                        |   | 8,000 |   |
| Accrued                expenses                                                                                                                                                                                               |   |                                     | 239,296     |                        |   | 193,936 |   |
| **TOTAL                LIABILITIES**                                                                                                                                                                                          |   |                                     | **239,296** |                        |   | **306,061** |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
| **NET                ASSETS (LIABILITIES)**                                                                                                                                                                                   |   |                                     |        |                        |   |   |   |
| Common                stock, par value $.00001 per share 1,000,000,000 shares authorized,                31,164,372 and 30,511,481 shares issued and outstanding in 2007 and                2006,                respectively |   |                                     | 312         |                        |   | 305 |   |
| Additional                paid-in capital                                                                                                                                                                                     |   |                                     | 800,853     |                        |   | 147,968 |   |
| Accumulated                net investment loss                                                                                                                                                                                |   |                                     | (656,031    | )                           |   | (444,697 | ) |
| Net                unrealized appreciation on investments                                                                                                                                                                     |   |                                     | 6,929       |                        |   | - |   |
| **TOTAL                NET ASSETS (LIABILITIES)**                                                                                                                                                                             |   |                                     | **152,063** |                        |   | **(296,424** | **)** |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
| **TOTAL                LIABILITIES AND NET ASSETS (LIABILITIES)**                                                                                                                                                             |   | **$**                                    | **391,359** |                        | **$**  | **9,637** |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
|                                                                                                                                                                                                                          |   |                                     |        |                        |   |   |   |
| **NET                ASSETS (LIABILITIES) PER COMMON SHARE**                                                                                                                                                                  |   | **$**                                    | **.00488**  |                        | **$**  | **(.00972** | **)** |

----

----

**BLACKHAWK      CAPITAL GROUP BDC INC.**

|    COMPANY                                      |   |   INVESTMENT |                            |  INITIALACQUISITIONDATE |   |    COST |   |   FAIRVALUE |    |  %                OF TOTALASSETS |   |  %                OF NETASSETS |   |
|----------------------------------------------------------------|--------|------------------------|---------------------------------|------------------------------|--------|------------------------|--------|-----------------------|---------|---------------------------------------|--------|-------------------------------------|--------|
|                                                           |   |                   |                            |                         |   |                   |   |                  |    |                                  |   |                                |   |
| Federal                Home Loan Bank 5.25% Due 12/11/07       |   |                   | Debt                Obligation  |                         |   | 6/7/07                 |   | $                     | 50,000  |                                  | $      | 49,989                              |   |   | 12.8 | % |   | 32.9 | % |
|                                                           |   |                   |                            |                         |   |                   |   |                  |    |                                  |   |                                |   |   |   |   |   |   |   |
| General                Electric Capital                Company |   |                   | Commercial                Paper |                         |   | 6/7/07                 |   |                  | 161,917 |                                  |   | 168,000                             |   |   | 42.9 | % |   | 110.5 | % |
| 0%                Due 2/29/08                                  |   |                   |                            |                         |   |                   |   |                  |    |                                  |   |                                |   |   |   |   |   |   |   |
|                                                           |   |                   |                            |                         |   |                   |   | $                     | 211,917 |                                  | $      | 217,989                             |   |   | 55.7 | % |   | 143.4 | % |

----

----

**BLACKHAWK      CAPITAL GROUP BDC INC.**

|                                                                                         |   | THREE MONTHS ENDED JUNE 30, |           | SIX MONTHS ENDED JUNE 30, |   |
|----------------------------------------------------------------------------------------------|--------|-------------------------------------------------|----------------|-----------------------------------------------|--------|
|                                                                                         |   |  2007                                      |           |  2006                                    |   |  2007 |   |  2006 |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |
| **INVESTMENT                INCOME:**                                                        |   |                                            |           |                                          |   |   |   |   |   |
| Interest                income                                                               |   | $                                               | 66             |                                          | $      | 116 |   | $ | 66 |   | $ | 403 |   |
| **TOTAL                INVESTMENT INCOME**                                                   |   |                                            | **66**         |                                          |   | **116** |   |   | **66** |   |   | **403** |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
| **EXPENSES:**                                                                                |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
| Professional                fees                                                             |   |                                            | 100,436        |                                          |   | 93,847 |   |   | 187,962 |   |   | 170,455 |   |
| Consulting                fees                                                               |   |                                            | 402            |                                          |   | 5,985 |   |   | 402 |   |   | 19,177 |   |
| Filing                fees                                                                   |   |                                            | 2,791          |                                          |   | 3,785 |   |   | 4,697 |   |   | 7,001 |   |
| Insurance                                                                                    |   |                                            | 5,454          |                                          |   | 9,951 |   |   | 10,945 |   |   | 12,454 |   |
| Interest                expense                                                              |   |                                            | 401            |                                          |   | - |   |   | 3,266 |   |   | - |   |
| Other                                                                                        |   |                                            | 4,128          |                                          |   | - |   |   | 4,128 |   |   | - |   |
| **TOTAL                EXPENSES**                                                            |   |                                            | **113,612**    |                                          |   | **113,568** |   |   | **211,400** |   |   | **209,087** |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
| **NET                INVESTMENT (LOSS)**                                                     |   |                                            | **(113,546**   | **)**                                         |   | **(113,452** | **)** |   | **(211,334** | **)** |   | **(208,684** | **)** |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
| **UNREALIZED                GAIN ON INVESTMENTS**                                            |   |                                            | **6,929**      |                                          |   | **-** |   |   | **6,929** |   |   | **-** |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
| **NET                  DECREASE IN ASSETS RESULTING FROM                  OPERATIONS**       |   | **$**                                           | **(106,617**   | **)**                                         | **$**  | **(113,452** | **)** | **$** | **(204,405** | **)** | **$** | **(208,684** | **)** |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
| **LOSS                  PER COMMON SHARE, BASIC AND DILUTED**                                |   | **$**                                           | **(0.00347**   | **)**                                         | **$**  | **(0.00402** | **)** | **$** | **(0.00668** | **)** | **$** | **(0.00804** | **)** |
|                                                                                         |   |                                            |           |                                          |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                  AVERAGE SHARES OUTSTANDING, BASIC AND                  DILUTED** |   |                                            | **30,726,720** |                                          |   | **28,241,800** |   |   | **30,619,695** |   |   | **25,947,039** |   |

----

----

**BLACKHAWK      CAPITAL GROUP BDC INC.**

|                                                                                             |   |  SIX                MONTHSENDEDJUNE                30, 2007 (Unaudited) |         |   YEAR                ENDEDDECEMBER                31, 2006 |   |
|--------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------------|-----------------------------------------------------------------------|--------|
|                                                                                             |   |                                                                              |         |                                                                  |   |
| **DECREASE                IN NET ASSETS FROM OPERATIONS**                                        |   |                                                                              |         |                                                                  |   |
| Net                investment loss                                                               |   | $                                                                                 | (211,334     | )                                                                     | $      | (387,247 | ) |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
| Unrealized                gain on investments                                                    |   |                                                                              | 6,929        |                                                                  |   | - |   |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
| NET                  DECREASE IN NET ASSETS RESULTING FROM OPERATIONS                            |   |                                                                              | **(204,405** | **)**                                                                 |   | **(387,247** | **)** |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
| **CAPITAL                STOCK TRANSACTIONS:**                                                   |   |                                                                              |         |                                                                  |   |   |   |
| Proceeds                from common stock sold                                                   |   |                                                                              | 520,001      |                                                                  |   | - |   |
| Conversion                  of amounts owed to affiliate into common stock                       |   |                                                                              | 132,891      |                                                                  |   | 68,847 |   |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
| **NET                  INCREASE IN NET ASSETS FROM CAPITAL STOCK                  TRANSACTIONS** |   |                                                                              | **652,892**  |                                                                  |   | **68,847** |   |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
| **TOTAL                INCREASE (DECREASE) IN NET ASSETS**                                       |   |                                                                              | **448,487**  |                                                                  |   | **(318,400** | **)** |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
| **NET                ASSETS (LIABILITIES) – BEGINNING OF PERIOD**                     |   |                                                                              | **(296,424** | **)**                                                                 |   | **21,976** |   |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
|                                                                                             |   |                                                                              |         |                                                                  |   |   |   |
| **NET                ASSETS (LIABILITIES) – END OF PERIOD**                           |   | **$**                                                                             | **152,063**  |                                                                  | **$**  | **(296,424** | **)** |

----

----

**BLACKHAWK      CAPITAL GROUP BDC INC.**

|                                                                                                                 |   |   | COMMON                STOCK  |   |   |           |   | ADDITIONAL  |         |   | NET                UNREALIZED  |           |   | ACCUMULATED                NET  |                                             |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------|--------|--------|----------------|--------|------------------|--------------|--------|-------------------------------------|----------------|--------|--------------------------------------|--------------------------------------------------|
|                                                                                                                 |   |   | TOTAL                        |   |   | SHARES         |   |             | AMOUNT  |   |                                | PAID-INCAPITAL |   |                                 | APPRECIATION                ON INVESTMENTS  |   |   | INVESTMENT                LOSS  |   |
| **Balance                –****December                31, 2005**                                               |   | **$**  | **21,976**                        |   |   | **23,626,781** |   | **$**            | **236**      |   | **$**                               | **79,190**     |   | **$**                                | **-**                                            |   | **$** | **(57,450** | **)** |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
| Net                decrease in assets resulting from operations                                                      |   |   | (387,247                          | )      |   | -              |   |             | -            |   |                                | -              |   |                                 | -                                                |   |   | (387,247 | ) |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
| Conversion                of a portion of                amount owed to affiliate (at                $.01 per share) |   |   | 68,847                            |   |   | 6,884,700      |   |             | 69           |   |                                | 68,778         |   |                                 | -                                                |   |   | - |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
| **Balance –****December                31, 2006**                                                         |   |   | **(296,424**                      | **)**  |   | **30,511,481** |   |             | **305**      |   |                                | **147,968**    |   |                                 | **-**                                            |   |   | **(444,697** | **)** |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
| Net                decrease in assets resulting from operations                                                      |   |   | (204,405                          | )      |   | -              |   |             | -            |   |                                | -              |   |                                 | 6,929                                            |   |   | (211,334 | ) |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
| Conversion                of amount due to affiliate (at $1.00 per share)                                            |   |   | 132,891                           |   |   | 132,891        |   |             | 1            |   |                                | 132,890        |   |                                 | -                                                |   |   | - |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
| Sale                of stock pursuant to Offering Plan (at $1.00 per share)                                          |   |   | 520,001                           |   |   | 520,000        |   |             | 6            |   |                                | 519,995        |   |                                 | -                                                |   |   | - |   |
|                                                                                                                 |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |
| **Balance                – June 30, 2007**                                                                     |   | **$**  | **152,063**                       |   |   | **31,164,372** |   | **$**            | **312**      |   | **$**                               | **800,853**    |   | **$**                                | **6,929**                                        |   | **$** | **(656,031** | **)** |
| (Unaudited)                                                                                                          |   |   |                              |   |   |           |   |             |         |   |                                |           |   |                                 |                                             |   |   |   |   |

----

----

**BLACKHAWK      CAPITAL GROUP BDC INC.**

|                                                                                                        |   |  SIX                MONTHS ENDED JUNE 30, |         |
|-------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------------|
|                                                                                                        |   | 2007                                           |         |  2006 |   |
| **CASH                FLOWS FROM OPERATING AND INVESTING ACTIVITIES:**                                      |   |                                           |         |   |   |
| Net                investment loss and decrease in net assets resulting from                operations      |   | $                                              | (204,405     | ) | $ | (208,684 | ) |
| ** **Unrealized                gain on investments                                                     |   |                                           | (6,072       | ) |   | - |   |
| Purchase                of investments                                                                      |   |                                           | (211,917     | ) |   | - |   |
| Increase                in prepaid expenses                                                                 |   |                                           | (9,653       | ) |   | (9,850 | ) |
| Decrease                in accrued expenses and accrued interest                                            |   |                                           | 48,626       |   |   | 142,939 |   |
|                                                                                                        |   |                                           |         |   |   |   |   |
| **NET                CASH USED IN OPERATING AND INVESTING ACTIVITIES**                                      |   |                                           | **(383,421** | **)** |   | **(75,595** | **)** |
|                                                                                                        |   |                                           |         |   |   |   |   |
|                                                                                                        |   |                                           |         |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                                    |   |                                           |         |   |   |   |   |
| Proceeds                from common stock                                                                   |   |                                           | 520,001      |   |   | - |   |
| Loan                from affiliated company                                                                 |   |                                           | 17,500       |   |   | 25,005 |   |
| Due                  to former stockholder in connection with common stock                  rescission |   |                                           | -            |   |   | (45 | ) |
|                                                                                                        |   |                                           |         |   |   |   |   |
| **NET                CASH PROVIDED BY FINANCING ACTIVITIES**                                                |   |                                           | **537,501**  |   |   | **24,960** |   |
|                                                                                                        |   |                                           |         |   |   |   |   |
|                                                                                                        |   |                                           |         |   |   |   |   |
| **NET                INCREASE (DECREASE) IN CASH**                                                          |   |                                           | **154,080**  |   |   | **(50,635** | **)** |
|                                                                                                        |   |                                           |         |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS - BEGINNING OF PERIOD**                                          |   |                                           | **637**      |   |   | **77,877** |   |
|                                                                                                        |   |                                           |         |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS - END OF PERIOD**                                                |   | **$**                                          | **154,717**  |   | **$** | **27,242** |   |
|                                                                                                        |   |                                           |         |   |   |   |   |
| Non-cash                financing activities:                                                               |   |                                           |         |   |   |   |   |
| Conversion                of amount due to affiliated company into common stock                             |   | $                                              | 132,891      |   | $ | - |   |

----

----

**BLACKHAWK      CAPITAL GROUP BDC INC.**

| **1** | **SIGNIFICANT                ACCOUNTING POLICIES** |
|-------|----------------------------------------------------|

***Business      description***

***Basis      of presentation***

***Revenue      recognition***

----

***Cash      and cash equivalents***

***Investments***

***New      accounting pronouncement***

| **2** | **INCOME                TAXES** |
|-------|---------------------------------|

| **3** | **RELATED                PARTY TRANSACTIONS** |
|-------|-----------------------------------------------|

----

| **4** | **STOCKHOLDERS'                EQUITY** |
|-------|-----------------------------------------|

| **5** | **FINANCIAL                HIGHLIGHTS** |
|-------|-----------------------------------------|

|                                                                        |   | SIX                MONTHS ENDEDJUNE                30, 2007 |       | SIX                MONTHS ENDEDJUNE                30, 2006 |   |  YEAR                ENDED DECEMBER                31, 2006 |   |
|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|-------------------------------------------------------------|--------|------------------------------------------------------------------|--------|
| **Per                Share Data:**                                          |   |                                                        |       |                                                        |   |                                                             |   |
| Net                (liability) asset value – beginning of period |   | $                                                           | (0.00972   | )                                                           | $      | 0.00093                                                          |   | $ | 0.00093 |   |
|                                                                        |   |                                                        |       |                                                        |   |                                                             |   |   |   |   |
| Net                investment loss *                                        |   |                                                        | (0.00690   | )                                                           |   | (0.00804                                                         | )      |   | (0.01371 | ) |
| Issuance                of common stock                                     |   |                                                        | 1.00000    |                                                        |   | 0.01000                                                          |   |   | 0.01000 |   |
| Net                realized and unrealized gain (loss)**                    |   |                                                        | (0.97850   | )                                                           |   | 0.00675                                                          |   |   | (0.00694 | ) |
|  Net                asset (liability) value – end of period |   |                                                        | 0.00488    |                                                        |   | (0.00386                                                         | )      |   | (0.00972 | ) |
|                                                                        |   |                                                        |       |                                                        |   |                                                             |   |   |   |   |
| **Total                return based on net asset (liability) value *****    |   |                                                        | (69        | )%                                                          |   | (865                                                             | )%     |   | (1,474 | )% |
|                                                                        |   |                                                        |       |                                                        |   |                                                             |   |   |   |   |
| Common                shares outstanding - end of period****                |   |                                                        | 31,164,372 |                                                        |   | 30,511,481                                                       |   |   | 30,511,481 |   |
| **Ratio/Supplemental                Data**:                                 |   |                                                        |       |                                                        |   |                                                             |   |   |   |   |
| Net                assets (liabilities) – end of period          |   | $                                                           | 152,063    |                                                        | $      | (117,861                                                         | )      | $ | (296,424 | ) |
|                                                                        |   |                                                        |       |                                                        |   |                                                             |   |   |   |   |
| Ratio                of net investment loss to average net assets*****      |   |                                                        | (834       | )%                                                          |   | (3,798                                                           | )%     |   | (3,524 | )% |
|                                                                        |   |                                                        |       |                                                        |   |                                                             |   |   |   |   |
| Ratio                of operating expenses to average net assets*****       |   |                                                        | 834        | %                                                           |   | 3,806                                                            | %      |   | 3,528 | % |

|  | * | Calculated                based on average shares outstanding during                period. |
|--|---|---------------------------------------------------------------------------------------------|

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

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

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

|   |   | ***** | Annualized                for periods less than one year. |
|--------|--------|-------|-----------------------------------------------------------|

----

**Item      2. Management’s Discussion and Analysis of Financial Condition and Results of      Operations.**

*Overview*

*Accounting      Policies*

*Basis      of Presentation*

*Use      of Estimates in the Preparation of Financial Statements*

----

*Income      Taxes*

*Portfolio      and Investment Activity*

*Investment      Strategy*

*Results      of Operations*

*Sales      Revenues*

*General      and Administrative Expenses*

----

*Other      Income (Expenses)*

*Liquidity      and Capital Resources*

----

**Item      3. Quantitative and Qualitative Disclosures about Market      Risk.**

----

**Item      4. Controls and Procedures.**

**PART      II. OTHER INFORMATION**

**Item      1. Legal Proceedings. **

**Item      1A. Risk Factors**

**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds.**

----

**Item      3. Defaults upon Senior Securities.**

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

**Item      5. Other Information.**

**Item      6. Exhibits.**

| 10.3   | Amendment                Agreement dated July 13, 2007 between Blackhawk Capital Group BDC,                Inc.                and SMH Capital Inc. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                |
| 31.1   | Certification                by Chief Executive Officer Pursuant to Section 302 of the Sarbanes                Oxley                Act of 2002     |
|   |                                                                                                                                                |
| 31.2   | Certification                by Chief Financial Officer Pursuant to Section 302 of the Sarbanes                Oxley                Act of 2002     |
|   |                                                                                                                                                |
| 32.1   | Certification                by Chief Executive Officer Pursuant to Section 906 of the Sarbanes                Oxley                Act of 2002     |
|   |                                                                                                                                                |
| 32.2   | Certification                by Chief Financial Officer Pursuant to Section 906 of the Sarbanes                Oxley                Act of 2002     |
|   |                                                                                                                                                |

----

|                                 | **BLACKHAWK                CAPITAL GROUP BDC, INC.**  |
|--------------------------------------|------------------------------------------------------------|
|                                 |                                                       |
| Date:                August 13, 2007 |  By:                                                  | /s/                Craig A. Zabala |
|                                 |                                                       | Craig                A. Zabala, Chief Executive Officer |
|                                 |                                                       |   |
| Date:                August 13, 2007 |  By:                                                  | /s/                Craig A. Zabala |
|                                 |                                                       | Craig                A. Zabala, Acting Chief Financial                Officer |

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