**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





*(Mark
      One)*


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




For
      the
      quarterly period ended July 31, 2008


o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934




For
      the
      transition period from _______ to _______





Commission
      File Number: 333-141480





**KENTUCKY
      USA ENERGY, INC.**


(Exact
      name of small business issuer as specified in its charter)





**Delaware**
            **20-5750488**(State
                of incorporation)
            (IRS
                Employer Identification No.)





**321
      Somerset Road, Suite 1**


**London,
      KY 40741**


(Address
      of principal executive offices)





**(606)
      878-5987**


(Issuer’s
      telephone number)





(Former
      name, former address and former fiscal year, if changed since last
      report)





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 xNo o





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check One):





Large accelerated filer o
            
            Accelerated filer o
            
            Non-accelerated filer o
            
            Smaller reporting companyþ(Do not check if a smaller
              Reporting company)





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





There
      were 36,194,592 **** shares
      of
      the issuer’s common stock outstanding as of July 31, 2008.










**KENTUCKY
      USA ENERGY, INC.**




**INDEX**




PagePart
                I Financial Information
            3Item 1
            Financial
                Statements
            3Condensed
                Consolidated Balance Sheet (unaudited)
            3Condensed
                Consolidated Statements of Operations (unaudited)
            4Condensed
              Consolidated
              Statements of Stockholders' Deficit
            5Condensed
                Consolidated Statements of Cash Flows (unaudited)
            6Notes
                to the Unaudited Financial Statements
            7Item 2
            Management’s
                Discussion and Analysis of Financial Condition and Results of Operations
            15Item 4T
            Controls
                and Procedures
            19Part
                II Other Information
            20Item 6
            Exhibits
            20Signatures
            
            21Exhibit
                – Certification of Principal Executive OfficerExhibit
                – Certification of Principal Financial OfficerExhibit
                – Certification of Chief Executive OfficerExhibit
                – Certification of Chief Financial Officer











**PART
      I – FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**




KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)




Condensed
      Consolidated Balance Sheet (unaudited)




July 31, 2008UnauditedASSETSCurrent
                AssetsCash
                and cash equivalents
            
            $
            2,142,100Total
                current assets
            
            
            2,142,100Other
                AssetsAdvances
                to public shell companyLoan
                fees
            
            
            1,096,188Discounts
            
            
            -Proved
                natural gas properties, using full cost method
            
            
            2,020,396Total
                other assets
            
            
            3,116,584Other
                property and equipment, net
            
            
            5,000Total
                assets
            
            $
            5,263,684LIABILITIES
                AND STOCKHOLDERS' DEFICITCurrent
                LiabilitiesAccrued
                liabilities
            
            $
            58,333Derivative
                liability - warrants
            
            
            2,126,959Notes
                payable, due within one year
            
            
            650,000Total
                current liabilities
            
            
            2,835,292Long-term
                DebtConvertible
                debt, net of discounts of $2,576,458
            
            
            1,208,111Notes
                payable, less current maturities
            
            
            2,500,000Total
                long-term debt
            
            
            3,708,111Total
                liabilities
            
            
            6,543,403Stockholders'
                DeficitCommon
                stock, ($0.0001 par value; 300,000,000 sharesauthorized;
                36,194,592 shares issued and outstanding)
            
            
            3,868Additional
                paid-in capital
            
            
            3,428,749Deficit
                accumulated during exploration stage
            
            
            (4,712,336
            )Total
                stockholders' deficit
            
            
            (1,279,719
            )Total
                liabilities and stockholders' deficit
            
            $
            5,263,684





The
      accompanying notes are an integral part of these financial
      statements.




3


KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)




Condensed
      Consolidated Statements of Operations (unaudited)




Three Months Ended
            
            Nine Months Ended
            
            From InceptionJuly 31, 2008
            
            July 31, 2008
            
            to July 31, 2008(Unaudited)
            
            (Unaudited)
            
            (Unaudited)Revenues
            
            $
            -
            
            $
            -
            
            $
            -General
                and Administrative ExpensesAmortization
                of loan fees
            
            
            54,016
            
            
            54,016
            
            
            54,016General
                and administrative
            
            
            31,347
            
            
            38,896
            
            
            38,896Legal
                and accounting
            
            
            181,582
            
            
            242,808
            
            
            244,808Loss
                from operations
            
            
            (266,945
            )
            
            (335,720
            )
            
            (337,720
            )Other
                Income (expense)Changes
                in fair value of derivative liability
            
            
            2,759,418
            
            
            2,759,418
            
            
            2,759,418Interest
                expense
            
            
            (7,083,821
            )
            
            (7,126,834
            )
            
            (7,132,534
            )Loss
                before income taxes
            
            
            (4,591,348
            )
            
            (4,703,136
            )
            
            (4,710,836
            )Income
                taxes
            
            
            -
            
            
            -
            
            
            -Net
                loss
            
            $
            (4,591,348
            )
            $
            (4,703,136
            )
            $
            (4,710,836
            )Net
                income per shareBasic
                and diluted:Operations
            
            $
            (0.13
            )
            $
            (0.20
            )
            $
            (0.20
            )Total
            
            $
            (0.13
            )
            $
            (0.20
            )
            $
            (0.20
            )





The
      accompanying notes are an integral part of these financial
      statements.




4


KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
  Condensed
        Consolidated Statements of Changes in Stockholders'
        Deficit


Common
                    StockShares
              
              Common
                  Stock
              
              AdditionalPaid-inCapital
              
              DeficitAccumulatedDuringExplorationStage
              
              
              TotalStockholders'(Deficit)Balance
                  at October 5, 2007 (inception)
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              
              $
              -18,000,000
                  shares of stock issued for serviceson
                  October 5, 2007 at $0.001 per share
              
              
              18,000,000
              
              
              1,800
              
              
              200
              
              
              
              
              
              
              2,000Net
                  loss for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,700
              )
              
              
              (7,700
              )Balance
                  at October 31, 2007
              
              
              18,000,000
              
              
              1,800
              
              
              200
              
              
              (7,700
              )
              
              
              (5,700
              )May
                  2008 issuance of 12,000,000 shares in connection with merger, net
                  of
                  $8,500,000of
                  common shares issued as cost of the transaction
              
              
              12,000,000
              
              
              1,200
              
              
              (8,499,500
              )
              
              (1,500
              )
              
              
              (8,499,800
              )May
                  2008 issuance of 5,000,000 shares inconnection
                  with issuance costs ofrecapitalization
              
              
              5,000,000
              
              
              500
              
              
              8,499,500
              
              
              -
              
              
              
              8,500,000Issuance
                  of stock in partial settlement ofderivative
                  liability - May 2008
              
              
              1,194,592
              
              
              368
              
              
              3,428,549
              
              
              
              
              
              
              3,428,917Net
                  loss for the period (unaudited)
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,703,136
              )
              
              
              (4,703,136
              )Balance
                  at July 31, 2008 (unaudited)
              
              
              36,194,592
              
              $
              3,868
              
              $
              3,428,749
              
              $
              (4,712,336
              )
              
              $
              (1,279,719
              )
  The
        accompanying notes are an integral part of these
        financial statements.


5


KENTUCKY
      USA ENERGY, INC.


(Formerly
      Las Rocas Mining Corp.)


(AN
      EXPLORATION STAGE COMPANY)




Condensed
      Consolidated Statements of Cash Flows (unaudited)





Nine Months Ended
            
            From InceptionJuly 31, 2008
            
            to July 31, 2008(Unaudited)
            
            (Unaudited)Net
                loss
            
            $
            (4,703,136
            )
            $
            (4,710,836
            )Adjustments
                to reconcile net loss to net cashused
                in operating activitiesNoncash
                equity transactions
            
            
            3,479,156
            
            
            3,431,117Changes
                in fair value of derivative liability
            
            
            (2,759,418
            )
            
            (2,759,418
            )Fair
                market value adjustment on convertible debt
            
            
            (3,429,117
            )
            
            (3,429,117
            )Amortization
                of convertible debt and derivative liability - warrants
            
            
            3,723,579
            
            
            3,723,579Increase
                in liabilitiesAccrued
                liabilities
            
            
            52,634
            
            
            58,333Total
                adjustments to reconcile net loss to net cashused
                in operating activities:
            
            
            1,066,834
            
            
            1,024,494Net
                cash used in operating activities
            
            
            (3,636,302
            )
            
            (3,686,342
            )Cash
                flows from investing activitiesPurchases
                of other property & equipment
            
            
            (5,000
            )
            
            (5,000
            )Purchases
                of natural gas leases
            
            
            (300,668
            )
            
            (2,020,396
            )Total
                cash flows from investing activities
            
            
            (305,668
            )
            
            (2,025,396
            )Cash
                Flows From Financing ActivitiesIncrease
                in convertible debt
            
            
            3,300,026
            
            
            3,300,026Proceeds
                from borrowings, net of loan fees of $1,096,188
            
            
            4,003,812
            
            
            5,803,812Repayments
                of long-term debt
            
            
            (1,250,000
            )
            
            (1,250,000
            )Total
                cash flows from financing activities
            
            
            6,053,838
            
            
            7,853,838Net
                increase in cash
            
            
            2,111,868
            
            
            2,142,100Cash
                and cash equivalents, beginning of period
            
            
            30,232
            
            
            -Cash
                and cash equivalents, end of period
            
            $
            2,142,100
            
            $
            2,142,100Supplemental
                Disclosures of Cash Flow InformationCash
                paid for interest
            
            $
            44,896
            
            $
            50,595Cash
                paid for income taxes
            
            $
            -
            
            $
            -





During
      the quarter ended July 31, 2008 the Company incurred noncash financing costs
      of
      $6,300,037.





The
      accompanying notes are an integral part of these financial
      statements.




6


KENTUCKY
      USA ENERGY, INC.


(Formerly
      Las Rocas Mining Corp.)


(AN
      EXPLORATION STAGE COMPANY)


NOTES
      TO
      FINANCIAL STATEMENTS


July
      31,
      2008




**Note
      1 – Basis of Presentation**





The
      accompanying unaudited condensed consolidated financial statements of Kentucky
      USA Energy, Inc. (the Company) have been prepared in accordance with generally
      accepted accounting principles for interim financial information and with the
      instructions to Form 10-Q and Item 210 of Regulation S-X. Accordingly, they
      do
      not include all of the information and footnotes required by generally accepted
      accounting principles for complete financial statements. In the opinion of
      management, all adjustments considered necessary for fair presentation have
      been
      included. Operating results for the three months ended July 31, 2008 are not
      necessarily indicative of the results that may be expected for the year ended
      October 31, 2008. The Company is still in the exploration stage, has recognized
      no revenue to date, and therefore has recorded no income tax
      expense.





These
      consolidated financial statements include the accounts of Kentucky USA Energy,
      Inc. and the accounts of its subsidiary, KY USA Energy, Inc. All inter-company
      balances have been eliminated in consolidation.




**Note
      2 – Acquisition**





On
      May 2,
      2008 Kentucky USA Energy, Inc. ("Kentucky,” “Company"), a Delaware corporation,
      completed the acquisition of all the outstanding stock of KY USA Energy, Inc.
       ("KY"), a Kentucky corporation, in exchange for 18,000,000 shares of
      Kentucky's common stock.





Prior
      to
      the Merger, the Company had 36,000,000 shares of Common Stock issued and
      outstanding. In connection with the Merger, the Company issued 18,000,000 shares
      of Common Stock in exchange for the issued and outstanding shares of common
      stock of KY USA.  Also in connection with the acquisition, 24,000,000
      shares of issued and outstanding shares of the Company’s Common Stock were
      returned to the Company and cancelled. In connection with the Merger, 5,000,000
      shares of the Company’s Common Stock were issued to the IR
      Consultants.





As
      a
      result of the acquisition, KY became a subsidiary of Kentucky. Upon consummation
      of the transaction the existing shareholders of KY held a majority of the voting
      power of the Company and controlled the Company’s board of directors.





Since
      at
      the time of the acquisition, Kentucky had no significant operations, liabilities
      or assets, the beginning equity balances of Kentucky have been presented as
      a
      recapitalization of KY whereby 18,000,000 common shares are considered
      constructively outstanding since inception and the transaction is accounted
      for
      as the subsequent issuance of 12,000,000 shares for the net assets of Kentucky.
      The 5,000,000 shares issued to IR Consultants were recorded as the cost of
      capital.





As
      a
      result of these transactions, the historical financial statements of KY are
      the
      continuing historical financial statements of the Company.




7


KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
 NOTES
        TO
        FINANCIAL STATEMENTS
 July
        31,
        2008




**Note
      3 - Significant Accounting Policies**





Cash
      and Cash Equivalents


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





Estimates


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts reported on the financial
      statements and accompanying notes. Actual results could differ from those
      estimates. Gas reserve estimates are developed from information provided by
      the
      Company’s management to Willard F. Glover, Petroleum Engineer and Geologist, of
      Crossville, Tennessee at October 31, 2007.





Natural
      Gas Properties


The
      Company follows the full cost method of accounting for gas property acquisition,
      exploration and development activities. Under this method, all productive and
      non-productive costs incurred in connection with the acquisition of, exploration
      for and development of gas reserves for each cost center are capitalized.
      Capitalized costs include lease acquisitions, geological and geophysical work,
      and the costs of drilling, completing and equipping gas wells. Costs, however,
      associated with production and general corporate activities are expensed in
      the
      period incurred. Interest costs related to proved properties and properties
      under development are also capitalized to gas properties. Gains or losses are
      recognized only upon sales or dispositions of significant amounts of gas
      reserves representing an entire cost center. Proceeds from all other sales
      or
      dispositions are treated as reductions to capitalized costs. The capitalized
      gas
      property, less accumulated depreciation, depletion and amortization and related
      deferred income taxes, if any, is generally limited to an amount (the ceiling
      limitation) equal to the sum of: (a) the present value of estimated future
      net
      revenues computed by applying current prices in effect as of the balance sheet
      date (with consideration of price changes only to the extent provided by
      contractual arrangements) to estimated future production of proved gas reserves,
      less estimated future expenditures (based on current costs) to be incurred
      in
      developing and producing the reserves using a discount factor of 10% and
      assuming continuation of existing economic conditions; and (b) the cost of
      investments in unevaluated properties that are excluded from the costs being
      amortized.





Issuance
      of Stock for Non-Cash Consideration


All
      issuances of the Company's stock for non-cash consideration have been assigned
      a
      per share amount equaling either the market value of the shares issued or the
      value of consideration received, whichever is more readily determinable. The
      majority of the non-cash consideration received pertains to services rendered
      by
      consultants and others and has been valued at the market value of the shares
      on
      the dates issued.





8


KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
 NOTES
        TO
        FINANCIAL STATEMENTS
 July
        31,
        2008




**Note
      3 - Significant Accounting Policies (Continued)**





Earnings
      per Share


In
      accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
      “Earnings per Share” (“SFAS 128”), basic income per share is based on 34,619,587
      weighted average shares outstanding for the quarter ended July 31, 2008. Diluted
      earnings per common share are computed by dividing income available to common
      shareholders by the weighted average number of shares of common stock
      outstanding during the period increased to include the number of additional
      shares of common stock that would have been outstanding if the dilutive
      potential shares of common stock had been issued. The dilutive effect of
      outstanding options and warrants is reflected in diluted earnings per
      share.





The
      number of dilutive shares outstanding at July 31, 2008 is 2,700,000 and these
      shares are related to options and warrants. The following table summarizes
      the
      changes in the Company’s outstanding stock options available through warrants
      for the quarter ended July 31, 2008:





Number
              of Stock
              Options
              Available
              through
              Warrants
            
            Weighted
              Average
              Exercise
              PriceOutstanding
                at beginning of period
            
            
            -
            
            
            -Granted
            
            
            4,700,000
            
            
            1.27Exercised
            
            
            2,000,000
            
            
            1.00Cancelled/forfeited
            
            
            -
            
            
            -Outstanding
                at July 31, 2008
            
            
            2,700,000
            
            
            1.46Options
                Exercisable at July 31, 2008
            
            
            2,700,000
            
            
            1.46





The
      following table summarizes the information respecting stock options available
      through warrants outstanding and exercisable at July 31, 2008:





Stock Options Outstanding
            
            Stock Options ExercisableExercise
              Price
            
            Number
              Outstanding
            
            Weighted
              Average
              Remaining
              Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
              Exercisable
            
            Weighted
              Average
              Remaining
              Contractual
              Life
            
            Weighted
              Average
              Exercise
              Price$
            1.00
            
            
            200,000
            
            
            0.08
            
            $
            1.00
            
            
            200,000
            
            
            0.08
            
            $
            1.00$
            1.50
            
            
            2,500,000
            
            
            3.00
            
            $
            1.50
            
            
            2,500,000
            
            
            3.00
            
            $
            1.50




9


KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
 NOTES
        TO
        FINANCIAL STATEMENTS
 July
        31,
        2008




**Note
      4 - Recent Accounting Pronouncements**





In
      July
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB
      Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in
      tax positions taken or expected to be taken by the Company, including issues
      relating to financial statement recognition and measurement. FIN 48 requires
      companies to determine whether it is “more likely than not” that a tax position
      will be sustained upon examination by the appropriate taxing authorities before
      any part of the benefit can be recorded in the financial statements. It also
      provides guidance on the recognition, measurement and classification of income
      tax uncertainties, along with any related interest and penalties. FIN 48 will
      also require significant additional disclosures. This Interpretation is
      effective for fiscal years beginning after December 15, 2006 for publicly traded
      companies. The Company will evaluate the potential impact of this Interpretation
      on its financial position and results of operations. The Company does not expect
      the interpretation to have a material impact on the results of its operations
      or
      financial position.





In
      September 2006, the FASB issued SFAS 157, Fair Value Measurements. The standard
      provides guidance for using fair value to measure assets and liabilities. It
      defines fair value, establishes a framework for measuring fair value under
      generally accepted accounting principles and expands disclosures about fair
      value measurement.  Under
      the
      standard, fair value refers to the price that would be received to sell an
      asset
      or paid to transfer a liability in an orderly transaction between market
      participants in the market in which the reporting entity transacts. It clarifies
      the principle that fair value should be based on the assumptions market
      participants would use when pricing the asset or liability. In support of this
      principle, the standard establishes a fair value hierarchy that prioritizes
      the
      information used to develop those assumptions. Under the standard, fair value
      measurements would be separately disclosed by level within the fair value
      hierarchy. SFAS 157 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007. The Company continues to evaluate
      the
      impact the adoption of this statement could have on its financial condition,
      results of operations and cash flows and does not believe the standard will
      have
      a material impact on the results of its operations or financial
      position.





In
      September 2006, the Securities and Exchange Commission staff published
      Staff Accounting Bulletin SAB No. 108 (“SAB 108”), "Considering the Effects of
      Prior Year Misstatements when Quantifying Misstatements in Current Year
      Financial Statements." SAB 108 addresses quantifying the financial statement
      effects of misstatements, specifically, how the effects of prior year
      uncorrected errors must be considered in quantifying misstatements in the
      current year financial statements. SAB 108 is effective for fiscal years ending
      after November 15, 2006. The Company has adopted SAB 108 and it has not had
      an
      impact on the Company’s financial statements.




10





KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
 NOTES
        TO
        FINANCIAL STATEMENTS
 July
        31,
        2008
 
 **Note
        4 - Recent Accounting Pronouncements (Continued)**
 
 In
        February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
        Assets and Financial Liabilities — as amended (“SFAS 159”). SFAS 159 permits
        entities to elect to report eligible financial instruments at fair value
        subject
        to conditions stated in the pronouncement including adoption of SFAS 157
        discussed above. The purpose of SFAS 159 is to improve financial reporting
        by
        mitigating volatility in earnings related to current reporting requirements.
        The
        Company is considering the applicability of SFAS 159 and will determine if
        adoption is appropriate. The effective date for SFAS 159 is for fiscal years
        beginning after November 15, 2007.
 
 In
        December 2007, the FASB issued SFAS No. 141(R), Business Combinations
        ("SFAS 141(R)"), which improves the relevance, representational
        faithfulness, and comparability of the information that a reporting entity
        provides in its financial reports about a business combination and its effects.
        SFAS 141(R) requires acquisition-related costs and restructuring costs to
        be recognized separately from the acquisition. This statement applies
        prospectively to business combinations for which the acquisition date is
        on or
        after the beginning of the first annual reporting period beginning on or
        after
        December 15, 2008. The Company continues to evaluate the potential impact
        of this Interpretation on its financial position and the results of its
        operations.
 
 **Note
        5 - Natural Gas Properties**
 
 The
        following table sets forth information concerning costs related to the Company’s
        natural gas property acquisitions, exploration, and development activities
        for
        the quarter ended July 31, 2008:
 
 July
                  31, 2008Property
                  acquisitions:
              
              $
              300,668Proved
              
              
              -Unproved
              
              
              -Less
                  proceeds from sales of properties
              
              
              -Development
                  cost
              
              
              -Total
              
              $
              300,668
 
 As
        of
        July 31, 2008, the Company was still in an exploratory stage and had not
        begun
        any revenue producing activities.
  11
  KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
 NOTES
        TO
        FINANCIAL STATEMENTS
 July
        31,
        2008
 
 **Note
        6 – Credit Agreements**
 
 On
        May
        29, 2008 the Company closed a $2,500,000 securities purchase agreement with
        a
        private investor. Under the agreement, the Company has authorized a series
        of
        senior convertible notes of the Company which are convertible into the Company’s
        common stock, par value $0.0001 per share. The note bears interest at 8%
        per
        year and has a maturity date thirty-six months from closing. Interest begins
        accruing on the issuance date and is computed on the basis of a 360-day year
        with the first interest payment due August 29, 2008 and the first principal
        installment due May 29, 2009. The note is secured by a lien on substantially
        all
        of the Company’s natural gas properties. The note has no financial covenants and
        the Company is in compliance with all non-financial covenants. The note proceeds
        were used for operating purposes of the Company. The Company incurred closing
        costs of approximately $651,000 which will be amortized over the term of
        the
        note.
 
 On
        June
        25, 2008 the Company closed a $10,000,000 senior credit facility with NSES
        12,
        LLC. Under the facility, the Company may borrow up to $10,000,000. The Company’s
        initial borrowing base was set at $2,500,000. The initial loan under the
        facility with NSES 12, LLC closed on June 25, 2008 in the principal amount
        of
        $2.5 million, bearing interest at 12% per year. Interest only is payable
        during the term of the loan and the principal balance of the loan is due
        thirty-six months from closing. Interest is to accrue starting on the day
        the
        loan is funded, with the first interest payment due October 2008. The facility
        is secured by a lien on substantially all of the Company’s natural gas
        properties. The facility has affirmative and negative covenants, with which
        the
        Company is in compliance. The loan proceeds were used for the development
        of
        certain oil and gas properties. The Company incurred closing costs associated
        with the loan of approximately $499,000, which will be amortized over the
        term
        of the loan.
 
 **Note
        7 – Derivative Liabilities, Beneficial Conversion Feature and
        Warrants**
 
 As
        of
        July 31, 2008, the Company recognized a derivative liability of $1,284,569
        pursuant to SFAS 133 “Accounting for Derivative Instruments and Hedging
        Activities” (SFAS 133) relating to a beneficial conversion feature embedded in
        the Company’s debt instrument entered into on May 29 (See Note 6). The
        conversion feature allowed for the conversion of the underlying debt into
        shares
        of the Company’s common stock at a price of $1.50 per share when the market
        price of the Company’s stock was $2.80 per share. The existence of this discount
        is called a “beneficial conversion feature.”
  12
  KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
 NOTES
        TO
        FINANCIAL STATEMENTS
 July
        31,
        2008
 
 **Note
        7 - Derivative Liabilities, Beneficial Conversion**
 **Feature
        and Warrants (Continued)**
 
 EITF
        00-19 “Accounting for Derivative Financial Instruments Indexed to, and
        Potentially Settled in, a Company's Own Stock” (EITF 00-19) specifies
        characteristics that financial instruments to be settled in a Company's own
        stock must satisfy in order to be accounted for as equity rather than debt
        under
        SFAS 133. Among other provisions, under the EITF, instruments must be
        categorized as debt if, under terms of the instrument, the Company might
        be
        required to issue a variable number of shares in satisfaction of the conversion
        feature. Provisions of the May 29 instrument allow net settlement of the
        instrument upon exercise, resulting in the potential settlement with a variable
        number of shares, and the settlement is based upon the fixed cash value of
        the
        debt, known at issuance.
 
 Accordingly
        the beneficial conversion feature was recorded at its intrinsic value of
        $1.98
        per warrant, or $3,300,026, which was expensed, the attached debt of $2,500,000
        having been previously discounted to zero in connection with warrants issued
        in
        the same transaction and discussed below. Under provisions of SFAS 133 the
        valuation of the beneficial conversion feature initially recorded as a liability
        is reset at each reporting period to fair value with gain or loss recognized
        in
        income. At July 31, 2008, the Company recognized a gain of $2,015,457 on
        the
        revaluation of this liability to fair value, using the Black-Scholes formula
        with an expected term of approximately 2.5 years, volatility of 60%, and
        a
        risk-free rate of interest of 4%, consistent with valuations of warrants
        outstanding at July 31, 2008, as discussed below.
 
 The
        Company recognized derivative liabilities related to detachable warrants
        issued
        with the May 29 instrument and other debt financing in accordance with SFAS
        150 “Accounting for Certain Financial Instruments with Characteristics of both
        Liabilities and Equity.” Under that pronouncement, free-standing instruments
        that may require the issuance of a variable number of equity shares must
        be
        accounted for as a liability under circumstances similar to those enumerated
        in
        EITF 00-19. The detachable warrants issued with the debt financings are
        remeasured at each reporting date with the resulting gain or loss included
        in
        income of the period.
 
 The
        Company recognized a net gain on the derivative liability during the three
        and
        nine months ended July 31, 2008 in the amount of $2,753,959 due to a partial
        settlement and revaluation of the derivative liability to market at July
        31.
 
 In
        connection with the Company’s warrants as discussed in Note 5, the Company
        incurred initial derivative liabilities totaling $6,300,037 in May, 2008.
        To the
        extent of proceeds received these liabilities were recorded as debt discount
        with any excess expensed upon issuance.  Upon early settlement of a
        loan, any remaining discount is written off. As of July 31, 2008, the
        unamortized balance of loan fees amounted to $1,096,188. The amount on
        these non-cash items charged to interest expense during the three and nine
        months ended July 31, 2008 was $7,023,605, including $247,568 in amortization
        and $1,986,188 to write off fees related to an early-settled
        loan.
  13
  KENTUCKY
        USA ENERGY, INC.
 (Formerly
        Las Rocas Mining Corp.)
 (AN
        EXPLORATION STAGE COMPANY)
 NOTES
        TO
        FINANCIAL STATEMENTS
 July
        31,
        2008
 
 **Note
        8 – Going Concern**
 
 The
        financial statements do not include any adjustments that could be required
        if
        the Company were unable to refinance debt or continue as a going concern.
        The
        Company has incurred substantial losses, which have strained its financial
        resources. If substantial losses continue, or the Company is unable to raise
        sufficient additional capital through debt and equity offerings, liquidity
        problems will cause the Company to curtail operations, liquidate or sell
        assets
        or entities, or pursue other actions that could adversely affect future
        operations. These factors have raised doubt about the Company’s ability to
        continue as a going concern.
  14
  **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
        OPERATION.**
 
 **Statement
        Regarding Forward-Looking Information**
 
 *This
        report contains forward-looking statements within the meaning of
        Section 27A of the Securities Act of 1933, as amended, Section 21E of
        the Securities Exchange Act of 1934 and the Private Securities Litigation
        Reform
        Act of 1995. All statements other than statements of historical facts included
        in this Quarterly Report on Form 10-Q, including without limitation, statements
        in this Management’s Discussion and Analysis of Financial Condition and Results
        of Operations regarding our financial position, estimated working capital,
        business strategy, the plans and objectives of our management for future
        operations and those statements preceded by, followed by or that otherwise
        include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”,
“projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar
        expressions or variations on such expressions are forward-looking statements.
        We
        can give no assurances that the assumptions upon which the forward-looking
        statements are based will prove to be correct. Because forward-looking
        statements are subject to risks and uncertainties, actual results may differ
        materially from those expressed or implied by the forward-looking statements.
        There are a number of risks, uncertainties and other important factors that
        could cause our actual results to differ materially from the forward-looking
        statements, including, but not limited to,* *the
        availability and pricing of additional capital to finance operations, including
        the drilling of our initial gas wells, longer term drilling programs and
        additional leasehold acquisitions, the viability of the shale gas fields
        in the
        Illinois Basin in western Kentucky, our ability to build and maintain a
        successful operations infrastructure and to effectively drill and develop
        producing wells, the successful negotiation and execution of cost-effective
        third-party gas drilling and distribution agreements, the continued commitment
        of drill rig operators and future economic conditions and energy
        prices* *.*
  *Except
        as otherwise required by the federal securities laws, we disclaim any
        obligations or undertaking to publicly release any updates or revisions to
        any
        forward-looking statement contained in this Quarterly Report on Form 10-Q
        to
        reflect any change in our expectations with regard thereto or any change
        in
        events, conditions or circumstances on which any such statement is based.*
 
 Background
 
 Kentucky
        USA Energy, Inc. (the “Company” or “we”) was incorporated in the State of
        Delaware on September 29, 2006 under the name Las Rocas Mining Corp.  On
        October 26, 2007, the Company changed its name to Kentucky USA Energy, Inc.
        to
        facilitate the merger discussions with KY USA Energy, Inc. (“KY USA”). On May 2,
        2008, the Company, KY Acquisition Corp., a wholly-owned subsidiary of the
        Company (“Acquisition Sub”), and KY USA entered into an Agreement and Plan of
        Merger and Reorganization (the “Merger Agreement”), which closed on May 2,
        2008.  Pursuant to the terms of the Merger Agreement, Acquisition Sub
        merged with and into KY USA, which became a wholly-owned subsidiary of the
        Company (the “Merger”).
  15
 
 KY
        USA
        was incorporated in the Commonwealth of Kentucky on October 5, 2007 to acquire,
        explore and develop oil and gas resource properties, with a primary focus
        initially on shale gas in the Illinois Basin in western Kentucky. KY USA
        has
        secured a 75% net revenue interest in a leasehold in Western Kentucky covering
        2,092 acres targeting gas extraction from the New Albany Shale. We have
        identified approximately 40-50 drilling locations on this
        leasehold.  Estimated net recoverable “proved undeveloped
        reserves1”,
        as
        determined by an independent petroleum engineer, are 499.8 million cubic
        feet of
        gas (“MMCF”) per well or 19.992 billion cubic feet of gas (“BCF”) based on 40
        locations with 40 acre spacing. This leasehold is directly adjacent to producing
        wells.
 
 Prior
        to
        the Merger our fiscal year end was February 28 and the fiscal year end of
        KY USA
        was October 31. Following published SEC accounting and financial reporting
        interpretations and guidance and in connection with the Merger, we have changed
        our fiscal year end to October 31 to match that of KY USA. As a result of
        this
        change, we are filing this quarterly report with the SEC for the quarter
        ended
        July 31, 2008.
  Following
        the closing of the Offering (defined below), we began drilling activities
        at our
        initial well locations previously identified. We have continued these drilling
        efforts using the net proceeds from our initial loan under the Credit Facility
        (defined below).
 
 Results
        of Operations for the Three and Nine Month Period Ended July 31,
        2008
 
 We
        are
        still in our exploration stage and have generated no revenues to
        date.
 
 We
        incurred operating expenses of $266,945 and $335,720 for the three and nine
        month periods ended July 31, 2008, respectively. These expenses consisted
        of
        general operating expenses incurred in connection with the day to day operation
        of our business, amortization of loan fees, our costs relating to the Merger
        and
        the preparation and filing of our periodic reports.
 
 We
        have
        generated no revenues and our net operating loss from inception through July
        31,
        2008 was $4,710,836. As KY USA was incorporated on October 5, 2007, there
        are no
        comparative figures from previous years.
 
 Liquidity
        and Capital Resources
 
 Our
        cash
        and cash equivalents balance as of July 31, 2008 was $2,142,100.
  On
        May 9, 2008, KY USA borrowed $100,000 from one individual as a bridge loan
        to be used for working capital purposes. In addition, upon the closing of
        the
        Merger, this lender received warrants to purchase 200,000 shares of our Common
        Stock, such warrants having an initial exercise price of $1.00 per share
        and
        expiring five years after issuance.
 
 1  According
          to Securities and Exchange Commission (“SEC”) definitions, “proved undeveloped
          reserves” are those that are expected to be recovered from new wells on
          undrilled acreage, or from existing wells where a relatively major expenditure
          is required.
  16
  On
        May
        29, 2008 we closed a private offering (the “Offering”) of an 8% senior secured
        convertible note (the “Note”) and warrants (the “Warrants”) to purchase
        2,500,000 shares of the Company’s common stock, $0.0001 par value per share (the
“Common Stock”), to one institutional investor (the “Investor”) for aggregate
        gross proceeds of $2.5 million, as more fully described in our Form 8-K filed
        with the SEC on June 4, 2008. We have used the net proceeds of the Offering
        of
        approximately $1,857,600 (after expenses of the Offering) to repay bridge
        loans
        made to KY USA, to begin drilling at one or more of the five locations that,
        as
        previously disclosed, we have identified for initial wells, and for general
        working capital purposes.
 
 On
        June
        27, 2008, KY USA closed on a senior secured credit facility (the “Credit
        Facility”) with NSES 12, LLC, a funding vehicle of New Stream Capital (the
        "Lender"), pursuant to which KY USA may borrow up to $10,000,000 in the
        aggregate, under certain conditions, as more fully described in our Form
        8-K
        filed with the SEC on July 1, 2008. Under the Credit Facility, KY USA borrowed
        $2,500,000 on June 27, 2008 (the "Initial Loan") and may borrow up to
        an additional aggregate amount of $7,500,000 in installments of a minimum
        of
        $2,500,000 each, solely at the discretion of the Lender.  The proceeds of
        the Initial Loan amount, net after expenses of the transaction, including a
        $200,000 credit facility fee paid to the Lender at closing and a $200,000
        consulting fee paid to one consultant, will be used by KY USA for
        ongoing working capital purposes, including the costs and expenses relating
        to
        the drilling of gas wells in the New Albany shale on KY USA's leasehold in
        western Kentucky.
 
 Including
        the net proceeds from the Offering and the Credit Facility, we have sufficient
        funds to conduct our operations for approximately three to six
        months.
 
 If
        we are
        not successful in generating sufficient liquidity from KY USA operations
        or in
        raising sufficient capital resources on terms acceptable to us, our business,
        results of operations, liquidity and financial condition could suffer
        materially.
 
 We
        presently do not have any available credit, bank financing or other external
        sources of liquidity, other than the net proceeds from the Offering and the
        Credit Facility. Due to our brief history and historical operating losses,
        our
        operations have not been a source of liquidity. We will need to obtain
        additional capital in order to expand operations and become profitable. In
        order
        to obtain capital, we may need to sell additional shares of our common stock
        or
        borrow funds from private lenders. There can be no assurance that we will
        be
        successful in obtaining additional funding in amounts or on terms acceptable
        to
        us, if at all.
 
 Critical
        Accounting Policies
 The
          Company prepares its financial statements in conformity with accounting
          principles generally accepted in the United States of America, which requires
          the Company to make estimates and assumptions that affect the reported
          amounts
          of assets and liabilities and disclosures of contingent assets and liabilities
          at the date of the financial statements and the reported amounts of revenues
          and
          expenses during the year. Actual results could differ from those estimates.
          The
          Company considers the following policies to be the most critical in
          understanding the judgments that are involved in preparing the Company’s
          financial statements and the uncertainties that could impact the Company’s
          results of operations, financial condition and cash flows.
 
 Revenue
          Recognition
 
 The
          Company recognizes revenues based on actual volumes of natural gas sold
          and
          delivered to its customers. Natural gas meters are placed at the customers’
location and usage is billed each month. Crude oil is stored and at the
          time of
          delivery to the customers, revenues are recognized. The Company is presently
          in
          the exploratory stage and has not recognized any revenue to date.
 
 Full
          Cost Method of Accounting
 
 The
          Company follows the full cost method of accounting for oil and gas property
          acquisition, exploration and development activities. Under this method,
          all
          productive and non-productive costs incurred in connection with the acquisition
          of, exploration for and development of oil and gas reserves for each cost
          center
          are capitalized. Capitalized costs include lease acquisitions, geological
          and
          geophysical work, day rate rentals and the costs of drilling, completing
          and
          equipping oil and gas wells. Costs, however, associated with production
          and
          general corporate activities are expensed in the period incurred. Interest
          costs
          related to unproved properties and properties under development are also
          capitalized to oil and gas properties. Gains or losses are recognized only
          upon
          sales or dispositions of significant amounts of oil and gas reserves
          representing an entire cost center. Proceeds from all other sales or
          dispositions are treated as reductions to capitalized costs. The capitalized
          oil
          and gas property, less accumulated depreciation, depletion and amortization
          and
          related deferred income taxes, if any, are generally limited to an amount
          (the
          ceiling limitation) equal to the sum of: (a) the present value of estimated
          future net revenues computed by applying current prices in effect as of
          the
          balance sheet date (with consideration of price changes only to the extent
          provided by contractual arrangements) to estimated future production of
          proved
          oil and gas reserves, less estimated future
 17
 
 Commodity
          Risk
 
 The
          Company's major market risk exposure is in the pricing applicable to its
          oil and
          gas production. Realized pricing is primarily driven by the prevailing
          worldwide
          price for crude oil and spot prices applicable to natural gas production.
          Historically for the industry, prices received for oil and gas production
          have
          been volatile and unpredictable and price volatility is expected to continue.
          As
          of July 31, 2008, the Company has not entered into any hedging agreements
          to
          limit exposure to oil and gas price fluctuations.
 
 Forward-Looking
          Statements And Risk
 
 Certain
          statements in this report, including statements of the future plans, objectives,
          and expected performance of the Company, are forward-looking statements
          that are
          dependent upon certain events, risks and uncertainties that may be outside
          the
          Company's control, and which could cause actual results to differ materially
          from those anticipated. Some of these include, but are not limited to,
          the
          market prices of oil and gas, economic and competitive conditions, inflation
          rates, legislative and regulatory changes, financial market conditions,
          political and economic uncertainties of foreign governments, future business
          decisions, and other uncertainties, all of which are difficult to
          predict.
 
 There
          are
          numerous uncertainties inherent in projecting future rates of production
          and the
          timing of development expenditures. The total amount or timing of actual
          future
          production may vary significantly from estimates. The drilling of exploratory
          wells can involve significant risks, including those related to timing,
          success
          rates and cost overruns. Lease and rig availability, complex geology and
          other
          factors can also affect these risks. Additionally, fluctuations in oil
          and gas
          prices, or a prolonged period of low prices, may substantially adversely
          affect
          the Company's financial position, results of operations, and cash
          flows.
 18
 Off-Balance
        Sheet Arrangements
 
 We
        have
        no off-balance sheet arrangements.
 
 **ITEM
        4T. CONTROLS AND PROCEDURES**
 
 EVALUATION
        OF DISCLOSURE CONTROLS AND PROCEDURES
 
 Under
        the
        supervision and with the participation of our management, including our
        principal executive officer and principal financial officer, we have conducted
        an evaluation of the effectiveness of the design and operation of our disclosure
        controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
        the
        Securities and Exchange Act of 1934, as of the end of the period covered
        by this
        report. Based on this evaluation, our principal executive officer and principal
        financial officer concluded as of the evaluation date that our disclosure
        controls and procedures were effective such that the material information
        required to be included in our SEC reports is recorded, processed, summarized
        and reported within the time periods specified in SEC rules and forms relating
        to our company, particularly during the period when this report was being
        prepared.
  Additionally,
        there were no significant changes in our internal controls or in other factors
        that could significantly affect these controls subsequent to the evaluation
        date. We have not identified any significant deficiencies or material weaknesses
        in our internal controls, and therefore there were no corrective actions
        taken.
  19
 
 **PART
        II – OTHER INFORMATION**
 
 **ITEM
        6. EXHIBITS.**
 
 Exhibit No.
              
              Description31.1
              
              Certification
                  of Principal Executive Officer pursuant to Section 302 the Sarbanes-Oxley
                  Act of 200231.2
              
              Certification
                  of Principal Financial Officer pursuant to Section 302 the Sarbanes-Oxley
                  Act of 200232.1
              
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  200232.2
              
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002
  20
  **SIGNATURES**
 
 In
        accordance with the requirements of the Securities Exchange Act of 1934,
        the
        Registrant has caused this report to be signed on its behalf by the undersigned,
        thereunto duly authorized.
 
 Date:
                  September 22, 2008
              Kentucky
                USA Energy, Inc.By:
              /s/
                  Steven d. EversoleName:Steven
                D. EversoleTitle:  
                Principal Executive Officer
  21