Combine All-Purpose Flour (1 1/2 cup), Granulated Sugar (1/3 cup), Baking Powder (2 teaspoon), Salt (1/2 teaspoon), and Ground Nutmeg (1/2 teaspoon) in a bowl.
In a separate bowl, mix the Egg (1) and Milk (1/2 cup). Temper in the Butter (2 tablespoon) and mix to combine.
Add the wet ingredients into the dry ingredients and mix to form a dough.
Heat enough Frying Oil (to taste) to coat the bottom of a small saucepan 1/2".
Roll the dough into grape sized balls, using extra flour if necessary. Drop into hot oil. To check if the oil is hot enough, drop a small amount of batter in and once it sizzles it's ready!
Fry donuts two minutes on each side. Each side should be crispy golden brown - things are looking good!
Place donuts on a plate lined with paper towels to drain.
Once all donuts are finished, place in a brown bag with Cinnamon Sugar (to taste) and shake to coat, or simply top with Powdered Confectioners Sugar (to taste).
To make the kahlua ganache, place the Milk Chocolate Chips (1/2 cup) in a microwave safe bowl and zap for 30 seconds. Stir. Microwave for another 30 seconds and stir once more. If it needs extra, microwave in 10 second increments.
Stir in Light Cream (1/2 cup) and Kahlua (to taste), alternating between the two until the chocolate reaches a pour-able consistency.
Place in bowl to dip or drizzle over donuts.