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 June 30, 2013

 

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

 

For the transition period from __________ to ___________

 

Commission File Number 000-54035

 

 

NOGAL 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 16,834,393 shares of Common Stock outstanding as of August 21, 2013.

 

PART I – FINANCIAL INFORMATION

 

Item 1.	Financial Statements (Unaudited)
				Page
	Balance Sheets – June 30, 2013 and December 31, 2012			1
	Statements of Operations -
		Three and Six months ended June 30, 2013 and 2012 and
		From December 11, 2007 (Inception) to June 30, 2013		2
	Statements of Shareholders’ Deficit -
		From December 11, 2007 (Inception) to June 30, 2013		3
	Statements of Cash Flows –
		Six months ended June 30, 2013 and 2012 and
		From December 11, 2007 (Inception) to June 30, 2013		4
	Condensed Notes to the 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			11
Item 4.	Mine Safety Disclosures			11
Item 5.	Other Information			11
Item 6.	Exhibits			11
SIGNATURES				12

 

 

Item 1.  Financial Statements

 

NOGAL ENERGY, INC.
(fka BLUGRASS ENERGY, INC.)
(A Development Stage Company)
BALANCE SHEETS
			June 30, 2013				December 31, 2012
			(Unaudited)
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		$	438,310			$	398,779
Accounts payable - related party			127,867				127,867
Notes payable			199,352				45,000
Line of credit			97,500				97,500
Convertible notes payable, net			100,000				202,215
Accrued interest			140,722				115,758
Total current liabilities			1,103,751				987,119
Total liabilities			1,103,751				987,119
Commitments and Contingencies
Shareholders' deficit:
Common stock par value $.001, 1,000,000,000 shares authorized,
1,834,393 issued and outstanding			1,834				1,834
Additional paid-in-capital			3,153,969				3,145,040
Deficit accumulated during the development stage			(4,251,013	)			(4,125,275	)
Total shareholders' deficit			(1,095,210	)			(978,401	)
Total liabilities and shareholders' deficit		$	8,541			$	8,718
(See accompanying notes to the financial statements)

 

 

NOGAL ENERGY, INC.
(fka BLUGRASS ENERGY, INC.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
			Three Months Ended June 30, 2013				Three Months Ended June 30, 2012				Six Months Ended June 30, 2013				Six Months Ended June 30, 2012				December 11, 2007 (Inception) to June 30, 2013
Operating expenses:
Professional fees		$	59,007			$	27,201			$	91,547			$	94,049			$	586,971
Impairment of oil and gas properties			—				—				—				—				1,984,383
General and administrative expenses			4,464				33,589				9,227				122,985				815,436
Total operating expenses			63,471				60,790				100,774				217,034				3,386,790
Other expense:
Loss on investment in Quad Energy			—				—				—				—				(500,000	)
Forgiveness of debt			—				—				—				—				169,044
Interest expense			(15,822	)			(114,924	)			(24,964	)			(175,796	)			(318,232	)
Interest expense - related party			—				—				—				(22,438	)			(215,035	)
Total other expense			(15,822	)			(114,924	)			(24,964	)			(198,234	)			(864,223	)
Net Loss		$	(79,293	)		$	(175,714	)		$	(125,738	)		$	(415,268	)		$	(4,251,013	)
Per share information:
Basic and diluted loss per common share		$	(0.04	)		$	(0.19	)		$	(0.07	)		$	(0.56	)
Weighted average shares outstanding			1,834,393				931,166				1,834,393				735,915
(See accompanying notes to the financial statements)

 

 

NOGAL ENERGY, INC.
(fka BLUGRASS ENERGY, INC.)
(A Development Stage Company)
STATEMENT OF SHAREHOLDER'S EQUITY / (DEFICIT)
			Common Stock								Additional				Deficit Accumulated During Development				Total Stockholders' Equity
			Shares				Amount				Paid-in-Capital				Stage				(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			349,227				349				(3,527,925	)			—				(3,527,576	)
Conversion of debentures			43,301				43				80,750				—				80,793
Common stock issued for services			1,220				1				36,599				—				36,600
Common stock and warrants issued			4,200				4				50,396				—				50,400
Stock compensation expense			—				—				273,186				—				273,186
Net loss			—				—				—				(3,786,993	)			(3,786,993	)
Balances at Decemebr 31, 2011			397,948				397				(1,102,611	)			(3,786,993	)			(4,889,207	)
Conversion of debentures			1,436,445				1,437				4,110,117				—				4,111,554
Stock compensation expense			—				—				137,534				—				137,534
Net loss			—				—				—				(338,282	)			(338,282	)
Balances at December 31, 2012			1,834,393				1,834				3,145,040				(4,125,275	)			(978,401	)
Stock compensation expense			—				—				8,929				—				8,929
Net loss			—				—				—				(125,738	)			(125,738	)
Balances at June 30, 2013 (Unaudited)			1,834,393			$	1,834			$	3,153,969			$	(4,251,013	)		$	(1,095,210	)
(See accompanying notes to the financial statements)

 

 

NOGAL ENERGY, INC.
(fka BLUGRASS ENERGY, INC.)
(A Development Stage Company)
STATEMENTS OF CASHFLOWS
			Six Months Ended June 30, 2013				Six Months Ended June 30, 2012				December 11, 2007 (Inception) to June 30, 2013
Cash flows used in operating activities:
Net loss		$	(125,738	)		$	(415,268	)		$	(4,251,013	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Debt discount amortization			—				124,933				216,561
Loss on 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			8,929				66,104				419,649
Changes in assets and liabilities:
Other receivable			—				(4,067	)			(8,541	)
Accounts payable and accrued liabilities			39,531				44,674				91,776
Accounts payable - related party			—				(12,185	)			127,867
Accrued interest			24,964				104,228				(76,174	)
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		$	—			$	4,062,952			$	4,192,347
(See accompanying notes to the financial statements)

 

NOGAL ENERGY, INC.

(fka BLUGRASS ENERGY INC.)

(A Development Stage Company)

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2013

 

Organization – Nature of Operations

 

Nogal Energy, Inc. (the “Company” or “Nogal”) 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.

 

On July 17, 2013, the Company amended its Articles of Incorporation to change its name from “Blugrass Energy, Inc.” to “Nogal Energy, Inc.”.

 

On July 17, 2013, the Company filed a Certificate of Change regarding a 1 for 200 shares reverse stock split. The split was effective August 12, 2013, and the stock continues trading under the symbol “BLUGD”. In early September of 2013, the stock symbol will change to “NGLE”. The accompanying financial statements reflect retroactive application of the split.

 

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 and six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013.

 

NOGAL ENERGY, INC.

(fka BLUGRASS ENERGY INC.)

(A Development Stage Company)

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 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 June 30, 2013 and December 31, 2012, respectively.  The balance of other receivable as of June 30, 2013 and December 31, 2012 consisted of amounts representing cash advances owed to the Company.

 

Loss Per Share - Loss per share requires 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.

 

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.

 

NOGAL ENERGY, INC.

(fka BLUGRASS ENERGY INC.)

(A Development Stage Company)

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2013

 

Going Concern

 

The Company’s financial statements for the three and six months ended June 30, 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 $125,738 for the period ended June 30, 2013, and an accumulated deficit during the development stage of $4,251,013 as of June 30, 2013.  At June 30, 2013, the Company had a working capital deficit of $1,095,210 and the Company had no revenues from its activities during the six months ended June 30, 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 December 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.

 

On November 19, 2012, the Company issued an unsecured promissory note to Excellere Capital Group LLC in the amount of $102,215 (the “$102,215 Excellere Note”). The $102,215 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 $102,215 Excellere Note has been extended to December 31, 2013. All past due principal and interest on the $102,215 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.

 

NOGAL ENERGY, INC.

(fka BLUGRASS ENERGY INC.)

(A Development Stage Company)

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2013

 

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 $52,137 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 December 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 June 30, 2013 and December 31, 2012, the Company had $97,500 outstanding under the Line of Credit. The amount is outstanding as of June 30, 2013, and is considered to be in default.

 

Convertible Promissory Notes

 

As of June 30, 2013 Convertible Promissory Notes totaling $100,000 were in payment default and, accordingly, accrued interest at a rate of 18%.  

 

Subsequent Events

 

On July 17, 2013, the Company amended its Articles of Incorporation to change the name to Nogal Energy, Inc.; and effectuated a 1 for 200 reverse split of the Common Stock of the Company.

 

The reverse split was processed by OTCBB effective August 12, 2013, and the stock continues trading under the symbol of BLUGD.

 

On August 9, 2013, the Company issued 15,000,000 shares of Common Stock, as compensation for consulting services, to Excellere Capital Group, LLC. The issuance resulted in change of control of the Company, with Excellere Capital Group, LLC being an 89.1% owner of the Company’s Common Stock on the date of issue. $206,447 of advances, notes payable and accrued interest due to Excellere as of June 30, 2013, will be classified as related debt.

 

In accordance with agreements, upon the change in control, certain debt to previous owners, officers and directors is forgiven. $127,867 of Accounts payable – related party, $17,851 of Accounts payable and accrued liabilities, and $4,707 of accrued interest, were written off on August 9, 2013.

 

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

 

Nogal 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. On July 17, 2013, the Company amended its Articles of Incorporation to change its name to Nogal Energy, Inc.

 

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 June 30, 2013 compared to the Three months Ended June 30, 2012

 

We are still in our development stage and have no revenues to date.  We incurred operating expenses of $63,471 and $60,790 for the three-month periods ended June 30, 2013 and 2012, respectively.

 

During the three months ended June 30, 2013, we recognized a net loss of $79,293 compared to a net loss of $175,714 for the three months ended June 30, 2012. The decrease was attributed to smaller interest expense for the three months ended June 30, 2013, due to the pay down and forgiveness of debt, which occurred during the quarter ended December 31, 2012.

 

For the Six months Ended June 30, 2013 compared to the Six months Ended June 30, 2012

 

We incurred operating expenses of $100,774 and $217,034 for the six-month periods ended June 30, 2013 and 2012, respectively. The decrease in operation expenses was due primarily to reduction in payroll and other general and administrative expenses.

 

During the six months ended June 30, 2013, we recognized a net loss of $125,738 compared to a net loss of $415,268 for the six months ended June 30, 2012. The decrease was attributed to reduced operating expenses and smaller interest expense for the six months ended June 30, 2013, due to the pay down and forgiveness of debt, which occurred during the quarter ended December 31, 2012.

 

Liquidity and Capital Resources

 

At June 30, 2013, we had total assets of $8,541 consisting of an other asset. At June 30, 2013, we had total current liabilities of $1,103,751 consisting of accounts payable totaling $566,177, accrued interest totaling $140,722, notes payable totaling $199,352, line of credit totaling $97,500, and $100,000 of convertible promissory notes outstanding. Compared to balances at December 31, 2012, this includes reclassification of convertible promissory note in the amount of $102,215 to note payable, due to waver of conversion rights by holder of the note.

 

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 six months ended June 30, 2013, we used cash of $52,314 in operations, and our source of cash inflows was from financing activities totaling $52,137.

 

During the six months ended June 30, 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 Quarterly 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 June 30, 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.

 

None

 

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.

 

N/A

 

Item 5.  Other Information.

 

N/A

 

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.

 

October 1, 2013

Blugrass Energy Inc. (Registrant)

	By:	/s/ Stephen Bargo
		Stephen Bargo, Chief Executive Officer
	By:	/s/ Stephen Bargo
		Stephen Bargo, Chief Accounting Officer

 

 

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