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 December 31, 2012

 

[_]

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 [_]

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 [_] (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 [_]   No [X]

 

The issuer had 28,990,715 shares of common stock, $.001 par value, outstanding as of February 7, 2013.

 

 

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	15
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.  Controls and Procedures	19
PART II.  OTHER INFORMATION	19
Item 1A.  Risk Factors.	19
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 4.  Mine Safety Disclosures	20
Item 6.  Exhibits	20
SIGNATURES	20

 

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

American Sands Energy Corp.

(A Development Stage Company)

Condensed Consolidated Balance Sheets (Unaudited)

 

		December 31,				March 31,
		2012				2012
Assets
Current assets:
Cash		$	11,994			$	624,300
Receivables			297,500				382,500
Prepaid and other current assets			92,496				237,693
Related-party receivable			22,324				–
Total current assets			424,314				1,244,493
Property and equipment, net			2,006				2,258
Other assets			334,304				–
Total assets		$	760,624			$	1,246,751
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable		$	596,413			$	536,809
Accrued expenses			1,428,436				1,222,450
Total current liabilities			2,024,849				1,759,259
Convertible notes payable, net of discount of $430,109 and $669,351, respectively			1,301,966				948,580
Convertible note payable, related party			1,749,509				1,685,329
Deposits for purchase of common stock, net			–				710,214
Mineral lease payable			19,520				34,159
Total liabilities			5,095,844				5,137,541
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;  28,990,715 and 27,676,960 shares issued, respectively			28,991				27,677
Additional paid-in capital			6,533,159				4,811,313
Deficit accumulated during the development stage			(10,897,370	)			(8,729,780	)
Total stockholders' deficit			(4,335,220	)			(3,890,790	)
Total liabilities and stockholders' deficit		$	760,624			$	1,246,751

 

 

See the accompanying notes to condensed consolidated financial statements.

 

 

American Sands Energy Corp.

(A Development Stage Company)

Condensed Consolidated Statements of Operations (Unaudited)

 

		For the Three Months Ended December 31, 2012				For the Three Months Ended December 31, 2011				For the Nine Months Ended December 31, 2012				For the Nine Months Ended December 31, 2011				Cumulative From Inception to December 31, 2012
Revenues		$	–			$	–			$	–			$	–			$	–
Operating expenses:
Selling, general and administrative			392,468				301,932				1,325,494				1,440,016				7,809,017
Research and development			78,583				12,260				264,747				111,865				701,155
Mineral lease expense			53,261				53,278				159,783				80,614				1,481,090
Total operating expenses			524,312				367,470				1,750,024				1,632,495				9,991,262
Loss from operations			(524,312	)			(367,470	)			(1,750,024	)			(1,632,495	)			(9,991,262	)
Other income (expense):
Interest expense			(139,179	)			(94,541	)			(417,566	)			(199,387	)			(926,143	)
Interest income			–				–				–				909				22,985
Other income (expense)			–				49				–				–				(2,000	)
Total other income (expense)			(139,179	)			(94,492	)			(417,566	)			(198,478	)			(905,158	)
Loss before provision for income taxes			(663,491	)			(461,962	)			(2,167,590	)			(1,830,973	)			(10,896,420	)
Provision for income taxes			–				(250	)			–				(250	)			(950	)
Net loss		$	(663,491	)		$	(462,212	)		$	(2,167,590	)		$	(1,831,223	)		$	(10,897,370	)
Net loss per common share - basic and diluted		$	(0.02	)		$	(0.02	)		$	(0.08	)		$	(0.08	)
Weighted average common shares outstanding - basic and diluted			28,912,238				23,698,860				28,725,308				22,502,861

 

See the accompanying notes to condensed consolidated financial statements.

 

 

American Sands Energy Corp.

(A Development Stage Company)

Condensed Consolidated Statement of Stockholders' Deficit

For the Nine Months Ended December 31, 2012 (Unaudited)

 

														Deficit
														accumulated
		Common stock								Additional				during the				Total
										paid-in				development				stockholders'
		Shares				Amount				capital				stage				deficit
Balance as of April 1, 2012			27,676,960			$	27,677			$	4,811,313			$	(8,729,780	)		$	(3,890,790	)
Shares issued to satisfy deposits to purchase common stock net of commissions paid			634,796				635				709,579				–				710,214
Common stock issued for cash at $1.15 per share, net of commissions paid			454,985				455				491,564				–				492,019
Common stock issued for services at $1.15 per share			223,974				224				257,276				–				257,500
Stock-based compensation			–				–				258,823				–				258,823
Issuance of stock options to consultants			–				–				4,604				–				4,604
Net loss			–				–				–				(2,167,590	)			(2,167,590	)
Balance as of December 31, 2012			28,990,715			$	28,991			$	6,533,159			$	(10,897,370	)		$	(4,335,220	)

 

See the accompanying notes to condensed consolidated financial statements.

 

 

American Sands Energy Corp.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

		For the Nine Months Ended				For the Nine Months Ended				Cumulative From Inception through
		December 31, 2012				December 31, 2011				December 31, 2012
Cash flows from operating activities:
Net loss		$	(2,167,590	)		$	(1,831,223	)		$	(10,897,370	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			252				192				5,978
Gain on disposal of property and equipment			–				(49	)			(49	)
Accretion of debt discount			239,242				125,207				542,452
Straight-line of mineral lease payable			(14,639	)			(14,639	)			19,520
Stock issued for consulting services			57,500				–				57,500
Stock-based compensation expense			258,823				584,062				1,469,868
Issuance of stock options to consultants			4,604				–				10,567
Special warrants issued as payment for leases			–				–				188,160
Notes payable issued as payment for leases			–				–				126,840
(Increase) decrease in operating assets:
Receivables			85,000				–				(297,500	)
Prepaid and other current assets			145,197				133,396				(92,496	)
Related-party receivable			(22,324	)			–				(22,324	)
Reclamation deposit			(19,060	)			–				(19,060	)
Increase (decrease) in operating liabilities:
Accounts payable			59,604				50,945				596,413
Accrued expenses			205,986				(60,607	)			3,117,422
Accrued interest on convertible debt			178,324				73,792				305,753
Net cash used in operating activities			(989,081	)			(938,924	)			(4,888,326	)
Cash flows from investing activities:
Acquisition of property and equipment			–				(3,072	)			(8,524	)
Disposal of property and equipment			–				588				588
Net cash used in investing activities			–				(2,484	)			(7,936	)
Cash flows from financing activities:
Proceeds from issuance of notes payable			–				475,000				437,000
Proceeds from issuance of convertible notes payable			–				–				745,000
Proceeds from issuance of notes payable, related party			–				–				25,000
Proceeds from issuance of common stock and special warrants			492,019				–				2,319,427
Increase in stock offering costs			(115,244	)			–				(115,244	)
Increase in deposits for purchase of common stock			–				–				710,214
Net cash received in reverse merger			–				852,759				852,759
Principal payments on notes payable			–				(65,900	)			(65,900	)
Net cash provided by financing activities			376,775				1,261,859				4,908,256
Net increase (decrease) in cash			(612,306	)			320,451				11,994
Cash, beginning of the period			624,300				54,224				–
Cash, end of the period		$	11,994			$	374,675			$	11,994
Supplemental disclosures of cash flow information:
Interest paid		$	–			$	–			$	12,153
Income taxes paid		$	–			$	–			$	950
Supplemental schedule of non-cash investing and financing activities:
Conversion of notes payable to common stock		$	–			$	188,595			$	666,780
Convertible note issued for accrued expenses		$	–			$	214,669			$	1,660,832
Issuance of warrants associated with convertible notes payable		$	–			$	273,071			$	424,266
Shares issued for stock offering costs		$	200,000			$	–			$	200,000
Shares issued to satisfy deposits to purchase common stock		$	710,214			$	–			$	710,214

 

 

See the accompanying notes to condensed consolidated financial statements.

 

 

Note 1 - Description of Business and Nature of Operations

 

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. GRC completed a merger with American Sands Energy Corp. (formerly Millstream Ventures, Inc.) (“ASEC”), a publicly traded company, on June 3, 2011. The merger was accounted for as a reverse acquisition with GRC treated as the accounting acquirer.

 

On December 31, 2011, GRC, a wholly-owned non-operating subsidiary of ASEC, was voluntarily dissolved under the Business Corporation Act of the Province of Alberta, Canada. As a result of the dissolution, ASEC 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 merger on June 3, 2011, and GRC, GRI, and ASEC (the legal parent) subsequent to the reverse merger transaction until December 31, 2011, and GRI and ASEC after December 31, 2011. The Company has not generated revenues from its principal operations and 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 – 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.

 

 

a) Principles of Consolidation

 

The condensed consolidated financial statements include the 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 December 31, 2012. All significant intercompany balances and transactions have been eliminated in consolidation.

 

b) 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.

 

c) Research and Development

 

The Company continues to develop additional technology related to its licensed proprietary bitumen extraction process. To date, the Company has expensed costs associated with developing its technology as research and development costs. For the nine months ended December 31, 2012 and 2011, the Company incurred costs of $264,747 and $111,865, respectively, for research and development of its technology.

 

d) 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.

 

e) Earnings or 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 and nine months ended December 31, 2012 and 2011.

 

f) 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.

 

 

In October 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements. The amendments in this update cover a wide range of Topics in the ASC. These amendments include technical corrections and improvements to the ASC and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on the Company’s consolidated financial statements.

 

Note 3 – 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 nine months ended December 31, 2012 of $2,167,590 and has an accumulated deficit of $10,897,370 as of December 31, 2012. In addition, the Company estimates it will require approximately $60,000,000 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.

 

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 and public 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 and public 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 4 – Accrued Expenses

 

Accrued expenses consist of the following:

 

		December 31,				March 31,
		2012				2012
Payroll		$	1,222,068			$	1,172,893
Deferred research and development billings			156,811				–
Mineral lease payable			49,557				49,557
Total accrued expenses		$	1,428,436			$	1,222,450

 

Note 5 – 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 unchanged.

 

 

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 market value of the minerals sold includes the value of any oil products sold, and the value of any by-products therefrom (including, but not limited to, sand, gravel, gold, titanium, silver and other minerals) which are, or which subsequently may be found on, in, or under the land. 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 December 31, 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.

 

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

 

	December 31,
	2013			$	232,562
	2014				232,562
	2015				6,638
	Total future minimum lease payments			$	471,762

 

Note 6 – 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 December 31, 2012. These notes were issued pursuant to a $1,750,000 private offering. As of December 31, 2012, there was $1,515,000 of convertible notes payable outstanding with accrued interest of $217,075. 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 December 31, 2012, the Company granted 3,038,667 warrants in connection with this offering (see Note 9). The Company recorded a debt discount related to the warrants and resulting beneficial conversion feature of $873,589. The unamortized debt discount was $430,109 and $669,351 as of December 31, 2012 and March 31, 2012, respectively. 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 7 – 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 December 31, 2012, the carrying balance of the note was $234,993, including accrued interest of $20,712. 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.

 

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 December 31, 2012, the carrying balance of the note was $1,514,516, including accrued interest of $67,965. 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 8 – 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 December 31, 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 9, the Company issued 272,402 warrants in connection with this private placement.

 

Note 9 – Warrants

 

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

 

a)

Bridge Warrants

In connection with the issuance of certain notes payable, 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 December 31, 2012 and March 31, 2012, there were 244,420 bridge warrants issued and outstanding.

 

b)

Convertible Debt Warrants

In connection with the Company’s $1,750,000 private convertible note offering (see Note 6), 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 December 31, 2012 and March 31, 2012, there were 3,038,667 convertible debt warrants outstanding.

 

 

c)

Private Placement Warrants

In connection with the Company’s $7,000,000 private placement (see Note 8), 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 December 31, 2012 and March 31, 2012, there were 228,922 and 158,706 private placement warrants outstanding, respectively.

 

Note 10 – 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 nine months ended December 31, 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 nine months ended December 31, 2012.

 

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 nine months ended December 31, 2012 is presented below:

 

					Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Life (years)
	Balance as of March 31, 2012				3,812,500			$	0.40				5.70
	Granted				450,000				1.15				5.00
	Exercised				–				–				–
	Canceled				(50,000	)			0.40				–
	Expired				–				–				–
	Balance as of December 31, 2012				4,212,500			$	0.59				4.98

 

The weighted average grant-date fair value of options granted during the nine months ended December 31, 2012 and December 31, 2011 was $1.09 and $0.34, respectively.

 

 

Outstanding and exercisable options presented by price range as of December 31, 2012 are as follows:

 

					Options Outstanding												Options Exerciseable
									Weighted
									Average				Weighted								Weighted
					Number of				Remaining				Average				Number of				Average
	Exercise				Options				Life				Exercise				Options				Exercise
	Price				Outstanding				(Years)				Price				Exercisable				Price
$	0.25				50,000				4.12			$	0.25				12,500			$	0.25
	0.40				3,037,500				5.25				0.40				3,037,500				0.40
	0.50				75,000				3.75				0.50				37,500				0.50
	1.15				1,050,000				4.33				1.15				150,000				1.15
	$0.25-$1.15				4,212,500				4.98			$	0.59				3,237,500			$	0.43

 

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 equity-based compensation expenses during the nine months ended December 31, 2012 and 2011.

 

		December 31,
		2012				2011
Stock-based compensation expense		$	263,427			$	584,062
Income tax benefit recognized related to stock-based compensation			–				–
Income tax benefit realized from the exercise and vesting of options			–				–

 

As of December 31, 2012, there was $268,394 of total unrecognized compensation cost with a weighted average vesting period of approximately 2.00 years.

 

As of December 31, 2012 and 2011, the intrinsic value of outstanding and vested stock options was as follows:

 

		December 31,
		2012				2011
Intrinsic value - options outstanding		$	2,371,875			$	321,250
Intrinsic value - options exercisable			2,313,750				321,250
Intrinsic value - options exercised			–				–

 

Note 11 – Related-Party Transactions

 

From inception, pursuant to the terms of the Operating Agreement (see Notes 1 and 7), 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. The Company is not responsible for the repayment of the note issued by GRI except for issuing stock if the note is converted. As of December 31, 2012, the carrying balance of the note was $1,514,516, including accrued interest of $67,965. 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 December 31, 2012, the carrying balance of the note was $234,993, including accrued interest of $20,712. In August 2012, the due date of the note was extended to April 30, 2014.

 

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 (see Note 5). 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.

 

As of December 31, 2012, the Company has a related-party receivable for $22,234 from an officer of the Company.

 

Note 12 – 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 Management 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.

 

On October 1, 2011, the Company entered into an advisory agreement with a company owned and controlled by the President of the Company. The agreement calls for the payment of $10,000 per month to this company for assistance with the development of the Company’s strategic objectives. The agreement is on a month-to-month basis, and either party may terminate the agreement at the earlier of either 1) such time as the President begins to draw a salary under his Employment Agreement, or 2) for any reason and at any time by providing 60 days’ written notice.

 

The Company’s President and CFO have been granted stock options to purchase 400,000 and 200,000 shares of common stock, respectively. The exercise price is $1.15 per share and the options expire on February 16, 2017. The options vest upon the Company achieving certain levels of funding with 50% vesting upon completion of the Company raising an initial $5,000,000 and the remaining 50% vesting when the Company raises an additional $40,000,000. To date, the Company has not accounted for these options due to the inherent uncertainty in the current economic environment that these milestones will be achieved.

 

 

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

 

The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2012, and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

 

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.

 

Overview

 

American Sands Energy Corp. (“ASEC”) is a development stage company that proposes to engage in the extraction of bitumen from oil sands, initially in projects in the Mountain West region of North America using an extraction and recovery system and a licensed proprietary solvent. Since our inception, we have been engaged in the business of acquiring and developing oil sand assets and extraction and recovery systems and unique solvents used to separate the oil contained in oil sands. The Company anticipates that its primary operations will include the mining of oil sands, the separation of oil from the sands 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 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; and
4. 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 5,000 barrel per day plant. We 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 also retained SRS Engineering to demonstrate the technology through a new pilot plant. The pilot test runs were successful, removing in excess of 99% of the bitumen from the sand and leaving less than the two parts per million of solvent in the sand. This means that the sand is suitable to be put back into the environment without tailing ponds or other environmental restrictions. Based on additional findings from the recent pilot tests, we are also proposing to expand the size of the initial Commercial Facility from the 3,000 barrels per day proposed in the AMEC BDR study, to 5,000 barrels 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 an underground mine. Based on the information from our consultants, we believe that we will require approximately $60,000,000 to procure and install the necessary equipment to begin operations of a plant that we believe will produce approximately 5,000 barrels per day of bitumen.

 

We have 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. Initial pilot plant test runs were conducted in 2006-2007. We hired an independent engineering firm, AMEC BDR Limited, to witness the initial pilot plant tests and to manage the lab work and review the results. In addition to the initial pilot test, we have run additional pilot tests on a new system designed by SRS Engineering International from July through September of 2012. In connection with those tests, we ran oil sand ore from Utah and the Congo to acquire additional information on the efficiency of the solvent in removing the bitumen from the sand, the recovery of solvent from the bitumen and sand, and the overall efficiency and energy use of the system. The current test results were consistent with the initial results. The results of these tests are summarized as follows:

 

• Virtually all of the bitumen was separated from the sand, leaving the sand “oil” free.
• 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 sand product contained less than 2 ppm of solvent residue and 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 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, we have evaluated the feasibility and costs of scaling the process into a plant that will initially process up to 5,000 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.

 

Business Developments

 

·         There were no major developments during the third quarter of the current fiscal year ending March 31, 2013.

 

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 Notes 2 and 3 to our unaudited financial statements included in this Form 10-Q for the quarter ended December 31, 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 December 31, 2012 of $663,491 and has an accumulated deficit of $10,897,370, as of December 31, 2012. In addition, the Company will require approximately $60,000,000 in capital expenditures to commence principal operations.

 

 

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, to date 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 December 31, 2012 compared to December 31, 2011

 

During the three months ended December 31, 2012, the Company incurred a net loss of $663,491 compared to a net loss of $462,212 for the three months ended December 31, 2011. During the three months ended December 31, 2012, operating expenses were $524,312, which represented a 43% increase, compared to the three months ended December 31, 2011 when we incurred operating expenses of $367,470. Selling, general and administrative expenses increased by 30% from $301,932 during the three months ended December 31, 2011 to $392,468 during the three months ended December 31, 2012. Costs for management services increased 81% to $135,979 as compared to $75,000 for the three months ended December 31, 2011. The increase was the result of the Company entering into management services agreements with the Company’s President and the CFO. Stock-based compensation increased from $0 for the three months ended December 31, 2011 to $42,534 for the three months ended December 31, 2012. The stock-based compensation costs incurred during the three months ended December 31, 2012 resulted from expense associated with stock options granted to management and the Company’s board of directors since the Company’s reverse merger transaction. Going forward, the Company believes that the obligations placed upon it as a result of growth coupled with its reporting requirements under SEC rules and regulations will result in operating expenses increasing.

 

During the three months ended December 31, 2012, the Company incurred $78,583 of research and development costs which represented a 541% increase from the $12,260 for research and development costs incurred during the three months ended December 31, 2011. Research and development costs incurred are for 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 $139,179 for the three months ended December 31, 2012 as compared to $94,541 for the three months ended December 31, 2011. The increase in interest expense is due to the Company having increased debt as a result of the convertible notes payable issued during the fiscal year ended 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.

 

 

Nine Months Ended December 31, 2012 compared to December 31, 2011

 

During the nine months ended December 31, 2012, the Company incurred a net loss of $2,167,590 compared to a net loss of $1,831,223 for the nine months ended December 31, 2011. During the nine months ended December 31, 2012, operating expenses were $1,750,024, which represented a 7% increase, compared to operating expenses of $1,632,495 for the nine months ended December 31, 2011. Current year operating expenses included research and development costs of $264,747 for the nine months ended December 31, 2012 compared to $111,865 for the nine months ended December 31, 2011. These costs related to the Company developing its technology and mining plans. Selling, general and administrative expenses decreased to $1,325,494 for the nine months ended December 31, 2012 from $1,440,016 for the nine months ended December 31, 2011. During the nine months ended December 31, 2011, the Company recorded selling, general and administrative expenses of $584,062 in non-cash expense from the issuance of 3,087,500 fully vested stock options to officers and directors of the Company shortly after the completion of the reverse merger transaction. This decrease in selling, general and administrative expenses was partially offset by increased professional fees, public company expenses and non-cash expenses associated with issuing stock options as described above. Going forward, management believes that the obligations placed upon the Company as a result of its reporting requirements under the Exchange Act will continue to result in operating expenses increasing.

 

Interest expense increased to $417,566 for the nine months ended December 31, 2012 as compared to $199,387 for the nine months ended December 31, 2011. The increase in interest expense is due to the Company having increased debt as a result of the convertible notes payable issued during fiscal 2012 coupled with higher non-cash interest expense as a result of amortization of warrants issued in connection with the convertible notes payable.

 

Liquidity and Capital Resources

 

As of December 31, 2012, the Company had cash of $11,994 and negative working capital of $1,600,535. As of December 31, 2012, the Company had total liabilities of $5,095,844. As of December 31, 2012, the Company’s total assets were $760,624 consisting of cash, receivables, prepaid and other current assets, related-party receivable, property and equipment, and other assets. 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 requires additional funding to complete these items. This funding is expected to be raised through a private or public offering of common stock. Upon completion of the financing, the Company will be in a position to initiate items 1 through 5 above. Further financing of approximately $60,000,000 will be required to procure and install the necessary equipment to begin operations of a plant that the Company believes will produce approximately 5,000 barrels per day of bitumen.

 

 

Management anticipates that the Company 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. The Company will need additional funding in the future in order to continue its business operations. While the Company continually looks 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 the Company. Failure to generate sufficient revenue or raise additional capital would have an adverse impact on the Company’s ability to achieve its longer-term business objectives, and would adversely affect its ability to continue operating as a going concern.

 

Off-Balance Sheet Arrangements

 

During the three months ended December 31, 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.

 

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 December 31, 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 1A. Risk Factors.

 

See “Item 1A – Risk Factors” in the Form 10-Q and Form 10-K filed with the SEC on November 13, 2012 and June 22, 2012, respectively.

 

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

 

During the quarter ended December 31, 2012, we sold the following unregistered securities that have not been previously disclosed in a prior report:

 

 

In November 2012, the Company issued 173,974 shares of its common stock at $1.15 per share, of which 86,987 were not fully earned and vested until February 1, 2013, to a consultant for services. 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. The purchaser of the shares 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 issuance.

 

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 13a-14(a) Certification by Principal Executive Officer
	31.2	Rule 13a-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
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 

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: February 14, 2013	By:	/s/ William C. Gibbs
		William C. Gibbs, Chief Executive Officer
		(Principal Executive Officer)

 

Date: February 14, 2013	By:	/s/ Daniel F. Carlson
		Daniel F. Carlson, Chief Financial Officer
		(Principal Financial Officer)