----

----

|                        |                                                                                                |
|-----------------------------|-----------------------------------------------------------------------------------------------------|
| (Mark                  One) |
|                        |                                                                                                |
| x                           | QUARTERLY                  REPORT PURSUANT TO SECTION 13 OR 15(d)                                   |
|                        | OF                  THE SECURITIES EXCHANGE ACT OF 1934                                             |
|                        |                                                                                                |
|                        | For                  the quarterly period ended December 31, 2005                                   |
|                        |                                                                                                |
|  ̈                      | TRANSITION                  REPORT PURSUANT TO SECTION 13                                           |
|                        | OR                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                    |
|                        |                                                                                                |
|                        | For                  the transition period from _______________ to                  _______________ |

| NevadaState                  or other jurisdiction of                  incorporation or organization) | 88-0322882(IRS                  EmployerIdentification                  No.) |
|-------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|

----

----

| **Frank                L. Sassetti & Co.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| **Certified                Public Accountants**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| The                Board of Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Pacific                Sands, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| Report                of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| We                have reviewed the balance sheet of PACIFIC SANDS, INC. as of December                31,                2005 and the related statements of operations for the three and six                months                ended December 31, 2005 and 2004, and the statements of stockholders'                equity and cash flows for the six months ended December 31, 2005                and 2004.                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 inquires of persons responsible for financial                and accounting matters. It is substantially less in scope than an                audit                conducted in accordance with standards of the Public Company Accounting                Oversight Board (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 12                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 12. The financial statements do not include any                adjustments that might result from the outcome of this                uncertainly.                                                                                                                                                                      |
| We                have previously audited, in accordance with auditing standards of                the                Public Company Accounting Oversight Board (United States), the balance                sheet of PACIFIC SANDS, INC. as of June 30, 2005 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                17,                2005, we expressed an unqualified opinion on those financial statements.                In our opinion, the information set forth in the accompanying balance                sheet as of June 30, 2005 is fairly stated, in all material respects,                in                relation to the balance sheet from which it has been                derived. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| /s/                Frank L. Sassetti & Co.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| February                4, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |
| Oak                Park, Illinois                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| 6611                W. North Avenue * Oak Park, Illinois 60302 * Phone (708) 386-1433                * Fax                (708) 386-0139                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

----

| PACIFIC                SANDS, INC.                               |
|------------------------------------------------------------------|
|                                                             |   |   |   |   |   |
| BALANCE                SHEETS                                    |
| DECEMBER                31, 2005 AND JUNE 30, 2005               |
|                                                             |
| **ASSETS**                                                       |
|                                                             |   |   | December                31, |   | June                30, |
|                                                             |   |   | 2005 |   | 2005 |
|                                                             |   |   | (A                Review) |   |   |
| **CURRENT                ASSETS**                                |   |   |   |   |
| Cash                and cash equivalents                         |   | $                2,492 |   | $                541 |
| Trade                receivables                                 |   | 48,576 |   | 60,699 |
| Inventories                                                      |   | 55,251 |   | 31,295 |
| Prepaid                expenses                                  |   | 14,584 |   | 15,210 |
|                                                             |   |   |   |   |   |
|                                                             | Total                Current Assets |   | 120,903 |   | 107,745 |
|                                                             |   |   |   |   |   |
| **PROPERTY                AND EQUIPMENT**                        |   |   |   |   |
| Furniture                and fixtures and office equipment       |   | 9,897 |   | 8,618 |
| Manufacturing                equipment                           |   | 12,204 |   | 12,653 |
|                                                             | Leasehold                improvements |   | 3,035 |   | 3,035 |
| Deposit                on software costs                         |   | 13,777 |   | 12,560 |
|                                                             |   | 38,913 |   | 36,866 |
| Less                accumulated depreciation                     |   | 5,089 |   | 2,712 |
|                                                             |   |   |   |   |   |
|                                                             | Property                and Equipment, net |   | 33,824 |   | 34,154 |
|                                                             |   |   |   |   |   |
| **OTHER                ASSETS**                                  |   |   |   |   |
| Accounts                receivable - other (net of allowance for |   | 23,572 |   | 59,496 |
| doubtful                accounts of $212,147 and $176,223)       |   |   |   |   |
| Security                deposits                                 |   | 816 |   | 816 |
|                                                             |   |   |   |   |   |
|                                                             | Total                Other Assets |   | 24,388 |   | 60,312 |
|                                                             |   |   |   |   |   |
|                                                             | Total                Assets |   | $                179,115 |   | $                202,211 |
|                                                             |   |   |   |   |   |
|                                                             |   |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**          |
|                                                             |   |   |   |   |   |
| **CURRENT                LIABILITIES**                           |   |   |   |   |
|                                                             | Accounts                payable |   | $                86,516 |   | $                45,544 |
|                                                             | Current                maturities of long-term obligations |   | 5,930 |   | 4,751 |
|                                                             | Accrued                expenses |   | 99,976 |   | 72,568 |
|                                                             | Deferred                compensation |   | 158,873 |   | 121,385 |
|                                                             | Notes                payable - other |   | 48,631 |   | 32,500 |
|                                                             |   |   |   |   |   |
|                                                             | Total                Current Liabilities |   | 399,926 |   | 276,748 |
|                                                             |   |   |   |   |   |
| **LONG                TERM OBLIGATIONS**                         |   |   |   |   |
|                                                             | Captial                leases, less current portion |   | 18,044 |   | 19,121 |
|                                                             |   |   |   |   |   |
| **STOCKHOLDERS'                EQUITY**                          |   |   |   |   |
|                                                             | Common                stock |   | 37,744 |   | 36,844 |
|                                                             | Additional                paid in capital |   | 2,970,269 |   | 2,879,170 |
|                                                             | Treasury                stock, at cost |   | (151,030) |   | (151,030) |
|                                                             | Accumulated                deficit |   | (3,095,838) |   | (2,858,642) |
|                                                             |   |   |   |   |   |
|                                                             |   |   |   |   |   |
|                                                             | Total                Stockholders' Equity |   | (238,855) |   | (93,658) |
|                                                             |   |   |   |   |   |
|                                                             |   |   |   |   |   |
|                                                             |   |   |   |   |   |
|                                                             | Total                Liabilities and Stockholders' Equity |   | $                179,115 |   | $                202,211 |

----

| PACIFIC                  SANDS, INC.                                   |
|------------------------------------------------------------------------|
|                                                                   |   |   |   |   |   |   |   |   |   |
| STATEMENTS                  OF OPERATIONS                              |
|                                                                   |   |   |   |   |   |   |   |   |   |
| THREE                  AND SIX MONTHS ENDED DECEMBER 31, 2005 AND 2004 |
| (A                  Review)                                            |
|                                                                   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |   | Three                  Months Ended |   | Six                  Months Ended |
|                                                                   |   |   | December                  31, |   | December                  31, |
|                                                                   |   |   | 2005 |   | 2004 |   | 2005 |   | 2004 |
|                                                                   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |   |
| NET                  SALES                                             |   |   | $                  59,348 |   | $                  20,019 |   | $                  130,582 |   | $                  36,817 |
|                                                                   |   |   |   |   |   |   |   |   |   |
| COST                  OF SALES                                         |   |   | 37,421 |   | 4,903 |   | 60,000 |   | 15,271 |
|                                                                   |   |   |   |   |   |   |   |   |   |
| GROSS                  PROFIT                                          |   |   | 21,927 |   | 15,116 |   | 70,582 |   | 21,546 |
|                                                                   |   |   |   |   |   |   |   |   |   |
| SELLING                  AND                                           |   |   |   |   |   |   |   |   |   |
| ADMINISTRATIVE                  EXPENSES                               |   | 147,554 |   | 81,276 |   | 302,409 |   | 203,127 |
|                                                                   |   |   |   |   |   |   |   |   |   |
| LOSS                  FROM OPERATIONS                                  |   |   | (125,627) |   | (66,160) |   | (231,827) |   | (181,581) |
|                                                                   |   |   |   |   |   |   |   |   |   |
| OTHER                  INCOME (EXPENSES)                               |   |   |   |   |   |   |   |   |   |
| Interest                  expense                                      |   |   | (1,561) |   |   |   | (2,704) |   | (3,000) |
| Loss                  on disposal of assets                            |   |   |   |   |   |   | (2,680) |   |   |
| Miscellaneous                  income                                  |   |   | 4 |   |   |   | 15 |   | 2,890 |
|                                                                   |   |   |   |   |   |   |   |   |   |
| Total                  Other Income(Expenses)                          |   | (1,557) |   |   |   | (5,369) |   | (110) |
|                                                                   |   |   |   |   |   |   |   |   |   |
| LOSS                  BEFORE INCOME TAXES                              |   | (127,184) |   | (66,160) |   | (237,196) |   | (181,691) |
|                                                                   |   |   |   |   |   |   |   |   |   |
| INCOME                  TAXES                                          |   |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |   |
| NET                  LOSS                                              |   |   | $                  (127,184) |   | $                  (66,160) |   | $                  (237,196) |   | $(181,691) |
|                                                                   |   |   |   |   |   |   |   |   |   |
| BASIC                  AND DILUTED NET LOSS                            |   |   |   |   |   |   |   |   |
| PER                  SHARE                                             |   |   | $                  (0.004) |   | $                  (0.002) |   | $                  (0.008) |   | $                  (0.006) |
|                                                                   |   |   |   |   |   |   |   |   |   |
| BASIC                  AND DILUTED WEIGHTED                            |   |   |   |   |   |   |   |   |
| AVERAGE                  SHARES                                        |   |   | 29,986,666 |   | 32,618,523 |   | 29,741,677 |   | 31,554,220 |
|                                                                   |   |   |   |   |   |   |   |   |   |

----

| PACIFIC                  SANDS, INC.                         |
|--------------------------------------------------------------|
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| STATEMENTS                  OF STOCKHOLDERS' EQUITY          |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SIX                  MONTHS ENDED DECEMBER 31, 2005 AND 2004 |
| (A                  Review)                                  |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   | Common                  Stock |   |   |   | Treasury                  Stock |   |   |   |   |   |   |
|                                                         |   | Par                  value - $.001 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   | 50,000,000                  shares authorized |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |   |   |   |   | Additional                  Paid |   | Number                  of |   |   |   | Accumulated |   | Shareholder |   |   |
|                                                         |   | Shares |   | Amount |   | In                  Capital |   | Shares |   | Amount |   | Deficit |   | Receivable |   | Total |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at June 30, 2004                    |   | 30,298,873 |   | $                  30,299 |   | $                  2,560,602 |   | (9,000) |   | $                  (5,514) |   | $(2,558,212) |   | $                  (121,480) |   | $                  (94,305) |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of Common Stock:                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| For                  Cash                                    |   | 2,904,969 |   | 905 |   | 49,541 |   |   |   |   |   |   |   |   |   | 50,446 |
| For                  Options Exercised                       |   | 2,633,333 |   | 2,633 |   | 9,667 |   |   |   |   |   |   |   |   |   | 12,300 |
| For                  Cancellation of Debt                    |   | 347,481 |   | 348 |   | 20,805 |   |   |   |   |   |   |   |   |   | 21,153 |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Below                  market rate stock                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| options                  granted                             |   |   |   |   |   | 66,700 |   |   |   |   |   |   |   |   |   | 66,700 |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                    |   |   |   |   |   |   |   |   |   |   |   | (181,691) |   |   |   | (181,691) |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2004                |   | 36,184,656 |   | $                  34,185 |   | $                  2,707,315 |   | (9,000) |   | $                  (5,514) |   | $(2,739,903) |   | $                  (121,480) |   | $(125,397) |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  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                                    |   | 518,816 |   | 519 |   | 55,453 |   |   |   |   |   |   |   |   |   | 55,972 |
| For                  Professional Services                   |   | 320,637 |   | 321 |   | 20,395 |   |   |   |   |   |   |   |   |   | 20,716 |
| For                  Salaries                                |   | 60,000 |   | 60 |   | 15,251 |   |   |   |   |   |   |   |   |   | 15,311 |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                    |   |   |   |   |   |   |   |   |   |   |   | (237,196) |   |   |   | (237,196) |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005                |   | 37,743,751 |   | $                  37,744 |   | $                  2,970,269 |   | (7,559,187) |   | $(151,030) |   | $(3,095,838) |   | $                  - |   | $(238,855) |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| PACIFIC                    SANDS, INC.                                                                                                                   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| STATEMENTS                    OF CASH FLOWS                                                                                                              |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| SIX                    MONTHS ENDED DECEMBER 31, 2005 AND 2004                                                                                           |
| (A                    Review)                                                                                                                            |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                     |   |   |   |   |   |   |   | 2005 |   | 2004 |
| CASH                    FLOWS FROM OPERATING ACTIVITIES                                                                                                  |   |   |   |   |   |
| Net                    loss                                                                                                                              |   |   |   |   |   |   | $                    (237,196) |   | $                    (181,691) |
| Adjustments                    to reconcile net loss to net cash                                                                                         |   |   |   |   |   |
| used                    in operating activities -                                                                                                        |   |   |   |   |   |   |
|             Depreciation                                                                     |   |   |   |   |   |   | 2,850 |   | 1,019 |
|                Loss                    on disposal of equipment               |   |   |   |   | 2,680 |   |   |
|             Deferred                    compensation                                         |   |   |   |   |   | 37,488 |   | 7,485 |
|             Compensation                    of                    below market stock         |   |   |   |   |   |   |
|     options                    granted                                                                                               |   |   |   |   |   |   |   | 66,700 |
|             Common                    shares and rights issued for services and compensation |   |   |   | 36,027 |   |   |
|       Changes                    in assets                    and liabilities -                                            |   |   |   |   |   |   |
| Trade                    accounts receivable                                                                                                             |   |   |   | 12,123 |   | (5,881) |
| Inventories                                                                                                                                              |   |   |   |   |   | (23,956) |   | (5,348) |
| Prepaid                    expenses                                                                                                                      |   |   |   |   | 626 |   | (1,432) |
| Other                    assets                                                                                                                          |   |   |   |   |   | 35,924 |   |   |
| Accounts                    payable and other current liabilities                                                                                        |   | 68,381 |   | 42,912 |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Net                    Cash Used in Operating Activities                                                                                                 |   |   | (65,053) |   | (76,236) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| CASH                    FLOWS FROM INVESTING ACTIVITIES                                                                                                  |   |   |   |   |   |   |
| Purchases                    of equipment                                                                                                                |   |   |   |   | (2,704) |   | (7,803) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Net                    Cash Used in Investing Activities                                                                                                 |   |   | (2,704) |   | (7,803) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| CASH                    FLOWS FROM FINANCING ACTIVITIES                                                                                                  |   |   |   |   |   |   |
| Issuance                    of common stock                                                                                                              |   |   |   |   | 55,972 |   | 50,446 |
| Issuance                    of common stock - exercise of options                                                                                        |   |   |   |   | 10,300 |
| Issuance                    of notes payable                                                                                                             |   |   |   |   | 35,000 |   | 15,000 |
| Repayment                    of notes payable and long term obligations                                                                                  |   | (21,264) |   | (500) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Net                    Cash Used in Financing Activities                                                                                                 |   |   | 69,708 |   | 75,246 |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| NET                    INCREASE (DECREASE) IN CASH AND                                                                                                   |   |   |   |   |   |   |
| CASH                    EQUIVALENTS                                                                                                                      |   |   |   |   |   | 1,951 |   | (8,793) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| CASH                    AND CASH EQUIVALENTS                                                                                                             |   |   |   |   |   |   |   |
| Beginning                    of period                                                                                                                   |   |   |   |   |   | 541 |   | 44,098 |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| End                    of period                                                                                                                         |   |   |   |   |   |   | $                    2,492 |   | $                    35,305 |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL                    DISCLOSURES OF                                                                                                           |   |   |   |   |   |   |
| CASH                    FLOW INFORMATION                                                                                                                 |   |   |   |   |   |   |   |
| Cash                    paid during the six months for                                                                                                   |   |   |   |   |   |   |
| Interest                                                                                                                                                 |   |   |   |   |   |   | $                    2,704 |   | $ |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Income                    taxes                                                                                                                          |   |   |   |   |   | $ |   | $ |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL                    INFORMATION FROM                                                                                                         |   |   |   |   |   |   |
| NONCASH                    FINANCING ACTIVITIES                                                                                                          |   |   |   |   |   |   |
| Conversion                    of debt to equity                                                                                                          |   |   |   |   | $ |   | $                    21,153 |
| Conversion                    of debt to equity - options exercised                                                                                      |   |   | $ |   | $                    2,000 |
| Capital                    Lease Obligations                                                                                                             |   |   |   |   | $                    2,496 |   | $ |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |

----

| PACIFIC                SANDS, INC.                                |
|-------------------------------------------------------------------|
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
| NOTES                TO FINANCIAL STATEMENTS                      |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
| DECEMBER                31, 2005 AND 2004 AND JUNE 30, 2005       |
|                                                              |   |   |   |   | (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 December 31, 2005 and the statements of operations                for the six months ended December 31, 2005 and 2004, and the statements                of                stockholders' equity and cash flows for the six months ended December                31,                2005 and 2004, 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                December 31, 2005 and the results of operations and cash flows for                the six                months ended December 31, 2005 and 2004. |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                              | 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                $2,850 and $1,019 during the six months ended December 31, 2005 and                2004,                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 six                months ended December 31, 2005 and 2004, advertising and promotion                costs                totaled $34,367 and $3,569, 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. |
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| PACIFIC                SANDS, INC.                                |
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|                                                              |   |   |   |   |   |   |   |   |   |   |   |
| NOTES                TO FINANCIAL STATEMENTS                      |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
| DECEMBER                31, 2005 AND 2004 AND JUNE 30, 2005       |
| (A                Review)                                         |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
| 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 $212,147 is adequate as of December 31,                2005. |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                              | 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 December 31, 2005 and June 30, 2005 consisted of the                following: |   |
|                                                              |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   |   |   |   |   |   | December                31, 2005 |   | June                30, 2005 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | Raw                materials |   |   |   | $                34,445 |   | $                25,118 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | Finished                goods |   |   |   | 20,806 |   | 6,177 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   |   |   |   |   |   | $                55,251 |   | $                31,295 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |

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| PACIFIC                SANDS, INC.                         |
|------------------------------------------------------------|
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| NOTES                TO FINANCIAL STATEMENTS               |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| DECEMBER                31, 2005 AND 2004 AND JUNE 30,2005 |
| (A                Review)                                  |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| 3.                                                         | LONG                TERM OBLIGATIONS |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | Long                term obligations consist of a four year lease agreement for software                dated                June 20, 2005 with an imputed interest rate of 14.45% and a two year                lease                agreement for computer hardware with an imputed interest rate of                22.94%                placed in service in December, 2005. Monthly installment payments                are $691                and $67, 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 December                31, |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   | 2006 |   |   | $ | 5,930 |   |   |   |
|                                                       |   |   |   | 2007 |   |   |   | 6,903 |   |   |   |
|                                                       |   |   |   | 2008 |   |   |   | 7,148 |   |   |   |
|                                                       |   |   |   | 2009 |   |   |   | 3,993 |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | The                Company accounts 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. As such, stock-based employee compensation                cost                of $66,700 is reflected in the net loss for the six months ended                June 30,                2004 for options granted under those plans where the exercise price                is                below market value and no cost is reflected in net losses for options                granted under those plans where they had an exercise price equal                to or                greater than the market value of the underlying common stock on the                date                of grant. The following table summarizes the effect on net losses                and                losses per share if the Company had applied the fair value recognition                provision of Statement of Financial Accounting Standard ("SFAS")                No. 123,                "Accounting for Stock-Based Compensation," to stock-based employee                compensation for the respective years: |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |

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| PACIFIC                SANDS, INC.                         |
|------------------------------------------------------------|
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| NOTES                TO FINANCIAL STATEMENTS               |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| DECEMBER                31, 2005 AND 2004 AND JUNE 30,2005 |
| (A                Review)                                  |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| 5.                                                         | STOCK-BASED                COMPENSATION - CONTINUED |   |   |   |
|                                                       |   |   |   |   |   |   |   | Six                Months Ended December, 31 |   |
|                                                       |   |   |   |   |   |   |   | 2005 |   | 2004 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | Net                losses, as reported |   |   |   |   |   | $                (237,196) |   | $                (181,691) |   |
|                                                       | Add:                stock-based employee compensation |   |   |   |   |   |   |
|                                                       | expense                determined under fair value based |   |   |   |   |   |   |
|                                                       | method                for all awards, net of related tax |   |   |   |   |   |   |
|                                                       | effects. |   |   |   |   |   |   |   | 66,700 |   |
|                                                       | Deduct:                total stock based employee compensation |   |   |   |   |
|                                                       | expense                determined under fair value based |   |   |   |   |   |   |
|                                                       | method                for all awards, net of related tax |   |   |   |   |   |   |
|                                                       | effects. |   |   |   |   |   |   |   | (70,000) |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | Pro                forma net losses |   |   |   |   |   | $                (237,196) |   | $                (184,991) |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | Basic                and diluted loss per share: |   |   |   |   |   |   |   |
|                                                       |   | As                reported |   |   |   |   |   | $                (0.008) |   | $                (0.006) |   |
|                                                       |   | Pro                forma |   |   |   |   |   | (0.008) |   | (0.006) |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | Employee                stock options are as follows: |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   | Price                per share |   |
|                                                       |   |   |   | Shares |   | Range |   | Weighted                Average |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | Balance,                June 30, 2005 | 3,166,667 |   | $                .03 - .10 |   | $                0.052 |   |
|                                                       | Granted |   |   |   |   |   |   |   |
|                                                       | Exercised |   |   |   |   |   |   |   |
|                                                       | Expired |   | 166,667 |   | 0.030 |   | 0.030 |   |
|                                                       | Balance,                December 31, 2005 | 3,000,000 |   | $                .03 - .10 |   | $                0.053 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | 6,100,000                options were issued and 2,633,333 options were exercised during the                six                months ended December 31, 2004. |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| 6.                                                         | LEASE                COMMITMENT |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | The                Company entered into a one year lease expiring December 31, 2006                for                11,000 square feet of office and warehouse space for $1,974 per month.                The                Company is responsible for insuring the premises. Rent expense was                approximately $11,046 and $2,280 for the six months ended December                31,                2005 and 2004, respectively. |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |

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| PACIFIC                SANDS, INC.                         |
|------------------------------------------------------------|
|                                                       |   |   |   |   |   |   |   |   |   |   |
| NOTES                TO FINANCIAL STATEMENTS               |
|                                                       |   |   |   |   |   |   |   |   |   |
| DECEMBER                31, 2005 AND 2004 AND JUNE 30,2005 |
| (A                Review)                                  |
|                                                       |   |   |   |   |   |   |   |   |   |   |
| 7.                                                         | BASIC                AND DILUTED LOSS PER SHARE |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | The                following table illustrates the reconciliation of the numerators                and                denominators of the basic loss per share computations. The Company                has                3,000,000 shares of exercisable potentially dilutive options outstanding                as of December 31, 2005. There were 3,466,667 options outstanding                at                December 31, 2004. |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   | Six                Months Ended December 31, |
|                                                       |   |   |   |   |   |   |   | 2005 |   | 2004 |
|                                                       | Basic                and diluted loss per share: |   |   |   |   |   |   |
|                                                       | Numerator: |   |   |   |   |   |   |   |   |   |
|                                                       | Net                loss |   |   |   |   |   |   | $                (237,196) |   | $                (181,691) |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | Denominator: |   |   |   |   |   |   |   |   |
|                                                       | Basic                and diluted weighted average number of |   |   |
|                                                       | common                shares outstanding during |   |   |   |   |
|                                                       | the                period |   |   |   |   |   |   | 29,986,666 |   | 31,554,220 |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | Basic                and diluted loss per share |   |   |   | $                (0.008) |   | $                (0.006) |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | 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 December 31, 2005                are as                follows: |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | Deferred                tax asset |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | Net                operating loss carryforwards |   |   |   | $                941,109 |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | Valuation                allowance |   |   |   |   |   | (941,109) |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | Net                deferred tax asset |   |   |   |   |   | $                - |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |
|                                                       | At                December 31, 2005, the Company has net operating loss carryforwards                for                Federal tax purposes of approximately $2,250,000 which, if unused                to                offset future taxable income, will expire in years beginning in                2018. |
|                                                       |   |   |   |   |   |   |   |   |   |   |

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| PACIFIC                SANDS, INC.                         |
|------------------------------------------------------------|
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| NOTES                TO FINANCIAL STATEMENTS               |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |
| DECEMBER                31, 2005 AND 2004 AND JUNE 30,2005 |
| (A                Review)                                  |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 two 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, 2005, the shares had been returned                to                treasury. |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       | In                addition, management has negotiated the restructuring of debt due                to the                Paulus'. This restructuring reduced the debt balance due the Paulus'                by                $15,791 and extended the due date to June, 2006. This reduction has                been                recorded as a gain from restructuring of debt in the statement of                operations. |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 $212,147 exists. Bad debt                expense in the amount of $35,980 was recorded in the statement of                operations for the three and six months ended December 31,                2005. |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |

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| PACIFIC                  SANDS, INC.                         |
|--------------------------------------------------------------|
|                                                         |
| NOTES                  TO FINANCIAL STATEMENTS               |
|                                                         |
| DECEMBER                  31, 2005 AND 2004 AND JUNE 30,2005 |
| (A                  Review)                                  |
|                                                         |
| 11.                                                          | CONCENTRATIONS |
|                                                         | The                  Company distributes water treatment and nontoxic cleaning products                  to the                  entire U.S. market. For the six months ended December 31, 2005,                  one                  customer accounted for approximately 12.2% of the Company's sales.                  For the                  six months ended December 31, 2004, there was no single customer                  that                  accounted for greater than ten percent (10%) of the Company's sales. |
|                                                         |   |
| 12.                                                          | 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 December                  31,                  2005, the Company had incurred cumulative losses of $3,095,838.                  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. |
|                                                         |   |

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