10-Q

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 March 31, 2015

OR

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

For the transition period from __________ to _________

COMMISSION FILE NUMBER 0-54669

BLUE EARTH, INC.

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

Nevada	98-0531496
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2298 Horizon Ridge Parkway, Suite 205, Henderson, NV 89052

(Address of principal executive offices) (Zip Code)

Registrant’s telephone Number: (702) 263-1808

N/A

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

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 [X]	Non-accelerated filer [  ]	Smaller reporting company [  ]
		(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]

As of May 6, 2015 the issuer had 93,836,058 outstanding shares of Common Stock

TABLE OF CONTENTS

Items	Page
PART I
Item 1.  Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2015 (unaudited) and December 31, 2014 (audited)	3-4
Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (unaudited)	5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (unaudited)	6-7
Notes to Condensed Consolidated Financial Statements (unaudited)	8-14
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	15-20
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	20
Item 4. Controls and Procedures	20-21
PART II
Item 1. Legal Proceedings	22
Item 1A. Risk Factors	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3. Defaults Upon Senior Securities	24
Item 4. Mine Safety Disclosures	24
Item 5. Other Information	24
Item 6. Exhibits	24
Signatures	25

2

PART I

ITEM 1. FINANCIAL STATEMENTS

BLUE EARTH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

ASSETS
			March 31,		December 31,
			2015		2014
			(unaudited)
CURRENT ASSETS
	Cash and cash equivalents		$	6,303,094	$	2,967,408
	Restricted cash			632,258		632,102
	Accounts receivable, net			4,119,522		2,515,772
	Costs and revenues in excess of billings			552,930		3,967,207
	Inventory, net			718,275		569,888
	Construction in  progress			71,128		68,212
	Other receivables			76,194		78,926
	Prepaid expenses and deposits			1,745,896		1,646,301
		Total Current Assets		14,219,297		12,445,816
PROPERTY AND EQUIPMENT, net				64,038,057		56,982,778
OTHER ASSETS
	Deposits			76,974		80,455
	Natural gas futures			2,259,995		2,426,266
	Long term receivables			1,417,901		1,587,548
	Equity method investment			9,525,841		9,353,402
	Contracts and technology, net			18,691,137		19,863,096
		Total Other Assets		31,971,848		33,310,767
		TOTAL ASSETS	$	110,229,202	$	102,739,361

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

3

BLUE EARTH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

LIABILITIES AND STOCKHOLDERS'  EQUITY
			March 31,		December 31,
			2015		2014
			(unaudited)
CURRENT LIABILITIES
	Accounts payable		$	4,512,801	$	4,071,164
	Current portion of notes payable, net			63,484		162,445
	Related party payables			1,333,147		1,333,147
	Line of credit payable			3,000,000		-
	Convertible note payable			8,026,072		-
	Accrued expenses			167,192		480,502
	Payroll expenses payable			326,652		217,359
		Total Current Liabilities		17,429,348		6,264,617
LONG TERM LIABILITIES
	Long term portion of notes payable			61,477		66,387
		Total Liabilities		17,490,825		6,331,004
Commitments and contingencies
STOCKHOLDERS' EQUITY
	Preferred stock; 25,000,000 shares authorized
	at $0.001 par value, 400,000 and -0- shares issued
	and  -0- and -0- shares outstanding, respectively			400		-
	Common stock; 500,000,000 shares authorized
	at $0.001 par value, 93,404,858 and 94,258,713
	shares issued and outstanding, respectively			93,405		94,259
	Additional paid-in capital			190,797,290		188,159,932
	Accumulated deficit			(98,152,718)		(91,845,834)
		Total Stockholders' Equity		92,738,377		96,408,357
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	110,229,202	$	102,739,361

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

4

BLUE EARTH, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

			For the Three Months Ended
			March 31,
			2015		2014
REVENUES			$	5,132,664	$	3,234,217
COST OF SALES				3,976,307		1,788,309
GROSS PROFIT				1,156,357		1,445,908
OPERATNG EXPENSES
	Depreciation and amortization			1,215,068		1,076,026
	General and administrative			6,422,527		5,832,933
		Total Operating Expenses		7,637,595		6,908,959
LOSS FROM OPERATIONS				(6,481,238)		(5,463,051)
OTHER INCOME (EXPENSE)
	Other income			940		940
	Loss from equity investment			(227,560)		-
	Interest expense			(430,520)		(235,584)
	Mark futures to market			(166,271)		-
	Gain on sale of assets			7,987		11,235
	Gain on settlement of litigation			989,778		-
	TOTAL OTHER INCOME (EXPENSE)			174,354		(223,409)
LOSS BEFORE INCOME TAXES				(6,306,884)		(5,686,460)
INCOME TAX EXPENSE				-		-
NET LOSS				(6,306,884)		(5,686,460)
PREFERRED DIVIDENDS				-		(392,888)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS			$	(6,306,884)	$	(6,079,348)
BASIC AND DILUTED LOSS PER SHARE			$	(0.07)	$	(0.09)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING BASIC AND DILUTED				94,311,979		61,928,226

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

5

BLUE EARTH, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

				For the Three Months Ended
				March 31,
				2015		2014
OPERATING ACTIVITIES
	Net loss			$	(6,306,884)	$	(5,686,460)
	Adjustments to reconcile net loss to net cash
	used in operating activities:
		Stock options and stock warrants issued for services			1,385,338		1,189,727
		Loss on equity subsidiary			227,560		-
		Impairment of construction in progress			369,039		-
		Mark gas futures to market			166,271		-
		(Gain) on settlement of litigation			(989,778)		-
		(Gain) on sale of assets			(7,987)		(11,235)
		Stock issued for services			320,653		670,542
		Depreciation and amortization			1,215,068		1,076,026
		Amortization of debt discount			279,254		-
	Changes in operating assets and liabilities:
		Accounts receivable and billings in excess			1,980,174		(731,331)
		Inventory			(148,387)		35,498
		Restricted cash			(156)		-
		Construction in progress			(371,955)		184,302
		Prepaid expenses and deposits			(293,372)		162,405
		Accounts payable and accrued expenses			237,621		406,480
			Net Cash Used in Operating Activities		(1,937,541)		(2,704,046)
INVESTING ACTIVITIES
		Collection of other receivables			2,732		-
		Proceeds from sale of equipment			7,987		-
		Purchase of equity method investment			(400,000)		-
		Lending of other receivables			-		(887)
		Purchase of property and equipment			(7,098,388)		(1,353,588)
			Net Cash Used in Investing Activities		(7,487,669)		(1,354,475)
			Net Cash Used in Discontinued Investing Activities		-		(17,882)
FINANCING ACTIVITIES
		Proceeds from common stock warrants and options exercised			-		100,857
		Cash received on stock subscriptions			-		1,000,000
		Proceeds from line of credit, net of closing costs			2,911,700		-
		Proceeds from notes payable, net of closing costs			9,953,068		-
		Repayment of notes payable and line of credit			(103,872)		(438,710)
		Repayment of related party loans			-		(4,004)
			Net Cash Provided by Financing Activities		12,760,896		658,143
NET INCREASE (DECREASE) IN CASH					3,335,686		(3,418,260)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					2,967,408		8,403,731
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	6,303,094	$	4,985,471

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

6

BLUE EARTH, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

(unaudited)

			For the Three Months Ended
			March 31,
			2015		2014
SUPPLEMENTAL DISCLOSURES OF
	CASH FLOW INFORMATION
	CASH PAID FOR:
		Interest	$	68,871	$	97,292
		Income taxes		-		-
	NON CASH FINANCING ACTIVITIES:
		Common stock issued upon conversion of preferred stock	$	-	$	333,128
		Common stock cancelled for settlement of litigation		(989,778)		-
		Common stock issued for acquisition of subsidiaries		-		4,602,500
		Preferred stock issued as collateral for loan		400		-
		Debt discount and conversion feature		1,385,338		-

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

7

BLUE EARTH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

(Unaudited)

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2015 and 2014, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2014 audited financial statements.  The results of operations for the periods ended March 31, 2015 and 2014 are not necessarily indicative of the operating results for the full year.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Inventory

Inventory is recorded at the lower of cost or market (net realizable value) using the average cost method. The inventory on hand as of March 31, 2015 consists of battery components, motors, controllers, miscellaneous refrigeration parts and raw gasket material at costs of $718,275. The inventory is valued net of an allowance of $6,188 as of March 31, 2015. The Company does not have any work in progress.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had, nor is expected to have a material impact on the Company’s financial position, or statements.

NOTE 3 - SIGNIFICANT EVENTS

Settlement of Litigation

The Company received 1,127,742 shares of its common stock in settlement of litigation valued at $0.922 per share. As part of the settlement the Company forgave a $50,000 note receivable resulting in a gain on settlement of litigation of $989,778.

Common Stock Transactions

During the three months ended March 31, 2015, the Company issued 73,887 common shares for services valued at $94,653. The Company also issued 200,000 common shares for debt issuance costs valued at $226,000. The Company cancelled the 1,127,742 shares of its common stock it received in settlement of litigation.

Credit Line Payable

During the three months ended March 31, 2015, the Company borrowed $3,000,000 on the line of credit. The line of credit is for up to $4,000,000 subject to approval of the use of proceeds by the lender. The line of credit accrues interest at 12% per annum and is secured by one of the Company’s CHP projects and one solar project. The Company received net proceeds of $2,911,700 after closing costs. The Company has issued 400,000 shares of Class D convertible preferred stock as tertiary collateral for the line of credit. The $88,300 of fees withheld from the proceeds of the line of credit are included in prepaid expenses and are being amortized over the term of the line of credit.

8

BLUE EARTH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

(Unaudited)

NOTE 3 - SIGNIFICANT EVENTS (continued)

Related Party Notes Payable

The related party notes payable, totaling $1,333,147, are due on demand, accrue interest at 12% per annum and are unsecured.

CHP Plant Energized

On March 30, 2015 the Company energized its initial combined heat and power (“CHP”) energy plant at a poultry processing facility in Sumter, South Carolina. The Company owns and operates the energy plant which provides combined heat and power (CHP) solutions. Electricity is generated and the thermal heat from the generator is captured and utilized for processes in the poultry facility, lowering energy costs, reducing greenhouse gas emissions and improving energy efficiency.

Convertible Note Payable

During the three months ended March 31, 2015, the Company borrowed $10,000,000 on a convertible note payable. The note payable is convertible to shares of the Company’s common stock at $1 per share. The convertible note payable accrues interest at 12% per annum and is due on September 10, 2015. The convertible note payable is secured by one of the Company’s CHP projects and the Company’s assets. The Company received net proceeds of $9,953,068 after closing costs. The $46,932 in legal fees withheld from the loan proceeds are included in prepaid expenses and are being amortized over the 6 month term of the convertible note payable.

The lender received 200,000 shares of common stock as consideration for making the loan valued at $226,000. The lender also received 2,000,000 warrants to purchase shares of the Company’s common stock at $1.00 per share. The value of the warrants measured by The Company was $1,321,600. The value was computed using the Black-Scholes formula with a 5 year maturity, 1.62% risk free rate and a 94.46% volatility.  The lender also received the right to purchase shares of the Company’s common stock at $1.00 per share upon the Company’s repayment of all or part of the convertible note payable. The value of the right to purchase common shares measured by the Company was $649,091. The value was computed using the Black-Scholes formula with a 1 year maturity, .25% risk free rate, a 87.06% volatility and a 5% probability of exercise.  The total discount on the convertible note payable of $2,196,691 is being amortized over the 6 month term of the debt. The Company recorded $222,763 of interest expense from the amortization of the discount during the quarter ended March 31, 2015.

The following is a summary of convertible note payable the period ended March 31, 2015:

Balance at December 31, 2014	$	--
Borrowing of convertible note payable		10,000,000
Discount on convertible note payable		(2,196,691)
Amortization of discount		222,763
Balance at March 31, 2015	$	8,026,072

Series D Preferred Stock

The Company has issued 400,000 shares of its $10.00 per share Series D preferred stock as tertiary collateral against the line of credit. The Series D preferred shares are issued, but not presently outstanding.  The Series D preferred shares certificate is held by a third party and the lender does not have access to the certificate without the consent and cooperation of the Company.  

Solely in the event of a default by the Company of its payment obligations under the terms of the line of credit, a block of the Series D preferred shares would be released and converted into common shares in accordance the formula provided in the line of credit agreement. The sufficient common shares would be sold by the lender to cure the default. Upon the repayment of the line of credit the Series D preferred stock will be returned to the Company and cancelled.

9

BLUE EARTH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

(Unaudited)

NOTE 4 - STOCK PURCHASE WARRANTS AND OPTIONS

A summary of the Company’s warrant activity during the periods ended March 31, 2015 and December 31, 2014 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining		Aggregate
	No. of	Exercise		Contractual		Intrinsic
	Warrants	Price		Term		Value
Balance Outstanding, December 31, 2013	22,660,668	$	1.90		6.52	$	43,055,269
Granted	200,000	$	0.00		10.00
Granted	100,000	$	1.00		10.00
Granted	8,521,654	$	6.00		3.00
Cancelled	(3,600,000)	$	(1.18)		--
Forfeited	(1,472,060)	$	(1.90)		--
Exercised	(9,778,344)	$	(1.60)		--
Balance Outstanding, December 31, 2014	16,631,918	$	3.80		5.29	$	53,353,862
Granted	2,000,000	$	1.00		5.00
Balance Outstanding, March 31, 2015	18,631,918	$	3.26		4.66	$	60,727,862
Exercisable, March 31, 2015	16,474,775	$	3.41		4.19	$	56,203,004

A summary of the Company’s option activity during the periods ended March 31, 2015 and December 31, 2014 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining		Aggregate
	No. of	Exercise		Contractual		Intrinsic
	Options	Price		Term		Value
Balance Outstanding, December 31, 2013	1,011,290	$	1.85		8.22	$	1,851,695
Granted	1,500,000	$	2.00		10
Granted	150,000	$	3.00		10
Granted	120,000	$	2.45		10
Granted	60,000	$	2.27		10
Granted	105,000	$	3.10		10
Granted	60,000	$	2.45		10
Granted	100,000	$	2.54		10
Granted	10,000	$	1.29		10
Granted	52,720	$	1.37		10
Granted	5,000	$	0.75		10
Forfeited	(492,119)	$	3.37		--
Exercised	(85,024)	$	1.36		--
Balance Outstanding, December 31, 2014	2,596,867	$	2.54		8.82		6,596,037
Granted	30,000	$	1.20		10
Granted	100,000	$	1.01		10
Granted	12,500	$	1.21		10
Forfeited	(53,513)	$	2.56		--
Balance Outstanding, March 31, 2015	2,685,854	$	2.07		8.66	$	5,562,931
Exercisable, March 31, 2015	1,377,944	$	1.96		8.26	$	2,606,233

10

BLUE EARTH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

(Unaudited)

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows the provisions of ASC 820 for fair value measurements of all nonfinancial assets and nonfinancial liabilities not recognized or disclosed at fair value in the financial statements on a recurring basis. The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

There were no changes in the valuation techniques during the periods ended March 31, 2015 and December 31, 2014. The estimated fair value of certain financial instruments, including cash and cash equivalents and current liabilities, are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Assets:

On December 15, 2014, the Company purchased 639.25 natural gas option contracts for $2,429,150, to mitigate its exposure to fluctuations in natural gas price in connection with its CHP facility in Alberta, Canada. The gas delivery dates range from January 1, 2016 to December 31, 2022. At each reporting date the Company revalues the options to the NYMEX-NG last trade value. The Company recorded a loss of $166,271 and $-0- for the three months ended March 31, 2015 and 2014, respectively, on the value of contracts.   

Assets measured at fair value on a recurring and non-recurring basis consisted of the following at March 31, 2015:

Liabilities:		Total Carrying Value at March 31, 2015		(Level 1)		(Level 2)		(Level 3)
Natural gas futures	$	2,259,995	$	2,259,995	$	-	$	-

The following is a summary of activity of Level 1 assets for the periods ended March 31, 2015 and December 31, 2014:

Balance at December 31, 2013		--
Purchases of futures contracts		2,429,150
Change in fair value 2014		(2,884)
Balance at December 31, 2014	$	2,426,266
Purchases of futures contracts		--
Change in fair value 2015		(166,271)
Balance at March 31, 2015	$	2,259,995

11

BLUE EARTH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

(Unaudited)

NOTE 6 - PROPERTY AND EQUIPMENT

The major classes of assets as of March 31, 2015 and  December 31, 2014 are as follows:

	March 31, 2015			December 31, 2014
Office and computer equipment	$	343,915	$	327,023
Software		91,256		91,256
Manufacturing and installation equipment		455,150		442,450
Leasehold improvements		759,304		759,304
Cogeneration plants (under construction)		63,091,360		56,022,580
Vehicles		480,455		480,455
Sub Total		65,221,440		58,123,068
Accumulated Depreciation		(1,183,383)		(1,140,290)
Net	$	64,038,057	$	56,982,778

Depreciation expense was $43,093 and $31,915, for the three months ended March 31, 2015 and 2014, respectively. Approximately $858,212 of the Company’s property and equipment serves as security against its long-term debt. Depreciation of the cogeneration plants will commence when the plants are placed in service during the second quarter of 2015.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Equipment Purchase Commitments

The Company has entered into equipment purchase agreements whereby it has committed to paying approximately $19,629,081 for electrical co-generation equipment. The Company has made deposits of approximately $8,079,699 (41% of the total commitment) toward the purchase of the equipment which is included in construction in progress-property and equipment. The balance of the purchase price will be due upon acceptance of the equipment by the Company in accordance with progress payments as set out in the purchase contracts.

Pending Arbitrations

The Company and two consultants, have filed demands for arbitration with the American Arbitration Association (“AAA”).  Consultants allege that the Company, specifically Johnny R. Thomas, CEO, have violated the "no disparagement" clause of their Consulting Agreement dated February 17, 2014 with the Company.  They alleged that the Company interfered with the ability of the Consultants to perform their consulting duties. The Company alleges that the Consultants failed to perform consulting work as required and never intended to perform under the Consulting Agreement. The proceedings are in the discovery stage with an arbitration hearing scheduled for May 2015. The Company expects to prevail in this arbitration proceeding and does not expect said action to have any material adverse consequences to the Company.

The Company has filed a demand for arbitration with the AAA and National Energy Partners and its subsidiary, Hawaii Solar, LLC, (“NEP”) have counter-claimed.  The Company alleged that NEP is in arrears on the payment of EPC services performed by the Company for construction work on the 24 schools in Hawaii contracted for between the parties. The Company further alleged that NEP provided deficient design drawings and interfered with the construction of the projects and engaged in negligence, fraud and/or willful misconduct.  NEP alleged that the Company failed to perform the contracted EPC services in a timely, proper manner and desires to validate termination of the contract in the arbitration process. The Company expects to prevail in this dispute, which would result in no material adverse consequences to the Company, other than legal costs and a delay in the recognition of revenue. However, if NEP prevails, the Company is likely to lose about $1.9 million on the work performed to date, as well as a possibility of limited damage payments. The Company is defending against counter claims raised in the arbitration.  On August 6, 2014, the Company commenced a civil action in Hawaii for declaratory and injunctive relief and damages against NEP in the circuit court of the First Circuit of Hawaii (CIV No. 14-1-1694-08).

12

BLUE EARTH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

(Unaudited)

NOTE 7 - COMMITMENTS AND CONTINGENCIES (continued)

Subsequent to the Company commencing the above-described arbitration, it learned that NEP did not possess a Hawaii contractor license.  The Company then withdrew its demand for arbitration without prejudice.  The Company is seeking damages in excess of $1,300,000 and a declaratory judgment and injunctive relief that the subcontracts are invalid, void and unenforceable, the arbitration provision in the subcontracts is unenforceable and the pending arbitration should be terminated.

Pending Litigation

On October 24, 2014, a purported class action lawsuit was filed against the Company, two executive officers, and one non-executive officer in the U.S. District Court for the Central District of California (Case No:2:14-cv-08263). On January 21, 2015, the court appointed a Lead Plaintiff and Lead Plaintiff's Counsel.  The Court also re-captioned the case In re Blue Earth, Inc. Securities Litigation, File No. CV 14-8263 DSF (JEMx). On March 13, 2015, plaintiff filed a First Amended Complaint ("FAC").  The FAC alleges claims under Sections 10(b) and 20(a) of the Exchange Act, and a purported class of purchasers of the Company's stock during the period from October 7, 2013 through October 21, 2014. Defendants responded to the FAC and filed a motion to dismiss the FAC.  Plaintiff's opposition to the motion to dismiss will be due on or before June 1, 2015.  Defendants' reply will be due on or before June 22, 2015.  The Company believes the claims contained in the complaint are without merit and is vigorously defending this matter.

NOTE 8 - OPERATING SEGMENTS

Operating segments are defined as components of an enterprise about which separate and discreet financial information is available and is evaluated regularly by the chief operating decision-maker in assessing performance and determining how to best allocate Company resources. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the business plan, budgets, profitability and cash flows of each respective segment.

The Company has two principal operating segments: (1) energy efficiency and technology and (2) construction of energy facilities owned by third parties. During the second quarter of 2015, a third segment will be introduced when energy is produced from facilities built and owned by the Company. These operating segments were delineated based on the nature of the products and services offered.

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BLUE EARTH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

(Unaudited)

NOTE 8 - OPERATING SEGMENTS (continued)

The Company evaluates the financial performance of the respective segments based on several factors, of which the primary measure is business segment income before taxes. All significant intercompany transactions and balances have been eliminated. The following tables show the operations of the Company’s reportable segments for the three months ended March 31, 2015 and 2014:

	Energy Efficiency
	and Technology		Construction		Corporate		Consolidated
March 31, 2015
Revenues	$	1,434,503	$	3,698,161	$	--	$	5,132,664
Cost of sales		597,723		3,378,584		--		3,976,307
Depreciation and amortization		358,162		472,079		384,827		1,215,068
General and administrative		2,009,783		1,504,472		2,908,272		6,422,527
Other income (expense)		(8,428)		7,537		175,245		174,354
Net income (loss)	$	(1,539,593)	$	(1,649,437)	$	(3,117,854)	$	(6,306,884)
Total assets	$	2,278,206	$	93,966,137	$	13,984,861	$	110,229,204
	Energy Efficiency
	and Technology		Construction		Corporate		Consolidated
March 31, 2014
Revenues	$	1,407,251	$	1,826,966	$	--	$	3,234,217
Cost of sales		586,901		1,201,408		--		1,788,309
Depreciation and amortization		127,206		469,065		479,755		1,076,026
General and administrative		1,103,074		972,515		3,757,344		5,832,933
Other (expense)		2,710		61,309		(287,428)		(223,409)
Net income (loss)	$	(407,220)	$	(754,713)	$	(4,524,527)	$	(5,686,460)
Total assets	$	1,033,867	$	7,216,209	$	79,942,616	$	88,192,692

NOTE 9 - SUBSEQUENT EVENTS

On April 9, 2015, the Company issued 12,500 shares of its common stock for director fees. On April 20, 2015, the Company issued 168,700 shares of its common stock under a Mutual and General Release Agreement with the landlord of the former offices of Blue Earth Solar, Inc. On April 22, 2015 the Company issued 250,000 shares of its common stock for consulting services.

In accordance with ASC 855-10, the Company’s management has reviewed all material events and there are no additional material subsequent events to report.

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

Forward-Looking Statements

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. All statements other than statements of historical facts included in this report are forward-looking statements. These statements relate to future events or to the Company’s future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Readers should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond the Company’s control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. Such risks, uncertainties and other factors, which could impact the Company and the forward-looking statements contained herein are included in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

LITIGATION DISCLOSURE STATEMENT

False allegations have been made against the Company by an anonymous blogger that stated he has a short position in the Company’s common stock, which has resulted in a class action lawsuit.  The Company has hired professionals to assist in communications and defense against the false allegations.  Management has been advised by counsel to continue to announce significant developments and milestones as they occur.  However, management has also been cautioned to avoid forecasts and detailed forward-looking statements for all of our solar, energy efficiency, technology and CHP business units.  Our general policy will be to release information as appropriate when significant events occur that define the event in the context of our business model.  Management continues to have confidence in our business model and in our ability to create shareholder value over time.

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Company Overview

Blue Earth, Inc. and subsidiaries (the “Company”) is a comprehensive provider of energy efficiency and alternative/renewable energy solutions for small and medium sized commercial facilities and industrial facilities. The Company also owns, manages and operates independent energy generation systems constructed in conjunction with these services.

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The Company has expanded its comprehensive energy solutions offerings through strategic acquisitions of companies that have been providing energy solutions to an established customer base or have developed a proprietary technology that can be utilized by our customers to improve equipment reliability, reduce maintenance costs and provide a better overall operating environment. The acquired companies’ operational activities are being conducted through the following six business units: Blue Earth Solar; Blue Earth CHP; Blue Earth EMS; Blue Earth PPS, Blue Earth Capital and Blue Earth EPS. Blue Earth EMS, Blue Earth EPS and Blue Earth PPS are part of the Energy Efficiency and Technology operating segments.  Blue Earth Solar and Blue Earth CHP are part of the Construction operating segments. As energy sales come online from facilities owned and built by the Company’s Blue Earth Solar or Blue Earth CHP business units, a third operating segment will be introduced. The primary strategic objective for the respective business units is to provide services which establish and build brand awareness about the comprehensive energy efficiency and alternative/renewable solutions provided by the Company to its existing and future customers.

The Blue Earth Solar unit of the Company has built and owned a 500,000 watt solar powered facility on the Island of Oahu, Hawaii, which it sold in 2014. It has also built, operates and manages seven solar powered facilities in California and is designing and permitting numerous other projects. Our turnkey energy solutions enable our customers to reduce or stabilize their energy related expenditures and lessen the impact of their energy use on the environment. Our services offered include the development, engineering, construction, operation and periodic warranty maintenance and in certain cases, financing of small and medium scale alternative/renewable energy plants including solar photovoltaic (PV), Combined Heat and Power (“CHP”) or on-site cogeneration and fuel cells.  Although the Company has a limited operating history and limited revenues in comparison to the size of the projects it has undertaken, as a result of the Company’s acquisitions, it is staffed with experienced CHP personnel.

The Blue Earth CHP unit builds, owns, operates and/or sells the energy plants or build them for the customer to own. As we continue to expand our core energy services business as an independent energy producer, we intend to sell the electricity, hot water, heat and cooling generated by the power plants that we own under long-term energy purchase agreements to utilities and long-term take or pay contracts to our industrial customers. The Company also intends to finance alternative and renewable energy projects through industry relationships. Blue Earth CHP recently added personnel and facilities enabling it to develop, construct and maintain backup generators and cogeneration systems in the New York metropolitan area. It plans to grow the segment into other East Coast and Mid-West metropolitan markets. This broadens BE CHP’s offerings to include co-generation systems and back-up generators for large commercial buildings in addition to the large industrial manufacturing facilities already served by BE CHP.

The Blue Earth EMS unit provides our customers with a variety of measures to improve the efficiency of their facilities’ energy consumption by designing, developing, engineering, installing, operating, maintaining and monitoring their major building systems, including refrigeration, lighting and heating, ventilation and air-conditioning. We offer our utility customers, energy efficiency programs, such as our proprietary Keep Your Cool™ refrigeration program, adopted by many utilities in California, targeted to their small and medium-sized commercial customers. Our utility based, rate-payer incentive programs, are designed to help commercial businesses use less energy through the upgrade of existing equipment with new, more efficient equipment that helps reduce demand for electricity, lower energy bills and also enable utilities to satisfy state-mandated energy reduction goals. In addition to designing and administering the utility program, we perform the technical audits, sell the program to the commercial customer and in most instances, provide the installation of the equipment.

Proprietary technologies owned by the Company are the PeakPower® System (Blue Earth PPS unit) and the UPStealth®System (Blue Earth EPS unit). The PeakPower® System is a patented demand response, cloud based technology, that allows remote, wireless monitoring of refrigeration units, lighting and heating, ventilation and air conditioning  with a potential market of thousands of facilities, such as super markets and food processing, restaurants and C-stores, drug and discount stores.  Revenues are expected to ramp up in 2015, as the Company is making some system changes before a commercial roll out later in 2015. The technology enables the Company’s business unit, Blue Earth PPS, to provide energy monitoring and control solutions with real-time decision support to protect our customers’ assets by preventing costly equipment failures and food product losses. Our PeakPower® System also serves as a platform to enter into long-term services agreements that allow most types of refrigeration equipment failures to be predicted, thereby enabling preventive servicing based on need rather than periodic, unscheduled and costly service calls.

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Management believes based on its knowledge of the industry, that the patent pending UPStealth® System is the only energy efficient, intelligent Nickel Zinc digital battery backup management system that was designed to power signalized traffic intersections during loss of utility power.  This system has been tested, approved and installed in several cities and municipalities throughout the United States.  The UPStealth® System is designed as an alternative to lead-acid battery backup systems, enabling the Company’s business unit, Blue Earth EPS, to provide its customers with an environmentally friendly product that is completely recyclable with no issues of hazardous out-gassing, corrosion, flammable or explosive characteristics.  The innovative UPStealth® battery backup management system can be formed in various configurations that allow the intelligent battery to bend around corners and fit into spaces that cannot be accessed by traditional battery backup systems. Compared to lead-acid battery backup systems, the total cost of ownership for the UPStealth® is typically less, requires less maintenance, performs several years longer, and eliminates costly hazardous disposal issues. We also offer a finance program, which allows cities and municipalities to replace existing systems without capital expenditures.

There are several other market verticals where we believe both of our proprietary technologies can be applied, separately, or in combination, as a viable, cost effective solution. Examples include: back-up energy storage systems for data centers, oil and natural gas wells, remote cell towers, risk management services, and demand response systems to decrease energy usage during peak load pricing periods charged by utilities.

Actual Results of Operations

Our revenues are derived from professional service contracts to provide energy efficient solutions and technology, and the construction of energy facilities owned by third parties. By the second quarter of 2015 we expect to add a third revenue stream from energy sales generated from facilities built and owned by the Company.

Three Months Ended March 31, 2015 Compared with Three Months Ended March 31, 2014

Revenues

The Company recognized $5,132,664 of revenue for the three months ended March 31, 2015, as compared to $3,234,217 for the three months ended March 31, 2014, an increase of $1,898,447 or 58.7%. The current year’s revenues represent sales from the Company’s divisions Energy Efficiency and Technology ($1,434,503) and Construction ($3,698,161).  The prior year’s revenues represent sales from the Company’s divisions Energy Efficiency and Technology ($1,407,251) and Construction ($1,826,966). Energy Efficiency and Technology sales include energy efficiency retrofits through the Keep Your Cool programs, website sales, refrigeration/HVAC services and the UPStealth® battery backup management systems.  Construction sales are from installation of alternative energy systems and installation and maintenance of HVAC systems. Energy Efficiency and Technology’s revenues were affected by a new contract with a national chain of convenience stores, increase in website sales, and sales of UPStealth® battery backup management systems. Construction's revenues increased due to work on the solar generation project in Indiana.

	Three Months Ended March 31,				Change
	2015		2014		$		%
Energy Efficiency and Technology
Battery backup systems	$	53,853	$	52,201		1,652		3
Energy efficiency		1,380,650		1,355,050		25,600		2
Total Energy Efficiency and Technology		1,434,503		1,407,251		27,252		2
Construction
Solar construction		3,698,161		1,826,966		1,871,195		102
Total revenue	$	5,132,664	$	3,234,217		1,898,447		59

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Cost of Sales and Gross Profit

Costs of sales for the three months ended March 31, 2015 were $3,976,307 resulting in a gross profit of $1,156,357 or 22.5% of revenues. Energy Efficiency and Technology had a gross profit of $836,780 or 58.3% compared to a profit of $319,577 or 8.6% for Construction. By comparison, during 2014 we had a cost of sales of $1,788,309 with a gross profit of $1,445,908 or 44.7%. Energy Efficiency and Technology had a gross profit of $820,350 or 58.3% compared to $625,558 or 34.2% for Construction.

Operating Expenses

General and Administrative Expenses and Depreciation and Amortization Expense

Operating expenses were $7,637,595 for the three months ended March 31, 2015 as compared to $6,908,959 for the three months ended March 31, 2014, an increase of $728,636 or 10.5%.  In 2015, approximately $2,367,945 (31.0%) of the operating expenses were from Energy Efficiency and Technology and $1,976,552 (25.9%) were from Construction. The balance of $3,293,098 (43.1%) for 2015 was corporate administrative expense. Approximately $2,566,142 (33.6%) of the operating expenses was for payroll costs and $982,354 (12.9%) was for consulting and professional fees in 2015. The increase in operating expenses for 2015 was primarily due an increase in payroll costs.

In 2014 approximately $1,230,280 (17.8%) of the operating expenses were from Energy Efficiency and Technology and $1,441,580 (20.9%) were from Construction. The balance of $4,237,099 (61.3%) for 2014 was corporate administrative expense. Approximately $1,960,697 (28.4%) of the operating expenses was for payroll costs and $1,562,807 (22.6%) was for professional fees in 2014.

In 2015, operating expenses include stock compensation expense of $1,705,991 (22.3%) compared to $1,860,269 (26.9%) in 2014. We recorded depreciation and amortization expense of $1,215,068  in 2015 compared to $1,076,026 in 2014. The increase was due to the amortization of the purchase price of Blue Earth Capital, Inc. which was purchased in 2014.

We expect our costs for personnel, consultants and other operating expenses to increase as we implement our business plan. Thus, our general and administrative expenses are likely to increase significantly in future reporting periods.

Other Income (Expense)

Total other income (expense) for the three months ended March 31, 2015 was $174,354 compared to $(223,409) for the three months ended March 31, 2014. The increase was primarily attributable to a gain of $989,778 from the settlement of litigation in the first quarter of 2015 compared to $-0- in the first quarter of 2014. The change in interest expense from $235,584 in 2014 to $430,520 in 2015 was due to the borrowing of a $10,000,000 convertible note payable and a line of credit of $3,000,000 in the first quarter of 2015.

Net Loss

Net loss was $6,306,884 for the three months ended March 31, 2015 as compared with a net loss of $5,686,460 for the three months ended March 31, 2014, an increase of $620,424.  Excluding the non cash expenses of common stock for services and amortization of intangible assets acquired for stock and stock options/warrants issued for services, the loss would have been $3,106,571 and $2,750,165 for 2015 and 2014, respectively. The increase is attributable primarily by interest expense related to the borrowing of $10,000,000 in convertible debt and $3,000,000 on the line of credit and a loss from an equity investment of $227,560, offset in part by the gain of $989,778 from the settlement of litigation. The net loss attributed to common shareholders was $6,306,884 in 2015 compared to $6,079,348 in 2014 due to the dividends accrued on the Series C preferred stock and paid in common shares. The Series C preferred shares were all converted into common shares by June 30, 2014 so no additional dividends will be incurred in the succeeding periods. The net loss translates to $0.07 per share in 2015 compared to $0.09 in 2014.

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Liquidity and Capital Resources as of March 31,  2015 compared with December 31, 2014

Net cash used in operating activities during the three months ended March 31, 2015 totaled $1,937,541 and resulted primarily from the operating expenses associated with the activities of the parent company related to carrying out our business plan.  In addition to a net loss of $6,306,884, we incurred an increase in construction in progress of $371,955 and prepaid expenses of $293,372 that was partially offset by common stock options and warrants granted for services expensed at $1,385,338, common stock issued for services valued at $320,653 and depreciation and amortization of $1,215,068. We also decreased our accounts receivable by $1,980,174 and increased accounts payable by $237,621.  We expect to continue with a negative cash flow from operations for the foreseeable future as we continue to build our business.

Net cash used in operating activities during the three months ended March 31, 2014 totaled $2,704,046 and resulted primarily from the operating expenses associated with the activities of the parent company related to carrying out our business plan.  In addition to a net loss of $5,686,460, we incurred an increase in accounts receivable and billings in excess of $731,331. These outflows were partially offset by common stock warrants and options granted for services expensed at $1,189,727, common stock issued for services valued at $670,542, and depreciation and amortization of $1,076,026.  We also increased our accounts payable and accrued expenses by $406,480 due to costs incurred on construction in progress.  

Net cash used in investing activities during the three months ended March 31, 2015 totaled $7,487,669 which included $7,098,388 for purchases of equipment and $400,000 invested in an equity subsidiary. Net cash used in continuing investing activities during the three months ended March 31, 2014 totaled $1,354,475, of which $1,353,588 was used for purchases of equipment.

Net cash provided by financing activities during the three months ended March 31, 2015 totaled $12,760,896 and resulted from $2,911,700 of proceeds from the line of credit and $9,953,068 of proceeds from the convertible note payable. The cash inflows were partially offset by principal payments on notes payable of $103,872.  Net cash provided by financing activities during the three months ended March 31, 2014 totaled $658,143. These inflows primarily came from $1,000,000 from common stock subscriptions and $100,857 of gross proceeds from the exercise of options and warrants. The inflows were offset by payments on notes payable of $438,710 and notes payable to related parties of $4,004.

At March 31, 2015, we had a working capital deficit of $3,210,051 including $6,303,094 in cash and cash equivalents compared with working capital of $6,181,199 at December 31, 2014.  We anticipate our revenue generating activities to continue and even increase as we execute on our alternative/renewable energy and energy efficiency initiatives as well as from future acquisitions. The decrease in working capital was the result of our increase of short term debt used for our investment in CHP projects.

Our ability to execute our business plan is subject to our ability to generate profits and/or obtain necessary funding from outside sources, including by the sale of our securities, or obtaining loans from lenders, where possible. Our continued net operating losses increase the difficulty of our meeting these goals. Nonetheless, the Company expects that it has sufficient cash and borrowing capacity to meet its working capital needs for at least the next 12 months. The Company’s project financing requirements are separate and apart from our working capital needs.

On February 22, 2013, we entered into a credit agreement with a $10 million line of credit of which $1,500,000 was funded and repaid during 2013 and $3,000,000 was funded and repaid in 2014. $4,000,000 is currently available upon our meeting the terms and conditions of the credit facility of which a draw of $3,000,000 was taken on February 24, 2015. Additional draws are subject to approval of the planned use of proceeds by the lender in order to borrow against the facility.  The Company has elected to not draw down any additional funds at this time The line of credit is secured by one CHP projects and by one solar project and accrues interest at 12% per annum.

On March 9, 2015, we issued a 6 month convertible note payable for $10,000,000. The note payable is convertible into shares of our common stock at $1.00 per share at the noteholder’s option. We granted 2,000,000 $1.00 stock purchase warrants  as consideration for the convertible note payable. The convertible note payable is secured by all of our assets except one CHP project and one solar project and accrues interest at 12% per annum.

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Historically, we have financed our working capital and capital expenditure requirements primarily from the sales of our equity securities. We intend to seek additional equity and/or debt financing in order to implement our business plan.  We raised $22,710,411 from equity financing during the year ended December 31, 2014.  We have a line of credit for $10,000,000 of which $4,000,000 is available and we are currently using $3,000,000 to meet our cash needs.  Furthermore, any additional equity or convertible debt financing will be dilutive to existing shareholders and may involve preferential rights over common shareholders. Debt financing, with or without equity conversion features, may involve restrictive covenants.

Related Party Transactions

The Company had no significant related party transactions during the three months ended March 31, 2015. The Company owes $1,333,147 plus accrued interest to a director for funds borrowed in prior periods.

New Accounting Pronouncements

See Note 2 to our unaudited condensed consolidated financial statements for a discussion of recently issued accounting pronouncements.

Critical Accounting Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, including, but not limited to valuation of accounts receivable and allowance for doubtful accounts, those related to the estimates of depreciable lives and valuation of property and equipment, valuation of derivatives, valuation of payroll tax contingencies, valuation of share-based payments, and the valuation allowance on deferred tax assets.

Off-Balance Sheet Arrangements

Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

N/A

ITEM 4. 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 evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report.   Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow time decisions regarding required disclosure.  Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that material information we are required to disclose in reports that we file under the Exchange Act is  recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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Changes in Internal Control Over Financial Reporting. During the most recent quarter ended March  31, 2015, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS.

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. There have been no substantive changes in any legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2014; and we are not involved in any other material pending legal proceeding or litigation, except as set forth below, and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

On October 24, 2014, a purported class action lawsuit was filed against the Company, two executive officers, and one non-executive officer in the U.S. District Court for the Central District of California (Case No:2:14-cv-08263). On January 21, 2015, the court appointed a Lead Plaintiff and Lead Plaintiff's Counsel.  The Court also re-captioned the case In re Blue Earth, Inc. Securities Litigation, File No. CV 14-8263 DSF (JEMx). On March 13, 2015, plaintiff filed a First Amended Complaint ("FAC").  The FAC alleges claims under Sections 10(b) and 20(a) of the Exchange Act, and a purported class of purchasers of the Company's stock during the period from October 7, 2013 through October 21, 2014. Defendants' responded and filed a motion to dismiss FAC.  Plaintiff's opposition to the motion to dismiss will be due on or before June 1, 2015.  Defendants' reply will be due on or before June 22, 2015.  The Company believes the claims contained in the complaint are without merit and is vigorously defending this matter.

The Company and two consultants, have filed demands for arbitration with the American Arbitration Association (“AAA”).  Consultants allege that the Company, specifically Johnny R. Thomas, CEO, have violated the "no disparagement" clause of their Consulting Agreement dated February 17, 2014 with the Company.  They alleged that the Company interfered with the ability of the Consultants to perform their consulting duties. The Company alleges that the Consultants failed to perform consulting work as required and never intended to perform under the Consulting Agreement.The proceedings are in the discovery stage. The Company expects to prevail in this arbitration proceeding and does not expect said action to have any material adverse consequences to the Company.

The Company has filed a demand for arbitration with the AAA and National Energy Partners and its subsidiary, Hawaii Solar, LLC, (“NEP”) have counter-claimed.  The Company allegedthat NEP is in arrears on the payment of EPC services performed by the Company for construction work on the 24 schools in Hawaii contracted for between the parties. The Company further alleged that NEP provided deficient design drawings and interfered with the construction of the projects and engaged in negligence, fraud and/or willful misconduct.  NEP alleged that the Company failed to perform the contracted EPC services in a timely, proper manner and desires to validate termination of the contract in the arbitration process. The Company expects to prevail in this dispute, which would result in no material adverse consequences to the Company, other than legal costs and a delay in the recognition of revenue. However, if NEP prevails, the Company is likely to lose about $1.9 million on the work performed to date, as well as a possibility of limited damage payments. The Company is definitely against counter claims raised in the arbitration.  On August 6, 2014, the Company commenced a civil action in Hawaii for declaratory and injunctive relief and damages against NEP in the circuit court of the First Circuit of Hawaii (CIV No. 14-1-1694-08).  Subsequent to the Company commencing the above-described arbitration, it learned that NEP did not possess a Hawaii contractor license.  The Company then withdrew its demand for arbitration without prejudice.  The Company is seeking damages in excess of $1,300,000 and a declaratory judgment and injunctive relief that the subcontracts are invalid, void and unenforceable.

On March 27, 2015, Blue Earth, Inc. (the “Company”) entered into a Settlement Agreement with the Broadway Family Group, LLC (“Broadway”) to settle all claims brought by Broadway, as well as certain other matters (the “Settlement Agreement”).  As previously disclosed in the Company’s filings with the Securities and Exchange Commission, Broadway commenced an action in the 8th Judicial District of Nevada (Case No.: A-14-709424-C) (the “Action”) whereby it alleged the Company’s wrongful termination of the Contractor and Services Agreement dated as of July 15, 2013 and Amended and Restated Contractor and Services Agreement, dated as of April 21, 2014 (collectively the “Consulting Agreements”).  On July 15, 2013, Broadway and the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), whereby Broadway acquired 3,030,000 shares of the Company’s common stock in exchange for its equity interests in Global Renewable Energy Group, Inc.  Pursuant to the Consulting Agreements Broadway received 84,000 restricted shares of the Company’s common stock and warrants to purchase 1,200,000 additional shares of the Company’s common stock.  

22

As of the date of the Settlement Agreement, Broadway owned 2,973,000 shares of the Company’s common stock and was seeking re-issuance of warrants to purchase 1,200,000 shares of common stock, which had been cancelled when the Company terminated the Consulting Agreements.  Pursuant to the terms of the Settlement Agreement, Broadway returned to the Company a total of 1,127,742 shares of the Company’s common stock and relinquished any claim on the previously cancelled 1,200,000 warrants. The return of these shares to the Company, paid a $50,000 promissory note, settled lock up violations and resolved any issues on the original issuance of the Company’s shares to Broadway.  Broadway retained ownership of 1,845,258 shares of the Company’s common stock, all of which are subject to lock-up/leak-out provisions that prohibit Broadway from selling more than 2,600 Lock-Up Shares in any single day during the next 18 months (the “Lock-Up Period”) or more than 13,000 Lock-Up Shares in any single week during the Lock-Up Period.  Broadway is required to submit weekly confirmations from the applicable financial institution verifying compliance with the lock-up and leak-out restrictions.  In the event of any violation of the lock-up and leak out restrictions, Broadway has agreed to forfeit shares of common stock held in escrow on a one for one basis in the amount of Lock-Up Shares sold in violation of such restrictions.  There are no restrictions on future share sales beyond the Lock-Up Period.

The Settlement Agreement provides the following additional terms:

·

A mutual release of all claims by the Company and Broadway against each other.

·

Broadway agreed that any obligations of the Company pursuant to the Consulting Agreement were terminated in all respects, including, but not limited to, the issuance of any warrants issued pursuant to the Consulting Agreements; provided, however, Broadway agreed that certain work for hire and other related obligations under the Consulting Agreements would survive.  

·

Broadway agreed to return certain proprietary information of the Company and to certain confidentiality obligations regarding the Settlement Agreement and the Action, including Broadway and the Company’s agreement not to make any public statements that imply wrongdoing on the part of the other, although the Company may make statements when required under the Federal securities laws or where required by a court of competent jurisdiction.  

·

Broadway also agreed to indemnify the Company for any claims relating to its ownership of the Company’s common stock and the Merger Agreement.

·

The Action was dismissed with prejudice.

In addition, in connection with this settlement, Anthony M. Santos, Esq., the attorney who wrote a previously disclosed demand letter to the Board of Directors on or about November 17, 2014, alleging certain breaches of fiduciary duties by the Company’s principals, has advised the Board of Directors in writing that the alleged issues are no longer a concern or have been otherwise addressed or resolved to the shareholders’ satisfaction.  The letter served as a formal notice that a response is no longer necessary.

ITEM 1A. RISK FACTORS.

There have been no material changes from risk factors previously reported in the Company's Form 10-K for December 31, 2014, as amended.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On February 24, 2015, the Company issued: (i) 10,000 restricted shares of Common Stock to Larry Eggleston pursuant to an offer letter dated September 18, 2014 for services rendered,  (ii) 63,887 restricted shares of Common Stock to Donald R. Kendall, Jr. as payment of expenses incurred from February through April 2015, and (iii) 400,000 shares of Series D Convertible Preferred Stock held by a third party and convertible solely in the event of a monetary default to TCA Global Credit Master Fund LP.

23

On March 9, 2015, the Company issued 200,000 restricted shares of Common Stock to Jackson Investment Group LLC (“Jackson”) as a commitment fee under a loan made pursuant to a Note and Warrant Purchase Agreement dated March 10, 2015.

The above shares were issued in transactions that were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act based on the representations and warranties contained in their investment intent letter and/or subscription agreements. No commissions were paid and no underwriter or placement agent was involved in these transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. MINE SAFETY DISCLOSURES

None

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

Exhibit
Number		Description of Exhibit
	31.1	Section 302 Certification of Principal Executive Officer
	31.2	Section 302 Certification of Principal Financial Officer
	32.1	Section 906 Certification of Principal Executive Officer and Principal Financial Officer

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	BLUE EARTH, INC.
Date: May 11, 2015	By:	/s/ Dr. Johnny R. Thomas
		Dr. Johnny R. Thomas
		Chief Executive Officer (Principal Executive Officer)
Date: May 11, 2015	By:	/s/ Brett Woodard
		Brett Woodard
		Chief Financial Officer (Principal Financial and Accounting Officer)

25

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. Johnny R. Thomas, certify that:

(1)	I have reviewed this quarterly report on Form 10-Q of Blue Earth, Inc.;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2015

/s/ Dr. Johnny R. Thomas

Dr. Johnny R. Thomas

President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brett Woodard, certify that:

(1)	I have reviewed this quarterly report on Form 10-Q of Blue Earth, Inc.;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2015 

/s/ Brett Woodard

Brett Woodard

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S. C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Blue Earth, Inc., (the “Company”) on Form 10-Q for period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dr. Johnny R. Thomas, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 11, 2014

/s/ Dr. Johnny R. Thomas

Dr. Johnny R. Thomas

President and Chief Executive Officer

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S. C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Blue Earth, Inc., (the “Company”) on Form 10-Q for period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brett Woodard, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 11, 2015

/s/ Brett Woodard

Brett Woodard

Chief Financial Officer

XML

Commitments and Contingencies Disclosure (Details) (EquipmentPurchaseAgreementsMember, USD $)	Mar. 31, 2015
EquipmentPurchaseAgreementsMember
Commitment to pay	$ 19,629,081
Deposits made toward purchase	$ 8,079,699

XML

Significant Accounting Policies: Inventory, Policy (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Details
Inventory on hand	$ 718,275	$ 569,888
Valuation allowance for inventory	$ 6,188

XML

Stock Purchase Warrants and Options

3 Months Ended

Mar. 31, 2015

Notes

Stock Purchase Warrants and Options

NOTE 4 - STOCK PURCHASE WARRANTS AND OPTIONS

A summary of the Company’s warrant activity during the periods ended March 31, 2015 and December 31, 2014 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining		Aggregate
	No. of	Exercise		Contractual		Intrinsic
	Warrants	Price		Term		Value
Balance Outstanding, December 31, 2013	22,660,668	$	1.90		6.52	$	43,055,269
Granted	200,000	$	0.00		10.00
Granted	100,000	$	1.00		10.00
Granted	8,521,654	$	6.00		3.00
Cancelled	(3,600,000)	$	(1.18)		--
Forfeited	(1,472,060)	$	(1.90)		--
Exercised	(9,778,344)	$	(1.60)		--
Balance Outstanding, December 31, 2014	16,631,918	$	3.80		5.29	$	53,353,862
Granted	2,000,000	$	1.00		5.00
Balance Outstanding, March 31, 2015	18,631,918	$	3.26		4.66	$	60,727,862
Exercisable, March 31, 2015	16,474,775	$	3.41		4.19	$	56,203,004

A summary of the Company’s option activity during the periods ended March 31, 2015 and December 31, 2014 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining		Aggregate
	No. of	Exercise		Contractual		Intrinsic
	Options	Price		Term		Value
Balance Outstanding, December 31, 2013	1,011,290	$	1.85		8.22	$	1,851,695
Granted	1,500,000	$	2.00		10
Granted	150,000	$	3.00		10
Granted	120,000	$	2.45		10
Granted	60,000	$	2.27		10
Granted	105,000	$	3.10		10
Granted	60,000	$	2.45		10
Granted	100,000	$	2.54		10
Granted	10,000	$	1.29		10
Granted	52,720	$	1.37		10
Granted	5,000	$	0.75		10
Forfeited	(492,119)	$	3.37		--
Exercised	(85,024)	$	1.36		--
Balance Outstanding, December 31, 2014	2,596,867	$	2.54		8.82		6,596,037
Granted	30,000	$	1.20		10
Granted	100,000	$	1.01		10
Granted	12,500	$	1.21		10
Forfeited	(53,513)	$	2.56		--
Balance Outstanding, March 31, 2015	2,685,854	$	2.07		8.66	$	5,562,931
Exercisable, March 31, 2015	1,377,944	$	1.96		8.26	$	2,606,233

XML

Stock Purchase Warrants and Options: Schedule of Stockholders' Equity, Options (Details) (USD $)	3 Months Ended	12 Months Ended	24 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Stock options outstanding	2,685,854	2,596,867	2,596,867	1,011,290
Weighted average exercise price, options outstanding	$ 2.07	$ 2.54	$ 2.54	$ 1.85
Aggregate intrinsic value, option outstanding	$ 5,562,931	$ 6,596,037	$ 6,596,037	$ 1,851,695
Stock options forfeited	(53,513)	(492,119)
Weighted average exercise price, options forfeited	$ 2.56	$ 3.37
Stock options exercised			(85,024)
Weighted average exercise price, options exercised		$ 1.36
Stock options exercisable	1,377,944
Weighted average exercise price, options exercisable	$ 1.96
Aggregate intrinsic value, options exercisable	$ 2,606,233
Grant (1)
Stock options granted	30,000	1,500,000
Weighted average exercise price, options granted	$ 1.20	$ 2.00
Grant (2)
Stock options granted	100,000	150,000
Weighted average exercise price, options granted	$ 1.01	$ 3.00
Grant (3)
Stock options granted	12,500	120,000
Weighted average exercise price, options granted	$ 1.21	$ 2.45
Grant (4)
Stock options granted		60,000
Weighted average exercise price, options granted		$ 2.27
Grant (5)
Stock options granted		105,000
Weighted average exercise price, options granted		$ 3.10
Grant (6)
Stock options granted		60,000
Weighted average exercise price, options granted		$ 2.45
Grant (7)
Stock options granted		100,000
Weighted average exercise price, options granted		$ 2.54
Grant (8)
Stock options granted		10,000
Weighted average exercise price, options granted		$ 1.29
Grant (9)
Stock options granted		52,720
Weighted average exercise price, options granted		$ 1.37
Grant (10)
Stock options granted		5,000
Weighted average exercise price, options granted		$ 0.75

XML

Stock Purchase Warrants and Options: Schedule of Stockholders' Equity Note, Warrants (Details) (USD $)	12 Months Ended	3 Months Ended
	Dec. 31, 2014	Mar. 31, 2015	Dec. 31, 2013
Warrants outstanding	16,631,918	18,631,918	22,660,668
Weighted average exercise price, warrants outstanding	$ 3.80	$ 3.26	$ 1.90
Aggregate intrinsic value, warrants outstanding	$ 53,353,862	$ 60,727,862	$ 43,055,269
Warrants cancelled	(3,600,000)
Weighted average exercise price, warrants cancelled	$ (1.18)
Warrants forfeited	(1,472,060)
Weighted average exercise price, warrants forfeited	$ (1.90)
Warrants exercised	(9,778,344)
Weighted average exercise price, warrants exercised	$ (1.60)
Warrants exercisable		16,474,775
Weighted average exercise price, warrants exercisable		$ 3.41
Aggregate intrinsic value, warrants exercisable		$ 56,203,004
Grant (1)
Warrants granted	200,000	2,000,000
Weighted average exercise price, warrants granted		$ 1.00
Grant (2)
Warrants granted	100,000
Weighted average exercise price, warrants granted	$ 1.00
Grant (3)
Warrants granted	8,521,654
Weighted average exercise price, warrants granted	$ 6.00

XML

Fair Value of Financial Instruments Disclosure: Summary of Activity of Level 1 Assets (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Details
Fair Value, Level 1 Assets	$ 2,259,995	$ 2,426,266	$ 2,429,150
Change in fair value, assets	$ (166,271)	$ (2,884)

XML

Property and Equipment Disclosure: Schedule of Major Classes of Assets (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Property and Equipment, asset value	$ 65,221,440	$ 58,123,068
Accumulated depreciation on property and equipment assets	(1,183,383)	(1,140,290)
Property and equipment, asset value, Net	64,038,057	56,982,778
Computer Equipment
Property and Equipment, asset value	343,915	327,023
Software and Software Development Costs
Property and Equipment, asset value	91,256	91,256
Other Machinery and Equipment
Property and Equipment, asset value	455,150	442,450
Leasehold Improvements
Property and Equipment, asset value	759,304	759,304
Cogeneration plants
Property and Equipment, asset value	63,091,360	56,022,580
Vehicles
Property and Equipment, asset value	$ 480,455	$ 480,455

XML

Significant Events

3 Months Ended

Mar. 31, 2015

Notes

Significant Events

NOTE 3 - SIGNIFICANT EVENTS

Settlement of Litigation

The Company received 1,127,742 shares of its common stock in settlement of litigation valued at $0.922 per share. As part of the settlement the Company forgave a $50,000 note receivable resulting in a gain on settlement of litigation of $989,778.

Common Stock Transactions

During the three months ended March 31, 2015, the Company issued 73,887 common shares for services valued at $94,653. The Company also issued 200,000 common shares for debt issuance costs valued at $226,000. The Company cancelled the 1,127,742 shares of its common stock it received in settlement of litigation.

Credit Line Payable

During the three months ended March 31, 2015, the Company borrowed $3,000,000 on the line of credit. The line of credit is for up to $4,000,000 subject to approval of the use of proceeds by the lender. The line of credit accrues interest at 12% per annum and is secured by one of the Company’s CHP projects and one solar project. The Company received net proceeds of $2,911,700 after closing costs. The Company has issued 400,000 shares of Class D convertible preferred stock as tertiary collateral for the line of credit. The $88,300 of fees withheld from the proceeds of the line of credit are included in prepaid expenses and are being amortized over the term of the line of credit.

Related Party Notes Payable

The related party notes payable, totaling $1,333,147, are due on demand, accrue interest at 12% per annum and are unsecured.

CHP Plant Energized

On March 30, 2015 the Company energized its initial combined heat and power (“CHP”) energy plant at a poultry processing facility in Sumter, South Carolina. The Company owns and operates the energy plant which provides combined heat and power (CHP) solutions. Electricity is generated and the thermal heat from the generator is captured and utilized for processes in the poultry facility, lowering energy costs, reducing greenhouse gas emissions and improving energy efficiency.

Convertible Note Payable

During the three months ended March 31, 2015, the Company borrowed $10,000,000 on a convertible note payable. The note payable is convertible to shares of the Company’s common stock at $1 per share. The convertible note payable accrues interest at 12% per annum and is due on September 10, 2015. The convertible note payable is secured by one of the Company’s CHP projects and the Company’s assets. The Company received net proceeds of $9,953,068 after closing costs. The $46,932 in legal fees withheld from the loan proceeds are included in prepaid expenses and are being amortized over the 6 month term of the convertible note payable.

The lender received 200,000 shares of common stock as consideration for making the loan valued at $226,000. The lender also received 2,000,000 warrants to purchase shares of the Company’s common stock at $1.00 per share. The value of the warrants measured by The Company was $1,321,600. The value was computed using the Black-Scholes formula with a 5 year maturity, 1.62% risk free rate and a 94.46% volatility.  The lender also received the right to purchase shares of the Company’s common stock at $1.00 per share upon the Company’s repayment of all or part of the convertible note payable. The value of the right to purchase common shares measured by the Company was $649,091. The value was computed using the Black-Scholes formula with a 1 year maturity, .25% risk free rate, a 87.06% volatility and a 5% probability of exercise.  The total discount on the convertible note payable of $2,196,691 is being amortized over the 6 month term of the debt. The Company recorded $222,763 of interest expense from the amortization of the discount during the quarter ended March 31, 2015.

The following is a summary of convertible note payable the period ended March 31, 2015:

Balance at December 31, 2014	$	--
Borrowing of convertible note payable		10,000,000
Discount on convertible note payable		(2,196,691)
Amortization of discount		222,763
Balance at March 31, 2015	$	8,026,072

Series D Preferred Stock

The Company has issued 400,000 shares of its $10.00 per share Series D preferred stock as tertiary collateral against the line of credit. The Series D preferred shares are issued, but not presently outstanding.  The Series D preferred shares certificate is held by a third party and the lender does not have access to the certificate without the consent and cooperation of the Company. 

Solely in the event of a default by the Company of its payment obligations under the terms of the line of credit, a block of the Series D preferred shares would be released and converted into common shares in accordance the formula provided in the line of credit agreement. The sufficient common shares would be sold by the lender to cure the default. Upon the repayment of the line of credit the Series D preferred stock will be returned to the Company and cancelled

XML

Property and Equipment Disclosure (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Details
Depreciation expense on property and equipment	$ 43,093	$ 31,915
Value of property and equipment serving as security against debt	$ 858,212

XML

Consolidated Balance Sheets (USD $)	Mar. 31, 2015	Dec. 31, 2014
CURRENT ASSETS
Cash and cash equivalents	$ 6,303,094	$ 2,967,408
Restricted cash	632,258	632,102
Accounts receivable, net	4,119,522	2,515,772
Costs and revenues in excess of billings	552,930	3,967,207
Inventory, net	718,275	569,888
Construction in progress	71,128	68,212
Other receivables	76,194	78,926
Prepaid expenses and deposits	1,745,896	1,646,301
Total Current Assets	14,219,297	12,445,816
PROPERTY AND EQUIPMENT, net	64,038,057	56,982,778
OTHER ASSETS
Deposits	76,974	80,455
Natural gas futures	2,259,995	2,426,266
Long term receivables	1,417,901	1,587,548
Equity method investment	9,525,841	9,353,402
Contracts and technology, net	18,691,137	19,863,096
Total Other Assets	31,971,848	33,310,767
TOTAL ASSETS	110,229,202	102,739,361
CURRENT LIABILITIES
Accounts payable	4,512,801	4,071,164
Current portion of notes payable	63,484	162,445
Related party payables	1,333,147	1,333,147
Line of credit payable	3,000,000
Convertible note payable	8,026,072
Accrued expenses	167,192	480,502
Payroll expenses payable	326,652	217,359
Total Current Liabilities	17,429,348	6,264,617
LONG TERM LIABILITIES
Long term portion of notes payable	61,477	66,387
Total Long Term Liabilities	61,477	66,387
Total Liabilities	17,490,825	6,331,004
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock value	400
Common stock value	93,405	94,259
Additional paid-in capital	190,797,290	188,159,932
Accumulated deficit	(98,152,718)	(91,845,834)
Total Stockholders' Equity	92,738,377	96,408,357
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 110,229,202	$ 102,739,361

XML

Condensed Financial Statements

3 Months Ended

Mar. 31, 2015

Notes

Condensed Financial Statements

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2015 and 2014, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2014 audited financial statements.  The results of operations for the periods ended March 31, 2015 and 2014 are not necessarily indicative of the operating results for the full year.

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Subsequent Events (Details)	1 Months Ended
	Apr. 22, 2015
Director fees
Common stock issued	12,500
Mutual and General Release Agreement
Common stock issued	168,700
Consulting services
Common stock issued	250,000

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Fair Value of Financial Instruments Disclosure: Summary of Activity of Level 1 Assets (Tables)

3 Months Ended

Mar. 31, 2015

Tables/Schedules

Summary of Activity of Level 1 Assets

Balance at December 31, 2013		--
Purchases of futures contracts		2,429,150
Change in fair value 2014		(2,884)
Balance at December 31, 2014	$	2,426,266
Purchases of futures contracts		--
Change in fair value 2015		(166,271)
Balance at March 31, 2015	$	2,259,995

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Operating Segments Disclosure: Schedule of Segment Reporting Information, by Segment (Tables)

3 Months Ended

Mar. 31, 2015

Tables/Schedules

Schedule of Segment Reporting Information, by Segment

	Energy Efficiency
	and Technology		Construction		Corporate		Consolidated
March 31, 2015
Revenues	$	1,434,503	$	3,698,161	$	--	$	5,132,664
Cost of sales		597,723		3,378,584		--		3,976,307
Depreciation and amortization		358,162		472,079		384,827		1,215,068
General and administrative		2,009,783		1,504,472		2,908,272		6,422,527
Other income (expense)		(8,428)		7,537		175,245		174,354
Net income (loss)	$	(1,539,593)	$	(1,649,437)	$	(3,117,854)	$	(6,306,884)
Total assets	$	2,278,206	$	93,966,137	$	13,984,861	$	110,229,204
	Energy Efficiency
	and Technology		Construction		Corporate		Consolidated
March 31, 2014
Revenues	$	1,407,251	$	1,826,966	$	--	$	3,234,217
Cost of sales		586,901		1,201,408		--		1,788,309
Depreciation and amortization		127,206		469,065		479,755		1,076,026
General and administrative		1,103,074		972,515		3,757,344		5,832,933
Other (expense)		2,710		61,309		(287,428)		(223,409)
Net income (loss)	$	(407,220)	$	(754,713)	$	(4,524,527)	$	(5,686,460)
Total assets	$	1,033,867	$	7,216,209	$	79,942,616	$	88,192,692

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Notes

Significant Accounting Policies

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Inventory

Inventory is recorded at the lower of cost or market (net realizable value) using the average cost method. The inventory on hand as of March 31, 2015 consists of battery components, motors, controllers, miscellaneous refrigeration parts and raw gasket material at costs of $718,275. The inventory is valued net of an allowance of $6,188 as of March 31, 2015. The Company does not have any work in progress.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had, nor is expected to have a material impact on the Company’s financial position, or statements.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Balance Sheet
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	400,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	93,404,858	94,258,713
Common stock, shares outstanding	93,404,858	94,258,713

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Significant Accounting Policies: Recent Accounting Pronouncements (Policies)

3 Months Ended

Mar. 31, 2015

Policies

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had, nor is expected to have a material impact on the Company’s financial position, or statements.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015
Document and Entity Information
Entity Registrant Name	Blue Earth, Inc.
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Entity Central Index Key	0001422109
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	93,404,858
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

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Significant Events: Convertible Debt Table (Tables)

3 Months Ended

Mar. 31, 2015

Tables/Schedules

Convertible Debt Table

Balance at December 31, 2014	$	--
Borrowing of convertible note payable		10,000,000
Discount on convertible note payable		(2,196,691)
Amortization of discount		222,763
Balance at March 31, 2015	$	8,026,072

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Consolidated Statements of Operations (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement
REVENUES	$ 5,132,664	$ 3,234,217
COST OF SALES	3,976,307	1,788,309
GROSS PROFIT	1,156,357	1,445,908
OPERATING EXPENSES
Depreciation and amortization	1,215,068	1,076,026
General and administrative	6,422,527	5,832,933
Total Operating Expenses	7,637,595	6,908,959
LOSS FROM OPERATIONS	(6,481,238)	(5,463,051)
OTHER INCOME (EXPENSE)
Other income	940	940
Loss from equity investment	(227,560)
Interest expense	(430,520)	(235,584)
Mark futures to market	(166,271)
Gain (loss) on sale of assets	7,987	11,235
Gain on settlement of litigation	989,778
Total Other Income (Expense)	174,354	(223,409)
LOSS BEFORE INCOME TAXES	(6,306,884)	(5,686,460)
INCOME TAX EXPENSE
NET LOSS	(6,306,884)	(5,686,460)
PREFERRED DIVIDENDS		(392,888)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ (6,306,884)	$ (6,079,348)
BASIC AND DILUTED LOSS PER SHARE	$ (0.07)	$ (0.09)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED	94,311,979	61,928,226

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Commitments and Contingencies Disclosure

3 Months Ended

Mar. 31, 2015

Notes

Commitments and Contingencies Disclosure

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Equipment Purchase Commitments

The Company has entered into equipment purchase agreements whereby it has committed to paying approximately $19,629,081 for electrical co-generation equipment. The Company has made deposits of approximately $8,079,699 (41% of the total commitment) toward the purchase of the equipment which is included in construction in progress-property and equipment. The balance of the purchase price will be due upon acceptance of the equipment by the Company in accordance with progress payments as set out in the purchase contracts.

Pending Arbitrations

The Company and two consultants, have filed demands for arbitration with the American Arbitration Association (“AAA”).  Consultants allege that the Company, specifically Johnny R. Thomas, CEO, have violated the "no disparagement" clause of their Consulting Agreement dated February 17, 2014 with the Company.  They alleged that the Company interfered with the ability of the Consultants to perform their consulting duties. The Company alleges that the Consultants failed to perform consulting work as required and never intended to perform under the Consulting Agreement. The proceedings are in the discovery stage with an arbitration hearing scheduled for May 2015. The Company expects to prevail in this arbitration proceeding and does not expect said action to have any material adverse consequences to the Company.

The Company has filed a demand for arbitration with the AAA and National Energy Partners and its subsidiary, Hawaii Solar, LLC, (“NEP”) have counter-claimed.  The Company alleged that NEP is in arrears on the payment of EPC services performed by the Company for construction work on the 24 schools in Hawaii contracted for between the parties. The Company further alleged that NEP provided deficient design drawings and interfered with the construction of the projects and engaged in negligence, fraud and/or willful misconduct.  NEP alleged that the Company failed to perform the contracted EPC services in a timely, proper manner and desires to validate termination of the contract in the arbitration process. The Company expects to prevail in this dispute, which would result in no material adverse consequences to the Company, other than legal costs and a delay in the recognition of revenue. However, if NEP prevails, the Company is likely to lose about $1.9 million on the work performed to date, as well as a possibility of limited damage payments. The Company is defending against counter claims raised in the arbitration.  On August 6, 2014, the Company commenced a civil action in Hawaii for declaratory and injunctive relief and damages against NEP in the circuit court of the First Circuit of Hawaii (CIV No. 14-1-1694-08).  Subsequent to the Company commencing the above-described arbitration, it learned that NEP did not possess a Hawaii contractor license.  The Company then withdrew its demand for arbitration without prejudice.  The Company is seeking damages in excess of $1,300,000 and a declaratory judgment and injunctive relief that the subcontracts are invalid, void and unenforceable, the arbitration provision in the subcontracts is unenforceable and the pending arbitration should be terminated.

Pending Litigation

On October 24, 2014, a purported class action lawsuit was filed against the Company, two executive officers, and one non-executive officer in the U.S. District Court for the Central District of California (Case No:2:14-cv-08263).On January 21, 2015, the court appointed a Lead Plaintiff and Lead Plaintiff's Counsel.  The Court also re-captioned the case In re Blue Earth, Inc. Securities Litigation, File No. CV 14-8263 DSF (JEMx). On March 13, 2015, plaintiff filed a First Amended Complaint ("FAC").  The FAC alleges claims under Sections 10(b) and 20(a) of the Exchange Act, and a purported class of purchasers of the Company's stock during the period from October 7, 2013 through October 21, 2014.  Defendants' responded to the FAC and filed a motion to dismiss FAC.  Plaintiff's opposition to the motion to dismiss will be due on or before June 1, 2015.  Defendants' reply will be due on or before June 22, 2015.  The Company believes the claims contained in the complaint are without merit and is vigorously defending this matter.

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Property and Equipment Disclosure

3 Months Ended

Mar. 31, 2015

Notes

Property and Equipment Disclosure

NOTE 6 - PROPERTY AND EQUIPMENT

The major classes of assets as of March 31, 2015 and  December 31, 2014 are as follows:

	March 31, 2015			December 31, 2014
Office and computer equipment	$	343,915	$	327,023
Software		91,256		91,256
Manufacturing and installation equipment		455,150		442,450
Leasehold improvements		759,304		759,304
Cogeneration plants (under construction)		63,091,360		56,022,580
Vehicles		480,455		480,455
Sub Total		65,221,440		58,123,068
Accumulated Depreciation		(1,183,383)		(1,140,290)
Net	$	64,038,057	$	56,982,778

Depreciation expense was $43,093 and $31,915, for the three months ended March 31, 2015 and 2014, respectively. Approximately $858,212 of the Company’s property and equipment serves as security against its long-term debt. Depreciation of the cogeneration plants will commence when the plants are placed in service during the second quarter of 2015.

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Property and Equipment Disclosure: Schedule of Major Classes of Assets (Tables)

3 Months Ended

Mar. 31, 2015

Tables/Schedules

Schedule of Major Classes of Assets

	March 31, 2015			December 31, 2014
Office and computer equipment	$	343,915	$	327,023
Software		91,256		91,256
Manufacturing and installation equipment		455,150		442,450
Leasehold improvements		759,304		759,304
Cogeneration plants (under construction)		63,091,360		56,022,580
Vehicles		480,455		480,455
Sub Total		65,221,440		58,123,068
Accumulated Depreciation		(1,183,383)		(1,140,290)
Net	$	64,038,057	$	56,982,778

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Stock Purchase Warrants and Options: Schedule of Stockholders' Equity Note, Warrants (Tables)

3 Months Ended

Mar. 31, 2015

Tables/Schedules

Schedule of Stockholders' Equity Note, Warrants

				Weighted
		Weighted		Average
		Average		Remaining		Aggregate
	No. of	Exercise		Contractual		Intrinsic
	Warrants	Price		Term		Value
Balance Outstanding, December 31, 2013	22,660,668	$	1.90		6.52	$	43,055,269
Granted	200,000	$	0.00		10.00
Granted	100,000	$	1.00		10.00
Granted	8,521,654	$	6.00		3.00
Cancelled	(3,600,000)	$	(1.18)		--
Forfeited	(1,472,060)	$	(1.90)		--
Exercised	(9,778,344)	$	(1.60)		--
Balance Outstanding, December 31, 2014	16,631,918	$	3.80		5.29	$	53,353,862
Granted	2,000,000	$	1.00		5.00
Balance Outstanding, March 31, 2015	18,631,918	$	3.26		4.66	$	60,727,862
Exercisable, March 31, 2015	16,474,775	$	3.41		4.19	$	56,203,004

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Significant Accounting Policies: Inventory, Policy (Policies)

3 Months Ended

Mar. 31, 2015

Policies

Inventory, Policy

Inventory

Inventory is recorded at the lower of cost or market (net realizable value) using the average cost method. The inventory on hand as of March 31, 2015 consists of battery components, motors, controllers, miscellaneous refrigeration parts and raw gasket material at costs of $718,275. The inventory is valued net of an allowance of $6,188 as of March 31, 2015. The Company does not have any work in progress.

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Operating Segments Disclosure

3 Months Ended

Mar. 31, 2015

Notes

Operating Segments Disclosure

NOTE 8 - OPERATING SEGMENTS

Operating segments are defined as components of an enterprise about which separate and discreet financial information is available and is evaluated regularly by the chief operating decision-maker in assessing performance and determining how to best allocate Company resources. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the business plan, budgets, profitability and cash flows of each respective segment.

The Company has two principal operating segments: (1) energy efficiency and technology and (2) construction of energy facilities owned by third parties. During the second quarter of 2015, a third segment will be introduced when energy is produced from facilities built and owned by the Company. These operating segments were delineated based on the nature of the products and services offered.

The Company evaluates the financial performance of the respective segments based on several factors, of which the primary measure is business segment income before taxes. All significant intercompany transactions and balances have been eliminated. The following tables show the operations of the Company’s reportable segments for the three months ended March 31, 2015 and 2014:

	Energy Efficiency
	and Technology		Construction		Corporate		Consolidated
March 31, 2015
Revenues	$	1,434,503	$	3,698,161	$	--	$	5,132,664
Cost of sales		597,723		3,378,584		--		3,976,307
Depreciation and amortization		358,162		472,079		384,827		1,215,068
General and administrative		2,009,783		1,504,472		2,908,272		6,422,527
Other income (expense)		(8,428)		7,537		175,245		174,354
Net income (loss)	$	(1,539,593)	$	(1,649,437)	$	(3,117,854)	$	(6,306,884)
Total assets	$	2,278,206	$	93,966,137	$	13,984,861	$	110,229,204
	Energy Efficiency
	and Technology		Construction		Corporate		Consolidated
March 31, 2014
Revenues	$	1,407,251	$	1,826,966	$	--	$	3,234,217
Cost of sales		586,901		1,201,408		--		1,788,309
Depreciation and amortization		127,206		469,065		479,755		1,076,026
General and administrative		1,103,074		972,515		3,757,344		5,832,933
Other (expense)		2,710		61,309		(287,428)		(223,409)
Net income (loss)	$	(407,220)	$	(754,713)	$	(4,524,527)	$	(5,686,460)
Total assets	$	1,033,867	$	7,216,209	$	79,942,616	$	88,192,692

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Subsequent Events

3 Months Ended

Mar. 31, 2015

Notes

Subsequent Events

NOTE 9 - SUBSEQUENT EVENTS

On April 9, 2015, the Company issued 12,500 shares of its common stock for director fees. On April 20, 2015, the Company issued 168,700 shares of its common stock under a Mutual and General Release Agreement with the landlord of the former offices of Blue Earth Solar, Inc. On April 22, 2015 the Company issued 250,000 shares of its common stock for consulting services.

In accordance with ASC 855-10, the Company’s management has reviewed all material events and there are no additional material subsequent events to report.

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Significant Accounting Policies: Use of Estimates (Policies)

3 Months Ended

Mar. 31, 2015

Policies

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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Operating Segments Disclosure: Schedule of Segment Reporting Information, by Segment (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Segment Revenues	$ 5,132,664	$ 3,234,217
Segment cost of sales	3,976,307	1,788,309
Segment Depreciation and Amortization	1,215,068	1,076,026
Segment General and Administrative Expense	6,422,527	5,832,933
Segment other income (expense)	174,354	(223,409)
Segment Net Income (loss)	(6,306,884)	(5,686,460)
Segment total assets	110,229,204	88,192,692
Energy Efficiency and Technology
Segment Revenues	1,434,503	1,407,251
Segment cost of sales	597,723	586,901
Segment Depreciation and Amortization	358,162	127,206
Segment General and Administrative Expense	2,009,783	1,103,074
Segment other income (expense)	(8,428)	2,710
Segment Net Income (loss)	(1,539,593)	(407,220)
Segment total assets	2,278,206	1,033,867
Construction
Segment Revenues	3,698,161	1,826,966
Segment cost of sales	3,378,584	1,201,408
Segment Depreciation and Amortization	472,079	469,065
Segment General and Administrative Expense	1,504,472	972,515
Segment other income (expense)	7,537	61,309
Segment Net Income (loss)	(1,649,437)	(754,713)
Segment total assets	93,966,137	7,216,209
Corporate Segment
Segment Depreciation and Amortization	384,827	479,755
Segment General and Administrative Expense	2,908,272	3,757,344
Segment other income (expense)	175,245	(287,428)
Segment Net Income (loss)	(3,117,854)	(4,524,527)
Segment total assets	$ 13,984,861	$ 79,942,616

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Fair Value of Financial Instruments Disclosure: Fair Value, Assets Measured on Recurring and Nonrecurring Basis (Tables)

3 Months Ended

Mar. 31, 2015

Tables/Schedules

Fair Value, Assets Measured on Recurring and Nonrecurring Basis

Liabilities:		Total Carrying Value at March 31, 2015		(Level 1)		(Level 2)		(Level 3)
Natural gas futures	$	2,259,995	$	2,259,995	$	-	$	-

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Significant Events (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Debt forgiven by the Company	$ 50,000
Gain on settlement of litigation	989,778
Common stock issued for services	73,887
Common stock received and cancelled	1,127,742
Line of credit payable	3,000,000
Proceeds from line of credit	2,911,700
Related party notes payable	1,333,147	1,333,147
Proceeds from notes payable	9,953,068
Stock issued for debt	200,000
Value of stock issued for debt	226,000
Warrants issued for debt	2,000,000
Value of the warrants issued	1,321,600
Amortization of discount on debt	222,763
Series D Preferred Stock issued	400,000
Line of credit fees
Prepaid expenses	88,300
Convertible Note Payable legal fees
Prepaid expenses	$ 46,932

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Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
OPERATING ACTIVITIES
NET LOSS	$ (6,306,884)	$ (5,686,460)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option and stock warrants issued for services	1,385,338	1,189,727
Loss from equity investment	227,560
Impairment of inventory	369,039
Mark gas futures to market	166,271
Gain on settlement of litigation	(989,778)
Gain (loss) on sale of assets	(7,987)	(11,235)
Stock issued for services	320,653	670,542
Depreciation and amortization	1,215,068	1,076,026
Amortization of debt discount	279,254
Changes in operating assets and liabilities:
Accounts receivable and billings in excess	1,980,174	(731,331)
Inventory	(148,387)	35,498
Restricted cash	(156)
Construction in progress	(371,955)	184,302
Prepaid expenses and deposits	(293,372)	162,405
Accounts payable and accrued expenses	237,621	406,480
Net Cash Used in Operating Activities	(1,937,541)	(2,704,046)
INVESTING ACTIVITIES
Collection of other receivables	2,732
Proceeds from sale of equipment	7,987
Purchase of equity method investment	400,000
Lending of other receivables		887
Purchase of property and equipment	7,098,388	1,353,588
Net Cash Used in Investing Activities	(7,487,669)	(1,354,475)
Net Cash Used in Discontinued Investing Activities		(17,882)
FINANCING ACTIVITIES
Proceeds from warrants and options exercised		100,857
Cash received on stock subscriptions		1,000,000
Proceeds from line of credit, net	2,911,700
Proceeds from notes payable, net	9,953,068
Repayment of notes payable and line of credit	103,872	438,710
Repayment of related party loans		4,004
Net Cash Provided by Financing Activities	12,760,896	658,143
NET INCREASE (DECREASE) IN CASH	3,335,686	(3,418,260)
CASH AT BEGINNING OF PERIOD	2,967,408	8,403,731
CASH AT END OF PERIOD	6,303,094	4,985,471
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for Interest	68,871	97,292
NON CASH FINANCING ACTIVITIES:
Common stock issued for conversion of preferred stock		333,128
Common stock issued for settlement of litigation	989,778
Common stock issued for acquisition of subsidiary		4,602,500
Preferred stock issued as collateral for loan	400
Debt discount and conversion feature	$ 1,385,338

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Fair Value of Financial Instruments Disclosure

3 Months Ended

Mar. 31, 2015

Notes

Fair Value of Financial Instruments Disclosure

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows the provisions of ASC 820 for fair value measurements of all nonfinancial assets and nonfinancial liabilities not recognized or disclosed at fair value in the financial statements on a recurring basis. The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

There were no changes in the valuation techniques during the periods ended March 31, 2015 and December 31, 2014. The estimated fair value of certain financial instruments, including cash and cash equivalents and current liabilities, are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Assets:

On December 15, 2014, the Company purchased 639.25 natural gas option contracts for $2,429,150, to mitigate its exposure to fluctuations in natural gas price in connection with its CHP facility in Alberta, Canada. The gas delivery dates range from January 1, 2016 to December 31, 2022. At each reporting date the Company revalues the options to the NYMEX-NG last trade value. The Company recorded a loss of $166,271 and $-0- for the three months ended March 31, 2015 and 2014, respectively, on the value of contracts.  

Assets measured at fair value on a recurring and non-recurring basis consisted of the following at March 31, 2015:

Liabilities:		Total Carrying Value at March 31, 2015		(Level 1)		(Level 2)		(Level 3)
Natural gas futures	$	2,259,995	$	2,259,995	$	-	$	-

The following is a summary of activity of Level 1 assets for the periods ended March 31, 2015 and December 31, 2014:

Balance at December 31, 2013		--
Purchases of futures contracts		2,429,150
Change in fair value 2014		(2,884)
Balance at December 31, 2014	$	2,426,266
Purchases of futures contracts		--
Change in fair value 2015		(166,271)
Balance at March 31, 2015	$	2,259,995

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Significant Events: Convertible Debt Table (Details) (USD $)	Mar. 31, 2015
Details
Convertible note payable	$ 8,026,072

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Stock Purchase Warrants and Options: Schedule of Stockholders' Equity, Options (Tables)

3 Months Ended

Mar. 31, 2015

Tables/Schedules

Schedule of Stockholders' Equity, Options

				Weighted
		Weighted		Average
		Average		Remaining		Aggregate
	No. of	Exercise		Contractual		Intrinsic
	Options	Price		Term		Value
Balance Outstanding, December 31, 2013	1,011,290	$	1.85		8.22	$	1,851,695
Granted	1,500,000	$	2.00		10
Granted	150,000	$	3.00		10
Granted	120,000	$	2.45		10
Granted	60,000	$	2.27		10
Granted	105,000	$	3.10		10
Granted	60,000	$	2.45		10
Granted	100,000	$	2.54		10
Granted	10,000	$	1.29		10
Granted	52,720	$	1.37		10
Granted	5,000	$	0.75		10
Forfeited	(492,119)	$	3.37		--
Exercised	(85,024)	$	1.36		--
Balance Outstanding, December 31, 2014	2,596,867	$	2.54		8.82		6,596,037
Granted	30,000	$	1.20		10
Granted	100,000	$	1.01		10
Granted	12,500	$	1.21		10
Forfeited	(53,513)	$	2.56		--
Balance Outstanding, March 31, 2015	2,685,854	$	2.07		8.66	$	5,562,931
Exercisable, March 31, 2015	1,377,944	$	1.96		8.26	$	2,606,233