UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 
 FORM
        10-QSB
 
 (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, 2006
 
 [    ]
              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 small business issuer as specified in its charter)
  Nevada
              88-0322882State
                  or other jurisdiction of incorporation or organization)
              (IRS
                  Employer Identification No.)
 
 1509
        Rapids Drive, Racine, WI 53404
 (Address
        of principal executive offices)
 
 (262)619-3261
 (Issuer's
        telephone number)
 
  Not
        Applicable
 (Former
        name, former address and former fiscal year, if changed since last
        report)
 
 Check
        whether the issuer (1) filed all reports required to be filed by
        Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 No ____
  As
        of
        December 1, 2006, the Company had 32,118,124 shares outstanding of its $.001
        par
        value common stock.
 
 
 Transitional
        Small Business Disclosure Format (check one):
 
 Yes 
        ____   No X














PART
                I   FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements
            3Report
                  of Independent Registered Public Accounting Firm
            3Condensed
                Balance Sheets as of September 30, 2006 (unaudited) and June 30, 2006
                (audited)
            4Condensed
                Statements of Operations for the Three Months Ended September 30,
                2006 and
                2005 (unaudited)
            5Condensed
                Statements of Stockholders' Equity ThreeMonths
                Ended September 30, 2006 and 2005 (unaudited)
            6Condensed
                Statements of Cash Flows for the Three Months Ended September 30,
                2006 and
                2005 (unaudited)
            7Notes
                to Condensed Financial Statements (unaudited)
            8Item
                2.
            Management's
                Discussion and Analysis or Plan of Operation
            16Item
                3.
            Quantitative
                  and Qualitative Disclosers About Market Risk
            19Item 4.
            Controls
                and Procedures
            20PART
                IIOTHER
                INFORMATIONItem
                1.
            Legal
                Proceedings
            21Item
                1A.
            Risk Factors
            21Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            21Item
                3.
            Defaults
                Upon Senior Securities
            22Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            22Item
                5.
            Other
                Information
            22Item
                6.
            Exhibits
            22Signatures
            22








2


**PART
        I   FINANCIAL INFORMATION**
  **Item
                  1**
              **Financial
                  Information**








**Frank
        L. Sassetti & Co.**
 **Certified
        Public Accountants**
 
 
 
 The
        Board
        of Directors
 Pacific
        Sands, Inc.
 
 
 
 We
        have
        reviewed the balance sheet of PACIFIC SANDS, INC. as of September 30, 2006
        and
        the related statements of operations for the three months ended September
        30,
        2006 and 2005, and the statements of stockholders' equity and cash flows
        for the
        three months ended September 30, 2006 and 2005. These interim financial
        statements are the responsibility of the Company's management.
 
 We
        conducted our reviews in accordance with standards of the Public Company
        Accounting Oversight Board (United States). A review of interim financial
        information consists principally of applying analytical procedures to financial
        data and making inquiries of persons responsible for financial and accounting
        matters. It is substantially less in scope than an audit conducted in accordance
        with auditing standards generally accepted in the United States, the objective
        of which is the expression of an opinion regarding the financial statements
        taken as a whole. Accordingly, we do not express such an opinion.
 
 Based
        on
        our reviews we are not aware of any material modifications that should be
        made
        to the financial statements referred to above for them to be in conformity
        with
        accounting principles generally accepted in the United States.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 14 to the financial
        statements, the Company has a significant accumulated deficit which raises
        substantial doubt about the Company's ability to continue as a going concern.
        Management's plans in regard to these matters are also described in Note
        14. The
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainly.
 
 We
        have
        previously audited, in accordance with the standards of the Public Company
        Accounting Oversight Board (United States), the balance sheet of PACIFIC
        SANDS,
        INC. as of June 30, 2006 and the related statements of operations, stockholders'
        equity and cash flows for the year then ended (not presented herein); and
        in our
        report dated September 12, 2006, we expressed an unqualified opinion on these
        financial statements. In our opinion, the information set forth in the
        accompanying balance sheet as of June 30, 2006 is fairly stated, in all material
        respects, in relation to the balance sheet from which it has been
        derived.
 
 
 /s/
        Frank
        L. Sassetti & Co.
 
 
 November
        30, 2006
 Oak
        Park,
        Illinois
 
 
 
 
 6611
        W.
        North Avenue * Oak Park, Illinois 60302 * Phone (708) 386-1433 * Fax (708)
        386-0139
 
 3




PACIFIC
      SANDS, INC.


BALANCE
          SHEETS
 SEPTEMBER
          30, 2006 AND JUNE 30, 2006
 
 **ASSETS**September
                    30,
                
                June
                    30,2006
                
                2006(A
                    Review)**CURRENT
                    ASSETS**Cash
                    and cash equivalents
                
                $
                2,431
                
                $
                4,977Trade
                    receivables, net of allowance for doubtful accounts of $5,497
                    and $4,340,
                    respectively
                
                
                67,873
                
                
                112,587Inventories
                
                
                71,702
                
                
                77,069Prepaid
                    expenses
                
                
                2,748
                
                
                7,212Total
                    Current Assets
                
                
                144,754
                
                
                201,845**PROPERTY
                    AND EQUIPMENT**Furniture
                    and fixtures & office equipment
                
                
                11,375
                
                
                10,238Manufacturing
                    equipment
                
                
                12,204
                
                
                12,204Leasehold
                    improvements
                
                
                3,035
                
                
                3,035Deposit
                    on software costs
                
                
                23,497
                
                
                20,26950,111
                
                
                45,746Less
                    accumulated depreciation
                
                
                8,548
                
                
                6,940Property
                    and Equipment, net
                
                
                41,563
                
                
                38,806**OTHER
                    ASSETS**Accounts
                    receivable - other (net of allowance for doubtful accounts of
                    $
                    235,718)
                
                
                -
                
                
                -Security
                    deposits
                
                
                841
                
                
                841Total
                    Other Assets
                
                
                841
                
                
                841Total
                    Assets
                
                $
                187,158
                
                $
                241,492**LIABILITIES
                    AND STOCKHOLDERS' EQUITY****CURRENT
                    LIABILITIES**Accounts
                    payable
                
                $
                91,436
                
                $
                99,795Current
                    maturities of long-term debt
                
                
                10,773
                
                
                9,877Accrued
                    expenses
                
                
                77,255
                
                
                59,691Deferred
                    compensation
                
                
                250,434
                
                
                227,934Notes
                    payable - other
                
                
                38,715
                
                
                61,177Total
                    Current Liabilities
                
                
                468,613
                
                
                458,474**LONG
                    TERM LIABILITIES**Capital
                    leases, less current portion
                
                
                20,517
                
                
                22,609Total
                    Long Term Liabilities
                
                
                20,517
                
                
                22,609**STOCKHOLDERS'
                    EQUITY**Common
                    stock
                
                
                39,284
                
                
                38,345Additional
                    paid in capital
                
                
                3,270,711
                
                
                3,041,947Treasury
                    stock, at cost
                
                
                (151,030
                )
                
                (151,030
                )Accumulated
                    deficit
                
                
                (3,460,937
                )
                
                (3,168,853
                )Total
                    Stockholders' Equity
                
                
                (301,972
                )
                
                (239,591
                )Total
                    Liabilities and Stockholders' Equity
                
                $
                187,158
                
                $
                241,492
 
 The
          accompanying notes are an integral part of
          the
          financial statements.
  4
 
 PACIFIC
          SANDS, INC.
 STATEMENTS
          OF OPERATIONS
 THREE
          MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
  Three
                    months endedSeptember
                    30,2006
                
                2005NET
                    SALES
                
                $
                119,558
                
                $
                71,234COST
                    OF SALES
                
                
                65,313
                
                
                22,578GROSS
                    PROFIT
                
                
                54,245
                
                
                48,656OPERATING
                    EXPENSESSelling
                    and administrative expenses
                
                
                165,027
                
                
                154,857Stock
                    based compensation to officers
                
                
                35,160
                
                
                -Stock
                    based compensation related to options
                
                
                134,211
                
                
                -Total
                    operating expenses
                
                
                334,398
                
                
                154,857LOSS
                    FROM OPERATIONS
                
                
                (280,153
                )
                
                (106,201
                )OTHER
                    INCOME (EXPENSES)Interest
                    expense
                
                
                (11,932
                )
                
                (1,142
                )Loss
                    on disposal of assets
                
                
                -
                
                
                (2,680
                )Miscellaneous
                    income
                
                
                1
                
                
                11Total
                    Other Income (Expenses)
                
                
                (11,931
                )
                
                (3,811
                )LOSS
                    BEFORE INCOME TAXES
                
                
                (292,084
                )
                
                (110,012
                )INCOME
                    TAXES
                
                
                -
                
                
                -NET
                    LOSS
                
                $
                (292,084
                )
                $
                (110,012
                )BASIC
                    AND DILUTED NET LOSS PER SHARE
                
                $
                (0.009
                )
                $
                (0.004
                )BASIC
                    AND DILUTED WEIGHTED AVERAGE SHARES
                
                
                31,212,029
                
                
                29,497,231
 
 The
          accompanying notes are an integral part of
          the
          financial statements.
  5
 
 PACIFIC
          SANDS, INC.
 STATEMENTS
          OF STOCKHOLDERS' EQUITY
 THREE
          MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
 
 Common
                        Stock
                
                
                
                Treasury
                    StockPar
                    value - $.00150,000,000 shares authorized
                
                Additional
                    Paid In
                
                Number
                    of
                
                
                
                AccumulatedShares
                
                Amount
                
                Capital
                
                Shares
                
                Amount
                
                Deficit
                
                TotalBalance
                    at June 30, 2005
                
                
                36,844,298
                
                $
                36,844
                
                $
                2,879,170
                
                
                (7,559,187
                )
                $
                (151,030
                )
                $
                (2,858,642
                )
                $
                (93,658
                )Issuance
                    of Common Stock:For
                    Cash
                
                
                150,000
                
                
                150
                
                
                15,822
                
                
                
                
                
                
                
                
                
                
                
                15,972For
                    Options Exercised
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                -For
                    Cancellation of Debt
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                -For
                    Professional services
                
                
                225,000
                
                
                225
                
                
                15,075
                
                
                
                
                
                
                
                
                
                
                
                15,300For
                    Salaries
                
                
                30,000
                
                
                30
                
                
                12,766
                
                
                
                
                
                
                
                
                
                
                
                12,796Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (110,012
                )
                
                (110,012
                )Balance
                    at September 30, 2005
                
                
                37,249,298
                
                $
                37,249
                
                $
                2,922,833
                
                
                (7,559,187
                )
                $
                (151,030
                )
                $
                (2,968,654
                )
                $
                (159,602
                )Balance
                    at June 30, 2006
                
                
                38,344,760
                
                $
                38,345
                
                $
                3,041,947
                
                
                (7,559,187
                )
                $
                (151,030
                )
                $
                (3,168,853
                )
                $
                (239,591
                )Issuance
                    of Common Stock:For
                    Cash
                
                
                50,000
                
                
                50
                
                
                4,950
                
                
                
                
                
                
                
                
                
                
                
                5,000For
                    Professional Services
                
                
                296,885
                
                
                297
                
                
                29,828
                
                
                
                
                
                
                
                
                
                
                
                30,125In
                    Lieu of Interest Payment
                
                
                100,000
                
                
                100
                
                
                5,900
                
                
                
                
                
                
                
                
                
                
                
                6,000For
                    Cancellation of Debt
                
                
                192,086
                
                
                192
                
                
                19,015
                
                
                
                
                
                
                
                
                
                
                
                19,207For
                    Salaries
                
                
                300,000
                
                
                300
                
                
                34,860
                
                
                
                
                
                
                
                
                
                
                
                35,160Stock
                    based compensation related to options
                
                
                
                
                
                
                
                
                134,211
                
                
                
                
                
                
                
                
                
                
                
                134,211Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (292,084
                )
                
                (292,084
                )Balance
                    at September 30, 2006
                
                
                39,283,731
                
                $
                39,284
                
                $
                3,270,711
                
                
                (7,559,187
                )
                $
                (151,030
                )
                $
                (3,460,937
                )
                $
                (301,972
                )
 
 The
          accompanying notes are an integral part of
          the
          financial statements.
  6
 
 PACIFIC
          SANDS, INC.
 STATEMENTS
          OF CASH FLOWS
 THREE
          MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
 
 2006
                
                2005CASH
                    FLOWS FROM OPERATING ACTIVITIESNet
                    loss
                
                $
                (292,084
                )
                $
                (110,012
                )Adjustments
                    to reconcile net loss to net cash provided by (used in) operating
                    activities -Depreciation
                
                
                1,608
                
                
                1,357Loss
                    on disposal of equipment
                
                
                -
                
                
                2,680Deferred
                    compensation
                
                
                22,500
                
                
                1,950Compensation
                    expense on stock options granted
                
                
                134,211
                
                
                -Common
                    shares and rights issued for services, compensation, and
                    interest
                
                
                71,285
                
                
                28,096Changes
                    in assets and liabilities -Trade
                    accounts receivable
                
                
                44,714
                
                
                3,146Inventories
                
                
                5,367
                
                
                (17,660
                )Prepaid
                    expenses
                
                
                4,464
                
                
                2,510Accounts
                    payable and other current liabilities
                
                
                9,206
                
                
                49,603Net
                    Cash Provided by (Used in) Operating Activities
                
                
                1,271
                
                
                (38,330
                )CASH
                    FLOWS FROM INVESTING ACTIVITIESPurchases
                    of equipment
                
                
                (4,365
                )Net
                    Cash Used in Investing Activities
                
                
                (4,365
                )
                
                -CASH
                    FLOWS FROM FINANCING ACTIVITIESIssuance
                    of common stock
                
                
                5,000
                
                
                15,972Issuance
                    of notes payable
                
                
                9,774
                
                
                25,000Repayment
                    of notes payable
                
                
                (14,226
                )
                
                (882
                )Net
                    Cash Provided by Financing Activities
                
                
                548
                
                
                40,090NET
                    (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                (2,546
                )
                
                1,760CASH
                    AND CASH EQUIVALENTSBeginning
                    of period
                
                
                4,977
                
                
                541End
                    of period
                
                $
                2,431
                
                $
                2,301SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATIONCash
                    paid during the period forInterest
                
                $
                11,932
                
                $
                1,142Income
                    taxes
                
                $
                -
                
                $
                -SUPPLEMENTAL
                    INFORMATION FROM NONCASH FINANCING ACTIVITIESConversion
                    of debt and interest to equity
                
                $
                19,207Capital
                    Lease Obligations
                
                $
                2,332
                
                $
                1,217
 
 
 The
          accompanying notes are an integral part of
          the
          financial statements.
  7
 
 PACIFIC
          SANDS, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2006 AND 2005 AND JUNE 30, 2006
 (A
          Review)
  1.
                NATURE
                    OF OPERATIONS AND SUMMARY OF 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 with an original
          authorized capital stock of 25,000 shares of $0.001 par value which was
          increased to 20,000,000 shares in 1997 with the same par value. On May
          6, 2002,
          the authorized capital stock was increased to 50,000,000 shares.
 
 The
          Company manufactures and distributes nontoxic cleaning and water treatment
          products with applications ranging from home spas and swimming pools to
          cleaning
          and pet care.
 
 Interim
          Financial Statements -
          The
          balance sheet as of September 30, 2006 and the statements of operations
          for the
          three months ended September 30, 2006 and 2005, and the statements of
          stockholders' equity and cash flows for the three months ended September
          30,
          2006 and 2005, are unaudited. In the opinion of management, such financial
          statements reflect all adjustments, which were of a normal and recurring
          nature,
          necessary for a fair presentation of financial position as of September
          30, 2006
          and the results of operations and cash flows for the three months ended
          September 30, 2006 and 2005.
 
 Inventories -
          Inventories are stated at the lower of cost or market on the first-in,
          first-out
          (FIFO) basis.
 
 Depreciation - For
          financial reporting purposes, depreciation of property and equipment has
          been
          computed over estimated useful lives of two to seven years primarily using
          the
          straight-line method. Depreciation charges totaled $1,608 and $1,356 during
          the
          three months ended on September 2006 and 2005, respectively.
 
 Revenue
          Recognition -
          Revenue from sales to distributors and resellers is recognized when the
          related
          products are shipped.
 
 Advertising
          and Promotional Costs -
          Advertising and promotion costs are expensed as incurred. During the three
          months ended September 30, 2006 and 2005, advertising and promotion costs
          totaled $13,772 and $24,774, respectively.
 
 Income
          Taxes - The
          Company accounts for income taxes under Statement of Financial Accounting
          Standards (SFAS) 109. Under the asset and liability method of SFAS 109,
          deferred
          income taxes are recognized for the tax consequences of temporary differences
          by
          applying enacted statutory rates applicable to future years to the difference
          between the financial statement carrying amounts and the tax basis of existing
          assets and liabilities.
 
  8
 
 PACIFIC
          SANDS, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2006 AND 2005 AND JUNE 30, 2006
 
 1.
                NATURE
                    OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                    -
                    CONTINUED
 
 Accounts
          Receivable -
          The
          Company makes judgments as to the collectibility 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 collectibility of the receivables. Management believes
          that
          the current specific and general receivable reserves aggregating $241,215
          is
          adequate as of September 30, 2006 and June 30, 2006.
 
 Basic
          and Diluted Net Loss Per Share - Net
          loss per share is calculated in accordance with Statement of Financial
          Accounting Standards 128, Earnings Per Share ("SFAS 128"). Basic net loss
          per
          share is based upon the weighted average number of common shares outstanding.
          Diluted net loss per share is based on the assumption that all dilutive
          convertible shares and stock options were converted or exercised. Dilution
          is
          computed by applying the treasury stock method. Under this method, options
          and
          warrants are assumed to be exercised at the beginning of the period (or
          at the
          time of issuance, if later), and as if funds obtained thereby were used
          to
          purchase common stock at the average market price during the
          period.
 
 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.
 
 2
                INVENTORIES
 
 Inventories
          as of September 30, 2006 and June 30, 2006 consisted of the
          following.
 
 September
                    30, 2006
                
                June
                    30,
                  2006Raw
                    materials
                
                $
                49,943
                
                $
                49,364Finished
                    goods
                
                
                21,759
                
                
                27,705$
                71,702
                
                $
                77,069
 
  9
 
 PACIFIC
          SANDS, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2006 AND 2005 AND JUNE 30, 2006
 
 3.
                LONG
                    TERM OBLIGATIONS
 
 Long
          term
          obligations consists of a four year lease agreement for software dated
          June 20,
          2005 with an imputed interest rate of 14.45%, a two year lease agreement
          for
          computer hardware with an imputed interest rate of 22.94% placed in service
          in
          December, 2005, a three year lease for computer hardware with an imputed
          interest rate of 21.62%, placed in service in January, 2006, a three and
          a half
          year lease agreement for software with an imputed interest rate of 12.64%,
          placed in service in January, 2006 and a two year computer lease with an
          imputed
          interest rate of 17.61%, placed in service in September, 2006. Monthly
          installment payments are $691, $67, $93, $312 and $57, respectively with
          a
          bargain purchase option at the end of each lease of $1. The transactions
          have
          been accounted for as capital leases in accordance with generally accepted
          accounting principles.
 
 The
          scheduled maturities are as follows for the years ending September
          30,
 
 2007
                
                $
                10,7732008
                
                
                11,6992009
                
                
                8,818
 
 4.
                NOTES
                    PAYABLE - OTHER
 
 Notes
          payable - other consist of various small unsecured notes to
          stockholders/officers at rates fluctuating up to 10%. Management intends
          to
          restructure its debt. To date, $3,000 in interest has been converted to
          equity.
 
 5.
                STOCK-BASED
                    COMPENSATION
 Prior
            to
            December 31, 2005, the Company accounted for its stock-based compensation
            plans
            under the recognition and measurement principles of Accounting Principles
            Board
            ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
            related
            interpretations. There was no impact/disclosure required for the three
            months
            ended September 30, 2005.
 Effective
            January 1, 2006 the Company adopted the revision to SFAS 123 ("SFAS 123R"),
            "Share-Based Payment", that focuses primarily on accounting for transactions
            in
            which an entity obtains employee services in share-based payment transactions
            utilizing the modified perspective method. This statement replaces SFAS
            123,
            "Accounting for Stock-Based Compensation", and supersedes APB Opinion
            No. 25,
            "Accounting for Stock Issued to Employees". SFAS 123R requires companies
            to
            expense the fair value of employee stock options and similar
            awards.
  During
            the quarter ended September 30, 2006, the Company modified 3,000,000
            options
            that were set to expire on July 5, 2006 by reissuing for one year with
            no
            vesting period at the same price. On September 28, 2006 these 3,000,000
            vested
            options were surrendered and reissued for four years with no vesting
            period and
            exercise prices as follows; 2,000,000 shares at $.16 and 1,000,000 shares
            at
            $1.00.
 
  10
 
 PACIFIC
          SANDS, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2006 AND 2005 AND JUNE 30, 2006
  5.
                STOCK-BASED
                    COMPENSATION - CONTINUED
 
 The
          fair
          value of each option award is estimated on the date of grant using the
          standard
          Black-Scholes-Merton model and modified using calculations based on likely
          "expected term" rather than "contractual term" additionally modified by
          historic
          likelihood that the participants will exercise the options based on previous
          exercise behavior. The Historic volatility was calculated using weekly
          price
          observations for the expected term of the options. Expected Term was calculated
          using the formula (vesting term plus original contractual term divided
          by two).
          The risk-free rate for periods within the contractual life of the option
          is
          based on the U.S. Treasury constant maturity for one year at July 3, 2006
          and
          the difference between three and five years at September 28,
          2006.
 July
                    3, 2006
                
                September
                    28, 2006Weighted
                    average volatility
                
                116%
                
                161%Expected
                    dividends
                
                0%
                
                0%Expected
                    term (in years)
                
                1
                
                2Risk
                    free rate
                
                5.260%
                
                4.585%
  A
        summary
        of option activity as of September 30, 2006 and changes during the year then
        ended is presented below:
 
 Price
                  per shareShares
              
              Range
              
              Weighted
                  AverageBalance,
                  June 30, 2006
              
              
              3,000,000
              
              $.03
                  - $.10
              
              $
              0.052Granted
                  /modified
              
              
              6,000,000
              
              $.03
                  - $1.00
              
              $
              0.247ExercisedCancelled
              
              
              (3,000,000
              )
              $.03
                  - $.10
              
              $
              0.053Expired
              
              
              (3,000,000
              )
              $.03
                    - $.10
              
              $
              0.053Outstanding
                  at September 30, 2006
              
              
              3,000,000
              
              $.16
                  - $1.00
              
              $
              0.440
  6.
              LEASE
                  COMMITMENT
  The
          Company entered into a one and a half year lease expiring July 31, 2007
          for
          11,000 square feet of office and warehouse space for $1,987 per month.
          The
          Company is responsible for insuring the premises. Rent expense was approximately
          $5,961 and $5,124 for the three months ended September 30, 2006 and 2005
          respectively.
 
 
 11
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006 AND 2005 AND JUNE 30, 2006
 
 7.
              BASIC
                  AND DILUTED LOSS PER SHARE
 
 The
        following table illustrates the reconciliation of the numerators and
        denominators of the basic and diluted loss per share computations.
 
 Three
                  months ending
                September
                  30,2006
              
              2005Basic
                  and diluted loss per share:Numerator:Net
                  loss
              
              $
              (292,084
              )
              $
              (110,012
              )Denominator:Basic
                  and diluted weighted average number of common shares outstanding
                  during
                  the period
              
              
              31,212,029
              
              
              29,497,231Basic
                  and diluted loss per share
              
              $
              (0.009
              )
              $
              (0.004
              )
 
 Since
        the
        Company has incurred losses from all periods presented, the dilutive per
        share
        calculation is the same as the basic calculation.
 
 8.
              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, 2006 are as follows:
 
 Deferred
                  tax assetNet
                  operating loss carryforwards
              
              $
              803,000Valuation
                  allowance
              
              
              (803,000
              )Net
                  deferred tax asset
              
              $
              -
 
 At
        September 30, 2006, the Company has net operating loss carryforwards for
        Federal
        tax purposes of approximately $2,295,000 which,
        if unused to offset future taxable income, will expire in years beginning
        in
        2018.
 
 
 12
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006 AND 2005 AND JUNE 30, 2006
 
 9.
              RELATED
                  PARTY TRANSACTIONS AND FORGIVENESS OF
                  DEBT
 
 On
        June
        15, 2004, Stan and Rita Paulus resigned as officers and board members of
        the
        Company and were replaced by a new management team. As part of the transition
        in
        management, several transactions occurred which are all recorded
        below.
 
 Stan
        and
        Rita agreed to waive all unpaid compensation from the Company except for
        $100,000, which shall be paid in full within three years of the transition
        date.
 
 The
        Paulus' purchased from the Company the inventory known as "technical books"
        for
        the sum of $150,000 in exchange for 4,859,187 shares of Pacific Sands, Inc.
        common stock. Based on the average market value of the Company's stock, which
        valued these shares at $121,480, there was an additional write down of the
        inventory of $28,500. This amount was recorded as a reduction to additional
        paid
        in capital based on the related party nature of the transaction. Since the
        shares were still being held in escrow by legal counsel at June 30, 2004,
        the
        transaction was recorded as due from shareholder. As of June 30, 2006, the
        shares had been returned to treasury.
  On
        June
        14, 2006, one day prior to the due date of the unpaid compensation to the
        Paulus' of $100,000, the Company and the Paulus' agreed to extend the payment
        until January, 2007 with monthly payments of $25,000 beginning in October,
        2006.
        In addition, there was a $5,000 note payable rolled into the monthly payment
        plan due January, 2007. In July, 2006 100,000 shares of restricted stock
        were
        issued as in exchange for extending the payment. The
        value
        of the shares was $6,000 and is included in interest expense for the period
        ended September 30, 2006.
 
 Finally,
        two of the current officers of the company have agreed to defer a substantial
        portion of their salaries until such time as it may be paid. As of September
        30,
        2006, the deferred compensation for these two officers was $ 142,624. Prior
        to
        accepting the position as an officer of the company, one of the current officers
        agreed to defer $11,500 of his professional consulting services which is
        still
        unpaid as of September 30, 2006. The deferred compensation charges to operations
        for the three months ended September 30, 2006 and 2005 was $22,500 and $1,950,
        respectively.
 
 10.
              CONTINGENCIES
 Accounts
          receivable from a major former customer, Mariani Raisin Company in the
          amount of
          $235,718 invoiced on October 25, 2001 and January 17, 2002 are being contested
          for compliance requirements. The customer maintained that the equipment
          did not
          work properly, but management felt that this equipment was built to customer
          specifications. Accordingly, management intends to vigorously pursue the
          outstanding receivable. Since counsel suggests that this amount cannot
          be
          collected without incurring some legal costs and that there is the potential
          that a settlement could ultimately be reached, an allowance for bad debts
          of
          $235,718 was established as of June 30, 2006. Bad debt expense in the amount
          of
          $3,631 and $0 was recorded in the statement of operations for the three
          months
          ended September 30, 2006 and 2005, respectively.
 
 
 13
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006 AND 2005 AND JUNE 30, 2006
 
 11
              RECENT
                  PRONOUNCEMENTS
 
 In
        June
        2006, the FASB released FASB Interpretation No. 48, "Accounting for Uncertainty
        in Income Taxes, " an interpretation of FASB Statement No. 109 ("FIN48").
        FIN 48
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. A Company must determine whether it is
        "more-likely-than-not" that a tax position will be sustained upon examination,
        including resolution of any related appeals or litigation procedures, based
        on
        the technical merits of the position. Once it is determined that a position
        meets the more-likely-than-not recognition threshold, the position is measured
        to determine the amount of benefit to recognize in the financial statement.
        This
        interpretation is effective for fiscal years beginning after December 15,
        2006.
        Earlier application of the provisions of this interpretation is interim
        financial statement, in the period this interpretation is adopted. The
        provisions of FIN 48 are not expected to have a material affect on the company's
        consolidated financial statements.
 
 In
        March
        2006, the FASB issued SFAS N. 156, "Accounting for Servicing of Financial
        Assets, " which provides an approach to simplify efforts to obtain hedge-like
        (offset) accounting. This Statement amends FASB SFAS No. 140, "Accounting
        for
        Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
        " with respect to the accounting for separately recognized servicing assets
        and
        servicing liabilities. The Statement (1) requires an entity to recognize
        a
        servicing asset or servicing liability each time it undertakes an obligation
        to
        service a financial asset by entering into a servicing contract in certain
        situations; (2) requires that a separately recognized servicing asset or
        servicing liability be initially measured at fair value, if practicable;
        (3)
        permits an entity to choose either the amortization method or the fair value
        method for subsequent measurement for each class of separately recognized
        servicing assets or servicing liabilities;(4) permits at initial adoption
        a
        one-time reclassification of available-for-sale securities to trading securities
        by an entity with recognized servicing rights, provided the securities
        reclassified offset the entity's exposure to changes in the fair value of
        the
        servicing assets or liabilities; (5) requires separate presentation of servicing
        assets and servicing liabilities subsequently measured at fair value in the
        balance sheet and additional disclosures for all separately recognized servicing
        assets and servicing liabilities. SFAS No. 156 is effective for all separately
        recognized servicing assets and liabilities as of the beginning of an entity's
        fiscal year that begins after September 15, 2006, with earlier adoption
        permitted in certain circumstances. The Statements also describes the manner
        in
        which it should be initially applied. The provisions of SFAS No. 156 are
        not
        expected to affect the Company's financial statements.
 
 In
        November 2004, the FASB issued SFAS No. 151, Inventory Costs. The new Statement
        amends ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting
        for
        abnormal amounts of idle facility expense, freight, handling costs and wasted
        material. This Statement requires that those items be recognized as current
        period charges and requires that allocation of fixed production overhead
        to the
        cost of conversion be based on the normal capacity of the production facilities.
        This Statement is effective for fiscal years beginning after June 15, 2005.
        The
        adoption of this statement did not have a material impact on the Company's
        financial position or results of operations.
 
 
 
 14
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006 AND 2005 AND JUNE 30, 2006
 
 
 12
              DISPUTED
                  PAYABLES WRITTEN OFF
 
 During
        the fiscal year ended June 30, 2004, the Company incurred professional fees
        for
        services that were reflected in the statement of operations. During the fiscal
        year ended June 30, 2005, the Company threatened to sue the vendor for dispute
        of services performed if they pursued this debt and after sending repeated
        letters to resolve the matter and not having any response for over two years,
        management has decided to write off the disputed amount and has reflected
        this
        in the quarter ended June 30, 2006 statement of operations.
 
 13
              CONCENTRATIONS
 
 The
        Company distributes water treatment and nontoxic cleaning products to the
        entire
        U.S. market. For the three months ended September 30, 2006, one customer
        accounted for approximately 31% of the Company's sales. For the three months
        ended September 30, 2005, there were three customers that accounted for 12.5%,
        14% and 13.5% of the Company's sales.
 
 14
              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, 2006, the Company had incurred
        cumulative losses of $3,460,937 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 contributions through the sale of common stock 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.


















15
 
 **Item
                  2.**
              **Management's
                  Discussion and Analysis or Plan 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-KSB FOR THE
          YEAR
          ENDED JUNE 30, 2006 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.
  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" and ecoONE Marketing Group.
  The
          Company develops, manufactures, markets and sells a range of non-toxic,
          environment 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) and pet care.
  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. Pacific Sands is also the master distributor for
          Rain
          Forest Blue, an EPA Registered chlorine and bromine free, non irritating,
          odor
          free, bactericide / algaecide alternative for the treatment of pool
          water.
  Currently
          the Company markets and sells its product lines over the Internet and through
          numerous retail outlets in the US, Canada and Europe. The products are
          also sold
          via Pacific Sands distributors, manufacturer's representatives and
          internationally established pool and spa industry distribution
          networks.
 
 The
          company's goal is to achieve sustained and significant profitability through
          revenues achieved by marketing and sale of its nontoxic, earth, health
          and
          kid-friendly, ecoONE® Pool, Spa, Household Cleaning and other product
          lines.
 
 In
          July
          of 2004, management began the implementation of a three year market saturation
          strategy for the ecoONE® line of pool and spa products. The strategy has been
          very successful to date, resulting in sharp increases in sales, dealer
          and
          distributor outlets and industry recognition. Management estimates that,
          as of
          September 30, 2006, at the end user level, an average of approximately
          1,400 new
          users are starting the ecoONE® System every single month compared to between 40
          and 100 new users per month as of the year June 30, 2005.
 
 Management
          intends to continue the aggressive marketing and sale of its products through
          direct retail and 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.
 
  16
  To
          date,
          the Company has funded operations through a combination of revenues from
          the
          sale of its products, established credit with vendors, loans from management,
          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, 2006 compared to the three months
          ending September 30, 2005.
 
 For
          the
          three months ending September 30, 2006 net sales were $119,558, an increase
          of
          68% over $71,234 **** in
          sales
          booked for the same period in 2005 **.** The
          increase in sales is attributable to a number of factors including a
          significantly higher number of retail outlets carrying the ecoONE® spa treatment
          products, increased direct Internet retail sales and an OEM deal with a
          major
          spa manufacturer which includes privately branded ecoONE® starter kits with
          their new spas sold.
 
 Cost
          of
          Goods Sold was $65,313 compared to $22,578 for the same period the previous
          fiscal year. The increase in cost of goods sold was partially due to the
          fact
          that company is now selling more product through distribution rather than
          direct
          retail sales. Additionally the company’s largest customer has a significant
          component in its manufacturer’s start up kit that is passed through to the
          customer at cost.
 
 Gross
          profits for the three months ending September 30, 2006 were $54,245 **** compared
          to $48,656 **** for
          the
          same period the previous fiscal year.
 
 For
          the
          three months ending September 30, 2006, selling and general administrative
          expenses were $159,167 compared to $154,857 for the three months ending
          September 30, 2005. The company continues to maintain a consistent cost
          structure while achieving quarterly period to period growth each
          year.
 
 The
          company currently has no income tax liabilities.
 
 The
          company has added one full time and one part time employee since the same
          quarter the previous fiscal year.
 
 During
          the three months ending September 30, 2006, the company incurred a charge
          of
          $134,211 for stock based compensation in the form of options valued and
          distributed as follows:
 
 Wynhoff:
          $88,675.63
 Michie:
          $22,767.73
 Rauscher:
          $22,767.73
 
 During
          the three months ending September 30, 2006, the company recorded a charge
          of $35,160 for
          stock based compensation in the form of restricted stock to
          its
          officers as
          follows:
 
 200,000
          shares issued to Michael Wynhoff for an executive bonus: $23,440
 100,000
          shares issued to Michael Michie for an executive bonus: $11,720
 
 The
          Company also issued 296,885 shares of Common Stock (restricted) for services
          for
          the three months ending September 30, 2006. The company recorded a charge
          to
          operations of $30,125 **** for
          those
          shares.
 
 
  17
  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 on its ability to sustain and enhance its current
          revenue stream and to continue to raise funds through loans, 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 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.
 
 Cash
          and
          cash equivalents totaled $2,431 on September 30, 2006 versus $4,977 on
          September
          30, 2005.
 
 At
          the
          end of the period ending September 30, 2006 Accounts receivable had a balance
          of
          $67,873 and current liabilities were $468,613. Current liabilities include
          $145,434 in deferred salaries owed to Company CEO, Michael Wynhoff and
          CFO
          Michael Michie and $105,000 owed to former CEO Stanley Paulus. Current
          liabilities exceed cash flow and A/R expectations. The company must secure
          outside financing to sustain operations and fund potential growth.
 
 Net
          cash
          provided by operations was $1,271 for the three months ending September
          30, 2006
          compared to $38,330 for the same period of the previous fiscal year. The
          company’s ability to fund operations through sales revenue growth accounts for
          this significant change over the previous period.
 
 Net
          cash
          provided by financing activities was $548 for the three month period ending
          September 30, 2006, compared to **$** 40,090 **** for
          the
          same period the previous fiscal year. The company continues to raise funds
          on an
          as needed basis choosing to rely on increasing revenues to fund
          operations.
 
 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.
 
 Management
          is currently in negotiations with a local, reputable and well-qualified
          group of
          investors who have expressed an interest in providing equity financing
          to the
          company to fund its planned growth. If fully funded, the funding arrangement
          would involve the sale of approximately 3,000,000 (three million) unregistered
          treasury shares to the individual investors of the group. Management believes
          that the resulting funding will be sufficient to fund operations and planned
          growth for fiscal year 2007.
 
 The
          Company would use the resulting funds to enhance and balance its cash flow,
          pay
          current obligations and pay for its planned marketing and sales initiatives
          which include expansion of internet sales, expanded trade show presence
          and
          print advertising.
 
 The
          company has no material commitments for capital expenditures at this time.
          The
          company has no “off balance sheet” source of liquidity
          arrangements.
 
 The
          company presently employees five full time and three part time
          employees.
 
  18
  
 **Item
                  3**
              **Quantitative
                  and Qualitative Disclosers 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 most recent quarter (4 th quarter,
        2006), the Company since commencing operations, has not been profitable on
        an
        annual or quarterly basis. The company cannot guarantee that recent quarterly
        profitability will continue on a quarter by quarter basis. 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.
 
 
  19
  **Item
                  4.**
              **Controls
                  and Procedures**
 
 (a)
        Evaluation of disclosure controls and procedures
  We
        maintain disclosure controls and procedures designed to ensure that financial
        information required to be disclosed in our reports filed under the Securities
        Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed,
        summarized, and reported within the required time periods, and that such
        information is accumulated and communicated to our management, including
        our
        Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
        for timely decisions regarding disclosure.
  In
        connection with the completion of its audit of, and issuance of its report
        on,
        our financial statements for the year ended June 30, 2006, Frank L. Sassetti
        & Co. (“Sassetti”) considered our internal controls in order to determine
        their auditing procedures for the purpose of expressing their opinion on
        the
        financial statements and not to provide assurance on our internal controls.
        Sassetti identified deficiencies that existed in the design or operation
        of our
        internal controls over financial reporting that it considered to be “significant
        deficiencies” or “material weaknesses.” The Public Company Accounting Oversight
        Board (“PCAOB”) has defined “significant deficiency” as a control deficiency, or
        a combination of control deficiencies, that adversely affects the company’s
        ability to initiate, authorize, record, process, or report external financial
        data reliably in accordance with generally accepted accounting principles
        such
        that there is more than a remote likelihood that the misstatement of the
        company’s annual or interim financial statements that is more than
        inconsequential will not be detected. The PCAOB has defined a “material
        weakness” as a “significant deficiency or combination of significant
        deficiencies that results in more than a remote likelihood that a material
        misstatement of the annual or interim financial will not be prevented or
        detected.”
  Because
        of inherent limitations of internal control, errors or fraud may nevertheless
        occur and not be detected. Also, projection of any evaluation of the internal
        control to future periods is subject to the risk that internal control may
        become inadequate because of changes in conditions or that the degree of
        compliance may deteriorate. Sassetti noted the following reportable conditions
        that they believe to be material weaknesses: (i) Improve segregation of
        incompatible accounting department duties, (ii) Improve maintenance of
        accounting records by implementing the use of an accounting software system
        and
        (iii) Implement a Corporate Code of Conduct.
  Based
        upon the above evaluation of Management, the Company's Chief Executive Officer
        and Chief Financial Officer concluded that the Company's disclosure controls
        and
        procedures are not yet effective, but the procedures are as effective as
        possible, considering the fact that there is a lack of segregation of duties
        which will continue until such time as the Company can support additional
        executive personnel to enhance segregation of duties.
  (b)
        Changes in internal controls and procedures
  There
        has
        been no change in our internal control over financial reporting during the
        first
        quarter ended September 30, 2006, that has materially affected, or is reasonably
        likely to material affect, our internal control over financial reporting.
 
  20
  **PART
        II** **** **OTHER
        INFORMATION**
 
 **Item
                  1.**
              **Legal
                  Proceedings**
 
 There
        are
        no legal proceedings against the Company and the Company is unaware of
        proceedings contemplated against it.
 
 **Item
                  1A**
              **Risk
                  Factors**
 
 There
        have been no material changes from the risk factors previously disclosed
        in the
        Company’s 10-KSB dated June 30, 2006
  **Item
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds**
 
 On
        July
        3, 2006, Al Green was issued 50,000 shares of restricted stock for professional
        services valued at $5,000.00.
  On
        July
        3, 2006, Advertising Arts Studios was issued 65,385 shares of restricted
        stock
        valued at $6,585.00 for service performed for the company.
  On
        July
        3, 2006, Donald M. Michie was issued 25,000 shares of restricted stock for
        professional services valued at $2,500.00.
 
 On
        July
        3, 2006, SmallCapVoice.com was issued 66,500 shares of restricted stock for
        professional services valued at $6,650.00
 
 On
        July
        31, 2006, Robert Warren was issued 117,086 shares of restricted stock for
        to
        retire a note valued at $11,708.60
 
 On
        July
        31, 2006, Stanley Paulus was issued 100,000 shares of restricted stock for
        extending the terms of the note he currently holds.
 
 On
        August
        25, 2006, an accredited investor was issued 75,000 shares of restricted stock
        for $7,500.00
 
 On
        August
        25, 2006, John D. Hagarty was issued 40,000 shares of restricted stock for
        professional services valued at $4,000.00.
 
 On
        August
        25, 2006, an accredited investor was issued 50,000 shares of restricted stock
        for $5,000.00.
  On
        September 28 th 2006,
        Michael L. Wynhoff was granted 200,000 shares of restricted stock for executive
        bonuses valued at 23,440.00
 On
          September 28 th 2006,
          Michael D. Michie was granted 100,000 shares of restricted stock for executive
          bonuses valued at 11,720.00
 
 On
          September 28 th 2006,
          Mark R. Rauscher was granted 50,000 shares of restricted stock for professional
          services valued at 5,860.00
   21
  **Item
                  3.**
              **Defaults
                  Upon Senior Securities**
 
 None.
 
 **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
 
 No
        matters were submitted to the security holders for a vote during this
        quarter.
 
 **Item
                  5.**
              **Other
                  Information**
 
 There
        is
        no other information deemed material by management for disclosure
        herein.
 
 **Item
                  6.**
              **Exhibits**
 
 Exhibits
        attached hereto. Reports on Form 8-K, inapplicable.
 
 
 
 **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:
                  December 1, 2006
              By:
              /s/
                  Michael
                  WynhoffMichael
                  WynhoffChief
                  Executive OfficerDated:
                  December 1, 2006
              By:
              /s/
                  Michael
                  MichieMichael
                  MichieChief
                  Financial Officer
 
  
 
 Index
        of
        Exhibits
  31.1
              CEO
                  Certification
 31.2
              CFO
                  Certification
 
 32.1
              CEO
                  906 Certification
 32.2
              CFO
                  906 Certification
   
 
  22