**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 December 31, 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
      February 20, 2007, the Company had 33,779,124 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 December 31, 2006 (unaudited) and June 30, 2006
                  (audited)
              4Condensed
                  Statements of Operations for the Three and Six Months Ended December
                  31,
                  2006 and 2005 (unaudited)
              5Condensed
                  Statements of Stockholders' Equity SixMonths
                  Ended December 31, 2006 and 2005 (unaudited)
              6Condensed
                  Statements of Cash Flows for the Six Months
                  Ended December 31, 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
              16Item 4.
              Controls
                  and Procedures
              16PART
                  IIOTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              18Item
                  1A.
              Risk Factors
              18Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              18Item
                  3.
              Defaults
                  Upon Senior Securities
              20Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              20Item
                  5.
              Other
                  Information
              20Item
                  6.
              Exhibits
              20Signatures
              21


2





**Item
                1**
            **Financial
                Information**








**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, 2006
        and
        the related statements of operations for the three and six months ended December
        31, 2006 and 2005, and the statements of stockholders' equity and cash flows
        for
        the six months ended December 31, 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 inquires 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.
 
 February
        19, 2007
 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
 DECEMBER
        31, 2006 AND JUNE 30, 2006
  **ASSETS**December
                  31,2006
              
              June
                  30,(A
                  Review)
              
              2006**CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              27,747
              
              $
              4,977Trade
                  receivables, net of allowances for doubtful accounts
              
              
              63,588
              
              
              112,587Inventories
              
              
              56,073
              
              
              77,069Prepaid
                  expenses
              
              
              5,940
              
              
              7,212Total
                  Current Assets
              
              
              153,348
              
              
              201,845**PROPERTY
                  AND EQUIPMENT**Furniture,
                  fixtures and office equipment
              
              
              16,360
              
              
              10,238Manufacturing
                  equipment
              
              
              12,204
              
              
              12,204Leasehold
                  improvements
              
              
              3,035
              
              
              3,035Deposit
                  on software costs
              
              
              31,301
              
              
              20,26962,900
              
              
              45,746Less
                  accumulated depreciation
              
              
              10,779
              
              
              6,940Property
                  and Equipment, net
              
              
              52,121
              
              
              38,806**OTHER
                  ASSETS**Accounts
                  receivable - other (net of allowance for doubtful accounts of $
                  235,718)
              
              
              -
              
              
              -Note
                  receivable
              
              
              8,694Security
                  deposits
              
              
              841
              
              
              841Total
                  Other Assets
              
              
              9,535
              
              
              841Total
                  Assets
              
              $
              215,004
              
              $
              241,492**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              74,943
              
              $
              99,795Current
                  maturities of long-term debt
              
              
              11,180
              
              
              9,877Accrued
                  expenses
              
              
              74,850
              
              
              59,691Deferred
                  compensation
              
              
              264,280
              
              
              227,934Notes
                  payable - other
              
              
              24,000
              
              
              61,177Total
                  Current Liabilities
              
              
              449,253
              
              
              458,474**LONG
                  TERM LIABILITIES**Capital
                  leases, less current portion
              
              
              17,573
              
              
              22,609Total
                  Long Term Liabilities
              
              
              17,573
              
              
              22,609**STOCKHOLDERS'
                  EQUITY**Common
                  stock
              
              
              41,253
              
              
              38,345Additional
                  paid in capital
              
              
              3,470,063
              
              
              3,041,947Treasury
                  stock, at cost
              
              
              (151,030
              )
              
              (151,030
              )Accumulated
                  deficit
              
              
              (3,612,108
              )
              
              (3,168,853
              )Total
                  Stockholders' Equity
              
              
              (251,822
              )
              
              (239,591
              )Total
                  Liabilities and Stockholders' Equity
              
              $
              215,004
              
              $
              241,492
 
 The
        accompanying notes are an integral part of the financial
        statements.
 4
 
 PACIFIC
        SANDS, INC.
 STATEMENTS
        OF OPERATIONS
 THREE
        AND
        SIX MONTHS ENDED DECEMBER 31, 2006 AND 2005
 
 Three
                  months ended
              
              Six
                  months endedDecember
                  31,
              
              December
                  31,2006
              
              2005
              
              2006
              
              2005(A
                  Review)
              
              (A
                  Review)
              
              (A
                  Review)
              
              (A
                  Review)NET
                  SALES
              
              $
              106,568
              
              $
              59,348
              
              $
              226,126
              
              $
              130,582COST
                  OF SALES
              
              
              41,410
              
              
              37,421
              
              
              106,723
              
              
              60,000GROSS
                  PROFIT
              
              
              65,158
              
              
              21,927
              
              
              119,403
              
              
              70,582OPERATING
                  EXPENSESSelling
                  and administrative expenses
              
              
              195,553
              
              
              147,554
              
              
              360,580
              
              
              302,409Stock
                  based compensation for board of directors
              
              
              8,000
              
              
              
              
              
              43,160Stock
                  based compensation related to options
              
              
              
              
              
              -
              
              
              134,211
              
              
              -Total
                  operating expenses
              
              
              203,553
              
              
              147,554
              
              
              537,951
              
              
              302,409LOSS
                  FROM OPERATIONS
              
              
              (138,395
              )
              
              (125,627
              )
              
              (418,548
              )
              
              (231,827
              )OTHER
                  INCOME (EXPENSES)Interest
                  expense
              
              
              (12,778
              )
              
              (1,561
              )
              
              (24,710
              )
              
              (2,704
              )Loss
                  on disposal of assets
              
              
              -
              
              
              
              
              
              -
              
              
              (2,680
              )Miscellaneous
                  income
              
              
              2
              
              
              4
              
              
              3
              
              
              15Total
                  Other Income (Expenses)
              
              
              (12,776
              )
              
              (1,557
              )
              
              (24,707
              )
              
              (5,369
              )LOSS
                  BEFORE INCOME TAXES
              
              
              (151,171
              )
              
              (127,184
              )
              
              (443,255
              )
              
              (237,196
              )INCOME
                  TAXES
              
              
              -
              
              
              -
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (151,171
              )
              $
              (127,184
              )
              $
              (443,255
              )
              $
              (237,196
              )BASIC
                  AND DILUTED NET LOSS PER SHARE
              
              $
              (0.005
              )
              $
              (0.004
              )
              $
              (0.014
              )
              $
              (0.008
              )BASIC
                  AND DILUTED WEIGHTED AVERAGE SHARES
              
              
              32,292,193
              
              
              29,986,666
              
              
              31,752,111
              
              
              29,741,677
 
     The
        accompanying notes are an integral part of the financial
        statements.
 
  5
 
 PACIFIC
        SANDS, INC.
 STATEMENTS
        OF STOCKHOLDERS' EQUITY
 SIX
        MONTHS ENDED DECEMBER 31, 2006 AND 2005
 
 Common
                  StockPar
                  value - $.001
                50,000,000
                  shares
              
              Additional
              
              Treasury
                  Stockauthorized
              
              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
              
              
              518,816
              
              
              519
              
              
              55,453
              
              
              
              
              
              
              
              
              
              
              
              55,972For
                  options exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -For
                  cancellation of debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -For
                  professional services
              
              
              320,637
              
              
              321
              
              
              20,395
              
              
              
              
              
              
              
              
              
              
              
              20,716For
                  salaries
              
              
              60,000
              
              
              60
              
              
              15,251
              
              
              
              
              
              
              
              
              
              
              
              15,311Net
                  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
              )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
              
              
              1,350,000
              
              
              1,350
              
              
              134,550
              
              
              
              
              
              
              
              
              
              
              
              135,900For
                  professional services
              
              
              550,141
              
              
              550
              
              
              58,670
              
              
              
              
              
              
              
              
              
              
              
              59,220In
                  lieu of interest payment
              
              
              187,098
              
              
              187
              
              
              14,523
              
              
              
              
              
              
              
              
              
              
              
              14,710For
                  cancellation of debt
              
              
              375,200
              
              
              375
              
              
              38,432
              
              
              
              
              
              
              
              
              
              
              
              38,807For
                  salaries
              
              
              446,112
              
              
              446
              
              
              47,730
              
              
              
              
              
              
              
              
              
              
              
              48,176Stock
                  based compensation related to options
              
              
              
              
              
              
              
              
              134,211
              
              
              
              
              
              
              
              
              
              
              
              134,211Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (443,255
              )
              
              (443,255
              )Balance
                  at December 31, 2006
              
              
              41,253,311
              
              $
              41,253
              
              $
              3,470,063
              
              
              (7,559,187
              )
              $
              (151,030
              )
              $
              (3,612,108
              )
              $
              (251,822
              )
 
 The
        accompanying notes are an integral part of the financial
        statements.
 
  6
 
 PACIFIC
        SANDS, INC.
 STATEMENTS
        OF CASH FLOWS
 SIX
        MONTHS ENDED DECEMBER 31, 2006 AND 2005
 
 2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (443,255
              )
              $
              (237,196
              )Adjustments
                  to reconcile net loss to net cash provided by used in operating
                  activities
                  -Depreciation
              
              
              3,838
              
              
              2,850Loss
                  on disposal of equipment
              
              
              -
              
              
              2,680Deferred
                  compensation
              
              
              36,346
              
              
              37,488Compensation
                  expense on stock options granted
              
              
              134,211
              
              
              -Common
                  shares and rights issued for services and compensation
              
              
              122,106
              
              
              36,027Changes
                  in assets and liabilities -Trade
                  accounts receivable
              
              
              48,999
              
              
              12,123Inventories
              
              
              20,996
              
              
              (23,956
              )Prepaid
                  expenses
              
              
              1,272
              
              
              626Note
                  receivables
              
              
              (8,694
              )
              
              35,924Accounts
                  payable and other current liabilities
              
              
              (9,692
              )
              
              68,381Net
                  Cash Used in Operating Activities
              
              
              (93,873
              )
              
              (65,053
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchases
                  of equipment
              
              
              (17,154
              )
              
              (2,704
              )Net
                  Cash Used in Investing Activities
              
              
              (17,154
              )
              
              (2,704
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESIssuance
                  of common stock
              
              
              135,900
              
              
              55,972Issuance
                  of notes payable
              
              
              36,601
              
              
              35,000Repayment
                  of notes payable
              
              
              (38,704
              )
              
              (21,264
              )Net
                  Cash Provided by Financing Activities
              
              
              133,797
              
              
              69,708NET
                  INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              22,770
              
              
              1,951CASH
                  AND CASH EQUIVALENTSBeginning
                  of period
              
              
              4,977
              
              
              541End
                  of period
              
              $
              27,747
              
              $
              2,492SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATIONCash
                  paid during the period forInterest
              
              $
              24,710
              
              $
              2,704Income
                  taxes
              
              $
              -
              
              $
              -SUPPLEMENTAL
                  INFORMATION FROM NONCASH FINANCING ACTIVITIESConversion
                  of debt to equity
              
              $
              38,807Non-cash
                  financing activitiesCapital
                  Lease Obligations
              
              $
              3,732
              
              $
              2,496
 
 The
        accompanying notes are an integral part of the financial
        statements.
 
  7
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 DECEMBER
        31, 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 December 31, 2006 and the statements of operations for
        the
        three and six months ended December 31, 2006 and 2005 and the statements
        of
        stockholders' equity and cash flows for the six months ended December 31,
        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 December 31, 2006 and
        the
        results of operations and cash flows for the six months ended December 31,
        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 $ 3,838 and $2,850 during
        the
        six months ended on December 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 six
        months
        ended December 31, 2006 and 2005, advertising and promotion costs totaled
        $17,649 and $ 34,367, 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
 DECEMBER
        31, 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 $ 242,242
        is
        adequate as of December 31, 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 December 31, 2006 and June 30, 2006 consisted of the
        following.
  December
                  31,
                2006
              
              June
                  30,
                2006Raw
                  materials
              
              $
              39,850
              
              $
              49,364Finished
                  goods
              
              
              16,223
              
              
              27,705$
              56,073
              
              $
              77,069
 
  9
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 DECEMBER
        31, 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 August, 2005, a three and a
        half
        year lease agreement for software dated January 6, 2006 with an imputed interest
        rate of 12.64% and a two year computer lease with an imputed interest rate
        of
        22.81%, placed in service in September, 2006. Monthly installment payments
        are
        $691, $67, $93, $312 and $59, 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,
 
 2007
              
              $
              11,1802008
              
              
              11,4902009
              
              
              6,083
 
 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, $19,417 in interest has been converted to
        equity.
 
       
  10
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 DECEMBER
        31, 2006 AND 2005 AND JUNE 30, 2006
 
 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 six months
        ended December 31, 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.
 
 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 December 31, 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 December 31, 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
              
              $
              0.053Granted
                  /modified
              
              
              7,250,000
              
              $
              .03
                  - $1.00ExercisedCancelled
              
              
              (3,000,000
              )
              $
              .03
                  - $.10
              
              $
              0.053Expired
              
              
              (3,000,000
              )
              $
              .03
                  - $.10
              
              $
              0.053Outstanding
                  at December 31, 2006
              
              
              4,250,000
              
              $
              .16
                  - $1.00
              
              $
              0.440
 
  11
 
 PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 DECEMBER
        31, 2006 AND 2005 AND JUNE 30, 2006
 
 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
        $11,922 and $11,046 for the six months ended December 31, 2006 and 2005
        respectively.  Remaining
        payments on the lease are $13,909.
 
 
 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.
 
 Six
                  months ending December 31,2006
              
              2005Basic
                  and diluted loss per share:Numerator:Net
                  loss
              
              $
              (443,255
              )
              $
              (237,196
              )Denominator:Basic
                  and diluted weighted average number of common shares outstanding
                  during
                  the period
              
              
              31,752,111
              
              
              29,741,677Basic
                  and diluted loss per share
              
              $
              (0.014
              )
              $
              (0.008
              )
 
 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, 2006 are as follows:
 
 Deferred
                  tax assetNet
                  operating loss carryforwards
              
              $
              803,000Valuation
                  allowance
              
              
              (803,000
              )Net
                  deferred tax asset
              
              $
              -
 
 At
        December 31, 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
 DECEMBER
        31, 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 six month period ended
        December 31, 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 December
          31,
          2006, the deferred compensation for these two officers was $ 156,470. 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 December 31, 2006. The deferred compensation charges to operations
          for the six months ended December 31, 2006 and 2005 was $36,346 and $37,488,
          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 not be reached, an allowance for bad debts
        of
        $235,718 exists. Bad debt expense in the amount of $4,658 and $35,980 was
        recorded in the statement of operations for the six months ended December
        31,
        2006 and 2005, respectively.
 
  13
  PACIFIC
        SANDS, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS
 DECEMBER
        31, 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
 DECEMBER
        31, 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 six months ended December 31, 2006, one customer accounted
          for approximately 33% of the Company's sales. For the six months ended
          December
          31, 2005, there were four customers that accounted for 29.78% 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 December 31, 2006, the Company had incurred
          cumulative losses of $3,612,108. 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
                Discussion and Analysis of Financial Condition and Results of
                Operation**






**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 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.





**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.




16


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.”




During
      the first quarter ended September 30, 2005, we hired an outside accounting
      firm
      to assist in the timely reconciliation of general ledger accounts, and controls
      over property and equipment and debt documentation. However, significant
      deficiencies or material weaknesses in our internal controls related to
      segregation of incompatible duties and controls over inventory and equity
      transactions still exist. We have disclosed those significant deficiencies
      and
      material weaknesses to our Board of Directors. Additional effort will continue
      to work with our management and outside advisors with the goal to implement
      internal controls over financial reporting that are adequate and effective.




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
      second quarter ended December 31, 2006, that has materially affected, or is
      reasonably likely to material affect, our internal control over financial
      reporting.
















17







**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
      October 5 th ,
      2006,
      John D. Hagarty was issued 50,330 shares of restricted stock for professional
      services valued at $6,000.





On
      October 5 th ,
      2006,
      Amy M. Parrish was issued 62,919 shares of restricted stock for professional
      services valued at $7,500.00





On
      October 5 th ,
      2006,
      an accredited investor was issued 67,115 shares of restricted stock for
      $8,000.





On
      October 5 th ,
      2006,
      Robert M. Krug was issued 16,112 shares of restricted stock for professional
      services valued at $1,611.20





On
      October 5 th ,
      2006,
      an accredited investor was issued 5,000 shares of restricted stock for
      $5,900.





On
      October 18 th ,
      2006,
      AllPennyStocks.com was issued 60,000 shares of restricted stock for a deposit
      for professional services valued at $6,000.





On
      October 18 th ,
      2006,
      Stanley Paulus was issued 40,025 shares of restricted stock valued at $5,000
      to
      extend the term of the note he currently holds.





On
      November 1 st ,
      2006,
      Stanley Paulus was issued 47,073 shares of restricted stock valued at $5,000
      to
      extend the term of the note he currently holds.





On
      December 11 th ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 11 th ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 11 th ,
      2006,
      an accredited investor was issued 200,000 shares of restricted stock for
      $20,000.






18




On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 50,000 shares of restricted stock for
      $5,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 100,000 shares of restricted stock for
      $10,000.





On
      December 22 nd ,
      2006,
      an accredited investor was issued 116,000 shares of restricted stock for
      $11,600.





On
      December 22 nd ,
      2006,
      Robert M. Krug was issued 25,000 shares of restricted stock for professional
      services valued at $2,500.00





On
      December 22 nd ,
      2006,
      Todd Taylor was issued 20,000 shares of restricted stock for professional
      services valued at $2,000.00





On
      December 22 nd ,
      2006,
      Angela M. Wuerker was issued 15,000 shares of restricted stock for professional
      services valued at $1,500.00





On
      December 22 nd ,
      2006,
      Jill M. Wegener was issued 20,000 shares of restricted stock for professional
      services valued at $2,000.00





On
      December 22 nd ,
      2006,
      Richard S. Blades was issued 10,000 shares of restricted stock for professional
      services valued at $1,000.00





On
      December 22nd, 2006, John D. Hagarty was granted 20,000 shares of restricted
      stock as a stipend for BOD duties valued at 2,000.00




19




On
      December 22nd, 2006, John D. Hagarty was issued 40,000 shares of restricted
      stock for professional services valued at $4,000.00.





On
      December 22nd, 2006, Michael L. Wynhoff was granted 20,000 shares of restricted
      stock as a stipend for BOD duties valued at 2,000.00





On
      December 22nd, 2006, Michael D. Michie was granted 20,000 shares of restricted
      stock as a stipend for BOD duties valued at 2,000.00





On
      December 22nd, 2006, Mark R. Rauscher was granted 20,000 shares of restricted
      stock as a stipend for BOD duties valued at 2,000.00





**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**





A
      group
      of accredited investors purchased a total of 1,250,000 restricted, rule 144
      treasury shares from the company during December of 2006 for a total investment
      of $125,000. Additionally, the investors have been issued two sets of options
      to
      purchase additional restricted shares from the company. The first options,
      callable on Feb 1, 2007 are for 625,000 restricted, rule 144 treasury shares
      at
      10 cents per share. The second set of options, callable June 15, 2007 are for
      625,000 restricted, rule 144 treasury shares at 15 cents per
      share.




**Item
                6.**
            **Exhibits**




31.1
            CEO
                Certification


31.2
            CFO
                Certification


32.1
            CEO
                906 Certification


32.2
            CFO
                906 Certification


99.1
            Press
                release issued December 29, 2006 (filed on Form 8-K on January 3,
                2007 and
                incorporated herein by reference)











20


**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:
                February 20, 2007
            By:
            /s/
                Michael
                WynhoffMichael
                WynhoffChief
                Executive OfficerDated:
                February 20, 2007
            By:
            /s/
                Michael
                MichieMichael
                MichieChief
                Financial Officer


























21







**Index
      of Exhibits**




31.1
            CEO
                Certification


31.2
            CFO
                Certification


32.1
            CEO
                906 Certification


32.2
            CFO
                906 Certification


99.1
            Press
                release issued December 29, 2006 (filed on Form 8-K on January 3,
                2007 and
                incorporated herein by reference)










































22