UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q  [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2010  [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT  For the transition period from __________ to ___________  Commission File Number 333-135852  BLUGRASS ENERGY, INC.(Exact name of small business issuer in its charter) Nevada20-4952339(State or other jurisdiction of(IRS Employer Identification No.)incorporation or organization)  730-1015-4th Street SW Calgary Alberta T2R 1J4 Address of principal executive offices) 403-830-7566(Telephone Number)  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  [ X ] No  [ ]   Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [ ]     No [ ]  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  Large accelerated filer [ ] Accelerated Filer [ ]  Non-accelerated filer   [ ] Smaller reporting company [x]  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  [ ] No  [ x ]  There were 75,000,034 shares of Common Stock outstanding as of February 14, 2010,.  PART I  FINANCIAL INFORMATION  Item 1.  Financial Statements (Unaudited) Page  Balance Sheets  December 31, 2010 and June 30, 2010 (Audited) F-1  Statements of Operations  - Three months ended December 31, 2010 and 2009 and From May 19, 2006 (Inception) to December 31, 2010 F-2  Statements of Cash Flows  Three months ended December 31, 2010 and 2009 and From May 19, 2006 (Inception) to December 31, 2010 F-3  Notes to the Financial Statements  F-4  Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations  1  Item 3.  Quantitative and Qualitative Disclosures About Market Risk  Not Applicable  Item 4. Controls and Procedures 3  Item 4T.  Controls and Procedures 4  PART II  OTHER INFORMATION  Item 1.  Legal Proceedings Not Applicable 4  Item 1A. Risk Factors- Not Applicable 4  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 4 -Not Applicable  Item 3.  Defaults Upon Senior Securities  Not Applicable 5  Item 4.  Submission of Matters to a Vote of Security Holders  Not Applicable 5  Item 5.  Other Information 5  Item 6.  Exhibits 5 SIGNATURES 6            Item 1.  Financial Statements   BLUGRASS ENERGY, INC.(A Development Stage Company)BALANCE SHEETS  December 31,June 30,20102010(Unaudited)(Audited)AssetsCurrent Assets:Cash$                  68$           14,620Total Current Assets6814,620Total Assets$                  68$           14,620Liabilities and Stockholders' Equity (Deficit)Current liabilitiesAccounts payable$         160,801$         136,959Accrued interest103,034124,315Notes payable-20,250Line of credit-550,000Convertible notes payable443,606366,666Total Current Liabilities707,4411,198,190Stockholders' Equity (Deficit)Common stock, $0.001 par value; 75,000,000 shares authorized,69,563,386 and 51,616,666 shares issued and outstandingat December 31, 2010 and June 30, 2009 respectively69,56451,617Share subscriptions-50,000Additional paid-in capital1,214,272423,483Deficit accumulated during the development stage(1,991,209)(1,708,670)Total Stockholders' Equity(707,373)(1,183,570)Total Liabilities and Stockholders' Equity (Deficit)$                  68$           14,620See the notes to these financial statements.       F-1     BLUGRASS ENERGY, INC.(A Development Stage Company)STATEMENTS OF OPERATIONS SIX MONTHSENDED DECEMBER 31, 2010 AND 2009(Unaudited)


|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|-------------------------------------------- | ----------------------------------- | ------------------------ | ---------- | ----------------------- | -------------------------- | ------------------------ | ----------------------- | ----------------------------------- | -----------------
|                                             |                                     |                          |            |                         | For the three months Ended | For the six months Ended | May 19, 2006           
|                                             |                                     |                          |            |                         | December 31,               | December 31,             | (Inception) to         
|                                             |                                     |                          |            |                         | 2010                       | 2009                     | 2010                    | 2009                                | December 31, 2010
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|Revenue:                                     |                                     |                          |            | $                     - | $                     -    | $                     -  | $                     - | $                                 -
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|Operational expenses:                        |                                     |                          |            |                         |                            |                          |                        
|                                             | Leasing expenses                    |                          | 950        | -                       | 950                        |                          | 454,420                
|                                             | Depreciation expense                |                          | -          | -                       | -                          | -                        | 747                    
|                                             | Professional fees                   |                          | 25,298     | 23,483                  | 27,276                     | 61,149                   | 613,837                
|                                             | General and administrative expenses | 11,506                   | 59,250     | 213,508                 | 64,859                     | 522,662                 
|                                             | Impairment of oil & gas properties  | -                        | -          | -                       | -                          | 203,424                 
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|                                             |                                     | Total operating expenses | 37,754     | 82,733                  | 241,734                    | 126,008                  | 1,795,090              
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|Other Expense:                               |                                     |                          |            |                         |                            |                          |                         |                                    
|                                             | Interest expense                    |                          | (19,846)   | (11,531)                | (40,805)                   | (16,320)                 | (196,119)              
|                                             |                                     |                          |            |                         | (19,846)                   | (11,531)                 | (40,805)                | (16,320)                            | (196,119)        
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|Net loss                                     |                                     |                          |            | $         (57,600)      | $         (94,264)         | $       (282,539)        | $       (142,328)       | $                (1,991,209)       
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|Per share information                        |                                     |                          |            |                         |                            |                          |                        
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|Net loss per common share                    |                                     |                          |            |                         |                            |                         
|                                             | Basic                               |                          |            |                         | *                          | $                 *      | *                       | $                 *                 |                  
|                                             | Fully diluted                       |                          |            | *                       | *                          | *                        | *                       |                                    
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|Weighted average number of common            |                                     |                          |            |                         |                           
|                                             | stock outstanding                   |                          | 56,916,666 | 50,050,000              | 55,961,775                 | 50,050,000               |                        
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|                                             | *  Less than $(0.01) per share.     |                          |            |                         |                            |                         
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  
|See the notes to these financial statements. |                                     |                          |            |                         |                           
|                                             |                                     |                          |            |                         |                            |                          |                         |                                     |                  

F-2


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|BLUGRASS ENERGY, INC.        
|(A Development Stage Company)
|STATEMENT OF CASH FLOWS      
|(Unaudited)                  
|                              |  |  |  |  |  |  |  |  |  | 

For the six months EndedMay 19, 2006December 31,(Inception) to20102009December 31, 2010Cash Flows from Operating Activities:Net Loss$     (282,539)$     (142,328)$            (1,991,209)Adjustments to reconcile net loss tonet cash used by operating activities:Depreciation--747Common Stock issued for services126,400-378,550Common Stock issued for interest31,000Impairment of fixed assets3,424Impairment of oil and gas properties200,000Adjustments to reconcile net loss to net cash usedin operating activities:Increase in accounts payable23,8421,416160,801Increase in accrued interest payable40,80516,321165,120Increase (decrease) in notes payable--41,250Net Cash Used by Operating Activities(91,492)(124,591)(1,010,317)Cash Flows from Investing ActivitiesPurchase of office equipment--(4,171)Purchase oil & gas lease-(200,000)(200,000)Net Cash Used in Investing Activities-(200,000)(204,171)Cash Flows from Financing Activities:Proceeds from convertible promissory notes76,940-635,556(Payment) of promissory note-(21,000)(21,000)Proceeds from line of credit-248,000550,000Proceeds from oil & gas property note-100,000-Proceeds from issuance of common stock--50,000Net Cash Provided by Financing Activities76,940327,0001,214,556Net Increase (decrease) in Cash(14,552)2,40968Cash and Cash Equivalents - Beginning of Period14,6206,074-Cash and Cash Equivalents - End of Period$                 68$            8,483$                          68$            -SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest expense$                     -$$                             -Cash paid for income taxes$                   -$                   -$                             -Non-cash financing activities:Conversion of promissory notes by issuance ofcommon stock or share subscriptions$                   --250,000Cancellation of common shares$                   --(8,000)Conversion of notes payable by issuance ofcommon stock or share subscriptions$          20,250-20,250Conversion of line of credit by issuance ofcommon stock or share subscriptions$        550,000-550,000Conversion of accrued interest on line of credit byissuance of common stock or share subscriptions$          62,086-62,086See the notes to these financial statements.                                             BLUGRASS ENERGY, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2010 (Unaudited) NOTE 1  BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES  Business BluGrass Energy, Inc. (the Company) was incorporated under the laws of the State of Nevada on May 19, 2006, as Coastal Media, Inc.  On October 1, 2008, the Company amended its Article of Incorporation to change its name from Coastal Media Inc. to BluGrass Energy, Inc., to reflect the change in direction of the Companys business to the Oil and Gas Industry. The Company was originally formed to engage in the business of manufacturing, marketing, distributing and selling its marine DVDs. In addition, on October 1, 2008, the Company amended its Articles of Incorporation to change its name from "Coastal Media Inc." to "Blugrass Energy, Inc.". As a result of the name of the change, the Companys trading symbol was changed to BLUG. On October 1, 2008, the Company affected a forward stock split of the issued and outstanding shares of common stock on a fifteen for one basis. Authorized capital remained at 75,000,000 common shares and par value remained at $.001 per share.  After the forward split the Company had 54,000,000 shares issued and outstanding. The Company is in the development stage. Its activities to date have been limited to capital formation, organization and development of its business plan.  The Company has commenced limited start up operations. Basis of Presentation  Development Stage Company  The Company has not earned significant revenues from planned operations.  Accordingly, the Companys activities have been accounted for as those of a Development Stage Company.  Among the disclosures required are that the Companys financial statements of operations and cash flows disclose activity since the date of the Companys inception.  Interim Presentation  In the opinion of the management of the Company, the accompanying unaudited financial statements include all adjustments, consisting only of normal and recurring adjustments, considered necessary to present fairly the financial position and operating results of the Company for the periods presented.  The financial statements and notes do not contain certain information included in the Companys financial statements for the year ended June 30, 2010.  It is the Companys opinion that when the interim financial statements are read in conjunction with the June 30, 2010 Audited Financial Statements, the disclosures are adequate to make the information presented not misleading.  Interim results are not necessarily indicative of results for a full year or any future period.    F-4    BLUGRASS ENERGY, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2010 Significant Accounting Policies  Use of Estimates  The preparation of the 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.  Cash and Cash Equivalents  The Company considers all highly liquid investments with an original maturity of three months or less and money market instruments to be cash equivalents.  Revenue Recognition  The Company recognizes revenue when it is earned and expenses are recognized when they occur.  Earnings (loss) Per Share  Earnings (loss) per share requires dual presentation of basic and diluted earnings or loss per share (EPS) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.  Basic EPS excludes dilution.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.  Income Taxes A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards.  Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Recent Accounting Pronouncements  In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 105, Generally Accepted Accounting Principals (formerly Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles). ASC 105 establishes the FASB ASC as the single source of authoritative nongovernmental U.S. GAAP. The standard is effective for interim and annual periods ending after September 15, 2009. We adopted the provisions of the standard on December 31, 2010, which did not have a material impact on our financial statements.  F-5       BLUGRASS ENERGY, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2010 The Company does not expect the adoption of any recent accounting standards to have a significant impact on its financial statements.  NOTE 2  GOING CONCERN AND MANAGEMENTS PLAN  The Companys financial statements for the three months ended December 31, 2010 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a net loss of $57,600 for the three months ended December 31, 2010, and an accumulated deficit during the development stage of $1,991,209 as at December 31, 2010.  At December 31, 2010, the Company had a working capital deficit of $707,373 and the Company had no revenues from its activities during the three months ended December 31, 2010.  The Companys ability to continue as a going concern may be dependent on the success of managements plan discussed below. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  During the 2011 fiscal year, the Company intends to continue its efforts to acquire, either by lease, farmout, or purchase, an interest in oil or gas prospects or properties for exploration, when available, with third parties. The Company intends to continue to raise funds to support the efforts through the sale of its equity securities.  To the extent the Companys operations are not sufficient to fund the Companys capital requirements, the Company may attempt to enter into a revolving loan agreement with financial institutions or attempt to raise capital through the sale of additional capital stock or through the issuance of debt. At the present time, the Company does not have a revolving loan agreement with any financial institution nor can the Company provide any assurance that it will be able to enter into any such agreement in the future or be able to raise funds through the further issuance of debt or equity in the Company.  NOTE 3  OIL AND GAS PROPERTIES  The Company entered into an agreement to purchase several oil and gas properties on October 12, 2009 for $550,000. The Agreement was subsequently amended on March 4, 2010 lowering the purchase price to $200,000 As of December 31, 2010 the transaction has not closed.  NOTE 4 - NOTES PAYABLE  During the year ended June 30, 2009, the Company issued, its then Chief Executive Officer and Director, a 4% unsecured promissory note for $21,000 for owed compensation in connection with her services.  The promissory note had a due date of August 31, 2009.  In July 2009, the Company paid the note in full.    F-6       BLUGRASS ENERGY, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2010  NOTE 5.  LINE OF CREDIT  The Company has entered into an Amended Line of Credit Agreement to receive up to $550,000 from a third party.  The Line of Credit has an interest rate of 10% per annum and a maturity date of December 21, 2010.  At June 30, 2010, the Company had received advances of $550,000 under the Line of Credit.  The Company has accrued interest of $62,086 as of December 28, 2010 in connection with advances under this line of credit. On December 28, 2010 the Line of Credit and accrued interest was converted into 11,000,000 shares of common stock at $0.05 per share for the payment of the principal balance of $550,000 and 1,241,720 shares of common stock at $0.05 per share for the payment of the accrued interest amount of $ 62,086.  NOTE 6.  CONVERTIBLE PROMISSORY NOTES During the year ended June 30, 2010 and 2009, in exchange for funds of $150,000 and $416,666, the Company executed 6% unsecured convertible commercial promissory notes.  The promissory notes were due on February 27, 2009. The promissory notes are exchangeable for a total of 150,000 and 466,666 shares of the Companys restricted common stock. On various dates during the years ended 2009 and 2010 the notes bear a default interest rate of 18% per annum  In addition to the stated interest rate, the company agreed to issue additional common shares to these debtors. The Company has $accrued interest in the amount of $ 103,034 under the terms of the interest rates under the notes. NOTE 7.  STOCKHOLDERS EQUITY (DEFICIT) During the Six months ended September 30, 2010, the Company issued 4,200,000 restricted common shares of The Company to its Officers and Directors for services rendered to the Company valued at $ 126,400 in the aggregate under a registration statement on Form S-8        F-7      Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations.  Forward-Looking Statements  This Quarterly Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. The words believes, anticipates, plans, seeks, expects, intends and similar expressions identify some of the forward-looking statements. Forward-looking statements are not guarantees of performance or future results and involve risks, uncertainties and assumptions. The factors discussed elsewhere in this Form 10-Q could also cause actual results to differ materially from those indicated by the Companys forward-looking statements.  The Company undertakes no obligation to publicly update or revise any forward-looking statements.  Business and Plan of Operations  We had no operations prior to and we had no revenues during the year ended June 30, 2010.  We have minimal capital and minimal cash. We are illiquid and need cash infusions from investors or shareholders to provide capital, or loans from any sources.  We are an oil and gas exploration and development company focused on creating a portfolio of North American assets that exhibit consistent, predictable, and long-lived production capabilities. We plan to build value for its shareholders through the acquisition and development of gas and oil assets that contain proven reserves in domestic areas where reserves can be economically produced at a low risk to us relying on joint venture partners to supply most of the funds needed to explore or develop these properties.  Our main emphasis will be to acquire production or revenue generating opportunities either by lease purchase or farm-out, when available, with third parties and industry partners.  Decisions regarding future participation in exploration wells or geophysical studies or other activities will be made on a case-by-case basis.  We may, in any particular case, decide to participate or decline participation.  If participating, we may pay our proportionate share of costs to maintain our proportionate interest through cash flow or debt or equity financing.  If participation is declined, we may elect to farmout, non-consent, sell or otherwise negotiate a method of cost sharing in order to maintain some continuing interest in the prospect.  On October 12, 2009 Blugrass entered into an agreement for the acquisition of the Robinhood L.L.C.,(Marks and Garner Productions) properties and corporate assets, located in and around the Cave Pool Unit in Eddy County, New Mexico. .The agreement calls for the purchase of a 100% working interest and other rights associated with the acreage in and around the Cave Pool Unit located in Eddy County, New Mexico, comprising approximately 2,800 acres held by Robinhood L.L.C., (Marks and Garner Productions). Additionally, Blugrass Energy Inc. will receive all operating rights with respect to the oil and gas leases owned by Robinhood L.L.C. (Marks and Garner Productions). This includes, all equipment used to produce and sell crude oil and natural gas on the acreage owned by Robinhood L.L.C.(Marks and Garner Productions). Consideration for this acquisition consists of cash in the amount of $550,000, with terms consisting of incremental cash payments between October 2009 and February 2010.    The Agreement was subsequently amended on March 4, 2010 lowering the purchase price to $200,000.. As of December 31, 2010 the transaction has not closed.  We will need substantial additional capital to support our proposed future energy operations.  We have no revenues.  We have no committed source for any funds as of date here.  No representation is made that any funds will be available when needed.  In the event funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales or royalty income, and could fail in business as a result of these uncertainties.  Results of Operations  For the Three months Ended December 31, 2010 compared to the Three months Ended December 31, 2009  We are still in our development stage and have no revenues to date.  We incurred operating expenses of $37,754 and $82,733 for the Three month periods ended December 31, 2010 and 2009, respectively.  The decrease in operation expenses is the result of the issuance of common stock to directors and officers during the current quarter compared to the same quarter in the prior year. During the three months ended December 31, 2010, we recognized a net loss of $57,600 compared to a net loss of $94,264 for the three months ended December 31, 2009.  The increase was a result of the increase in expenses as indicated above  Liquidity and Capital Resources  At December 31, 2010, we had total assets of $ 68 consisting cash.  At December 31, 2010, we had total current liabilities of $707,441 consisting of accounts payable of $160,801, accrued interest of $103,034 $20,250 in notes payable and $443,306 in convertible promissory notes.  During the three months ended December 31, 2010, we used cash of $282,539 in operations.  During the six months ended December 31, 2009, we used $142,328 in operations.  During the six months ended December 31, 2010 and 2009, we did not have any cash flows from investment activities.  During the six months ended December 31, 2010, we received $76,940 from our financing activities.  During the six months ended December 31, 2009, we received $327,000from our financing activities  The Company has entered into an Amended Line of Credit Agreement to receive up to $550,000 from a third party.  The Line of Credit has an interest rate of 10% per annum and a maturity date of December 21, 2010.  At June 30, 2010, the Company had received advances of $550,000 under the Line of Credit.  The Company has accrued interest of $62,086 as of December 31, 2010 in connection with these funds. On October 28, 2010 and December 28, 2010 the Line of Credit and accrued interest was converted into 10,000,000 shares of common stock at $0.05 per share and 1, 241,720 shares of common stock at $0.05 per share.  Our auditors have expressed their doubt about our ability to continue as a going concern unless we are able to generate profitable operations.       Off-Balance Sheet Arrangements  We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.  Need for Additional Financing  We do not have capital sufficient to meet our cash needs.  We will have to seek loans or equity placements to cover such cash needs.  Once exploration commences, our needs for additional financing is likely to increase substantially.  No commitments to provide additional funds have been made by our management or other stockholders.  Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.  ITEM 3.  QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  Not Applicable  Item 4.  Controls and Procedures  Evaluation of Disclosure Controls and Procedures  We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules  13a 15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934,  as  amended  (the  "Exchange  Act"))  that are  designed  to ensure  that information  required to be disclosed in our reports  under the Exchange Act, is recorded,  processed,  summarized and reported within the time periods  required under  the  SEC's  rules and forms  and that the  information  is  gathered  and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.  As required by SEC Rule 15d-15(b), Mr. Berscht our Chief Executive Officer and Principal Accounting Officer, carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report.  Based on the foregoing evaluation,  Mr. Berscht has concluded that our disclosure controls and procedures  are  effective  in  timely  alerting  them to material  information required  to be  included  in  our  periodic  SEC  filings  and to  ensure  that information  required to be disclosed in our periodic SEC filings is accumulated and communicated to our management,  including our Chief Executive  Officer,  to allow  timely  decisions  regarding  required  disclosure  as a  result  of  the deficiency in our internal control over financial reporting discussed below.           ITEM 4T. CONTROLS AND PROCEDURES  Managements Quarterly Report on Internal Control over Financial Reporting.  Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;  (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and  (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.  Management's assessment of the effectiveness of the registrant's internal control over financial reporting is as of the three months ended December 31, 2010. We believe that internal control over financial reporting is effective. We have not identified any, current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.  There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  PART II  OTHER INFORMATION  Item 1. Legal Proceedings.  Blugrass Energy, Inc. is not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.    Item 1A.  Risk Factors.  Not applicable to smaller reporting companies.  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.  There were no sales of unregistered securities during the period covered by this report.  Item 3.  Defaults Upon Senior Securities.  There were no defaults upon senior securities during the period covered by this report.  Item 4.  Submission of Matters to a Vote of Security Holders.  There were no matters submitted to a vote of security holders during the period covered by this report.  Item 5.  Other Information.  The Company changed its corporate address from 7609 Ralston Road, Arvada, CO 80002 to 730-1015-4th Street SW Calgary Alberta T2R 1J4  Item 6.  Exhibits.  Exhibits.  The following is a complete list of exhibits filed as part of this Form 10-Q.  Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.  Exhibit 31.1 Certification of Chief Executive and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act  Exhibit 32.1 Certification of Principal Executive and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act       SIGNATURES  Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  February 14, 2011 BluGrass Energy, Inc. (Registrant)  By: /s/ John Kenney Berscht ______________________________ John Kenney Berscht, Chief Executive Officer and Principal Accounting Officer