UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
Amendment No. 1
[X] ANNUAL REPORT UNDER SECTION 10 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended: June 30, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Pacific Sands, Inc.
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(Exact name of registrant)
Nevada 88-0322882
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(State of Incorporation) (I.R.S. Employer Id. No.)
601 W. Shaw Ave., #D, Clovis, CA 93612
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (559) 325-7023
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Securities registered under Section 12(b) of the Exchange Act: Common Stock
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 [X]Yes [ ] No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporation by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for fiscal year 2000: $26,937.00
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) As of October 17, 2000 the aggregate market value of
common equity held by non-affiliates was $1,637,804.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of October 17, 2000 there were
19,953,045 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format (Check one): Yes ; No X
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TABLE OF CONTENTS
Page
PART I
<S> <C> <C>
Item 1. Description of the Business 3
Item 2. Description of Property 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 5
Item 6. Management's Discussion and Plan of Operation 8
Item 7. Financial Statements F1-F13
Item 8. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure 9
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance With
Section 16(a) of the Exchange Act 9
Item 10. Executive Compensation 10
Item 11. Security Ownership of Certain Beneficial Owners and Management 11
Item 12. Certain Relationships and Related Transactions 11
Item 13 Exhibits and Reports on Form 8-K 12
Signatures 12
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PART I
Forward-Looking Statements.
The Company has made forward-looking statements in this Form 10-KSB that are
subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of operations. Also, when
any of the words `may,' `plan,' `seek,' `estimate,' `continue,' `believes,'
`expects,' `intends,' `anticipates,' or similar expressions are used, the
Company is making forward-looking statements. All statements other than
statements of historical fact included in this Form 10-KSB are forward-looking
statements. Such forward-looking statements are based on management's current
expectations and beliefs and are subject to a number of factors which could mean
the actual result may materially differ from those described in the
forward-looking statement. Although the Company believes these forward-looking
statements to be reasonable, there can be no assurance that such expectations
will prove to be correct. For these statements the Company claims the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
Item 1. Description of Business.
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 does business as "Natural Water Technologies," and produces a
nontoxic compound for eliminating germs and bacteria for use in spas and
cleaning products. The Company's target markets for these products include
retail and industrial uses. Currently, the Company markets the retail spa
products and is testing equipment for industrial use. To date, such industrial
use tests have brought positive results.
As of June 1, 2000, the Company secured tentative a license, based on successful
installation, with Hurriclean Corporation to sell its Industrial Waste Water
Cleaning System and technology. This technology is an additional means by which
the Company can bring to market a system to lower waste water output,
particularly to industrial clients such as food processing plants. Under the
license agreement the Company has the right to manufacture, install, test and
service the system in the states of Washington, Oregon, Nevada, Arizona, Utah,
California and Idaho. The license contains a three-year exclusive to the Company
for Industrial Waste Water markets and a non-exclusive license for other uses,
in the territory named above.
As of June 2000, the Company secured its first contract to install the service a
Hurriclean Waste Water Cleaning System in a California food processing plant.
The Company is currently in the process of installing this waste water system.
The Company, in June 2000, also entered an additional agreement with Mody L.L.C.
to allow Mody L.L.C. to sell the Company's Hurriclean Waste Water cleaning
system. Mody L.L.C. will provide the Company with a sales force to market the
waste water system.
Additionally, in June 2000, the Company entered into an agreement with Gaia
Media, Inc. for use of dynamic simulation software. Such software will allow the
Company to show others a visual simulation of waste water being cleaned through
the Hurriclean system.
The Company currently has three employees. Two of these employees are full time
employees. All additional services required by the Company are handled on a
contractor basis.
3
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Risk Factors
In addition to the other information contained on this Form 10-KSB report, the
following risk factors should be considered carefully.
THE COMPANY HAS EXPERIENCED LOSSES FROM OPERATIONS SINCE COMMENCING OPERATIONS
Since commencing operations, the Company has not been profitable on an annual or
quarterly basis. The company may never generate sufficient revenues to achieve
profitability.
POSSIBLE DIFFICULTY FINANCING PLANNED GROWTH
The company's present plans require an amount of expenditure and working capital
need. In the future the Company believes it may require financing in addition to
the cash generated from operations and the current debenture program, to fund
this planned growth. If additional resources are unavailable it may result in
the Company being unable to grow according to its present plan.
TESTING COULD PROVE TO BE UNSUCCESSFUL
The Company is currently testing the Hurriclean Waste Water cleaning system.
These test will not be complete until at a minimum the end of January 2001.
Should the system prove to be unsuccessful at that point, the Company will be
forced to conclude that the Hurriclean Waste Water cleaning system is inadequate
for the proposed use. As such, management will be forced to reset its goals and
objectives for the fiscal year 2001.
MANAGEMENT'S ASSUMPTIONS REGARDING THE FUTURE MARKET MAY BE FAULTY
Management believes the future desirability for reduction of output of
industrial waste water to be a increasing in the market place. This is due to
extensive fines and regulations in the industries which produce an output of
industrial water. Management assumes these regulations will stay in place.
Additionally, management assumes there will be an increased desirability in the
retail market for nontoxic products for cleaning and spa use. Should
management's assumptions as to this increased desirability be faulty, the
Company 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 materially adversely affected.
Item 2. Description of Property.
The Company leases office space for their principal executive offices and owns
no property. Any manufacturing required for the Company's products is carried
out by contract with manufacturing facilities.
Item 3. Legal Proceedings.
The Company is engaged in no legal proceedings at this time. The Company does
not foresee any involvement in legal proceedings in the future.
4
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Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of the Security Holders during the quarter
ended June 30, 2000.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information
The Company's common stock trades on the National Association of Securities
Dealers Electronic Bulletin Board under the symbol PFSD.
Following are the high and low sales price for each quarter (trading commenced
October 16, 1998);
Quarter End High Low
------------------- ---- -----
December 31, 1998 1.50 0.250
March 31, 1999 1.312 0.250
June 30, 1999 0.875 0.080
September 30, 1999 0.25 0.10
December 31, 1999 0.201 0.038
March 31, 2000 0.45 0.034
June 30, 2000 0.260 0.031
September 30, 2000 0.240 0.101
As of October 4, 2000 there were approximately 55 Holders.
The Company has never declared a cash dividend.
Description of the Recent Sale of Unregistered & Registered Securities
On July 6, 1997, the Company sold for cash, restricted common stock to its
officers and directors as follows: Ermine Trust 3,333,333 shares for $3,333. R.
Douglas Dahl and Michael E. James were officers, directors and sole shareholders
of American Integrity, Inc., a Nevada Corporation, Trustee for the Trust. R.
Douglas Dahl and Michael E. James may be deemed to be the beneficial owners of
said stock; Stanley Paulus purchased 1,666,667 shares for $1,667. Stanley Paulus
is the President and a Director of the Company. The purchasers were in a
position to insist upon the issuer providing them with information more
extensive than that contained in a registration statement.
5
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On July 6, 1997, the Company issued for legal services rendered 300,000 shares
of restricted common stock to Neil Leibman or order. The purchaser was in a
position to insist upon the issuer providing them with information more
extensive than that contained in a registration statement.
On July 11, 1997 the Company issued for consulting services rendered, 500,000
shares of restricted common stock to J.B. Marc for consulting services. The
purchaser was in a position to insist upon the issuer providing them with
information more extensive than that contained in a registration statement.
On August 5, 1997, the company issued to Bratton Group 1,000,000 shares of
restricted common stock in exchange for inventory provided. The estimated fair
market value of such shares was $23,900.
The forgoing issuance, were taken without the services of an underwriter. Each
of these persons had access to all material information regarding the Company
prior to the sale of the Company's common stock. These offers and sales were
believed to be exempt from the registration requirements of Section 5 of the
Securities and Exchange Act, as amended. All purchases were of common stock of
the issuer.
The following shares were issued at a price of $1.00 per share based on an
exemption from registration. November 22, 1997, 6,000 shares for $6,000 to Susan
Van Klaverman. April 28, 1998, 5,000 shares to Michael Moreno and 5,000 shares
to Walter Hahn for a total of $10,000. April 29, 1998, issued shares for a total
of $20,000 as follows: Karen Gaynor 5,000 shares; Martin and Mary Fleischer,
5,000 shares; Martin Kalunn, 5,000 shares, Robert Ross, 3,000 shares; Daniel
Roden, 2,000 shares. April 30, 1998, issued shares for a total of $18,500 as
follows: Robert Sanzoverinio, 6,000 shares; Joseph Swinton, 2,500 shares. May 1,
1998, issued shares for a total of $49,500 as follows: George Wilson Strera,
2,000 shares; Linda Vito Andrew, 6,000 shares; Bernard Seringer III, 31,000
shares; Francis Belando, 3,000 shares; Patricia Seringer, 5,000 shares; John
Seringer 2,500 shares. May 5, 1998, issued shares for a total of $8,000 as
follows: Frank Kezmoff, 5,000 shares; Christopher Duncan, 3,000 shares. May 6,
1998, issued shares for a total of $35,000 as follows: Joseph Stansky, 10,000
shares; John Seringer, 25,000 shares. May 13, 1998 issued shares for a total of
$5,000 to Terrence Green, 5,000 shares. May 14, 1998, issued shares for a total
of $5,000 to Scott Broder, 5,000 shares. May 15, 1998, issued shares for a total
of $15,000 to Devon Norton Goldenor, 15,000 shares. May 29, 1998, issued shares
for a total of $10,000 to Thomas Ispas, 10,000 shares. June 8, 1998, issued
shares for a total of $650 as follows: Ellise Donahue, 200 shares; Herman
Leibman, 450 shares. June 9, 1998, issued shares for a total of $ 2,250 as
follows: Daniel Horawitz, 400 shares; Charles Huorian, 200 shares; James
Colucci, 1,650 shares. June 18, 1998, issued shares for a total of $500 as
follows: Eric Workman, 400 shares; Jannell Rosenfield, 100 shares. June 30,
1998, issued shares for a total of $10,000 to Jerry Holden, 10,000 shares.
Additionally, for a total of $1,850 there were 1,850 shares issued in company
records to an unnamed party.
July 16, 1998, issued shares for a total of $7,700 as follows: Robert J. Rose,
2,000 shares; Eugene Yanniguchi, 5,000 shares; issued to unnamed party, 700
shares. On July 21, 1998, issued shares for a total of $40,300 Joseph
Sansfavirio, 6,000 shares; Francisco Balando, 2,000 shares; Steven Ross, 15,000
shares; Steve Cande, 300 shares; Robert Venino, 5,000 shares; Jack Zeigler,
5,000 shares; Patricia Seringer, 5,000 shares; issued to unnamed party, 2,000
shares.
At October 28, 1998, 5,000 shares were issued to Albert Stu for services
performed and 100,000 shares to George Stu for services performed. Services were
performed during the months of August, September and October 1998.
At October 28, 1998, Neil Leibman was issued 10,000 shares for legal services
performed for the Company. At January 27, 1999, Neil Leibman was issued 30,000
shares for legal services performed for the Company.
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At February 1, 1999, Arthur Hartman was issued 1,700 shares for engineering
services performed for the Company. From February 3, 1999 through February 26,
1999, Neil Leibman, or order, was issued a total of 93,500 shares for legal
services performed for the Company. At February 3, 1999, Madison Capital was
issued 15,000 shares for consulting services performed for the Company.
At March 9, 1999, the Company issued 220,000 shares for a total of $44,900 to
Oriental New Investment.
At March 17, 1999, JH Maac & Associates were issued 500,000 shares for
consulting services performed for the Company.
At March 25, 1999, the Company issued 100,000 shares for a total of $39,773 to
Robert & Melissa Shirton.
At April 5, 1999, Neil Leibman was issued 141,850 shares for legal services
performed for the Company.
On December 4, 1999, as part of the dissolution of the active business
relationship between R. Douglas Dahl and Stanley Paulus, the Ermine Trust
transferred to Stanley Paulus 658,333.25 shares of restricted stock. 700,000
shares of restricted stock were transferred to Harold Dahl and 1,974,999 shares
of restricted stock to R. Douglas Dahl. These shares were not issued directly
from the Company, but were an allocation of shares that had been previously held
by the Ermine Trust.
On August 13, 1999 the Company issued to Stanley Paulus, 500,000 shares of
restricted stock as compensation for his services as President to the Company.
On August 13, 1999 the Company issued to Rita Paulus, 200,000 shares of
restricted stock as compensation for her services as treasurer to the Company.
On August 13, 1999 the Company issued to Wade Hanson, Director and Secretary,
1,000,000 shares of restricted stock as compensation for his services as
secretary of the Company.
On August 13, 1999, the Company issued to Arvind Nigam 25,000 shares and to Lana
Dieringer 5,000 shares for services performed for the Company.
At September 16, 1999, the Company raised money for the Company through the
vehicle of a convertible debenture program. Such program allowed the option of
full repayment plus 8% per annum at September 16, 2001 or the right to convert
such debt at a rate of 75% of the bid price the day prior to the date of
election of conversion. The Company raised a total of $300,000 through this
convertible debenture vehicle. At October 18, 1999, $10,000 was converted at a
share price of .0525 resulting in the issuance to BVH Holding Company of 190,476
shares. At November 11, 1999, $18,000 was converted at a share price of .026
resulting in the issuance to BVH Holding Company of 236,842 shares. At December
1, 1999, $10,000 was converted at a share price of .04125 resulting in the
issuance to BVH Holding Company of 242,424 shares. At December 14, 1999, $22,000
was converted at a share price of .045 resulting in the issuance to BVH Holding
Company of 488,889 shares. At January 10, 2000, $8,000 was converted at a share
price of .01333 resulting in the issuance to BVH Holding Company of 600,000
shares. At February 4, 2000, $57,000 was converted at a share price of .02625
resulting in the issuance to BVH Holding Company of 2,171,429 shares. February
9, 2000, $175,000 was converted at a share price of .0318 resulting in the
issuance to BVH Holding Company of 728,571 shares. Thus, all $300,000 raised was
converted with a result of 4,658,631 shares issued to BVH Holding Company.
At April 10, 2000, Ailene Pitts was issued 50,000 shares of restricted stock for
Sales services performed in marketing the product to retail outlets on behalf of
the Company.
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At June 20, 2000, David Anderson was issued 1,200,000 shares of restricted stock
for Legal Services performed for the Company.
On June 20, 2000 the Company issued to Stanley Paulus 700,000 shares of
restricted stock for his services as President of the Company.
On June 20, 2000 the Company issued to Rita Paulus 250,000 shares of restricted
stock for services as treasurer of the Company.
On June 20, 2000 the Company issued to Glen Dunning, as per his employment
contract with the company, 100,000 shares of restricted stock for agreeing to
serve as Secretary of the Company.
On June 20, 2000 the Company issued to Noel Moya, 100,000 shares of restricted
stock for services as Chief Engineer for the Company.
On June 20, 2000, Hurriclean Corporation was issued 800,000 shares of restricted
stock as per the licensing agreement between Hurriclean Corporation and the
Company for the licensing of the Hurriclean Industrial Waste Water Cleaning
Technology.
On June 20, 2000 the Company issued to Lori Chittenden, 100,000 shares of
restricted stock for services of Marketing and Public Relations for the Company.
In August 2000, the Company raised additional money through the same vehicle of
a convertible debenture program as note above. Such program allowed the option
of full repayment plus 8% per annum at August 2001, or the right to convert such
debt at a rate of 75% of the bid price the day prior to the date of election of
conversion. The Company raised a total of $152,000 to date through this
convertible debenture vehicle. To date, all those who have participated in the
convertible debenture program have elected to convert their debenture amount
into shares of the Company. Thus, the Company has issued 2,002,114 shares as a
result of this debenture program.
Adjustment of Prior Evaluation.
The Company previously filed financial statements, in its 10-SB and third
quarter 10-Q filing, which are now being restated to correct an error in the
earlier filing. Prior transactions in which common stock was issued in
consideration for services have been re-valued to reflect fair market value of
the shares at the time these shares were issued.
Item 6. Management's Discussion and Plan of Operation.
At this time, the Company has no material commitments for any significant
capital expenditures.
At this time the Company is engaging in extensive testing of the Hurriclean
Waster Water System which is currently being installed. Such testing of the
various different types of waste output, under varying conditions, is expected
to continue through at least through January 31, 2001. Upon completion of the
installation and successful testing of the Hurriclean Waste Water System, the
Company will experience an increase in revenues due to payments for this system.
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Should the system installation and testing prove successful, there is no
comparable technology known to management at his time. As such, during the next
twelve months the Company would expect, due to a successful installation of its
first Hurriclean Waster Water System, additional interest in the Hurriclean
Waste Water System. The Company would then hope to gain contracts to install
additional systems in other food processing plants and other industries with
high waste water output, within the licensed area. Management is considering
alternatives for securing adequate financing for this future operational plan.
Management also attempts to increase revenues through increased retail sales of
the Company's spa products, increasing marketing potential of the products.
However, there can be no assurance that management will be successful in their
endeavors.
At this time, the Company does not foresee any substantial future cash flow
problems.
At this time, the Company does not foresee the need for significant changes in
the number of employees.
Item 7. Financial Statements.
See F-1 through F-13 attached.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
In its previously filed 10-SB, Registrant engaged the services of Brad B.
Haynes, CPA as its principal accountant to audit the financial statements
included in that filing. Mr. Haynes operated as the Company's principal
accountant during the Company's fiscal year end June 1999 and from July 1999
through December 31, 1999. As of October 5, 2000 the Registrant dismissed Mr.
Haynes as their principal accountant to audit their financial statements. There
were no disagreements with Mr. Haynes in regard to accounting principals or
practice, matters of disclosure, or auditing scope of procedure.
Registrant, as of October 5, 2000, retained Cacciamatta Accountancy Corporation
to act as Registrant's independent accountant to audit Registrant's financial
statements.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Directors of the Company:
Name Age Title
---- --- -----
Stanley Paulus 53 Chairman of the Board
Rita Paulua 51 Director
Glen Dunning 37 Director
All directors have indefinite terms of office.
Stanley Paulus became a director on February 4, 1998. Rita Paulus became a
director on November 2, 1998. Glen Dunning became a director on April 1, 2000.
Officers of the Company:
Name Age Title
---- --- -----
Stanley Paulus 53 President
Rita Paulua 51 Treasurer
Glen Dunning 37 Secretary
Stanley Paulus and Rita Paulus are husband and wife.
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Business Experience:
Stanley Paulus - Stanly Paulus has overseen the creation and development of
Pacific Sands. Mr. Paulus brought to market the spa products through Pacific
Sands and has developed the distribution of the product through increased sales.
Mr. Paulus has diversified experience includes sales and marketing, water
treatment and general contracting. Mr. Paulus has, for almost 25 years worked as
a General Contractor for high end custom homes. Additionally, he has developed,
manufactured and marketed custom made cabinets and kitchen accessories for the
past ten years.
Rita Paulus - Rita Paulus has over 20 years of general administrative, sales and
management business experience. Ms. Paulus has overseen all accounting and
office management portions for custom home contracting business and Pacific
Sands. Additionally, she has worked in selling the spa products for Pacific
Sands for the past 5 years.
Glen Dunning - Glen Dunning has business development, management and marketing
experience in the United States and abroad. Me. Dunning has a counseling degree
in psychology. His work experience includes that of Executive Director of Green
Apple Holistic health center which provides business management and health
management counseling. Mr. Dunning serves as President of Business Development
for a non-profit religious organization, which focuses on community outreach.
Additionally, Mr. Dunning serves as co-producer of Vision Quest International.
Vision Quest organizes and provides speakers, booths and presentations on
holistic living. He is also currently the managing director of a law office.
Compliance with Section 16(a) of the Exchange Act:
During the past fiscal year, and any prior year required, Stanley Paulus and
Rita Paulus failed to timely file reports required by Section 16 (a) of the
Exchange Act. During the past fiscal year Glen Dunning failed to timely file
reports required by Section 16 (a) of the Exchange Act. On October 20, 2000,
such delinquent filings were rectified as to Stanley Paulus by a filing of Form
3 reporting receipt of 1,666,667 shares at 5/1/97; Form 3 reporting receipt of
658,333.25 shares at 12/4/98; Form 3 reporting receipt of 500,000 shares at
8/13/99; Form 3 reporting receipt of 700,000 shares at 6/20/00 and a Form 5
reporting increase in number of shares by 700,000 shares in the Company's fiscal
year 1999. On October 20, 2000, such delinquent filings were rectified as to
Rita Paulus by a filing of Form 3 reporting receipt of 200,000 shares at
8/13/99; Form 3 reporting receipt of 250,000 shares at 6/20/00 and a Form 5
reporting increase in number of shares by 250,000 shares in the Company's fiscal
year 1999. On October 20, 2000, such delinquent filings were rectified as to
Glen Dunning by a filing of Form 3 reporting receipt of 100,000 shares at
6/20/00 and a Form 5 reporting increase in number of shares by 100,000 shares in
the Company's fiscal year 1999.
The Company has received no compliance with Section 16(a) of the Exchange Act
from Cede & Co. The Company is unaware of the specific date and requirements for
Cede & Co. to comply with Section 16(a) of the Exchange Act.
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Item 10. Executive Compensation.
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Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Restricted All
and Annual Stock Options/ LTIP Other
Principal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
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Stanley Paulus 2000 $72,000 $ 91,500 -0- -0- -0- -0- -0-
President 1999 $48,000 -0- -0- -0- -0- -0- -0-
1998 $48,000 -0- -0- -0- -0- -0- -0-
Rita Paulus 2000 $30,000 $ 31,000 -0- -0- -0- -0- -0-
Treaurer 1999 $30,000 -0- -0- -0- -0- -0- -0-
1998 $30,000 -0- -0- -0- -0- -0- -0-
Glen Dunning (Note A)
Secretary 2000 $ 6,000 $3,000 -0- -0- -0- -0- -0-
Note A: Glen Dunning began his services for the Company as of April 1, 2000.
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Name and Address of Amount of Percent of
Beneficial Owner Beneficial Ownership Class
---------------- -------------------- -----
Stanley Paulus 3,025,000.25 15%
601 W. Shaw
Clovis, CA 93615
Rita Paulus 450,000 2%
601 W. Shaw
Clovis, CA 93615
Glen Dunning 100,000 0.5%
601 W. Shaw
Clovis, CA 93615
All Directors, Nominees and Executive 3,575,000.25 17.5%
Officers as a Group (3 persons)
At October 17, 2000:
CEDE & Co. 6,798,253 34%
Bowling Green Station
New York, NY 10274
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Item 12. Certain Relationships and Related Transactions.
Not applicable at this time.
Item 13. Exhibits and Reports on Form 8-K.
Reports on Form 8-K
A report was filed on Form 8-K at June 1, 200 reporting the entering of a
licensing agreement by the Company to sell, install and service with Hurriclean
Industrial Waste Water Cleaning System and technology throughout the states of
Washington, Oregon, Nevada, Arizona, Utah, California and Idaho.
A report was filed on Form 8-K at October 11, 2000 reporting the change in
principal accountant from Brad B. Haynes to Cacciamatta Accountancy
Corporation.This Form 8-K was amended October 19, 2000 and again on November 15,
2000.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) Pacific Sands, Inc.
By /s/ Stanley Paulus
Stanley Paulus, President, Chairman of the Board
Date: November 20, 2000
In accordance with the Exchange Act, this report has been signed below by the
following person on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Rita Paulus
Rita Paulus, Treasurer, Director
Date: November 20, 2000
By: /s/ Glen Dunning
Glen Dunning, Secretary, Director
Date: November 20, 2000
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Pacific Sands, Inc.
Financial Statements
June 30, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Board of Directors and Shareholders
Pacific Sands, Inc.
We have audited the accompanying balance sheet of Pacific Sands, Inc. dba
Natural Water Technologies (the "Company") as of June 30, 2000, and the related
statements of operations, shareholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes, on a test basis, examination of evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pacific Sands, Inc. as of June
30, 2000, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has incurred significant losses since its
inception and lacks the capital necessary to pursue its operating plan. These
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding these matters are also described in Note
9. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
As discussed in Note 5, the Company restated the financial statements referred
to above.
/s/ CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
November 6, 2000
F-1
<PAGE>
BRAD B. HAYNES 9005 Burton Way
CERTIFIED PUBLIC ACCOUNTANT Los Angeles, California 90048
Tel (310) 273-7417
Fax (310) 285-0865
INDEPENDENT AUDITOR'S REPORT
----------------------------
To The Shareholders and Board of Directors
Pacific Sands, Inc.
dba Natural Water Technologies
We have audited the accompanying combined balance sheet of Pacific Sands, Inc.
dba Natural Water Technologies as of June 30, 1999 and June 30, 1998, and the
related statement of operations, retained earnings, and cash flows for the
fiscal years ending June 30, 1999 and June 30, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pacific Sands, inc. dba Natural
Water Technologies as of June 30, 1999 and June 30, 1998 and the result of its
operations and its cash flows for the fiscal years ending June 30, 1999 and June
30, 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Companies will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered a current loss from operations
and has a capital deficiency to pursue its projected operation that 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 7. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company's 1999 financial statements have been restated to correct an error
in the recording of the value of services received in exchange for common stock.
Generally Accepted Accounting Principles requires that services received in
exchange for common stock must be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. The previously reported 1999 financial
statements incorrectly accounted for such issuances at the $.001 par value of
the Company's common stock.
F-2
<PAGE>
Pacific Sands, Inc.
Independent Auditor's Report continued
---------------------------------------
The effect of the $659,921 restatement is as follows:
As Previously As
Year ended June 30, 1999 Reported Restated
------------------------------- -------------- ------------
Statement of Shareholder's Equity
Accumulated deficit $ 331,078 $ 990,999
Additional paid-in capital $ 362,299 $ 1,022,220
Statement of Operations:
Selling, general and administrative
expenses $ 119,968 $ 779,889
Net loss $ (102,477) $ (762,398)
Basic and diluted net loss per share $ (0.02) $ (0.10)
Brad B. Haynes
/s/ Brad B. Haynes
Los Angeles, California
November 6, 2000
F-3
<PAGE>
Pacific Sands, Inc.
Balance Sheet
June 30, 2000
-------------
ASSETS
Current assets:
Cash $ 16,588
Inventory 27,319
Other 25,320
-------------
Total current assets 69,227
Property and equipment, net 4,822
-------------
$ 74,049
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,785
Accrued vacation and sick pay 17,450
Deferred revenue 27,505
Other 1,066
-------------
Total current liabilities 70,806
-------------
Commitments and contingencies --
Shareholders' equity:
Common stock, $.001 par value, 20,000,000 shares authorized,
17,950,931 shares issued and outstanding 17,951
Additional paid-in capital 1,808,931
Accumulated deficit (1,818,125)
Treasury stock, at cost (5,514)
-------------
Total shareholders' equity 3,243
-------------
$ 74,049
=============
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Pacific Sands, Inc.
Statements of Operations
Year ended June 30,
------------------------------
2000 1999
RESTATED
-------------- -------------
Net sales $ 26,937 $ 20,449
Cost of goods sold (15,575) (2,958)
-------------- -------------
Gross profit 11,362 17,491
Selling, general and administrative 681,679 779,889
-------------- -------------
Loss from operations (670,317) (762,398)
Interest expense 137,505 --
-------------- -------------
Net loss $ (807,822) $ (762,398)
============== =============
Basic and diluted net loss per share $ (0.07) $ (0.10)
============== =============
Basic and diluted weighted average shares 11,740,111 7,446,791
============== =============
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Pacific Sands, Inc.
Statements of Cash Flows
Year ended June 30,
2000 1999
Cash flows from operating activities: RESTATED
------------ -----------
<S> <C> <C>
Net loss $ (807,822) $ (762,398)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 932 190
Common stock issued for services 371,600 660,818
Issuance of treasury stock for services 5,200 -
Intrinsic value of beneficial conversion feature 100,000 -
Changes in assets and liabilities:
Inventory (5,583) 1,734
Other current assets (520) -
Deferred revenue 27,505 -
Accounts payable 22,080 155
Accrued liabilities (12,629) -
Other accrued expenses 1,066 15,525
------------ -----------
Net cash used by operating activities (298,171) (83,976)
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment (4,041) (1,903)
------------ -----------
Net cash used in investing activities (4,041) (1,903)
------------ -----------
Cash flows from financing activities:
Issuance of common stock 132,674
Issuance of convertible debentures 300,000 -
Purchase of company stock - (30,018)
------------ -----------
Net cash provided by financing activities 300,000 102,656
------------ -----------
Net (decrease) increase in cash (2,212) 16,777
Cash, beginning of period 18,800 2,023
------------ -----------
Cash, end of period $ 16,588 $ 18,800
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ - $ -
=========== ==========
Franchise taxes $ 800 $ 800
=========== ==========
Non-cash investing and financing activities:
Treasury stock issued for services $ 24,504 $ -
=========== ==========
License agreement acquired in exchange for common stock $ 24,800 $ -
=========== ==========
Common stock issued for services $ 371,600 $ 660,818
=========== ==========
Conversion of debentures to common stock $ 300,000 $ -
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
Pacific Sands, Inc.
Statement of Shareholders' Equity - RESTATED
For the years ended June 30, 2000 and 1999
Common Stock
-----------------------------------
Amount Additional Treasury Stock
--------------------- Paid-in -------------------------
Shares Per Share Total Capital Shares Amount
----------------------------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 6,997,250 -- $ 6,997 $ 229,993 -- --
---------- ----------- ----------- ---------- ----------
Issuance of common stock for cash 368,000 0.36 368 132,306 -- --
Issuance of common stock for services 897,050 0.25 - 1.06 897 659,921 -- --
Purchase of treasury stock -- -- -- -- (49,000) (30,018)
Net loss -- -- -- -- -- --
---------- ----------- ----------- ---------- ----------
Balance, June 30, 1999 8,262,300 $ 8,262 $ 1,022,220 (49,000) (30,018)
---------- ----------- ----------- ---------- ----------
Conversion of debentures 4,658,631 0.03 - 0.32 4,659 295,341 -- --
Intrinsic value of beneficial conversion feature -- -- -- 100,000 -- --
Issuance of common stock for services 2,480,000 0.03 - 0.17 2,480 217,570 -- --
Issuance of common stock for license agreement 800,000 0.03 800
Issuance of common stock for compensation 1,750,000 0.03 - 0.17 1,750 149,800 -- --
Issuance of treasury stock -- -- -- -- 40,000 24,504
Net loss -- -- -- -- -- --
---------- ----------- ----------- ---------- ----------
Balance, June 30, 2000 17,950,931 $ 17,951 $ 1,808,931 (9,000) $ (5,514)
========== =========== =========== ========== ==========
Accumulated Shareholders'
Deficit Equity
------------- -------------
Balance, June 30, 1998 $ (228,601) $ 8,389
------------- -------------
Issuance of common stock for cash -- 132,674
Issuance of common stock for services -- 660,818
Purchase of treasury stock -- (30,018)
Net loss (762,398) (762,398)
------------- -------------
Balance, June 30, 1999 (990,999) 9,465
------------- -------------
Conversion of debentures -- 300,000
Intrinsic value of beneficial conversion feature -- 100,000
Issuance of common stock for services -- 220,050
Issuance of common stock for license agreement 24,000 24,800
Issuance of common stock for compensation -- 151,550
Issuance of treasury stock (19,304) 5,200
Net loss (807,822) (807,822)
------------- -------------
Balance, June 30, 2000 $(1,818,125) $ 3,243
============= =============
</TABLE>
F-7
<PAGE>
Pacific Sands, Inc.
Notes to Financial Statements
June 30, 2000
1. Nature of operations and summary of significant accounting policies
-- -------------------------------------------------------------------
Nature of operations
--------------------
Pacific Sands, Inc. doing business as Natural Water Technologies (the
"Company") was incorporated in Nevada on July 7, 1994. The Company
manufactures and distributes a nontoxic product formulation that
eliminates germs and bacteria from pool and spa water. Additionally, in
June 2000, the Company introduced an industrial waste water cleaning
system which is designed to lower waste water output to industrial
clients.
Inventory
---------
Inventory is stated at the lower of cost or market value determined using
the first-in, first-out (FIFO) method.
Property and equipment
----------------------
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of three years using the straight-line method.
Revenue recognition
-------------------
Revenue from sales to distributors and resellers is recognized when the
related products are shipped. Products shipped to distributors and
resellers where significant obligations exist and/or collection is not
probable are recorded as deferred revenue.
Advertising and promotional costs
Advertising and promotion costs are expensed as incurred. During fiscal
2000 and 1999, advertising and promotion costs totaled $1,051 and $1,517
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 bases of existing assets and liabilities.
F-8
<PAGE>
Pacific Sands, Inc.
Notes to Financial Statements
June 30, 2000
1. Nature of operations and summary of significant accounting policies
-- ------ -- ---------- --- ------- -- ----------- ---------- --------
(continued)
-----------
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 estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to fiscal
2000 presentation.
2. Inventory
-- ---------
June 30, 2000
-------------
Raw materials and supplies $ 9,995
Work in process 17,324
--------
$ 27,319
--------
3. Property and equipment
-- ----------------------
June 30, 2000
-------------
Office equipment $ 11,910
Accumulated depreciation (7,088)
---------
$ 4,822
=========
F-9
<PAGE>
Pacific Sands, Inc.
Notes to Financial Statements
June 30, 2000
4. Common Stock
-- ------------
On September 16, 1999, the Company issued an 8% Series A Senior
Subordinated Convertible Redeemable Debentures (the "Debentures") at
$300,000 face value maturing on September 16, 2001. The Debentures are
immediately convertible into the Company's common stock at 75% of the
closing bid price of the Company's common stock as reported on the
National Association of Securities Dealers Electronic Bulletin Board. The
$100,000 intrinsic value of the beneficial conversion feature is included
in interest expense and additional paid-in capital in the accompanying
financial statements. During fiscal 2000, the Debentures were converted
into 4,658,631 shares of the Company's common stock at prices ranging
between $0.03 and $ 0.32 per share.
The Company issued 2,480,000 and 897,050 shares of common stock in
exchange for services in fiscal 2000 and 1999 respectively. Additionally,
the Company issued 1,750,000 shares of common stock as compensation to its
three officers in fiscal 2000, and 800,000 shares of common stock in
exchange for a license agreement. The stock issuances for services,
compensation and the license agreement were recorded at fair value
generally at the low bid quotation (See note 5 following).
5. Prior period adjustment - correction of error
-- --------------------------------------- -----
The Company's 1999 financial statements have been restated to correct an
error in the recording of the value of services received in exchange for
common stock. Generally Accepted Accounting Principles requires that
services received in exchange for common stock must be accounted for based
on the fair value of the consideration received or the fair value of the
equity instruments issued, whichever is more reliably measurable. The
previously reported 1999 financial statements incorrectly accounted for
such issuances at the $.001 par value of the Company's common stock.
The effect of the $659,921 restatement is as follows:
As Previously As
Year ended June 30, 1999 Reported Restated
------------------------ ------------- -----------
Statement of Shareholders' Equity
Accumulated Deficit: $ 331,078 $ 990,999
Additional paid-in capital $ 362,299 $ 1,022,220
Statement of operations: $ 119,968 $ 779,889
Selling, general and administrative
expense $ (102,477) $ (762,398)
Basic and diluted net loss per
share $ (0.02) $ (0.10)
F-10
<PAGE>
Pacific Sands, Inc.
Notes to Financial Statements
June 30, 2000
6. Basic and diluted loss per share
-- --------------------------------
The following table illustrates the reconciliation of the numerators and
denominators of the basic loss per share computations. The Company has no
potentially dilutive securities, options, warrants or other rights
outstanding.
Period ended June 30,
----------------------------------
2000 1999
RESTATED
------------- --------------
Basic and diluted loss per share:
Numerator:
Net loss $ (807,822) $ (762,398)
------------- --------------
Denominator:
Basic and diluted weighted average
number of common shares
outstanding during the period $ 11,740,111 $ 7,446,791
------------- --------------
Basic and diluted loss per share $ (0.07) $ (0.10)
============= ==============
7. 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 tax assets are reduced by a valuation allowance
when deemed appropriate.
F-11
<PAGE>
Pacific Sands, Inc.
Notes to Financial Statements
June 30, 2000
At June 30, 2000, the Company has a net operating loss carryforward for
federal tax purposes of $642,000 which, if unused to offset future taxable
income, will expire in years beginning in 2019.
The Company has deferred tax assets of $257,000 at June 30, 2000 relating
to its net operating losses and the Company provided a 100% valuation
allowance for these deferred tax assets. The Company recorded no benefit
for income taxes during the periods presented. During the periods ended
June 30, 2000 and 1999, the Company's total valuation allowance increased
approximately $125,000 and $41,000, respectively.
8. Related party transactions
-- --------------------------
Stanley R. Paulus, President, serves under a two year employment contract
renewed effective August 28, 2000 at compensation of $6,000 per month The
agreement provides for automatic two year renewals with any changes in
terms or compensation to be negotiated 90 days before the contract ends.
In addition, the agreement provides for incentive compensation based on
debt and equity financing arranged by Mr. Paulus and such compensation may
be paid in common stock options at $.01 per share.
Rita M. Paulus, Treasurer, serves under a two year employment contract
renewed effective August 28, 2000 at compensation of $1,500 per month The
agreement provides for automatic two year renewals with any changes in
terms or compensation to be negotiated 90 days before the contract ends.
Glen Dunning, Secretary, serves under a one year employment contract
effective April 1, 2000 at compensation of $2,000 per month. In addition,
Mr. Dunning shall be paid 200,000 shares of the Company stock, 50,000 upon
signing and 50,000 every 90 days. The agreement provides for automatic two
year renewals with any changes in terms or compensation to be negotiated
90 days before the contract ends
9. Going concern
-- -------------
The accompanying financial statements have been prepared 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 June 30, 2000,
the Company had incurred cumulative losses of $1,818,125. 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. However, there is no assurance that the Company will be able to
implement its plan.
F-12
<PAGE>
Pacific Sands, Inc.
Notes to Financial Statements
June 30, 2000
In the first quarter of fiscal 2001, the Company raised $152,000 through
the issuance of Debentures under the same terms as those described in note
4. The Debentures were subsequently converted to 2,002,114 shares of the
Company's common stock.
F-13
