SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ending June 30, 2000
Commission File Number 0-16423
SAN Holdings, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-0907969
(State of incorporation ) (I.R.S. Employer ID Number)
900 W. Castleton Road, Suite 100, Castle Rock, CO 80104
(Address of principal executive offices) (zip code)
(303) 660-3880
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of Securities Exchange Act of 1934
during the preceding 12 months (or for such a shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of August 18, 2000, 8,522,738 common shares, no par value per share, were
outstanding.
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
INDEX
Page
Part I FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets, December 31, 1999 and
June 30, 2000 (Unaudited) ................................... 3
Consolidated Income Statement for the Three Months
Ended June 30, 1999 and 2000 (Unaudited) .................... 5
Consolidated Income Statement for the Six Months
Ended June 30, 1999 and 2000 (Unaudited) .................... 6
Consolidated Statement of Stockholders' Equity for the
Six Months Ended June 30, 2000 (Unaudited) .................. 7
Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1999 and 2000 (Unaudited) .................... 8
Notes to Unaudited Consolidated Financial Statements ........ 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings ..................................... 16
Item 2. Changes in Securities ................................. 16
Item 3. Default on Senior Securities .......................... 16
Item 4. Submission of Matters to a Vote of Security Holders ... 16
Item 5. Other Information ..................................... 16
Item 6. Exhibits and Reports on Form 8-K ...................... 16
Part III SIGNATURES ............................................... 17
Exhibit 27
2
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED BALANCE SHEET
December 31, 1999 and June 30, 2000
(Unaudited)
ASSETS
1999 2000
----------- -----------
Current assets:
Cash and cash equivalents $ 2,789,170 $ 2,149,619
Certificate of deposit (Note 3) - 1,000,000
Accounts receivable, less allowance for
doubtful accounts of $326,987 (1999) and
$20,000 (2000) 4,156,227 4,288,291
Notes receivable (Note 6) - 3,477,270
Inventory - 466,039
Prepaid expenses 32,271 62,255
Investment securities available for sale
(Note 5) - 1,995,070
Deferred income taxes (Note 4) 66,000 66,000
----------- -----------
Total current assets 7,043,668 13,504,544
Property and equipment:
Furniture and fixtures 15,311 323,171
Office equipment 6,108 171,933
Leasehold improvements 2,491 2,491
----------- -----------
23,910 497,595
Less accumulated depreciation and amortization 1,770 175,299
----------- -----------
Net property and equipment 22,140 322,296
Other assets:
Goodwill, net of accumulated amortization of
$61,208 (Note 2) - 2,625,140
Cost of purchased contracts, less accumulated
amortization of $120,000 (1999) and $160,000
(2000) 380,000 340,000
Deposits 2,000 2,000
----------- -----------
Total other assets 382,000 2,967,140
----------- -----------
$ 7,447,808 $16,793,980
=========== ===========
See accompanying notes.
3
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED BALANCE SHEET
December 31, 1999 and June 30, 2000
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 2000
----------- -----------
Current liabilities:
Accounts payable $ 3,837,162 $ 4,838,341
Income taxes payable (Note 4) 85,253 34,738
Accrued expenses 452,125 384,425
Accrued expenses - related parties 195,000 110,170
Deferred revenue (Note 6) - 468,935
Short-term notes payable - related party 50,000 -
Short-term notes payable (Notes 2 and 3) - 1,255,950
----------- -----------
Total current liabilities 4,619,540 7,092,559
Long-term debt:
Long-term debt (Note 2) - 215,000
Deferred income taxes payable (Note 4) 6,000 6,000
----------- -----------
Total long-term debt 6,000 221,000
Stockholders' equity (Note 2):
Preferred stock; no par value, 10,000,000
shares authorized:
Preferred AA stock; 1,550,800 shares (1999)
and no shares (2000) issued and outstanding 2,042,985 -
Preferred AAA stock; 133,600 shares (1999)
and no (2000) shares issued and outstanding 352,000 -
Common stock; no par value, 25,000,000 shares
authorized, issued and outstanding:
3,800,000 shares (1999) and 8,309,004 shares
(2000) 364,505 6,240,627
Warrant proceeds received - 3,059,724
Retained earnings 62,778 180,070
----------- -----------
Total stockholders' equity 2,822,268 9,480,421
----------- -----------
$ 7,447,808 $16,793,980
=========== ===========
See accompanying notes.
4
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 1999 and 2000
(Unaudited)
June 30, June 30,
1999 2000
----------- -----------
Revenues $ 2,251,969 $ 3,531,143
Cost of revenues 2,041,335 2,811,596
----------- -----------
Gross profit 210,634 719,547
General and administrative expenses 119,786 719,820
Amortization of goodwill - 34,430
----------- -----------
Income (loss) from operations 90,848 (34,703)
Other income (expense):
Interest expense (14,038) (48,001)
Interest income 16,997 43,317
----------- -----------
Total other income (expense) 2,959 (4,684)
----------- -----------
Income (loss) before income taxes 93,807 (39,387)
Income taxes (Note 4) 35,177 (14,691)
----------- -----------
Net income (loss) $ 58,630 $ (24,696)
=========== ===========
Basic earnings per common share $ 0.02 $ *
=========== ===========
Diluted earnings per common share $ 0.02 $ *
=========== ===========
* Less than $.01 per share.
See accompanying notes.
5
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 and 2000
(Unaudited)
June 30, June 30,
1999 2000
----------- -----------
Revenues $ 6,347,058 $ 7,280,042
Cost of revenues:
Cost of revenues 5,727,152 5,924,294
Settlement of disputed payable - (477,572)
----------- -----------
Total cost of revenues 5,727,152 5,446,722
----------- -----------
Gross profit 619,906 1,833,320
General and administrative expenses 396,338 1,617,864
Amortization of goodwill - 61,208
----------- -----------
Income (loss) from operations 223,568 154,248
Other income (expense):
Interest expense (21,538) (74,326)
Interest income 17,947 107,147
----------- -----------
Total other income (expenses) (3,591) 32,821
----------- -----------
Income before income taxes 219,977 187,069
Income taxes (Note 4) 82,491 69,777
----------- -----------
Net income (loss) $ 137,486 $ 117,292
=========== ===========
Basic earnings per common share $ 0.05 $ 0.02
=========== ===========
Diluted earnings per common share $ 0.04 $ 0.02
=========== ===========
See accompanying notes.
6
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2000
(Unaudited)
Stock & Retained
AA Preferred Stock AAA Preferred Stock Common Stock Warrant Earnings
Shares Amount Shares Amount Shares Amount Proceeds (Deficit)
--------- --------- ------- ----------- --------- ---------- ---------- --------
Balance, December 31, 1999 1,550,800 $2,042,985 133,600 $352,000 3,800,000 $ 364,505 $ - $ 62,778
Stock issued in reorganiza-
tion with Citadel (Note 2) - - - - 951,789 (18,337) - -
Issuance of stock to
CoComp (Note 2) - - - - 88,888 153,332 - -
Issuance of Series AA
preferred stock (Note 2) 1,134,526 1,530,291 - - - - - -
Issuance of Series AAA
preferred stock (Note 2) 363,734 898,350 - - - -
Sale of common stock in
a private placement - - - - 170,667 515,001 - -
Receipt of stock and
warrant proceeds - - - - - - 3,059,724 -
Conversion of Series AA
and Series AAA preferred
stock to common (2,685,326) (3,573,276) (497,334) (1,250,350) 3,182,660 4,823,626 - -
Issuance of common stock
for acquisition of Value
Tech (Note 2) - - - - 115,000 402,500 - -
Net income for the six
months ended June 30,
2000 - - - - - - - 117,292
--------- --------- ------- ----------- --------- ---------- ---------- --------
Balance, June 30, 2000 - $ - - $ - 8,309,004 $6,240,627 $3,059,724 $180,070
========= ========= ======= =========== ========= ========== ========== ========
See accompanying notes.
7
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 2000
(Unaudited)
June 30, June 30,
1999 2000
----------- -----------
Cash flows from operating activities:
Net income $ 137,486 $ 117,292
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 1,000 199,165
Changes in assets and liabilities:
Accounts receivable (1,233,760) (3,732,650)
Inventory (1,460) (311,057)
Prepaid expenses (28,913) 12,056
Accounts payable 1,301,870 16,633
Income taxes payable 105,103 (50,515)
Accrued expenses (46,280) (299,030)
Deferred revenue - 468,935
----------- -----------
Total adjustments 97,560 (3,696,463)
----------- -----------
Net cash provided by (used in) operating
activities 235,046 (3,579,171)
Cash flows from investing activities:
Purchase of property and equipment (11,415) (290,855)
Purchase of certificate of deposit - (1,000,000)
Purchase of contract (500,000) -
Notes receivable (132,318) (215,331)
Acquisition of CoComp - (1,817,510)
Acquisition of Value Tech - (220,000)
----------- -----------
Net cash used in investing activities (643,733) (3,543,696)
Cash flows from financing activities:
Proceeds from issuance of preferred stock - 2,428,641
Stock and warrant proceeds - 3,574,725
Proceeds from short-term borrowings 500,000 1,025,000
Payments on notes payable - (545,050)
----------- -----------
Net cash provided by financing activities 500,000 6,483,316
----------- -----------
Net increase (decrease) in cash and cash
equivalents 91,313 (639,551)
Cash and cash equivalents at beginning of period 224,963 2,789,170
----------- -----------
Cash and cash equivalents at end of period $ 316,276 $ 2,149,619
=========== ===========
See accompanying notes.
8
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
1. Basis of presentation
The accompanying unaudited interim financial statements have been prepared in
accordance with the instructions to Form 10-QSB and does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The results of operations for any
interim period are not necessarily indicative of results for the year. These
statements should be read in conjunction with the financial statements and
related notes included in the Company's Annual Report to shareholders on Form
10-KSB/A for the year ended December 31, 1999 and Forms 8-K relating to the
acquisition of Storage Area Networks and CoComp, Inc.
Upon completion of the reverse acquisition between SAN and Citadel, SAN
previously had a year end of November 30 and has changed its year end to
December 31 effective December 31, 1999.
2. Changes in securities
On January 7, 2000, the Company acquired 100% of the outstanding stock of
Storage Area Networks, Inc. (SAN), a data storage solutions and services
business, by issuing 3,800,000 shares of the Company's Series BB convertible
preferred stock to the shareholders of Storage Area Networks. The shares of
Series BB preferred stock were converted into 3,800,000 shares of common stock
on March 10, 2000. The share exchange with SAN has been treated as a reverse
acquisition for accounting purposes with SAN as the acquirer of Citadel
Environmental Group, Inc. for 631,789 shares of common stock. A finders fee
equal to 320,000 shares of the Company's common stock was issued on March 10,
2000. Following the closing of this acquisition the Company issued 1,134,526
and 363,734 shares of Series AA and Series AAA convertible preferred stock for
$1.50 and $3.00 per share, respectively, generating net proceeds of $2,428,641
(net of offering costs of $364,350).
On January 21, 2000, in exchange for $1,079,000 in cash, $951,000 in
promissory notes and 88,888 shares of Citadel common stock valued at $153,332,
Citadel acquired all the outstanding stock of CoComp, Inc., a provider of data
storage systems and services based in Colorado. The notes are payable
$251,000 on June 30, 2000, $500,000 on January 21, 2001 and $200,000 on
January 21, 2002, including interest at 12% per annum. The Citadel common
shares were to be issued within 15 days from the effective date of the
proposed 1 for 36 reverse stock split. The Company also paid $408,000 in
dividends to the prior owners of CoComp in January 20000, prior to the
acquisition and $408,729 under an earn out provision to the former
shareholders of CoComp. As of June 30, 2000, the Company is contingently
liable for an additional $56,271 under the earn out provision.
In connection with this transaction, the Company recorded goodwill of
$2,065,748, which is being amortized over 15 years, the period estimated by
management to be benefited.
9
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
2. Changes in securities (continued)
On March 1, 2000, the shareholders of the Company approved a 1 for 36 common
stock reverse split. All numbers of shares have been adjusted to reflect the
reverse split.
During March and April 2000, the Company completed a private placement of
170,667 shares of common stock with a third party for net proceeds of $515,001
(net of offering costs of $55,000). The agreement provides common stock
warrants with an exercise price of $9.00 per share and expiring in three
periods: 200,000 in December 2000, 400,000 in June 2001, and 400,000 in
December 2001.
On April 4, 2000, all of the outstanding Series AA and AAA preferred stock
were converted into common stock at the rate of one share of common stock for
each preferred share.
Between March and June 2000, the Company received net proceeds of $3,059,724
from the exercise of warrants to purchase 775,148 shares of common stock. The
stock certificates were not issued as of June 30, 2000.
On June 27, 2000, the Company purchased the business of Value Technologies,
Inc. for $130,000 in cash and 115,000 shares of common stock valued at
$402,500 ($3.50 per share). If the closing bid price of the Company's stock
is below $15 anytime during the 20 days prior to December 31, 2000, the
Company agreed to issue 28,750 additional shares of its common stock in this
transaction. The Company also entered into a two year employment agreement
with an employee of Value Technologies, Inc. which calls for the payment of
salary and commissions. The Company has agreed to issue this individual
15,000 options to purchase common stock of the Company at the closing bid
price of the stock on the date of closing of the agreement. The options vest
one-half at the end of each year of employment under the agreement. The
agreement calls for substantial payments if the employee is terminated without
cause. The Company incurred costs and finders fees of $90,000. The assets
recorded included $1,900 of equipment and goodwill of $620,600.
Unaudited results of operations of Value Technologies, Inc. are as follows:
Six Months Year Ended
Ended December 31,
June 30, 2000 2000
------------- ------------
Revenues $1,692,418 $4,135,273
Cost of sales 1,515,258 3,767,764
Gross profit 177,160 367,509
Net income (loss) before
income taxes (4,364) 243,493
10
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
2. Changes in securities (continued)
Stock option plan:
On March 1, 2000, shareholders of the Company approved the 2000 Incentive
Stock Option Plan. The total number of shares of common stock subject to
options under the 2000 Plan may not exceed 1,500,000.
On June 9, 2000, the Company issued 15,000 options to directors of the
Company. The options are exercisable for five years at $10.82 per share.
3. Note payable
On March 16, 2000, the Company borrowed $1,000,000 from a bank payable $86,500
monthly including interest at 6.9% with the balance due on March 10, 2001,
secured by a certificate of deposit. As of June 30, 2000, the loan balance
was $755,950.
4. Income taxes
As of December 31, 1999 and June 30, 2000, total deferred tax assets and
valuation allowance are as follows:
1999 2000
-------- --------
Deferred tax asset $ 66,000 $ 66,000
Deferred tax liability (6,000) (6,000)
-------- --------
Net deferred tax asset $ 60,000 $ 60,000
======== ========
5. Settlement of accounts receivable
During the quarter ended March 31, 2000, the Company settled a delinquent
account receivable with a book value of $1,995,070 (net of related bad debt
reserve) for common stock of another company. In addition, the customer has
agreed upon the payment of certain other obligations to another of its
vendors, to redeem the shares held by the Company at $.35 per share before
September 28, 2000, at the greater of $.52 per share or the then current
market price on or after September 28, 2000. Proceeds from the customer's (1)
sale of a division, (2) 50% of net earnings or (3) 50% of any capital
contributions or loans are to be used to redeem the shares. The market value
of the stock held at June 30, 2000 was $1,518,132. Therefore, the value of
the recorded asset is subject to change should the financial condition of the
customer deteriorate.
11
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
6. Notes receivable
During the quarter ended March 31, 2000, the Company sold equipment to XS Data
Solutions, Inc. (XSDS) for $3,261,939. The Company has tried to assist XSDS
in securing lease financing but without success. During the quarter ended
June 30, 2000, the Company advanced XSDS $215,331 evidenced by a note
receivable due June 26, 2001, bearing interest at the rate of 10% per annum.
XSDS also entered into a note for the payment of the $3,261,939 amount
invoiced due June 30, 2001, bearing interest at the rate of 10% per annum.
The Company has deferred the potential revenue of $468,935 on this
transaction.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
In the fiscal quarter ended June 30, 2000, the Company was primarily
engaged in the development of its data storage solutions business. The
Company is pursuing plans to expand sales together with growth by acquisition
of similar data storage services businesses as detailed in its Form 10-KSB for
the period ended December 31, 1999.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30,
1999
Revenues for the six month period ended June 30, 2000, were $7,280,042 as
compared to $6,347,058 for the six months ended June 30, 1999. The increase
in revenues was the result of revenues generated by CoComp, Inc. acquired in
January 2000. Revenues were negatively impacted by the distractions
associated with integrating the businesses and personnel of Citadel, SAN and
CoComp.
The cost of revenues for the six months ended June 30, 2000, were
$5,924,294 as compared to $5,727,152 for the six months ended June 30, 1999.
As a percentage of revenues, the cost of revenues declined from 90.2% in the
1999 period to 81.4% in the six months ended June 30, 2000. The reason for
the decreasing percentage is that the Company realizes a higher profit margin
on its storage area network products and on its services, and revenues from
these areas is increasing as a percentage of total revenues. This analysis
ignores the one time settlement of a disputed payable in the amount of
$477,572.
General and administrative expenses for the six months ended June 30,
2000, were $1,617,864 as compared to $396,338 for the six months ended June
30, 1999. The increase in general and administrative expenses reflects the
emphasis being placed on increasing the number and experience of the
engineering support. The number of qualified engineers grew from two in 1999
to thirteen as of June 30, 2000. These increases were the result of revenue
growth and the acquisition of CoComp, Inc. including expansion of technical
service offerings and hiring of sales support staff.
Interest income increased to $107,147 in the six months ended June 30,
2000, as compared to $17,947 in the prior year due to the increased cash
balance of the Company.
The Company had a net income before tax of $187,069 in the six months
ended June 30, 2000, compared to net income of $219,977 in the six months
ended June 30, 1999. The decrease is attributable to the settlement of the
disputed payables, the increase in margins created by additional services
business, offset by expenditures on required infrastructure.
13
THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THREE MONTHS ENDED JUNE
30, 1999
Revenues for the three month period ended June 30, 2000, were $3,531,143
as compared to $2,251,969 for the three months ended June 30, 1999. The
increase in revenues was the result of revenues generated by CoComp, Inc.
acquired in January 2000. Revenues were negatively impacted by the
distractions associated with integrating the businesses and personnel of
Citadel, SAN and CoComp.
The cost of revenues for the three months ended June 30, 2000, were
$2,811,596 as compared to $2,041,335 for the three months ended June 30, 1999.
As a percentage of revenues, the cost of revenues declined from 90.6% in the
1999 period to 79.6% in the three months ended June 30, 2000. The reason for
the decreasing percentage is that the Company realizes a higher profit margin
on its storage area network products and on its services, and revenues from
these areas is increasing as a percentage of total revenues.
General and administrative expenses for the three months ended June 30,
2000, were $719,820 as compared to $119,786 for the three months ended June
30, 1999. The increase in general and administrative expenses reflects the
emphasis being placed on increasing the number and experience of the
engineering support. The number of qualified engineers grew from two in 1999
to thirteen as of June 30, 2000. These increases were the result of revenue
growth and the acquisition of CoComp, Inc. including expansion of technical
service offerings and hiring of sales support staff.
Interest income increased to $43,317 in the three months ended June 30,
2000, as compared to $16,997 in the prior year due to the increased cash
balance of the Company.
The Company had a net loss before tax of $(39,387) in the three months
ended June 30, 2000, compared to net income of $93,807 in the three months
ended June 30, 1999. The loss is attributable to the increased level of
general and administrative expenses attributable to building the Company's
infrastructure.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $6,411,985 at June 30, 2000, as
compared to $2,424,128 at December 31, 1999. The increase in working capital
was primarily due to the proceeds from the sale of the preferred stock and
exercise of warrants during the six months ended June 30, 2000.
During the six months ended June 30, 2000, cash used in operating
activities was $(3,579,171) compared to cash provided of $235,046 for the six
months ended June 30, 1999. The primary reason for the large increase in cash
used in operating activities was the $(3,732,650) increase in accounts
receivable, and the $311,057 increase in inventory, offset by an increase in
deferred revenue of $468,935, and net income of $117,292.
Cash used in investing activities during the six months ended June 30,
2000, was $(3,543,696) as compared to $(643,733) during the six months ended
June 30, 1999. During the six months ended June 30, 2000, the Company paid
$1,817,510 for CoComp, Inc., purchased a $1,000,000 certificate of deposit,
and advanced $215,331 to XS Data Solutions, Inc.
14
Cash provided by financing activities during the six months ended June
30, 2000, was $6,483,316 as compared to $500,000 for the comparable period in
1999. The Company received $6,003,366 from the sale of preferred and common
stock and the exercise of warrants and $1,025,000 from short-term loans in the
six months ended June 30, 2000, less payments of $545,050 on the notes
payable.
15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
During the three months ended June 30, 2000, the Compared issued a total
of 775,148 shares of its common stock to 23 accredited investors who exercised
warrants. The shares were issued in reliance on the exemption provided by
Section 4(6). Each investor was provided with information on the Company and
each person signed an investment representation statement.
On June 28, 2000, the Company completed the acquisition of 100% of the
outstanding common stock of Value Technology, Inc., and in connection
therewith the Company issued a total of 115,000 shares to three principals of
Value Technology, Inc. pursuant to the exemption provided by Section 4(2).
Two of these three persons became employees of the Company. Each person
signed an agreement in which he represented that he was acquiring the shares
for investment only and not for the purpose of resale or distribution. The
appropriate restrictive legend was placed on the certificates and stop
transfer orders were issued to the transfer agent.
ITEM 3. DEFAULTS OF SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K dated April 20, 2000, related to
the change in the Company's auditors to Causey, Demgen & Moore, Inc. The 8-K
reported on Items 4 and 7.
The Company filed a Report on Form 8-K dated June 28, 2000, related to
the acquisition of Value Technology, Inc. which reported on Items 2 and 7.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SAN HOLDINGS, INC.
By:/s/ L.W. Buxton
Date: August 22, 2000 L. W. Buxton, President
17