UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










FORM
10-Q





(Mark
One)


x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.








For the quarterly period ended
            September
      30, 2009


OR





TRANSITION
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.





For the
transition period from ___________________________ to
___________________________





Commission
file number 000-29483





Pacific
Sands, Inc.





(Exact
Name of Registrant as specified in its charter)





Nevada
            88-0322882(State
      or Other Jurisdiction of Incorporation or
      Organization)
            (IRS
      Employer Identification No.)








1509
      Rapids Drive
              Racine,
      WI
            53404(Address
      of Principal Executive Offices)
            (Zip
      Code)





Issuer’s
Telephone Number, Including Area Code:  (262) 619-3261





N/A


(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 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.      Yesx
             No ̈





§ x o






Indicate
by check mark whether the registrant is a larger accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one)





Large
      accelerated filer  o
            Accelerated
      filer  oNon-accelerated
      filer  o
            Smaller
      reporting company  x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
  Yes ̈            
NoQ


The
numbers of shares outstanding of each of the issuer's classes of common equity,
as of November 16, 2009 are as follows:





Class
      of Securities
            
            Shares
      OutstandingCommon
      Stock, $0.001 par value
            
            43,581,940










TABLE OF CONTENTS










PagePART I  FINANCIAL
      INFORMATIONItem
      1.
            Financial Statements
            3Balance Sheet as of September, 30 2009 (unaudited)
      and June 30, 2009
            3Statements of Operations for the
      Three  Months Ended September 30, 2009 and 2008
      (unaudited)
            4Statements of Cash Flows for the Three Months
      Ended September 30, 2009 and
    2008 (unaudited)
            5Notes to Financial Statements
      (unaudited)
            6Item
      2.
            Management Discussion and Analysis of Financial
      Condition and Results of Operations
            13Item
      3.
            Quantitative and Qualitative Disclosures About
      Market Risk
            16Item
      4.
            Controls and Procedures
            17PART
      IIOTHER INFORMATIONItem
      1.
            LEGAL PROCEEDINGS
            18Item
      2.
            UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS
            18Item
      3.
            DEFAULTS UPON SENIOR
    SECURITIES
            18Item
      4.
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
            18Item
      5.
            OTHER INFORMATION
            19Item
      6.
            EXHIBITS
            19SIGNATURES
            20EX-31.1 (Certifications required under
      Section 302 of the Sarbanes-Oxley Act of 2002)EX-31.2 (Certifications required under
      Section 302 of the Sarbanes-Oxley Act of 2002)EX-32.1 (Certifications required under
      Section 906 of the Sarbanes-Oxley Act of 2002)EX-32.2 (Certifications required under
      Section 906 of the Sarbanes-Oxley Act of 2002)













PACIFIC
      SANDS, INC.BALANCE
      SHEETSSEPTEMBER
      30, 2009 AND JUNE 30, 2009ASSETSSeptember
      30, 2009
            
            
            June
      30, 2009Current
      assets:
            
            (Unaudited)Cash
      and cash equivalents
            
            $
            1,889
            
            
            $
            7,144Trade
      receivables, net of allowances for doubtful accounts of $9,373 and
      $70,000
            
            
            120,089
            
            
            
            137,412Inventories
            
            
            118,882
            
            
            
            108,803Other
      current assets
            
            
            1,906
            
            
            
            1,257Total
      Current Assets
            
            
            242,766
            
            
            
            254,616Property
      and equipment, net
            
            
            52,588
            
            
            
            59,663Other
      assets:Goodwill
            
            
            877,854
            
            
            
            877,854877,854
            
            
            
            877,854Total
      Assets
            
            $
            1,173,208
            
            
            $
            1,192,133LIABILITIES AND
      STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
            
            $
            165,999
            
            
            $
            152,022Accrued
      expenses
            
            
            145,512
            
            
            
            125,660Current
      portion of notes payable and capital leases
            
            
            198,737
            
            
            
            223,330Total
      Current Liabilities
            
            
            510,248
            
            
            
            501,012Notes
      payable and capital leases - net of discount of $25,247 and $33,946, less
      current portion
            
            
            986,639
            
            
            
            989,285Total
      Liabilities
            
            
            1,496,887
            
            
            
            1,490,297Stockholders'
      deficitCommon
      stock (50,000,000 shares authorized, 50,191,127 and 49,196,090shares issued, and 43,581,940 and 42,586,903 shares
      outstanding)
            
            
            50,192
            
            
            
            49,196Additional
      paid in capital
            
            
            4,173,367
            
            
            
            4,134,561Treasury
      stock, at cost
            
            
            (132,030
            )
            
            
            (132,030
            )Accumulated
      deficit
            
            
            (4,415,208
            )
            
            
            (4,349,891
            )Total
      Stockholders' Deficit
            
            
            (323,679
            )
            
            
            (298,164
            )Total
      Liabilities and Stockholders' Deficit
            
            $
            1,173,208
            
            
            $
            1,192,133See
      accompanying notes.





3





PACIFIC
      SANDS, INC.STATEMENTS
      OF OPERATIONSFOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008(UNAUDITED)Three
      months endedSeptember
      30,2009
            
            
            2008Net
      sales
            
            $
            253,545
            
            
            $
            352,806Cost
      of sales
            
            
            106,186
            
            
            
            161,950Gross
      profit
            
            
            147,359
            
            
            
            190,856Selling
      and administrative expenses
            
            
            191,420
            
            
            
            239,680Loss
      from operations
            
            
            (44,061
            )
            
            
            (48,824
            )Other
      expenseInterest
      expense
            
            
            (21,256
            )
            
            
            (16,088
            )Loss
      before income taxes
            
            
            (65,317
            )
            
            
            (64,912
            )Income
      taxes
            
            
            -
            
            
            
            -Net
      loss
            
            $
            (65,317
            )
            
            $
            (64,912
            )Basic
      and diluted loss per share:
            
            $
            (0.002
            )
            
            $
            (0.002
            )Basic
      and diluted weighted average shares outstanding:
            
            
            43,506,231
            
            
            
            39,229,515See
      accompanying notes.





4





PACIFIC
      SANDS, INC.STATEMENTS
      OF CASH FLOWSFOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008(UNAUDITED)2009
            
            
            2008Cash
      flows from operating activitiesNet
      loss
            
            $
            (65,317
            )
            
            $
            (64,912
            )Adjustments
      to reconcile net loss to net cash used in operating activities
      -Depreciation
      and amortization
            
            
            7,073
            
            
            
            6,542Amortization
      of debt discount
            
            
            8,700
            
            
            
            11,325Common
      shares issued for services  and compensation
            
            
            2,000
            
            
            
            15,950Changes
      in assets and liabilities -Trade
      accounts receivable
            
            
            17,323
            
            
            
            (82,051
            )Inventories
            
            
            (10,079
            )
            
            
            8,836Prepaid
      expenses
            
            
            -
            
            
            
            948Other
      assets
            
            
            (649
            )
            
            
            (200
            )Accounts
      payable and other current liabilities
            
            
            33,829
            
            
            
            11,794Net
      Cash Used in Operating Activities
            
            
            (7,120
            )
            
            
            (91,768
            )Cash
      flows from investing activitiesPurchases
      of equipment
            
            
            -
            
            
            
            (3,146
            )Security
      deposits
            
            
            -
            
            
            
            (711
            )Net
      Cash Used in Investing Activities
            
            
            -
            
            
            
            (3,857
            )Cash
      flows from financing activitiesProceeds
      from common stock issued
            
            
            8,930
            
            
            
            41,169Proceeds
      from notes payable
            
            
            9,982
            
            
            
            116,364Repayment
      of notes payable and long term obligations
            
            
            (17,047
            )
            
            
            (46,744
            )Net
      Cash Provided by Financing Activities
            
            
            1,865
            
            
            
            110,789Net
      increase (decrease) in cash and cash equivalents
            
            
            (5,255
            )
            
            
            15,164Cash
      and cash equivalents:Beginning
      of period
            
            
            7,144
            
            
            
            7,487End
      of period
            
            $
            1,889
            
            
            $
            22,651




Supplemental
      disclosures of cash flow information:Cash
      paid during the period for:Interest
            
            $
            7,947
            
            
            $
            2,483Income
      taxes
            
            $
            -
            
            
            $
            -Supplemental
      disclosure of non cash financingand investing
      activitiesConversion
      of debt to equity
            
            $
            28,871
            
            
            $
            50,000See
      accompanying notes.





5
 FORM 10-Q
                    SEPTEMBER 30,
      2009
 PACIFIC SANDS, INC





1.     BASIS
OF PRESENTATION





The
accompanying unaudited interim financial statements of Pacific Sands, Inc., have
been prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
(“SEC”), and should be read in conjunction with the audited financial statements
and notes thereto contained in Pacific Sands, Inc’s Annual Report filed with the
SEC on Form 10-K for the year ended June 30, 2009.  In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected
herein.  The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full
year.  Notes to the financial statements which would substantially
duplicate the disclosure contained in the audited financial statements for
fiscal 2009 as reported elsewhere in this Form 10-Q have been
omitted.








2.     DESCRIPTION
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES





Nature of Business - Pacific
Sands, Inc. with the right to do business as Natural Water Technologies (the
"Company" or “Pacific Sands”) was incorporated in Nevada on July 7,
1994.  Pacific Sands develops, manufactures, markets and sells a range
of nontoxic, environmentally friendly cleaning and water-treatment products
based on proprietary blended botanical, nontoxic and natural chemical
technologies. The Company’s products have applications ranging from water
maintenance (spas, swimming pools, fountains, decorative ponds) to cleaning
(nontoxic household and industrial) and pet care.





In
February of 2008, the Company acquired Natural Choices Home Safe Products, LLC
(“Natural Choices”), a developer and manufacturer of environmentally friendly
cleaning and laundry products. The acquisition added dozens of new products to
the Pacific Sands portfolio of earth, health, pet and kid-friendly offerings,
including Oxy-BoostTM an oxygen-bleach based, chlorine-free bleach alternative.
The Company now has a large selection of oxygen- bleach based formulations
available both for retail distribution under its ecoone®, e-2 elemental earth®
and Natural ChoicesTM brands as well as for contract manufacturing and
re-label.





The
Company markets and sells its product lines directly, over the Internet and
through pool, spa, hardware, specialty and other retail outlets in the US,
Canada and Europe. The products are also sold via Pacific Sands distributors,
manufacturers’ representatives and internationally established pool and spa
industry distribution networks. The Company’s products are also sold through
numerous popular pool and spa websites.  The Company’s Natural Choices
branded product are sold in numerous retail outlets around the country and in
Europe as well as dozens of the top environmentally-oriented
websites.





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





6
 FORM 10-Q
                  SEPTEMBER 30,
      2009
 PACIFIC SANDS, INC





Depreciation and Amortization - For
financial reporting purposes, depreciation and amortization of property and
equipment has been computed over estimated useful lives of two to seven years
primarily using the straight-line method.  Depreciation and
amortization charges totaled $7,074 and $6,542 during the three months ended
September 30, 2009 and 2008, respectively.





Revenue Recognition - Revenue
is recognized when the related products are shipped.





Income Taxes - The Company
uses the asset and liability method in accounting for income
taxes.  Deferred taxes are recognized for temporary differences
between the basis of assets and liabilities for financial statement and income
tax purposes.  The temporary differences relate primarily to net
operating loss carryforwards and deferred compensation charges.  A
valuation allowance is recorded for deferred tax assets when it is more likely
than not that some or all of the deferred tax assets will not be realized
through future operations.





The
income tax accounting process for uncertainty in income taxes 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 statements.
Management's review of the Company’s possible tax for the three months ended
September 30, 2009 and 2008 did not result in any positions requiring
disclosure.  Should the Company need to record interest and/or
penalties related to uncertain tax positions, or other tax authority
assessments, it would classify such expenses as part of the income tax
provision.





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 $9,373 is adequate as of September 30,
2009.





Basic and Diluted Net Loss Per
Share - Basic net loss per share is based upon the weighted average
number of common shares outstanding.  Dilutive convertible shares and
stock options are not included in the compensation of the weighted average
number of shares outstanding for dilutive net loss per common share, as the
effect would be antidilutive.




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.





7
 FORM 10-Q
                  SEPTEMBER 30,
      2009
 PACIFIC SANDS, INC






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.




Subsequent Events




Recent Accounting
Pronouncements - The following is a summary of recent authoritative
pronouncements that affect accounting, reporting and disclosure of financial
information by the Company.





In June
2009, the FASB issued new accounting guidance related to accounting standards
codification and the hierarchy of GAAP. FASB Accounting Standards Codification
(“Codification”) is to become the single official source of authoritative U.S.
generally accepted accounting principles (“GAAP”) to be applied by
nongovernmental entities, superseding existing FASB, American Institute of
Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and
related accounting literature. Rules and interpretive releases of the Securities
and Exchange Commission (“SEC”) under authority of federal securities laws are
also sources of authoritative U.S. GAAP for SEC registrants.  The
Guidance reorganizes the previously issued GAAP pronouncements into accounting
topics and displays them using a consistent structure. The subsequent issuances
of new standards will be in the form of Accounting Standards Updates that will
be included in the Codification. The guidance is effective for the Company as of
the interim period ended September 30, 2009. As the Codification was not
intended to change or alter existing GAAP, it will not have an impact on the
Company’s consolidated financial statements. The only impact will be that any
future references to authoritative accounting literature will be in accordance
with the new numbering system prescribed by the Codification.









8
 FORM 10-Q
                  SEPTEMBER 30,
      2009
 PACIFIC SANDS, INC




3.     GOING
CONCERN





The
accompanying financial statements have been presented assuming that the Company
will continue as a going concern.  This basis of accounting
contemplates the recovery of the Company's assets and the satisfaction of its
liabilities in the normal course of business.  Through September 30,
2009, the Company has incurred cumulative losses of $4,415,208.  The
Company's successful transition to attaining profitable operations is dependent
upon obtaining financing adequate to fulfill its development, marketing and
sales activities and achieving a level of revenues adequate to support the
Company's cost structure.  Management's plan of operations anticipates
that the cash requirements of the Company for the next twelve months will be met
by obtaining capital through the sale of common stock, debt financings and from
current operations.  However, there is no assurance that the Company
will be able to fully implement its plan in order to generate the funds needed
on a going concern basis.








4.     INVENTORIES





Inventories
at September 30, 2009 and June 30, 2009 consisted of the following:





September
      30,
              2009
            
            
            June
      30,
              2009Raw
      materials
            
            $
            89,533
            
            
            $
            94,484Finished
      goods
            
            
            29,349
            
            
            
            14,319Total
            
            $
            118,882
            
            
            $
            108,803








5.     PROPERTY
AND EQUIPMENT





Property
and equipment at September 30, 2009 and June 30, 2008 consisted of the
following:





September
      30,
              2009
            
            
            June
      30,
              2008Furniture
      and office equipment
            
            $
            33,596
            
            
            $
            33,596Manufacturing
      equipment
            
            
            63,104
            
            
            
            63,104Leasehold
      improvements
            
            
            3,035
            
            
            
            3,035Computer
      software
            
            
            15,277
            
            
            
            15,277115,012
            
            
            
            115,012Less
      accumulated depreciation and amortization
            
            
            (62,424
            )
            
            
            (55,349
            )Property
      and equipment, net
            
            $
            52,588
            
            
            $
            59,663




9
 FORM 10-Q
                  SEPTEMBER 30,
      2009
 PACIFIC SANDS, INC





6.     ACCRUED
EXPENSES


Accrued
expenses at September 30, 2009 and June 30, 2008 consisted of the
following:




September
      30, 2009
            
            
            June
      30, 2008Accrued
      compensation
            
            $
            74,452
            
            
            $
            55,894Accrued
      payroll withholding taxes and penalties
            
            
            44,040
            
            
            
            39,525Accrued
      professional fees
            
            
            9,800
            
            
            
            18,766Accrued
      interest
            
            
            12,248
            
            
            
            9,897Accrued
      other
            
            
            4,972
            
            
            
            1,578Total
            
            $
            145,512
            
            
            $
            125,660








7.     NOTES
PAYABLE AND CAPITAL LEASE OBLIGATIONS





Notes
payable at September 30, 2009 and June 30, 2008 consisted of the
following:





September
      30, 2009
            
            
            June
      30, 2008Dell
      Financial Services – line of credit
            
            $
            12,603
            
            
            $
            13,652J.P.
      Morgan Chase –  business line of credit
            
            
            92,043
            
            
            
            94,992Notes
      payable - stockholders and directors
            
            
            39,115
            
            
            
            59,652Notes
      payable – settlement obligation
            
            
            38,500
            
            
            
            44,500Notes
      payable – acquisition, net of discount
            
            
            636,869
            
            
            
            629,684Convertible
      notes payable – net of discount
            
            
            69,884
            
            
            
            68,370Notes
      payable – executive officers
            
            
            271,443
            
            
            
            274,443Capital
      leases
            
            
            24,919
            
            
            
            27,3221,185,376
            
            
            
            1,212,615Less
      current maturities
            
            
            198,737
            
            
            
            223,330$
            986,639
            
            
            $
            989,285








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





2010
            
            $
            198,7372011
            
            
            94,6152012
            
            
            917,271








8.    
STOCKHOLDERS’ EQUITY





On July
7, 2009, the Company issued 50,000 shares of its common stock to a consultant
for services performed. The fair market value of the shares on the date issued
was $0.04 per share. The Company recorded consulting fee expense of $2,000
related to the issuance of these shares.





10
 FORM 10-Q
                  SEPTEMBER 30,
      2009
 PACIFIC SANDS, INC





On July
7, 2009, the Company issued 150,000 shares of its common stock to an unrelated
investor for a cash investment of $6,000.





On July
7, 2009, the Company issued 73,259 shares of its common stock to an employee for
a cash investment of $2,930.





On July
7, 2009, the Company issued 721,778 shares of its common stock to a related
party shareholder as settlement of a note payable in the amount of
$28,871.








9.    
LOSS PER SHARE





Basic
loss per common share is based on the weighted average number of common shares
outstanding in each period and net loss.











Three
      Months EndedSeptember30,
              2009
            
            
            September
      30,
              2008Numerator:Basic
      and diluted loss
            
            $
            (65,317
            )
            
            $
            (64,912
            )Denominator:Basic
      and diluted per share data - weighted average shares
            
            
            43,506,231
            
            
            
            39,229,515Basic
      and diluted loss per share
            
            $
            (0.002
            )
            
            $
            (0.002
            )







Outstanding
stock options were not included in the computation of diluted loss per common
share for the three month periods ended September 30, 2009 and 2008 since their
inclusion would have resulted in an antidilutive effect.





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





September
      30, 2009
            September
      30, 2008Stock
      options
            3,000,000
            3,000,000




11
 FORM 10-Q
                  SEPTEMBER 30,
      2009
 PACIFIC SANDS, INC





10.    INCOME
TAXES





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





The tax
effects of existing temporary differences that give rise to significant portions
of deferred tax assets at September 30, 2009 and June 30, 2008 are as
follows:





September
      30, 2009
            
            
            June
      30, 2008Net
      operating loss carryforwards
            
            $
            1,370,000
            
            
            $
            1,342,000Deferred
      compensation
            
            
            130,000
            
            
            
            134,000Accounts
      receivable allowance
            
            
            4,000
            
            
            
            30,000Valuation
      allowance
            
            
            (1,504,000
            )
            
            
            (1,506,000
            )Net
      deferred tax asset
            
            $
            --
            
            
            $
            --





At
September 30, 2009, the Company has net operating loss carryforwards for Federal
tax purposes of approximately $3,261,000 which, if unused to offset future
taxable income, will expire in years beginning in





12


Item
      2.
              Management
      Discussion and Analysis of Financial Condition and Results of
      Operation
 
 
 THIS
REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY
UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING
FUTURE EVENTS OR FUTURE PERFORMANCE OF THE COMPANY. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH ARE ONLY
PREDICTIONS AND SPEAK ONLY AS OF THE DATE HEREOF. FORWARD-LOOKING STATEMENTS
USUALLY CONTAIN THE WORDS "ESTIMATE," "ANTICIPATE," "BELIEVE," "EXPECT," OR
SIMILAR EXPRESSIONS, AND ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD
CAREFULLY REVIEW VARIOUS RISKS AND UNCERTAINTIES IDENTIFIED BELOW, AS WELL AS
THE MATTERS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON 10-KSB FOR THE YEAR
ENDED JUNE 30, 2008 AND ITS OTHER SEC FILINGS. THESE RISKS AND UNCERTAINTIES
COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
INDICATED IN THE FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO
OBLIGATION TO UPDATE OR PUBLICLY ANNOUNCE REVISIONS TO ANY FORWARD-LOOKING
STATEMENTS TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.
  General
  Pacific
Sands, Inc. (the "Company" or "Pacific Sands") was incorporated in the State of
Nevada on July 7, 1994. The Company's fiscal year ends June 30. The Company is a
C-Corporation for federal income tax purposes. The Company does not have
subsidiaries or affiliated entities. The Company also does business as "Natural
Water Technologies", ecoONE Marketing Group and Natural Choices Home Safes
Products (see discussion below).
  The
Company develops, manufactures, markets and sells a range of non-toxic,
environmentally friendly cleaning and water-treatment products based on
proprietary blended botanical and nontoxic chemical technologies. The Company's
products have applications ranging from water installation maintenance (spas,
swimming pools, fountains, decorative ponds) to cleaning (non-toxic household
and industrial) 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.
  13
  In mid
February of 2008, the Company acquired Natural Choices Home Safe Products, LLC
(“Natural Choices”), a developer and manufacturer of environmentally friendly
cleaning and laundry products. The acquisition added dozens of new products to
the Pacific Sands portfolio of earth, health, pet and kid-friendly offerings,
including Oxy-BoostTM an oxygen-bleach based, chlorine-free bleach alternative.
The Company now has a large selection of oxygen- bleach based formulations
available both for retail distribution under its ecoone®, e-2 elemental earth®
and Natural ChoicesTM brands as well as for contract manufacturing and
re-label.
  The
Company markets and sells its product lines directly, over the Internet and
through pool, spa, hardware, specialty and other retail outlets in the US,
Canada and Europe. The products are also sold via Pacific Sands distributors,
manufacturers’ representatives and internationally established pool and spa
industry distribution networks. The Company’s products are also sold through
numerous popular pool and spa websites.  The Company’s Natural Choices
branded product are sold in numerous retail outlets around the country and in
Europe as well as dozens of the top environmentally-oriented
websites.
 
 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.
 
 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.
 
 To date,
the Company has funded operations through a combination of revenues from the
sale of its products, established credit with vendors, a bank line of credit and
the sale of rule 144 stocks through private placement. The Company's failure to
continue to raise adequate financing to fund operations may jeopardize its
existence. (See “Liquidity and Capital Resources”)
 
 Management
knows of no additional trends or uncertainties beyond those discussed that are
reasonably likely to have a material impact on the Company's short or long-term
liquidity.
 
 
 RESULTS
OF OPERATIONS
 
 Results
for the three months ending September 30, 2009 compared to the three months
ending September 30, 2008.
 
 For the
three months ended September 30, 2009, net sales were $253,545, a decrease of
28% from net sales of $352,806 for the same period in fiscal 2008. The decrease
is due in part to the loss of the Company’s largest customer, accounting for 25%
of Pacific Sands sales during the period ending September 30, 2008. During the
fourth quarter of fiscal 2009, the Company took a bad debt charge of
approximately $60,000 for accounts receivable from this
customer.  General economic conditions also contributed to the overall
decrease in sales.
  14
  For the
three months ended September 30, 2009, cost of goods sold was $106,186 compared
to $161,950 for the same period in the previous fiscal year.  The
Company’s gross margin increased from 54% for the three months ended September
30, 2008 to 58% for the current fiscal quarter. This increase is due to the fact
that the Company has begun to recognize cost savings from efficiencies of
manufacturing certain products in-house that were previously manufactured by a
third party contract manufacturer.  Additionally, the Company
discontinued a few of their lower margin products.
 
 For the
three months ended September 30, 2009 and 2008, selling and general
administrative expenses were $191,420 and $239,680 respectively. The decrease in
operating expenses is explained in large part by a significant decrease in
salaries and wage expense resulting from layoffs and salary reductions. Salaries
and wage expense for the three months ended September 30, 2009 approximated
$82,000 compared to $146,000 for the three months ended September 30,
2008.
 
 Interest
expense for the three months ended September 30, 2009 was $21,256 compared to
$16,088 for the three months ended September 30, 2008.  During the
three months ended September 30, 2009, the Company amortized $7,185 of the
discount of note payable recorded upon the acquisition of Natural Choices in
February 2008 and amortized an additional $1,515 of debt discount for
convertible notes. The Company also recorded interest expense of approximately
$4,800 related to these notes.
 
 The
Company recorded a net loss of $65,317 or $0.002 per share for the three months
ended September 30, 2009 as compared to a net loss of $64,912 or $(0.002) per
share for the three months ended September 30, 2008.
  
 LIQUIDITY AND CAPITAL
RESOURCES
 
 Management
believes that the Company is positioned for sales growth but will require
additional funding to continue operations. The Company's ability to achieve its
objectives is dependent upon its ability to sustain and enhance its current
revenue stream and to continue to raise funds through loans, vendor credit and
the private placement of restricted securities until such time as the Company
sustains fiscal profitability. To date, the Company has funded operations and
expansion through a combination of revenues from the sale of its products,
established credit with vendors, deferred salaries, debt financings and the sale
of rule 144 stock through private placement. The Company's failure to continue
to raise adequate financing to fund planned expansion may jeopardize its plans
for growth.
 
 At
September 30, 2009, the Company had current assets of $242,766 and total assets
of $1,173,208, compared to June 30, 2009 when current assets were $254,616 and
total assets were $1,192,133. Accounts receivable decreased to $120,089 at
September 30, 2009 from $137,412 at June 30, 2009. The decrease is due to a
slowdown in overall business as evidenced by the decrease in sales. Noncurrent
assets include goodwill resulting from the acquisition of Natural Choices in the
amount of $877,854.
 
 Current
liabilities at September 30, 2009 were $510,248. Current liabilities include
accounts payable, capital lease obligations and accrued expenses. At September
30, 2009, the Company had outstanding line of credit balances with banks
totaling approximately $105,000. Current liabilities also include $36,000 in
payments due to a former officer pursuant to a settlement agreement executed in
December 2007.
  15
  Noncurrent
liabilities include notes payable due for the acquisition of Natural Choices for
approximately $637,000, net of discount. Noncurrent liabilities also include
$82,000 of convertible debt and $272,000 of notes payable due the Company’s two
executive officers.
 
 Net cash
used in operating activities during the three months ended September 30, 2009
was $7,120 compared to $91,768 used in operating activities during the three
months ended September 30, 2008. The increase in operating cash flow is due in
large part to a decrease in accounts receivable balances at September 30,
2009.
 
 For the
three months ended September 30, 2009, the Company did not have any cash flows
from investing activities. Net cash used in investing activities during the
three months ended September 30, 2008 was $3,857.
 
 Net cash
provided by financing activities was $1,865 and $110,789 for the three months
ended September 30, 2009 and 2008, respectively. During the three months ended
September 30, 2009, the Company issued restricted common stock for cash totaling
$8,930 compared to $41,169 in 2008, and also received proceeds from borrowings
in the amount of $9,982 and $116,364 during the three months ended September 30,
2009 and 2008, respectively. Proceeds from financing activities were used to
fund operations and to meet current obligations of notes payable.
 
 On
September 30, 2009 the Company had an accumulated deficit of $4,415,208 and
total stockholders’ deficit of $323,679.
 
 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.
 
  Item
      3.
              Quantitative
      and Qualitative Disclosures About Market
Risk
 
 An
investment in the common stock of the Company involves a high degree of risk. In
addition to the other information in this report, the following risk factors
should be considered carefully in evaluating the Company and its business. This
Report contains forward-looking statements. All forward-looking statements are
inherently uncertain as they are based on current expectations and assumptions
concerning future events or future performance of the Company. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
are only predictions and speak only as of the date hereof. Forward-looking
statements usually contain the words "estimate," "anticipate," "believe,"
"plan," "expect," or similar expressions, and are subject to numerous known and
unknown risks and uncertainties. In evaluating such statements, prospective
investors should review carefully various risks and uncertainties identified in
this report, including the matters set below and in the Company's other SEC
filings. These risks and uncertainties could cause the Company's actual results
to differ materially from those indicated in the forward-looking statements. The
Company undertakes no obligation to update or publicly announce revisions to any
forward-looking statements to reflect future events or
developments.
  16
  THE
COMPANY HAS EXPERIENCED LOSSES FROM OPERATIONS SINCE COMMENCING
OPERATIONS:
 With the
exception of the 3rdquarter of
fiscal 2009 and the 4th
quarters of fiscal 2007 and 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
  Evaluation
of Disclosure Controls and Procedures
 
 Based
upon an evaluation of the effectiveness of disclosure controls and procedures,
our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have
concluded that as of the end of the period covered by this Quarterly Report on
Form 10-Q our disclosure controls and procedures (as defined in Rules 13a-15(e)
or 15d-15(e) under the Exchange Act) were effective to provide reasonable
assurance that information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified by the rules and forms of the SEC and is accumulated and communicated
to management, including the CEO and CFO, as appropriate to allow timely
decisions regarding required disclosure.
  17
  Changes
in Internal Control over Financial Reporting
 
 As
reported in our Annual Report on Form 10-K for the year ended June 30, 2009,
management is aware that there is a significant deficiency in our internal
control over financial reporting. The significant deficiency relates to a lack
of segregation of duties due to the small number of employees involvement with
general administrative and financial matters. However, management believes that
compensating controls are in place to mitigate the risks associated with the
lack of segregation of duties. Compensating controls include outsourcing certain
financial functions to an independent contractor. Management concluded that
internal controls over financial reporting were effective as of June 30,
2009.
 
 There
have not been any changes in the Company's internal control over financial
reporting during the quarter ended September 30, 2009 that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting
 
 
 PART
II OTHER INFORMATION
 
 Item
1 – LEGAL PROCEEDINGS
 
 None
 
 Item 2 –
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 On July
7, 2009, the Company issued 50,000 shares of its common stock to a consultant
for services performed. The fair market value of the shares on the date issued
was $0.04 per share. The Company recorded consulting fee expense of $2,000
related to the issuance of these shares.
  On July
7, 2009, the Company issued 150,000 shares of its common stock to an unrelated
investor for a cash investment of $6,000.
 
 On July
7, 2009, the Company issued 73,259 shares of its common stock to an employee for
a cash investment of $2,930.
 
 On July
7, 2009, the Company issued 721,778 shares of its common stock to a shareholder
as settlement of a note payable in the amount of $28,871.
 
 Item 3 – DEFAULTS
UPON SENIOR SECURITIES
 
 None
 
 Item 4 – SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None
  18
  Item 5 – OTHER
INFORMATION
 
 None
 
 Item 6 –
EXHIBITS
 
 (a)
              Exhibit
      IndexExhibit
              Description
      of the Exhibit31.1
              Chairman
      of the Board Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.31.2
              Chief
      Financial Officer Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.32.1
              Chairman
      of the Board Certification Pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2
              Chief
      Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes Oxley Act of
      2002.
 
 
 
 SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 PACIFIC
      SANDS, INC.Dated:
      November 16, 2009
              By:
              /s/ Michael
      WynhoffMichael
      WynhoffChief
      Executive OfficerDated:
      November 16, 2009
              By:
              /s/ Michael
      MichieMichael
      MichieChief
      Financial Officer(principal
      accounting officer)
  19