The Q1 10QSB if out - sales up 50% and expenses down 50%.
Form 10QSB for PACIFIC SANDS INC
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19-Nov-2007
Quarterly Report
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.
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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.
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 months ending September 30, 2007 compared to the three months ending September 30, 2006.
For the three months ending September 30, 2007 net sales were $179,807 an increase of 50% over net sales of $119,558 for the same period in 2006. The increase in sales is attributable to a number of factors including more retail outlets carrying the ecoONE® pool and spa treatment products, an increased sales cycle attributable to new marketing and sales initiatives and an increase in direct Internet retail sales, particularly of the company's All-Purpose Garden Hose Filter.
Cost of Goods Sold was $62,863 compared to $65,313 for the same period the previous fiscal year. The decrease in cost of goods sold was due, in part to a decrease in the amount of lower-profit sale of promotional materials to the company's OEM spa manufacturer partner during the period as well as increased efficiencies.
Gross profits for the three months ending September 30, 2007 were $116,944 or 65% compared to $54,245 or 46% for the same period the previous fiscal year. The significant increase in gross profit is a sharp increase in overall sales, coupled with a decrease in the amount of lower-profit sale of promotional materials to the company's OEM spa manufacturer partner. It is anticipated that the sale of those lower-profit promotional goods will concentrate in the up-coming quarter.
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For the three months ending September 30, 2007, selling and general administrative expenses were down 50% to $167,806 compared to $334,398 for the three months ending September 30, 2006. During the three months ending September 30, 2006, the Company incurred a charge of $134,211 for stock based compensation in the form of options as well as a charge of $35,160 for stock based compensation in the form of restricted stock to its officers. During the three months ended September 30, 2007, the Company's stock based compensation to officers and directors totaled $5,400. Other selling and general administrative cost remained relatively consistent for the three months ended September 30, 2007 as compared to the three months ended September 30, 2006.
Interest expense for the three months ended September 30, 2007 was $2,967 as compared to $11,931 for the same period in fiscal 2007. The decrease is attributed to the reduction of five capital lease obligations for which the Company makes monthly payments thus reducing the principal owed.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that the Company is positioned for sales growth but will require additional funding to continue operations. The Company's ability to achieve its objectives is dependent on its ability to sustain and enhance its current revenue stream and to continue to raise funds through loans, credit and the private placement of restricted securities until such time as the Company sustains fiscal profitability. To date, the Company has funded operations and expansion through a combination of revenues from the sale of its products, established credit with vendors, deferred salaries and the sale of rule 144 stock through private placement. The Company's failure to continue to raise adequate financing to fund planned expansion may jeopardize its plans for growth.
Additionally, the Board of Directors has instructed the President (Mr. Wynhoff) to begin the process of evaluating certain profitable companies and/or enterprises with similar or complimentary business models as potential acquisition candidates in order to accelerate the growth of Pacific Sands and enhance its revenue stream and shareholder value.
As of September 30, 2007, the Company had $253,466 of current assets and total assets for fiscal year 2007 were $289,119. Cash and cash equivalents totaled $2,805 on September 30, 2007.
Current liabilities at September 30, 2007 were $591,968 of which approximately $252,000 was deferred compensation owed to two of the Company's officers and another related party. Current liabilities also include amounts owed on two lines of credit, one being a bank line of credit with Chase Bank for approximately $96,000 and the other is with Dell for approximately $6,000.
Net cash used in operating activities during the three months ended September 30, 2007 was $99,122 compared to net cash provided by operations of $1,271 for the three months ended September 30, 2006. The decrease in net cash from operations comes from an increase in accounts receivable as the result of higher sales volume, and a decrease in accounts payable and accrued expenses. The Company used proceeds from its bank line of credit to pay down trade payables and other accrued expenses.
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The Company did not use any in investing activities for the three months ended September 30, 2007. For the same period last fiscal year, the Company purchased capital assets in the amount of $4,365, representing the only use of cash for investing activities.
Net cash provided by financing activities was $87,958 and $548 for the three months ended September 30, 2007 and 2006, respectively. In July 2007, the Company executed a bank line of credit for $100,000. At September 30, 2007 the Company had a balance due of approximately $96,000. The proceeds were used primarily to fund operations. Additionally, the Company received $20,000 by issuing 200,000 shares of its common stock to an investor.
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 employs five full time and three part time employees.