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PFSD > SEC Filings for PFSD > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for PACIFIC SANDS INC

Form 10-Q for PACIFIC SANDS INC


14-Nov-2012

Quarterly Report


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 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 September 30, 2012 compared to the three months ending September 30, 2011.

For the three months ended September 30, 2012, net sales were $432,842, an increase of 23% over net sales of $352,830 for the three months ended September 30, 2011. This increase in sales was due to continued increase in spa product stocking orders.

For the three months ended September 30, 2012, cost of sales was $231,102 compared to $230,976 for the same period in the previous fiscal year. The Company's gross margin increased from 35% for the three months ended September 30, 2011, to 47% for the current fiscal quarter. This increase is due to the fact that the major share of the Company's sales during the period was for large stocking orders to distributors of our higher margin spa products.

For the three months ended September 30, 2012 and 2011, selling and general administrative expenses were $223,560 and $204,486, respectively. The increase in operating expenses is due to continued investment in sales and marketing.


Interest expense for the three months ended September 30, 2012 was $5,174 compared to $6,208 for the three months ended September 30, 2011. The decrease is due to a significant reduction of debt during fiscal year 2012, including conversions of promissory notes to equity. Additionally, during the three months ended September 30, 2012, the Company did not amortize discounts of notes payable compared to an amortization of $1,514 during the three months ended September 30, 2011.

The Company recorded a net loss of $26,994 or $0.0004 loss per share for the three months ended September 30, 2012 as compared to a net loss of $88,840 or $0.0015 loss per share for the three months ended September 30, 2011.

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, 2012, the Company had current assets of $557,903 and total assets of $769,135, compared to June 30, 2012, when current assets were $672,536 and total assets were $828,625. Cash and cash equivalents at September 30, 2012, was $15,195 compared to $57,575 at June 30, 2012. Standard receivables management resulted in a decrease in accounts receivable to $355,540 at September 30, 2012, from $385,558 at June 30, 2012.

Current liabilities at September 30, 2012, were $378,514 as compared to $411,911 at June 30, 2012. Current liabilities include accounts payable, current portion of notes payable and capital lease obligations and accrued expenses. At September 30, 2012, the Company had an outstanding line of credit balance totaling approximately $30,000.

Non-current liabilities include a $89,031 note payable due a former executive officer of the Company and a note payable to Kenosha Area Business Alliance for $102,749.

Net cash provided by operating activities during the three months ended September 30, 2012, was $1,136 compared to $1,366 used in operating activities during the three months ended September 30, 2011.

During the three months ended September 30, 2012, net cash used in investing activities was $68,051, which included an investment in new manufacturing equipment. For the three months ended September 30, 2012, net cash provided by financing activities was $24,535, which included proceeds of $102,500 from debt issued and $77,965 of debt repayments.

The Company had working capital of approximately $179,389 and $260,625 at September 30, 2012, and June 30, 2012, respectively.

On September 30, 2012, the Company had an accumulated deficit of $5,402,870 and total stockholders' equity of $95,673.
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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.


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