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PFSD > SEC Filings for PFSD > Form 10-Q on 14-Nov-2013All Recent SEC Filings

Show all filings for PACIFIC SANDS INC

Form 10-Q for PACIFIC SANDS INC


14-Nov-2013

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 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.

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, 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.


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