Bulova Technologies Group, Inc. - FORM 10-Q

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EX-31.2 - SECTION 302 CFO CERTIFICATION - Bulova Technologies Group, Inc.	dex312.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - Bulova Technologies Group, Inc.	dex321.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - Bulova Technologies Group, Inc.	dex311.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - Bulova Technologies Group, Inc.	dex322.htm

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 June 30, 2010

¨	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 ¨ No x

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):

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 December 24, 2010, the Company had 141,269,127 shares of Common Stock outstanding.

BULOVA TECHNOLOGIES GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 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			22
Item 4. Controls and Procedures			24

	PART II – OTHER INFORMATION

Item 6. Exhibits			24

	Signatures		25

PART I

Item 1. Consolidated Financial Statements

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30,
	2010			September 30,
	(unaudited)			2009
ASSETS

Cash and equivalents	$	293,407		$	69,295
Accounts receivable		43,417			513,700
Contract claim receivable		—			—
Inventory		1,409,229			1,304,789
Other current assets		—			10,460
Current assets held for sale		1,601,552			1,992,441


Total current assets		3,347,605			3,890,685

Property, plant and equipment		2,542,899			2,661,685
Investments		1,766,855			2,058,385
Other assets		576,953			549,839
Non-current assets held for sale		2,633,050			1,265,144


	$	10,867,362		$	10,425,738


LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable	$	74,469		$	107,873
Accrued expenses		6,220,290			1,958,767
Advance payments and billings in excess of cost		1,127,056			4,327,946
Current portion of long term debt		3,029,577			1,361,749
Current liabilities associated with assets held for sale		5,633,845			437,386


Total current liabilities		16,085,237			8,193,721

Deferred revenue		—			540,531
Shareholder loans and accrued interest		4,330,461			4,294,589
Long term debt, net of current portion		1,294,797			1,512,444
Non-current liabilities associated with assets held for sale		1,328,000			—


		23,038,495			14,541,285


Commitments and contingencies		—			—

Shareholders’ deficit:
Common stock, $.001 par; authorized 150,000,000 shares; 80,055,909 and 72,355,910 issued and 80,052,909 and 72,352,910 outstanding at June 30, 2010 and September 30, 2009		80,055			72,355
Additional paid in capital in excess of par		7,891,897			6,407,159
Retained deficit		(20,104,901	)		(10,556,877	)
Treasury stock at cost – 3,000 shares		(38,184	)		(38,184	)

		(12,171,133	)		(4,115,547	)

	$	10,867,362		$	10,425,738

See accompanying notes to consolidated financial statements.

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2010 AND 2009

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30
	2010			2009			2010			2009

Revenues	$	3,033,197		$	2,447,626		$	10,547,298		$	14,701,556
Cost of revenues		2,050,307			2,023,391			7,899,898			12,481,845


Gross profit		982,890			424,235			2,647,400			2,219,711

Selling and administrative expense		1,037,794			1,067,471			3,383,834			2,237,041
Stock based compensation		—			—			433,500			—
Depreciation and amortization expense		275,822			30,296			518,661			59,161
Interest expense		170,524			24,961			529,005			44,121


Total expenses		1,484,140			1,122,728			4,865,000			2,340,323


Loss from operations		(501,250	)		(698,493	)		(2,217,600	)		(120,612	)

Other income (expense)
Other expense		(360	)		(749	)		(966	)		(984	)


Loss from continuing operations before Income taxes		(501,610	)		(699,242	)		(2,218,566	)		(121,596	)

Income tax expense		—			—			—			—


Loss from continuing operations		(501,610	)		(699,242	)		(2,218,566	)		(121,596	)
Loss from discontinued operations, net of tax		(4,799,237	)		(1,153,507	)		(7,329,458	)		(1,957,351	)


Net loss	$	(5,300,847	)	$	(1,852,749	)	$	(9,548,024	)	$	(2,078,947	)


Basic and diluted net loss per share
Loss from continuing operations		(.006	)		(.010	)		(.029	)		(.002	)
Loss from discontinued operations		(.060	)		(.017	)		(.094	)		(.039	)

Net loss	$	(.066	)	$	(.027	)	$	(.123	)	$	(.041	)


Weighted average shares used in computing basic and diluted net loss per common share		80,055,909			68,644,799			77,704,255			50,466,204

See accompanying notes to consolidated financial statements.

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JUNE 30, 2010 AND 2009

(Unaudited)


	2010			2009
Cash flows from operating activities:
Net loss	$	(9,548,024	)	$	(2,078,947	)
Loss from discontinued operations		7,329,458			1,957,351

Loss from continuing operations		(2,218,566	)		(121,596	)
Adjustments to reconcile loss from continuing operations to net cash flows from operating activities:
Depreciation and amortization		518,662			59,161
Recognition of deferred revenue		(136,349	)		(21,913	)
Stock based compensation		433,500			2,000
Changes in operating assets and liabilities
Accounts receivable		470,283			(530,178	)
Inventory		(104,440	)		1,785,694
Prepaid expenses and other assets		82,847			(520,081	)
Accounts payable and accrued expenses		4,228,119			(1,115,497	)
Advance payments and billings in excess of costs		(3,200,890	)		3,228,612


Net cash flows from operating activities – continuing operations		73,166			2,766,202
Net cash flows from operating activities – discontinued operations		(1,726,508	)		(3,584,531	)

Net cash flows from operating activities		(1,653,342	)		(818,329	)


Cash flows from investing activities:
Cash acquired in business acquisition		—			21,662
Cash disposed of in business disposition		(42,853	)		—
Investments in multiple companies		(256,545	)		(694,011	)
Purchase of property and equipment		(4,573	)		(50,829	)


Net cash flows from investing activities – continuing operations		(303,971	)		(723,178	)
Net cash flows from investing activities – discontinued operations		(257,057	)		(75,399

Net cash flows from investing activities		(561,028	)		(798,577	)


Cash flows from financing activities
Shareholder advances		325,118			1,856,443
Increases in long term debt		2,000,000			—
Repayments of long term debt		(88,185	)		(49,827	)


Net cash flows from financing activities – continuing operations		2,236,933			1,806,616
Net cash flows from financing activities – discontinued operations		201,549			—

Net cash flows from financing activities		2,438,482			1,806,616


Increase (decrease) in cash and cash equivalents		224,112			189,710
Cash and cash equivalents, beginning		69,295			—


Cash and cash equivalents, ending	$	293,407		$	189,710


Cash paid for interest	$	385,594		$	44,121

Cash paid for taxes	$	—		$	—

Supplemental schedule of non-cash financing and investing activities:

•

November 4, 2008, the Company issued 14,000,000 shares of common stock to reduce related party debt.

•

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

•

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

•

January 20, 2010, the Company issued 2,000,000 shares to securitize debt and recorded it as stock based compensation

•

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

•

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).

See accompanying notes to consolidated financial statements.

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

FOR THE NINE MONTHS ENDED JUNE 30, 2010

(Unaudited)


	Common Stock
	Number of Shares		Amount		Additional Paid in Capital		Accumulated (deficit)			Treasury Stock			Total

Balances, October 1, 2009		72,355,910	$	72,355	$	6,407,159	$	(10,556,877	)	$	(38,184	)	$	(4,115,547	)

Issuance of shares for to acquire Cybercare		249,999		250		102,250								102,500

Issuance of shares in satisfaction of debt		2,100,000		2,100		422,900								425,000

Issuance of shares for securitization		2,500,000		2,500		272,500								275,000

Issuance of warrants associated with new debt						256,438								256,438

Issuance of shares to securitize debt		2,000,000		2,000		338,000								340,000

Issuance of shares as stock based compensation		850,000		850		92,650								93,500

Net loss for the nine months ended June 30, 2010								(9,548,024	)					(9,548,024	)


Balances, June 30, 2010		80,055,909	$	80,055	$	7,891,897	$	(20,104,901	)	$	(38,184	)	$	(12,171,133	)

See accompanying notes to consolidated financial statements.

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED JUNE 30, 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 and a contract manufacturer in the United States. Headquarter facilities are in Clearwater and Brandon, Florida and its operating facilities are located in Clearwater, Mayo and Melbourne, Florida.

2. Principles of consolidation and basis of presentation:

The accompanying consolidated balance sheet as of September 30, 2009, 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 are accounted for in three operating subsidiaries, BT Manufacturing Company LLC, Bulova Technologies Ordnance Systems LLC, and Bulova Technologies Combat Systems LLC.

BT Manufacturing Company LLC – located in Melbourne, Florida, in a 35,000 square foot facility, assembles a wide range of printed circuit boards, including single sided through 14 layers, through-hole, surface mount and mixed. It manufactures cable assemblies and complete systems and offers value-add services such as direct-ship to end customers, depot repair and design assistance. In June 2010, the Company determined to dispose of this business segment, and has accounted for it as a discontinued operation in this Form 10Q.

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 Combat Systems LLC – located in the Company’s corporate headquarters in Clearwater, Florida, Combat Systems was formed to administer an acquisition contract that Bulova Technologies Ordnance Systems LLC was awarded from the U.S. Department of Defense in January 2009. Bulova Technologies Combat Systems LLC functions as a broker to facilitate the movement of military articles across friendly borders to support soldiers throughout the world

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 June 30, 2010 and the results of operations and cash flows for the nine months ended June 30, 2010 and 2009.

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 January 25, 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 operates in two business segments, government contracting and contract manufacturing. Once the disposal of BT Manufacturing Company LLC is accomplished, the Company will no longer be operating a contract manufacturing segment.

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. The breakdown of inventory at June 30, 2010 and 2009 is as follows:


	As of June 30,
	2010			2009
Finished goods	$	26,318		$	17,279
Work in process		369,749			274,147
Materials and supplies		2,332,735			2,465,149

Total inventory	$	2,728,802		$	2,756,575
Less inventory classified as held for sale		(1,319,573	)		(1,389,113	)

Total inventory of continuing operations	$	1,409,229		$	1,367,461

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 June 30, 2010 and 2009


	As of June 30,
	2010			2009
Land	$	1,225,000		$	1,225,000
Buildings and improvements		1,170,194			315,764
Machinery and equipment		3,214,054			2,716,312
Furniture and fixtures		98,081			87,025
Leasehold improvements		234,489			—


		5,941,818			4,344,101
Less accumulated depreciation		(995,928	)		(477,801	)


Net Property, plant and equipment		4,945,890			3,866,300
Less property, plant and equipment classified as held for sale		(2,402,991	)		(2,056,834	)

Net Property, plant and equipment of continuing operations	$	2,542,899		$	1,809,466

Impairment of Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets at least annually. Impairment losses are 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. .

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”

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 nine months ended June 30, 2010 and 2009 were $27,504 and $3,741, respectively.

Shipping Costs

The Company includes shipping costs in cost of revenues.

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 ASC 740, 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 June 30, 2010, there were 2,500,000 shares that were dilutive but had no effect on loss per share.

Effect of Recent Accounting Pronouncements

The Company reviews new accounting standards as issued. Some of the accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management and evaluated for the potential effect on these consolidated financial statements.

Management does not believe any 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 September 30, 2009 through the date these financial statements were issued.

3. Acquisition of 3Si Holdings, Inc.

On December 16, 2008, BT Acquisition Company LLC purchased from Webster Business Credit Corporation, various assets including inventory, machinery and equipment, and the membership interest of Bulova Technologies Ordnance Systems LLC, an operating company, under Section 9 of the Uniform Commercial Code as enacted in the state of New York. The primary reason for the acquisition was to acquire the rights to current and future government contracts and the operating assets of Bulova Technologies Ordnance Systems LLC to complete those contracts.

BT Acquisition Company LLC accounted for the assets, liabilities and ownership interests in accordance with the provisions of ASC 805, Business Combinations for acquisitions occurring in years beginning before December 15, 2008 (formerly SFAS No. 141, Business Combinations). As such, the recorded costs of the assets acquired were limited to the consideration given, and consequently not recorded at the fair market value of the assets received. The values recorded as of the date of acquisition are as follows:


Contract Claim	$	3,200,597
Reserve against claim		(3,200,597	)
Inventory		3,153,155
Property plant and equipment		4,021,146
Other assets		34,745


Total assets acquired	$	7,209,046


Current liabilities assumed	$	4,195,135
Long term debt assumed		1,603,911
Shareholder loans		585,000
Acquisition debt		825,000


Total consideration given	$	7,209,046

On December 17, 2008 BT Manufacturing Company LLC was formed. Everything acquired from Webster Business Credit Corporation except for what was part of Bulova Technologies Ordnance LLC was placed into BT Manufacturing Company LLC with the intent of starting a contract manufacturing business. During December 2008 BT Manufacturing Company LLC incurred various liabilities and paid certain expenses as a part of this process.

On January 1, 2009, Bulova Technologies Group, Inc. acquired 100% of the outstanding stock of 3Si Holdings, Inc. (Florida) by issuing 40,000,000 shares of its common stock.

The majority shareholder of Bulova Technologies Group, Inc. also held a majority interest in 3Si Holdings, Inc. and maintained his controlling interests in both entities both before and after the transaction. Accordingly, the acquisition of 3Si Holdings, Inc. (Florida) has been accounted for as a corporate re-organization because of the retention of common control. The book value of 3Si Holdings, Inc. (Florida) at the time of the acquisition was as follows:


Cash	$	41,793
Contract Claim		3,200,597
Reserve against claim		(3,200,597	)
Inventory		3,153,155
Property plant and equipment		4,021,146
Other assets		37,262


Total assets	$	7,253,356


Current liabilities assumed	$	5,244,232
Shareholder loans assumed		693,477
Long term debt assumed		1,603,911
Equity deficit acquired		(288,264	)


Total liabilities and deficit	$	7,253,356

Pro forma results of operations for the nine months ended June 30, 2010 and 2009 as though this acquisition had taken place at October 1, 2008 for continuing operations are as follows:


	Nine Months Ended June 30,
	2010			2009
Revenues	$	10,547,298		$	15,133,491

Net loss	$	(2,218,566	)	$	(347,549	)

Net loss per share	$	(0.032	)	$	(0.007	)

The unaudited pro forma results disclosed in the table above are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the Company completed this acquisition on October 1, 2008.

4. 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.

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 represents 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 June 30, 2010 and 2009 and has segregated its operating results and presented them separately as a discontinued operation for all periods presented.

Summarized operating results for discontinued operations is as follows:


	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009

Revenue	$	581,812		$	887,545		$	1,371,077		$	1,375,205
Cost of Sales		(371,597	)		(720,451	)		(1,086,610	)		(1,182,533	)

Gross profit		210,215			167,094			284,467			192,672
Operating expenses		(715,467	)		(1,387,476	)		(3,368,376	)		(2,222,851	)
Other income		6,015			66,875			54,451			72,828

Loss from operations		(499,237	)		(1,153,507	)		(3,029,458	)		(1,957,351	)
Loss on disposal of discontinued operations		(4,300,000	)		—			(4,300,000	)		—
Income tax benefit		—			—			—			—

Loss from discontinued operations, net of tax	$	(4,799,237	)	$	(1,153,507	)	$	(7,329,458	)	$	(1,957,351	)

The 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 as follows:


Estimated loss on disposal	$	2,650,000
Provision for operating losses during phase-out period		1,650,000


	$	4,300,000

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:


	June 30,
	2010		2009

Accounts receivable	$	224,573	$	665,843
Inventory		1,319,573		1,389,114
Other current assets		57,406		30,904

Total current assets held for sale		1,601,552		2,085,861
Property plant and equipment - net		2,402,991		2,056,834
Other assets		230,059		—

Total assets held for sale	$	4,234,602	$	4,142,695


Accounts payable and accrued expenses	$	787,845	$	235,435
Current portion of long-term debt		546,000		—
Provision for loss on disposal of business segment		4,300,000		—

Total current liabilities associated with assets held for sale		5,633,845		235,435
Long term debt, net of current portion		1,328,000		—

Total liabilities associated with assets held for sale	$	6,961,845	$	235,435

6. 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). The Company still has effective control over the new investment in GRWT and as such recorded the transaction at the book value of the Bulovatech Labs at the time of the sale. Also, due to the limited market for the GRWT stock and the common control, management believes that the book value is the best estimate of fair value in GRWT stock. No adjustment has been made to changes in market value of the stock.

At June 30, 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		1,582,355		—		—		1,582,355

	$	1,766,855	$	—	$	—	$	1,766,855

7. 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 June 30, 2010 and 2009 are $1,127,056 and $2,988,292 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. Billings on uncompleted contracts in excess of the costs incurred plus estimated earnings calculated on this percentage of completion method as of June 30, 2010 and 2009 are $0 and $3,440,917 respectively.

Billing in Excess


	2010			2009

Total contract amount	$	23,674,556		$	26,794,334

Total estimated costs		20,090,239			22,779,479
Amount incurred to date		20,090,239			11,662,080

Percentage complete		100	%		51	%

Amount earned to date		23,674,556			13,742,722
Amount Received to date		23,674,556			17,183,639

Billing in excess of costs plus earning on uncompleted contracts	$	—		$	3,440,917

At June 30, 2010, the Company has included in accrued expenses an amount of approximately $6,100,000 relative to a contract performance dispute with the US Government. The Company has filed claims pursuant to this dispute to reduce or recover substantially all of the amount provided for in this accrual. There can be no assurance with respect to the outcome of this litigation.

8. Deferred Revenue

Deferred revenue represents the unamortized portion of the fair value of the stock received for license rights to technology owned by Bulovatech Labs. The license fee is being amortized on a straight line basis over the initial term of the license agreement, of 3 years. The revenue recognized for the nine months ended June 30, 2010 is $136,349. On June 25, 2010 the Company sold all of its interest in Bulovatech Labs and will no longer have license fee revenue.

9. Long Term Debt

Long term debt consisted of the following as of:


	June 30,
	2010			2009

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 June 30, 2010.	$	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 June 30, 2010. Final payment is due on March 10, 2021.		602,000			658,000

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 June 30, 2010. Final payment is due on December 1, 2020.		869,307			924,623

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.		64,701			68,837

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.		1,874,000			—

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 June 30, 2010. Final payment is due July 31, 2010.		1,963,366			—


		6,198,374			2,476,460

Less current portion - continuing operations		(3,029,577	)		(935,648	)

Less current portion associated with assets held for sale		(546,000	)		—

Less long term portion associated with assets held for sale		(1,328,000	)		—


Long term debt, net	$	1,294,797		$	1,540,812

Principal maturities of long term debt for the next five years and thereafter as of June 30, 2010 are as follows:


Period ended June 30,
2011	$	3,575,577
2012		1,322,126
2013		125,448
2014		131,213
2015		137,455
Thereafter		906,555

	$	6,198,374

10. 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.

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, 2009 the Company had federal net operating loss carry forwards of approximately $3,725,000 and Florida net operating loss carry forwards of approximately $3,600,000. The federal net operating loss carry forwards will expire in 2020 through 2029 and state net operating loss carry forwards that will expire in 2028 through 2029.

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


Continuing Operations	6/30/10			9/30/2009

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, 2009, 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.

11. 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, 2009, 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.

The Company leased certain equipment used in its contract manufacturing business segment from Lamar Systems Co., a related corporation owned by Stephen L Gurba, our Chief Executive Officer and a shareholder of the Company for $65,000 per month. In December 2009, the Company bought out this lease canceling any future obligation under this lease from that point forward and recorded $1,272,451 in equipment and a lease termination cost of $400,000, which is included in selling, general and administrative expenses.

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.

Total rent expense for the nine months ended June 30, 2010, was approximately $470,000.

The Company’s commitments for minimum lease payments under these operating leases for the next five years and thereafter as of June 30, 2010 are as follows:


Period ended June 30
2011	$	554,462
2012		530,913
2013		433,400
2014		433,400
2015		301,508
Thereafter		2,591,250

	$	4,844,933

12. Related Party Transactions

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

On November 4, 2008, and then on July 13, 2009, the Company settled the full amount of the amount of the outstanding debt to eSPG through the issuance of 14,000,000 shares and 2,000,000 shares respectively, to entities affiliated with or identified by our Chairman of the Board. Our Chairman, John D. Stanton had financed a proposed merger transaction, which letter of intent was dated August 23, 2005 through eSPG. eSPG assigned its $195,000 balance outstanding to him, and he subsequently assigned it to other parties, some of which are the beneficiary of these share issuances. As a result of these issuances the balance has been satisfied in full.

The acquisition of 3Si Holdings, Inc., which occurred on January 1, 2009, had certain preexisting relationships. Our Chairman of the Board, John D. Stanton owned and/or beneficially controlled 44% of 3Si Holdings, Inc. prior to the acquisition.

Stephen L Gurba, our Chief Executive Officer owned and/or beneficially controlled 35% of 3Si Holdings, Inc. prior to the acquisition. Stephen L Gurba, our Chief Executive Officer did not own any shares of Bulova Technologies Group, Inc. before this acquisition.

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, and has not been renewed as of the date of this filing. 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 nine months ended June 30, 2010 was $188,401.

The Company has received loans from the two (2) major shareholders totaling $4,613,092 and $4,294,589 as of June 30, 2010 and September 30, 2009 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 June 30, 2010.

13. Stockholders’ Equity

On November 4, 2008, the Company affected a 1 share for 15 shares reverse split of its common stock. As a result, the issued and outstanding shares at September 30, 2008 were decreased from 95,326,943 shares to 6,355,910, and the treasury shares were reduced from 45,000 shares to 3,000. In addition, the par value of the common stock was decreased from $0.01 to $0.001

On November 4, 2008, the Company issued 14,000,000 shares of common stock to pay down the amount of loan payable – eSPG, reducing the outstanding balance at that time to $24,375.

On January 1, 2009, the Company authorized, with an effective date of January 1, 2009, the acquisition of 3Si Holdings, Inc., a Florida corporation, through a tax free exchange of shares by the issuance of 40,000,000 shares of its common stock in exchange for 100% of the outstanding shares of 3Si Holdings, Inc.

On January 1, 2009, the Company, as a part of consummating the acquisition of 3Si Holdings, Inc., authorized, with an effective date of January 1, 2009, the issuance of 8,000,000 shares to satisfy an obligation associated with warrants outstanding of 3Si Holdings, Inc., at the date of the acquisition.

On June 17, 2009, the Company issued 2,000,000 shares of common stock to securitize a loan.

On July 13, 2009, the Company issued 2,000,000 shares of common stock to pay the balance of the loan payable – eSPG of $24,375 satisfying the balance in full.

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 securitized 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.

14. Subsequent Events

Subsequent to June 30, 2010, the Company issued additional shares of its common stock as follows:

August 2010 – 1,849,496 shares issued to various individuals

October 2010 –59,366,722 shares issued to various individuals

The Company declared a distribution of 141,272,127 shares of its 200,000,000 shares of Growth Technologies International, Inc. to the shareholders of record as of October 29, 2010

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.

15. Segment Information

Commencing with the Company’s acquisition of 3Si Holdings, Inc. in January of 2009, the Company operates 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 Combat Systems LLC. The Contract Manufacturing segment produces cable assemblies as well as complete systems, and is accounted for through BT Manufacturing Company, LLC, another of its wholly owned subsidiaries.

(UNAUDITED)

SEGMENT INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 2010 IS AS FOLLOWS:


	Government Contracting			Contract Manufacturing (Discontinued Segment)			Total
Revenue	$	2,999,110		$	581,812		$	3,580,922
Cost of Sales		2,050,307			371,597			2,421,904


Gross profit		948,803			210,215			1,159,018
Selling, general and administrative expenses		431,354			496,006			927,360
Depreciation, amortization and interest expense		379,214			219,461			598,675


Income (loss) from operations		138,235			(505,252	)		(367,017	)


Other income (expense)		(360	)		6,015			5,655

Net Income (loss)	$	137,875		$	(499,237	)	$	(361,362	)

Total Assets	$	4,743,624		$	4,304,618		$	9,048,242


Reconciliation of Segment Amounts Reported to Condensed Consolidated Amounts

Revenue
Total revenues for reportable segments							$	3,580,922
Amount included in loss from discontinued operations								(581,812	)
Unallocated amounts relating to corporate operations
License fee revenue								34,087


Total consolidated revenue							$	3,033,197


Net loss

Total loss for reportable segments							$	(361,362	)
Amount included in loss from discontinued operations								499,237

Unallocated amounts relating to corporate operations
License fee revenue								34,087
Selling, general and administrative expenses								(606,440	)
Depreciation, amortization and interest expense								(67,132	)

Total consolidated net loss from continuing operations							$	(501,610	)

Assets

Total assets for reportable segments							$	9,048,242

Corporate investments and other assets								1,819,120


Total consolidated assets							$	10,867,362

(UNAUDITED)

SEGMENT INFORMATION FOR THE NINE MONTHS ENDED JUNE 30, 2010 IS AS FOLLOWS:


	Government Contracting			Contract Manufacturing (Discontinued Segment)			Total
Revenue	$	10,410,949		$	1,371,077		$	11,782,026
Cost of Sales		7,899,898			1,086,610			8,986,508


Gross profit		2,511,051			284,467			2,795,518
Selling, general and administrative expenses		1,528,439			2844,533			4,372,972
Depreciation, amortization and interest expense		840,018			523,843			1,363,861


Income (loss) from operations		142,594			(3,083,909	)		(2,941,315	)


Other income (expense)		(966	)		54,451			53,485

Net Income (loss)	$	141,628		$	(3,029,458	)	$	(2,887,830	)

Total Assets	$	4,743,624		$	4,304,618		$	9,048,242


Reconciliation of Segment Amounts Reported to Condensed Consolidated Amounts

Revenue
Total revenues for reportable segments							$	11,782,026
Amount included in loss from discontinued operations								(1,371,077	)
Unallocated amounts relating to corporate operations
License fee revenue								136,349


Total consolidated revenue							$	10,547,298


Net loss

Total loss for reportable segments							$	(2,887,830	)
Amount included in loss from discontinued operations								3,029,458

Unallocated amounts relating to corporate operations
License fee revenue								136,349
Selling, general and administrative expenses								(2,288,895	)
Depreciation, amortization and interest expense								(207,648	)

Total consolidated net loss from continuing operations							$	(2,218,566	)

Assets

Total assets for reportable segments							$	9,048,242

Corporate investments and other assets								1,819,120


Total consolidated assets							$	10,867,362

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 Combat Systems 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 June 30, 2010 and 2009 and has segregated its operating results and presented them separately as a discontinued operation for all periods presented.

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:

Discontinued Operations

For the three months ended June 30, 2010 compared to the three months ended June 30, 2009.

The results of operations of BT Manufacturing Company LLC, reported as discontinued operations reflect an operational loss of $499,237 and an estimated loss on disposal of $4,300,000 for the three months ended June 30, 2010 as compared to an operational loss of $1,153,507 for the three months ended June 30, 2009,

For the nine months ended June 30, 2010 compared to the nine months ended June 30, 2009.

The results of operations of BT Manufacturing Company LLC, reported as discontinued operations reflect an operational loss of $3,029,458 and an estimated loss on disposal of $4,300,000 for the nine months ended June 30, 2010 as compared to an operational loss of $1,957,351 for the nine months ended June 30, 2009,

Continuing Operations

For the three months ended June 30, 2010 compared to the three months ended June 30, 2009.

The Company’s revenue for continuing operations for the three months ended June 30, 2010 of $3,033,197 is an increase of $585,571 when compared to the Company’s revenue for the three months ended June 30, 2009 of $2,447,626.

The Company’s cost of sales for continuing operations for the three months ended June 30, 2010 of $2,050,307 is an increase of $26,916 when compared to the Company’s cost of sales for the three months ended June 30, 2009 of $2,023,391.

The Company’s gross profit for continuing operations for the three months ended June 30, 2010 of $982,890 is an increase of $558,655 when compared to the Company’s gross profit for the three months ended June 30, 2009 of $424,235.

The Company’s operating expenses for continuing operations consisting of selling, general and administrative, depreciation, amortization, and interest for the three months ended June 30, 2010 of $1,484,140 is an increase of $361,412 when compared to the same expenses of $1,122,728 for the three months ended June 30, 2009.

The Company’s net loss for continuing operations for the three months ended June 30, 2010 of $501,610 is a decrease of $197,632 when compared to the Company’s net loss for the three months ended June 30, 2009 of $699,242.

For the nine months ended June 30, 2010 compared to the nine months ended June 30, 2009.

The Company’s revenue for continuing operations for the nine months ended June 30, 2010 of $10,547,298 is a decrease of $4,154,258 when compared to the Company’s revenue for the nine months ended June 30, 2009 of $14,701,556.

The Company’s cost of sales for continuing operations for the nine months ended June 30, 2010 of $7,899,898 is a decrease of $4,581,947 when compared to the Company’s cost of sales for the nine months ended June 30, 2009 of $12,481,845.

The Company’s gross profit for continuing operations for the nine months ended June 30, 2010 of $2,647,400 is an increase of $427,689 when compared to the Company’s gross profit for the nine months ended June 30, 2009 of $2,219,711.

The Company’s operating expenses for continuing operations consisting of selling, general and administrative, depreciation, amortization, and interest for the nine months ended June 30, 2010 of $4,431,500 is an increase of $2,091,177 when compared to the same expenses of $2,340,323 for the nine months ended June 30, 2009.

The Company’s Stock based compensation for continuing operations for the nine months ended June 30, 2010 of $433,500 is an increase of $433,500 when compared to the nine months ended June 30, 2009, as the Company did not have any stock based compensation for that period.

The Company’s net loss for continuing operations for the nine months ended June 30, 2010 of $2,218,566 is an increase of $2,096,970 when compared to the Company’s net loss for the nine months ended June 30, 2009 of $121,596.

3. Liquidity and capital resources:

As of June 30, 2010, the Company’s sources of liquidity were new debt and loans from shareholders.

As of June 30, 20110, we had $293,407 in cash and cash equivalents.

Cash flows used in operating activities was $1,653,342 for the nine months ended June 30, 2010. Continuing operations provided cash flows of $73,166, while discontinued operations used $1,726,508.

Cash flows used in investing activities was $561,028 for the nine months ended June 30, 2010. Continuing operations used $303,971, which consisted of $42,853 of cash disposed of with the sale of Buovatech Labs, $256,545 of investments through Bulovatech Labs prior to its disposal, and acquisitions of property, plant and equipment of $4,573. Discontinued operations used $257,057.

Cash flows from financing activities were $2,438,482 for the nine months ended June 30, 2010. Cash flows provided by continuing operations in the amount of $2,236,933 consisted primarily of new debt in the amount of $2,000,000 and increased loans from shareholders in the amount of $325,118. Discontinued operations provided $201,549.

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 June 30, 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.

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

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 Gurba
		Stephen L Gurba
		Principal Executive Officer

By		/s/ John D. Stanton
		John D. Stanton
		Principal Financial Officer

DATED: January 25, 2011

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