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 March 31, 2007





[   
                ]
            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 May
      21, 2007, the Company had 34,319,124.000  shares
      outstanding of its $.001 par value common stock.








Transitional
      Small Business Disclosure Format (check one):





Yes 
      ____   No X



















**Table
          of Contents**
 
 
 PART
                    I   FINANCIAL
                    INFORMATIONItem
                    1.
                Financial
                    Statements
                3Report
                    of Independent Registered Public Accounting Firm
                3Condensed
                    Balance Sheets as of March 31, 2007 (unaudited) and June 30, 2006
                    (audited)
                4Condensed
                    Statements of Operations for the Three and Nine Months Ended
                    March 31,
                    2007 and 2006 (unaudited)
                5Condensed
                    Statements of Stockholders' Equity NineMonths
                    Ended March 31, 2007 and 2006 (unaudited)
                6Condensed
                    Statements of Cash Flows for the Nine Months
                    Ended March 31, 2007 and 2006(unaudited)
                7Notes
                    to Condensed Financial Statements (unaudited)
                8Item
                    2.
                Management's
                    Discussion and Analysis or Plan of Operation
                16Item
                    3.
                Quantitative
                      and Qualitative Disclosers About Market Risk
                19Item 4.
                Controls
                    and Procedures
                19PART
                    IIOTHER
                    INFORMATIONItem
                    1.
                Legal
                    Proceedings
                21Item
                    2.
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                21Item
                    3.
                Defaults
                    Upon Senior Securities
                21Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                21Item
                    5.
                Other
                    Information
                21Item
                    6.
                Exhibits
                21Signatures
                22




2




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




Frank
        L.
        Sassetti & Co.
 Certified
        Public Accountants
 
 The
        Board
        of Directors
 Pacific
        Sands, Inc.
 
 We
        have
        reviewed the balance sheet of PACIFIC SANDS, INC. as of March 31, 2007 and
        the
        related statements of operations for the nine months ended March 31, 2007
        and
        2006, and the statements of stockholders' equity and cash flows for the nine
        months ended March 31, 2007 and 2006. 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 15 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
        15. 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
 
 May
        21,
        2007
 Oak
        Park,
        Illinois
 
     611
        W.
        North Avenue * Oak Park, Illinois 60302 * Phone (708)386-1433 * Fax (708)
        386-0139





3




PACIFIC
      SANDS, INC.





BALANCE
      SHEETS





MARCH
      31,
      2007 AND JUNE 30, 2006





**ASSETS**March
                31,
            
            June
                30,2007
            
            2006(A
                Review)**CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            16,080
            
            $
            4,977Trade
                receivables, net of allowances for doubtful accounts
            
            
            67,674
            
            
            112,587Due
                from shareholder
            
            
            500Inventories
            
            
            57,419
            
            
            77,069Prepaid
                expenses
            
            
            8,039
            
            
            7,212Total
                Current Assets
            
            
            149,712
            
            
            201,845**PROPERTY
                AND EQUIPMENT**Furniture
                and fixtures & office equipment
            
            
            24,031
            
            
            10,238Manufacturing
                equipment
            
            
            12,204
            
            
            12,204Leasehold
                improvements
            
            
            3,035
            
            
            3,035Deposit
                on software costs
            
            
            15,277
            
            
            20,26954,547
            
            
            45,746Less
                accumulated depreciation
            
            
            13,273
            
            
            6,940Property
                and Equipment, net
            
            
            41,274
            
            
            38,806**OTHER
                ASSETS**Accounts
                receivable - other (net of allowance for doubtful accounts of $
                235,718)
            
            
            -
            
            
            -Note
                Receivable
            
            
            6,590
            
            
            -Security
                deposits
            
            
            841
            
            
            841Total
                Other Assets
            
            
            7,431
            
            
            841Total
                Assets
            
            $
            198,417
            
            $
            241,492**LIABILITIES
                AND STOCKHOLDERS' DEFICIT****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            80,409
            
            $
            99,795Current
                maturities of long-term debt
            
            
            18,215
            
            
            9,877Accrued
                expenses
            
            
            98,767
            
            
            59,691Deferred
                compensation
            
            
            264,280
            
            
            227,934Notes
                payable - other
            
            
            51,329
            
            
            61,177Total
                Current Liabilities
            
            
            513,000
            
            
            458,474**LONG
                TERM LIABILITIES**Capital
                leases, less current portion
            
            
            13,440
            
            
            22,609Total
                Long Term Liabilities
            
            
            13,440
            
            
            22,609**STOCKHOLDERS'
                EQUITY**Common
                stock
            
            
            40,878
            
            
            38,345Additional
                paid in capital
            
            
            3,508,090
            
            
            3,041,947Treasury
                stock, at cost
            
            
            (132,030
            )
            
            (151,030
            )Accumulated
                deficit
            
            
            (3,744,961
            )
            
            (3,168,853
            )Total
                Stockholders' Deficit
            
            
            (328,023
            )
            
            (239,591
            )Total
                Liabilities and Stockholders' Deficit
            
            $
            198,417
            
            $
            241,492





The
      accompanying notes are an integral part of the financial
      statements.








4




**PACIFIC
      SANDS, INC.**




STATEMENTS
      OF OPERATIONS


THREE
      AND
      NINE MONTHS ENDED MARCH 31, 2007 AND 2006








Three
                months ended
            
            Nine
                months endedMarch
                31,
            
            March
                31,2007
            
            2006
            
            2007
            
            2006(A
                Review)
            
            (A
                Review)
            
            (A
                Review)
            
            (A
                Review)NET
                SALES
            
            $
            151,486
            
            $
            136,805
            
            $
            377,612
            
            $
            267,387COST
                OF SALES
            
            
            69,074
            
            
            57,606
            
            
            175,797
            
            
            117,606GROSS
                PROFIT
            
            
            82,412
            
            
            79,199
            
            
            201,815
            
            
            149,781OPERATING
                EXPENSESSelling
                and administrative expenses
            
            
            194,318
            
            
            188,229
            
            
            554,898
            
            
            490,638Stock
                based compensation for board of directors
            
            
            8,000
            
            
            
            
            
            51,160Stock
                based compensation related to options
            
            
            
            
            
            -
            
            
            134,211
            
            
            -Total
                operating expenses
            
            
            202,318
            
            
            188,229
            
            
            740,269
            
            
            490,638LOSS
                FROM OPERATIONS
            
            
            (119,906
            )
            
            (109,030
            )
            
            (538,454
            )
            
            (340,857
            )OTHER
                INCOME (EXPENSES)Interest
                expense
            
            
            (13,118
            )
            
            (2,434
            )
            
            (37,828
            )
            
            (5,138
            )Loss
                on disposal of assets
            
            
            -
            
            
            
            
            
            -
            
            
            (2,680
            )Miscellaneous
                income
            
            
            171
            
            
            16
            
            
            174
            
            
            31Total
                Other Income (Expenses)
            
            
            (12,947
            )
            
            (2,418
            )
            
            (37,654
            )
            
            (7,787
            )LOSS
                BEFORE INCOME TAXES
            
            
            (132,853
            )
            
            (111,448
            )
            
            (576,108
            )
            
            (348,644
            )INCOME
                TAXES
            
            
            -
            
            
            -
            
            
            -
            
            
            -NET
                LOSS
            
            $
            (132,853
            )
            $
            (111,448
            )
            $
            (576,108
            )
            $
            (348,644
            )BASIC
                AND DILUTED NET LOSS PER SHARE
            
            $
            (0.003
            )
            $
            (0.004
            )
            $
            (0.015
            )
            $
            (0.012
            )BASIC
                AND DILUTED WEIGHTED AVERAGE SHARES
            
            
            40,553,922
            
            
            30,537,094
            
            
            39,688,438
            
            
            30,018,273



















The
      accompanying notes are an integral part of the financial
      statements.





5




**PACIFIC
      SANDS, INC.**





STATEMENTS
      OF STOCKHOLDERS' EQUITY


NINE
      MONTHS ENDED MARCH 31, 2007 AND 2006





Common
                StockPar
                value - $.00150,000,000
                shares authorized
            
            
            
            Treasury
                StockAdditional
                Paid
            
            Number
                of
            
            
            
            AccumulatedShares
            
            Amount
            
            In
                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
            
            
            636,673
            
            
            637
            
            
            67,835
            
            
            
            
            
            
            
            
            
            
            
            68,472For
                Options Exercised
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            -For
                Cancellation of Debt
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -For
                Professional services
            
            
            656,072
            
            
            656
            
            
            50,749
            
            
            
            
            
            
            
            
            
            
            
            51,405For
                Salaries
            
            
            60,000
            
            
            60
            
            
            15,251
            
            
            
            
            
            
            
            
            
            
            
            15,311Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (348,644
            )
            
            (348,644
            )Balance
                at March 31, 2006
            
            
            38,197,043
            
            $
            38,197
            
            $
            3,013,005
            
            
            (7,559,187
            )
            $
            (151,030
            )
            $
            (3,207,286
            )
            $
            (307,114
            )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
            
            
            550,000
            
            
            550
            
            
            55,350
            
            
            
            
            
            
            
            
            
            
            
            55,900For
                Professional Services
            
            
            785,141
            
            
            885
            
            
            90,987
            
            
            
            
            
            
            
            
            
            
            
            91,872In
                Lieu of Interest Payment
            
            
            187,098
            
            
            187
            
            
            14,523
            
            
            
            
            
            
            
            
            
            
            
            14,710For
                Cancellation of Debt
            
            
            375,200
            
            
            375
            
            
            38,432
            
            
            
            
            
            
            
            
            
            
            
            38,807For
                Salaries
            
            
            486,112
            
            
            486
            
            
            51,690
            
            
            
            
            
            
            
            
            
            
            
            52,176Issuance
                of Treasury Stock:For
                Cash
            
            
            
            
            
            
            
            
            68,000
            
            
            850,000
            
            
            17,000
            
            
            
            
            
            85,000Exercised
                Stock options
            
            
            50,000
            
            
            50
            
            
            12,950
            
            
            100,000
            
            
            2,000
            
            
            
            
            
            15,000Stock
                based compensation related to options
            
            
            
            
            
            
            
            
            134,211
            
            
            
            
            
            
            
            
            
            
            
            134,211Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (576,108
            )
            
            (576,108
            )Balance
                at March 31, 2007
            
            
            40,778,311
            
            $
            40,878
            
            $
            3,508,090
            
            
            (6,609,187
            )
            $
            (132,030
            )
            $
            (3,744,961
            )
            $
            (328,023
            )



















The
      accompanying notes are an integral part of the financial
      statements.


6




**PACIFIC
      SANDS, INC.**





STATEMENTS
      OF CASH FLOWS


NINE
      MONTHS ENDED MARCH 31, 2007 AND 2006





2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (576,108
            )
            $
            (348,644
            )Adjustments
                to reconcile net loss to net cash provided by (used in) operating
                activities -Depreciation
            
            
            6,333
            
            
            4,726Loss
                on disposal of equipment
            
            
            -
            
            
            2,680Deferred
                compensation
            
            
            36,346
            
            
            79,488Compensation
                expense on stock options granted
            
            
            134,211
            
            
            -Common
                shares and rights issued for services and compensation
            
            
            158,758
            
            
            66,714Due
                from shareholder
            
            
            (500
            )Changes
                in assets and liabilities -Trade
                accounts receivable
            
            
            44,913
            
            
            (30,781
            )Inventories
            
            
            19,650
            
            
            (14,074
            )Prepaid
                expenses
            
            
            (827
            )
            
            4,683Note
                receivables
            
            
            (6,590
            )
            
            59,496Accounts
                payable and other current liabilities
            
            
            19,690
            
            
            87,990Net
                Cash Used in Operating Activities
            
            
            (164,124
            )
            
            (87,722
            )CASH
                FLOWS FROM INVESTING ACTIVITIESPurchases
                of equipment
            
            
            (8,801
            )
            
            (2,704
            )Net
                Cash Used in Investing Activities
            
            
            (8,801
            )
            
            (2,704
            )CASH
                FLOWS FROM FINANCING ACTIVITIESIssuance
                of common stock
            
            
            10,900
            
            
            68,472Issuance
                of treasury stock
            
            
            125,000Issuance
                of notes payable
            
            
            71,809
            
            
            75,341Exercised
                stock options
            
            
            20,000Repayment
                of notes payable
            
            
            (43,681
            )
            
            (49,586
            )Net
                Cash Provided by Financing Activities
            
            
            184,028
            
            
            94,227NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            11,103
            
            
            3,801CASH
                AND CASH EQUIVALENTSBeginning
                of period
            
            
            4,977
            
            
            541End
                of period
            
            $
            16,080
            
            $
            4,342SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATIONCash
                paid during the period forInterest
            
            $
            24,710
            
            $
            8,769Income
                taxes
            
            $
            -
            
            $
            -SUPPLEMENTAL
                INFORMATION FROM NONCASH FINANCING ACTIVITIESConversion
                of debt to equity
            
            $
            38,807Capital
                Lease Obligations
            
            $
            6,368
            
            $
            11,181







The
      accompanying notes are an integral part of the financial
      statements.




7




**PACIFIC
      SANDS, INC.**





NOTES
      TO
      FINANCIAL STATEMENTS


MARCH
      31,
      2007 AND 2006 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 March 31, 2007 and the statements of operations for the
      three and nine months ended March 31, 2007 and 2006 and the statements of
      stockholders' equity and cash flows for the nine months ended March 31, 2007
      and
      2006, 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 March 31, 2007 and the
      results of operations and cash flows for the nine months ended March 31, 2007
      and 2006.





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 $6,332 and $4,726 during
      the
      nine months ended March 31, 2007 and 2006, 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 nine months
      ended March 31, 2007 and 2006, advertising and promotion costs totaled $20,630
      and $36,041, 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


MARCH
      31,
      2007 AND 2006 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 $243,615 is
      adequate as of March 31, 2007.





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 March 31, 2007 and June 30, 2006 consisted of the following.





March
                31, 2007
            
            June
                30, 2006Raw
                materials
            
            $
            48,814
            
            $
            49,364Finished
                goods
            
            
            8,605
            
            
            27,705$
            57,419
            
            $
            77,069








9




**PACIFIC
      SANDS, INC.**





NOTES
      TO
      FINANCIAL STATEMENTS


MARCH
      31,
      2007 AND 2006 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
      Company received a line of credit from Dell Financial Services for $15,000
      with
      an imputed interest rate of 27.24% for any outstanding balance. As of March
      31,
      2007 the company owes $5,750 with a monthly payment of $144 for accounting
      and
      e-commerce servers placed in service in March 2007.





The
      scheduled maturities are as follows for the years ending March 31,





2008
            
            $
            18,2152009
            
            
            8,5332010
            
            
            4,907





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. As of March 31, 2007, $14,710 in interest has been
      converted to equity.








5.
            STOCKHOLDERS'
                EQUITY





On
      December 22, 2006, under private placement agreements, the Company issued
      850,000 shares of treasury stock for $85,000. In addition to these shares the
      Company issued 625,000 options to these investors at $.10 that expire on May
      31,
      2007, which are callable by the Company after February 1, 2007 and 625,000
      options at $.15 that expire on June 30, 2007, which are callable by the Company
      after May 1, 2007. Of the 625,000 options that were issued at $.10, 150,000
      were
      exercised and 475,000 were called by the Company as of March 31, 2007. None
      of
      the $.15 options were exercised. The remaining 625,000, $.15 options are
      outstanding as of March 31, 2007. Through May 21, 2007, these options have
      not
      been called by the Company.











10





**PACIFIC
      SANDS, INC.**





NOTES
      TO
      FINANCIAL STATEMENTS


MARCH
      31,
      2007 AND 2006 AND JUNE 30, 2006





6.
            STOCK-BASED
                COMPENSATION





The
      Company currently records stock based compensation under 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 September 28, 2006.





July
                3, 2006
            
            September
                28, 2006Weighted
                average volatility
            
            116%
            
            161%Expected
                dividends
            
            0%
            
            0%Expected
                term (in years)
            
            1
            
            2Risk
                free rate
            
            5.260%
            
            4.585%





A
      summary
      of option activity as of March 31, 2007 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
            
            6,000,000
            
            $.03
                - $1.00
            
            $0.247ExercisedCancelled
            
            (3,000,000)
            
            $.03
                - $.10
            
            $0.053Expired
            
            (3,000,000)
            
            $.03
                - $.10
            
            $0.053Outstanding
                at March 31, 2007
            
            3,000,000
            
            $.16
                - $1.00
            
            $0.440








11





**PACIFIC
      SANDS, INC.**





NOTES
      TO
      FINANCIAL STATEMENTS


MARCH
      31,
      2007 AND 2006 AND JUNE 30, 2006





7.
            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 which
      then
      increased to $2,049 in February, 2007. The Company is responsible for insuring
      the premises. Rent expense was approximately $18,006 and $16,994 for the nine
      months ended March 31, 2007 and 2006 respectively.








8.
            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.





Nine
                months ending
              March
                31,2007
            
            2006Basic
                and diluted loss per share:Numerator:Net
                loss
            
            $
            (576,108
            )
            $
            (348,644
            )Denominator:Basic
                and diluted weighted average number of common shares outstanding
                during
                the period
            
            
            39,688,436
            
            
            30,018,273Basic
                and diluted loss per share
            
            $
            0.015
            
            $
            (0.012
            )





Since
      the
      Company has incurred losses from all periods presented, the dilutive per share
      calculation is the same as the basic calculation.





9.
            INCOME
                TAXES





The
      Company recognizes deferred tax assets and liabilities for temporary differences
      between the financial reporting and tax bases of its assets and liabilities.
      Deferred assets are reduced by a valuation allowance when deemed
      appropriate.





The
      tax
      effects of existing temporary differences that give rise to significant portions
      of deferred tax assets at March 31, 2007 are as follows:





Deferred
                tax assetNet
                operating loss carryforwards
            
            $
            850,000Valuation
                allowance
            
            
            (850,000
            )Net
                deferred tax asset
            
            $
            -





At
      March
      31, 2007 the Company has net operating loss carryforwards for Federal tax
      purposes of approximately $2,428,000 which, if unused to offset future taxable
      income, will expire in years beginning in 2018.








12





**PACIFIC
      SANDS, INC.**





NOTES
      TO
      FINANCIAL STATEMENTS


MARCH
      31,
      2007 AND 2006 AND JUNE 30, 2006





10.
            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





Subsequent
      to December 31, 2006, management has decided to commence negotiation with the
      Paulus' to reduce or eliminate the debt. Current management cites certain
      nonperformance issues on the part of the Paulus' at the time that they were
      officers and board members of the Company.





Additonally,
      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 March 31,
      2007, 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 March 31, 2007. The deferred compensation charges to operations
      for
      the nine months ended March 31, 2007 and 2006 was $36,346 and $79,488,
      respectively.





Finally,
      a relative of the CFO, received 25,000 shares of stock, with a value of $2,500,
      for consulting services provided to the Company during the quarter ended
      September 30, 2006. This tranaction is believed to be at arm's length and is
      not
      significant to the financial position or results of operations of the
      Company.








13





**PACIFIC
      SANDS, INC.**





NOTES
      TO
      FINANCIAL STATEMENTS


MARCH
      2007 AND 2006 AND JUNE 30, 2006





11.
            RECENT
                PRONOUNCEMENTS





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No
      157, "Fair Value Measurements". This statement defines fair value, establishes
      a
      framework for measuring fair value under generally accepted accounting
      principles, and expands disclosures about fair value measurements. The statement
      is effective in the fiscal first quarter of 2008 and the Company will adopt
      the
      statement at that time. The Company believes that the adoption of SFAS No 157
      will not have a material effect on its results of operations, cash flows or
      financial position.

























12.
            DISPUTED
                PAYABLES WRITTEN OFF





During
      the fiscal year ended June 30, 2004, the Company accrued professional fees
      for
      services. 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.
            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 $62,226 was recorded in
      the
      statement of operations for the nine months ended March 31, 2006 related to
      this
      receivable.





The
      Company received notice on May 3, 2007 that a lawsuit had been filed against
      the
      Company in US District Court, Eastern District of California by the Company's
      former CEO, Stanley Paulus. The lawsuit demands payment of $105,000 plus
      penalties and legal fees for a note that was issued in June of 2006. The note
      was based on deferred salaries accrued for Mr. Paulus during his tenure as
      CEO of the Company. The Company has retained legal counsel in Fresno, California
      to vigorously dispute this matter and take whatever counter actions may be
      necessary in the best interest the Company.








14





**PACIFIC
      SANDS, INC.**





NOTES
      TO
      FINANCIAL STATEMENTS


MARCH
      31,
      2007 AND 2006 AND JUNE 30, 2006








14.
            CONCENTRATIONS





The
      Company distributes water treatment and nontoxic cleaning products to the entire
      U.S. market. For the nine months ended March 31, 2007, one customer accounted
      for approximately 20% of the Company's sales. For the nine months ended March
      31, 2006, one customer accounted for approximately 16.7% of the Company's
      sales.





15.
            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 March 31, 2007, the Company had incurred
      cumulative losses of $3,744,961. 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**





THIS
      REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
      OF
      THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
      EXCHANGE ACT OF 1934, AS AMENDED. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY
      UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING
      FUTURE EVENTS OR FUTURE PERFORMANCE OF THE COMPANY. READERS ARE CAUTIONED NOT
      TO
      PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH ARE ONLY
      PREDICTIONS AND SPEAK ONLY AS OF THE DATE HEREOF. FORWARD-LOOKING STATEMENTS
      USUALLY CONTAIN THE WORDS "ESTIMATE," "ANTICIPATE," "BELIEVE," "EXPECT," OR
      SIMILAR EXPRESSIONS, AND ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND
      UNCERTAINTIES. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD
      CAREFULLY REVIEW VARIOUS RISKS AND UNCERTAINTIES IDENTIFIED BELOW, AS WELL
      AS
      THE MATTERS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON 10-KSB FOR THE YEAR
      ENDED JUNE 30, 2006 AND ITS OTHER SEC FILINGS. THESE RISKS AND UNCERTAINTIES
      COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
      INDICATED IN THE FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO
      OBLIGATION TO UPDATE OR PUBLICLY ANNOUNCE REVISIONS TO ANY FORWARD-LOOKING
      STATEMENTS TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.




Pacific
      Sands, Inc. (the "Company" or "Pacific Sands") was incorporated in the State
      of
      Nevada on July 7, 1994. The Company's fiscal year ends June 30. The Company
      is a
      C-Corporation for federal income tax purposes. The Company does not have
      subsidiaries or affiliated entities. The Company also does business as "Natural
      Water Technologies" and ecoONE Marketing Group.




The
      Company develops, manufactures, markets and sells a range of non-toxic,
      environment friendly cleaning and water-treatment products based on proprietary
      blended botanical and nontoxic chemical technologies. The company's products
      have applications ranging from water installation maintenance (spas, swimming
      pools, fountains, decorative ponds) to cleaning (non-toxic household and
      industrial) and pet care.




The
      Company has a mature, actively marketed product line known as the ecoONE® Spa
      Treatment system as well as ecoONE® Pool conditioner and the Pacific Sands
      All-Purpose Hose Filter. Pacific Sands is also the master distributor for Rain
      Forest Blue, an EPA Registered chlorine and bromine free, non irritating, odor
      free, bactericide / algaecide alternative for the treatment of pool
      water.




Currently
      the Company markets and sells its product lines over the Internet and through
      numerous retail outlets in the US, Canada and Europe. The products are also
      sold
      via Pacific Sands distributors, manufacturer's representatives and
      internationally established pool and spa industry distribution
      networks.





The
      company's goal is to achieve sustained and significant profitability through
      revenues achieved by marketing and sale of its nontoxic, earth, health and
      kid-friendly, ecoONE® Pool, Spa, Household Cleaning and other product
      lines.





In
      July
      of 2004, management began the implementation of a three year market saturation
      strategy for the ecoONE® line of pool and spa products. The strategy has been
      very successful to date, resulting in sharp increases in sales, dealer and
      distributor outlets and industry recognition.





Management
      intends to continue the aggressive marketing and sale of its products through
      direct retail and a widening base of retail outlets, distribution centers and
      OEM arrangements in order to achieve its goals.





The
      company's ability to achieve its objectives is dependent on its ability to
      sustain and enhance its revenue stream and to continue to raise funds through
      loans, credit and the private placement of restricted securities until such
      time
      as the company achieves sustained fiscal profitability.





16








To
      date,
      the Company has funded operations through a combination of revenues from the
      sale of its products, established credit with vendors, and the sale of rule
      144
      stocks through private placement. The company's failure to continue to raise
      adequate financing to fund operations may jeopardize its existence. (See
“Liquidity and Capital Resources”)





Management
      knows of no additional trends or uncertainties beyond those discussed that
      are
      reasonably likely to have a material impact on the company's short or long-term
      liquidity.





RESULTS
      OF OPERATIONS





Results
      for the three and nine months ending March 31, 2007 compared to the three and
      nine months ending March 31, 2006.





For
      the
      three months ending March 31, 2007 net sales were $151,486, an increase of
      10.7%
      over $ 136,805 in sales booked for the same period in 2006.  For the nine
      months ending March 31, 2007 net sales were $377,612, an increase of 41% over
      $
      267,387 in sales booked for the same period in 2006.





The
      increase in sales is attributable to a number of factors including more retail
      outlets carrying the ecoONE® spa treatment products, increased direct Internet
      retail sales and an OEM contract with a major spa manufacturer which includes
      privately branded ecoONE® starter kits with their new spas sold. Anticipated
      growth rate was slowed somewhat in the third quarter due to two major customers
      delaying early stocking orders.





Gross
      profits for the current quarter ending March 31, 2007 were $ 82,412 compared
      to
      $ 79,199 an increase of 4% over the same period the previous fiscal year. Gross
      profits for the nine months ending March 31, 2007 were $201,815 compared to
      $149,781 an increase of 34.7% over the same period the previous fiscal year.





For
      the
      three months ending March 31, 2007, selling and general administrative expenses
      were $194,318 up 3.2%% compared to $188,229 for the three months ending March
      31, 2006. For the nine months ending March 31, 2007, selling and general
      administrative expenses were $554,898, up 13% compared to $490,638 for the
      nine
      months ending March 31, 2006.





For
      the
      three months ending March 31, 2007, total operating expenses were $202,318
      up
      7.5% compared to $ 188,229 for the three months ending March 31, 2006. For
      the
      nine months ending March 31, 2007, total operating expenses were $740,269,
      up
      51% compared to $490,638 for the nine months ending March 31, 2006. The nine
      month figure includes $51,160 of restricted stock issued to members of the
      board
      of directors in return for their agreeing to allow 'in the money options' to
      expire and board member compensation. The nine-month figure also includes
      $134,211 for options to purchase Rule 144 restricted common stock issued to
      management and board members for prices ranging between $.16 and $1.00 per
      share. (see - Stock Based Compensation)





Loss
      from
      operations for the three months ending March 31, 2007 was $119,906 compared
      to
      $109,030 for the same period the previous fiscal year. Loss from operations
      for
      the nine months ending March 31, 2007 was $538,454 compared to $340,857 for
      the
      same period the previous fiscal year, the increase largely due to the
      above-mentioned options.




The
      company incurred a net loss of $ 132,853 for the three months ending March
      31,
      2007 compared to $111,448 for the same period the previous fiscal year. The
      company incurred a net loss of $ 576,108 for the nine months ending March 31,
      2007 compared to $ 348,644 for the same period the previous fiscal year.





The
      company currently has no income tax liabilities.





***************************








17





LIQUIDITY
      AND CAPITAL RESOURCES





Management
      believes that the company is positioned for sales growth but will require
      additional funding to continue operations and expansion. The company's ability
      to achieve its objectives is dependent on its ability to continue to sustain
      and
      enhance its current revenue stream and to continue to raise funds through loans,
      credit and the private placement of securities until such time as the company
      sustains fiscal profitability. To date, the Company has funded operations and
      expansion through a combination of revenues from the sale of its products,
      established credit with vendors, deferred salaries and the sale of rule 144
      stock through private placement. The Company's failure to continue to raise
      adequate financing to fund planned expansion may jeopardize its plans for
      growth.





Cash
      and
      cash equivalents totaled $16,080 on March 31, 2007 versus $4,977 on June 30,
      2006.





Total
      current assets as of March 31, 2007 were $149,712 compared to $201,845 on June
      30, 2006. Of the current assets, the company had $67,674 in trade receivables
      on
      March 31, 2007 versus $112,587 in trade receivables on June 30, 2006 and $57,419
      in inventories versus $77,069 in inventories on June 30, 2006. The reduction
      in
      trade receivables is partially a reflection of a more aggressive collection
      stance taken on the part of the company. Additionally, the company experienced
      a
      sharp surge in sales in the latter part of the fourth quarter of fiscal 2006
      with accounts receivable carrying over into the first quarter.





Total
      assets were $198,417 on March 31, 2007 versus $241,492 on June 30, 2006. The
      reduction in total assets is roughly commensurate with reduction in accounts
      receivable and inventory.





At
      the
      end of the period ending March 31, 2007 Accounts receivable had a balance of
      $67,674 and total current liabilities were $507,462.





Included
      in Total Current Liabilities is $264,280 in deferred compensation.





Deferred
      Compensation includes combined salaries of $159,280 owed to Company CEO, Michael
      Wynhoff and CFO Michael Michie who deferred substantial portions of their
      salaries for fiscal years 2005, 2006 and 2007. Mr. Wynhoff and Mr. Michie
      continue to defer these past-due salaries until the company is in a position
      to
      pay.





Current
      liabilities also reflects $105,000 which had been booked as deferred salary
      to
      former CEO Stanley Paulus and was converted to a note in June of 2006. This
      balance is currently being disputed by the company primarily for Mr. Paulus
      failure to disclose certain transactions as compensation during his tenure
      as
      CEO and other significant issues. Mr. Paulus has filed suit to collect and,
      as
      of May 17, 2007, the matter remained unresolved.




Net
      cash
      used in operations was $164,124 for the nine months ending March 31, 2007
      compared to $87,722 for the same period of the previous fiscal year.





Net
      cash
      provided by financing activities was $184,028 for the nine month period ending
      March 31, 2007, compared to $94,227 for the same period the previous fiscal
      year.





The
      company's ability to achieve its objectives is dependent on its ability to
      sustain and enhance its revenue stream and to continue to raise funds through
      loans, credit and the private placement of restricted securities until such
      time
      as the company achieves profitability. To date, management has been successful
      in raising cash on an as-needed basis for the continued operations of the
      company. There is no guarantee that management will be able to continue to
      raise
      needed cash in this fashion.





The
      company has no material commitments for capital expenditures at this time.
      The
      company has no “off balance sheet” source of liquidity
      arrangements.





The
      company presently employees six full time and three part time
      employees.








18





**Item
                3**
            **Quantitative
                and Qualitative Disclosers About Market
                Risk**





An
      investment in the common stock of the Company involves a high degree of risk.
      In
      addition to the other information in this report, the following risk factors
      should be considered carefully in evaluating the Company and its business.
      This
      Report contains forward-looking statements. All forward-looking statements
      are
      inherently uncertain as they are based on current expectations and assumptions
      concerning future events or future performance of the Company. Readers are
      cautioned not to place undue reliance on these forward-looking statements,
      which
      are only predictions and speak only as of the date hereof. Forward-looking
      statements usually contain the words "estimate," "anticipate," "believe,"
      "plan," "expect," or similar expressions, and are subject to numerous known
      and
      unknown risks and uncertainties. In evaluating such statements, prospective
      investors should review carefully various risks and uncertainties identified
      in
      this report, including the matters set below and in the Company's other SEC
      filings. These risks and uncertainties could cause the Company's actual results
      to differ materially from those indicated in the forward-looking statements.
      The
      Company undertakes no obligation to update or publicly announce revisions to
      any
      forward-looking statements to reflect future events or
      developments.




THE
      COMPANY HAS EXPERIENCED LOSSES FROM OPERATIONS SINCE COMMENCING OPERATIONS:


With
      the
      exception of 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.








19





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 significant
      deficiencies 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
      third
      quarter ended March 31, 2007, that has materially affected, or is reasonably
      likely to material affect, our internal control over financial reporting.











20





**PART
      II** **** **OTHER
      INFORMATION**





**Item
                1.**
            **Legal
                Proceedings**





There
      is
      a law suit filed against the Company by former CEO, Stanley Paulus for $105,000
      plus attorney files and court costs, which was reported on Form 8-K, dated
      May
      10, 2007.




**Item
                2.**
            **Unregistered
                Sales of Equity Securities and Use of
                Proceeds**





On
      January 10 th ,
      2007,
      S. John May was issued 42,500 shares of restricted stock for professional
      services valued at $4,250.00.





On
      March
      9 th ,
      2007,
      Marc Paul Hujik was issued 42,500 shares of restricted stock for professional
      services valued at $4,250.00.





On
      March
      9 th ,
      2007,
      Andrew J. Barwicki was issued 70,000 shares of restricted stock for professional
      services valued at $7,000.00.





On
      March
      9 th ,
      2007,
      an accredited investor excersised option of 100,000 shares of Treasury stock
      for
      $10,000.





On
      March
      9 th ,
      2007,
      an accredited investor purchased 50,000 shares of restricted stock and
      excersised 50,000 options for $10,000.





On
      March
      9 th ,
      2007,
      The Sondra Blake Living Trust was issued 100,000 shares of restricted stock
      for
      professional services valued at $10,000.00.





On
      March
      9 th ,
      2007,
      John D. Hagarty was granted 20,000 shares of restricted stock as a stipend
      for
      BOD duties valued at 2,000.00





On
      March
      9 th ,
      2007,
      John D. Hagarty was issued 40,000 shares of restricted stock for professional
      services valued at $4,000.00.





On
      March
      9 th ,
      2007,
      Michael L. Wynhoff was granted 20,000 shares of restricted stock as a stipend
      for BOD duties valued at 2,000.00





On
      March
      9 th ,
      2007,
      Michael D. Michie was granted 20,000 shares of restricted stock as a stipend
      for
      BOD duties valued at 2,000.00





On
      March
      9 th ,
      2007,
      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**







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





31.1
            CEO
                Certification





31.2
            CFO
                Certification





32.1
            CEO
                906 Certification





32.2
            CFO
                906 Certification





Reference 8K
      issued on 5/10/07








21





**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:
                May 21, 2007
            By:
            /s/
                Michael
                WynhoffMichael
                WynhoffChief
                Executive OfficerDated:
                May 21, 2007
            By:
            /s/
                Michael
                MichieMichael
                MichieChief
                Financial Officer
















































































22





Index
        of
        Exhibits




31.1
            CEO
                Certification





31.2
            CFO
                Certification





32.1
            CEO
                906 Certification





32.2
            CFO
                906 Certification























































23