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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





For the
quarterly period ended September 30, 2010





or





 ̈
            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
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)880
      Third Avenue, 12th
      Floor, New York, NY
              10022-4730(Address
      of principal executive offices)
              (Zip
      Code)




(646)
833-1030


(Registrant’s
telephone number, including area code)





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





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 twelve (12) month (or for such
shorter period that the registrant was required to submit and post such
files).  Yes  ̈No 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 the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting company" in Rule
12b-2 of the Exchange Act.  (Check one):





Large
accelerated filer ̈                          Accelerated
filer ̈





Non-accelerated
filerx (Do
not check if a smaller reporting company) Smaller reporting company ̈





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





Yes     
 ̈                                           No   
x





Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.





Class
                Outstanding on November 17,
      2010Common
      Stock, $0.00001 par value
                32,467,484





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





PagePART
      I.
                    FINANCIAL
      INFORMATIONItem
      1.
                    Financial
      Statements.Condensed
      Statements of Assets and Liabilities as of September 30, 2010 (unaudited)
      and December 31, 2009
                    
                    2Condensed
      Schedule of Investments as of September 30, 2010
    (unaudited)
                    
                    3Condensed
      Statements of Operations for the three and nine months ended September 30,
      2010 (unaudited) and September 30, 2009 (unaudited)
                    
                    4Condensed
      Statements of Changes in Net Assets (Liabilities) for the nine months
      ended September 30, 2010 (unaudited) and year ended December 31,
      2009
                    
                    5Condensed
      Statement of Stockholders' Equity (Capital Deficit) for the nine months
      ended September 30, 2010 (unaudited) and year ended December 31,
      2009
                    
                    6Condensed
      Statements of Cash Flows for the nine months ended September 30, 2010
      (unaudited) and September 30, 2009 (unaudited)
                    
                    7Notes
      to Condensed Financial Statements
                    
                    8Item
      2.
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                    
                    17Item
      3.
                    Quantitative
      and Qualitative Disclosures about Market Risk.
                    
                    19Item
      4T.
                    Controls
      and Procedures.
                    
                    19PART
      II.
                    OTHER
      INFORMATIONItem
      1.
                    Legal
      Proceedings.
                    
                    20Item
      1A.
                    Risk
      Factors.
                    
                    20Item
      2.
                    Unregistered
      Sales of Equity Securities and Use of Proceeds.
                    
                    20Item
      3.
                    Defaults
      upon Senior Securities.
                    
                    20Item
      4.
                    Submission
      of Matters to a Vote of Security Holders.
                    
                    20Item
      5.
                    Other
      Information.
                    
                    20Item
      6.
                    Exhibits.
                    
                    20











BLACKHAWK
CAPITAL GROUP BDC INC.





CONDENSED
STATEMENTS OF ASSETS AND LIABILITIES





SEPTEMBER 30,
                        2010
                      
                      
                      DECEMBER 31,
                        2009(Unaudited)ASSETS:Investment
      at fair value (cost $250,000 and $326,350)
                      
                      $
                      250,000
                      
                      
                      $
                      325,123Cash
      and cash equivalents
                      
                      
                      82
                      
                      
                      
                      59,715Prepaid
      expenses
                      
                      
                      -
                      
                      
                      
                      17,278TOTAL
      ASSETS
                      
                      $
                      250,082
                      
                      
                      $
                      402,116LIABILITIESAccrued
      expenses
                      
                      $
                      792,004
                      
                      
                      $
                      536,612TOTAL
      LIABILITIES
                      
                      
                      792,004
                      
                      
                      
                      536,612NET
      ASSETSCommon
      stock, par value $0.00001 per share1,000,000,000
      shares authorized,32,467,484shares
      issued andoutstanding
      in 2010 and 2009
                      
                      
                      325
                      
                      
                      
                      325Additional
      paid-in capital
                      
                      
                      2,106,641
                      
                      
                      
                      2,106,641Accumulated
      net investment loss
                      
                      
                      (2,648,888
                      )
                      
                      
                      (2,240,235
                      )Net
      unrealized loss on investment
                      
                      
                      -
                      
                      
                      
                      (1,227
                      )TOTAL
      NET LIABILITIES
                      
                      
                      (541,922
                      )
                      
                      
                      (134,496
                      )TOTAL
      LIABILITIES AND NET ASSETS/LIABILITIES
                      
                      $
                      250,082
                      
                      
                      $
                      402,116NET
      LIABILITY VALUE PER COMMON SHARE
                      
                      $
                      (0.01669
                      )
                      
                      $
                      (0.00414
                      )







See notes to condensed
financial statements





2





BLACKHAWK
CAPITAL GROUP BDC INC.


CONDENSED
SCHEDULE OF INVESTMENTS (Unaudited)


SEPTEMBER
30, 2010







COMPANY
                                      
                                      INVESTMENT
                                      
                                      INITIAL
                                        ACQUISITION
                                        DATE
                                      
                                      NUMBER
                                        OF UNITS
                                      
                                      
                                      COST
                                      
                                      
                                      FAIR
                                        VALUE
                                      
                                      
                                      % OF
                                        TOTAL
                                        ASSETSMacroMarkets,
      LLC
                                      
                                      Capital
      Interests
                                      
                                      1/21/09
                                      
                                      
                                      624,432
                                      
                                      
                                      $
                                      250,000
                                      
                                      
                                      $
                                      250,000
                                      
                                      
                                      
                                      99.97
                                      %





See notes
to condensed financial statements





DECEMBER
31, 2009







COMPANY
                                                                                                  
                                                                                                  INVESTMENT
                                                                                                  
                                                                                                  INITIAL
                                                                                                    ACQUISITION
                                                                                                    DATE
                                                                                                  
                                                                                                  NUMBER
                                                                                                    OF
                                                                                                    OF UNITS
                                                                                                  
                                                                                                  
                                                                                                  COST
                                                                                                  
                                                                                                  
                                                                                                  FAIR
                                                                                                    VALUE
                                                                                                  
                                                                                                  
                                                                                                  % OF
                                                                                                    TOTAL
                                                                                                    ASSETSMacroMarkets,
      LLC
                                                                                                  
                                                                                                  Capital
      Interests
                                                                                                  
                                                                                                  1/21/09
                                                                                                  
                                                                                                  
                                                                                                  624,432
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  250,000
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  250,000
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  62.17
                                                                                                  %Caterpillar
      Fin. 4.15% due 1/15/10
                                                                                                  
                                                                                                  Notes
                                                                                                  
                                                                                                  10/13/09
                                                                                                  
                                                                                                  
                                                                                                  25,000
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  25,495
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  25,024
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  6.22
                                                                                                  %Citigroup
      4.125% due 2/22/10
                                                                                                  
                                                                                                  Notes
                                                                                                  
                                                                                                  10/13/09
                                                                                                  
                                                                                                  
                                                                                                  25,000
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  25,421
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  25,100
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  6.24
                                                                                                  %Protective
      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 condensed financial statements





3





BLACKHAWK
CAPITAL GROUP BDC INC.





CONDENSED
STATEMENTS OF OPERATIONS


(Unaudited)





THREE MONTHS ENDED
                                SEPTEMBER30
                              
                              
                              NINE MONTHS ENDED
                                SEPTEMBER30,2010
                              
                              
                              2009
                              
                              
                              2010
                              
                              
                              2009INVESTMENT
      INCOME:Interest
      income
                              
                              
                              -
                              
                              
                              $
                              131
                              
                              
                              $
                              192
                              
                              
                              $
                              6,099TOTAL
      INVESTMENT INCOME
                              
                              
                              -
                              
                              
                              
                              131
                              
                              
                              
                              -
                              
                              
                              
                              6,099EXPENSES:Compensation
                              
                              
                              15,000
                              
                              
                              
                              31,124
                              
                              
                              
                              64,969
                              
                              
                              
                              206,925Professional
      fees
                              
                              
                              48,020
                              
                              
                              
                              140,317
                              
                              
                              
                              250,935
                              
                              
                              
                              499,358Consulting
      fees
                              
                              
                              -
                              
                              
                              
                              16,250
                              
                              
                              
                              -
                              
                              
                              
                              16,250Advisory
      fees
                              
                              
                              2,263
                              
                              
                              
                              2,188
                              
                              
                              
                              7,104
                              
                              
                              
                              12,030Rent-related
      party
                              
                              
                              12,000
                              
                              
                              
                              12,000
                              
                              
                              
                              36,000
                              
                              
                              
                              36,000Filing
      fees
                              
                              
                              3,174
                              
                              
                              
                              2,236
                              
                              
                              
                              9,781
                              
                              
                              
                              21,076Insurance
                              
                              
                              7,960
                              
                              
                              
                              14,516
                              
                              
                              
                              24,445
                              
                              
                              
                              26,476Other
                              
                              
                              262
                              
                              
                              
                              633
                              
                              
                              
                              15,611
                              
                              
                              
                              3,555TOTAL
      EXPENSES
                              
                              
                              88,679
                              
                              
                              
                              219,264
                              
                              
                              
                              408,845
                              
                              
                              
                              821,670NET
      INVESTMENT LOSS
                              
                              
                              (88,679
                              )
                              
                              
                              (219,133
                              )
                              
                              
                              (408,653
                              )
                              
                              
                              (815,571
                              )UNREALIZED
      LOSS ON INVESTMENTS
                              
                              
                              -
                              
                              
                              
                              1,288
                              
                              
                              
                              1,227
                              
                              
                              
                              1,288NET
      DECREASE IN ASSETS RESULTING FROM OPERATIONS
                              
                              
                              (88,679
                              )
                              
                              $
                              (217,845
                              )
                              
                              $
                              (407,426
                              )
                              
                              $
                              (814,283
                              )LOSS
      PER COMMON SHARE, BASIC AND DILUTED
                              
                              $
                              (0.00273
                              )
                              
                              $
                              (0.00671
                              )
                              
                              $
                              (0.01255
                              )
                              
                              $
                              (0.02508
                              )WEIGHTED
      AVERAGE SHARES OUTSTANDING,BASIC
      AND DILUTED
                              
                              
                              32,467,484
                              
                              
                              
                              32,467,484
                              
                              
                              
                              32,467,484
                              
                              
                              
                              32,467,484







See notes
to condensed financial statements





4





BLACKHAWK
CAPITAL GROUP BDC INC.





CONDENSED
STATEMENTS OF CHANGES IN NET ASSETS (LIABILITIES)




NINE MONTHS
              ENDED
              SEPTEMBER 30,
              2010
            
            
            YEAR ENDED
              DECEMBER 31,2009(Unaudited)DECREASE
      IN NET ASSETS FROM OPERATIONSNet
      investment loss
            
            $
            (408,653
            )
            
            $
            (986,533
            )Unrealized
      gain on investments
            
            
            1,227
            
            
            
            61NET
      DECREASE IN ASSETSRESULTING
      FROM OPERATIONS
            
            
            (407,426
            )
            
            
            (986,472
            )CAPITAL
      STOCK TRANSACTIONS:Stock-based
      compensation
            
            
            -
            
            
            
            132,000NET
      INCREASE IN ASSETS FROMCAPITAL
      STOCK TRANSACTIONS
            
            
            -
            
            
            
            132,000TOTAL
      DECREASE IN NET ASSETS
            
            
            (407,426
            )
            
            
            (854,472
            )NET
      (LIABILITIES) ASSETS - BEGINNING OF PERIOD
            
            
            (134,496
            )
            
            
            719,976NET
      LIABILITIES - END OF PERIOD
            
            $
            (541,922
            )
            
            $
            (134,496
            )







See notes
to condensed financial statements





5




BLACKHAWK
CAPITAL GROUP BDC INC.





CONDENSED
STATEMENT OF STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT)







COMMON STOCK
                          
                          
                          ADDITIONAL
                            PAID-IN
                          
                          
                          NET
                            UNREALIZED
                            APPRECIATION ON
                          
                          
                          ACCUMULATED
                            NET
                            INVESTMENTTOTAL
                          
                          
                          SHARES
                          
                          
                          AMOUNT
                          
                          
                          CAPITAL
                          
                          
                          INVESTMENT
                          
                          
                          LOSSBalance-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
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          132,000Balance-December
      31, 2009 (audited)
                          
                          
                          (134,496
                          )
                          
                          
                          32,467,484
                          
                          
                          
                          325
                          
                          
                          
                          2,106,641
                          
                          
                          
                          (1,227
                          )
                          
                          
                          (2,240,235
                          )Net
      decrease in assets resulting from operations
                          
                          
                          (407,426
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,227
                          
                          
                          
                          (408,653
                          )Balance-September
      30, 2010 (unaudited)
                          
                          $
                          (541,922
                          )
                          
                          
                          32,467,484
                          
                          
                          $
                          325
                          
                          
                          $
                          2,106,641
                          
                          
                          $
                          -
                          
                          
                          $
                          (2,648,888
                          )





See notes
to condensed financial statements





6





BLACKHAWK
CAPITAL GROUP BDC INC.





CONDENSED
STATEMENTS OF CASH FLOWS





(Unaudited)





NINE MONTHS ENDED SEPTEMBER 30,2010
                      
                      
                      2009CASH
      FLOWS FROM OPERATING AND INVESTING ACTIVITIES:Net
      investment loss and net decrease in assets resulting from
      operations
                      
                      $
                      (407,426
                      )
                      
                      $
                      (814,283
                      )Adjustments  to
      reconcile net investment loss and net decrease in assets to  net
      cash (used in) provided by operating activities:Unrealized
      gain on investments
                      
                      
                      (1,227
                      )
                      
                      
                      (1,288
                      )Stock
      Based Compensation
                      
                      
                      -
                      
                      
                      
                      132,000Change
      in operating assets and liabilities:Increase
      in accrued expenses
                      
                      
                      255,392
                      
                      
                      
                      323,119Decrease
      (increase) in prepaid expenses
                      
                      
                      17,278
                      
                      
                      
                      (21,450
                      )Purchase
      of Investments
                      
                      
                      -
                      
                      
                      
                      (250,000
                      )Proceeds
      from sale and redemption of investments
                      
                      
                      76,350
                      
                      
                      
                      654,024NET
      CASH (USED IN) PROVIDED BY OPERATING AND NET CHANGE IN
CASH
                      
                      
                      (59,633
                      )
                      
                      
                      22,122CASH
      AND EQUIVALENTS – BEGINNING OF PERIOD
                      
                      
                      59,715
                      
                      
                      
                      173,797CASH
      AND EQUIVALENTS – END OF PERIOD
                      
                      $
                      82
                      
                      
                      $
                      194,919







See notes
to condensed financial statements





7





BLACKHAWK
CAPITAL GROUP BDC INC.





NOTES TO
CONDENSED FINANCIAL STATEMENTS





SEPTEMBER
30, 2010


(Unaudited)





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 14, 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.





Interim financial statements of the
Company are prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and
pursuant to the requirements for reporting on Form 10-Q and Regulation
S-X.  Accordingly, certain disclosures accompanying annual financial
statements prepared in accordance with GAAP are omitted.  In the
opinion of management, all adjustments, consisting solely of normal recurring
accruals, considered necessary for the fair presentation of financial statements
for the interim periods have been included.  The results of operations
for the current period are not necessarily indicative of results that ultimately
may be achieved for the year.  The interim unaudited financial
statements and notes thereto have not been reviewed by an outside auditor and
should be read in conjunction with the December 31, 2009 financial statements
and notes thereto included in the Company’s Form 10-K as filed with the
SEC.





The Company had a net decrease in
assets resulting from operations for the three and nine-month periods ended
September 30, 2010 of $88,679 and $407,426, respectively, and total net
liabilities of $541,922 as of September 30, 2010.  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.  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 October 1, 2011 to the extent that Concorde has such capital
available.  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.





8





New
Accounting Pronouncements





In January 2010, the Financial
Accounting Standards Board (“FASB”) issued new accounting guidance which expands
disclosure requirements relating to fair value measurements. The guidance adds
requirements for disclosing amounts of and reasons for significant transfers
into and out of Levels 1 and 2 and requires gross rather than net disclosures
about purchases, sales, issuance and settlements relating to Level 3
measurements. The guidance also provides clarification that fair value
measurement disclosures are required for each class of assets and liabilities.
Disclosures about the valuation techniques and inputs used to measure fair value
for measurements that fall in either Level 2 or Level 3 are also required. The
Company adopted the provisions of the guidance as of September 30, 2010.
Disclosures are not required for earlier periods presented for comparative
purposes. The new guidance affects disclosures only and therefore, the adoption
had no impact on the Company’s results of operation or financial
position.





Revenue
recognition





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





Use
of estimates in the preparation of financial statements





The preparation of financial statements
in conformity with generally accepted principles accepted in the United States
("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.  Significant estimates
include the valuation of investments and the valuation allowance for deferred
tax assets.





Investments





The Company's investments are carried
at fair value.





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.





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.





The following table provides basic and
diluted earnings (loss) per share for the three months ended September 30, 2010
and 2009:





Net Loss
                
                
                Weighted
                  Average Shares
                
                
                Basic and Diluted
                  Loss Per ShareThree
      Months EndedSeptember
      30, 2010
                
                $
                (88,679
                )
                
                
                32,467,484
                
                
                $
                (0.00273
                )




9





Net Loss
                
                
                Weighted
                  Average Shares
                
                
                Basic
      and Diluted
                  Loss Per ShareThree
      Months EndedSeptember
      30, 2009
                
                $
                (217,845
                )
                
                
                32,467,484
                
                
                $
                (0.00671
                )





The following table provides Basic and
Diluted EPS for the nine months ended September 30, 2010 and 2009:





Net Loss
                
                
                Weighted
                  Average Shares
                
                
                Basic and Diluted
                  Loss Per ShareNine
      Months EndedSeptember
      30, 2010
                
                $
                (407,426
                )
                
                
                32,467,484
                
                
                $
                (0.01255
                )Nine
      Months EndedSeptember
      30, 2009
                
                $
                (814,283
                )
                
                
                32,467,484
                
                
                $
                (0.02508
                )





There were no potential dilutive
securities issued or outstanding for the three months ended September 30,
2010.  For the three months ended September 30, 2009, 600,000 shares
attributable to stock options were excluded from the calculation of diluted EPS
because the effect was anti-dilutive.





2.
INCOME TAXES





The
Company recognizes deferred tax assets and liabilities based on the differences
between the financial statement carrying amount and the tax bases of assets and
liabilities.  The Company regularly reviews its deferred tax assets
for recoverability and establishes a valuation allowance based upon historical
losses, projected future taxable income and the expected timing of the reversals
of existing temporary differences.





As of
September 30, 2010, net deferred tax assets aggregated approximately $1,139,000
and consist principally of net operating loss carry forwards and capitalized
start up costs, which were fully reserved based on the likelihood of
realization.  The net operating loss will expire by 2029.





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 September 30, 2010 and December 31, 2009, the
Company has not recorded any unrecognized tax benefits.  The Company's
policy is to recognize 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.





3.
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.





10





·
            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.





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 value 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:





11





Carrying Value
                            
                            
                            Quote Prices in
                              Active Markets
                              (Level 1)
                            
                            
                            Significant Other
                              Observable Inputs
                              (Level 2)
                            
                            
                            Significant
                              Unobservable
                              Inputs
                              (Level 3)September
      30, 2010Financial
      AssetsMembership
      Interest in LLC
                            
                            $
                            250,000
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            250,000Total
      Financial Assets
                            
                            $
                            250,000
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            250,000December
      31, 2009:Financial
      AssetsNotes
                            
                            $
                            75,123
                            
                            
                            
                            -
                            
                            
                            $
                            75,123
                            
                            
                            $
                            -Membership
      Interest in LLC
                            
                            
                            250,000
                            
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            250,000Total
      Financial Assets
                            
                            $
                            325,123
                            
                            
                            
                            -
                            
                            
                            $
                            75,123
                            
                            
                            $
                            250,000





The
following table presents additional information about assets measured at fair
value using Level 3 inputs for the three months ended September 30,
2010:





Membership Interest In LLCBalance
      as of January 1, 2010
                        
                        $
                        250,000Purchases
                        
                        
                        -Balance
      as of September 30, 2010
                        
                        $
                        250,000





There was no change in the unrealized
gain/(losses) in earnings of the Company's Level 3 assets still held at
September 30, 2010.





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.





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.





12





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.





4.
RELATED PARTY TRANSACTIONS





The Company shares office space and
other administrative functions with Concorde.  The Board voted to
start paying Concorde monthly rent of $4,000 beginning January 1,
2009.  Rent incurred in each of the three and nine months ended
September 30, 2010 and 2009 amounted to $12,000 and $36,000,
respectively.





5.
INVESTMENT ADVISORY AGREEMENTS





Pursuant to an investment advisory
management agreement dated October 31, 2006, Blackhawk engaged Barak Asset
Management, LLC (“Barak”), a Delaware limited liability company who is an
investment adviser registered under the Investment Advisers Act of 1940
(“Advisers Act”), to serve as an investment adviser to Blackhawk and manage its
portfolio of investments.  The agreement is for a one-year term and
extendable for one year periods.  The agreement with Barak expired 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.





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 in arrears (or a prorated period when applicable).





For the three and nine months ended
September 30, 2010 and 2009, the Company incurred fees in the amount of $2,263
and $2,188, respectively, and $7,104 and $12,030, respectively.





6.
ACCRUED EXPENSES





Accrued expenses at September 30, 2010
and December 31, 2009 consist principally of legal fees.





7.
STOCKHOLDERS’ EQUITY





During the nine months ended September
30, 2010 and for the year ended December 31, 2009, the Company did not sell or
issue any sharesof
Common Stock.





8.
FINANCIAL HIGHLIGHTS





The following is a schedule of
financial highlights for the nine months ended September 30, 2010 and 2009, and
the year ended December 31, 2009.





13




NINE MONTHS ENDED
                    September 30, 2010
                    (unaudited)
                  
                  
                  NINE MONTHS ENDED
                    September 30, 2009
                    (unaudited)
                  
                  
                  YEAR ENDED
                    DECEMBER 31,
                    2009Per
      Share Data:Net
      asset value – beginning of period
                  
                  $
                  (0.00414
                  )
                  
                  $
                  0.02218
                  
                  
                  $
                  0.02218Net
      investment loss 1
                  
                  
                  (0.01259
                  )
                  
                  
                  (0.02512
                  )
                  
                  
                  (0.03039
                  )Net
      realized and unrealized gain (loss) 1
                  
                  
                  0.00004
                  
                  
                  
                  0.00410
                  
                  
                  
                  0.00407Net
      asset/(liability) value – end of period
                  
                  $
                  (0.01669
                  )
                  
                  $
                  0.00116
                  
                  
                  $
                  (0.00414
                  )Total
      return based on net asset value 2
                  
                  
                  (303
                  )%
                  
                  
                  (95
                  )%
                  
                  
                  (119
                  )%Common
      shares outstanding – end of period
                  
                  
                  32,467,484
                  
                  
                  
                  32,467,484
                  
                  
                  
                  32,467,484Ratio/Supplemental
      Data:Net
      assets/(liabilities) – end of period
                  
                  $
                  (541,922
                  )
                  
                  $
                  37,693
                  
                  
                  $
                  (134,496
                  )Ratio
      of net investment loss to average net assets 3
                  
                  
                  [4
                  ]
                  
                  
                  (294
                  )%
                  
                  
                  (334
                  )%Ratio
      of operating expenses to average net assets 3
                  
                  
                  [4
                  ]
                  
                  
                  296
                  %
                  
                  
                  (336
                  )%




1
            Calculated
      based on weighted average shares outstanding during
  period.  2
              Total
      returns for periods of less than one year not annualized.  The
      rate of return for each period was calculated by taking the difference
      between the ending and beginning net asset value and dividing this
      difference by the beginning net
  asset  value.
  3
              Annualized
      for periods less than one year.
  4
              Ratio
      was not presented as it is not considered meaningful because the Company
      had a net liability throughout the reporting
  period.


9.
STOCK OPTION PLAN; STOCK-BASED COMPENSATION





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 are
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”).





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.





14





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.





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.





The Company accounts for stock-based
payments by regarding 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 nine months ended September 30,
2010:





Shares Under
                        Options
                      
                      
                      Weighted Average
                        Exercise Price
                      
                      Remaining
                        Contractual Life
                        (In Years)
                      
                      Aggregate
                        Intrinsic ValueOutstanding
      at beginning of period
                      
                      
                      600,000
                      
                      
                      $
                      0.40GrantsExercised
                      
                      
                      —
                      
                      
                      
                      —Forfeited
                      
                      
                      —
                      
                      
                      
                      —Outstanding
      at end of period
                      
                      
                      600,000
                      
                      
                      $
                      0.40
                      
                      
                      
                      $
                      0Exercisable
      at end of period
                      
                      
                      600,000
                      
                      
                      $
                      0.40
                      
                      
                      
                      $
                      0




15





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 September
30, 2010, there were no options outstanding to purchase shares with an exercise
price below the quoted price of the Company's common stock.





There were no stock options granted
during the three months ended September 30, 2010.  The weighted
average fair value at date of grant for options granted during the three months
ended September 30, 2009 was $.22.  The Company recorded $132,000of compensation expense
for the nine months ended September 30, 2009.  Estimated unrecognized
stock-based compensation relating to stock options as of September 30, 2010 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 Employment Period 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 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 sold a minimum of $3,000,000 of shares of its common
stock in its 2009 private placement offering ("Offering") under Rule 506 under
Regulation D under the Securities Act, the Company would have had to increase
Zabala's annual base salary to $250,000 and pay him a $50,000 bonus (which bonus
could have been increased proportionately if the Company raised more than
$3,000,000 in the Offering but the amount of the bonus would not have been
greater than $100,000).  If the minimum amount is not raised in the
Offering, Zabala's base salary remains at $60,000.  The Offering was
terminated on December 14, 2009 with no shares being sold and consequently Dr.
Zabala was not paid any bonus and did not receive a salary
increase.





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.





16





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 the market value of $0.22 on date of grant) which
expires on February 1, 2019.  The options were fully vested upon
issuance.





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 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.





Item
2.  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.





The statements contained in this
Quarterly Report on Form 10-Q that are not historical facts may contain
forward-looking statements that involve a number of known and unknown risks and
uncertainties that could cause actual results to differ materially from those
discussed or anticipated by management.  Potential risks and
uncertainties include, among other factors, general business conditions,
government regulations, competitive market conditions, success of Blackhawk's
business strategy, and other risks and uncertainties currently unknown to
management.





Overview





Blackhawk
is a business development company registered under the Investment Company Act of
1940 formed to engage in the business of investing primarily in small to
mid-sized companies.  The Company also intends to provide managerial
assistance to developing companies.  To date, the Company has made one
investment in a portfolio company, MacroMarkets.





Accounting
policies





Basis
of presentation





Interim financial statements of the
Company are prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and
pursuant to the requirements for reporting on Form 10-Q and Regulation
S-X.  Accordingly, certain disclosures accompanying annual
consolidated financial statements prepared in accordance with GAAP are
omitted.  In the opinion of management, all adjustments, consisting
solely of normal recurring accruals, considered necessary for the fair
presentation of financial statements for the interim periods have been
included.  The results of operations for the current period are not
necessarily indicative of results that ultimately may be achieved for the
year.  The interim unaudited financial statements and notes thereto
have not been reviewed by an outside auditor and should be read in conjunction
with the December 31, 2009 audited financial statements and notes thereto
included in the Company’s Form 10-K as filed with the SEC.




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
and the valuation allowance for deferred tax assets.





17





We recognize deferred tax assets and
liabilities based on the differences between the financial statement carrying
amounts and the tax bases of assets and liabilities.  We regularly
review our deferred tax assets for recoverability and establish a valuation
allowance based upon historical losses, projected future taxable income and the
expected timing of the reversals of existing temporary
differences.  As of September 30, 2010, net deferred tax assets
aggregated $1,139,000, and consist principally of net operating loss carry
forwards and capitalized start up costs which, were fully reserved based on the
likelihood of realization.  The net operating loss will expire by
2029.





The Company's investments are carried
at fair value.  See Note 3 to our Condensed Financial Statements for
additional information with respect to investments.





Portfolio
and investment activity





Blackhawk
did not make any portfolio investment in 2008 or in prior
years.  However, on January 12, 2009, Blackhawk entered into a Voting
Capital Interests Purchase Agreement ("Purchase Agreement") with MacroMarkets
LLC, a Delaware limited liability company ("MacroMarkets").  Pursuant
to the Purchase Agreement, Blackhawk purchased a five percent (5%) membership
interest in MacroMarkets for $250,000 and Craig A. Zabala, Chairman and
President of Blackhawk, was appointed a non-voting board member of
MacroMarkets.  The Purchase Agreement contains standard
representations, warranties and indemnification provisions.  The
transaction closed on January 12, 2009. Blackhawk used funds from working
capital to make the equity investment.




Results
of operations





Investment
income





For the
three months ended September 30, 2010 and 2009, we had $0 and $131,
respectively, of interest income.





For the
nine months ended September 30, 2010 and 2009, we had $192 and $6,099,
respectively, of interest income.





General
and administrative expenses





For the
three months ended September 30, 2010 and 2009, general and administrative
expenses were $88,679 and $219,264, respectively.  The decrease was
due to a reduction in professional fees and compensation.





For the
nine months ended September 30, 2010 and 2009, general and administrative
expenses were $408,845 and $821,670, respectively.  The decrease was
due to a reduction in professional fees and compensation.





Liquidity
and capital resources





From inception (April 22, 2004) through
September 30, 2010, Blackhawk funded its cash operating requirements through the
sale of its common stock and loans from an affiliated company,
Concorde.





The net
cash proceeds from the Regulation E offerings since inception have been
$1,711,731 through September 30, 2010.





Blackhawk had a net decrease in assets
resulting from operations of $407,426 for the nine months ended September
30, 2010, and had total net liabilities of $541,922 at September 30, 2010 and to
date has made one investment in an eligible portfolio company, MacroMarkets,
LLC.  Blackhawk intends to raise capital and access the equity markets
to raise cash to fund investments.  The ability of Blackhawk to raise
capital in this current market environment will be very
difficult.  Small business development companies similar to Blackhawk
are encountering trying market conditions in attempts to raise
capital.  There can be no assurance that Blackhawk will be able to
raise capital.  Since inception, Blackhawk's operations have been
principally funded by three Regulation E offerings and by loans from
Concorde.  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 October 1, 2011 to the extent that Concorde has such capital
available.  Concorde currently does not have the capital to provide to
Blackhawk such financial support.  If the Company is unable to raise
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.





18




Item
3. Quantitative and Qualitative Disclosures about Market Risk.





We are subject to financial market
risks, including changes in 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 generally accepted accounting
principles.  Blackhawk has made one investment to date in
MacroMarkets.





Item
4T. Controls and Procedures.





Management Report on Internal
Control Over Financial Reporting.  The management of the
Company is responsible for establishing and maintaining adequate internal
control over financial reporting.  The Company's internal control
system is a process designed to provide reasonable assurance to the Company's
management and board of directors regarding the preparation and fair
presentation of published financial statements.





Our
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. generally accepted accounting
principles and that receipts and expenditures are being made only in accordance
with authorizations of management and the directors of the Company; and provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on our consolidated 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 the Company's internal control over financial
reporting as of September 30, 2010.  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 upon this evaluation, management (consisting of one
individual, Dr. Craig A. Zabala) concluded that the Company's disclosure
controls and procedures were not effective to ensure that material information
is recorded, processed, summarized and reported by management of the Company on
a timely basis in order to comply with the Company's disclosure obligations
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.  This conclusion regarding the
Company's disclosure controls and procedures is based solely on management's
conclusion that the Company's internal control over financial reporting are
ineffective as identified in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2009 and continues to be ineffective as of September 30,
2010.  In connection with our Annual Report on Form 10-K for the
fiscal year ended December 31, 2009, our management assessed the effectiveness
of the Company's internal control over financial reporting was not effective
based on management's identification of the material weaknesses as
follows:  (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.





19




Changes in Internal
Controlsover Financial
Reporting.  During the quarter ended September 30, 2010, there
have been no significant changes in our internal controls 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.





PART
II.  OTHER INFORMATION





Item
1.  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
1A. Risk Factors





This Section is not
applicable.





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





This
Section is not applicable.





Item
3.  Defaults upon Senior Securities.





This
Section is not applicable.




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





There
were no matters submitted to a vote of security holders during the third quarter
ended September 30, 2010.





Item
5.  Other Information.





This Section is not
applicable.




Item
6.  Exhibits.





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





20




SIGNATURE





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





BLACKHAWK
      CAPITAL GROUP BDC, INC.Date:  November
      18, 2010
              By:
              /s/ Craig A. ZabalaCraig
      A. Zabala, Chief Executive OfficerDate:  November
      18, 2010
              By:
              /s/ Craig A. ZabalaCraig
      A. Zabala, Acting Chief Financial
Officer




21