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PFSD > SEC Filings for PFSD > Form 10-Q on 14-Feb-2014All Recent SEC Filings

Show all filings for PACIFIC SANDS INC

Form 10-Q for PACIFIC SANDS INC


14-Feb-2014

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, 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 believes the Company must continue to provide new and innovative products and branding to the consumer in order to grow its business. Research and product development activities, designed to enable sustained organic growth, continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, management believes these activities demonstrate the Company's commitment to future growth. Concurrent with the R&D efforts the company continues to consult with outside marketing companies to help enhance the value of the Company's current and future products, sales techniques and production efforts.

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, 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 December 31, 2013, compared to the three months ending December 31, 2012.

For the three months ended December 31, 2013, net sales were $727,732, an increase of 69% over net sales of $431,153 for the three months ended December 31, 2012. This change was due to an increase in private label product sales.

For the three months ended December 31, 2013, cost of sales was $431,821 compared to $264,682 for the same period in the previous fiscal year. The Company's gross margin increased from 39% for the three months ended December 31, 2012 to 41% for the current fiscal quarter due to purchasing and manufacturing efficiencies.

For the three months ended December 31, 2013 and 2012, selling and general administrative expenses were $347,627 and $253,173, respectively. This 37% increase in operating expenses is due to investment into sales and marketing efforts.

Interest expense for the three months ended December 31, 2013 was $10,158 a 3% increase from the $9,878 recorded for the three months ended December 31, 2012. This was caused by an increase of total liabilities for the Company from $814,228 on December 31, 2012 to $843,276 on December 31, 2013. The Company secured short term financing to fund operations.

The Company recorded a net loss of $61,574 or $0.001 loss per share for the three months ended December 31, 2013 as compared to a net loss of $96,580 or $0.002 loss per share for the three months ended December 31, 2012.

Results for the six months ending December 31, 2013, compared to the six months ending December 31, 2012.

For the six months ended December 31, 2013, net sales were $1,265,085, an increase of 46% over net sales of $863,995 for the six months ended December 31, 2012. This was due to an increase in sales from current private label customers and the acquisition of new customers.

For the six months ended December 31, 2013, cost of sales was $749,030 compared to $481,224 for the same period in the previous fiscal year. The Company's gross margin decreased from 44% for the six months ended December 31, 2012 compared to 41% for the current fiscal year to date. This decrease was due to the addition of employees for production and quality assurance.

For the six months ended December 31, 2013, and 2012, selling and general administrative expenses were $556,419 and $476,733, respectively, or a 17% increase. The increase is due to investment into sales, promotion, marketing research and brand development.

Interest expense for the six months ended December 31, 2013, was $21,121 compared to $15,052 for the six months ended December 31, 2012. This 40% increase is a result of financing of short-term debt.


The Company recorded a net loss of $60,776 or $0.001 loss per share for the six months ended December 31, 2013, compared to a net loss of $109,014 or $0.002 loss per share for the six months ended December 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 December 31, 2013, the Company had current assets of $659,062 and total assets of $875,967, compared to June 30, 2013 when current assets were $673,588 and total assets were $906,956.

Current liabilities at December 31, 2013, were $607,127 as compared to $538,499 at June 30, 2013. Current liabilities include accounts payable, current portion of notes payable and accrued expenses. At December 31, 2013, the Company had an outstanding city loan balance from Kenosha Area Business Alliance totaling $98,912.

Net cash provided by operating activities during the six months ended December 31, 2013, was $37,526 compared to $44,334 used in operating activities during the six months ended December 31, 2012.

Net cash used in financing activities for the six months ended December 31, 2013, was $15,831. During the six months ending December 31, 2013, the Company received proceeds from new debt of $140,957. During the six months ended December 31, 2013, the Company repaid $239,476 of long term and short term debt.

On December 31, 2013, the Company had an accumulated deficit of $5,541,134 and total stockholders' equity of $32,691.

At December 31, 2013, the Company had working capital of $51,935, a decrease from the June 30, 2013, working capital of $135,089.

Total liabilities of $843,276 at December 31, 2013, is an increase from $814,228 at June 30, 2013, due to short term financing needs.

Total stockholders' equity of $32,691 at December 31, 2013, has decreased from $92,728 at June 30, 2013.

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 consistent 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.


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