UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549






FORM 10-Q








S QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June
30, 2012



£TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from ______ to
_______



Commission file number: 000-30215



LUSTROS INC.

(Formerly Power-Save Energy Company)

(Exact name of registrant as specified
in its charter)



|Utah                                                           | 87-9369569                
|-------------------------------------------------------------- | --------------------------
|(state or other jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. No.)



POWER-SAVE ENERGY COMPANY

(former name of former address, if changes
since last report)



|1005 South Center
        Redlands, CA 92373
|--------------------------------------------
|(Address of principal executive offices)    



(909) 253-0774(Issuer's telephone number)



with a copy to:

Zouvas Law Group, P.C.

2368 Second Avenue

San Diego, CA 92101

Telephone (619) 688-1116

Facsimile: (619) 688-1716



Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes S
No £

Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes £ No S
(Not required)



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 £ | Accelerated Filer £        
|------------------------- | ---------------------------
|Non-Accelerated Filer £   | Smaller Reporting Company S



Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £
No S



As of, August 17, 2012, there were
70,754,821shares of the registrant’s $0.001 par value Common Stock issued and outstanding.
















LUSTROS INC.

(FORMERLY POWER-SAVE ENERGY COMPANY*)



TABLE OF CONTENTS





|         |                                                                                       |  | PAGE
|-------- | ------------------------------------------------------------------------------------- |  | ----
|PART I   | FINANCIAL INFORMATION                                                                 |  | 4   
|ITEM 1.  | FINANCIAL STATEMENTS                                                                  |  | 4   
|ITEM 2.  | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 14  
|ITEM 3.  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 15  
|ITEM 4.  | CONTROLS AND PROCEDURES                                                               |  | 15  
|         |                                                                                       |  |     
|PART II  | OTHER INFORMATION                                                                     |  | 16  
|ITEM 1.  | LEGAL PROCEEDINGS                                                                     |  | 16  
|ITEM 1A. | RISK FACTORS                                                                          |  | 16  
|ITEM 2.  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           |  | 16  
|ITEM 3.  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 17  
|ITEM 4.  | MINING SAFETY DISCLOSURE                                                              |  | 17  
|ITEM 5.  | OTHER INFORMATION                                                                     |  | 17  
|ITEM 6.  | EXHIBITS                                                                              |  | 18  











2







Special Note Regarding Forward-Looking
Statements



Information included in this Form 10-Q
contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information
may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements
of Lustros Inc. (the “Company”), to be materially different from future results, performance or achievements expressed
or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans,
strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,”
“should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,”
or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking
statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these
forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied
by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation
to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur
in the future.



*Please note that throughout this Quarterly
Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "LSLD"
refers to Lustros Inc.





3







PART I - FINANCIAL INFORMATION



ITEM 1. 	FINANCIAL STATEMENTS



|INDEX                                                                                                                                                                                       |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -
|                                                                                                                                                                                            |  
|Unaudited Consolidated Balance Sheet as of June 30,
2012                                                                                                                                    | 4
|                                                                                                                                                                                            |  
|Unaudited Consolidated Statement of Operations for
the three Months Ended June 30, 2012 and Since Inception And Statement of Income for the period ending June 30, 2012 and Since
Inception | 5
|                                                                                                                                                                                            |  
|Unaudited Consolidated Statement of Cash Flows for
the period Ended June 30, 2012                                                                                                           | 6
|                                                                                                                                                                                            |  
|Notes to Financial Statements                                                                                                                                                               | 7















4







Lustros, Inc.

(An Exploration Stage Company)

Consolidated Balance Sheets

(Unaudited)



|                                                                                                    |  | June 30, 2012 |           
|--------------------------------------------------------------------------------------------------- |  | ------------- | ----------
|ASSETS                                                                                              |  |               |           
|Current Assets                                                                                      |  |               |           
|Cash                                                                                                |  | $             | 29,034    
|Prepaid expenses                                                                                    |  |               | 948,420   
|Total current assets                                                                                |  |               | 977,454   
|                                                                                                    |  |               |           
|Non-Current Assets                                                                                  |  |               |           
|Fixed asset, net                                                                                    |  |               | 7,809,316 
|Land                                                                                                |  |               | 549,310   
|Total non-current assets                                                                            |  |               | 8,358,626 
|                                                                                                    |  |               |           
|TOTAL ASSETS                                                                                        |  | $             | 9,336,080 
|                                                                                                    |  |               |           
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                |  |               |           
|                                                                                                    |  |               |           
|Liabilities                                                                                         |  |               |           
|Accounts payable                                                                                    |  | $             | 1,293,367 
|Notes payable                                                                                       |  |               | 446,217   
|Notes payable - related party                                                                       |  |               | 342,393   
|Total liabilities                                                                                   |  |               | 2,081,977 
|                                                                                                    |  |               |           
|Stockholders' Equity                                                                                |  |               |           
|Preferred stock, $.001 par value, 10,000,000 shares authorized, 175,000 issued and
    outstanding  |  |               | 175       
|Common stock, $.001 par value, 100,000,000 shares authorized, 69,674,608 issued and
    outstanding |  |               | 69,674    
|Additional paid-in capital                                                                          |  |               | 5,393,467 
|Minority interest                                                                                   |  |               | 3,264,303 
|Other comprehensive income                                                                          |  |               | 219,048   
|Accumulated deficit during exploration stage                                                        |  |               | (1,692,564
|Total stockholders' equity                                                                          |  |               | 7,254,103 
|                                                                                                    |  |               |           
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                          |  | $             | 9,336,080 



See notes to consolidated financial statements





5











Lustros, Inc.

(An Exploration Stage Company)

Consolidated Statements of Operations

(Unaudited)







|                                      |  | For the three months ended June 30, 2012 |            |   | Inception, (January 26, 2012) to June 30, 2012 |  
|------------------------------------- |  | ---------------------------------------- | ---------- | - | ---------------------------------------------- | -
|                                      |  |                                          |            |   |                                                |  
|Revenue                               |  | $                                        | 31,057     |   |                                                | $
|Cost of goods sold                    |  |                                          | –          |   |                                                |  
|Gross profit                          |  |                                          | 31,057     |   |                                                |  
|                                      |  |                                          |            |   |                                                |  
|Operating expenses                    |  |                                          |            |   |                                                |  
|General and administrative            |  |                                          | 484,124    |   |                                                |  
|Payroll                               |  |                                          | 625,778    |   |                                                |  
|Legal and accounting                  |  |                                          | 98,294     |   |                                                |  
|Mining costs                          |  |                                          | 41,935     |   |                                                |  
|Research & development                |  |                                          | 3,312      |   |                                                |  
|Total expenses                        |  |                                          | 1,253,443  |   |                                                |  
|                                      |  |                                          |            |   |                                                |  
|Loss from  operations                 |  |                                          | (1,222,386 | ) |                                                |  
|                                      |  |                                          |            |   |                                                |  
|Other loss                            |  |                                          | (1,165     | ) |                                                |  
|                                      |  |                                          |            |   |                                                |  
|Net loss                              |  | $                                        | (1,223,551 | ) |                                                | $
|                                      |  |                                          |            |   |                                                |  
|Income per share, basic               |  | $                                        | (0.02      | ) |                                                |  
|                                      |  |                                          |            |   |                                                |  
|Weighted average common shares, basic |  |                                          | 62,931,351 |   |                                                |  







Statements of Comprehensive Loss

(Unaudited)



|                                     |  | For the three months ended June 30, 2012 |            |   | Inception, (January 26, 2012) to June 30, 2012 |  
|------------------------------------ |  | ---------------------------------------- | ---------- | - | ---------------------------------------------- | -
|                                     |  |                                          |            |   |                                                |  
|Net loss                             |  | $                                        | (1,223,551 | ) |                                                | $
|                                     |  |                                          |            |   |                                                |  
|Gain on foreign currency translation |  |                                          | 219,048    |   |                                                |  
|                                     |  |                                          |            |   |                                                |  
|Total comprehensive loss             |  | $                                        | (1,004,503 | ) |                                                | $



See notes to consolidated financial statements





6







Lustros, Inc.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                           |  | Inception (January 26, 2012) to June 30, 2012 |           
|-------------------------------------------------------------------------- |  | --------------------------------------------- | ----------
|Cash flows from operating activities                                       |  |                                               |           
|Net loss                                                                   |  | $                                             | (1,692,564
|                                                                           |  |                                               |           
|Adjustments to reconcile net loss to net cash used by operating activities |  |                                               |           
|Depreciation                                                               |  |                                               | 31,927    
|                                                                           |  |                                               |           
|Changes in operating assets and liabilities:                               |  |                                               |           
|Accounts payable                                                           |  |                                               | 844,955   
|Prepaid expenses                                                           |  |                                               | (183,869  
|Total cash used by operations                                              |  |                                               | (999,551  
|                                                                           |  |                                               |           
|Cash flows from investing activities                                       |  |                                               |           
|Funds received in Bluestone SA acquisition                                 |  |                                               | 892,294   
|Funds received in Power Save merger                                        |  |                                               | 38,572    
|Disposal of Power Save operations                                          |  |                                               | (20,642   
|Purchase of fixed assets                                                   |  |                                               | (1,058,898
|Total cash used in investing activities                                    |  |                                               | (148,674  
|                                                                           |  |                                               |           
|Cash from financing activities                                             |  |                                               |           
|Proceeds from notes payable                                                |  |                                               | 2,482,211 
|Repayment of notes payable                                                 |  |                                               | (2,745,000
|Stock sales                                                                |  |                                               | 1,221,000 
|Total cash used in financing activities                                    |  |                                               | 958,211   
|                                                                           |  |                                               |           
|Effect of foreign currency exchange rate                                   |  |                                               | 219,048   
|                                                                           |  |                                               |           
|INCREASE IN CASH                                                           |  |                                               | 29,034    
|                                                                           |  |                                               |           
|BEGINNING CASH                                                             |  |                                               | –         
|                                                                           |  |                                               |           
|ENDING CASH                                                                |  | $                                             | 29,034    
|                                                                           |  |                                               |           
|Supplemental disclosure of cash flow information:                          |  |                                               |           
|Interest paid                                                              |  | $                                             | (1,165    
|Income taxes paid                                                          |  | $                                             | –         
|                                                                           |  |                                               |           
|Supplemental disclosure of non-cash investing activities:                  |  |                                               |           
|                                                                           |  |                                               |           
|Common stock issued to satisfy notes payable                               |  |                                               | 1,529,000 
|Net assets acquired in reverse merger with Power Save                      |  |                                               | 63,207    
|Net assets acquired in Sulfatos Chile acquisition                          |  |                                               | (5,068,464
|Net assets disposed of in Power Save sale                                  |  |                                               | (62,138   
|Effect of reverse merger with Power Save                                   |  |                                               | (24,635   
|Contributed capital in Sulfatos Chile acquisition                          |  |                                               | 2,696,455 
|Contributed capital on Power Save sale                                     |  |                                               | 41,496    





See notes to consolidated financial statements





7







LUSTROS, INC.

(An Exploration Stage Company)

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS



Note 1 - Organization and Principal Activities



Organization and Description of Business



Lustros, Inc., formerly Power-Save Energy Company, (the “Company")
is the successor corporation of Mag Enterprises, Inc., a Utah corporation incorporated on July 30, 1980. On September 10, 1993,
an Amendment to the Articles of Incorporation was filed to change its name from Mag Enterprises, Inc. to Safari Associates, Inc.
On September 12, 2006, an Amendment to the Articles of Incorporation was filed to change its name from Safari Associates, Inc.
to Power-Save Energy Company.



On February 29, 2012, Power-Save Energy
Company entered into an agreement to acquire all of the capital stock of Bluestone S.A. On March 9, 2012, pursuant to a Share Exchange
Agreement (the “Share Exchange Agreement”) with Bluestone, S.A., a Chilean corporation (“Bluestone”), and
the shareholders of Bluestone, S.A. (“Bluestone Shareholders’), the Company acquired 100% of the outstanding shares
of Common Stock of Bluestone (the “Bluestone Stock”) from Bluestone Shareholders.  In exchange for the Bluestone
Stock, the Company issued 60,000,000 shares of its Common Stock to the Bluestone Shareholders.  As a result of closing
the transaction, Bluestone Shareholders now hold approximately 96.7% of the Company’s issued and outstanding Common Stock.  For
accounting purposes, the Bluestone acquisition is treated as a reverse acquisition with Bluestone treated as the acquirer and the
Company as the acquired party. As a result, the business and financial information included in the report is the business and financial
information of Bluestone prior to March 9, 2012 and the combined entity after March 9, 2012.



On March 25, 2012, the Company agreed
with the former management of Power-Save Energy Company to transfer the renewable energy and energy savings product business, including
all assets, liabilities, and the name Power-Save Energy Company to the former management in lieu of unpaid salaries and any other
potential monies owed to them.



On April
12, 2012,an Amendment to the Articles of Incorporation was filed to change its name from Power-Save Energy Company to Lustros,
Inc.



Note 2 - Summary of Significant Accounting Policies



Basis of Presentation



The consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America. The preparation of the consolidated financial statements
requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements,
including the estimated useful lives of tangible and intangible assets. Management believes the estimates used in preparing the
financial statements are reasonable and prudent. Actual results could differ from these estimates.



Principles of Consolidation



The consolidated financial statements include the financial
statements of Lustros, Inc., its wholly owned subsidiary Bluestone, and the subsidiaries and mining projects owned by Bluestone.
All significant inter-company balances and transactions have been eliminated in consolidation.



Foreign Currency Translation



The financial statements of the Company’s wholly-owned
subsidiary, Bluestone are measured using the local currency (the Chilean Peso (CLP) is the functional currency). Assets and liabilities
of Bluestone SA are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average
rates of exchange in effect during the period. The resulting cumulative translation adjustments have been recorded as a component
of comprehensive income (loss), included as a separate item in the statement of operations. The exchange rate at June 30, 2012
was 509.73 Chilean Pesos per United States Dollar, based on historical rates from Banco Central de Chile.





8







The Company is exposed to movements in foreign currency exchange
rates. In addition, the Company is subject to risks including adverse developments in the foreign political and economic environment,
trade barriers, managing foreign operations, and potentially adverse tax consequences. There can be no assurance that any of these
factors will not have a material negative impact on the Company's financial condition or results of operations in the future.



Financial Instruments



The Company's financial instruments include cash and cash equivalents,
and accounts payable. At June 30, 2012 the carrying cost of these instruments approximate their fair value.



Cash Equivalents



Cash equivalents include highly liquid investments with maturities
of three months or less.



Property and Equipment



Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally on the straight-line method over the estimated useful life of each type of asset which ranges
from three to five years. Major improvements are capitalized, while expenditures for repairs and maintenance are expensed when
incurred. Upon retirement or disposition, the related costs and accumulated depreciation are removed from the accounts, and any
resulting gains or losses are credited or charged to income.



Mining Properties and Equipment



The Company will follow the successful efforts method of accounting.
All developmental costs will be capitalized. Depreciation and depletion of producing properties will be computed on the unit-of-production
method based on estimated proved reserves. Repairs and maintenance will be expensed, while renewals and betterments will be generally
capitalized.



At least quarterly, or more frequently if conditions indicate
that long-term assets may be impaired, the carrying value of our properties will be compared to management's future estimated pre-tax
cash flow from the properties. If undiscounted cash flows are less than the carrying value, then the asset value will be written
down to fair value. Impairment of individually significant unproved properties will be assessed on a property-by-property basis,
and impairment of other unproved properties is assessed and amortized on an aggregate basis.



Revenue Recognition



Revenue is recognized in accordance with SEC Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements". The Company recognizes revenue when the significant
risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors
such as when there has been evidence of a sales arrangement, delivery has occurred, or services have been rendered, the price to
the buyer is fixed or determinable, and collection is reasonably assured. The Company is responsible for warehousing and shipping
the merchandise.



Stock - Based Compensation



The Company may periodically issue shares of Common Stock for
services rendered or for other costs and expenses. Such shares will be valued based on the market price of the shares on the transaction
date.



The Company may periodically issue stock options to employees
and stock options or warrants to non-employees in non-capital raising transactions for services and for financing costs.



The Company accounts for its stock-based compensation in accordance
with ASC Topic 718, "Share-Based Payment, and an Amendment of FASB Statement No. 123." The Company recognizes in the
statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and
non-employees.





9







Earnings Per Common Share



ASC Topic 260, “Earnings Per Share”, requires presentation
of basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic earnings
(loss) per share is computed by dividing earnings (loss) available to Common Stockholders by the weighted average number of common
shares outstanding (including shares reserved for issuance) during the period. Diluted earnings per share gives effect to all potential
dilutive common shares outstanding during the period.



Going Concern



The Company’s financial statements are prepared using
accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements, the Company has a limited operating history and limited funds and has an accumulated deficit
of $1,692,564.  These factors affect the Company’s ability to continue as a going concern.



In order to continue as a going concern and achieve a profitable
level of operations, the Company will require additional cash infusions from the sale of equity and will seek to generate income
from several avenues.



The financial statements do not include
any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the
Company be unable to continue as a going concern. The continuation as a going concern is dependent upon the ability of the Company
to meet our obligations on a timely basis, and, ultimately to attain profitability.



Note 3 -  Sulfatos Chile



Supplemental cash flows information



The following information presents supplemental cash flows information
of assets acquired and liabilities assumed in connection with the Sulfatos Chile Acquisition:





|                                                             |  | Six Months Ended June 30,
    2012 |           
|------------------------------------------------------------ |  | ---------------------------------- | ----------
|Prepaid expenses                                             |  | $                                  | 764,551   
|Property and equipment                                       |  |                                    | 7,331,655 
|Accounts payable                                             |  |                                    | (447,343  
|Notes payable                                                |  |                                    | (2,580,399
|                                                             |  | $                                  | 5,068,464 
|Plus, cash acquired                                          |  |                                    | 892,294   
|Total value of acquisition                                   |  | $                                  | 5,960,758 
|Value of acquisition allocated to additional paid-in capital |  | $                                  | 2,696,455 
|Value of acquisition allocated to minority interest          |  | $                                  | 3,264,303 





On February 15, 2012, Bluestone purchased
a 60% equity interest in Sulfatos Chile from Santa Teresa Minerals pursuant to the stock purchase agreement dated January 26, 2012,
as amended. The interests in Sulfatos Chile were sold in exchange for (a) Santa Teresa Minerals receiving 2,000 shares of Common
Stock of Bluestone, representing 20% of the outstanding capital stock of Bluestone at the time; and (b) $2.2 million, with $1.1
million paid by cancellation of a demand loan made to Santa Teresa Minerals by Angelique de Maison, a director of the Company,
in January 2012, which loan had been assigned by Ms. de Maison to Bluestone, and the balance of $1.1 million to be paid in monthly
installments from time to time upon demand by Santa Teresa Minerals. A total of $2,065,000 has been paid as of June 30, 2012 with
$135,000 remaining as a note payable.



The transaction has been accounted for as a purchase. However,
the purchase price has been allocated to additional paid-in capital and the assets and liabilities are carried over at historical
costs since the purchase was between related parties. Results of operations for the acquired companies have been reflected in the
Company's financial statements from the day the acquisition closed.





10







The following table summarizes the estimated fair values of
the assets acquired and liabilities assumed at the date of Acquisition. The allocation of the purchase price to the fair value
of net assets acquired has been based on appraisals of the assets acquired:



|                                                             |  | At February 15, 2012 |           
|------------------------------------------------------------ |  | -------------------- | ----------
|Working Capital Items                                        |  |                      |           
|Cash and cash equivalents                                    |  | $                    | 892,294   
|Prepaid expenses and other                                   |  |                      | 764,551   
|Accounts payable and accrued liabilities                     |  |                      | (447,343  
|Notes payable                                                |  |                      | (2,580,399
|Subtotal—Working Capital Items                               |  |                      | 829,103   
|Long-lived Assets:                                           |  |                      |           
|Property & Equipment                                         |  |                      |           
|Land                                                         |  |                      | 549,310   
|FFE and Equipment                                            |  |                      | 6,782,345 
|Subtotal—long-lived assets                                   |  |                      | 7,331,655 
|Total value of acquisition                                   |  | $                    | 5,960,758 
|Value of acquisition allocated to additional paid-in capital |  | $                    | 2,696,455 
|Value of acquisition allocated to minority interest          |  | $                    | 3,264,303 



In accordance with accounting principles generally accepted
in the United States, the assets and liabilities acquired are carried over at their historical value because the transaction occurred
between related parties.



Had the Acquisition taken place on January 1, 2012, results
of operations would have reflected the following pro forma amounts for the six months ended June 30, 2012:



|                 |  | Three Months Ended June 30, 2012 |         |   | Six Months Ended June 30, 2012 |  
|---------------- |  | -------------------------------- | ------- | - | ------------------------------ | -
|Revenues         |  | $                                | 31,057  |   |                                | $
|Operating income |  |                                  | 889,477 |   |                                |  
|Net loss         |  | $                                | (85,420 | ) |                                | $



The principal differences between reported amounts and the pro
forma amounts result from elimination of January’s operations since they were not part of the consolidated Company.



Note 4  - Bluestone SA Acquisition



The following information presents supplemental cash flows information
of assets acquired and liabilities assumed in connection with the Bluestone SA merger :



|                                                                   |  | Six Months EndedJune 30, 2012 |         
|------------------------------------------------------------------ |  | ----------------------------- | --------
|Notes receivable                                                   |  | $                             | 18,446  
|Inventories                                                        |  |                               | 65,565  
|Prepaid expenses and other                                         |  |                               | 4,765   
|Property and equipment                                             |  |                               | 48,406  
|Accounts payable                                                   |  |                               | (181,172
|Notes payable                                                      |  |                               | (19,217 
|                                                                   |  | $                             | (63,207 
|Plus, cash acquired                                                |  |                               | 38,572  
|Total reverse merger business combination Bluestone and Power-Save |  | $                             | (24,635 





11







The following information presents supplemental cash flows information
of assets given and liabilities released in connection with the Power Save Energy business disposal on March 9, 2012:



|                                      |  | Six Months EndedJune 30, 2012 |        
|------------------------------------- |  | ----------------------------- | -------
|Notes receivable                      |  | $                             | (18,446
|Inventories                           |  |                               | (65,565
|Prepaid expenses and other            |  |                               | (4,765 
|Property and equipment                |  |                               | (48,406
|Accounts payable                      |  |                               | 180,103
|Notes payable                         |  |                               | 19,217 
|                                      |  | $                             | 62,138 
|Less, cash transferred in disposal    |  |                               | (20,642
|Total disposal of Power-Save business |  | $                             | 41,496 



On February 29, 2012, Power-Save Energy
Company, a Utah corporation, entered into an agreement to acquire all of the capital stock of Bluestone S.A. On March 9, 2012,
pursuant to a Share Exchange Agreement with Bluestone, S.A., a Chilean corporation, and the shareholders of Bluestone, S.A., the
Company acquired 100% of the outstanding shares of Common Stock of Bluestone from Bluestone Shareholders.  In exchange
for the Bluestone Stock, the Company issued 60,000,000 shares of its Common Stock to the Bluestone Shareholders.  As
a result of closing the transaction, Bluestone Shareholders now hold approximately 96.7% of the Company’s issued and outstanding
Common Stock.  For accounting purposes, the Bluestone acquisition is treated as a reverse acquisition with Bluestone
treated as the acquirer and the Company as the acquired party. As a result, the business and financial information included in
the report is the business and financial information of Bluestone prior to March 9, 2012 and the combined entity after March 9,
2012. The Company will undergo a full valuation of the assets, liabilities, and contingencies acquired from Bluestone within the
next twelve months, and will adjust any balances accordingly.



The Company’s current primary business is the operations
of Bluestone. Bluestone is a pre-revenue exploration stage Chilean company with a 60% equity ownership of Sulfatos Chile. Sulfatos
Chile owns the Anico Copper Mine and is building a copper sulfate production facilityspecializing in
the production of the highest quality food-grade copper sulfate.



Note 5 - Fixed Assets



The Company acquired fixed assets with a fair value of $7,331,655
in the Bluestone acquisition in March 2012. See Note 4- Bluestone SA Acquisition. The fixed assets are being amortized over their
remaining useful lives.



Note 6 - Debt



From November 2011 through February 2012, Angelique de Maison,
a director of the Company, provided a total of $1.1m in working capital advances in the form of an unsecured demand loan with no
interest and no set terms of repayment to Santa Teresa Minerals. In February 2012 these advances were assigned to Bluestone, of
which Ms. de Maison is a major shareholder, and were applied to the purchase of Santa Teresa Minerals’ 60% equity interest
in Sulfatos Chile by Bluestone in February 2012. After the acquisition of Bluestone by Lustros in March 2012, Lustros became responsible
for repayment of this debt to Ms. de Maison. In April 2012 Ms. de Maison assigned her right to repayment of $1,000,000 of this
loan to two third parties who agreed to apply this debt to the purchase of 5,000,000 shares of Common Stock. In June 2012 Ms. de
Maison agreed to apply the remaining $100,000 balance due under the loan to the purchase of 181,818 shares of Common Stock.



From February through June 2012, Suprafin, Ltd. (“Suprafin”)
provided a total of $1,316,393 in unsecured demand loans with no interest and no set terms of repayment which was applied to the
purchase of Sulfatos Chile. Zirk Engelbrect, Chief Executive Officer and a director of the Company, is an officer of Suprafin,
Ltd. In May 2012 Suprafin elected to apply $429,000 of these loans toward the purchase of 100,000 shares of Preferred Stock in
the Company. In June 2012 $680,000 of these loans were repaid. $207,393 remained outstanding under these loans at June 30, 2012.



$135,000 remains due to Santa Teresa
Minerals for the purchase of Sulfatos Chile as a note payable. See Note 3- Sulfatos Chile.



In April 2012 Sulfatos Chile borrowed
40,500,223 CLP or approximately $79,454 from Banco de Chile for working capital purposes. This is a 12 month loan due on March
31, 2013 at 13.43% interest with payments beginning on October 1, 2012. The balance due under this loan at June 30, 2012 is 41,438,863
CLP or approximately $81,296.



Sulfatos Chile currently
owes 186,011,000 CLP or approximately $364,921 for the last payment of the land acquired in the first quarter of 2011.



12







The following
table sets forth the consolidated indebtedness of the Company at the date indicated. Inter-company transactions have been eliminated
in the consolidated balance sheets:





|Description           |  | Total Due atJune 30, 2012 |        
|--------------------- |  | ------------------------- | -------
|Suprafin, Ltd.        |  | $                         | 207,393
|Santa Teresa Minerals |  |                           | 135,000
|Banco de Chile Loan   |  |                           | 81,296 
|Land Purchase Balance |  |                           | 364,921
|                      |  | $                         | 788,610





Note 7 - Stockholder’s Equity





The authorized capital stock of the Company
is 100,000,000 shares of common stock with a $0.01 par value and 100,000,000 shares of preferred stock with a par value of $0.01
per share. At June 30, 2012, the Company had 69,674,608 shares of its common stock issued and outstanding.



On March 9, 2012, the Company issued 60,000,000 shares of its
Common Stock to the Bluestone Shareholders in exchange for 100% of the outstanding stock of Bluestone SA. See Note 4.



In March 2012 an option was granted to both Zirk Engelbrecht,
now our Chief Executive Officer, and Gonzalo Troncoso, now our President and Chief Operating Officer, to purchase shares of Preferred
Stock at $4.29 per share. In May 2012 Mr. Engelbrecht exercised the option to purchase 100,000 shares of Preferred Stock and Mr.
Troncoso exercised the option to purchase 75,000 shares of Preferred Stock. Preferred Stock is convertible to Common Stock at the
rate of 100 shares of Common Stock for each share of Preferred Stock. The Company received $750,000 from the sale of these shares.



In April 2012, the Company sold 5,000,000 shares of its Common
Stock in a private placement at $0.20 per share. The Company received net proceeds from the offering of $1,000,000.



In June 2012, the Company sold 1,818,182 shares of its Common
Stock in a private placement at $0.55 per share. The Company received net proceeds from the offering of $1,000,000



Note 8  - Subsequent
Events



In accordance with Accounting Standards Codification Topic No.
855 “Subsequent Events” (ASC 855), the Company has evaluated subsequent events through the time between the end of
the reporting period and the time this Quarterly Report on Form 10-Q for the period ended June 30, 2012 was filed and has found
the following events to report.



In July 2012 the Company sold 727,272 shares of its Common Stock
in a private placement at $0.55 per share. The Company received net proceeds from the offering of $400,000.



In July and August 2012 the Company sold 352,941 shares of its
Common Stock in a private placement at $0.85 per share. The Company received net proceeds from the offering of $300,000.







[End Notes to Financial Statements]



13







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



FORWARD-LOOKING STATEMENTS



This Management's Discussion and Analysis
of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown
risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those
forward-looking statements.  You can identify forward-looking statements by the use of the words may, will, should, could,
expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those
terms.  These statements are only predictions. In evaluating these statements, you should consider various factors which may
cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking
statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.



CORPORATE HISTORY



Power-Save Energy Company is the successor
corporation of Mag Enterprises, Inc., a Utah corporation incorporated on July 30, 1980. On September 10, 1993, an Amendment to
the Articles of Incorporation was filed to change the name from Mag Enterprises, Inc. to Safari Associates, Inc. On September 12,
2006, an Amendment to the Articles of Incorporation was filed to change the name from Safari Associates, Inc. to Power-Save Energy
Company (the “Company”).



On February 29, 2012, Power-Save Energy
Company, a Utah corporation, entered into an agreement to acquire all of the capital stock of Bluestone S.A. On March 9, 2012,
pursuant to a Share Exchange Agreement (the “Share Exchange Agreement”) with Bluestone, S.A., a Chilean corporation
(“BLUESTONE”), and the shareholders of BLUESTONE, S.A. (“BLUESTONE Shareholders’), the Company acquired
100% of the outstanding shares of Common Stock of Bluestone (the “Bluestone Stock”) from Bluestone Shareholders. In
exchange for the Bluestone Stock, the Company issued 60,000,000 shares of its Common Stock to the Bluestone Shareholders. As a
result of closing the transaction, Bluestone Shareholders now hold approximately 96.7% of the Company’s issued and outstanding
Common Stock. For accounting purposes, the Bluestone acquisition is treated as a reverse acquisition with Bluestone treated as
the acquirer and the Company as the acquired party. As a result, the business and financial information included in the report
is the business and financial information of Bluestone prior to March 9, 2012 and the combined entity after March 9, 2012.



Through Bluestone SA we now have a
majority interest in Sulfatos Chile. Our Sulfatos Chile subsidiary specializes in the production of the highest quality food-grade
copper sulfate. Copper ore is processed in its copper sulfate processing plant in Puerto Oscuro, Chile. The ore is extracted from
the Sulfatos Chile owned 1,325 hectare Anica copper mine or bought from local artisanal miners. Our copper sulfate facility is
expected to begin processing 5,000 tons of material per month in August 2012. The current plant capacity of 15,000 tons per month
will occur upon receiving permits for unlimited production which we expect to receive in April of 2013. Cash flow from this first
phase is expected to begin in October of 2012 and will fund future expansion for an additional 25,000 ton processing plant.



NO COMPARABLE INFORMATION



There is no relevant comparable historic
financial information for the current quarter ended June 30, 2012 and the six months ended June 30, 2011, as Bluestone SA’s
operations did not begin until January 2012. Therefore, limited information is provided in our Results of Operations section below.



RESULTS OF OPERATIONS



Three and Six Months Ended June 30, 2012



Revenue for the three and six months ended
June 30, 2012 was $31,057 and $51,943, respectively for the sale of copper and copper sulfate. Gross profit for the three and six
months ended June 30, 2012 was $31,057 and $51,943 respectively. We expect revenues to increase significantly after the full scale
launch of our copper sulfate production facility in Q4 2012.



Operating expenses for the three and six
months ended June 30, 2012 was $1,253,443 and $1,743,342, respectively. Operating expenses were primarily associated with the operations
of Sulfatos Chile in the ordinary course of business as well as legal and accounting expenses required by a public company.



Due to the losses during the period the
Company has not recorded a provision for income taxes. The Company will carry back any net operating loss to recover taxes paid
in prior periods.





14







LIQUIDITY AND CAPITAL RESOURCES.



As of June 30, 2012 the current liabilities
exceeded the current assets by $1,104,523. Cash for the period ended June 30, 2012 was $29,034 primarily from the sales of stock
and intercompany loans.



Cash Requirements



During the next twelve months, the Company
plans to satisfy its cash requirements by income from operations as well as additional equity financing and contributions from
its current principal shareholders and other investors. The Company intends to undertake additional private placements of its securities
in order to raise future development and operating capital. The Company depends upon capital to be derived from contributions from
its principal shareholders and future financing activities such as subsequent offerings of its securities. There can be no assurance
that the Company will be successful in raising the capital it requires through the sale of its securities.



ITEM 3.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK



We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.



ITEM 4.  CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



Disclosure controls and procedures are
controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our
management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and
with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 ("Exchange Act").



Based on this evaluation, our principal
executive and principal financial and accounting officer concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of June 30, 2012.



Changes in Internal Control over
Financial Reporting



On March 9, 2012 Trisha Malone was appointed as the Chief Financial
Officer of the Company.



Louis Fox resigned as Chief Financial Officer. The resignation
was not the result of any disagreement with us on any matter relating to our operations, policies or practices.



The Company is not required by current
SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has
not attested to Management's reports on the Company's internal control over financial reporting.





15







PART II - OTHER INFORMATION



ITEM 1. 	LEGAL PROCEEDINGS



On March 18, 2011, 142 Cross Street, LLC filed a Complaint against
the Company in San Luis Obispo Superior Court, seeking damages for breach of contract. The suit arises from a dispute surrounding
a commercial real estate lease. This case was settled.



On September 21, 2011, Chris
Frye filed a lawsuit against the Company in California Superior Court alleging, among other things, breach of contract surrounding
the Company’s CBS Television solar project. Chris Frye also filed a cross-complaint in a New Mexico action filed by Uni-Rac
involving similar subject matter. The Company vigorously denies all the allegations and insists the lawsuit is an attempt on Chris
Frye’s part to evade paying an outstanding invoice owed to the Company. The California Suit has since been dismissed in
its entirety and the cross-complaint in New Mexico has been dismissed as well. Chris Frye and Power-Save have joined forces to
combat Uni-Rac in the New Mexico portion of the case, which is reduced to a dispute of less than $200,000 regarding the racking
supplied in relation to the CBS project.1



Other than the foregoing, we
know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered
or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.2



ITEM 1A. 	RISK FACTORS



We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.



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



| | A. | During the Quarter
| | -- | ------------------



Preferred Stock



In May 2012 Mr. Engelbrecht exercised the option to purchase
100,000 shares of Preferred Stock and Mr. Troncoso exercised the option to purchase 75,000 shares of Preferred Stock. The Company
received $750,000 from the sale of these shares.



Common Stock



In April 2012 the Company sold 5,000,000 shares of its Common
Stock in a private placement at $0.20 per share. The Company received net proceeds from the offering of $1,000,000.



In June 2012 the Company sold 1,818,182 shares of its Common
Stock in a private placement at $0.55 per share. The Company received net proceeds from the offering of $1,000,000.



The shares of Common Stock of the Company issued pursuant
to the Share Exchange Agreement were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended. A copy of the Share Exchange Agreement is attached hereto and is hereby incorporated by this reference.
All references to the Share Exchange Agreement and other exhibits to this Current Report are qualified, in their entirety, by the
text of such exhibits.



| | B. | Subsequent Issuances
| | -- | --------------------



In July 2012 the Company sold 727,272 shares of its Common Stock
in a private placement at $0.55 per share. The Company received net proceeds from the offering of $400,000.



In July and August 2012 the Company sold 727,272 shares of its
Common Stock in a private placement at $0.85 per share. The Company received net proceeds from the offering of $300,000.



__________________________

1 As of March 31, 2012, Power-Save Energy Company’s
assets and liabilities were transferred to Michael Forster pursuant to a settlement Agreement. As such, the lawsuits listed above,
although filed against the Company while it was operating as Power-Save Energy Company, are the sole responsibility of Michael
Forster.



2 As of March 31, 2012, Power-Save Energy Company’s
assets and liabilities were transferred to Michael Forster pursuant to a settlement Agreement. As such, the lawsuits listed above,
although filed against the Company while it was operating as Power-Save Energy Company, are the sole responsibility of Michael
Forster.





16







ITEM 3. 	DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. 	MINE SAFETY DISCLOSURE



None.



ITEM 5. 	OTHER INFORMATION



Quarterly Events



On April 09, 2012 The Company announced
its name change from Power-Save Company to Lustros, Inc. to better reflect the focus of the business in the mining sector.



On April 18, 2012, Gonzalo Troncoso resigned as Secretary of
the Company. Mr. Troncoso retains his position as President. His resignation from the Secretary position is not the result of a
disagreement with the Company.



On April 18, 2012, Trish Malone was appointed as Secretary of
the Company. She holds this position in addition to being the current Chief Financial Officer of the Company.



On April 18, 2012 the Board of Directors approved the appointment
of Gonzalo Troncoso as Chief Operating Officer.



On April 18, 2012 the Board of Directors approved the appointment
of Larry A. Zielke as Senior Vice President and General Counsel.



On April 18, 2012 Gonzalo Troncoso was appointed as a member
of the Board of Directors.



On April 18, 2012 Zirk Engelbrecht was appointed as a member
of the Board of Directors.



On April 18, 2012 William H. Lavin was appointed as a member
of the Board of Directors.



On April 18, 2012 Benjamin R. Dickey was appointed as a member
of the Board of Directors.



On April 18, 2012 Trisha Malone was appointed as a member of
the Board of Directors.



On May 24, 2012 Myoung Won Sohn was appointed as a member of
the Board of Directors.



On June 22, 2012, Robert Dickey was elected to serve as an alternate
director of the Company. Mr. Dickey's role as alternate director shall be to fill any future vacancies that may occur as the result
of the absence or unavailability of any of the directors of the Company.



On June 28, 2012, we dismissed Gruber & Company, LLC as
our independent auditor. This dismissal of Gruber & Company was approved by our board of directors (we have no audit committee).



Gruber & Company’s reports on our consolidated financial
statements for each of our fiscal years ended December 31, 2011, December 31, 2010 and December 31, 2009 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles,
except that each of such reports contained a going concern qualification.



During the years ended December 31, 2011 and December 31, 2010
and the interim period between December 31, 2011 and June 28, 2012: (i) there were no disagreements between our company and Gruber
& Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to Gruber & Company’s satisfaction, would have caused Gruber & Company to make
reference to the subject matter of the disagreement in connection with its report for such years; and (ii) Gruber & Company
did not advise us of any of the events requiring reporting in this Current Report on Form 8-K under Item 304(a)(1)(v) of Regulation
S-K.



We provided Gruber & Company with a copy of the disclosures
made in this report before this report was filed with the Securities and Exchange Commission. We requested that Gruber & Company
furnish a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements
that are related to Gruber & Company.





17







On June 28, 2012, we engaged De Joya Griffith & Company,
LLC (“De Joya Griffith”) to serve as our independent auditors for the fiscal year ending December 31, 2012. The engagement
of De Joya Griffith was approved by our board of directors.



During the years ended December 31, 2011
and December 31, 2010 and the interim period between December 31, 2011 and June 28, 2012, neither we nor anyone acting on our
behalf consulted De Joya Griffith regarding either (i) the application of accounting principles to a specific, completed or proposed
transaction, or the type of audit opinion that might be rendered on our financial statements, or (ii) any matter that was either
the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of
Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).



ITEM 6.  	EXHIBITS



|Exhibit
        Number |  | Description of Exhibit                                                                                                |  | Filing                                                           
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------
|10.01                  |  | Share Exchange Agreement between Power-Save Energy and Bluestone SA and their Shareholders                            |  | Incorporated by reference as filed on Form 8-K on March 12, 2012.
|10.02                  |  | Asset Purchase Agreement between Power-Save Energy Company/Lustros, Inc. and Michael Forster and SLO 3 Holdings, Inc. |  | Filed herewith.                                                  
|31.01                  |  | Certification of Principal Executive Officer Pursuant to Rule 13a-14                                                  |  | Filed herewith.                                                  
|31.02                  |  | Certification of Principal Financial Officer Pursuant to Rule 13a-14                                                  |  | Filed herewith.                                                  
|32.01                  |  | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act                                                   |  | Filed herewith.                                                  
|32.02                  |  | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act                                                   |  | Filed herewith.                                                  
|101.INS                |  | XBRL Instance Document*                                                                                               |  |                                                                  
|101.SCH                |  | XBRL Taxonomy Extension Schema*                                                                                       |  |                                                                  
|101.CAL                |  | XBRL Taxonomy Extension Calculation Linkbase*                                                                         |  |                                                                  
|101.DEF                |  | XBRL Taxonomy Extension Definition Linkbase*                                                                          |  |                                                                  
|101.LAB                |  | XBRL Taxonomy Extension Label Linkbase*                                                                               |  |                                                                  
|101.PRE                |  | XBRL Taxonomy Extension Presentation Linkbase*                                                                        |  |                                                                  



* Pursuant to Rule 405(a)(2) of Regulation S-T, the Company
will furnish the XBRL Interactive Data Files with detailed footnote tagging as Exhibit 101 in an amendment to this Form 10-Q within
the permitted 30-day grace period granted for the first quarterly period in which detailed footnote tagging is required.





18









SIGNATURES



In accordance with
Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



|                        | LUSTROS, INC.                                            
|----------------------- | ---------------------------------------------------------
|                        |                                                          
|Dated:  August 20, 2012 | /s/ Zirk Engelbrecht                                     
|                        | By: Zirk Engelbrecht
        Its: Chief Executive Officer
|                        |                                                          
|Dated:  August 20, 2012 | /s/ Trisha Malone                                        
|                        | By: Trisha Malone
        Its: Chief Financial Officer   









19