10-Q

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, 2012

OR

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, 2012 are as follows:

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	63,683,253

TABLE OF CONTENTS

PART I  FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	3
	Balance Sheets as of  September 30, 2012,  (unaudited) and June 30, 2012	3
	Statements of Operations for the Three Months Ended September 30, 2012, and 2011, (unaudited)	4
	Statements of Cash Flows for the Three Months Ended September 30, 2012, and 2011, (unaudited)	5
	Notes to Financial Statements (unaudited)	7
Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16
PART II  OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS	17
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	17
Item 3.	DEFAULTS UPON SENIOR SECURITIES	17
Item 4.	MINE SAFETY DISCLOSURES	17
Item 5.	OTHER INFORMATION	17
Item 6.	EXHIBITS	18
SIGNATURES		18
EX-31.1 (Certifications required under Section 302 of the Sarbanes-Oxley Act of 2002)
EX-31.2 (Certifications required under Section 302 of the Sarbanes-Oxley Act of 2002)
EX-32.1 (Certifications required under Section 906 of the Sarbanes-Oxley Act of 2002)
EX-32.2 (Certifications required under Section 906 of the Sarbanes-Oxley Act of 2002)

2

PACIFIC SANDS, INC.
BALANCE SHEETS
SEPTEMBER 30, 2012, AND JUNE 30, 2012
ASSETS
	September 30, 2012				June 30, 2012
Current assets:	(Unaudited)
Cash and cash equivalents		$	15,195			$	57,575
Trade receivables, net of allowances for doubtful accounts of  $ 11,425			355,540				385,558
Inventories			159,629				191,690
Other current assets			27,539				37,713
Total Current Assets			557,903				672,536
Property and equipment, net			207,178				151,859
Other Assets			4,054				4,230
Total Assets		$	769,135			$	828,625
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:						$
Accounts payable		$	227,936				270,387
Accrued expenses			17,357				31,137
Current portion of notes payable and capital leases			120,688				99,987
Deferred Rent expense			12,533				10,400
Total Current Liabilities			378,514				411,911
Notes payable and capital leases - net of discount of  $0 and $1,514, less current portion			271,481				266,790
Deferred rent expense, less current portion			23,467				26,400
Total Liabilities			673,462				705,101
Stockholders' deficit
Common stock (100,000,000 shares authorized, 63,683,253 shares issued and outstanding as of September 30, 2012 and  63,781,213 shares issued and outstanding as of June 30, 2012)			63,683				63,781
Additional paid in capital			5,434,860				5,435,619
Accumulated deficit			(5,402,870	)			(5,375,876	)
Total Stockholders' Equity			95,673				123,524
Total Liabilities and Stockholders' Equity		$	769,135			$	828,625

See accompanying notes.

3

PACIFIC SANDS, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED)

	Three months ended September 30,
	2012		2011
Net sales	$	432,842	$	352,830
Cost of sales		231,102		230,976
Gross profit		201,740		121,854
Selling and administrative expenses		223,560		204,486
Loss from operations		(21,820)		(82,632)
Other expense
Interest expense		(5,174)		(6,208)
		(5,174)		(6,208)
Loss before income taxes		(26,994)		(88,840)
Income taxes		-		-
Net loss	$	(26,994)	$	(88,840)
Basic and diluted loss per share	$	(0.0004)	$	(0. 0015)
Basic and diluted weighted average shares outstanding		63,495,187		61,247,626

See accompanying notes.


4

PACIFIC SANDS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(UNAUDITED)
	2012		2011
Cash flows from operating activities
Net loss	$	(26,994)	$	(88,840)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities -
Depreciation and amortization		12,908		5,087
Amortization of debt discount		-		1,514
Allowance for doubtful accounts		-		9,322
Deferred rent		(800)		-
Changes in assets and liabilities -
Trade accounts receivable		30,018		68,307
Inventories		32,061		(8,032)
Other assets		10,174		(6,284)
Accounts payable and other current liabilities		(56,231)		4,992
Net Cash Provided by (Used In) Operating Activities		1,136		(1,366)
Cash flows from investing activities
Purchase of equipment		(68,051)		-
Net Cash Used in Investing Activities		(68,051)		-
Cash flows from financing activities
Proceeds from notes payable		102,500		-
Repayment of notes payable and long term obligations		(77,965)		(7,395)
Net Cash (Used in) Provided by Financing Activities		24,535		(7,395)
Net decrease in cash and cash equivalents		(42,380)		(8,761)
Cash and cash equivalents:
Beginning of period		57,575		9,753
End of period	$	15,195	$	992

+

See accompanying notes.


5

PACIFIC SANDS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(UNAUDITED)
	2012		2011
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	5,174	$	1,898
Income taxes	$	-	$	-
Supplemental disclosure of non cash financing and investing activities:
Conversion of debt to equity	$	20,000	$	-
Acquisition of stock for note payable	$	20,857	$	-

See accompanying notes.

6

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.

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 $12,908 and $5,087 during the three months ended September 30, 2012 and 2011, 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.

7

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.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). 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, 2012.

Basic and Diluted Net Loss Per Share - Basic 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.

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.

8

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, 2012, the Company has incurred cumulative losses of $5,402,870.  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, 2012 and June 30, 2012 consisted of the following:

	September 30, 2012		June 30, 2012
Raw  materials	$	143,077	$	164,487
Finished goods		16,552		27,203
Total	$	159,629	$	191,690

5.            PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2012 and June 30, 2012 consisted of the following:

	September 30, 2012			June 30, 2012
Furniture and office equipment	$	32,966		$	22,464
Manufacturing equipment		163,827			106,989
Leasehold improvements		78,460			78,460
Computer software		16,577			16,577
Office equipment		52,706			51,996
Less accumulated depreciation and amortization		(137,358	)		(124,627	)
Property and equipment, net	$	207,178		$	151,859

9

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

6.            ACCRUED EXPENSES

Accrued expenses at September 30, 2012 and June 30, 2012 consisted of the following:

	September 30, 2012		June 30, 2012
Accrued compensation	$	10,250	$	19,435
Accrued payroll taxes		882		8,764
Accrued professional fees		1,200		238
Accrued health insurance		2,325		-
Accrued interest		2,700		2,700
Total	$	17,357	$	31,137

7.           NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable at September 30, 2012 and June 30, 2012 consisted of the following:

	September 30, 2012		June 30, 2012
J.P. Morgan Chase –  business line of credit	$	30,117	$	34,991
Federal payroll tax installment payable		45,699		51,699
Notes payable - stockholders		64,400		55,400
Convertible notes payable – net of discount of $0 and $1,514		-		20,000
Note payable – former executive officer		134,420		146,641
Promissory Note – Kenosha Area Business Alliance		117,533		58,046
		392,169		366,777
Less current maturities		120,688		99,987
	$	271,481	$	266,790

The scheduled annual maturities for notes payable and capital lease obligations are as follows for the years ending September 30,

2013	$	120,688
2014		140,786
2015		60,306
2016		17,692
2017		18,783
2018 and thereafter		33,914

10

PACIFIC SANDS, INC

NOTES TO FINANCIAL STATEMENTS

8.           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.

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 September 30,
	2012		2011
Numerator:
Basic and diluted loss	$	(26,994)	$	(88,840)
Denominator:
Basic and diluted per share data - weighted average shares		63,495,187		61,247,626
Basic and diluted loss per share	$	(.0004)	$	(.0015)

Convertible debt is not included in the computation of diluted loss per common share for the three month period ended September 30, 2011 since their inclusion would have resulted in an anti-dilutive effect.

Anti-dilutive securities not included in the net loss per share calculation:

	September 30, 2012		September 30, 2011
Convertible notes		-		420,000

11

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, 2012 and June 30, 2012 are as follows:

	September 30,  2012		June 30, 2012
Net operating loss carryforwards	$	1,330,000	$	1,320,000
Deferred compensation		57,000		62,000
Deferred rent expense		15,000		15,000
Accounts receivable allowance		4,000		4,000
Valuation allowance		(1,406,000)		(1,402,000)
Net deferred tax asset	$	--	$	--

At September 30, 2012, the Company has net operating loss carry-forwards for Federal tax purposes of approximately $3,169,000 which, if unused to offset future taxable income, will expire in years beginning in 2018.

12

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.

13

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. 

14

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.

.

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.  

15

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 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.

16

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, 2012, 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, 2012.

There have not been any changes in the Company's internal control over financial reporting during the quarter ended September 30, 2012, 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

Item 5 – OTHER INFORMATION

None

17

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, 2012	By:	/s/ Michael Michie
		Michael Michie Chief Executive Officer
		Chief Financial Officer

18

EX-31.1

EXHIBIT 31.1

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael D. Michie, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pacific Sands, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2012	/s/ Michael D. Michie
	Michael D. Michie
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael D. Michie, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pacific Sands, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2012	/s/ Michael D. Michie
	Michael D. Michie
	Chief Financial Officer
	(principal accounting officer)

EX-32.1

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Pacific Sands, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Michael D. Michie, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1)  The Report fully complies with the requirements of section 13 (a) or 15 (d), as applicable of the Securities Exchange Act of 1934: and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2012	/s/ Michael D. Michie
	Michael D. Michie
	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Pacific Sands, Inc. and will be retained by Pacific Sands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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6. Accrued Expenses: Schedule of accrued expenses (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Accrued compensation	$ 10,250	$ 19,435
Accrued payroll taxes	882	8,764
Accrued professional fees	1,200	238
Accrued health insurance	2,325
Accrued interest	2,700	2,700
Accrued expenses	$ 17,357	$ 31,137

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9. Income Taxes: Schedule of deferred tax assets (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of deferred tax assets

	September 30, 2012		June 30, 2012
Net operating loss carryforwards	$	1,330,000	$	1,320,000
Deferred compensation		57,000		62,000
Deferred rent expense		15,000		15,000
Accounts receivable allowance		4,000		4,000
Valuation allowance		(1,402,000)		(1,402,000)
Net Deferred Tax Asset	$	-	$	-

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2. Description of Business and Significant Accounting Policies: Recent Accounting Pronouncements (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Recent Accounting Pronouncements

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. 

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8. Loss Per Share: Computation of diluted loss per share (Details) (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Net loss	$ (26,994)	$ (88,840)
Basic and diluted weighted average shares	63,495,187	61,247,626
Basic and diluted loss per share	$ (0.0004)	$ (0.0015)

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4. Inventories: Schedule of inventories (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Raw Materials	$ 143,077	$ 164,487
Finished goods	16,552	28,203
Inventories	$ 159,629	$ 191,690

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4. Inventories

3 Months Ended

Sep. 30, 2012

Notes

4. Inventories

4.                     INVENTORIES

Inventories at September 30, 2012 and June 30, 2012 consisted of the following:

	September 30, 2012		June 30, 2012
Raw materials	$	143,077	$	164,487
Finished goods		16,552		28,203
Total	$	159,629	$	191,690

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8. Loss Per Share: Schedule of antidilutive securities (Details) (USD $)	Jun. 30, 2012
Value of antidilutive securities excluded from net loss per share calculation	$ 420,000

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7. Notes Payable and Capital Lease Obligations: Schedule of notes payable and capital lease obligations (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of notes payable and capital lease obligations

September 30, 2012		June 30, 2012
J.P. Morgan Chase –  business line of credit	$	30,117	$	34,991
Federal payroll tax installment payable		45,699		51,699
Notes payable - stockholder		64,400		55,400
Convertible notes payable – net of discount of $0 and $1,514		-		20,000
Notes payable – former executive officer		134,420		146,641
Promissory Note – Kenosha Area Business Alliance		117,533		58,046
		392,169		366,777
Less current maturities		120,688		99,987
	$	271,481	$	266,790

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6. Accrued Expenses: Schedule of accrued expenses (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of accrued expenses

	September 30, 2012		June 30, 2012
Accrued compensation	$	10,250	$	19,435
Accrued  payroll taxes		882		8,764
Accrued professional fees		1,200		238
Accrued health insurance		2,325		-
Accrued interest		2,700		2,700
Total	$	17,357	$	31,137

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9. Income Taxes: Schedule of deferred tax assets (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Net operating loss carryforwards	$ 1,330,000	$ 1,320,000
Deferred compensation	57,000	62,000
Deferred rent expense	15,000	15,000
Valuation allowance	$ (1,402,000)	$ (1,402,000)

XML

7. Notes Payable and Capital Lease Obligations: Schedule of maturities of notes payable and capital lease obligations (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of maturities of notes payable and capital lease obligations

2013	$	120,688
2014		140,786
2015		60,306
2016		17,692
2017		18,783
2018 and thereafter		33,914

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8. Loss Per Share: Computation of diluted loss per share (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Computation of diluted loss per share

	Three months ended September 30,
	2012		2011
Numerator:
Basic and diluted loss	$	(26,994)	$	(88,840)
Denominator:
Basic and diluted per share data - weighted average shares		63,495,187		61,247,626
Basic and diluted loss per share		(0.0004)		(0.0015)

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3. Going Concern

3 Months Ended

Sep. 30, 2012

Notes

3. Going Concern

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, 2012, the Company has incurred cumulative losses of $5,402,870.  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.

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8. Loss Per Share: Schedule of antidilutive securities (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of antidilutive securities

	September 30, 2012		September 30, 2011
Convertible notes	$	-	$	420,000

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7. Notes Payable and Capital Lease Obligations: Schedule of notes payable and capital lease obligations (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
J.P. Morgan Chase - business line of credit	$ 30,117	$ 34,991
Federal payroll tax installment payable	45,699	51,699
Notes payable - stockholder	64,400	55,400
Convertible notes payable - net of discount of $0 and $1,514		20,000
Notes payable - former executive officer	134,420	146,641
Promissory Note - Kenosha Area Business Alliance	117,533	58,046
Notes payable and capital leases	392,169	366,777
Current portion of notes payable and capital leases	120,688	99,987
Notes payable and capital leases - net of discount of $0 and $1,514, less current portion	$ 271,481	$ 266,790

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Balance Sheets (USD $)	Sep. 30, 2012	Jun. 30, 2012
Cash and cash equivalents	$ 15,195	$ 57,575
Trade receivables, net of allowances for doubtful accounts of $11,425	355,540	385,558
Inventories	159,629	191,690
Other current assets	27,539	37,713
Total Current Assets	557,903	672,536
Property and equipment, net	207,178	151,859
Other Assets	4,054	4,230
Total Assets	769,135	828,625
Accounts payable	227,936	270,387
Accrued expenses	17,357	31,137
Current portion of notes payable and capital leases	120,688	99,987
Deferred rent expense, current	12,533	10,400
Total Current Liabilities	378,514	411,911
Notes payable and capital leases - net of discount of $0 and $1,514, less current portion	271,481	266,790
Deferred rent expense, less current portion	23,467	26,400
Total Liabilities	673,462	705,101
Common stock (100,000,000 shares authorized, 63,683,253 shares issued and outstandingas of June 30, 2012)	63,683	63,781
Additional paid in capital	5,434,860	5,435,619
Accumulated deficit	(5,402,870)	(5,375,876)
Total Stockholders' Equity	95,673	123,524
Total Liabilities and Stockholders' Equity	$ 769,135	$ 828,625

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9. Income Taxes (Details) (USD $)	Sep. 30, 2012
Operating loss carryforwards	$ 3,169,000

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1. Basis of Presentation

3 Months Ended

Sep. 30, 2012

Notes

1. Basis of Presentation

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.

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2. Description of Business and Significant Accounting Policies: Accounts Receivable (Details) (USD $)	Sep. 30, 2012
Trade receivables allowance for doubtful accounts	$ 11,425

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2. Description of Business and Significant Accounting Policies: Basic and Diluted Net Loss Per Share (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Basic and Diluted Net Loss Per Share

Basic and Diluted Net Loss Per Share - Basic 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.

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3. Going Concern (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Accumulated deficit	$ 5,402,870	$ 5,375,876

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2. Description of Business and Significant Accounting Policies: Statement of Cash Flows (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Statement of Cash Flows

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.

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2. Description of Business and Significant Accounting Policies

3 Months Ended

Sep. 30, 2012

Notes

2. Description of Business and Significant Accounting Policies

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 $12,908 and $5,087 during the three months ended September 30, 2012 and 2011, 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.

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.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). 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, 2012.

Basic and Diluted Net Loss Per Share - Basic 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.

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. 

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Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Trade receivables allowance for doubtful accounts	$ 11,425
Notes payable and capital leases discount		$ 1,514
Common stock shares authorized	100,000,000	100,000,000
Common stock shares issued	63,781,213	63,781,213
Common stock shares outstanding	63,781,213	63,781,213

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2. Description of Business and Significant Accounting Policies: Depreciation and Amortization (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Depreciation and Amortization

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 $12,908 and $5,087 during the three months ended September 30, 2012 and 2011, respectively.

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Document and Entity Information	3 Months Ended
	Sep. 30, 2012	Nov. 14, 2012
Document and Entity Information
Entity Registrant Name	PACIFIC SANDS INC
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Entity Central Index Key	0001069799
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		63,683,253
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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2. Description of Business and Significant Accounting Policies: Revenue Recognition (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Revenue Recognition

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.

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Statements Of Operations (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Net sales	$ 432,842	$ 352,830
Cost of sales	231,102	230,976
Gross profit	201,740	121,854
Selling and administrative expenses	223,560	204,486
Loss from operations	(21,820)	(82,632)
Interest expense	(5,174)	(6,208)
Total other expense	(5,174)	(6,208)
Loss before income taxes	(26,994)	(88,840)
Income taxes
Net loss	$ (26,994)	$ (88,840)
Basic and diluted loss per share	$ (0.0004)	$ (0.0015)
Basic and diluted weighted average shares outstanding - basic	63,495,187	61,247,626

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7. Notes Payable and Capital Lease Obligations

3 Months Ended

Sep. 30, 2012

Notes

7. Notes Payable and Capital Lease Obligations

7.                     NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable at September 30, 2012 and June 30, 2012 consisted of the following:

September 30, 2012		June 30, 2012
J.P. Morgan Chase –  business line of credit	$	30,117	$	34,991
Federal payroll tax installment payable		45,699		51,699
Notes payable - stockholder		64,400		55,400
Convertible notes payable – net of discount of $0 and $1,514		-		20,000
Notes payable – former executive officer		134,420		146,641
Promissory Note – Kenosha Area Business Alliance		117,533		58,046
		392,169		366,777
Less current maturities		120,688		99,987
	$	271,481	$	266,790

The scheduled annual maturities for notes payable and capital lease obligations are as follows for the years ending September 30,

2013	$	120,688
2014		140,786
2015		60,306
2016		17,692
2017		18,783
2018 and thereafter		33,914

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6. Accrued Expenses

3 Months Ended

Sep. 30, 2012

Notes

6. Accrued Expenses

6.                     ACCRUED EXPENSES

Accrued expenses at September 30, 2012 and June 30, 2012 consisted of the following:

	September 30, 2012		June 30, 2012
Accrued compensation	$	10,250	$	19,435
Accrued  payroll taxes		882		8,764
Accrued professional fees		1,200		238
Accrued health insurance		2,325		-
Accrued interest		2,700		2,700
Total	$	17,357	$	31,137

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2. Description of Business and Significant Accounting Policies: Use of Accounting Estimates (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Use of Accounting Estimates

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.

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2. Description of Business and Significant Accounting Policies: Advertising and Promotional Costs (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Advertising and Promotional Costs

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

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2. Description of Business and Significant Accounting Policies: Nature of Business (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Nature of Business

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.

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8. Loss Per Share

3 Months Ended

Sep. 30, 2012

Notes

8. Loss Per Share

8.                     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.

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 September 30,
	2012		2011
Numerator:
Basic and diluted loss	$	(26,994)	$	(88,840)
Denominator:
Basic and diluted per share data - weighted average shares		63,495,187		61,247,626
Basic and diluted loss per share		(0.0004)		(0.0015)

Convertible debt is not included in the computation of diluted loss per common share for the three month period ended September 30, 2011 since its inclusion would have resulted in an anti-dilutive effect.

Anti-dilutive securities not included in the net loss per share calculation:

	September 30, 2012		September 30, 2011
Convertible notes	$	-	$	420,000

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9. Income Taxes

3 Months Ended

Sep. 30, 2012

Notes

9. Income Taxes

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, 2012 and June 30, 2012 are as follows:

	September 30, 2012		June 30, 2012
Net operating loss carryforwards	$	1,330,000	$	1,320,000
Deferred compensation		57,000		62,000
Deferred rent expense		15,000		15,000
Accounts receivable allowance		4,000		4,000
Valuation allowance		(1,402,000)		(1,402,000)
Net Deferred Tax Asset	$	-	$	-

At September 30, 2012, the Company has net operating loss carry-forwards for Federal tax purposes of approximately $3,169,000 which, if unused to offset future taxable income, will expire in years beginning in 2018.

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2. Description of Business and Significant Accounting Policies: Inventories (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Inventories

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

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2. Description of Business and Significant Accounting Policies: Depreciation and Amortization (Details) (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Depreciation and amortization	$ 12,908	$ 5,087

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2. Description of Business and Significant Accounting Policies: Accounts Receivable (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Accounts Receivable

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, 2012.

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4. Inventories: Schedule of inventories (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of inventories

	September 30, 2012		June 30, 2012
Raw materials	$	143,077	$	164,487
Finished goods		16,552		28,203
Total	$	159,629	$	191,690

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7. Notes Payable and Capital Lease Obligations: Schedule of maturities of notes payable and capital lease obligations (Details) (USD $)	Sep. 30, 2012
2013	$ 120,688
2014	140,786
2015	60,306
2016	17,692
2017	18,783
2018 and thereafter	$ 33,914

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Statements Of Cash Flows (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Net loss	$ (26,994)	$ (88,840)
Depreciation and amortization	12,908	5,087
Amortization of debt discount		1,514
Allowance for doubtful accounts		9,322
Deferred rent expense	(800)
Change in trade accounts receivable	30,018	68,307
Change in inventories	32,061	(8,032)
Change in other assets	10,174	(6,284)
Change in accounts payable and other current liabilities	(56,231)	4,992
Net Cash Provided by (Used in) Operating Activities	1,136	(1,366)
Cash flows from investing activities
Purchase of equipment	(68,051)
Net Cash Used in Investing Activities	(68,051)
Proceeds from notes payable	102,500
Repayment of notes payable and long term obligations	(77,965)	(7,395)
Net Cash Provided by (Used in) Financing Activities	24,535	(7,395)
Net decrease in cash and cash equivalents	(42,380)	(8,761)
Beginning of period	57,575	9,753
End of period	15,195	992
Cash paid for interest	5,174	1,898
Cash paid for income taxes
Conversion of debt to equity	20,000
Acquisition of stock for debt	$ 20,857

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5. Property and Equipment

3 Months Ended

Sep. 30, 2012

Notes

5. Property and Equipment

5.                     PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2012 and June 30, 2012 consisted of the following:

	September 30, 2012		June 30, 2012
Furniture and office equipment	$	32,966	$	22,464
Manufacturing equipment		163,827		106,989
Leasehold improvements		78,460		78,460
Computer software		16,577		16,577
Office equipment		52,706		51,996
Property and equipment, gross		344,566		276,486
Less accumulated depreciation and amortization		(137,358)		(124,627)
Property and equipment, net	$	207,178	$	151,859

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5. Property and Equipment: Schedule of Property and Equipment (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of Property and Equipment

	September 30, 2012		June 30, 2012
Furniture and office equipment	$	32,966	$	22,464
Manufacturing equipment		163,827		106,989
Leasehold improvements		78,460		78,460
Computer software		16,577		16,577
Office equipment		52,706		51,996
Property and equipment, gross		344,566		276,486
Less accumulated depreciation and amortization		(137,358)		(124,627)
Property and equipment, net	$	207,178	$	151,859

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5. Property and Equipment: Schedule of Property and Equipment (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Furniture and office equipment	$ 32,966	$ 22,464
Manufacturing equipment	163,827	106,989
Leasehold improvements	78,460	78,460
Computer software	16,577	16,577
Office equipment	52,706	51,996
Property and equipment, gross	344,566	276,486
Accumulated depreciation and amortization	(137,358)	(124,627)
Property and equipment, net	$ 207,178	$ 151,859

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2. Description of Business and Significant Accounting Policies: Income Taxes (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Income Taxes

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.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). 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.