UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549



FORM 10-Q





|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------
|  |                                                                                        
|  | For the quarterly period ended June 30, 2012                                           
|  |                                                                                        
|o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT             
|  |                                                                                        
|  | For the transition period from __________ to _________                                 





Commission File Number 000-53167



|AMERICAN
    SANDS ENERGY CORP.                        
|-------------------------------------------------------
|(Exact name of registrant as specified  in its charter)



|Delaware                                                       | 87-0405708                       
|-------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.)



|4760 S. Highland Drive                  
|----------------------------------------
|Suite 341                               
|Salt Lake City, UT  84117               
|(Address of principal executive offices)



|(801) 699-3966                                      
|----------------------------------------------------
|(Registrant’s telephone number, including area code)



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed under Section 13 or 15(d) of the Exchange Act during the past 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 o



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).

Yes £     No S



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



|Large Accelerated Filer o                                             | Accelerated Filer o        
|--------------------------------------------------------------------- | ---------------------------
|Non-Accelerated Filer o (Do not check if a smaller reporting company) | Smaller Reporting Company x



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

Yes o
      No x



The issuer had 28,766,741 shares of common
stock, $.001 par value, outstanding as of August 7, 2012.
















TABLE OF CONTENTS





|                                                                                               | Page
|---------------------------------------------------------------------------------------------- | ----
|                                                                                               |     
|PART I.  FINANCIAL INFORMATION                                                                 | 3   
|Item 1.  Financial Statements                                                                  | 3   
|Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16  
|Item 3.  Quantitative and Qualitative Disclosures About Market Risk                            | 19  
|Item 4.  Controls and Procedures                                                               | 19  
|PART II.  OTHER INFORMATION                                                                    | 20  
|Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                           | 20  
|Item 4.  Mine Safety Disclosures                                                               | 20  
|Item 6.  Exhibits                                                                              | 20  
|SIGNATURES                                                                                     | 21  









2









PART I. FINANCIAL INFORMATION



Item 1. Financial Statements





American Sands Energy Corp.

(Formerly Millstream Ventures, Inc.)

(A Development Stage Company)

Condensed Consolidated Balance Sheets (Unaudited)



|                                                                                                                    |  | June 30, |            |   | March 31, |  
|------------------------------------------------------------------------------------------------------------------- |  | -------- | ---------- | - | --------- | -
|                                                                                                                    |  | 2012     |            |   | 2012      |  
|Assets                                                                                                              |  |          |            |   |           |  
|Current assets:                                                                                                     |  |          |            |   |           |  
|Cash                                                                                                                |  | $        | 741,022    |   |           | $
|Receivables                                                                                                         |  |          | 14,598     |   |           |  
|Prepaid and other current assets                                                                                    |  |          | 209,135    |   |           |  
|Total current assets                                                                                                |  |          | 964,755    |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Property and equipment, net                                                                                         |  |          | 2,174      |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Total assets                                                                                                        |  | $        | 966,929    |   |           | $
|                                                                                                                    |  |          |            |   |           |  
|Liabilities and Stockholders' Deficit                                                                               |  |          |            |   |           |  
|Current liabilities:                                                                                                |  |          |            |   |           |  
|Accounts payable                                                                                                    |  | $        | 217,754    |   |           | $
|Accrued expenses                                                                                                    |  |          | 1,241,265  |   |           |  
|Total current liabilities                                                                                           |  |          | 1,459,019  |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Convertible notes payable, net of discount of $589,152 and $669,351, respectively                                   |  |          | 1,066,551  |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Convertible note payable, related party                                                                             |  |          | 1,706,567  |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Deposits for purchase of common stock, net                                                                          |  |          | –          |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Mineral lease payable                                                                                               |  |          | 29,279     |   |           |  
|Total liabilities                                                                                                   |  |          | 4,261,416  |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Commitments and contingencies                                                                                       |  |          |            |   |           |  
|                                                                                                                    |  |          |            |   |           |  
|Stockholders' deficit:                                                                                              |  |          |            |   |           |  
|Preferred stock, $.001 par value: 10,000,000 shares authorized; no shares issued                                    |  |          | –          |   |           |  
|Common stock, $.001 par value: 200,000,000 shares authorized; 28,766,741 and 27,676,960 shares issued, respectively |  |          | 28,767     |   |           |  
|Additional paid-in capital                                                                                          |  |          | 6,187,052  |   |           |  
|Deficit accumulated during the development stage                                                                    |  |          | (9,510,306 | ) |           |  
|Total stockholders' deficit                                                                                         |  |          | (3,294,487 | ) |           |  
|                                                                                                                    |  |          |            |   |           |  
|Total liabilities and stockholders' deficit                                                                         |  | $        | 966,929    |   |           | $





See the accompanying
notes to condensed consolidated financial statements.



3









American Sands Energy Corp.

(Formerly Millstream Ventures, Inc.)

(A Development Stage Company)

Condensed Consolidated Statements of Operations (Unaudited)



|                                                               |  |               |            |   |               |   |            |                    | 
|-------------------------------------------------------------- |  | ------------- | ---------- | - | ------------- | - | ---------- | ------------------ | 
|                                                               |  | For the Three |            |   | For the Three |   |            | Cumulative
 From   | 
|                                                               |  | Months
 Ended |            |   | Months
 Ended |   |            | Inception 
through | 
|                                                               |  | June 30, 2012 |            |   | June 30, 2011 |   |            | June 30, 2012      | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Revenues                                                       |  | $             | –          |   |               | $ | –          |                    | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Operating expenses:                                            |  |               |            |   |               |   |            |                    | 
|Selling, general and administrative                            |  |               | 508,148    |   |               |   | 840,638    |                    | 
|Research and development                                       |  |               | 79,909     |   |               |   | –          |                    | 
|Mineral lease expense                                          |  |               | 53,261     |   |               |   | (25,908    | )                  | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Total operating expenses                                       |  |               | 641,318    |   |               |   | 814,730    |                    | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Loss from operations                                           |  |               | (641,318   | ) |               |   | (814,730   | )                  | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Other income (expense):                                        |  |               |            |   |               |   |            |                    | 
|Interest expense                                               |  |               | (139,208   | ) |               |   | (16,423    | )                  | 
|Interest income                                                |  |               | –          |   |               |   | –          |                    | 
|Other income (expense)                                         |  |               | –          |   |               |   | 286        |                    | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Total other income (expense)                                   |  |               | (139,208   | ) |               |   | (16,137    | )                  | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Net loss before provision for income taxes                     |  |               | (780,526   | ) |               |   | (830,867   | )                  | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Provision for income taxes                                     |  |               | –          |   |               |   | –          |                    | 
|Net loss                                                       |  | $             | (780,526   | ) |               | $ | (830,867   | )                  | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Net loss per common share - basic and diluted                  |  | $             | (0.03      | ) |               | $ | (0.06      | )                  | 
|                                                               |  |               |            |   |               |   |            |                    | 
|Weighted average common shares outstanding - basic and diluted |  |               | 28,476,522 |   |               |   | 14,632,312 |                    | 









See the accompanying
notes to condensed consolidated financial statements.



4









American Sands Energy Corp.

(Formerly Millstream Ventures, Inc.)

(A Development Stage Company)

Condensed
Consolidated Statement of Stockholders' Deficit  (Unaudited)

For the Three Months Ended June 30, 2012



|                                                                  |  |        |              |  |        |            |        |         |            |         | Deficit     |       |             |         |           
|----------------------------------------------------------------- |  | ------ | ------------ |  | ------ | ---------- | ------ | ------- | ---------- | ------- | ----------- | ----- | ----------- | ------- | ----------
|                                                                  |  |        |              |  |        |            |        |         |            |         | accumulated |       |             |         |           
|                                                                  |  |        | Common stock |  |        | Additional |        |         | during the |         |             | Total |            
|                                                                  |  |        |              |  |        |            |        |         |            | paid-in |             |       | development |         |           
|                                                                  |  | Shares |              |  | Amount |            |        | capital |            |         | stage       |       |             | deficit |           
|Balance as of April 1, 2012                                       |  |        | 27,676,960   |  |        | $          | 27,677 |         |            | $       | 4,811,313   |       |             | $       | (8,729,780
|Shares issued to satisfy deposits to purchase common common stock |  |        | 634,796      |  |        |            | 635    |         |            |         | 709,579     |       |             |         | –         
|Common stock issued for cash at $1.15 per share                   |  |        | 454,985      |  |        |            | 455    |         |            |         | 491,564     |       |             |         | –         
|Stock-based compensation                                          |  |        | –            |  |        |            | –      |         |            |         | 173,061     |       |             |         | –         
|Issuance of stock options to consultants                          |  |        | –            |  |        |            | –      |         |            |         | 1,535       |       |             |         | –         
|Net loss                                                          |  |        | –            |  |        |            | –      |         |            |         | –           |       |             |         | (780,526  
|Balance as of June 30, 2012                                       |  |        | 28,766,741   |  |        | $          | 28,767 |         |            | $       | 6,187,052   |       |             | $       | (9,510,306







See the accompanying
notes to condensed consolidated financial statements.



5









American Sands Energy Corp.

(Formerly Millstream Ventures, Inc.)

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows (Unaudited)



|                                                                            |  | For the Three |          |   | For the Three |   |          | Cumulative
 From   | 
|--------------------------------------------------------------------------- |  | ------------- | -------- | - | ------------- | - | -------- | ------------------ | 
|                                                                            |  | Months
 Ended |          |   | Months
 Ended |   |          | Inception
 through | 
|                                                                            |  | June 30, 2012 |          |   | June 30, 2011 |   |          | June 30, 2012      | 
|Cash flows from operating activities:                                       |  |               |          |   |               |   |          |                    | 
|Net loss                                                                    |  | $             | (780,526 | ) |               | $ | (830,867 | )                  | 
|Adjustments to reconcile net loss to net cash used in operating activities: |  |               |          |   |               |   |          |                    | 
|Depreciation                                                                |  |               | 84       |   |               |   | –        |                    | 
|Gain on disposal of fixed assets                                            |  |               | –        |   |               |   | –        |                    | 
|Accretion of debt discount                                                  |  |               | 80,200   |   |               |   | 7,719    |                    | 
|Straight-line of mineral lease payable                                      |  |               | (4,880   | ) |               |   | (4,880   | )                  | 
|Stock-based compensation expense                                            |  |               | 173,061  |   |               |   | 584,061  |                    | 
|Issuance of stock options to consultants                                    |  |               | 1,535    |   |               |   | –        |                    | 
|Special warrants issued as payment for leases                               |  |               | –        |   |               |   | –        |                    | 
|Notes payable issued as payment for leases                                  |  |               | –        |   |               |   | –        |                    | 
|(Increase) decrease in operating assets:                                    |  |               |          |   |               |   |          |                    | 
|Receivables                                                                 |  |               | 367,902  |   |               |   | –        |                    | 
|Prepaid and other current assets                                            |  |               | 28,558   |   |               |   | 31,950   |                    | 
|Increase (decrease) in operating liabilities:                               |  |               |          |   |               |   |          |                    | 
|Accounts payable                                                            |  |               | (319,055 | ) |               |   | 96,530   |                    | 
|Accrued expenses                                                            |  |               | 18,815   |   |               |   | (63,722  | )                  | 
|Accrued interest on convertible debt                                        |  |               | 59,009   |   |               |   | 8,317    |                    | 
|Net cash used in operating activities                                       |  |               | (375,297 | ) |               |   | (170,892 | )                  | 
|Cash flows from investing activities:                                       |  |               |          |   |               |   |          |                    | 
|Acquisition of property and equipment                                       |  |               | –        |   |               |   | (9,450   | )                  | 
|Disposal of property and equipment                                          |  |               | –        |   |               |   | –        |                    | 
|Net cash used in investing activities                                       |  |               | –        |   |               |   | (9,450   | )                  | 
|Cash flows from financing activities:                                       |  |               |          |   |               |   |          |                    | 
|Proceeds from issuance of notes payable                                     |  |               | –        |   |               |   | 150,000  |                    | 
|Proceeds from issuance of convertible notes payable                         |  |               | –        |   |               |   | –        |                    | 
|Proceeds from issuance of notes payable, related party                      |  |               | –        |   |               |   | –        |                    | 
|Proceeds from issuance of common stock and special warrants                 |  |               | 492,019  |   |               |   | 852,759  |                    | 
|Increase in deposits for purchase of common stock                           |  |               | –        |   |               |   | –        |                    | 
|Net cash received in reverse merger                                         |  |               | –        |   |               |   | (65,900  | )                  | 
|Principal payments on notes payable                                         |  |               | –        |   |               |   | –        |                    | 
|Net cash provided by financing activities                                   |  |               | 492,019  |   |               |   | 936,859  |                    | 
|Net increase in cash                                                        |  |               | 116,722  |   |               |   | 756,517  |                    | 
|Cash, beginning of the period                                               |  |               | 624,300  |   |               |   | 54,224   |                    | 
|Cash, end of the period                                                     |  | $             | 741,022  |   |               | $ | 810,741  |                    | 
|Supplemental disclosures of cash flow information:                          |  |               |          |   |               |   |          |                    | 
|Interest paid                                                               |  | $             | –        |   |               | $ | 12,153   |                    | 
|Income taxes paid                                                           |  | $             | –        |   |               | $ | –        |                    | 
|Supplemental schedule of non-cash investing and financing activities:       |  |               |          |   |               |   |          |                    | 
|Conversion of notes payable to common stock                                 |  | $             | –        |   |               | $ | 188,595  |                    | 
|Convertible note issued for accrued expenses                                |  | $             | –        |   |               | $ | 214,669  |                    | 
|Issuance of warrants associated with convertible notes payable              |  | $             | –        |   |               | $ | 86,025   |                    | 
|Shares issued to satisfy deposits to purchase common stock                  |  | $             | 710,214  |   |               | $ | –        |                    | 





See the accompanying
notes to condensed consolidated financial statements.





6


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)






Note 1 - Description of Business and
Nature of Operations





American Sands Energy Corp. (the Company”
or “ASEC”) is a development stage company engaged in the clean extraction of bitumen from oil sands prevalent in the
Mountain West region of North America using proprietary technology. The Company was originally incorporated in the State of Nevada
on May 26, 2005 under the name Millstream Ventures, Inc. On October 19, 2011, the Company changed is legal domicile by merging
into a newly formed Delaware corporation named American Sands Energy Corp. which was incorporated on September 14, 2011, for the
sole purpose of changing the domicile of the Company from the State of Nevada to the State of Delaware.



Green River Resources Corp., an Alberta,
Canada, corporation (“GRC”), formed on December 1, 2004, and its wholly owned subsidiary, Green River Resources, Inc.,
a Utah corporation (“GRI”), formed on February 16, 2005, were formed for the purpose of extracting oil from oil sands,
oil shale, and other similar types of naturally occurring hydrocarbons in a cost effective and environmentally safe manner. As
described in Note 2, on June 3, 2011, ASEC acquired GRC in a stock for stock transaction which, for accounting purposes, was treated
as a reverse acquisition ,whereby GRC was treated as the accounting acquirer.



On December 31, 2011, GRC, a wholly owned
non-operating subsidiary of the Company, was voluntarily dissolved under the Business Corporation Act of the Provence of Alberta,
Canada. As a result of the dissolution, the Company assumed all of the outstanding stock of GRI which was the sole asset of GRC
at the time of dissolution. References to the “Company” refer to GRC and its wholly owned subsidiary, GRI, prior to
the reverse acquisition on June 3, 2011, and GRC, GRI, and ASEC (the legal parent) subsequent to the reverse acquisition transaction
until December 31, 2011, and GRI and ASEC after December 31, 2011. The Company has not generated revenues from its principal operations
and, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
915, Development Stage Entities, is considered a development stage company.



The Company has acquired rights to approximately
1,760 acres of prime oil sand deposits in the Sunnyside area of Utah. Prior to January 24, 2012, the Company had licensed proprietary
extraction technology with Bleeding Rock, LLC (“Bleeding Rock”), which had an exclusive license to a bitumen and hydrocarbon
extraction process to separate oil and other hydrocarbons from sand, dirt and other substances. Bleeding Rock is a significant
stockholder of the Company and is 50% owned in combination among the Chief Executive Officer of the Company and two of his relatives.



Effective January 24, 2012, the Company
entered into a License, Development and Engineering Agreement with Universal Oil Recovery Corp. and SRS International (the “License
Agreement”) whereby the Company was granted an exclusive non-transferable license to use certain technology in its proposed
business to extract bitumen from oil sands. The territory covered by the agreement includes the State of Utah and any other geographic
location in which a future designated project is commenced by or through the Company. In conjunction with the License Agreement,
the Company terminated its operating agreement with Bleeding Rock under which Bleeding Rock had licensed rights to use similar
technology to GRI. The License Agreement also designates the Company as an “authorized agent” in representing the owner
of the technology in future projects. The Chief Executive Officer, a director, and principal stockholder of the Company, is an
owner and manager of Bleeding Rock.



The License Agreement requires the licensing
parties to provide demonstration equipment for the process by which their proprietary solvent extracts bitumen from oil sands and
to demonstrate the process on up to 150 tons of oil sands. The term of the License Agreement is for 20 years and thereafter so
long as production of products using the technology is commercially and economically feasible.



Note 2 - Agreement and Plan of Merger





On May 5, 2011, the Company entered into
a Stock Exchange Agreement dated April 29, 2011, as amended June 3, 2011, with GRC, a privately held company, pursuant to which
the Company agreed to issue 11,334,646 shares of its common stock to the stockholders of GRC in exchange for all of the outstanding
equity securities of GRC. The Company also agreed to issue up to 5,492,196 shares of its common stock upon exercise of warrants
assumed at closing and 535,704 common shares upon conversion of a promissory note to Bleeding Rock.



On June 3, 2011, the Company and GRC closed
the reverse acquisition transaction described above. As a result of the closing of the transaction, stockholders of GRC obtained
a 56% interest in the Company. Because the stockholders of GRC obtained a majority ownership in the Company through the stock-for-stock
exchange, the transaction has been accounted for as a reverse acquisition. Accordingly, the historical financial statements reflect
the consolidated operations of GRC through June 3, 2011, the consolidated operations of GRC and the Company subsequent to June
3, 2011 through December 31, 2011 (the date of GRC’s dissolution described above) and the consolidated operations of the
Company and GRI after December 31, 2011. Through the reverse acquisition, GRC received approximately $853,000 in cash to fund operations.
In connection with the agreement, GRC lenders exchanged $175,000 in notes payable plus accrued interest of $13,000 for 437,500
shares of ASEC common stock. Based upon the closing of the reverse acquisition transaction, the Company is no longer considered
to be a shell company.







7


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)






Note 3 – Significant Accounting
Policies



These financial statements have been prepared
by the Company in accordance with U.S. generally accepted accounting principles (“US GAAP”) for interim financial information,
as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by US GAAP
for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting solely of normal
recurring adjustments) considered necessary for a fair presentation of the interim financial statements have been included.



The preparation of
financial statements in conformity with US GAAP requires management to make judgments, estimates, and assumptions that could
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 significantly from those estimates. Operating
results for the three months ended June 30, 2012, are not necessarily indicative of the results that may be expected for the
full fiscal year ending March 31, 2013.



For further information, refer to
the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K, as amended, for
the year ended March 31, 2012.



a) Principles of Consolidation



The condensed
consolidated financial statements includethe consolidated operations of GRC through June 3, 2011, the consolidated operations
of GRC and ASEC from June 3, 2011 through the GRC dissolution on December 31, 2011 and the consolidated operations of ASEC and
GRI through June 30, 2012. All significant intercompany balances and transactions have been eliminated
in consolidation.



b) Receivables



The Company has not generated revenues
from its principal operations and remains a development stage company as of June 30, 2012. As of June 30, 2012, the Company has
receivables related to billings to a third-party company for certain research and development expenses incurred. At the end of
each reporting period, the Company estimates its allowance for doubtful accounts based on historical information and specific facts
and circumstances associated with each customer balance. As of June 30, 2012, the Company anticipates that all outstanding accounts
receivable will be fully collected and thus no allowance for doubtful accounts has been recorded.



c) Mineral Leases



In certain cases, the Company capitalizes
costs related to investments in mineral lease interests on a property-by-property basis. Such costs include mineral lease acquisition
costs. Costs are deferred until such time as the extent of proved developed reserves has been determined and mineral lease interests
are either developed, the property sold or the mineral lease rights are allowed to lapse. To date all exploration and lease costs
have been expensed.



8


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)




d) Deposits for Purchase of Common Stock,
net



The Company records deposits for purchase
of common stock when monies are received to purchase common stock but the related shares have not yet been issued. The Company
also records a reduction in deposits for purchase of common stock for commissions associated with the money raised. Deposits for
purchase of common stock are recorded to common stock when the related common shares are issued. As of June 30, 2012 and March
31, 2012, the Company had $0 and $710,214 of deposits for purchase of common stock (net of commission of $19,801).



e) Stock-based Compensation



The Company uses the Black-Scholes option-pricing
model to determine the fair value of stock options and warrants granted. For employee stock options, the Company records the grant-date
fair value as expense over the period in which it is earned, typically the vesting period. For consultants, the fair value of the
stock-based award is recorded as expense over the term of the service period, and unvested amounts are revalued using the Black-Scholes
model at each reporting period. For warrants issued to lenders, the Company records the grant-date fair value of the warrants and
any resulting beneficial conversion feature for convertible debt, as a note discount. The discount is then amortized over the term
of the convertible debt as non-cash interest expense.



f) Net Loss Per Common Share



Basic earnings or loss per common share
is computed on the basis of the weighted average number of shares outstanding during the periods. Diluted earnings or loss per
common share is calculated on the basis of the weighted average number of common shares outstanding during the period plus the
effect of potential dilutive shares during the period. Potential dilutive shares include outstanding stock options and warrants
and convertible debt instruments. For periods in which a net loss is reported, potential dilutive shares are excluded because they
are antidilutive. Therefore, basic loss per common share is the same as diluted loss per common share for the three months ended
June 30, 2012 and 2011.



g) Recent Accounting Pronouncements



In July 2012, the FASB issued Accounting
Standards Update (“ASU’) 2012-02, Intangibles-Goodwill and Other (Topic350): Testing Indefinite-Lived Intangible
Assets for Impairment.This ASU permits an entity the option to first assess qualitative factors to determine whether it is
more-likely-than-not that an indefinite-lived intangible asset is impaired. If the qualitative assessment supports the conclusion
that it is more-likely-than-not that the fair value of the asset exceeds its carrying amount, the entity would not need to perform
the two-step quantitative impairment test. The focus of the guidance is to reduce the cost and complexity of performing impairment
tests for indefinite-lived intangible assets other than goodwill, and to improve consistency in impairment testing among long-lived
asset categories. This ASU is effective for annual and interim impairment tests performed prior to the issuance of the final ASU,
if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Company has
not early-adopted this ASU, and this ASU is not expected to have a material impact on the Company’s consolidated financial
statements.



Note 4 – Going Concern



The Company’s financial statements
have been prepared assuming the Company is a going concern, which contemplates the realization of assets and the liquidation of
liabilities in the ordinary course of business. The Company has incurred substantial losses from operations, has negative working
capital, and has negative cash flows from operating activities, which raise substantial doubt about the Company’s ability
to continue as a going concern. The Company sustained a net loss for the three months ended June 30, 2012 of $780,526 and has an
accumulated deficit of $9,510,306, as of June 30, 2012. In addition, the Company will require approximately $50,000,000 in capital
to commence its principal operations.



The Company intends to continue its research
and development efforts, but does not have revenues from which to finance these activities internally. As a result, the Company
intends to seek financing in order to fund its operations.

9


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)




The Company has been able to meet its short-term
needs primarily through loans from third parties, private placements of equity and debt securities, and deferring certain payment
obligations to related parties.  The Company is actively seeking additional private placements of equity securities.  The
Company plans to continue to obtain financing through the sale of equity or debt securities in order to finance operations until
it can generate positive cash flows from operating activities.The equity private placements are expected to provide the
needed funds for continued operations and further research and development of the Company’s proprietary oil sands refining
methods. The Company can provide no assurance that it will be able to obtain sufficient additional financing needed to develop
its technology and alleviate doubt about its ability to continue as a going concern. To the extent the Company raises additional
funds by issuing equity securities the Company’s stockholders may experience significant dilution. Any debt financing, if
available, may involve restrictive covenants that impact the Company’s ability to conduct business. The condensed consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Note 5 – Accrued Expenses



Accrued expenses consist of the following:





|                       |  | June 30, |           |  | March 31, |  
|---------------------- |  | -------- | --------- |  | --------- | -
|                       |  | 2012     |           |  | 2012      |  
|Payroll                |  | $        | 1,191,708 |  |           | $
|Mineral lease payable  |  |          | 49,557    |  |           |  
|                       |  |          |           |  |           |  
|Total accrued expenses |  | $        | 1,241,265 |  |           | $





Note 6 – Mineral Leases



During 2005, the Company acquired two oil
sands mineral leases: one covering an undivided 40% interest and the other covering an undivided 20% interest in a 1,120-acre parcel.
Additionally, an undivided 16.666% interest in a 640-acre tract was acquired. These leases are located in Carbon County, Utah,
have a 6-year life, and require minimum yearly lease payments of $151,403, increasing to $224,597 on the fifth anniversary of the
lease date if the properties have not reached commercial production. In January 2012, the lease terms were extended through 2014
and the annual lease payments remained at $224,597.



In 2009, a fourth lease was entered into
with William G. Gibbs, a relative of the chief executive officer of the Company, for an additional undivided 5% interest in the
640-acre tract (for a total 21.666% undivided interest in the 640-acre tract). This lease is located in Carbon County, Utah, adjacent
to the 1,120-acre tract. This lease has a 6-year life with a minimum yearly lease payment of $7,965 and is scheduled to terminate
by October, 2015 if the property has not reached commercial production.



The Company’s interest in these leases
is conditioned upon the payments of royalties, minimum yearly investment in development, tax payments, and other obligations to
the owners of the leased property.



Upon commencement of operations, each lease
requires a production royalty of 10% of the market value of the minerals sold, net of applicable costs and expenses. The Company
has the right, but not the obligation, to pool or unitize the leases, such that the ore mined is allocated between the leases and
the corresponding royalties are paid on their proportionate interests. If not pooled, the owners will be paid royalties only to
the extent the oil sand ore is mined on their respective property. Through June 30, 2012, no production royalties were accrued
or paid because production on these properties had not commenced. After three consecutive calendar years of production on the 1,120-acre
parcel, the production royalty on the 1,120-acre parcel shall be the greater of the 10% royalty or $1,000,000 annually.

10


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)




Future minimum lease payments are as follows
for the years ending:





|June 30,                            |   |         |        
|----------------------------------- | - | ------- | -------
|2013                                |   | $       | 232,562
|2014                                |   |         | 232,562
|2015                                |   |         | 6,638  
|Total future minimum lease payments | $ | 471,762 |        









Note 7 – Notes Payable



On June 3, 2011, outstanding notes payable
of $150,000, related-party notes payable of $25,000, and approximately $13,000 of accrued interest, were converted into 437,500
shares of common stock in connection with the Company’s reverse merger.



Note 8 – Convertible Notes Payable



As a result of the reverse merger, the
Company assumed convertible notes payable of $770,000 on June 3, 2011. In addition, the Company has issued $745,000 of convertible
notes payable subsequent to the reverse merger, through June 30, 2012. These notes were issued pursuant to a $1,750,000 private
offering. As of June 30, 2012, there was $1,515,000 of convertible notes payable outstanding with accrued interest of $140,703.
This offering was closed by the Company effective January 31, 2012.



The notes bear interest at 10% per annum
and all principal and interest are due and payable by April 30, 2014. The notes and all accrued interest are convertible into the
Company’s common stock at any time by the lender at approximately $0.50 per common share until the due date. The notes automatically
convert upon completion of a financing of $10,000,000 or more.



In connection with the terms of the offering,
holders of the notes also received 100,286 warrants for each $50,000 loaned to the Company. Through June 30, 2012, the Company
granted 3,038,667 warrants in connection with this offering. The Company recorded a debt discount related to the warrants and
resulting beneficial conversion feature of $865,334. For the warrants issued, the Company valued the warrant discount using the
Black-Scholes pricing model with the following weighted average assumptions:





|Assumptions                 |        
|--------------------------- | -------
|Dividend yield              |        
|Weighted average volatility | 158.34%
|Risk-free interest rate     | 0.99%  
|Expected life (years)       | 2.79   
|                            |        





Note 9 – Convertible Note Payable,
Related Party



On May 31, 2011, the Company converted
$214,281 of its outstanding payable to a related party, Bleeding Rock LLC, into a 6% convertible promissory note. The note is convertible
into 535,704 shares of the Company’s common stock. As of June 30, 2012, the carrying balance of the note was $228,512, including
accrued interest of $14,231. In August 2012, the Company extended the due date of the note to April 30, 2014.





Effective January 24, 2012, the Company
entered into a Termination Agreement with Bleeding Rock (the “Termination Agreement”). The purpose of the agreement
was to terminate the Operating Agreement dated May 31, 2005, as amended, between Bleeding Rock and GRI (the “Operating Agreement”).
Pursuant to the Operating Agreement GRI had obtained the rights through Bleeding Rock to utilize a process for the development,
engineering and extraction of hydrocarbons from oil sands. In light of conversations with potential investors, the Company determined
that having the technology licensed directly to the Company (rather than through Bleeding Rock and the Operating Agreement) would
be beneficial to fund raising prospects.

11


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)




As of the date
of the Termination Agreement, GRI owed $1,446,551 to Bleeding Rock, payable under the terms of the Operating Agreement. In connection
with the termination of the Operating Agreement, GRI issued a 5% convertible promissory note to Bleeding Rock for this amount.
The note initially was due and payable in one year from the date of the note and is convertible into shares of the Company’s
common stock any time before maturity at the rate of one share for each $0.50 of principal or interest converted. In August
2012, the Company extended the due date of the note to April 30, 2014.



As of June 30, 2012, the carrying balance
of the note was $1,478,055, including accrued interest of $31,504. Effective on the date of termination, Bleeding Rock assigned
its interest in the note to Hidden Peak, a related party who is the majority owner of Bleeding Rock.



Note 10 – Common Stock



In March 2012, the Company initiated a
private placement to raise an aggregate maximum of $7,000,000 through the sale of up to 140 units at $50,000 per unit. Each unit
is composed of 43,478 shares of common stock and two-year warrants to purchase another 10,870 shares of common stock at $1.15 per
share. As of June 30, 2012, the Company had sold 1,089,781 shares of common stock under the private placement agreement resulting
in gross proceeds of $1,253,248. As more fully described in Note 11, the Company issued 272,402 warrants in connection with this
private placement.



Note 11 – Warrants



The Company has four classes of warrants;
namely, special warrants, bridge warrants, convertible debt warrants, and private placement warrants.



| | a) | Special Warrants
| | -- | ----------------

The Company has issued 5,624,752
warrants from its inception in exchange for cash totaling $1,826,408. Each warrant issued entitles the holder without payment of
additional consideration, to acquire fully paid and non-assessable common shares. The warrants can be exercised at the option of
the holder or the Company at any time. In December 2011, the Company elected to exchange the special warrants for common stock
of the Company. As of June 30, 2012 and March 31, 2012, there were no special warrants outstanding.



| | b) | Bridge Warrants
| | -- | ---------------

In connection with the issuance
of certain notes payable (see Note 7), the Company granted bridge warrants to the note holders. These bridge warrants give the
holder the right to purchase shares of the Company’s common stock at $0.40 per share. As of June 30, 2012 and March 31, 2012,
there were 244,420 bridge warrants issued and outstanding.



| | c) | Convertible Debt Warrants
| | -- | -------------------------

In connection with the Company’s
$1,750,000 private convertible note offering (see Note 8), the Company granted warrants to the note holders. These warrants give
the holder the right to purchase shares of the Company’s common stock at approximately $0.50 per share. The warrants expire
on April 30, 2014. As of June 30, 2012 and March 31, 2012, there were 3,038,667 convertible debt warrants outstanding.



| | d) | Private Placement Warrants
| | -- | --------------------------

In connection with the Company’s
$7,000,000 private placement (see Note 10), the Company granted warrants to the stock purchasers. These warrants give the holder
the right to purchase shares of the Company’s common stock at $1.15 per share for a 2-year period. As of June 30, 2012 and
March 31, 2012, there were 272,402 and 158,706 private placement warrants outstanding, respectively.



Note 12 – Stock Option Plan



In April 2011, the Company adopted the
2011 Long-Term Incentive Plan (the “2011 Plan”) which reserves for the issuance of up to 7,000,000 shares of the Company’s
common stock. During the three months ended June 30, 2012, the Company issued 450,000 options to officers and directors of the
Company under the 2011 Plan. The options vest 1/3 immediately and 1/3 on each of the first two anniversary dates, have an exercise
price of $1.15 per share, and expire on June 15, 2017. The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model. The assumptions noted below were used to value the options granted during the three months
ended June 30, 2012.

12


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)






|Assumptions                 |        
|--------------------------- | -------
|Dividend yield              | -      
|Weighted average volatility | 175.45%
|Risk-free interest rate     | 0.43%  
|Expected life (years)       | 5      





Expected option lives were based on historical
data of the Company. Expected stock price volatility was based on data from comparable public companies. The risk free interest
rate was calculated using U.S. Treasury constant maturity rates similar to the expected lives of the options, as published by the
Federal Reserve. The Company has no plans to declare any future dividends.



The summary of option activity for the
three months ended June 30, 2012 is presented below:





|                             |  | Number of Shares |           |  | Weighted Average
 Exercise Price |   |      | Weighted Average Remaining
 Life (years) | 
|---------------------------- |  | ---------------- | --------- |  | -------------------------------- | - | ---- | ---------------------------------------- | 
|Balance as of March 31, 2012 |  |                  | 3,212,500 |  |                                  | $ | 0.40 |                                          | 
|Granted                      |  |                  | 450,000   |  |                                  |   | 1.15 |                                          | 
|Exercised                    |  |                  | –         |  |                                  |   | –    |                                          | 
|Canceled                     |  |                  | –         |  |                                  |   | –    |                                          | 
|Expired                      |  |                  |           |  |                                  |   | –    |                                          | 
|Balance as of June 30, 2012  |  |                  | 3,662,500 |  |                                  | $ | 0.49 |                                          | 





The weighted average grant-date fair value
of options granted during the three months ended June 30, 2012 and June 30, 2011 was $1.09 and $0.19, respectively.



Outstanding and exercisable options presented
by price range as of June 30, 2012 are as follows:





|  |             |  |  |  | Options Outstanding |  |  | Options Exercisable
|- | ----------- |  |  |  | ------------------- |  |  | -------------------
|  |             |  |  |  | Number of           |  |  |                    
|  | Exercise    |  |  |  | Options             |  |  |                    
|  | Price       |  |  |  | Outstanding         |  |  |                    
|$ | 0.25        |  |  |  | 50,000              |  |  |                    
|  | 0.40        |  |  |  | 3,087,500           |  |  |                    
|  | 0.50        |  |  |  | 75,000              |  |  |                    
|  | 1.15        |  |  |  | 450,000             |  |  |                    
|  | $0.25-$1.15 |  |  |  | 3,662,500           |  |  |                    





The estimated fair value of the Company’s stock options,
less expected forfeitures, is amortized over the options’ vesting period on the straight-line basis. The Company recognized
the following equty-based compensation expenses during the three months ending June 30, 2012 and 2011.

13


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)






|                                                                     |  | June 30, |        
|-------------------------------------------------------------------- |  | -------- | -------
|                                                                     |  | 2012     |        
|Stock-based compensation expense                                     |  | $        | 174,596
|Income tax benefit recognized related to stock-based compensation    |  |          | –      
|Income tax benefit realized from the exercise and vesting of options |  |          | –      





As of June 30, 2012, there was $313,156 of total unrecognized
compensation expense with a weighted average vesting period of approximately 2.5 years.



As of June 30, 2012, the intrinsic value of outstanding
and vested stock options was as follows:





|Intrinsic value - options outstanding |  | $ | 2,409,375 | 
|------------------------------------- |  | - | --------- | 
|Intrinsic value - options exercisable |  |   | 2,339,063 | 
|Intrinsic value - options exercised   |  |   | –         | 







Note 13 – Related-Party Transactions



From inception, pursuant to the terms of
the Operating Agreement (see Notes 1 and 9), the Company has entered into transactions with Bleeding Rock. Historically, the Company
has paid Bleeding Rock a fee as required by the Operating Agreement. The Chief Executive Officer of the Company is also the managing
executive of Bleeding Rock.



Effective January 24, 2012, the Company
entered into a Termination Agreement with Bleeding Rock. The purpose of the agreement was to terminate the Operating Agreement
dated May 31, 2005, as amended, between Bleeding Rock and GRI. Pursuant to the Operating Agreement, GRI had obtained the rights
through Bleeding Rock to utilize a process for the development, engineering and extraction of hydrocarbons from oil sands. In light
of conversations with potential investors, the Company determined that having the technology licensed directly to the Company (rather
than through Bleeding Rock and the Operating Agreement) would be beneficial to fund raising prospects.



As of the
date of the Termination Agreement, GRI owed $1,446,551 to Bleeding Rock, payable under the terms of the Operating Agreement.
In connection with the termination of the Operating Agreement, GRI issued a 5% convertible promissory note to Bleeding Rock
for this amount. The note is due and payable in one year from the date of the note and is convertible into shares of the
Company’s common stock any time before maturity at the rate of one share for each $0.50 of principal or interest
converted. In August 2012, the due date of the note was extended to April 30, 2014.As of June 30, 2012, the carrying
balance of the note was $1,478,055, including accrued interest of $31,504. Effective on the date of termination, Bleeding
Rock assigned its interest in the note to Hidden Peak, a related party who is the majority owner of Bleeding Rock.



Contemporaneous with the execution of the
License Agreement and the Termination Agreement described above, the Company entered into a Gross Royalty Agreement with Bleeding
Rock whereby the Company is obligated to pay a royalty equal to 1.5% of the gross receipts from future projects using the technology,
excluding the current project in Sunnyside, Utah. The Gross Royalty Agreement was similarly assigned to Hidden Peak.



On May 31, 2011, the Company converted
$214,281 of the accrued fees to Bleeding Rock into a 6% convertible promissory note. The note is convertible into 535,704 shares
of the Company’s common stock. As of June 30, 2012, the carrying balance of the note was $228,512, including accrued interest
of $14,231. In August 2012, the due date of the note was extended to April 30, 2014.

14


American Sands Energy Corp. (Formerly Millstream Ventures, Inc.)(A Development Stage Company)Notes to Condensed Consolidated Financial Statements (Unaudited)




In 2009, the Company entered into a mineral
lease with William G. Gibbs, a relative of the Chief Executive Officer of the Company, for an additional undivided 5% interest
in the 640-acre tract (for a total 21.666% undivided interest in the 640-acre tract). This lease is located in Carbon County, Utah,
adjacent to the 1,120-acre tract. This lease has a 6-year life with a minimum yearly lease payment of $7,965 and is scheduled to
terminate by October 2015 if the property has not reached commercial production.



Note 14 – Commitments



On April 1, 2012, the Company entered into
a Management and Services Agreement (the “Management Agreement”) with a principal stockholder to provide management
services to the Company (the “Principal Stockholder”). The Principal Stockholder is managed by one of the Company’s
directors and is owned in part by this director and by the Company’s CFO, who is also the chief financial officer of the
Principal Stockholder. The term of the Agreement commenced on April 1, 2012 and is effective for 36 months, and automatically renews
for an additional 12 months on each succeeding anniversary unless terminated in writing by either party. In exchange for the services
provided by the Principal Stockholder, the Company agrees to pay a monthly fee to the Principal Stockholder of $25,000. The monthly
fee will accrue until the Company raises a minimum of $3,500,000 in an equity or debt offering (the “Offering”) and
at the time of the closing of the Offering, the Principal Stockholder shall have the option, but not the obligation, to convert
all outstanding amounts accrued into the equity or debt instruments issued by the Company in the Offering.



Note 15 – Subsequent Events



The Company announced on July 25, 2012, the successful operation
of its oil sand recovery pilot facility. The pilot facility, which is based in Phoenix, Arizona, has been operational since early
July. Approximately 80 tons of the Company’s oil sands were shipped to the facility, which has been able to run at its designed
rate of up to two tons per hour, generating consistent flows of oil and clean, dry sand over multiple, consecutive days of operation.



On August 14, 2012, the Company extended
the due dates of both of its convertible notes payable owed to a related party (see Note 9) to April 30, 2014.



On August 14, 2012, the Company
issued 50,000 shares of common stock with a fair value of $57,500 to a third party consulting firm for services rendered.



15











Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations



Forward-Looking Statements



The statements contained herein that are
not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently
available information. Forward-looking statements include the information concerning our current and future operations, business
strategies, need for financing, competitive position, ability to retain and recruit personnel, and the effects of competition.
Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking
terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,”
“expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances
that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly
affect expected results, and actual future results could differ materially from those described in such forward-looking statements.



The following discussion should be read
in conjunction with our financial statements and related notes thereto as included with this report.



Overview



American Sands Energy Corp. (“ASEC”)
is a development stage company that proposes to engage in the clean extraction of bitumen from oil sands prevalent in the Mountain
West region of North America using proprietary technology. Since the project’s inception, we have been engaged in the business
of acquiring and developing oil sands assets and technologies used to separate the oil contained in oil sands. The Company anticipates
that its principal operations will include the mining of oil sands, the separation of oil products therefrom and the sale of oil
and oil by-products.



We have obtained a license for a hydrocarbon
extraction process that separates oil and other hydrocarbons from sand, shale, dirt and other substances, without leaving behind
toxins or other contaminants. We are currently developing our first project on certain hydrocarbon and mineral leases which cover
approximately 1,760 acres near Sunnyside, Utah (the “Sunnyside Project”). In accordance with the standards contained
in Rule 4-10(a) of the SEC’s Regulation S-X, these leases contain no proven reserves of oil or gas. However, we have obtained
an independent Resource Audit and Classification report dated May 29, 2009, from a major international geology and mining consulting
firm describing the quantity and quality of the bitumen resource estimated to be located on the properties covered by our leases.



To date, we have acquired extensive bitumen
resources, a working knowledge of the process technology and have initiated applications for mining, environmental and other permits
required to build a commercial plant (the “Commercial Facility”). Additional work to be completed as part of the project
development phase includes:



|1. |  | Final mine planning and civil engineering for the Sunnyside Project.
|-- |  | --------------------------------------------------------------------

|2. |  | Acquisition of additional property in areas of interest in order to block-up properties
into logical and economical mining units.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------

|3. |  | Determination of technical and economic parameters for the commercial scale use of
the process, including engineering.
|-- |  | ----------------------------------------------------------------------------------------------------------------------

|4. |  | Preparation of environmental impact statements and receipt of federal and state regulatory
agency approval for the Commercial Facility.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------

|5. |  | Completion of environmental and permitting work for the Commercial Facility.
|-- |  | ----------------------------------------------------------------------------



Contemporaneously with the pursuit of the
permitting of the project, we will also finalize engineering and equipment for the 3,000 barrel per day plant. We have retained
a leading engineering firm in the North American oil sands extraction industry, AMEC BDR Limited, and they have completed an engineering
and feasibility study with respect to a commercial plant that will produce up to 3,000 barrels of oil per day. We have also retained
an environmental engineering and consulting firm to assist us in preparing and filing the necessary mine and environmental permits
to operate a large mine. Based on the information from our consultants, we believe that additional financing of approximately $50
million will be required to procure and install the necessary equipment to begin operations of a plant that we believe will produce
approximately 3,000 barrels per day of bitumen.

16







We performed lab and pilot plant tests
on oil sands from the Utah Green River Formation to prove the viability of the technology and to understand several key elements
in the process. We hired an independent engineering firm, AMEC BDR Limited, to witness the pilot plant tests and to manage the
lab work and review the results. The results of these tests are summarized as follows:





| | — | The bitumen was completely separated from the sand, leaving the sand “oil” free.                                                                                                                              
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                               
| | — | No sand particles or other contaminates were found in the separated bitumen.                                                                                                                                  
| |   |                                                                                                                                                                                                               
| | — | The sand product contained less than 2 parts per million (“PPM’) of solvent residue, presents no environmental liability and can be returned to the mine site or sold.                                        
| |   |                                                                                                                                                                                                               
| | — | Solvent losses to the bitumen product were also insignificant. Consequently, because the solvent is recycled with minimal loss in a closed loop system, make-up solvent costs are minimal.                    
| |   |                                                                                                                                                                                                               
| | — | The compositional characteristics of the bitumen were not altered by the process; therefore, the bitumen will be suitable for upgrading and refining to saleable products by conventional refining technology.
| |   |                                                                                                                                                                                                               
| | — | The composition and properties of the solvent recovered by the process were not altered by the process; therefore, the solvent can be recycled through the process without further conditioning or processing.





Based on the results of those tests, the
engineering firm evaluated the feasibility and costs of scaling the process into a plant that will initially process up to 3,000
barrels per day, with possible future expansion of facilities of up to 50,000 barrels per day,subject to market conditions
and the availability of financing on terms acceptable to the Company.



In addition to the initial tests that were
performed in 2006, we recently began testing oil sands ore from the Sunnyside Project on a new system designed by SRS Engineering
International, pursuant to a current license agreement. These tests will provide additional information to be used in the design
of the 3,000 barrels per day facility.



Business Developments



During the first quarter of the current
fiscal year ending March 31, 2013, we had the following major developments:





| | — | The Company announced on July 25, 2012, the successful operation of its oil sand recovery pilot facility. The pilot facility, which is based in Phoenix, Arizona, has been operational since early July. Approximately 80 tons of the Company’s oil sands were shipped to the facility, which has been able to run at its designed rate of up to two tons per hour, generating consistent flows of oil and clean, dry sand over multiple, consecutive days of operation.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | — | During the quarter ended June 30, 2012, the Company raised $492,019 of net proceeds from the sale of 454,985 shares of restricted common stock in connection with the Company’s $7,000,000 private placement offering.                                                                                                                                                                                                                                                  





Critical Accounting Policies and
Estimates



The selection and application of accounting
policies is an important process that has developed as our business activities have evolved and as the accounting rules have changed.
Accounting rules generally do not involve a selection among alternatives, but involve an implementation and interpretation of existing
rules, and the use of judgment, to the specific set of circumstances existing in our business. Discussed below are the accounting
policies that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions
involved and the magnitude of the asset, liability, revenue or expense being reported. See Note 3 to our unaudited condensed consolidated
financial statements included in this Form 10-Q for the quarter ended June 30, 2012, for a discussion of those policies.



Going Concern - The Company’s
financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization
of assets and the liquidation of liabilities in the ordinary course of business. The Company has incurred substantial losses from
operations resulting in negative working capital (current liabilities exceed current assets), and the Company has negative operating
cash flows, which raise substantial doubt about the Company’s ability to continue as a going concern. The Company sustained
a net loss for the quarter ended June 30, 2012 of $780,526 and has an accumulated deficit of $9,510.306, as of June 30, 2012.
In addition, the Company will require approximately $50,000,000 in capital expenditures to commence principal operations.

17







Since inception of the development stage,
the Company has not generated any revenue and its financial position is not sufficient to fund its planned business objective for
an extended period of time. The Company is dependent on the sale of equity or debt securities in the next twelve months in order
to obtain the requisite capital to continue to pursue its business objectives. If the Company is not able to obtain additional
capital through the sale of equity or debt securities, it will not be able to commence production.



Mineral Leases – Due to the
uncertainty regarding the recoverability of costs to acquire, maintain, and develop mineral leases, all costs to acquire, maintain,
and develop mineral leases have been expensed as incurred.



Stock-Based Compensation –
The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options and warrants granted. For
employee stock options, the Company records the grant-date fair value as expense over the period in which it is earned, typically
the vesting period. For consultants, the fair value of the stock-based award is recorded as expense over the term of the service
period, and unvested amounts are revalued using the Black-Scholes model at each reporting period. For warrants issued to lenders,
the Company records the grant-date fair value of the warrants and any resulting beneficial conversion feature for convertible debt,
as a note discount. The discount is then amortized over the estimated life of the warrant as non-cash interest expense.



Results of Operations



Three months ended June 30, 2012 compared
to the three months ended June 30, 2011



During the three months ended
June 30, 2012, the Company incurred a net loss of $780,526 compared to a net loss of $830,867 for the three months ended June
30, 2011. During the three months ended June 30, 2012, our operating expenses were $641,318, which represented a 21%
decrease, compared to the three months ended June 30, 2011. Selling, general and administrative expenses decreased by 40%
from $840,638 during the three months ended June 30, 2011 to $508,148 during the three months ended June 30, 2012. Costs for
stock- based compensation decreased from $584,061 for the three months ended June 30, 2011 to a $173,061 for the three months
ended June 30, 2012. The stock-based compensation costs incurred during the three months ended June 30, 2011 resulted from
the reverse acquisition where the Company cancelled certain GRC stock options that had been previously issued to officers and
directors and exchanged them for new stock options of the Company that had different terms. In addition, certain key members
of management received additional stock options in the Company at the time of the reverse merger. Going forward, we believe
that the obligations placed upon us as a result of our reporting requirements under SEC rules and regulations will result in
our operating expenses increasing.



During the three months ended June
30, 2012, the Company incurred $79,909 of research and development costs associated primarily with engineering and related
costs incurred to obtain the necessary licenses and permits for the Company to develop its mining assets. In addition, the
Company incurred costs to develop a pilot test unit to further develop and prove the viability of
the Company’s proprietary technology to separate the bitumen from the sand.



Interest expense increased to $139,208
for the three months ended June 30, 2012 as compared to $16,423 for the three months ended June 30, 2011. The increase in interest
expense is due to the Company having increased debt as a result of the convertible notes payable issued during our fiscal year
ending March 31, 2012 (“Fiscal 2012”), coupled with higher non-cash interest expense as a result of amortization of
warrants issued in connection with the convertible notes payable. The Company also converted certain obligations to related parties
to notes payable resulting in additional interest expense.



18







Liquidity and Capital Resources



As of June 30, 2012, the Company had $741,022
in cash and negative working capital of $494,264. As of June 30, 2012, the Company had total liabilities of $4,261,416. As of June
30, 2012, the Company’s total assets were $966,929 consisting of cash, receivables, prepaid and other current assets, and
property and equipment. The Company received $852,759 of cash in connection with the reverse merger that occurred on June 3, 2011.



The Company has established a resource
position, a working knowledge of the process technology and an initial list of environmental and other permits required to build
a commercial plant. Additional work to be completed as part of the project development phase includes:



| | 1. | Final mine planning and civil engineering for the Sunnyside Project.
| | -- | --------------------------------------------------------------------



| | 2. | Acquisition of additional property in areas of interest in order to block-up properties into logical
and economical mining units.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------



| | 3. | Determination of technical and economic parameters for the commercial scale use of the process,
including engineering.
| | -- | ----------------------------------------------------------------------------------------------------------------------



| | 4. | Preparation of environmental impact statements and receipt of federal and state regulatory agency
approval for the commercial facility.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Completion of environmental and permitting work for the commercial facility.
| | -- | ----------------------------------------------------------------------------



The Company believes that with the $1,515,000
of proceeds from the sale of convertible notes payable received through June 30, 2012, together with the $1,253,248 from its private
placement of stock and the balance of the remaining proceeds the Company expects to raise from its private placement of stock,
we will be in a position to initiate items 1 through 5 above. Additional financing of approximately $50,000,000 will be required
to procure and install the necessary equipment to begin operations of a plant that we believe will produce approximately 3,000
barrels per day of bitumen.



Management anticipates that we will be
dependent, for the near future, on additional capital to fund operating expenses and anticipated growth. The report of the Company’s
independent registered public accounting firm for the year ended March 31, 2012, expressed substantial doubt about the Company’s
ability to continue as a going concern. The Company’s operating losses have been funded through the issuance of equity securities
and borrowings. We will need additional funding in the future in order to continue our business operations. While we continually
look for additional financing sources, in the current economic environment, the procurement of outside funding is extremely difficult
and there can be no assurance that such financing will be available, or, if available, that such financing will be at a price that
will be acceptable to us. Failure to generate sufficient revenue or raise additional capital would have an adverse impact on our
ability to achieve our longer-term business objectives, and would adversely affect our ability to continue operating as a going
concern.



Off-Balance Sheet Arrangements



During the three months ended June 30,
2012, we did not engage in any off-balance sheet transactions.



Item 3. Quantitative and Qualitative
Disclosures About Market Risk



As a smaller reporting company, we have
elected not to provide the disclosures required by this item.



Item 4. Controls and Procedures



Disclosure Controls and Procedures



Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end
of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief 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
information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and
(ii) is accumulated and communicated to the Company’s management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

19







Changes in Internal Control over
Financial Reporting



There were no changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30,
2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



It should be noted that any system of controls,
however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system will
be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls
will succeed in achieving their stated goals under all potential future conditions.



PART II. OTHER INFORMATION





Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds



During the quarter ended June 30, 2012,
we sold the following unregistered securities that have not been previously reported in a prior report:



In March 2012, the Company began its
non-public offering to raise up to $7,000,000, through the sale of up to 140 units (the “Units”) at $50,000 per
Unit, each Unit composed of 43,478 shares of common stock and warrants to purchase another 10,870 shares of common stock at
$1.15 per share (the “Private Offering”). During the quarter ended June 30, 2012, we sold 10.46 Units representing
454,985  shares and 113,696 warrants for gross proceeds of $520,235 in the Private Offering. These securities were sold
without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of
Section 4(a)(5) and/or Section 4(a)(2) thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not
involving any public offering. Each of the purchasers of the Units was an accredited investor as defined in Regulation D.
These securities have not been and will not be registered under the Securities Act and may not be offered or sold in the
United States absent registration or an applicable exemption from registration requirements. No selling commissions were paid
in connection with the Private Offering.



Item 4. Mine Safety Disclosures



There are no reportable events required
pursuant to this item.



Item 6. Exhibits



The following exhibits are furnished with
this report:



|31.1 | Rule 15d-14(a) Certification by Principal Executive Officer
|---- | -----------------------------------------------------------

|31.2 | Rule 15d-14(a) Certification by Principal Financial Officer
|---- | -----------------------------------------------------------

|32.1 | Section 1350 Certification of Principal Executive Officer
|---- | ---------------------------------------------------------

|32.2 | Section 1350 Certification of Principal Financial Officer
|---- | ---------------------------------------------------------

|101.INS | XBRL Instance Document
|------- | ----------------------

|101.SCH | XBRL Taxonomy Extension Schema Document(1)
|------- | ------------------------------------------

|101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document(1)
|------- | --------------------------------------------------------

|101.DEF | XBRL Taxonomy Extension Definition Linkbase Document(1)
|------- | -------------------------------------------------------

|101.LAB | XBRL Taxonomy Extension Label Linkbase Document(1)
|------- | --------------------------------------------------

|101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document(1)
|------- | ---------------------------------------------------------












|(1) | XBRL Interactive Data files with detailed tagging will be filed by amendment to this Quarterly Report on Form 10-Q within 30 days of the filing date of this Quarterly Report on Form 10-Q, as permitted by Rule 405(a)(2) of Regulation S-T.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





20









SIGNATURES



Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.





|                      | American Sands Energy Corp.               
|--------------------- | ------------------------------------------
|                      |                                           
|                      |                                           
|                      |                                           
|Date: August 14, 2012 | By:                                       
|                      | William C. Gibbs, Chief Executive Officer 
|                      | (Principal Executive Officer)             
|                      |                                           
|                      |                                           
|                      |                                           
|                      |                                           
|Date: August 14, 2012 | By:                                       
|                      | Daniel F. Carlson, Chief Financial Officer
|                      | (Principal Financial Officer)             















21