PACIFIC SANDS INC - FORM 10-Q - November 13, 2013

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - PACIFIC SANDS INC	Financial_Report.xls
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	pacoficexh321.htm
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	pacoficexh312.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	pacoficexh311.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.

For the quarterly period ended: September 30, 2013OR

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 x No o

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 November 14, 2013 are as follows:

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	64,398,172

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION		Page

Item 1.	Financial Statements	3

	Balance Sheets as of September 30, 2013, (unaudited) and June 30, 2013	3

	Statements of Operations for the Three Months Ended September 30, 2013, and 2012, (unaudited)	4

	Statements of Cash Flows for the Three Months Ended September 30, 2013, and 2012, (unaudited)	5

	Notes to Financial Statements (unaudited)	7

Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	16

PART II OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS	16

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	16

Item 3.	DEFAULTS UPON SENIOR SECURITIES	16

Item 4.	MINE SAFETY DISCLOSURES	16

Item 5.	OTHER INFORMATION	16

Item 6.	EXHIBITS	17

SIGNATURES		17

PACIFIC SANDS, INC.
BALANCE SHEETS
SEPTEMBER 30, 2013, AND JUNE 30, 2013

ASSETS

	September 30, 2013			June 30, 2013
Current assets:	(Unaudited)
Cash and cash equivalents		$	51,314		$	90,040
Trade receivables, net of allowances for doubtful accounts of $ 11,425			308,044			390,839
Inventories			213,245			180,375
Other current assets			22,282			12,334
Total Current Assets			594,885			673,588

Property and equipment, net			223,097			229,843
Other Assets			3,350			3,525
Total Assets		$	821,332		$	906,956

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:					$
Accounts payable		$	257,668			228,104
Accrued expenses			24,451			34,179
Current portion of notes payable and capital leases			197,990			258,616
Deferred Rent expense			17,600			17,600

Total Current Liabilities			497,709			538,499

Notes payable and capital leases, less current portion			250,697			266,929
Deferred rent expense, less current portion			4,400			8,800
Total Liabilities			752,806			814,228


Stockholders' deficit
Common stock (100,000,000 shares authorized, 64,398,172 shares issued and outstanding as of September 30, 2013 and 64,898,172 shares issued and outstanding as of June 30, 2013)			64,398			64,898
Additional paid in capital			5,483,688			5,508,188
Accumulated deficit			(5,479,560)			(5,480,358)
Total Stockholders' Equity			68,526			92,728

Total Liabilities and Stockholders' Equity		$	821,332		$	906,956

See accompanying notes

PACIFIC SANDS, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(UNAUDITED)

	Three months ended September 30,
	2013		2012

Net sales	$	537,353	$	432,842
Cost of sales		317,209		231,102

Gross profit		220,144		201,740

Selling and administrative expenses		208,792		223,560

Income (Loss) from operations		11,352		(21,820)

Other income/expense
Other income		409		-
Interest expense		(10,963)		(5,174)
		(10,554)		(5,174)

Income (Loss) before income taxes		798		(26,994)

Income taxes		-		-

Net income (loss)	$	798	$	(26,994)

Basic and diluted net income (loss) per share	$	-	$	(0. 0004)

Basic and diluted weighted average shares outstanding		64,566,650		63,495,187

See accompanying notes. 

PACIFIC SANDS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(UNAUDITED)

	2013		2012
Cash flows from operating activities
Net income (loss)	$	798	$	(26,994)
Adjustments to reconcile net loss to net cash provided by operating activities -
Depreciation and amortization		15,800		12,908
Deferred rent		(4,400)		(800)
Changes in assets and liabilities -
Trade accounts receivable		82,795		30,018
Inventories		(32,870)		32,061
Other assets		(9,773)		10,174
Accounts payable and other current liabilities		19,836		(56,231)

Net Cash Provided by Operating Activities		72,186		1,136

Cash flows from investing activities
Purchase of equipment		(9,054)		(68,051)

Net Cash Used in Investing Activities		(9,054)		(68,051)

Cash flows from financing activities
Proceeds from notes payable		41,797		102,500
Repayment of notes payable and long term obligations		(143,655)		(77,965)

Net Cash (Used in) Provided by Financing Activities		(101,858)		24,535

Net decrease in cash and cash equivalents		(38,726)		(42,380)

Cash and cash equivalents:
Beginning of period		90,040		57,575

End of period	$	51,314	$	15,195

See accompanying notes. 

PACIFIC SANDS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(UNAUDITED)

	2013		2012
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	9,608	$	5,174
Income taxes	$	-	$	-

Supplemental disclosure of non cash financing and investing activities:
Conversion of debt to equity	$	-	$	20,000
Acquisition and retirement of stock for note payable	$	25,000	$	20,857

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, 2013. 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 2013 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.

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 $15,800 and $12,908 during the three months ended September 30, 2013 and 2012, respectively.

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.

Advertising and Promotional Costs - Advertising and promotion costs are expensed as incurred.

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

Income Taxes - The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statement of Operations in the period that includes the enactment date.

Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

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

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 reserve of $11,425 is adequate as of September 30, 2013.

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

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.

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 September 30, 2013, the Company has incurred cumulative losses of $5,479,560. 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 September 30, 2013 and June 30, 2013 consisted of the following:

	September 30, 2013		June 30, 2013
Raw materials	$	164,921	$	155,531
Finished goods		48,324		24,844
Total	$	213,245	$	180,375

5. PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2013 and June 30, 2013 consisted of the following:

	September 30, 2013			June 30, 2013
Furniture and office equipment	$	32,966		$	32,966
Manufacturing equipment		202,770			193,948
Leasehold improvements		80,650			80,650
Computer software		52,150			51,918
Office equipment		52,706			52,706

Less accumulated depreciation and amortization		(198,145	)		(182,345	)
Property and equipment, net	$	223,097		$	229,843

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

6. ACCRUED EXPENSES

Accrued expenses at September 30, 2013 and June 30, 2013 consisted of the following:

	September 30, 2013		June 30, 2013
Accrued compensation	$	12,447	$	19,207
Accrued payroll taxes		1,126		1,833
Accrued other expense		2,337		2,377
Accrued health insurance		1,446		1,392
Accrued interest		7,095		9,370
Total	$	24,451	$	34,179

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable at September 30, 2013 and June 30, 2013 consisted of the following:

	September 30, 2013		June 30, 2013
J.P. Morgan Chase – business line of credit	$	11,170	$	14,993
Federal payroll tax installment agreement		12,339		18,339
Notes payable - stockholders		167,396		206,344
Promissory Note – Unrelated party		-		10,000
Note payable – former executive officer		89,033		101,253
Promissory Note – Kenosha Area Business Alliance		102,749		106,528
Capital Lease		1,000		3,088
Note payable – related party		65,000		65,000
		448,687		525,545
Less current maturities		197,990		258,616
	$	250,697	$	266,929

On July 3, 2013, the Company repurchased 500,000 shares of common stock from a shareholder for $25,000 in the form of a note payable. The remaining loan balance of $17,000 is included in notes payable - stockholders as of September 30, 2013. The scheduled annual maturities for notes payable and capital lease obligations are as follows for the years ending September 30,

2014	$	197,990
2015		60,308
2016		137,692
2017		18,783
2018		19,942
2019 and thereafter		13,972

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

8. INCOME (LOSS) PER SHARE

Basic income (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 income (loss) per share.

	Three months ended September 30,
	2013		2012
Numerator:
Basic and diluted income (loss)	$	798	$	(26,994)

Denominator:
Basic and diluted per share data - weighted average shares		64,566,650		63,495,187

Basic and diluted income (loss) per share	$	-	$	(.0004)

There were no common Stock equivalents as of September 30, 2013 and 2012.

9. 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 September 30, 2013 and June 30, 2013 are as follows:

	September 30, 2013		June 30, 2013
Net operating loss carryforwards	$	1,360,000	$	1,360,000
Deferred compensation		37,000		43,000
Deferred rent expense		9,000		11,000
Accounts receivable allowance		5,000		5,000
Valuation allowance		(1,411,000)		(1,419,000)
Net deferred tax asset	$	--	$	--

At September 30, 2013, the Company has net operating loss carry-forwards for Federal tax purposes of approximately $3,138,000 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, 2011 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 private label.

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.

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 September 30, 2013 compared to the three months ending September 30, 2012.

For the three months ended September 30, 2013, net sales were $537,353, an increase of 24% over net sales of $432,842 for the three months ended September 30, 2012. This increase in sales was due to continued growth in private label sales.

For the three months ended September 30, 2013, cost of sales was $317,209 compared to $231,102 for the same period in the previous fiscal year. The Company’s gross margin decreased from 47% for the three months ended September 30, 2012, to 41% for the current fiscal quarter as private label sales are sold at a reduced margin.

For the three months ended September 30, 2013 and 2012, selling and general administrative expenses were $208,792 and $223,560, respectively. The decrease was due to a reduction in trade show attendance and associated labor expenses.

Interest expense for the three months ended September 30, 2013 was $10,963 compared to $5,174 for the three months ended September 30, 2012.

The Company recorded net income of $798 or $0.0000 income per share for the three months ended September 30, 2013 as compared to a net loss of $26,994 or $0.0004 loss per share for the three months ended September 30, 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 September 30, 2013, the Company had current assets of $594,885 and total assets of $821,332, compared to June 30, 2013, when current assets were $673,588 and total assets were $906,956. Cash and cash equivalents at September 30, 2013, was $51,314 compared to $90,040 at June 30, 2013. As of September 30,2013, the Company had inventory of $213,345, compared to June 30, 2013 when inventory was $180,375. Inventory levels increased due to strategic sourcing and volume purchasing of commodity materials to achieve better margins. Standard receivables management resulted in a decrease in accounts receivable to $308,044 at September 30, 2013, from $390,839 at June 30, 2013.

Current liabilities at September 30, 2013, were $497,709 as compared to $538,499 at June 30, 2013. Current liabilities include accounts payable, current portion of notes payable and capital lease obligations and accrued expenses. At September 30, 2013, the Company had an outstanding line of credit balance totaling approximately $11,169, which has since been closed.

Non-current liabilities include a $43,644 note payable due a former executive officer of the Company and a note payable to Kenosha Area Business Alliance for $87,053 and others.

The Company had working capital of approximately $97,176 and $135,089 at September 30, 2013, and June 30, 2013, respectively.

On September 30, 2013, the Company had an accumulated deficit of $5,479,560 and total stockholders’ equity of $68,526.

Net cash provided by operating activities during the three months ended September 30, 2013, was $72,186 compared to $1,136 provided by operating activities during the three months ended September 30, 2012.

During the three months ended September 30, 2013, net cash used in investing activities was $9,054. For the three months ended September 30, 2013, net cash used by financing activities was $101,858, which included proceeds of $41,797 from debt issued and $143,655 of debt repayments.

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 profitability. To date, management has been successful in raising cash on an as-needed basis for the continued operations of the Company. There is no guarantee that management will be able to continue to raise needed cash in this fashion.

The Company has no material commitments for capital expenditures at this time. 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:

Since commencing operations the Company has been profitable in fiscal year 2011. The Company has had profitable quarters in each of the past 4 fiscal years, which reduced the fiscal year losses. The Company may or 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.

COMPETITION:

The Company’s current branded products market share is minimal compare to the overall marketplace. The Company’s product quality and price performance is competitive to superior compared to other brands in the marketplace.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based upon an evaluation of the effectiveness of disclosure controls and procedures, the Company’s 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, 2013, management is aware that there is a significant deficiency in the Company’s 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, 2013.

There have not been any changes in the Company's internal control over financial reporting during the quarter ended September 30, 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

None

Item 5 – OTHER INFORMATION

None

Item 6 – 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*

101.SCH	XBRL Schema*

101.CAL	XBRL Calculation*

101.DEF	XBRL Definition*

101.LAB	XBRL Label*

101.PRE	XBRL Presentation*

* 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: November 14, 2013	By:	/s/ Michael Michie
		Michael Michie Chief Executive Officer
		Chief Financial Officer

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