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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 December 31, 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 000-09358





BULOVA TECHNOLOGIES GROUP, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Florida                                                        |  | 83-0245581                       
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer Identification No.)

19337 U.S. Highway 19 North, Suite
525

Clearwater, Florida 33764

(Address of principal executive offices) (Zip Code)

(727) 536-6666

(Registrants telephone number, including area code)





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

Securities registered pursuant to Section 12(g) of the Act:





Common Stock, $.001 par value

(Title of Class)





Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 12 months (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 filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

As of February 17, 2011, the Company had 146,699,127 shares of Common Stock outstanding.









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BULOVA TECHNOLOGIES GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 31, 2010

TABLE OF CONTENTS



|                                                                                              |  |      |    | 
|--------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                              |  | Page |   
|PART I  FINANCIAL INFORMATION                                                                |  |      |    | 
|                                                                                              | 
|Item 1. Financial Statements                                                                  |  |      | 3  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations |  |      | 19 | 
|Item 4. Controls and Procedures                                                               |  |      | 20 | 
|                                                                                              | 
|PART II  OTHER INFORMATION                                                                   |  |      |    | 
|                                                                                              | 
|Item 6. Exhibits                                                                              |  |      | 21 | 
|                                                                                              | 
|Signatures                                                                                    |  |      | 22 | 



2



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PART I

Item 1. Consolidated Financial Statements

BULOVA
TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                      |  | December 31,2010(unaudited) |             |   | September 30,2010 |  
|ASSETS                                                                                                                                                |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|Cash and equivalents                                                                                                                                  |  | $                           | 39,249      |   |                   | $ | 12,605      |  
|Accounts receivable                                                                                                                                   |  |                             | 576,837     |   |                   |   | 451,793     |  
|Contract claim receivable                                                                                                                             |  |                             |            |   |                   |   |            |  
|Inventory                                                                                                                                             |  |                             | 1,006,999   |   |                   |   | 1,240,031   |  
|Other current assets                                                                                                                                  |  |                             | 219,368     |   |                   |   |            |  
|Current assets held for sale                                                                                                                          |  |                             | 882,410     |   |                   |   | 1,305,707   |  
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|Total current assets                                                                                                                                  |  |                             | 2,724,863   |   |                   |   | 3,010,136   |  
|                                                                                                                                                      |  |                            
|Property, plant and equipment                                                                                                                         |  |                             | 2,460,508   |   |                   |   | 2,501,704   |  
|Investments                                                                                                                                           |  |                             | 1,791,855   |   |                   |   | 1,766,855   |  
|Other assets                                                                                                                                          |  |                             | 522,920     |   |                   |   | 548,748     |  
|Non-current assets held for sale                                                                                                                      |  |                             | 2,612,778   |   |                   |   | 2,594,707   |  
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|                                                                                                                                                      |  | $                           | 10,112,924  |   |                   | $ | 10,422,150  |  
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                  |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|Accounts payable                                                                                                                                      |  | $                           | 71,133      |   |                   | $ | 231,365     |  
|Accrued expenses                                                                                                                                      |  |                             | 6,564,086   |   |                   |   | 6,451,243   |  
|Advance payments and billings in excess of cost                                                                                                       |  |                             | 1,287,721   |   |                   |   | 1,451,287   |  
|Current portion of long term debt                                                                                                                     |  |                             | 3,483,234   |   |                   |   | 2,941,376   |  
|Current liabilities associated with assets held for sale                                                                                              |  |                             | 4,886,912   |   |                   |   | 5,277,590   |  
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|Total current liabilities                                                                                                                             |  |                             | 16,293,086  |   |                   |   | 16,352,861  |  
|                                                                                                                                                      |  |                            
|Shareholder loans and accrued interest                                                                                                                |  |                             | 4,068,954   |   |                   |   | 4,409,469   |  
|Long term debt, net of current portion                                                                                                                |  |                             | 1.363,892   |   |                   |   | 1,396,022   |  
|Non-current liabilities associated with assets held for sale                                                                                          |  |                             | 1.034.000   |   |                   |   | 1,160,000   |  
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|                                                                                                                                                      |  |                             | 22,759,932  |   |                   |   | 23,318,352  |  
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|Commitments and contingencies                                                                                                                         |  |                             |            |   |                   |   |            |  
|                                                                                                                                                      |  |                            
|Shareholders deficit:                                                                                                                                |  |                             |             |   |                   |   |             |  
|Common stock, $.001 par; authorized 150,000,000 shares; 141,269,127 and 81,902,405 issued and outstanding at December 31,
2010 and September 30, 2010 |  |                             | 141,269     |   |                   |   | 81,902      |  
|Additional paid in capital in excess of par                                                                                                           |  |                             | 9,098,413   |   |                   |   | 8,002,412   |  
|Retained deficit                                                                                                                                      |  |                             | (21,886,690 | ) |                   |   | (20,980,516 | )
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|                                                                                                                                                      |  |                             | (12,647,008 | ) |                   |   | (12,896,202 | )
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  
|                                                                                                                                                      |  |                            
|                                                                                                                                                      |  | $                           | 10,112,924  |   |                   | $ | 10,422,150  |  
|                                                                                                                                                      |  |                             |             |   |                   |   |             |  

See accompanying notes to consolidated financial statements.



3



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BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009

(Unaudited)



|                                                    |  |      |             |   |      |   |            |  
|--------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | -
|                                                    |  | 2010 |             |   | 2009 |  
|                                                    |  |     
|Revenues                                            |  | $    | 1,390,678   |   |      | $ | 2,751,174  |  
|Cost of revenues                                    |  |      | 739,925     |   |      |   | 2,169,766  |  
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Gross profit                                        |  |      | 650,753     |   |      |   | 581,408    |  
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Selling and administrative expenses                 |  |      | 1,282,646   |   |      |   | 1,142,797  |  
|Depreciation and amortization expense               |  |      | 55,235      |   |      |   | 41,633     |  
|Interest expense                                    |  |      | 220,236     |   |      |   | 92,633     |  
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Total expenses                                      |  |      | 1,558,117   |   |      |   | 1,277,063  |  
|                                                    |  |     
|Loss from operations                                |  |      | (907,364    | ) |      |   | (695,655   | )
|                                                    |  |     
|Other income (expense)                              |  |      |             |   |      |   |            |  
|Other income                                        |  |      | 1,190       |   |      |   | (607       | )
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Loss from continuing operations before Income taxes |  |      | (906,174    | ) |      |   | (696,262   | )
|                                                    |  |     
|Income tax expense                                  |  |      |            |   |      |   |           |  
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Loss from continuing operations                     |  |      | (906,174    | ) |      |   | (696,262   | )
|Loss from discontinued operations, net of tax       |  |      |            |   |      |   | (1,711,938 | )
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Net loss                                            |  | $    | (906,174    | ) |      | $ | (2,408,200 | )
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Basis and diluted net loss per share                |  |      |             |   |      |   |            |  
|Loss from continuing operations                     |  | $    | (.01        | ) |      | $ | (.01       | )
|Loss from discontinued operations                   |  |      |            |   |      |   | (.02       | )
|                                                    |  |      |             |   |      |   |            |  
|Net loss                                            |  | $    | (.01        | ) |      | $ | (.03       | )
|                                                    |  |      |             |   |      |   |            |  
|                                                    |  |     
|Weighted average common shares, basic and diluted   |  |      | 124,827,498 |   |      |   | 73,830,634 |  
|                                                    |  |      |             |   |      |   |            |  

See accompanying notes to consolidated financial statements.



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BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009

(Unaudited)



|                                                                                  |  |      |          |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ---------- | -
|                                                                                  |  | 2010 |          |   | 2009 |  
|Cash flows from operating activities:                                             |  |      |          |   |      |   |            |  
|Net loss                                                                          |  | $    | (906,174 | ) |      | $ | (2,408,200 | )
|Loss from discontinued operations                                                 |  |      |          |   |      |   | (1,711,938 | )
|                                                                                  |  |      |          |   |      |   |            |  
|Loss from continuing operations                                                   |  |      | (906,174 | ) |      |   | (696,262   | )
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |          |   |      |   |            |  
|Depreciation and amortization                                                     |  |      | 55,235   |   |      |   | 41,633     |  
|Recognition of deferred revenue                                                   |  |      |          |   |      |   | (51,131    | )
|Lease settlement expense                                                          |  |      |          |   |      |   | 400,000    |  
|Stock based payment for services                                                  |  |      | 126,638  |   |      |   |            |  
|Changes in operating assets and liabilities                                       |  |      |          |   |      |   |            |  
|Accounts receivable                                                               |  |      | (125,044 | ) |      |   | 473,868    |  
|Inventory                                                                         |  |      | 233,032  |   |      |   | (30,227    | )
|Prepaid expenses and other assets                                                 |  |      | 61,162   |   |      |   | (141,718   | )
|Accounts payable and accrued expenses                                             |  |      | 2,611    |   |      |   | (144,260   | )
|Advance payments and billings in excess of costs                                  |  |      | (163,566 | ) |      |   | (798,226   | )
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Net cash flows from operating activities  continuing operations                  |  |      | (716,106 | ) |      |   | (946,323   | )
|Net cash flows from operating activities  discontinued operations                |  |      | (111,452 | ) |      |   | (1,150,595 | )
|                                                                                  |  |      |          |   |      |   |            |  
|Net cash flows from operating activities                                          |  |      | (827,558 | ) |      |   | (2,096,918 | )
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Cash flows from investing activities:                                             |  |      |          |   |      |   |            |  
|Investments in multiple companies                                                 |  |      | (25,000  | ) |      |   | (169,955   | )
|Purchase of property and equipment                                                |  |      |         |   |      |   |           |  
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Net cash flows from investing activities  continuing operations                  |  |      | (25,000  | ) |      |   | (169,955   | )
|Net cash flows from investing activities  discontinued operations                |  |      |         |   |      |   | (105,356   | )
|                                                                                  |  |      |          |   |      |   |            |  
|Net cash flows from investing activities                                          |  |      | (25,000  | ) |      |   | (275,311   | )
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Cash flows from financing activities:                                             |  |      |          |   |      |   |            |  
|Repayment of Shareholder loans                                                    |  |      | (14,883  | ) |      |   | 550,356    |  
|Increases in long term debt                                                       |  |      | 535,000  |   |      |   | 327,549    |  
|Repayment of long term debt                                                       |  |      | (30,915  | ) |      |   | (27,535    | )
|Proceeds from sale of stock                                                       |  |      | 390,000  |   |      |   |           |  
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Net cash flows from financing activities  continuing operations                  |  |      | 879,202  |   |      |   | 850,370    |  
|Net cash flows from financing activities  discontinued operations                |  |      |         |   |      |   | 2,000,000  |  
|                                                                                  |  |      |          |   |      |   |            |  
|Net cash flows from financing activities                                          |  |      | 879,202  |   |      |   | 2,850,370  |  
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Increase (decrease) in cash and cash equivalents                                  |  |      | 26,644   |   |      |   | 478,141    |  
|Cash and cash equivalents, beginning                                              |  |      | 12,605   |   |      |   | 69,295     |  
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Cash and cash equivalents, ending                                                 |  | $    | 39,249   |   |      | $ | 547,436    |  
|                                                                                  |  |      |          |   |      |   |            |  
|                                                                                  |  |     
|Cash paid for interest                                                            |  | $    | 78,383   |   |      | $ | 35,866     |  
|                                                                                  |  |     
|Cash paid for taxes                                                               |  | $    |         |   |      | $ |           |  

Supplemental schedule of non-cash
financing and investing activities:



| |  |  | October 16,2009, the Company issued 249,999 shares of common stock to acquire Cybercare
| | - |  | ---------------------------------------------------------------------------------------



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| |  |  | November 24, 2009, the Company issued 2,100,000 shares of common stock in satisfaction of debt to unrelated parties
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | December 16, 2009, the Company issued 2,500,000 shares of common stock to securitized debt
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | December 22, 2009, the Company issued warrants to acquire 2,500,000 shares of common stock in conjunction with the acquisition of new debt
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | December 22, 2009, the Company incurred debt in the amount of $1,672,451 to acquire equipment and settle a related party lease
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | October 29, 2010, the Company issued 45,000,000 shares of common stock for interest accrued on related party debt
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | November 5, 2010, the Company issued warrants to acquire 1,600,000 shares of common stock in conjunction with the acquisition of new debt
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | November 22, 2010, the Company issued warrants to acquire 1,600,000 shares of common stock in conjunction with the acquisition of new debt
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



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BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

STATEMENT OFCHANGES IN STOCKHOLDERS EQUUITY

FOR THE THREE MONTHS ENDED DECEMBER 31, 2010

(Unaudited)



|                                                      |  |                 |             |  |        |   |         |                           |  |   |                      |  |  |       |             |   |  |   |             |  
|----------------------------------------------------- |  | --------------- | ----------- |  | ------ | - | ------- | ------------------------- |  | - | -------------------- |  |  | ----- | ----------- | - |  | - | ----------- | -
|                                                      |  | Common Stock    |             |  |        |   |         |                           |  |   |                      | 
|                                                      |  | Number ofShares |             |  | Amount |   |         | AdditionalPaid in Capital |  |   | Accumulated(deficit) |  |  | Total |            
|Balances, October 1, 2010                             |  |                 | 81,902,405  |  |        | $ | 81,902  |                           |  | $ | 8,002,412            |  |  | $     | (20,980,516 | ) |  | $ | (12,896,202 | )
|                                                      |  |                 |             |  |       
|Issuance of shares for services                       |  |                 | 2,328,156   |  |        |   | 2,328   |                           |  |   | 124,310              |  |  |       |             |   |  |   | 126,638     |  
|                                                      |  |                 |             |  |       
|Issuance of shares from sales                         |  |                 | 12,038,566  |  |        |   | 12,039  |                           |  |   | 377,961              |  |  |       |             |   |  |   | 390,000     |  
|                                                      |  |                 |             |  |       
|Issuance of shares associated with related party debt |  |                 | 45,000,000  |  |        |   | 45,000  |                           |  |   | 500,000              |  |  |       |             |   |  |   | 545,000     |  
|                                                      |  |                 |             |  |       
|Issuance of warrants associated with new debt         |  |                 |             |  |        |   |         |                           |  |   | 93,730               |  |  |       |             |   |  |   | 93,730      |  
|                                                      |  |                 |             |  |       
|Net loss for the three months ended December 31, 2010 |  |                 |             |  |        |   |         |                           |  |   |                      |  |  |       | (906,174    | ) |  |   | (906,174    | )
|                                                      |  |                 |             |  |       
|                                                      |  |                 |             |  |        |   |         |                           |  |   |                      |  |  |       |             |   |  |   |             |  
|Balances, December 31, 2010                           |  |                 | 141,269,127 |  |        | $ | 141,269 |                           |  | $ | 9,098,413            |  |  | $     | (21,886,690 | ) |  | $ | (12,647,008 | )
|                                                      |  |                 |             |  |        |   |         |                           |  |   |                      |  |  |       |             |   |  |   |             |  

See accompanying notes to consolidated financial statements.



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BULOVA TECHNOLOGIES GROUP,INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009

(Unaudited)

1. Description of business:

Bulova Technologies Group, Inc. (BLVT or the Company) was originally incorporated in Wyoming in 1979 as Tyrex Oil
Company. During 2007, the Company divested itself of all assets and previous operations. During 2008, the Company filed for domestication to the State of Florida, and changed its name to Bulova Technologies Group, Inc. and changed its fiscal
year from June 30 to September 30. On January 1, 2009 the Company acquired the stock of a private company that was under common control and began operations in Florida. The Company operates as a government contractor in the United
States. Headquarter facilities are in Clearwater and Brandon, Florida and its operating facilities are located in Clearwater and, Mayo, Florida.

2. Principles of consolidation and basis of presentation:

The accompanying consolidated
balance sheet as of September 30, 2010, has been derived from audited financial statements.

The unaudited interim consolidated financial
statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial statements and the notes thereto, included in the Companys latest Form 10-K.

On January 1, 2009, the Company acquired the stock of 3Si Holdings, Inc. (3Si) a privately held Florida corporation controlled by the majority stockholder of the Company in exchange for
40,000,000 shares of its common stock. The assets and operations of 3Si have been accounted for in three operating subsidiaries, BT Manufacturing Company LLC, Bulova Technologies Ordnance Systems LLC, and Bulova Technologies (Europe) LLC (formerly
Bulova Technologies Combat Systems LLC).

BT Manufacturing Company LLC  located in Melbourne, Florida, in a 35,000 square
foot facility, assembled a wide range of printed circuit boards, including single sided through 14 layers, through-hole, surface mount and mixed. It manufactured cable assemblies and complete systems and offered value-add services such as
direct-ship to end customers, depot repair and design assistance. In June 2010, the Company determined to dispose of BT Manufacturing Company LLC, and as such has accounted for this business segment as a discontinued operation.

Bulova Technologies Ordnance Systems LLC.  located on 261 acres in Mayo, Florida is a load, assembly, and pack facility specializing
in fuzes, safe and arming devices and explosive simulators. Bulova Technologies Ordnance Systems LLC is registered with the United States Department of State Directorate of Defense Trade Controls (DDTC). It produces a variety of pyrotechnic devices,
ammunition and other energetic materials for the U. S. Government and other allied governments throughout the world.

Bulova
Technologies (Europe) LLC located in the Companys corporate headquarters in Clearwater, Florida, this subsidiary was originally formed to administer an acquisition contract that Bulova Technologies Ordnance Systems LLC was
awarded from the U.S. Department of Defense in January 2009. The Company has since changed the name to Bulova Technologies (Europe) LLC and is developing a Mortar Exchange program to facilitate the needs of NATO member countries.

Bulovatech Labs, Inc., located in Clearwater, Florida was formed to incubate, develop and license commercial applications of technologies
pertinent to the defense, alternative energy and healthcare industries. Subsequent to its formation Bulovatech Labs, Inc. has made various loans and investments in both private and public companies. On June 25, 2010, the Company sold all of its
interest in Bulovatech Labs in exchange for 200,000,000 shares of Growth Technologies International, Inc. (GRWT)

In the opinion of
management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of December 31, 2010 and the results of
operations and cash flows for the three months ended December 31, 2010 and 2009.



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The results of operations for interim periods are not necessarily indicative of the results to be expected
for the full year.

Subsequent Events

The Company has evaluated subsequent events through February 22, 2011 to assess the need for potential recognition or disclosure in this report. Based upon this evaluation, management determined that
all subsequent events that require recognition in the financial statements have been included.

Business Segments

Commencing with the Companys acquisition of 3Si Holdings, Inc. in January of 2009, the Company operated in two business segments, government
contracting and contract manufacturing. With the Companys decision to dispose of BT Manufacturing Company LLC, the Company is no longer operating more than one business segment as all efforts of the company are now focused on government
contracting

Use of Estimates

The preparation of the Companys financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Financial Instruments

The carrying amounts of cash, receivables and current liabilities
approximated fair value due to the short-term maturity of the instruments. Debt obligations were carried at cost, which approximated fair value due to the prevailing market rate for similar instruments.

Fair Value Measurement

All financial
and nonfinancial assets and liabilities were recognized or disclosed at fair value in the financial statements. This value was evaluated on a recurring basis (at least annually). Generally accepted accounting principles in the United States define
fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on a
measurement date. The accounting principles also established a fair value hierarchy which required an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs were
used to measure fair value.

Level 1: Quotes market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that were corroborated by market data.

Level 3: Unobservable inputs that were not corroborated by market data.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company
considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains its cash deposits in major financial institutions in the United States. At times deposits within a bank may
exceed the amount of insurance provided on such deposits. Generally, these deposits are redeemed upon demand and, therefore, are considered by management to bear minimal risk.

Accounts receivable

Accounts receivable represent amounts due from customers in the
ordinary course of business from sales activities in each of the Companys business segments. The Company considers accounts more than 90 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an
account is deemed uncollectible, it is written off against the allowance. The Company generally does not require collateral for its accounts receivable. The Company considers all accounts receivable to be collectable and consequently has provided no
allowance for doubtful accounts.

The majority of the Companys revenues and accounts receivable pertain to contracts with the US
Government.

Inventory

Inventory is stated at the lower of cost (first-in, first-out) or market. Market was generally considered to be net realizable value. Inventory consisted
of materials used to manufacture the Companys products work in process and finished goods ready for sale.



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The breakdown of inventory at December 31, 2010 and September 30, 2010 is as follows:



|                                           |  |                  |           |   |                   |   |            |  
|------------------------------------------ |  | ---------------- | --------- | - | ----------------- | - | ---------- | -
|                                           |  | December 31,2010 |           |   | September 30,2010 |  
|Finished goods                             |  | $                | 13,397    |   |                   | $ | 14,733     |  
|Work in process                            |  |                  | 31,630    |   |                   |   | 106,119    |  
|Materials and supplies                     |  |                  | 1,844,382 |   |                   |   | 2,153,992  |  
|                                           |  |                  |           |   |                   |   |            |  
|                                           |  |                 
|Total inventory                            |  |                  | 1,889,409 |   |                   |   | 2,274,844  |  
|Less inventory classified as held for sale |  |                  | (882,410  | ) |                   |   | (1,034,813 | )
|                                           |  |                  |           |   |                   |   |            |  
|                                           |  |                 
|Total inventory of continuing operations   |  | $                | 1,006,999 |   |                   | $ | 1,240,031  |  
|                                           |  |                  |           |   |                   |   |            |  

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by applying principally the straight-line method to the estimated useful lives of the related
assets. Useful lives range from 10 to 20 years for buildings and improvements and 5 to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated
useful life of the improvements. When property or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Companys balance sheet and the net gain or loss is included in the determination of operating
income. Property, plant and equipment acquired as part of a business acquisition are valued at fair value.

Property, plant and equipment are
comprised of the following at December 31, 2010 and September 30, 2010



|                                                               |  |                  |            |   |                   |   |            |  
|-------------------------------------------------------------- |  | ---------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                               |  | December 31,2010 |            |   | September 30,2010 |  
|Land                                                           |  | $                | 1,225,000  |   |                   | $ | 1,225,000  |  
|Buildings and improvements                                     |  |                  | 1,170,194  |   |                   |   | 1,170,194  |  
|Machinery and equipment                                        |  |                  | 3,214,054  |   |                   |   | 3,214,054  |  
|Funiture and fixtures                                          |  |                  | 98,080     |   |                   |   | 98,081     |  
|Leasehold improvements                                         |  |                  | 234,489    |   |                   |   | 234,489    |  
|                                                               |  |                  |            |   |                   |   |            |  
|                                                               |  |                 
|                                                               |  |                  | 5,941,817  |   |                   |   | 5,941,818  |  
|Less accumulated depreciation                                  |  |                  | (1,078,318 | ) |                   |   | (1,037,123 | )
|                                                               |  |                  |            |   |                   |   |            |  
|                                                               |  |                 
|Net Property, plant and equipment                              |  |                  | 4,863,499  |   |                   |   | 4,904,695  |  
|Less property, plant and equipment classified as held for sale |  |                  | (2,402,991 | ) |                   |   | (2,402,991 | )
|                                                               |  |                  |            |   |                   |   |            |  
|                                                               |  |                 
|Net property, plant and equipment of continuing operations     |  | $                | 2,460,508  |   |                   | $ | 2,501,704  |  
|                                                               |  |                  |            |   |                   |   |            |  

Impairment of Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets at least annually. Impairment losses were recorded on long-lived assets used in operations when indicators of impairment were present and
the undiscounted future cash flows estimated to be generated by those assets were less than the assets carrying amount. If such assets were impaired, the impairment to be recognized was measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. Assets to be disposed of were reported at the lower of the carrying value or fair value, less costs to sell.

Discontinued Operations

In accordance with ASC 205-20, Presentation of
Financial Statements-Discontinued Operations(ASC 205-20), we reported the results of BT Manufacturing Company LLC, our contract manufacturing segment as a discontinued operation. The application of ASC 205-20 is discussed in
Note 5 Discontinued Operations



10



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Revenue Recognition

Sales revenue is generally recognized upon the shipment of product to customers or the acceptance by customers of the product. Allowances for sales returns, rebates and discounts are recorded as a
component of net sales in the period the allowances were recognized. The majority of the Companys revenue is generated under various fixed and variable price contracts as follows:

Revenues on fixed-price type contracts are recognized using the Percentage-Of-Completion (POC) method of accounting as specified in government contract accounting standards and the particular contract.
Revenues earned on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recognized as units are delivered based on their contractual selling prices (the Units-of-Delivery
basis of determination). Sales and profits on each fixed-price production contract under which units are not produced in a continuous or sequential process are recorded based on the ratio of actual cumulative costs incurred to the total estimated
costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the Cost-to-Cost basis of determination). Under both types of basis for determining revenue
earned, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year. The estimated total profit margin is evaluated on a periodic basis by management
throughout the term of an individual contract to determine if the estimated total profit margin should be adjusted.

The Company has certain
contracts with the U.S. Government that are funded through Performance-Based-Payments. Performance-based-payments are a method of financing designed by the Government to facilitate the accomplishment of the terms of the contract, and are
not payments for accepted items. These financing payments are designed as a funding mechanism to facilitate production and may be made based on performance measured by objective, the accomplishment of defined events, or other quantifiable measures
of results. As units are delivered and invoiced, the U.S. Government withholds 90% of the invoiced amount as repayment of the contract financing advances.

Cost of Revenues

The costs of revenues include direct materials and labor costs, and
indirect labor associated with production and shipping costs.

Advertising Costs

The costs of advertising are expensed as incurred and are included in the Companys operating expenses. Advertising expenses for the three months
ended December 31, 2010 and 2009 were $0 and $10,155 respectively.

Shipping Costs

The Company includes shipping costs in cost of goods sold.

Income Taxes

Income tax benefits or provisions are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax
reporting. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities were recovered or settled. Deferred tax assets were also
recognized for operating losses that were available to offset future taxable income and tax credits that were available to offset future federal income taxes, less the effect of any allowances considered necessary. The Company follows the guidance
provided by FIN 48, Accounting for Uncertainty in Income Taxes, for reporting uncertain tax provisions.

Loss per Common Share

Basic net loss per share includes the impact of common stock equivalents. Diluted net loss per share utilizes the average market price per
share when applying the treasury stock method in determining common stock equivalents. As of September 30, 2010, there were 4,100,000 shares that were dilutive but had no effect on loss per share.

Basic net loss per share includes the impact of common stock equivalents. Diluted net loss per share utilizes the average market price per share when
applying the treasury stock method in determining common stock equivalents.

Effect of Recent Accounting Pronouncements

The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting
pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the
subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active
application of any accounting pronouncements issued subsequent to December 31, 2010 through the date these financial statements were issued.



11



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##### Table of Contents

3. Contract Claim Receivable

The acquisition of 3Si Holdings, Inc. included the membership interest in Bulova Technologies Ordnance Systems LLC which had certain obligations to perform on then existing
contracts with the US Government. Bulova Technologies Ordnance Systems, LLC had received advance funding under these contracts by the US Government through Performance-Based-Payments, a method of financing designed by the government to
provide working capital to small business contractors so they can purchase the materials needed to fulfill the contract. At the time of the acquisition, the US Government had provided advance financing on the assumed contracts in the amount of
$3,200,597.

In accordance with the provisions of Section 9-610 of the Uniform Commercial Code as enacted in the state of New York these
cash funds amounting to $3,200,597 were retained by Webster Business Capital Corporation, the secured lender that had acquired the assets pursuant to the Section 9 foreclosure proceedings. The Company has performed under the contract and has
filed a claim against the secured lender, Webster Bank, for the recovery of these funds.

The Company is attempting to resolve this matter,
and expects to be successful in recovering these amounts. However, as in all matters in litigation, the outcome is not certain and amounts recovered, if any, could be materially different than expected. These amounts, which are not carried as assets
on the balance sheet, will be recorded as revenue if and when such claims are settled.

4. Investments

Investments represent various loans and investments in both private and public companies through Bulovatech Labs. Loans are reported at cost and equity
investments are valued at fair value. Equity investments are primarily in technology development companies and are not held for resale.

On
June 25, 2010, the Company sold all of its interest in Bulovatech Labs in exchange for 200,000,000 shares of Growth Technologies International, Inc. (GRWT).

At December 31, 2010 the cost and fair values of the investments were as follows:

Investments



|                           |  |      |           |  |      |   |   |      |  |   |            |  |  |   |           | 
|-------------------------- |  | ---- | --------- |  | ---- | - | - | ---- |  | - | ---------- |  |  | - | --------- | 
|                           |  | Cost |           |  | Gain |   |   | Loss |  |   | Fair Value | 
|Level 1 Equity Investments |  | $    |          |  |      | $ |  |      |  | $ |           |  |  | $ |          | 
|Level 2 Equity Investments |  |      | 184,500   |  |      |   |  |      |  |   |           |  |  |   | 184,500   | 
|Level 2 Loans              |  |      | 1,607,355 |  |      |   |  |      |  |   |           |  |  |   | 1,607,355 | 
|                           |  |      |           |  |      |   |   |      |  |   |            |  |  |   |           | 
|                           |  |      |           | 
|                           |  | $    | 1,791,855 |  |      | $ |  |      |  | $ |           |  |  | $ | 1,791,855 | 
|                           |  |      |           |  |      |   |   |      |  |   |            |  |  |   |           | 

5. Discontinued Operations

In June of 2010, because of continuing losses in our contract manufacturing business segment, the Company announced managements decision to market BT Manufacturing Company LLC for sale. BT
Manufacturing Company LLC, a wholly owned subsidiary of the Company represented our contract manufacturing segment. As a result of the decision to sell this business segment, the Company has identified the assets and liabilities of BT Manufacturing
Company LLC as held for sale at December 31, 2010 and September 30, 2010 and has segregated its operating results and presented them separately as a discontinued operation for all periods presented.

In September 2010, the Company estimated a loss in the amount of $2,650,000 to be realized upon completion of the disposal of this business segment, as
well as an estimated operating loss of $900,000 to be incurred during the phase-out period. This amount is included in current liabilities associated with assets held for sale. For the quarter ended December 31, 2010, the Company incurred
actual operating losses associated with this discontinued segment of $431,784. As this amount did not exceed the operating loss provision, no additional loss on disposal of discontinued operations will be recognized at this time. The provision
included on the balance sheet will be reduced by the actual loss incurred to date. The amount included as a provision for loss on disposal of discontinued operations is $3,118,216 as of December 31, 2010.



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Summarized operating resultes for discontinued operations is as follows:



|                                                               |  |                                |          |   |      |   |            |  
|-------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | ---------- | -
|                                                               |  | Three Months EndedDecember 31, |         
|                                                               |  | 2010                           |          |   | 2009 |  
|                                                               |  |                               
|Revenue                                                        |  | $                              | 254,004  |   |      | $ | 321,874    |  
|Cost of Sales                                                  |  |                                | (152,403 | ) |      |   | (342,834   | )
|                                                               |  |                                |          |   |      |   |            |  
|Gross profit                                                   |  |                                | 101,601  |   |      |   | (20,960    | )
|Operating expenses                                             |  |                                | (533,385 | ) |      |   | (1,707,681 | )
|Other income                                                   |  |                                |         |   |      |   | 16,703     |  
|                                                               |  |                                |          |   |      |   |            |  
|Loss from operations                                           |  |                                | (431,784 | ) |      |   | (1,711,938 | )
|Prior provision for operating losses during phase-out period   |  |                                | 900,000  |   |      |   |           |  
|Income tax benefit                                             |  |                                |         |   |      |   |           |  
|                                                               |  |                                |          |   |      |   |            |  
|Loss to be recognized from discontinued operations, net of tax |  | $                              |         |   |      | $ | (1,711,938 | )
|                                                               |  |                                |          |   |      |   |            |  

The provision for loss on disposal of BT Manufacturing Company LLC has been estimated based on the premise that the sale of
this business segment will be completed within one year. The balance remaining as of December 31, 2010 is calculated as follows:



|                                                                |  |   |           |  
|--------------------------------------------------------------- |  | - | --------- | -
|Estimated loss on disposal                                      |  | $ | 2,650,000 |  
|Provision for operating losses during phase-out period          |  |   | 900,000   |  
|                                                                |  |   |           |  
|                                                                | 
|                                                                |  |   | 3,550,000 |  
|Loss from operations quarter ended December 31, 2010            |  |   | (431,784  | )
|                                                                |  |   |           |  
|                                                                | 
|Balance of accrued provision for loss - discontinued operations |  | $ | 3,118,216 |  
|                                                                |  |   |           |  

The losses from discontinued operations above do not include any income tax effect as the Company was not in a taxable
position due to its continued losses and a full valuation allowance

Summary of assets and liabilities of discontinued operations is as
follows:



|                                                               |  |              |           |  |               |   |           | 
|-------------------------------------------------------------- |  | ------------ | --------- |  | ------------- | - | --------- | 
|                                                               |  | December 31, |           |  | September 30, |  
|                                                               |  | 2010         |           |  | 2010          |  
|                                                               |  |             
|Accounts receivable                                            |  | $            |          |  |               | $ | 633,621   | 
|Inventory                                                      |  |              | 882,410   |  |               |   | 1,313,028 | 
|Other current assets                                           |  |              |          |  |               |   | 45,792    | 
|                                                               |  |              |           |  |               |   |           | 
|Total current assets held for sale                             |  |              | 882,410   |  |               |   | 1,992,441 | 
|Property plant and equipment - net                             |  |              | 2,402,991 |  |               |   | 1,265,144 | 
|Other assets                                                   |  |              | 209,788   |  |               |   |          | 
|                                                               |  |              |           |  |               |   |           | 
|Total assets held for sale                                     |  | $            | 3,495,189 |  |               | $ | 3,257,585 | 
|                                                               |  |              |           |  |               |   |           | 
|                                                               |  |             
|Accounts payable and accrued expenses                          |  | $            | 970,696   |  |               | $ | 437,386   | 
|Current portion of long-term debt                              |  |              | 798,000   |  |               |   |          | 
|Provision for loss on disposal of business segment             |  |              | 3,118,216 |  |               |   |          | 
|                                                               |  |              |           |  |               |   |           | 
|Total current liabilities associated with assets held for sale |  |              | 4,886,912 |  |               |   | 437,386   | 
|Long term debt, net of current portion                         |  |              | 1,034,000 |  |               |   |          | 
|                                                               |  |              |           |  |               |   |           | 
|Total liabilities associated with assets held for sale         |  | $            | 5,920,912 |  |               | $ | 437,386   | 
|                                                               |  |              |           |  |               |   |           | 



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6. Advance Payments and Billings in Excess of Cost

Advance payments and billings in excess of costs represents liabilities of the Company associated with contracts in process as of the balance sheet date,
and consist of the following:

Advance Payments - The Company has certain contracts with the U.S. Government that are funded through
Performance-Based-Payments. Performance-based-payments are a method of financing designed by the Government to facilitate the accomplishment of the terms of the contract, and are not payments for accepted items. These financing payments
are designed as a funding mechanism to facilitate production and may be made based on performance measured by objective, the accomplishment of defined events, or other quantifiable measures of results. As units are delivered and invoiced, the U.S.
Government withholds 90% of the invoiced amount as repayment of the contract financing advances. On January 1, 2009, with the acquisition of 3Si Holdings, Inc. and membership interest of Bulova Technologies Ordnance Systems LLC, the Company
assumed certain obligations to perform contracts with the US Government with an outstanding balance at the date of acquisition of $3,200,597. The balances outstanding as of December 31, 2010 and September 30, 2010 are $1,287,721 and
$1,451,287 respectively.

Billings in Excess of Cost plus Earnings on Uncompleted Contracts  The Company accounts for fixed-price
production contracts under which units are not produced in a continuous or sequential process based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated
contract price. The Company did not have any billings on uncompleted contracts in excess of the costs incurred plus estimated earnings calculated on this percentage of completion method as of December 31, 2010 and September 30, 2010.

7. Long Term Debt

Long term
debt consisted of the following as of:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |           |  |               |   |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- |  | ------------- | - | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | December 31, |           |  | September 30, |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 2010         |           |  | 2010          |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             
|Promissory note payable to Webster Business Capital Corporation, dated December 16, 2008, in the original amount of $825,000 payable in full on March 31, 2009, with
interest at 4.5% annually. This note was not repaid and is still outstanding as of the issuance of these financial statements. This note is secured by a lien on real estate, timber rights and certain equipment with net carrying values of
approximately $2,000,000 at December 31 30, 2009. |  | $            | 825,000   |  |               | $ | 825,000   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             
|Mortgage payable to Bank of America, dated March 10, 2006, in the original amount of $840,000 payable in monthly fixed principal payments of $4,667 plus variable interest at
2.5% plus the banks index rate, secured by real estate with carrying values of approximately $1,500,000 at December 31, 2009. Final payment is due on March 10, 2021.                                                                                                                  |  |              | 574,000   |  |               |   | 588,000   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             
|Note payable to Harold L. and Helene M. McCray, dated October 19, 2005, in the original amount of $1,070.000, bearing interest at 8% per annum, payable in monthly
installments of $10,225.48 secured by land and buildings with carrying values of approximately $1,500,000 at December 31, 2009. Final payment is due on December 1, 2020.                                                                                                                         |  |              | 844,815   |  |               |   | 860,365   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             
|Note payable to Edward Viola, dated October 19, 2005, in the original amount of $80,000, bearing interest at 8% per annum, payable in monthly installments of $764.52.
Final payment is due on December 1, 2020.                                                                                                                                                                                                                                                     |  |              | 62,668    |  |               |   | 64,032    | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             
|Note payable to Sovereign Bank, dated December 22, 2009, in the original amount of $2,000,000, payable in monthly fixed principal payments of $42,000 plus variable interest at
LIBOR plus 5% with a minimum rate of 5.5%, secured by all personal property of BT Manufacturing Company, LLC with carrying values of approximately $4,000,000 at December 31, 2009. Final balloon payment is due December 22, 2011.                                                  |  |              | 1,832,000 |  |               |   | 1,832,000 | 



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##### Table of Contents

|                                                                                                                                                                                                                                                                                                                                                     |  |   |            |   |  |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | -
|Note payable to Edward Tschiggfrie, dated October 8, 2010, in the original amount of $125,000, non interest bearing, payable in full at December 7, 2010                                                                                                                                                                                             |  |   | 125,000    |   |  |   |           |  
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|Note payable to GovFunding, LLC, dated November 5, 2010, in the amount of $250,000 net of debt discount of $58,213, bearing interest at 18%., secured by a lock box agreement
tied to the proceeds of a single government contract with a carrying value of approximately $2,800,000 at December 31, 2010. Final payment is due September 30, 2011.  |  |   | 197,609    |   |  |   |           |  
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|Note payable to GovFunding, LLC, dated November 22, 2010, in the amount of $250,000 net of debt discount of $35,517, bearing interest at 24%., secured by a lock box agreement
tied to the proceeds of a single government contract with a carrying value of approximately $2,800,000 at December 31, 2010. Final payment is due September 30, 2011. |  |   | 218,034    |   |  |   |           |  
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|Note payable to GovFunding, LLC, dated December 22, 2009, in the amount of $2,000,000 net of debt discount of $256,438, bearing interest at 24%., secured by a lock box
agreement tied to the proceeds of a single government contract with a carrying value of approximately $2,800,000 at December 31, 2010. Final payment is due July 31, 2010.   |  |   | 2,000,000  |   |  |   | 2,000,000  |  
|                                                                                                                                                                                                                                                                                                                                                     |  |   |            |   |  |   |            |  
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|                                                                                                                                                                                                                                                                                                                                                     |  |   | 6,679,126  |   |  |   | 6,169,398  |  
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|Less current portion pertaining to continuing operations                                                                                                                                                                                                                                                                                             |  |   | (2,449,234 | ) |  |   | (2,941,376 | )
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|Less current portion associated with assets held for sale                                                                                                                                                                                                                                                                                            |  |   | (798,000   | ) |  |   | (672,000   | )
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|Less long term portion associated with assets held for sale                                                                                                                                                                                                                                                                                          |  |   | (1,034,000 | ) |  |   | (1,160,000 | )
|                                                                                                                                                                                                                                                                                                                                                     |  |   |            |   |  |   |            |  
|                                                                                                                                                                                                                                                                                                                                                     |  |  
|                                                                                                                                                                                                                                                                                                                                                     |  | $ | 2,397,892  |   |  | $ | 1,396,022  |  
|                                                                                                                                                                                                                                                                                                                                                     |  |   |            |   |  |   |            |  

Principal maturities of long term debt for the next five years and thereafter as of December 31, 2010 are as follows:



|                          |  |   |           | 
|------------------------- |  | - | --------- | 
|Period ended December 31, |  |   |          
|                          | 
|2011                      |  | $ | 4,281,234 | 
|                          | 
|2012                      |  |   | 1,156,703 | 
|                          | 
|2013                      |  |   | 128,240   | 
|                          | 
|2014                      |  |   | 134,235   | 
|                          | 
|2015                      |  |   | 140,729   | 
|                          | 
|Thereafter                |  |   | 837,985   | 
|                          |  |   |           | 
|                          | 
|                          |  | $ | 6,679,126 | 
|                          |  |   |           | 

8. Income Taxes

Deferred income taxes are the result of timing differences between book and tax basis of certain assets and liabilities, timing of income and expense recognition of certain items and net operating loss
carry forwards. The Company evaluates temporary differences resulting from the different treatment of items for tax and accounting purposes and records deferred tax assets and liabilities on the balance sheet using the tax rates expected when the
temporary differences reverse.

On January 1 2009 the Company acquired for stock of 3SI Holdings in exchange for shares of the
Companys common stock. For income tax purposes this transaction has been treated as tax free reorganization under the provisions of Section 368A of the Internal Revenue Code. 3SI Holdings had various net operating loss carryovers. Because
of the change in ownership of 3SI Holdings, the net operating loss carry-overs will transfer to the Company. The transferred net operating losses are subject to an annual limitation under the provisions of Section 382 of the Internal Revenue
Code to offset future taxable income of the Company. These net operating loss carry-overs are included in the deferred tax asset of the Company.



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The Company has previously recognized an income tax benefit for its operating losses generated since
inception through September 30 2009 based on uncertainties concerning its ability to generate taxable income in future periods. Based on current events management has re-assessed the valuation allowance and the recognition of the deferred tax
assets attributable to the net operating losses and other assets. Based on the Companys history of losses and other negative evidence, the Company has determined that the valuation allowance should be increased accordingly to offset the entire
deferred tax asset.

As of September 30, 2010 the Company had federal net operating loss carry forwards of approximately $9,832,000 and
Florida net operating loss carry forwards of approximately $9,631,000. The federal net operating loss carry forwards will expire in 2020 through 2030 and state net operating loss carry forwards that will expire in 2028 through 2030.

The income tax rate computed using the federal statutory rates is reconciled to the reported effective income tax rate as follows:



|                                        |  |            |        |    |           |   |        |   
|--------------------------------------- |  | ---------- | ------ | -- | --------- | - | ------ | --
|Continuing Operations                   |  | 12/31/2010 |        |    | 9/30/2010 |  
|                                        |  |           
|Expected provision at US statutory rate |  |            | 34.00  | %  |           |   | 34.00  | % 
|                                        |  |           
|State income tax net of federal benefit |  |            | 3.63   | %  |           |   | 3.63   | % 
|                                        |  |           
|Permanent and Other Differences         |  |            |       |    |           |   |       |   
|                                        |  |           
|Valuation Allowance                     |  |            | (37.63 | )% |           |   | (37.63 | %)
|                                        |  |            |        |    |           |   |        |   
|                                        |  |           
|Effective Income Tax Rate               |  | $          |       |    |           | $ |       |   
|                                        |  |            |        |    |           |   |        |   

The Company files income tax returns on a consolidated basis in the United States federal jurisdiction and the State of
Florida. As of September 30, 2010, the tax returns for the Company for the years ending 2008 and 2009 remain open to examination by the Internal Revenue Service and Florida Department of Revenue. In addition the tax returns related to 3SI
remain open to federal and state examination for the periods ending June 2005 through 2008. The Company and its subsidiaries are not currently under examination for any period.

The Company has adopted a policy to recognize interest and penalties accrued related to unrecognized tax benefits in its income tax provision. The Company has evaluated its unrecognized tax benefits and
determined that due to the NOL carry forwards, that no accrual of interest and penalties is required in the current period.

9. Commitments
and Contingencies

From time to time the Company may be a party to litigation matters involving claims against the Company. Management
believes that there are no current matters that would have a material effect on the Companys financial position or results of operations.

U.S. Government agencies, including the Defense Contract Audit Agency and various agency Inspectors General routinely audit and investigate costs and
performance on contracts, as well as accounting and general business practices of contractors Based on the results of such audits, the U.S. Government may adjust contract related costs and fees, including allocated indirect costs. None of the
Companys contracts are currently the subject of any government audits.

The Company operates corporate and administrative offices in two
leased facilities, one in Clearwater, Florida, and the other in Brandon, Florida. During the quarter ended December 31, 2010, the Clearwater location was leased for a monthly base rent of $6,717, increased by 3% each year through the expiration
date of April 30, 2012 The Brandon location is leased for a monthly rental of $17,275 with an expiration date of December 21, 2027.

In November 2009 the Company relocated its contract manufacturing business segment to a new facility also located in Melbourne, Florida at a monthly
rental of $18,842. The new lease expires November 2014. With the disposal of the manufacturing business segment, the Company anticipates this lease obligation to cease.

The Company leases certain equipment used in its contract manufacturing segment from Fleetwood Leasing, LLC, under various leases. The lease terms are for three years with an expiration date of April
2012. The monthly lease payments through December 2009 are $6,000. The leases were modified effective January 1, 2010 whereby the monthly lease payments were reduced to $3,371 for the remainder of the lease term. With the disposal of the
manufacturing business segment the Company anticipates this lease obligation to cease.



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Total rent expense for the three months ended December 31, 2010, was approximately $142,090.

The Companys commitments for minimum lease payments under these operating leases for the next five years and thereafter as of
December 31, 2010 are as follows:



|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Period ended December 31 |  |   |          
|                         | 
|2011                     |  | $ | 554,462   | 
|                         | 
|2012                     |  |   | 470,383   | 
|                         | 
|2013                     |  |   | 433,400   | 
|                         | 
|2014                     |  |   | 414,558   | 
|                         | 
|2015                     |  |   | 207,300   | 
|                         | 
|Thereafter               |  |   | 2,487,600 | 
|                         |  |   |           | 
|                         | 
|                         |  | $ | 4,567,703 | 
|                         |  |   |           | 

10. Related Party Transactions

The following related party transactions not disclosed elsewhere in this document are as follows:

Bulova Technologies Ordnance Systems LLC has a Marketing Firm Agreement with Ramal Management Co. (Ramal), a related company owned by Stephen
L Gurba, our Chief Executive Officer which expires on January 1, 2011. Pursuant to the terms of the agreement, Ramal receives a marketing fee for services of 4% of net sales generated through contracts of Bulova Technologies Ordnance Systems
LLC. Marketing fees paid to Ramal for the three months ended December 31, 2010 was $43,515.

The Company has received loans from the two
(2) major shareholders totaling $4,068,954 and $4,409,469 as of December 31, 2010 and September 30, 2010 respectively. These loans are supported by notes bearing interest at 5% annually with restricted conversion features and no
repayment schedule. The notes were originally issued for $1,500,000 for each shareholder then subsequently raised to a maximum of $5,000,000. All shareholder debt is accruing interest. Due to restrictions on the maximum amount of stock holdings
allowed, the conversion feature was not operable as of December 31, 2010.

On October 29, 2010 the Company issued each of the two
major shareholders 22,500,000 shares of stock as payment on interest accrued to date and for an estimate of the interest that will accrue on their respective loans through 2011.

11. Stockholders Equity

On October 16, 2009, the Company issued 249,999 shares
of common stock as satisfaction of the reorganization plan of Cybercare, a company acquired in Bulovatech Labs

On November 24, 2009, the
Company issued 2,100,000 shares of common stock as satisfaction of debt to unrelated parties in the amount of $425,000.

On December 16,
2009 the Company authorized the issuance of 2,500,000 shares to securitize its new debt with Sovereign Bank.

On December 22, 2009 the
Company issued debt in the amount of $2,000,000 with detachable warrants. These warrants provide for the purchase of 2,500,000 shares of the Companys stock at $.10 per share for a period of 5 years. The warrants have a fair value of $256,438
which is accounted for as a discount to the debt and amortized over the life of the debt which is 7 months.

On January 20, 2010 the
Company issued 2,000,000 shares to the Companys Chief Executive Officer as stock based compensation for the purpose of securitizing debt.

On February 8, 2010 the Company issued 850,000 shares to various individuals as stock based compensation



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During August 2010, the Company issued 1,849,496 shares to various individuals as stock based compensation

On October 7, 2010, the Company sold 6,659,181 shares to various individuals

On October 8, 2010 the Company issued 932,284 shares for services in the amount of $42,885.

On October 29, 2010 the Company issued 1,395,872 shares for services in the amount of $83,752.

On October 29, 2010 the Company sold 5,379,385 shares to various individuals

On October 29, 2010 the Company issued 22,500,000 shares to its Chief Executive Officer in payment of past due interest accrued on a convertible promissory note over the balance of 2010 and
prospectively through 2011.

On October 29, 2010 the Company issued 22,500,000 shares to its Chairman of the Board in payment of past due
interest accrued on a convertible promissory note over the balance of 2010 and prospectively through 2011.

On November 5, 2010 the
Company issued debt in the amount of $250,000 with detachable warrants. These warrants provide for the purchase of 1,600,000 shares of the Companys stock at $.05 per share for a period of 5 years. The warrants have a fair value of $58,213
which is accounted for as a discount to the debt and amortized over the life of the debt which is 10 months.

On November 22, 2010 the
Company issued debt in the amount of $250,000 with detachable warrants. These warrants provide for the purchase of 1,600,000 shares of the Companys stock at $.05 per share for a period of 5 years. The warrants have a fair value of $35,517
which is accounted for as a discount to the debt and amortized over the life of the debt which is 10 months.

12. Subsequent Events

Subsequent to December 31, 2010, the Company issued additional shares of its common stock as follows:

January 27, 2011  4,950,000 shares issued to various individuals

February 2, 2011  480,000 shares issued to various individuals

As of December 31, 2010, the Company has ceased all operations of BT Manufacturing Company LLC at its Melbourne, Florida location. The final outcome of this discontinued operation is still being
negotiated as of the date of this filing. The assets at this location have been seized by the landlord and are currently being used by the prospective buyer in carrying on the business at this location Pending finalizations of the sale, the
prospective buyer and the landlord have agreed not to sell, dispose, pledge, assign, transfer or otherwise convey control or title over any of BTs assets wherever located.



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

FORWARD LOOKING STATEMENTS

Certain portions of this report, and particularly the Managements Discussion and Analysis of Financial Condition and Results of Operations, and the Notes to Consolidated Financial Statements,
contain forward-looking statements which represent the Companys expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements.

1 . Overview:

Since January 1, 2009, Bulova Technologies Group, Inc. has operated in two business segments. The Government Contracting segment is focused on the production and procurement of military articles for
the US. Government and other Allied Governments throughout the world, and is accounted for through two of the Companys wholly owned subsidiaries, Bulova Technologies Ordnance Systems LLC., and Bulova Technologies (Europe) LLC, The Contract
Manufacturing segment produces cable assemblies, circuit boards as well as complete systems, and is accounted for through BT Manufacturing Company, LLC, another of its wholly owned subsidiaries. In June of 2010, because of continuing losses in our
contract manufacturing business segment, the Company announced managements decision to market BT Manufacturing Company LLC for sale. As a result of the decision to sell this business segment, the Company has identified the assets and
liabilities of BT Manufacturing Company LLC as held for sale at December 31, 2010 and September 30, 2010 and has segregated its operating results and presented them separately as a discontinued operation for all periods.

Application of critical accounting policies:

Managements Discussion and Analysis of our Financial Condition and Results of Operations is based on the Companys unaudited Consolidated Financial Statements, which have been prepared in
accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and
corresponding disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we continue to evaluate our estimates which in large part are based on
historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily
available from other sources. Actual results may differ from these estimates under different assumptions or conditions.

2 . Results of
operations:

For the three months ended December 31, 2010 compared to the three months ended December 31, 2009.

Discontinued Operations

The results of operations of BT Manufacturing Company LLC, reported as discontinued operations do not reflect any loss for the three months ended December 31, 2010, as the estimated loss on disposal
of this segment was accrued as of September 30, 2010. The actual loss of this discontinued segment was $431,784 for the three months ended December 31, 2010. No loss is reported for this period as the amount of actual los did not exceed
the amount previously provided for. For the three months ended December 31, 2009, the company reported a loss for this discontinued segment of $1,711,938.

Continuing Operatons

The Companys revenue for continuing operations for the
three months ended December 31, 2010 of $1,390,678 is a decrease of $1,360,496 when compared to the Companys revenue for the three months ended December 31, 2009 of $2,751,174.

The Companys cost of sales for continuing operations for the three months ended December 31, 2010 of $739,925 is a decrease of $1,429,841 when
compared to the Companys cost of sales for the three months ended December 31, 2009 of $2,169,766.

The Companys gross profit
for continuing operations for the three months ended December 31, 2010 of $650,753 is an increase of $69,345 when compared to the Companys gross profit for the three months ended December 31, 2009 of $581,408.

The Companys operating expenses for continuing operations consisting of selling, general and administrative, depreciation, amortization, and
interest for the three months ended December 31, 2010 of $1,558,117 is an increase of $281,054 when compared to the same expenses of $1,227,063 for the three months ended June 30, 2009.



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The Companys net loss for continuing operations for the three months ended December 31, 2010 of
$906,174 is an increase of $209,912 when compared to the Companys net loss for the three months ended December 31, 2009 of $696,262.

3. Liquidity and capital resources:

As
of December 31, 2010, the Companys sources of liquidity were new debt and loans from shareholders.

As of December 31, 2010,
we had $39,249 in cash and cash equivalents.

Cash flows used in operating activities was $827,558 for the three months ended
December 31, 2010. Continuing operations used cash flows of $716,106, while discontinued operations used $111,452.

Cash flows used in
investing activities was $25,000 for the three months ended December 31,2010, and was all used by continuing operations.

Cash flows from
financing activities were $879,202 for the three months ended December 31, 2010, and was all provided by continuing operations. Cash flows provided by continuing operations consisted primarily of new debt in the amount of $535,000 and proceeds
from sale of stock of $390,000.

The Companys ability to cover its operating and capital expenses, and make required debt service
payments will depend primarily on its ability to generate substantial operating cash flows.

The Companys business may not generate cash
flows at sufficient levels, and it is possible that currently anticipated contract awards may not be achieved. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to reduce costs and expenses,
sell assets, reduce capital expenditures, refinance all or a portion of our existing debt as well as our operating needs, or obtain additional financing and we may not be able to do so on a timely basis, on satisfactory terms, or at all. Our ability
to make scheduled principal payments or to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the U.S. defense
industry and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

While the Company
believes that anticipated revenues resulting from additional contract awards accompanied by its efforts will be sufficient to bring profitability and a positive cash flow to the Company, it is uncertain that these results can be achieved.
Accordingly, the Company will, in all likelihood have to raise additional capital to operate. There can be no assurance that such capital will be available when needed, or that it will be available on satisfactory terms.

There are no off-balance sheet arrangements.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act), the Company carried out an evaluation of the effectiveness of the design and operation of
the Companys disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Companys management, including the Companys
principal executive officer and the Companys principal financial officer.

Based upon that evaluation, the principal executive officer
and the principal financial officer concluded that the Companys disclosure controls and procedures were not effective at December31, 2010 to ensure that information required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, but are being changed to allow timely filing in the future.

The Company has made numerous changes in its internal control over financial reporting during the Companys most recent fiscal quarter that has
materially affected, or is reasonably likely to affect, the Companys internal control over financial reporting. The Company continues to enhance its internal controls over financial reporting, primarily by evaluating and enhancing process and
control documentation. Management discusses with and discloses these matters to the Board of Directors and the Companys auditors.



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PART II  OTHER INFORMATION

Item 6. Exhibits



|(b) | Exhibits:
|--- | ---------



|     |  |                                                                                                                                                     
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Rule 13a-14(a) Certification of Principal Executive Officer                                                                                         
|     | 
|31.2 |  | Rule 13a-14(a) Certification of Principal Financial Officer                                                                                         
|     | 
|32.1 |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|     | 
|32.2 |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002



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SIGNATURE

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



BULOVA TECHNOLOGIES GROUP, INC.By

/s/ Stephen L GurbaStephen L GurbaPrincipal Executive OfficerBy

/s/ John D. StantonJohn D. StantonPrincipal Financial Officer


DATED:
February 22, 2011



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