NOVAMEX ENERGY INC. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - NOVAMEX ENERGY INC.	Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - NOVAMEX ENERGY INC.	blug_10q033113ex321.htm
EX-31.1 - EXHIBIT 31.1 - NOVAMEX ENERGY INC.	blug_10q033113ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to ___________

Commission File Number 000-54035

BLUGRASS ENERGY INC.

(Exact name of small business issuer in its charter)


Nevada		20-4952339
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)

3102 Maple Avenue, Suite 450, Dallas, Texas 75201

(Address of principal executive offices)

(214) 953-9358

(Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]

No [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

	Large accelerated filer [_]	Accelerated Filer [_]

	Non-accelerated filer [_]	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]

There were 366,850,613 shares of Common Stock outstanding as of May 5, 2013.

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
			Page

	Balance Sheets – March 31, 2013 and December 31, 2012		1

	Statements of Operations -
		Three months ended March 31, 2013 and 2012 and
		From December 11, 2007 (Inception) to March 31, 2013	2

	Statements of Shareholders’ Deficit -		3
		From December 11, 2007 (Inception) to March 31, 2013

	Statements of Cash Flows –
		Three months ended March 31, 2013 and 2012 and
		From December 11, 2007 (Inception) to March 31, 2013	4

	Notes to the Condensed Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	– Not Applicable		10

Item 4.	Controls and Procedures		10

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		11

Item 1A.	Risk Factors		11

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		11

Item 3.	Defaults Upon Senior Securities		12

Item 4.	Mine Safety Disclosures		12

Item 5.	Other Information		12

Item 6.	Exhibits		12

SIGNATURES			12

Item 1. Financial Statements

BLUGRASS ENERGY INC.

(A Development Stage Company)

BALANCE SHEETS

	March 31,
	2013			December 31,
	(Unaudited)			2012
ASSETS
Current assets:
Cash	$	-		$	177
Other receivable		8,541			8,541
Total current assets		8,541			8,718

Total assets	$	8,541		$	8,718


LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	379,302		$	398,779
Accounts payable - related party		127,867			127,867
Notes payable		97,137			45,000
Line of credit		97,500			97,500
Convertible notes payable, net		202,215			202,215
Accrued interest		124,900			115,758
Total current liabilities		1,028,921			987,119

Total liabilities		1,028,921			987,119

Commitments and Contingencies
Shareholders' deficit:
Common stock par value $.001, 1,000,000,000 shares authorized,
366,850,613 issued and outstanding, respectively		366,850			366,850
Additional paid-in-capital		2,784,489			2,780,024
Deficit accumulated during the development stage		(4,171,719	)		(4,125,275	)
Total shareholders' deficit		(1,020,380	)		(978,401	)
Total liabilities and shareholders' deficit	$	8,541		$	8,718

(See accompanying notes to the financial statements)

BLUGRASS ENERGY INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

							December 11, 2007
	Three Months Ended			Three Months Ended			(Inception) to
	March 31, 2013			March 31, 2012			March 31, 2013

Operating expenses:
Professional fees	$	32,540		$	66,848		$	527,964
Impairment of oil and gas properties		-			-			1,984,383
General and administrative expenses		4,762			89,395			810,971
Total operating expenses		37,302			156,243			3,323,318

Other expense:
Loss on investment in Quad Energy		-			-			(500,000	)
Forgiveness of debt		-			-			169,044
Interest expense		(9,142	)		(60,872	)		(302,410	)
Interest expense - related party		-			(22,439	)		(215,035	)
Total other expense		(9,142	)		(83,311	)		(848,401	)
Net Loss		(46,444	)		(239,554	)		(4,171,719	)

Per share information:
Basic and diluted loss per common share	$	(0.00	)	$	(0.00	)

Weighted average shares outstanding		366,850,613			108,133,063

(See accompanying notes to the financial statements)

BLUGRASS ENERGY INC.

(A Development Stage Company)

STATEMENTS OF SHAREHOLDERS' DEFICIT

December 11, 2007 (Inception) through

March 31, 2013

								Deficit Accumulated
								During			Total
	Common Stock				Additional			Development			Stockholders'
	Shares		Amount		Paid-in-Capital			Stage			Equity (Deficit)


Balance at December 11, 2007		-	$	-	$	1,984,383		$	-		$	1,984,383
Balance at December 31, 2010		-		-		1,984,383			-			1,984,383
Reverse Merger - February 23, 2011		69,818,386		69,818		(3,597,394	)		-			(3,527,576	)
Conversion of debentures		8,660,111		8,660		72,133			-			80,793
Common stock issued for services		244,000		244		36,356			-			36,600
Common stock and warrants issued		840,000		840		49,560			-			50,400
Stock compensation expense		-		-		273,186			-			273,186
Net loss		-		-		-			(3,786,993	)		(3,786,993	)
Balances at Decemebr 31, 2011		79,562,497		79,562		(1,181,776	)		(3,786,993	)		(4,889,207	)
Conversion of debentures		287,288,116		287,288		3,824,266			-			4,111,554
Stock compensation expense		-		-		137,534			-			137,534
Net loss		-		-		-			(338,282	)		(338,282	)
Balances at December 31, 2012		366,850,613		366,850		2,780,024			(4,125,275	)		(978,401	)
Stock compensation expense		-		-		4,465			-			4,465
Net loss		-		-		-			(46,444	)		(46,444	)
Balances at March 31, 2013 (Unaudited)		366,850,613	$	366,850	$	2,784,489		$	(4,171,719	)	$	(1,020,380	)

(See accompanying notes to the financial statements)

BLUGRASS ENERGY INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

							December 11, 2007
	Three Months Ended			Three Months Ended			(Inception) to
	March 31, 2013			March 31, 2012			March 31, 2013

Cash flows (used in) operating activities:
Net loss	$	(46,444	)	$	(239,554	)	$	(4,171,719	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Debt discount amortization		-			24,285			216,561
Loss in investment in Quad Energy		-			-			500,000
Impairment of oil and gas properties		-			-			1,984,383
Stock issued for services		-			-			36,600
Forgivenes of debt		-			-			169,044
Stock compensation		4,465			30,389			415,185
Changes in assets and liabilities:
Other receivable		-			(3,547	)		(8,541	)
Accounts payable and accured liabilities		(19,477	)		17,473			32,768
Accounts payable - related party		-			(10,849	)		127,867
Accrued interest		9,142			90,222			(91,996	)
Accrued interest - related party		-			-			192,596
Net cash used in operating activities		(52,314	)		(91,581	)		(597,252	)

Cash flows from financing activities:
Proceeds from issuance of short term notes		52,137			-			97,137
Proceeds from line of credit		-			75,000			122,500
Proceeds from convertible promissory notes		-			15,000			327,215
Proceeds from issuance of common stock and warrants		-			-			50,400
Net cash provided by financing activities		52,137			90,000			597,252

Net decrease in cash and cash equivalents		(177	)		(1,581	)		-
Cash and cash equivalents at the beginning of the year		177			1,581			-
Cash and cash equivalents at the end of the year	$	-		$	-		$	-

Supplemental disclosures of cash flow information:
Cash paid for interest expense	$	-		$	-		$	-
Cash paid for income taxes	$	-		$	-		$	-

Non-cash activities:
Debt and interest converted to equity	$	-		$	4,021,131		$	4,192,347

(See accompanying notes to the financial statements)

BLUGRASS ENERGY INC.

(A Development Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2013

Organization – Nature of Operations

Blugrass Energy Inc. (the “Company” or “Blugrass”) was incorporated under the laws of the State of Nevada on May 19, 2006, as Coastal Media Inc. The Company was originally formed to engage in the business of manufacturing, marketing, distributing and selling its marine DVDs. On September 11, 2008, the Company amended its Articles of Incorporation to change its name from "Coastal Media Inc." to "Blugrass Energy Inc.", to reflect the change in direction of the Company’s business to the Oil and Gas Industry. As a result of the name change, the Company’s trading symbol was changed to “BLUG”.

On February 23, 2011, Petro Grande, LLC (“Petro Grande”) consummated a transaction with Blugrass whereby Petro Grande acquired a controlling interest in Blugrass. This transaction effected a change of control and Blugrass’ management team was replaced with Petro Grande’s management team. Upon the reverse merger on February 23, 2011 the inception date of the Company changed to December 11, 2007, the date of the acquisition of the lease by Petro Grande, LLC.

The Company is in the development stage. Its activities to date have been limited to capital formation, organization and development of its business plan.

The Company has not earned revenues from planned operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Company”. Among the disclosures required are that the Company’s financial statements of operations, shareholders’ equity (deficit) and cash flows disclose activity since the date of the Company’s inception.

Basis of Presentation

The Financial Statements are unaudited. As permitted under the Securities and Exchange Commission (“SEC”) requirements for interim reporting, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. We believe that these financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results. These financial statements should be read in conjunction with the Financial Statements and related notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2012. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013.

Summary of Significant Accounting Policies

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Key estimates in the accompanying financial statements include, among others, revenue recognition, allowances for doubtful accounts, valuation of long-lived assets, and deferred income tax asset valuation allowances.

Cash Equivalents – The Company considers all highly-liquid investments with a maturity of three months or less, when purchased, to be cash equivalents.

Other Receivable – There was an other receivable totaling $8,541 as of March 31, 2013 and December 31, 2012, respectively. The balance of other receivable as of March 31, 2013 and December 31, 2012 consisted of amounts representing cash advances owed to the Company.

Earnings (loss) Per Share - Earnings (loss) per share require dual presentation of basic and diluted earnings or loss per share (EPS) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Impairment of Long-Lived Assets - We assess the impairment of long-lived assets, such as property and equipment and definite-lived intangibles subject to amortization, annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated future undiscounted net cash flows of the related asset or group of assets over their remaining lives. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent of other groups of assets. The impairment of long-lived assets requires judgments and estimates. If circumstances change, such estimates could also change. Assets held for sale are reported at the lower of the carrying amount or fair value, less the estimated costs to sell.

Income Taxes – The Company has adopted ASC 740 “Accounting for Uncertainty in Income Taxes” which prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740 states that a tax benefit from an uncertain position may be recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information.

The Company may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company’s financial results. In the event the Company receives an assessment for interest and penalties, it has been classified in the consolidated financial statements as income tax expense. Generally, the Company’s federal, state, and local tax returns for years subsequent to 2008 remain open to examination by the major taxing jurisdictions to which the Company is subject.

Fair Value of Financial Instruments - The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this information in the notes to financial statements when the fair value is different than the carrying value of those financial instruments. The estimated fair value of accounts receivable and accounts payable approximate the carrying amounts due to the relatively short maturity of these instruments. The carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest. None of these instruments are held for trading purposes.

Going Concern

The Company’s financial statements for the three months ended March 31, 2013 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a net loss of $46,444 for the period ended March 31, 2013, and an accumulated deficit during the development stage of $4,171,719 as of March 31, 2013. At March 31, 2013, the Company had a working capital deficit of $1,020,380 and the Company had no revenues from its activities during the three months ended March 31, 2013.

The Company’s ability to continue as a going concern may be dependent on the success of management’s plan. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

During the 2013 fiscal year, the Company intends to continue its efforts to acquire, merge, or purchase oil field services companies. The Company intends to continue to raise funds to support the efforts through the sale of equity and/or debt securities.

To the extent the Company’s operations are not sufficient to fund the Company’s capital requirements, the Company may attempt to enter into a revolving loan agreement with financial institutions or attempt to raise capital through the sale of additional capital stock or through the issuance of debt. At the present time, the Company does not have a revolving loan agreement with any financial institution nor can the Company provide any assurance that it will be able to enter into any such agreement in the future or be able to raise funds through the further issuance of debt or equity in the Company.

Notes Payable

On May 12, 2011 the Company issued an unsecured note payable in the amount of $20,000 (the “Ladner Note”). The Ladner Note matured on August 31, 2011, and is considered to be in default. The note includes a “bonus payment” of $2,500 due at maturity.

On November 19, 2012, the Company issued an unsecured promissory note to Excellere Capital Group LLC in the amount of $25,000 (the “$25K Excellere Note”). The $25,000 Excellere Note accrues interest at the rate of 6% per annum. The outstanding principal and interest becomes due on the earlier to occur of (a) a “Change in Control” of the Company, defined as the date that any person or group of persons (other than the shareholders of the Company as of the date of such note) acquire beneficial ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of fifty-one percent or more of the issued and outstanding shares of capital stock of the Company or (b) May 31, 2013. The maturity of the $25,000 Excellere Note has been extended to July 31, 2013. All past due principal and interest on the $25,000 Excellere Note bears interest from maturity until paid at the lesser of (i) the rate of 12% per annum or (ii) the highest rate for which the Company may legally contract under applicable law. The holder of the $25,000 Excellere Note has the right to convert all or any part of the outstanding principal amount to shares of common stock of the Company.

On March 10, 2013, the Company issued an unsecured promissory note to Excellere Capital Group LLC in the amount of $52,137 (the “$52,137 Excellere Note”). The $52K Excellere Note accrues interest at the rate of 6% per annum. The outstanding principal and interest becomes due on the earlier to occur of (a) a “Change in Control” of the Company (as defined above) or (b) May 31, 2013. The maturity of the $52,137 Excellere Note has been extended to July 31, 2013. All past due principal and interest on the $52,137 Excellere Note bears interest from maturity until paid at the lesser of (i) the rate of 12% per annum or (ii) the highest rate for which the Company may legally contract under applicable law.

Line of Credit

On October 7, 2011, the Company entered into an unsecured Line of Credit with a third party for up to $100,000. The Line of Credit carries an interest rate of 12% per annum on amounts outstanding and matured on October 7, 2012. The Line of Credit is in default, the interest rate on the Line of Credit is the lower of 14% per annum or the maximum amount allowed by law. As of March 31, 2013 and December 31, 2012, the Company had $97,500 outstanding under the Line of Credit. The amount is outstanding as of March 31, 2013, and is considered to be in default.

Convertible Promissory Notes

As of March 31, 2013 and December 31, 2012, the Company had outstanding $202,215 of unsecured convertible commercial promissory notes (the “Convertible Promissory Notes”).

November 19, 2012, the Company issued a convertible, unsecured promissory note to Excellere Capital Group LLC in the amount of $102,215 (the “$102K Excellere Note”). The proceeds of the $102,215 Excellere Note were used to settle the outstanding balance owed to Asher Enterprises, Inc. Accordingly, the Company paid the settlement amount of $102,215 on December 31, 2012, which represented 70% of $146,450 (original balance). The outstanding principal and interest becomes due on May 31, 2013; however, the maturity of the $102K Excellere Note has been extended to July 31, 2013, and the note bears interest at 6%. The holder of the $102,215 Excellere Note has the right to convert all or any part of the outstanding principal amount to shares of common stock of the Company.

As of March 31, 2013 Convertible Promissory Notes totaling $100,000 were in payment default and, accordingly, accrued interest at a rate of 18%.

Subsequent Events

On November 19, 2012 the Company entered into a letter of intent with Excellere Capital Group, LLC to document the interest regarding the acquisition of a majority of the capital stock of the Company. The proposed acquisition will be accomplished by means of a reverse acquisition, as a consequence of which Excellere Capital Group, LLC shall acquire beneficial ownership of ninety-nine and one-half percent (99.5%) of the issued and outstanding stock of the Company. The reverse merger acquisition is expected to close in the third quarter of 2013.

In accordance with the Company’s bylaws for filling board vacancies, Abram Janz appointed Stephen Bargo to the Company’s Board of Directors effective April 11, 2013.

On April 15, 2013, immediately following the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, Abram Janz resigned as an officer and director of the Company.

On April 16, 2013, the sole board member, Stephen Bargo, elected Pat Mendoza to serve as the Company’s Chief Executive Officer.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. The words “believes,” “anticipates,” “plans,” “seeks,” “expects,” “intends” and similar expressions identify some of the forward-looking statements. Forward-looking statements are not guarantees of performance or future results and involve risks, uncertainties and assumptions. The factors discussed elsewhere in this Form 10-Q could also cause actual results to differ materially from those indicated by the Company’s forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

Business and Plan of Operations

General

Blugrass Energy Inc. is a publicly held Nevada corporation listed on the OTC under the symbol BLUG.PK. The Company was incorporated under the laws of the State of Nevada on May 19, 2006 as Coastal Media Inc. On September 11, 2008, the Company amended its Articles of Incorporation to change its name to Blugrass Energy Inc. Upon the reverse merger recapitalization the new inception date is December 11, 2007.

Business Strategy

We continue to seek out opportunities to acquire oil field services companies. However, the ability to consummate these transactions will likely be contingent on our ability to obtain financing. Our goal is to acquire companies in the oil field services industry through purchase or merger. To date, we have no revenues and limited capital resources. Our ability to continue as a going concern will depend on our ability to raise additional debt or equity capital in the near-term. Management continues to attempt to raise additional debt and equity capital and is engaged in discussions with numerous potential capital sources.

Plans for 2013

During the 2013 fiscal year, the Company intends to acquire, merge, or purchase, oil field services companies. The Company intends to continue to raise funds to support the efforts through the sale of equity, debt securities and/or working interest partners.

Results of Operations

For the Three months Ended March 31, 2013 compared to the Three months Ended March 31, 2012

We are still in our development stage and have no revenues to date. We incurred operating expenses of $37,302 and $156,243 for the three-month periods ended March 31, 2013 and 2012, respectively. The decrease in operation expenses is the result of professional fees and in general and administrative expenses during the current quarter compared to the same quarter in the prior year.

During the three months ended March 31, 2013, we recognized a net loss of $46,444 compared to a net loss of $239,554 for the three months ended March 31, 2012. The decrease was attributed to the result of less interest expense for the months ended March 31, 2013, due to the pay down and forgiveness of debt which occurred during the three months ended December 31 2012.

Liquidity and Capital Resources

At March 31, 2013, we had total assets of $8,541 consisting of an other asset. At March 31, 2013, we had total current liabilities of $1,028,921 consisting of accounts payable totaling $507,169 accrued interest totaling $124,900, notes payable totaling $97,137, line of credit totaling $97,500, and $202,215 of convertible promissory notes outstanding.

At December 31, 2012, we had total assets of $8,718 consisting of cash and an other asset. At December 31, 2012, we had total current liabilities of $987,119 consisting of accounts payable totaling $526,646, accrued interest totaling $115,758, notes payable totaling $45,000, line of credit totaling $97,500, and $202,215 of convertible promissory notes outstanding..

During the three months ended March 31, 2013, we used cash of $52,314 in operations, and our source of cash inflows was from financing activities totaling $52,137.

During the three months ended March 31, 2012, we used cash of $91,581 in operations, and our source of cash inflows was from financing activities totaling $90,000.

Our auditors have expressed their doubt about our ability to continue as a going concern unless we are able to generate profitable operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (Disclosure Controls) as of the end of the period covered by this Form 10-Q. The Disclosure Controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer. Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (SEC’s) rules and forms. Disclosure Controls are also designed to provide reasonable assurance that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

The evaluation of our Disclosure Controls included a review of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in this Form 10-Q. During the course of our evaluation of our internal control over financial reporting, we advised our Board of Directors that we had identified a material weakness as defined under standards established by the Public Company Accounting Oversight Board (United States). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Our Chief Executive Officer has concluded that as a result of the material weakness, as of the end of the period covered by this Annual Report on Form 10-Q, our Disclosure Controls were not effective.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended March 31, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.

Item 1A. Risk Factors.

We are subject to various risks and uncertainties in the course of our business. In addition to the factors discussed elsewhere in this report, you should carefully consider the risks and uncertainties described under Item 1A. Risk Factors filed in our Report on Form 10-K for the period year ended December 31, 2012. There have been no material changes from the risk factors previously disclosed in that Form 10-K.

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

On March 7, 2012, the Company issued an aggregate of 3,000,000 shares of its common stock to a provider of professional services to the Company, in lieu of the payment of cash for such services. The issuance of these shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The Company made this determination based on the provider’s long-standing business relationship with the Company and knowledge and experience in financial and business matters. Appropriate legends have been affixed to all shares of the Company’s common stock issued in the transaction.

On March 7, 2012, the Company issued an aggregate of 1,588,000 shares of its common stock to the holders of convertible promissory notes, upon conversion of all or part of the principal amount of such notes. The shares of common stock issued upon conversion were not registered under the Securities Act of 1933. The issuance of these shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The Company made this determination based on the representations of each note holder that it is an “accredited investor,” as defined in Regulation D of the Securities Act.

On March 7, 2011, the Company issued an aggregate of 74,300,700 shares of its common stock to the holder of a note payable upon conversion of all or part of the principal amount of such notes. The issuance of these shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The Company made this determination based on the provider’s long-standing business relationship with the Company and knowledge and experience in financial and business matters. Appropriate legends have been affixed to all shares of the Company’s common stock issued in the transaction.

Item 3. Defaults Upon Senior Securities.

There were no defaults upon senior securities during the period covered by this report.

Item 4. Mine Safety Disclosures.

Item 5. Other Information.

Item 6. Exhibits.

The following documents are filed as part of this report:

Exhibit 31.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

May 20, 2013

Blugrass Energy Inc. (Registrant)

	By:	/s/ Pat Mendoza
		Pat Mendoza, Chief Executive Officer


	By:	/s/ Pat Mendoza
		Pat Mendoza, Chief Accounting Officer

Attached files

NOVAMEX ENERGY INC. Reports

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