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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

 

OR

For the transition period from ___________________________ to ___________________________

Commission file number 000-29483

 

(Exact Name of Registrant as specified in its charter)

 

Issuer's Telephone Number, Including Area Code:  (262) 925-0123

 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes ☒        No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒    No  ☐

 

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

 

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐             No ☒

The number of shares outstanding of each of the issuer's classes of common equity, as of February 24, 2016 are as follows:

 

 

 

TABLE OF CONTENTS

 

 

PACIFIC SANDS, INC.
BALANCE SHEETS
DECEMBER 31, 2015, AND JUNE 30, 2015
ASSETS
		December 31, 2015				June 30, 15
Current assets:		(Unaudited)
Cash and cash equivalents		$	16,702			$	30,908
Trade receivables, net of allowances for doubtful accounts of $5,000			28,116				121,094
Inventories			202,185				258,917
Other current assets			62,939				48,705
Total Current Assets			309,942				459,624
Property and equipment, net			170,856				201,711
Other Assets			1,762				2,115
Total Assets		$	482,560			$	663,451
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable		$	541,671			$	439,597
Customer Deposits			50,000				-
Accrued expenses			117,608				150,486
Current portion of notes payable and capital leases			511,835				533,929
Convertible notes, less discount of $79,609 and $55,790			104,808				17,708
Embedded conversion derivative liability			216,361				276,377
Total Current Liabilities			1,542,283				1,418,097
Notes payable, less current portion			57,470				88,375
Total Liabilities			1,599,753				1,506,472
Stockholders' deficit
Preferred series A stock (1,000,000 shares authorized, 0 shares issued and outstanding)			-				-
Common stock (400,000,000 shares authorized, 184,182,008 and 89,811,292 shares issued and outstanding.)			184,181				89,811
Additional paid in capital			6,522,155				6,214,378
Accumulated deficit			(7,823,529	)			(7,147,210	)
Total Stockholders' Equity			(1,117,193	)			(843,021	)
Total Liabilities and Stockholders' Equity		$	482,560			$	663,451

 

See accompanying notes.

 

 

See accompanying notes.

 

 

See accompanying notes.

 

 

See accompanying notes.

 

PACIFIC SANDS, INC.

NOTES TO FINANCIAL STATEMENTS 

 

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, 2015.  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 2015 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") 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.

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 many 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.

 

PACIFIC SANDS, INC.

NOTES TO FINANCIAL STATEMENTS

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 $37,875 and $35,540 during the six months ended December 31, 2015, and 2014, respectively.

Revenue Recognition - Revenue is recognized when the related products are shipped unless the customer is under a bill-and-hold arrangement. Under a bill-and-hold arrangement revenue is recognized when the product is manufactured, invoiced and set aside in a specifically designated finished goods area. Upon invoicing under this arrangement ownership has passed to the buyer with no residual warranty obligation or right of return. All customers under a bill-and-hold arrangement have committed to purchases and have specifically requested they be on a bill-and-hold arrangement. In all cases goods are transferred to a designated finished goods fulfillment location under a fulfillment arrangement and are complete and ready for shipment. These bill-and-hold goods are either privately labeled or set aside exclusively for the customers use.

Advertising and Promotional Costs - Advertising and promotion costs are expensed as incurred.

Income Taxes – The Company adopted section 740 of the FASB Accounting Standards Codification. The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statement of Operations in the period that includes the enactment date.

Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement.  Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.  The Company had no material adjustments to its liabilities for unrecognized income tax benefits and does not believe there are uncertain tax positions according to the provisions of Section 740-10-25.

 

The Company's income tax returns for the year's ending June 30, 2015, 2014, and 2013, are subject to examination by the IRS and related states, generally for three years after filed.

 

Accounts Receivable - The Company makes judgments as to the collectability 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 collectability of the receivables. Management believes that the current specific and general receivable reserves aggregating $5,000 are adequate as of December 31, 2015.

 

PACIFIC SANDS, INC.

NOTES TO FINANCIAL STATEMENTS

 

Basic and Diluted Net Earnings (Loss) Per Share - Basic net earnings (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 computation 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.

  

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.

 

Recent Accounting Pronouncements – In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).  We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

PACIFIC SANDS, INC.

NOTES TO FINANCIAL STATEMENTS

 

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 December 31, 2015, the Company has incurred cumulative losses of $7,823,529.  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 restructuring 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 December 31, 2015, and June 30, 2015, consisted of the following:

 

5.               PROPERTY AND EQUIPMENT

 

Property and equipment at December 31, 2015, and June 30, 2015, consisted of the following:

 

 

 

PACIFIC SANDS, INC.

NOTES TO FINANCIAL STATEMENTS

6.               ACCRUED EXPENSES

 

Accrued expenses at December 31, 2015, and June 30, 2015, consisted of the following:

 

 

7.               NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Long term obligations at December 31, 2015, and June 30, 2015, consisted of the following:

 

 

 

 

The scheduled annual maturities for notes payable and capital lease obligations are as follows for the years ending December 31,

 

(1)

During the quarter ended December 31, 2015, the Company issued a short term note payable for $150,000 to support current operations and payoff two higher interest rate loans. This note bears 38% annual interest and matures on August 21, 2016. Under the terms of this agreement daily payments of $1,242 are required. The balance as of December 31, 2015, was $105,357. During the quarter ended September 30, 2015, the Company issued a short term note payable on July 23, 2015, for $60,000 to support current operations. This note bears 35% annual interest and matures on March 22, 2016. Under the terms of this agreement daily payments of $482.14 are required. The balance as of December 31, 2015 was $19,643. The Company issued a short term note payable on September 24, 2015, for $50,000 to support current operations. This note bears 43% annual interest and matures on January 30, 2016. Under the terms of this agreement daily payments of $812.50 are required. The note was paid in full during the period ended December 31, 2015.

 

8.	CONVERTIBLE DEBT

Debt Discount – Costs incurred with parties who are providing short-term financing, which include the fair value of an embedded derivative conversion, are reflected as a debt discount and are amortized over the life of the related debt. When the debt is repaid, the related debt discount is recorded as additional interest expense and the related derivative liability is relieved into additional paid in capital.

 

 

The derivatives were valued using the Black-Scholes option pricing model with the following assumptions:

 

 

The following table presents the embedded conversion derivative liabilities, the Company's only financial liabilities measured and recorded at fair value on the Company's balance sheet on a recurring basis, and their level within the fair value hierarchy as of December 31, 2015:

 

The following table reconciles for the period ended December 31, 2015, the beginning and ending balances for financial instruments that are recognized at fair value in the financial statements:

 

Balance at June 30, 2015		$	276,377
Issued during period ending December 31, 2015			99,000
(Gain) Loss on fair value adjustments			(11,304	)
Reductions in fair value due to conversion of Convertible Debentures into common stock			(147,712	)
Balance of embedded conversion of derivative liability as of December 31, 2015		$	216,361

 

9.               STOCKHOLDERS' DEFICIT

 

On September 28, 2015, the board of directors polled a majority of shareholders and gained approval to increase the authorized shares to 400,000,000.

 

Transactions for the six months ended December 31, 2015, are as follows:     

On July 16, 2015, the Company issued 125,000 shares of common stock for $5,000 for payment of services rendered.

On September 11, 2015, the Company issued 2,050,000 shares of common stock to an employee for $32,800 for payment of compensation.

On November 3, 2015, the Company issued 950,000 shares of common stock to an employee for $15,504 for payment of compensation.

On November 6, 2015, the Company issued 15,450,437 shares of common stock to an officer for $108,153 for payment of compensation.

On December 7, 2015, the Company issued 1,315,789 shares of common stock to convert a portion of a convertible note payable.

On December 7, 2015, the Company issued 5,408,444 shares of common stock to convert a portion of a convertible note payable.

On December 15, 2015, the Company issued 8,000,000 shares of common stock to convert a portion of a convertible note payable.

On December 17, 2015, the Company issued 6,143,228 shares of common stock to convert a portion of a convertible note payable.

On December 18, 2015, the Company issued 10,823,077 shares of common stock to convert a portion of a convertible note payable.

On December 21, 2015, the Company issued 10,823,077 shares of common stock to convert a portion of a convertible note payable.

 

On December 22, 2015, the Company issued 6,989,702 shares of common stock to convert a portion of a convertible note payable.

On December 23, 2015, the Company issued 12,230,769 shares of common stock to convert a portion of a convertible note payable.

On December 23, 2015, the Company issued 5,310,949 shares of common stock to convert a portion of a convertible note payable.

On December 30, 2015, the Company issued 8,750,244 shares of common stock to convert a portion of a convertible note payable.

PACIFIC SANDS, INC.

NOTES TO FINANCIAL STATEMENTS

 

10.               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.

 

The following table sets forth the computation of basic and diluted loss per share.

 

                                                                                         *Less than $.01

 

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

 

PACIFIC SANDS, INC.

NOTES TO FINANCIAL STATEMENTS

 

 

12.             INCOME TAXES

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

The tax effects of existing temporary differences that give rise to significant portions of deferred tax assets at December 31, 2015 and June 30, 2014 are as follows:

 

 

At December 31, 2015, the Company has net operating loss carry-forwards for Federal tax purposes of approximately $6,132,000 which, if unused to offset future taxable income, will expire in years beginning in 2018.

13.             Concentrations

For the period ended December 31, 2015, the Company had no customers that represented more than 10% of the Company's sales. For the period ended December 31, 2014, the Company's two largest customers accounted for 38% and 33% of sales, respectively and account receivable amounts are 50% and 0%, respectively. 

   

14.             Subsequent Events

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-K FOR THE YEAR ENDED JUNE 30, 2010 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 Safe 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).

 

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.

The Company markets and sells its product lines directly, 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 products are sold in numerous retail outlets around the country as well as dozens of the top environmentally-oriented websites.

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

Management intends to continue the marketing and sale of its products through a widening base of retail outlets, distribution centers, OEM arrangements and private label manufacturing 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, issuing convertible debt 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 December 31, 2015, compared to the three months ending December 31, 2014.

For the three months ended December 31, 2015, net sales were $166,430, a decrease of 80% over net sales of $831,677 for the three months ended December 31, 2014. This change was due to the shift in developing the Company's brand and not manufacturing for a large private label customer that is a potential competitor of the Company's brand of products.

For the three months ended December 31, 2015, costs of sales were $95,176 compared to $500,173 for the same period in the previous fiscal year.  The Company's gross margin increased from 39% for the three months ended December 31, 2014 to 43% for the current fiscal quarter due to increased sales of high margin products.

For the three months ended December 31, 2015 and 2014, selling and general administrative expenses were $234,474 and $447,623, respectively. This 48% decrease in operating expenses is due a reduction in labor force and overhead costs as the Company works to restructure its operations.

 

Interest expense for the three months ended December 31, 2015 was $184,833 a 51% increase from the $90,167 recorded for the three months ended December 31, 2014.  The increase in interest expense includes amortization of debt discount of $41,930 and higher rate short term debt secured to support current operations.

 

The Company recorded a net loss of $270,058 or les than $0.01 loss per share for the three months ended December 31, 2015 as compared to a net loss of $218,335 or less than $0.01 loss per share for the three months ended December 31, 2014.

 

Results for the six months ending December 31, 2015, compared to the six months ending December 31, 2014.

 

For the six months ended December 31, 2015 and 2014, selling and general administrative expenses were $515,352 and $1,041,086, respectively, or a 50.4% decrease. The decrease is due to suspension of marketing research for brand development and the Company restructuring its overhead expense.

Interest expense for the six months ended December 31, 2015, was $300,790 compared to $159,598 for the six months ended December 31, 2014.  This 47% increase is a result of amortization of debt discount of $71,823 and financing of short-term debt at higher interest rates.

The Company recorded a net loss of $676,319 or $0.01 loss per share for the six months ended December 31, 2015, compared to a net loss of $675,127 or less than $0.01 loss per share for the six months ended December 31, 2014.

 

LIQUIDITY AND CAPITAL RESOURCES

 

    

Current liabilities at December 31, 2015, were $1,542,283 as compared to $1,418,097 at June 30, 2015. Current liabilities include accounts payable, current portion of notes payable, accrued expenses, and customer deposits. The Company currently has $50,000 of customer deposits. The customer deposits represent 80% of the total order. These deposits are non-refundable since they are for custom ordered products. The Company will recognize the deposit as revenue upon completion of the order.

Non-current liabilities include a $9,364 lease payable due to an unrelated party of the Company and a note payable to Kenosha Area Business Alliance for $48,106.

 

Net cash used by operating activities during the six months ended December 31, 2015, was $41,127 compared to $123,971 used by operating activities during the six months ended December 31, 2014.

 

During the six months ended December 31, 2015, the Company used $7,020 in investing activities, representing the purchase of property and equipment.

 

Net cash provided by financing activities for the six months ended December 31, 2015, was $33,941. During the six months ending December 31, 2015, the Company received proceeds from new debt of $270,000 and received proceeds of $99,000 from convertible notes. During the six months ended December 31, 2015, the Company repaid $335,059 of long term and short term debt. 

 

On December 31, 2015, the Company had an accumulated deficit of $7,823,529 and total stockholders' deficit of $1,117,193 as compared to June 30, 2015, when accumulated deficit was $7,147,210 and stockholders' deficit was $843,021.

 

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 consistent 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.

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. 

 

THE COMPANY HAS EXPERIENCED LOSSES FROM OPERATIONS SINCE COMMENCING OPERATIONS:

While the Company has not been profitable since commencing operations in 1994, for the quarter ending December 31, 2015, the Company continued to make significant investments in its branding and marketing efforts to expand the Company's selling demographics.

POSSIBLE DIFFICULTY FINANCING PLANNED GROWTH:

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 incorrect, 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. Disclosure controls and procedures are defined as those controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

Item 1 – LEGAL PROCEEDINGS

None

Item 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3 – DEFAULTS UPON SENIOR SECURITIES

None

 

Item 4 – MINE SAFETY DISCOSURES

None

Item 5 – OTHER INFORMATION

None

Item 6 – EXHIBITS

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.