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, 2009





 ̈
            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 markwhether 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 ̈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. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
One):





Large accelerated filer  ̈
            
            Accelerated
      filer  ̈
            
            Non-accelerated
      filer  ̈
            
            Smaller
      reporting company þ(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  ̈ No
x


There
were 36,927,092shares
of the issuer’s common stock outstanding as of September 14,
2009.





PART
I – FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS


2





KENTUCKY
USA ENERGY, INC.


(Formerly
Las Rocas Mining Corp.)


(AN
EXPLORATION STAGE COMPANY)


Condensed
Consolidated Balance Sheets




July 31,
    2009
                    
                    
                    October 31,
      2008ASSETS
                    
                    UnauditedCurrent
      AssetsCash and cash
      equivalents
                    
                    $
                    57,296
                    
                    
                    $
                    899,037Prepaid
      expenses
                    
                    
                    10,229
                    
                    
                    
                    15,613Total Current
      Assets
                    
                    
                    67,525
                    
                    
                    
                    914,650Other
AssetsLoan fees, net of
      accumulated amortization of $563,527 and $145,115
                    
                    
                    528,357
                    
                    
                    
                    855,814Investment in natural
      gas properties, using full cost method
                    
                    
                    6,852,819
                    
                    
                    
                    3,796,351Total Other
      Assets
                    
                    
                    7,381,176
                    
                    
                    
                    4,652,165Other property and equipment, net
      of accumulated depreciation of $32,899 and $7,830
                    
                    
                    444,824
                    
                    
                    
                    306,366Total
      Assets
                    
                    $
                    7,893,525
                    
                    
                    $
                    5,873,181LIABILITIES AND STOCKHOLDERS'
      EQUITY (DEFICIT)Current
      LiabilitiesAccounts
      payable
                    
                    $
                    200,477
                    
                    
                    $
                    188,225Accrued
      interest
                    
                    
                    285,528
                    
                    
                    
                    81,928Accrued
      liabilities
                    
                    
                    15,000
                    
                    
                    
                    -Stock
      liability
                    
                    
                    850,600
                    
                    
                    
                    188,600Derivative liability
      - warrants
                    
                    
                    1,275,946
                    
                    
                    
                    1,574,177Notes
      payable
                    
                    
                    5,650,000
                    
                    
                    
                    3,150,000Capital lease
      obligations
                    
                    
                    83,268
                    
                    
                    
                    83,268Total Current
      Liabilities
                    
                    
                    8,360,819
                    
                    
                    
                    5,266,198Long-term
    DebtConvertible debt, net
      of discounts of $1,527,779 and $2,152,778
                    
                    
                    972,221
                    
                    
                    
                    347,222Capital lease
      obligations
                    
                    
                    136,299
                    
                    
                    
                    202,169Total Long-term
      Debt
                    
                    
                    1,108,520
                    
                    
                    
                    549,391Total
      Liabilities
                    
                    
                    9,469,339
                    
                    
                    
                    5,815,589Stockholders' Equity
      (Deficit)Common stock, ($0.0001 par
      value; 300,000,000 sharesauthorized;
      36,194,592 shares issued and outstanding)
                    
                    
                    3,619
                    
                    
                    
                    3,619Additional paid-in
      capital
                    
                    
                    3,427,498
                    
                    
                    
                    3,427,498Deficit accumulated during
      exploration stage
                    
                    
                    (5,006,931
                    )
                    
                    
                    (3,373,525
                    )Total Stockholders' Equity
      (Deficit)
                    
                    
                    (1,575,814
                    )
                    
                    
                    57,592Total
      Liabilities and Stockholders' equity (Deficit)
                    
                    $
                    7,893,525
                    
                    
                    $
                    5,873,181





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




From Date
ofThree
Months
                    
                    
                    Three
Months
                    
                    
                    Nine Months
                    
                    
                    Nine Months
                    
                    
                    InceptionEnded
                    
                    
                    Ended
                    
                    
                    Ended
                    
                    
                    Ended
                    
                    
                    (October 5,
      2007)July 31,
    2009
                    
                    
                    July 31,
    2008
                    
                    
                    July 31,
    2009
                    
                    
                    July 31,
    2008
                    
                    
                    to July 31,
      2009Unaudited
                    
                    
                    Unaudited
                    
                    
                    Unaudited
                    
                    
                    Unaudited
                    
                    
                    UnauditedRevenues
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -General and Administrative
      ExpensesAmortization of loan
      fees
                    
                    
                    109,045
                    
                    
                    
                    54,016
                    
                    
                    
                    327,132
                    
                    
                    
                    54,016
                    
                    
                    
                    472,247General and
      administrative
                    
                    
                    29,315
                    
                    
                    
                    31,347
                    
                    
                    
                    95,644
                    
                    
                    
                    38,896
                    
                    
                    
                    142,171Legal and
      accounting
                    
                    
                    361,807
                    
                    
                    
                    181,582
                    
                    
                    
                    1,132,768
                    
                    
                    
                    242,808
                    
                    
                    
                    1,810,986Loss from
      operations
                    
                    
                    (500,167
                    )
                    
                    
                    (266,945
                    )
                    
                    
                    (1,555,544
                    )
                    
                    
                    (335,720
                    )
                    
                    
                    (2,425,404
                    )Other Income
      (expense)Changes in fair value of
      derivative liability
                    
                    
                    37,088
                    
                    
                    
                    2,759,418
                    
                    
                    
                    298,231
                    
                    
                    
                    2,759,418
                    
                    
                    
                    4,895,000Interest
      expense
                    
                    
                    (132,680
                    )
                    
                    
                    (7,083,821
                    )
                    
                    
                    (376,093
                    )
                    
                    
                    (7,126,834
                    )
                    
                    
                    (7,476,527
                    )Loss before
      income taxes
                    
                    
                    (595,759
                    )
                    
                    
                    (4,591,348
                    )
                    
                    
                    (1,633,406
                    )
                    
                    
                    (4,703,136
                    )
                    
                    
                    (5,006,931
                    )Income
taxes
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net income
      (loss)
                    
                    $
                    (595,759
                    )
                    
                    $
                    (4,591,348
                    )
                    
                    $
                    (1,633,406
                    )
                    
                    $
                    (4,703,136
                    )
                    
                    $
                    (5,006,931
                    )Loss per
    shareBasic and
      diluted:
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.13
                    )
                    
                    $
                    (0.05
                    )
                    
                    $
                    (0.21
                    )
                    
                    $
                    (0.15
                    )




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)


Statement
of Changes in Stockholders’ Deficit


For the
period ended July 31, 2009


Deficit
                  
                  
                  TotalCommon
                  
                  
                  
                  
                  
                  Additional
                  
                  
                  Accumulated
                  
                  
                  Stockholders’Stock
                  
                  
                  Common
                  
                  
                  Paid -in
                  
                  
                  During
      Exploration
                  
                  
                  EquityShares
                  
                  
                  Stock
                  
                  
                  Capital
                  
                  
                  Stage
                  
                  
                  (Deficit)Balance at October 31,
      2007
                  
                  
                  18,000,000
                  
                  
                  
                  1,800
                  
                  
                  
                  200
                  
                  
                  
                  (7,700
                  )
                  
                  
                  (5,700
                  )May 2008 issuance of 12,000,000
      shares for shell acquisition
                  
                  
                  12,000,000
                  
                  
                  
                  1,200
                  
                  
                  
                  (1,000
                  )
                  
                  
                  -
                  
                  
                  
                  200May 2008 application of services
      provided in connectionwith
      recapitalization as a cost of the transaction
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (8,500,000
                  )
                  
                  
                  -
                  
                  
                  
                  (8,500,000
                  )May 2008 issuance of 5,000,000
      shares in connection withservices
      for recapitalization
                  
                  
                  5,000,000
                  
                  
                  
                  500
                  
                  
                  
                  8,499,500
                  
                  
                  
                  -
                  
                  
                  
                  8,500,000Issuance of stock in partial
      settlement of derivative liability -May
      2008
                  
                  
                  1,194,592
                  
                  
                  
                  119
                  
                  
                  
                  3,428,798
                  
                  
                  
                  -
                  
                  
                  
                  3,428,917Net loss for the
      year
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3,365,825
                  )
                  
                  
                  (3,365,825
                  )Balance at October 31,
      2008
                  
                  
                  36,194,592
                  
                  
                  
                  3,619
                  
                  
                  
                  3,427,498
                  
                  
                  
                  (3,373,525
                  )
                  
                  
                  57,592Net loss for the nine months ended
      July  31, 2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,633,406
                  )
                  
                  
                  (1,633,406
                  )Balance at July 31,
      2009
                  
                  
                  36,194,592
                  
                  
                  $
                  3,619
                  
                  
                  $
                  3,427,498
                  
                  
                  $
                  (5,006,931
                  )
                  
                  $
                  (1,575,814
                  )





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




From Date
ofNine Months
                  
                  
                  Nine Months
                  
                  
                  InceptionEnded
                  
                  
                  Ended
                  
                  
                  (October 5,
      2007)July 31,
    2009
                  
                  
                  July 31,
    2008
                  
                  
                  to July 31,
      2009Unaudited
                  
                  
                  Unaudited
                  
                  
                  UnauditedNet loss
                  
                  $
                  (1,633,406
                  )
                  
                  $
                  (4,703,136
                  )
                  
                  $
                  (5,006,931
                  )Adjustments to
      reconcile net loss to net cashused in operating
      activities(Gains) Losses
      on market valuation of derivative liabilities
                  
                  
                  (298,231
                  )
                  
                  
                  (2,759,418
                  )
                  
                  
                  (4,895,000
                  )Derivative
      instruments charged to interest expense
                  
                  
                  -
                  
                  
                  
                  6,884,716
                  
                  
                  
                  6,851,947Amortization
      charged to interest expense
                  
                  
                  952,456
                  
                  
                  
                  138,889
                  
                  
                  
                  1,097,571Depreciation
                  
                  
                  25,069
                  
                  
                  
                  -
                  
                  
                  
                  32,898Common stock
      issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,000Decrease (increase) in assets and
      increase (decrease) in liabilitiesPrepaid
      expenses
                  
                  
                  5,384
                  
                  
                  
                  50,040
                  
                  
                  
                  (10,229
                  )Accounts
      payable and accrued expenses
                  
                  
                  230,852
                  
                  
                  
                  52,633
                  
                  
                  
                  501,005Stock
      liability
                  
                  
                  662,000
                  
                  
                  
                  -
                  
                  
                  
                  850,600Total adjustments to reconcile
      net loss to net cashprovided used
      in operating activities
                  
                  
                  1,577,530
                  
                  
                  
                  4,366,860
                  
                  
                  
                  4,430,792Net cash flows
      from operating activities
                  
                  
                  (55,876
                  )
                  
                  
                  (336,276
                  )
                  
                  
                  (576,139
                  )Cash flows from investing
      activitiesPurchase of
      other property and equipment
                  
                  
                  (163,527
                  )
                  
                  
                  (5,000
                  )
                  
                  
                  (477,722
                  )Investment in
      natural gas properties
                  
                  
                  (3,056,468
                  )
                  
                  
                  (300,668
                  )
                  
                  
                  (6,108,205
                  )Net cash flows from
      investing activities
                  
                  
                  (3,219,995
                  )
                  
                  
                  (305,668
                  )
                  
                  
                  (6,585,927
                  )Cash flows from financing
      activitiesProceeds from
      borrowings
                  
                  
                  2,500,000
                  
                  
                  
                  5,100,000
                  
                  
                  
                  9,400,000Proceeds from
      borrowings under capital leases
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  307,394Loan fees
      incurred with borrowings
                  
                  
                  -
                  
                  
                  
                  (1,096,188
                  )
                  
                  
                  (1,150,205
                  )Repayments of
      long-term debt
                  
                  
                  -
                  
                  
                  
                  (1,250,000
                  )
                  
                  
                  (1,250,000
                  )Repayments of
      capital lease obligation
                  
                  
                  (65,870
                  )
                  
                  
                  -
                  
                  
                  
                  (87,827
                  )Total
      cash flows from financing activities
                  
                  
                  2,434,130
                  
                  
                  
                  2,753,812
                  
                  
                  
                  7,219,362Net
      (decrease) increase in cash
                  
                  
                  (841,741
                  )
                  
                  
                  2,111,868
                  
                  
                  
                  57,296Cash and cash equivalents,
      beginning of period
                  
                  
                  899,037
                  
                  
                  
                  30,232
                  
                  
                  
                  -Cash and cash equivalents, end of
      period
                  
                  $
                  57,296
                  
                  
                  $
                  2,142,100
                  
                  
                  $
                  57,296Supplemental Disclosures of Cash
      Flow informationCash paid for
      interest
                  
                  $
                  317,500
                  
                  
                  $
                  44,896
                  
                  
                  $
                  476,928




In
non-cash transactions from inception to date, $3,429,116 of stock was issued to
satisfy derivative liabilities in 2008.


In
non-cash transactions, $1,030,494 of interest was capitalized to oil and gas
properties during the nine months ended July 31, 2009, and $1,775,108 was
capitalized from inception to date.





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


(Unaudited)





(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 Article 10 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 nine
months ended July 31, 2009 are not necessarily indicative of the results that
may be expected for the year ended October 31, 2009.  The Company is
still in the exploration stage and has recognized no revenue to
date.





(2)  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 36,194,592
weighted average shares outstanding for the three and nine months ended July 31,
2009.  Basic income per share is calculated
using  35,630,256 and 22,251,759 weighted average shares outstanding
for the three and nine months ended July 31, 2008 and on 32,987,801 weighted
average shares for the period from inception to July 31, 2009 . 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.  Because the Company
has incurred losses from inception, all potentially dilutive securities are
anti-dilutive for all periods presented.





The
number of potentially dilutive shares outstanding at July 31, 2009 is 4,366,677.
These shares include 1,666,667 shares related to a beneficial conversion option
and warrants described in Note 6 and below.





The
following table summarizes the changes in the Company’s outstanding stock
options available through warrants for the nine months ended July 31,
2009:





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, 2009:


7




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





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





(3)  Recent
Accounting Pronouncements





In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting  Standards (“SFAS”) 168 The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles (as
amended) which replaces SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles, to establish theFASB Accounting Standards
Codification as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in preparation
of financial statements in conformity with generally accepted accounting
principles in the United States. SFAS 168 is effective for interim and
annual periods ending after September 15, 2009 (the Company's fourth
quarter ends October 31, 2009). The Company plans to adopt this standard
for the year ending October 31, 2009. We do not expect the adoption of this
standard to have an impact on our financial position or results of
operations.





In May
2009, the FASB issued SFAS 165, Subsequent Events (“FASB
165”).  The Standard does not require significant changes regarding
recognition or disclosure of subsequent events, but does require disclosure of
the date through which subsequent events have been evaluated for disclosure and
recognition.  The standard is effective for financial statements
issued after June 15, 2009.  Management has evaluated the financial
statements for disclosure and recognition through September 21, 2009. Management
does not believe that the implementation of this standard will have a
significant impact on the financial statements of the Company.





In April
2008, the FASB issued EITF 07-5, Determining whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock, (“EITF 07-5”).  EITF
07-5 provides guidance on determining what types of instruments or embedded
features in an instrument held by a reporting entity can be considered indexed
to its own stock for the purpose of evaluating the first criteria of the scope
exception in paragraph 11 (a) of SFAS 133, EITF 07-5 is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and early
application is not permitted.  Management does not believe that the
implementation of this standard will have a significant impact on the financial
statements of the Company.





In March
2008, the FASB issued Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB No. 133 (“SFAS
161”).  SFAS 161 requires additional  disclosures about the
objectives for using derivative instruments and hedging activities, method of
accounting for such instruments under SFAS 133 and its related interpretations,
the effect of derivative instruments and related hedged items on financial
position, results of operations, and cash flows, and a tabular disclosure of the
fair values of derivative instruments and their gains and losses.  The
effective date for SFAS 161 is November 15, 2008 for fiscal years and interim
periods.  Management does not believe that the implementation of this
standard will have a significant impact on the financial statements of the
Company.


8




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





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 first annual reporting period beginning on or
after December 15, 2008.  Management does not believe that the
implementation of this standard will have a significant impact on the financial
statements of the Company.





(4)  Natural
Gas Properties





The
following table sets forth information concerning costs related to the Company’s
natural gas property acquisitions, exploration and development
activities:





July
      31, 2009
                    
                    
                    October
      31, 2008Property
      acquisitions:Development
      cost
                    
                    $
                    6,852,819
                    
                    
                    $
                    3,796,391Total
                    
                    $
                    6,852,819
                    
                    
                    $
                    3,796,391





As of
July 31 2009, the Company was still in an exploratory stage and had not begun
any producing activities.





(5)  Credit
Facilities





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 senior convertible note which is
convertible into the Company’s common stock, at $1.50 per share. The note bears
interest at 8% per year and has a maturity date forty-eight 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,
2010.  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 Company incurred closing costs of approximately
$651,000 which are being 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 initial loan
under the facility with NSES 12, LLC (“NSES”) closed on June 25, 2008 with an
initial borrowing base amount of $2,500,000 million, bearing interest of
12%.  Interest is payable quarterly during the term of the loan with
the remaining principal balance of the loan is due thirty-six months from
closing.  Interest began to accrue beginning on the day the loan was
funded, with the first interest payment due October 2008, with subsequent
payments due quarterly thereafter. The Company borrowed an additional $2,500,000
on February 10, 2009. 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 not in compliance.  The current
ratio covenant, which requires a current ratio of 1.0, was in violation at July
31, 2009 and remains in violation as of the date of these financials. As such,
the remaining balance of the note has been classified as a current liability. At
July 31, 2009, the current ratio was 0.02. 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.


9


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


(6) Derivative Liabilities,
Beneficial Conversion Feature, Convertible Debt and Warrants





For the
three months ended July 31, 2009, the Company recognized a derivative liability
of $37,088 and convertible debt liability, net of discounts of $1,324,343, of
$2,003,502 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, 2008. The
related debt is a convertible 8% senior secured 48 month note dated May 29, 2008
with an Institutional Investor.  Interest only is payable quarterly.
Principle repayments due in 24 equal payments beginning with the 2nd year
anniversary.  This note is convertible into 2,500,000 shares. 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.”





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 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 relative fair value, 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.





The
Company recognized derivative liabilities related to detachable warrants issued
with the May 29, 2008, 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.





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, 2009, the
unamortized balance of loan fees amounted to $528,679.





For the
three and nine months ended July 31, 2009, the Company recognized a loss of
$37,088 and $298,231 on the revaluation of these liabilities 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%.





(7)Reclassifications





Certain
balances pertaining to loan fees, derivative liabilities, convertible debt and
debt discounts in prior financial statements have been reclassified to conform
to the 2009 presentation.





(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.  Additionally, at July 31, 2009 the
Company’s liabilities exceed its assets.  The Company is currently in
default on the senior credit facility with NSES. If substantial losses continue,
the NSES loan may be called. Thus, if 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.


10




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


(9) Subsequent
Event




Under
terms of the credit facility with NSES, solely at the discretion of the Lender,
the Company may borrow additional installments up to a total of $10,000,000. At
July 31, 2009 the Company had borrowed a total of $5,000,000 including the
initial loan of $2.5 million and one $2.5 million installment. Subsequent to the
balance sheet date, on August 14, 2009 the Lender approved and advanced an
additional $600,000 loan to the Company, leaving approximately $4.4 million as
potential draws on the remaining credit facility.


11





ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.





Statement Regarding Forward-Looking
Information





This
report contains forward-looking statements. 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,
processing and distribution agreements, the continued commitment of drill rig
operators and future economic conditions and the volatility and decreases in
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”).


12





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
approximately 3,000 acres targeting gas extraction from the New Albany Shale
(the “Leasehold”). We have identified approximately 40-50 drilling locations on
the Leasehold.  Our net recoverable “proved developed producing
reserves1” on the
Leasehold as of October 31, 2008, are estimated at 1.825 billion cubic feet of
gas (“Bcf”)2, while
“proved undeveloped primary reserves3” are
estimated at 23.725 Bcf, for a total proved developed and undeveloped reserves
of 25.550 Bcf.  The Leasehold is directly adjacent to third-party
producing wells.





Following
the closing of the Offering (discussed below), we began drilling activities at
our initial well locations.  We have continued these drilling efforts
using the net proceeds from our Initial Loan and first Installment Loan under
the Credit Facility (discussed below).





To date,
we have drilled 16 wells to total depths (“TD”) from 2,340 to 3,460 feet in
the New Albany shale formation on our Leasehold. All of these wells have
been logged; 15 of these wells have been logged and cased with 4 1⁄2" production
casing, cemented, perforated and fractured; and 11 have been
tested.  We utilize nitrogen fracturing of the shale formation to
create open spaces for the gas to escape and have not, to this point,
encountered any water in our formations.





The
Company has completed the connection of its pipeline gathering system to 16 of
its wells and has entered into a Gas Gathering & Treatment Agreement with
Seminole Energy Services, LLC (“Seminole”). The recently concluded agreement
provides for the gathering and treatment by Seminole of the Company’s natural
gas production from its Leasehold wells. The Company and Seminole have begun the
final phases of work to interconnect the Company’s field gathering lines with
Seminole’s Olive Grove Gathering & Treatment Facility (the “Olive Grove
Treatment Facility”). The Company expects to complete the interconnection and to
sign a contract with Seminole for the sale of its gas shortly.





On August
24, 2009, KY USA entered into a farm-out agreement with Thomasson Petroleum
Enterprises, Inc. (“TPE”) to acquire from TPE certain drilling rights on
farm-out acreage in Todd, Muhlenberg and Christian counties in western Kentucky
adjacent to the Company’s existing Leasehold. Under the terms of the
agreement with TPE, KY USA acquired the right to drill up to 40 wells on the
subject leases to explore for oil and gas in, above and below the New Albany
Shale. KY USA must drill ten (10) wells in each year of the agreement to be
eligible to drill an additional ten wells in the following year, up to a maximum
of 40 wells over four years. TPE will retain a 25% net revenue interest in the
wells that KY USA drills into the Albany shale on the TPE acreage and an 18.75%
net revenue interest in any oil “twin wells” drilled above the top of the Albany
shale.




1   According
to Securities and Exchange Commission (“SEC”) definitions, “proved developed
reserves” are those that are expected to be recovered from existing wells with
existing equipment and operating methods.


2   As
determined by Robinson Engineering & Oil Co., Inc., an independent petroleum
engineering firm in a report to us dated February 26, 2009.


3  According
to 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.


13





KY USA
recently entered into a joint venture (“JV”) agreement with 7921 Energy LLC
(“7921”) to develop natural gas and oil prospects in, above and below the New
Albany Shale formation on the TPE acreage. The wells to be drilled under the JV
agreement will utilize the Company’s field gathering system that is currently in
final phases of being connected to the Olive Grove Treatment
Facility.  Under the terms of the JV agreement, 7921 will have the
right to participate with KY USA in drilling and developing up to 40 wells on
the newly acquired TPE farm-out acreage. Phase 1 under this JV agreement will
consist of drilling and completing ten (10) wells. Under the terms of the JV,
7921 will earn a 50% working interest in each of the first ten wells, which
translates to a 37.5% net revenue interest (assuming each well is funded by 7921
and drilled to completion), in exchange for providing KY USA with $1,675,000 in
working capital to drill and complete the Phase 1 wells.  7921 will
also retain the option to participate with KY USA in the drilling of the up to
30 additional wells on the TPE acreage.





Results of Operations for
the Three and Nine Month Periods Ended July 31, 2009 and
2008





We are
still in our exploration stage and have generated no revenues to
date.





All
productive and non-productive costs incurred in connection with the acquisitions
of, exploration for and development of our gas reserves are capitalized using
the full cost method of accounting.  These costs include lease
acquisitions, geological and geophysical work, and the costs of drilling,
completing and equipping our gas wells.  For the three month periods
ended July 31, 2009 and 2008, we incurred such total capitalized costs of
$879,716 and $291,758, respectively.  For the nine month periods ended
July 31, 2009 and 2008, we incurred such total capitalized costs of $3,576,484
and $300,668 respectively.  The increases from 2008 to 2009 were the
result of our beginning to drill our first wells.




We
incurred general and administrative expenses of $29,315 and $31,347 for the
three month periods ended July 31, 2009 and 2008, respectively, and of $95,644
and $38,896 for the nine month periods ended July 31, 2009 and 2008,
respectively. These expenses consisted of costs incurred in connection with the
start-up and day to day operation of our business.




Amortization
of loan fees for the three and nine month periods ended July 31, 2009 totaled
$109,045 and $327,132 respectively.  These costs are related to the
Note and the Loan (discussed below).  Amortization of loan fees for
the three and nine month periods ended July 31, 2008 totaled $109,045 in each
such period.




We
incurred legal and professional expenses of $361,807 and $181,582 for the three
month periods ended July 31, 2009 and 2008, respectively, and of $1,358,768 and
$242,808 for the nine month periods ended July 31, 2009 and 2008, respectively.
The increase in these expenses primarily resulted from increased periodic SEC
filing requirements.




Our
interest expense for the three month periods ended July 31, 2009 and 2008, was
$132,680 and $7,083,821respectively,
and for the nine month periods ended July 31, 2009 and 2008, was $376,093 and
$7,126,834respectively.
This cost is attributable to interest due and paid on the Note and the Loan, as
well as non-cash amortization of the note discount. The higher interest costs in
the nine month periods were due to the beneficial conversion features of certain
warrants that we had issued that were expensed during these
periods.  During the three and nine month periods ended July 31, 2009,
we recognized a net gain on a derivative liability relating to the Note in the
amount of $37,088 and $298,231,respectively,
due to a revaluation of the derivative liability to market at July 31,
2009.


14





We have
generated no revenues to date.  Our net operating loss from inception
through July 31, 2009 was $5,232,431.




Liquidity and Capital
Resources





Our cash
and cash equivalents balance as of July 31, 2009 was $57,296.




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.





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 our initial wells, and for
general working capital purposes. The initial installment payment date on the
Note was extended from May 29, 2009 to May 29, 2010.





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 (each, an “Installment Loan”), 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, have been used by KY USA for ongoing working capital
purposes, including the costs and expenses relating to the drilling of our
initial gas wells in the New Albany shale on KY USA's leasehold in western
Kentucky.





On
February 12, 2008, KY USA received the first Installment Loan in an amount of
$2.5 million.  On August 14, 2009, KY USA received an advance of
$600,000 against an expected second Installment Loan.  This advance is
being used to complete the connection of the pipeline gathering system to the
Olive Grove Treatment Facility.  To date, we have received $5,600,000
under the Credit Facility.


15





The
credit agreement governing the Credit Facility (the “Credit Agreement”) requires
that KY USA comply with financial covenants relating to, among other things,
collateral and current ratio coverage. As of July 31, 2009, KY USA was not in
compliance with the 1.0 to 1.0 current ratio requirement of the Credit
Agreement.  This breach of the current ratio covenant contained in the
Credit Agreement constitutes an event of default under the Credit Agreement. The
breach would permit the Lender under the Credit Agreement to declare all amounts
borrowed thereunder to be immediately due and payable.  We intend to
request from the Lender a waiver of this current ratio covenant, but we cannot
assure you that we will be successful in obtaining such waiver.  Additionally, even if we
obtain a waiver from the Lender, we may not be able to satisfy these or other
covenants in the future or be able to pursue our strategies within the
constraints of these covenants.These circumstances could
materially and adversely impair our liquidity and, among other factors, raise
substantial doubt regarding our ability to continue as a going
concern.





On July
22, 2009, KY USA entered into the JV agreement with 7921 pursuant to which 7921
agreed to provide KY USA with $1,675,000 in working capital for the Phase 1
drilling of the first 10 wells on the TPE acreage.  These funds may
not be used for any other purpose and are to be disbursed to KY USA on a well by
well basis prior to the drilling of a particular well.  We expect to
begin drilling under Phase 1 of this JV program prior to the end of our fiscal
year.





Including
the net proceeds from the Offering, the Credit Facility and the 7921 JV
agreement, we believe that we have sufficient funds to conduct our operations
for approximately the next 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, the New
Stream Credit Facility and 7921 JV agreement. 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 Consolidated 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.


16





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 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 excluded from the costs being amortized.
No ceiling write-downs have been recorded to date.





Oil and Gas
Reserves





The Company’s proved gas reserves as of
October 31, 2008 were developed from information provided by Glenn Robinson –
Robinson Engineering. Projecting the effects of commodity prices on production,
and timing of development expenditures includes many factors beyond the
Company’s control. The future estimates of net cash flows from the Company’s
proved reserves and their present value are based upon various assumptions about
future production levels, prices, and costs that may prove to be incorrect over
time. Any significant variance from assumptions could result in the actual
future net cash flows being materially different from the
estimates.





Derivative
Instruments





We value
derivative instruments in accordance with the interpretative guidance of SFAS
No. 133 Accounting for
Derivative Instruments and Hedging Activities, EITF 00-19 Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock, Accounting Principles Board Opinion No. 14 Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants, EITF 98-5 Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, and EITF 00-27 Application of Issue No. 98-5 to
Certain Convertible  Instruments and associated pronouncements
related to the classification and measurement of warrants and instruments with
embedded conversion features. We make certain assumptions and estimates to value
our derivative liabilities. Factors affecting these liabilities and values
include changes in the stock price and other assumptions.


17





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, due to the
insufficiency of the depth and breadth of our accounting function, our
disclosure controls and procedures were not adequate and effective to ensure
that our management is alerted to material information required to be included
in our periodic filings with the SEC. Nevertheless, our management has
determined that all matters to be disclosed in this report have been fully and
accurately reported. We are in the process of improving our processes and
procedures to ensure full, accurate and timely disclosure in the current fiscal
year, with the expectation of establishing effective disclosure controls and
procedures as soon as reasonably practicable.





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.


18





PART
II – OTHER INFORMATION





ITEM
6. EXHIBITS.





Exhibit
      No.
                  
                  Description10.1
                  
                  Gas
      Gathering & Treatment Agreement dated August 6, 2009 by and among the
      Registrant, Seminole Energy Services, L.L.C. and Seminole Gas Company,
      L.L.C.10.2
                  
                  Farm-out
      agreement dated August 20, 2009 by and between the Registrant and
      Thomasson Petroleum Enterprises, Inc.10.3
                  
                  Participation
      agreement dated July 22, 2009 by and between the Registrant and 7921
      Energy LLC31.1
                  
                  Certification
      of Principal Executive Officer pursuant to Section 302 the Sarbanes-Oxley
      Act of 200231.2
                  
                  Certification
      of Interim 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
  2002*32.2
                  
                  Certification
      of Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*







* This
certification is being furnished and shall not be deemed “filed” with the SEC
for purposes of Section 18 of the Exchange Act, or otherwise subject to the
liability of that section, and shall not be deemed to be incorporated by
reference into any filing under the Securities Act or the Exchange Act, except
to the extent that the Registrant specifically incorporates it by
reference.


19


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
      21, 2009
                Kentucky
      USA Energy, Inc.By:
                /s/Steven D. EversoleName:
      Steven D. Eversole
                  Title:  
      Principal Executive
Officer





By:
              /s/ Charles M.
      StiversName:  Charles
      M. StiversTitle:   
      Interim Principal Financial
Officer




20