PACIFIC SANDS INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - PACIFIC SANDS INC	Financial_Report.xls
EX-31.2 - CHIEF FINANCIAL OFFICER CERTIFICATION OF PERIODIC FINANCIAL REPORT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - PACIFIC SANDS INC	pacificsandsexh312.htm
EX-32.1 - CHAIRMAN OF THE BOARD CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - PACIFIC SANDS INC	pacificsandsexh321.htm
EX-31.1 - CHIEF EXECUTIVE OFFICER CERTIFICATION OF PERIODIC FINANCIAL REPORT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - PACIFIC SANDS INC	pacificsandsexh311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ___________________________ to ___________________________

Commission file number 000-29483

Pacific Sands, Inc.

(Exact Name of Registrant as specified in its charter)

Nevada	88-0322882
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

4611 Green Bay Road Kenosha, WI	53144
(Address of Principal Executive Offices)	(Zip Code)

Issuer’s Telephone Number, Including Area Code: (262) 925-0123

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 x x No o

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

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

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

Yes o No x

The number of shares outstanding of each of the issuer's classes of common equity, as of May 15, 2013 are as follows:

Class of Securities		Shares Outstanding
Common Stock, $0.001 par value		64,481,505

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements 3

	Balance Sheets as of March 31, 2013 (unaudited) and June 30, 2012	3

	Statements of Operations for the Three and Nine Months Ended March 31, 2013 and 2012 (unaudited)	4

	Statements of Cash Flows for the Nine Months Ended March 31, 2013 and 2012 (unaudited)	5

	Notes to Financial Statements (unaudited)	7

Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17

Item 4.	Controls and Procedures	18

PART II OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS	19

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	19

Item 3.	DEFAULTS UPON SENIOR SECURITIES	19

Item 4.	MINE SAFETY DISCLOSURES	19

Item 5.	EXHIBITS	20

SIGNATURES		21

PACIFIC SANDS, INC.
BALANCE SHEETS
MARCH 31, 2013 AND JUNE 30, 2012

ASSETS

	March 31, 2013		June 30,
Current assets:	(Unaudited)		2012

Cash and cash equivalents	$	37,481	$	57,575
Trade receivables, net of allowances for doubtful accounts of $11,425		435,406		385,558
Inventories		147,606		191,690
Other current assets		30,710		37,713
Total Current Assets		651,203		672,536

Property and equipment, net		217,389		151,859

Other asset		3,702		4,230

Total Assets	$	872,294	$	828,625


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	343,153	$	270,387
Accrued expenses		19,006		31,137
Deferred rent expenses		17,600		10,400

Current portion of notes payable and capital leases		162,930		99,987
Total Current Liabilities		542,689		411,911

Notes payable and capital leases - less current portion		291,053		266,790
Deferred rent		13,200		26,400
Total Liabilities		846,942		705,101


Stockholders' equity (deficit)
Common stock (100,000,000 shares authorized, 64,481,505 and 63,781,213 shares issued and outstanding)		64,481		63,781
Additional paid in capital		5,481,874		5,435,619
Accumulated deficit		(5,521,003)		(5,375,876)
Total Stockholders' Equity		25,352		123,524

Total Liabilities and Stockholders' Equity	$	872,294	$	828,625

See accompanying notes.

PACIFIC SANDS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


	Three months ended March 31,				Nine months ended March 31,
	2013		2012		2013		2012

Net sales	$	573,335	$	428,696	$	1,437,330	$	1,197,743
Cost of sales		366,067		272,695		847,291		743,743

Gross profit		207,268		156,001		590,039		454.000

Selling and administrative expenses		234,981		227,300		711,714		581,097

Loss from operations		(27,713)		(71,299)		(121,675)		(127,097)

Other income (expense)
Gain on sale of direct retail business		-		-		-		88,795
Interest expense		(8,579)		(3,501)		(23,631)		(16,810)
Other income (expense)		179		(5,435)		179		(5,435)
Total other income (expense)		(8,400)		(8,936)		(23,452)		66,550
Loss before income taxes		(36,113)		(80,235)		(145,127)		(60,547)

Income taxes		-		-		-		-

Net loss	$	(36,113)	$	(80,235)	$	(145,127)	$	(60,547)

Loss per share:
Basic	$	(0.001)	$	(0.001)	$	(0.002)	$	(0.001)
Diluted	$	(0.001)	$	(0.001)	$	(0.002)	$	(0.001)

Weighted average share outstanding:
Basic		64,470,950		61,247,288		63,953,607		60,975,023
Diluted		64,470,950		61,247,288		63,953,607		60,975,023

See accompanying notes.

PACIFIC SANDS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


	2013		2012
Cash flows from operating activities
Net loss	$	(145,127)	$	(60,547)
Adjustments to reconcile net loss to net cash used in operating activities -
Depreciation and amortization		42,613		19,777
Amortization of debt discount		-		1,514
Common shares issued for services and compensation		9,809		34,600
Gain on sale of direct retail business		-		(88,795)
Common shares received for retail business		-		(6,081)
Deferred rent		(6,000)		28,000
Trade accounts receivable		(49,848)		(17,647)
Inventories		44,084		12,493
Other assets		7,531		(51,033)
Loss on the disposal of plant, property and equipment		-		5,435
Accounts payable and other current liabilities		60,635		53,378

Net Cash Used in Operating Activities		(36,303)		(68,906)

Cash flows from investing activities
Purchases of equipment		(108,143)		(98,095)
Net Cash Used in Investing Activities		(108,143)		(106,144)

Cash flows from financing activities
Proceeds from common stock issued		71,000		110,770
Proceeds from notes payable		236,552		112,727
Repayment of notes payable and long term obligations		(183,200)		(55,728)

Net Cash Provided by Financing Activities		124,352		167,769

Net (decrease) increase in cash and cash equivalents		(20,094)		768

Cash and cash equivalents:
Beginning of period		57,575		9,753

End of period	$	37,481	$	10,521

See accompanying notes.

PACIFIC SANDS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)

	2013		2012
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	22,680	$	13,319
Income taxes	$	-	$	-

Supplemental disclosure of non cash financing and investing activities
Conversion of debt to equity	$	20,000	$	12,000
Conversion of accrued compensation and professional fees to equity	$	9,809	$	22,643
Stock issued for purchases of machinery & equipment	$	-	$	20,000
Acquisition of stock for note payable	$	53,852	$	-

See accompanying notes.

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Pacific Sands, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in Pacific Sands, Inc’s Annual Report filed with the SEC on Form 10-K for the year ended June 30, 2012. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2012 as reported elsewhere in this Form 10-Q have been omitted.

2. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business - Pacific Sands, Inc. with the right to do business as Natural Water Technologies (the "Company") was incorporated in Nevada on July 7, 1994.

Pacific Sands develops, manufactures, markets and sells a range of nontoxic, environmentally friendly cleaning and water-treatment products based on proprietary blended botanical, nontoxic and natural chemical technologies. The Company’s products have applications ranging from water maintenance (spas, swimming pools, fountains, decorative ponds) to cleaning (nontoxic household and industrial) and pet care.

The Company markets and sells its product lines directly, over the Internet and through pool, spa, hardware, specialty and other retail outlets in the US, Canada and Europe. The products are also sold via Pacific Sands’ distributors, manufacturers’ representatives and internationally established pool and spa industry distribution networks. The Company’s

products are also sold through numerous popular pool and spa websites. The Company’s Natural Choices branded product are sold in numerous retail outlets around the country and in Europe as well as dozens of the top environmentally-oriented websites.

Inventories - Inventories are stated at the lower of cost or market on the first-in, first-out (FIFO) basis.

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

Depreciation and Amortization - For financial reporting purposes, depreciation and amortization of property and equipment has been computed over estimated useful lives of two to seven years primarily using the straight-line method. Depreciation and amortization charges totaled $42,613 and $19,777 during the nine months ended March 31, 2013 and 2012, respectively.

Income Taxes - The Company uses the asset and liability method in accounting for income taxes. Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The temporary differences relate primarily to net operating loss carry-forwards and deferred compensation charges. A valuation allowance is recorded for deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized through future operations.

The income tax accounting process for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. A company must determine whether it is "more-likely-than-not" that a tax position will be sustained upon examination, including resolution of any related appeals or litigation procedures, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. Management's review of the Company’s possible tax positions at March 31, 2012 and June 30, 2012 did not result in any positions requiring disclosure. Should the Company need to record interest and/or penalties related to uncertain tax positions, or other tax authority assessments, it would classify such expenses as part of the income tax provision.

The Company’s income tax returns for the years ending June 30, 2010, 2011 and 2012 are subject to examination by the IRS and related states, generally for three years after filed.

Revenue Recognition - Revenue is recognized when the related products are shipped unless the customer is under a bill and hold arrangement. Under a bill and hold arrangement revenue is recognized when the product is manufactured, invoiced and set aside in a specifically designated finished goods area. Upon invoicing under this arrangement ownership has passed to the buyer with no residual warranty obligation or right of return. All customers under a bill and hold arrangement have committed to purchases and have specifically requested they be on a bill and hold arrangement. In all cases goods are transferred to a designated finished goods fulfillment location under a fulfillment arrangement and are complete and ready for shipment. These bill and hold goods are either privately labeled or set aside exclusively for the customers use.

Accounts Receivable - The Company makes judgments as to the collectability of trade and other accounts receivable based on historic trends and future expectations. Management estimates an allowance for doubtful receivables, which reflects its current assessment of the collectability of the receivables. Management believes that the current specific and general receivable reserves aggregating $11,425 are adequate as of March 31, 2013.

Advertising and Promotional Costs - Advertising and promotion costs are expensed as incurred. During the nine months ended March 31, 2013, and 2012, advertising and promotion costs totaled $58,393 and $32,584, respectively.

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

Basic and Diluted Net Earnings (Loss) Per Share - Basic net earnings (loss) per share is based upon the weighted average number of common shares outstanding. Dilutive convertible shares and stock options are not included in the computation of the weighted average number of shares outstanding for dilutive net loss per common share, as the effect would be antidilutive.

Use of Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Statement of Cash Flows - For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents.

Recent Accounting Pronouncements –The following is a summary of recent authoritative pronouncements that affect accounting, reporting and disclosure of financial information by the Company.

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2011-05, Comprehensive Income: Presentation of Comprehensive Income. The new guidance requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance eliminates the option to present the components of other comprehensive income as part of the statement of equity. For public entities, the guidance is effective for fiscal years beginning after December 15, 2011. The adoption of this guidance did not have any impact on the Company’s financial position, cash flows or results of operations.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

3. GOING CONCERN

The accompanying financial statements have been presented assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. Through March 31, 2013, the Company has incurred cumulative losses of $5,521,003. The Company's successful transition to attaining profitable operations is dependent upon obtaining financing adequate to fulfill its development, marketing and sales activities and achieving a level of revenues adequate to support the Company's cost structure. Management's plan of operations anticipates that the cash requirements of the Company for the next twelve months will be met by obtaining capital through the sale of common stock, debt financings and from current operations. However, there is no assurance that the Company will be able to fully implement its plan in order to generate the funds needed on a going concern basis.

4. INVENTORIES

Inventories at March 31, 2013 and June 30, 2012 consisted of the following:

	March 31, 2013		June 30, 2012

Raw materials	$	125,685	$	162,887
Finished goods		21,921		28,803
Total	$	147,606	$	191,690

5. PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2013 and June 30, 2012 consisted of the following:

	March 31, 2013		June 30, 2012

Furniture	$	32,966	$	22,464
Manufacturing equipment		186,457		106,989
Office Equipment		52,706		51,996
Leasehold improvements		80,335		78,460
Assets in Suspense		15,588		-
Computer software		16,577		16,577
Less accumulated depreciation and amortization		(167,240)		(124,627)
Property and equipment, net	$	217,389	$	151,859

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

6. ACCRUED EXPENSES

Accrued expenses at March 31, 2013 and June 30, 2012 consisted of the following:

	March 31, 2013		June 30, 2012

Accrued compensation	$	8,748	$	19,435
Accrued payroll withholding taxes and penalties		1,011		8,764
Accrued expense		2,827		-
Accrued Sales Tax		77		-
Accrued professional fees		1,200		238
Accrued interest		5,143		2,700
Total	$	19,006	$	31,137

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable at March 31, 2013 and June 30, 2012 consisted of the following:

	March 31, 2013		June 30, 2012

J.P. Morgan Chase – business line of credit		19,993		34,991
Notes payable – other		178,315		55,400
Convertible notes payable – net of discount		-		20,000
Notes payable – former executive officer		111,728		146,641
Promissory Note – Kenosha Area Business Alliance		110,251		58,046
Federal payroll taxes payable		33,696		51,699
		453,983		366,777
Less current maturities		162,930		99,987
	$	291,053	$	266,790

On March 22, 2013, the Company issued an unsecured promissory note for the amount of $120,000. The note is due on March 22, 2016 and accrues interest at the rate of 12.08% per annum, interest payable monthly. The Company may pay the note in full or in part prior to maturity, without penalty or prior written notice to the holder.

The scheduled annual maturities for notes payable and capital lease obligations are as follows for the years ending March 31,

2014	$	162,930
2015		71,258
2016		158,119
2017		18,229
2018		19,353
2019 and thereafter		24,094

8. STOCKHOLDERS’ DEFICIT

Transactions for the nine months ended March 31, 2013 are as follows:

On July 2, 2012, the Company retired 297,960 shares of common stock for $20,857; a note payable was issued for $19,800.

On September 27, 2012, the Company converted a convertible note for 200,000 shares of common stock.

On November 16, 2012, the Company issued 80,000 shares of common stock for consulting services to a related party. The Company recorded a consulting expense of 4,800 for the shares issued.

On November 16, 2012, the Company issued 84,833 shares of common stock for accounting services. The Company recorded an accounting expense of $5,009 for the shares issued. A payable of 3,929 for past services and 1,080 in current expenses was paid through this issuance.

On November 16, 2012, the Company issued 300,000 shares of common stock to an investor for a cash investment of $18,000.

On November 16, 2012, the Company issued 200,000 shares of common stock to an investor for a cash investor of $12,000.

On November 16, 2012, the Company retired 549,914 shares of common stock for $32,995. A note payable was issued for $32,995 for the retired shares of common stock.

On December 3, 2012, the Company issued 666,666 shares of common stock to an investor for a cash investment of $40,000.

On February 27, 2013, the Company issued 16,667 shares of common stock to an employee for a cash investment of $1,000.

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

9. LOSS PER SHARE

Basic loss per common share is based on the weighted average number of common shares outstanding in each period and net loss.

The following table sets forth the computation of basic and diluted loss per share.

	Three months ended March 31,				Nine months ended March 31,
	2013		2012		2013		2012

Net loss - basic	$	(37,212)	$	(80,235)	$	(145,127)	$	(60,547)

Interest expense on the conversion of Promissory notes		-		-		2,700		-
Net loss diluted		(37,212)		(80,235)		(142,127)		(60,547)
Weighted average shares - basic		64,470,950		61,247,288		63,953,607		60,975,023
Incremental shares outstanding
Assuming the conversion of dilutive
Convertible promissory notes		-		-		-		-
Weighted average shares - diluted		64,470,950		61,247,288		63,953,607		60,975,023

Loss per share
Basic	$	(0.001)	$	(0.001)	$	(0.002)	$	(0.001)
Diluted	$	(0.001)	$	(0.001)	$	(0.002)	$	(0.001)

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

10. INCOME TAXES

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting and tax bases of its assets and liabilities. Deferred assets are reduced by a valuation allowance when deemed appropriate.

The tax effects of existing temporary differences that give rise to significant portions of deferred tax assets at March 31, 2013 and June 30, 2012 are as follows:

	March 31, 2013		June 30, 2012

Net operating loss carryforwards	$	1,381,000	$	1,320,000
Deferred compensation		47,000		62,000
Deferred rent expense		13,000		15,000
Accounts receivable allowance		5,000		5,000
Valuation allowance		(1,446,000)		(1,402,000)
Net deferred tax asset	$	--	$	--

At March 31, 2013, the Company has net operating loss carry-forwards for Federal tax purposes of approximately $3,381,000 which, if unused to offset future taxable income, will expire in years beginning in 2018.

Item 2. Management Discussion and Analysis of Financial Condition and Results of Operation

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE PERFORMANCE OF THE COMPANY. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH ARE ONLY PREDICTIONS AND SPEAK ONLY AS OF THE DATE HEREOF. FORWARD-LOOKING STATEMENTS USUALLY CONTAIN THE WORDS "ESTIMATE," "ANTICIPATE," "BELIEVE," "EXPECT," OR SIMILAR EXPRESSIONS, AND ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW VARIOUS RISKS AND UNCERTAINTIES IDENTIFIED BELOW, AS WELL AS THE MATTERS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON 10-K FOR THE YEAR ENDED JUNE 30, 2010 AND ITS OTHER SEC FILINGS. THESE RISKS AND UNCERTAINTIES COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR PUBLICLY ANNOUNCE REVISIONS TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.

General

Pacific Sands, Inc. (the "Company" or "Pacific Sands") was incorporated in the State of Nevada on July 7, 1994. The Company's fiscal year ends June 30. The Company is a C-Corporation for federal income tax purposes. The Company does not have subsidiaries or affiliated entities. The Company also does business as Natural Water Technologies, ecoONE Marketing Group and Natural Choices Home Safe Products (see discussion below).

The Company develops, manufactures, markets and sells a range of non-toxic, environmentally friendly cleaning and water-treatment products based on proprietary blended botanical and nontoxic chemical technologies. The Company's products have applications ranging from water installation maintenance (spas, swimming pools, fountains, decorative ponds) to cleaning (non-toxic household and industrial).

The Company has a mature, actively marketed product line known as the ecoONE® Spa Treatment system as well as ecoONE® Pool conditioner and the Pacific Sands All-Purpose Hose Filter.

In mid February of 2008, the Company acquired Natural Choices Home Safe Products, LLC (“Natural Choices”), a developer and manufacturer of environmentally friendly cleaning and laundry products. The acquisition added dozens of new products to the Pacific Sands portfolio of earth, health, pet and kid-friendly offerings, including Oxy-Boost™ an oxygen-bleach based, chlorine-free bleach alternative. The Company now has a large selection of oxygen- bleach based formulations available both for retail distribution under its ecoone®, e-2 elemental earth® and Natural Choices™ brands as well as for contract manufacturing and re-label.

The Company markets and sells its product lines directly, through pool, spa, hardware, specialty and other retail outlets in the US, Canada and Europe. The products are also sold via Pacific Sands distributors, manufacturers’ representatives and internationally established pool and spa industry distribution networks. The Company’s products are also sold through numerous popular pool and spa websites. The Company’s Natural Choices branded products are sold in numerous retail outlets around the country as well as dozens of the top environmentally-oriented websites.

The Company's goal is to achieve sustained profitability through revenues achieved by marketing and sales of its nontoxic, earth, health and kid-friendly, ecoONE® Pool, Spa, Household Cleaning and other product lines.

Management intends to continue the aggressive marketing and sale of its products through a widening base of retail outlets, distribution centers and OEM arrangements in order to achieve its goals.

The Company's ability to achieve its objectives is dependent on its ability to sustain and enhance its revenue stream and to continue to raise funds through loans, credit and the private placement of restricted securities until such time as the Company achieves sustained fiscal profitability.

To date, the Company has funded operations through a combination of revenues from the sale of its products, established credit with vendors, a bank line of credit and the sale of rule 144 stocks through private placement. The Company's failure to continue to raise adequate financing to fund operations may jeopardize its existence. (See “Liquidity and Capital Resources”)

Management knows of no additional trends or uncertainties beyond those discussed that are reasonably likely to have a material impact on the Company's short or long-term liquidity.

RESULTS OF OPERATIONS

Results for the three months ending March 31, 2013 compared to the three months ending March 31, 2012.

For the three months ended March 31, 2013, net sales were $573,335, an increase from net sales of $428,696 for the three months ended March 31, 2012.

For the three months ended March 31, 2013, cost of sales was $366,067 compared to $272,695 for the same period in the previous fiscal year. The Company’s gross profit remained the same at 36% for both the three months ended March 31, 2012 and the current fiscal quarter.

For the three months ended March 31, 2013 and 2012, selling and general administrative expenses were $234,981 and $227,300, respectively. This slight increase represents continued investment in sales and marketing specifically trade shows to promote our branded products.

Interest expense for the three months ended March 31, 2013 was $8,579 compared to $3,501 for the three months ended March 31, 2012. This increase is due to additional borrowing.

The Company recorded a net loss of $36,113 or $0.001 loss per share for the three months ended March 31, 2013, as compared to a net loss of $80,235 or $0.001 loss per share for the three months ended March 31, 2012.

Results for the nine months ending March 31, 2013 compared to the nine months ending March 31, 2012.

For the nine months ended March 31, 2013, net sales were $1,437,330, an increase of 20% over net sales of $1,197,743 for the nine months ended March 31, 2012. This increase was due to an increase in private label product sales.

For the nine months ended March 31, 2013, cost of sales was $847,291 compared to $743,743 for the same period in the previous fiscal year. The Company’s gross margin increased from 38% for the nine months ended March 31, 2012 to 41% for the current fiscal year to date. This increase is due to the ability to purchase raw materials in greater volumes and production efficiencies despite increased sales to private label customers which are sold at a much lower margin

For the nine months ended March 31, 2013 and 2012, selling and general administrative expenses were $711,714 and $581,097, respectively. The significant increase is due to a committed investment in advertising and promotional expenses over the same period in 2012.

Interest expense for the nine months ended March 31, 2013 was $23,631 compared to $16,810 for the nine months ended March 31, 2012. Again, the increase in interest costs is due to additional borrowing.

The company recorded a net loss of $145,127 or $0.002 loss per share for the nine months ended March 31, 2013. This compares to a net loss of $60,547 or $0.001 loss per share for the nine months ended March 31, 2012.

LIQUIDITY AND CAPITAL RESOURCES

Management believes that the Company is positioned for sales growth but will require additional funding to continue operations. The Company's ability to achieve its objectives is dependent upon its ability to sustain and enhance its current revenue stream and to continue to raise funds through loans, vendor credit and the private placement of restricted securities until such time as the Company sustains fiscal profitability. To date, the Company has funded operations and expansion through a combination of revenues from the sale of its products, established credit with vendors, deferred salaries (subsequently converted to notes payable to officers), debt financings and the sale of rule 144 stock through private placement. The Company's failure to continue to raise adequate financing to fund planned expansion may jeopardize its plans for growth.

At March 31, 2013, the Company had net working capital of $108,514 composed of current assets of $651,203 and current liabilities of $542,689. This reduction from $260,625 at June 30, 2012 when current assets were $672,536 and current liabilities were $411,911 is due to the investment in sales and marketing in the first three quarters that should yield significant sales in the current quarter.

Net cash used in operating activities during the nine months ended March 31, 2013 was $36,303, substantially lower than the $68,906 cash used in operating activities during the nine months ended March 31, 2012.

To finance the equipment purchases and the cash used in operating activities for the nine months ending March 31, 2012, the Company issued $110,770 of common stock and increased notes payable, net of principal payments, by $56,999 as compared to $71,000 of common stock and increased notes payable, net of principal payments, by $53,353 for the nine months ending March 31, 2013.

At June 30, 2012 the Company had a stockholders’ equity of $123,524. At March 31, 2013 the Company had stockholders’ equity of $25,352.

The Company has no “off balance sheet” source of liquidity arrangements

Item 3. Quantitative and Qualitative Disclosures About Market Risk

An investment in the common stock of the Company involves a high degree of risk. In addition to the other information in this report, the following risk factors should be considered carefully in evaluating the Company and its business. This Report contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements usually contain the words "estimate," "anticipate," "believe," "plan," "expect," or similar expressions, and are subject to numerous known and unknown risks and uncertainties. In evaluating such statements, prospective investors should review carefully various risks and uncertainties identified in this report, including the matters set below and in the Company's other SEC filings. These risks and uncertainties could cause the Company's actual results to differ materially from those indicated in the forward-looking statements. The Company undertakes no obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.

THE COMPANY HAS EXPERIENCED LOSSES FROM OPERATIONS SINCE COMMENCING OPERATIONS:

With the exception of the 3rd quarter of fiscal 2010, 2011 and the 4th quarters of fiscal 2006, 2007, 2011 and 2012, the Company since commencing operations, has been profitable once in fiscal 2011. The Company may not, in the future, generate sufficient revenues to achieve sustainable profitability.

POSSIBLE DIFFICULTY FINANCING PLANNED GROWTH:

The Company's present plans require an amount of expenditure and working capital. In the future the Company will require financing in addition to the cash generated from operations to fund planned growth. If additional resources are unavailable the Company may be unable to grow according to its present plan.

MANAGEMENT'S ASSUMPTIONS REGARDING THE FUTURE MARKET MAY BE FAULTY:

Management assumes there will be a continuing and increased desirability in the retail market for nontoxic, environment and health friendly products for cleaning and water treatment use. Should management's assumptions as to this increased desirability be faulty, the Company may have difficulty achieving its planned growth.

THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT THE COMPANY:

The Company is run by a small number of key personnel. Should the Company experience a loss of these key people due to their inability or unwillingness to continue in their present positions, the Company's business and financial results could be adversely affected.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Disclosure controls and procedures are defined as those controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

As reported in our Annual Report on Form 10-K for the year ended June 30, 2012, management is aware that there is a significant deficiency in our internal control over financial reporting. The significant deficiency relates to a lack of segregation of duties due to the small number of employees involvement with general administrative and financial matters. However, management believes that compensating controls are in place to mitigate the risks associated with the lack of segregation of duties. Compensating controls include outsourcing certain financial functions to an independent contractor. Management concluded that internal controls over financial reporting were effective as of June 30, 2012.

There have not been any changes in the Company's internal control over financial reporting during the quarter ended March 31, 2013, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting

PART II OTHER INFORMATION

Item 1 – LEGAL PROCEEDINGS

None

Item 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3 – DEFAULTS UPON SENIOR SECURITIES

None

Item 4 – MINE SAFETY DISCLOSURES

Not applicable

Item 5 – EXHIBITS

(a)	Exhibit Index

Exhibit	Description of the Exhibit

31.1	Chief Executive Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Chief Financial Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Chairman of the Board Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 INS	XBRL Instance Document*

101 SCH	XBRL Schema Document*

101 CAL	XBRL Calculation Linkbase Document*

101 LAB	XBRL Labels Linkbase Document*

101 PRE	XBRL Presentation Linkbase Document*

101 DEF	XBRL Definition Linkbase Document*

* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PACIFIC SANDS, INC.



Dated: May 15, 2013	By:	/s/ Michael Michie
		Michael Michie Chief Executive Officer
		Chief Financial Officer

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