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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO SECTION 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Month Ended Commission file number
January 31, 2008 0-14884
Exact name of the registrant as specified in its charter
SAND TECHNOLOGY INC.
Jurisdiction of Incorporation
CANADA
Address of principal executive offices:
215 REDFERN, SUITE 410
WESTMOUNT, QUEBEC, CANADA H3Z 3L5
TELEPHONE (514) 939-3477
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes |_| No |X|
If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- N/A.
Total number of pages is 22
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Sand Technology Inc. (the "Company") incorporates this Form 6-K Report by
reference into the Prospectus contained in the Company's Registration Statement
on Form F-3 (333-51014).
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[SAND(TM) TECHNOLOGY LOGO]
INVESTOR RELATIONS:
de Jong & Associates,
sndt@dejong.org
+(1) 760/943-9065
PRESS RELEASE
SAND ANNOUNCES FIRST QUARTER RESULTS
MONTREAL, JANUARY 29TH, 2008: SAND Technology Inc. (OTCBB:SNDTF), an innovator
in analytic application infrastructure, today reported results for the
three-month period ended October 31, 2007. The Company reported a loss for the
first quarter of fiscal year 2008 of $304,920, or ($0.02) per share on revenues
of $1,784,925. In comparison with the first quarter of fiscal year 2007,
revenues have increased by over 21% and the operating loss has decreased by over
64%.
"We are encouraged by the revenue growth over the first quarter of last year."
said Arthur Ritchie, President and Chief Executive Officer of SAND. "This gives
us some indication on the level of the growing interest for our SAND/DNA
products in general and our new SAND/DNA for SAP BI offering," added Ritchie.
ABOUT SAND TECHNOLOGY(R)
SAND Technology provides organizations worldwide with a unique vantage point
from which to survey the competitive landscape. SAND's advanced analytic data
management products empower users with a better understanding of their business
environment through better access to their business data.
SAND Technology-based solutions include CRM analytics, financial analysis,
regulatory compliance and specialized Business Intelligence applications for
government and security, healthcare, telecommunications, financial services,
retail and other business sectors.
SAND Technology has offices in the United States, Canada, the United Kingdom and
Central Europe. For more information, visit www.sand.com
All Rights Reserved. SAND Technology and Nucleus are registered trademarks, and
SAND Analytic Server, SAND Searchable Archive, See What's on the Horizon,
ANALYTICS @ THE SPEED OF BUSINESS, and all related SAND- and Nucleus-based marks
and designs, are trademarks of SAND Technology Inc. Other trademarks are the
property of their respective owners.
Certain statements contained in this press release are "forward looking
statements" within the meaning of the United States Securities Act of 1933 and
of the United States Securities Exchange Act of 1934. The forward-looking
statements are intended to be subject to the safe harbour protection provided by
these Acts. We have based these forward-looking statements on our current
expectations and projections about future results, levels of activity, events,
trends or plans. Such forward-looking statements are not guarantees and are
subject to known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of SAND to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. All forward looking statements
included in this press release are based on current expectations and on
information available to SAND on the date of this press release. For a more
detailed discussion of these risks and uncertainties and other business risks,
see SAND's current Annual Report and SAND's reports to the Securities and
Exchange Commission. You are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date made. We undertake
no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
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SAND TECHNOLOGY INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
IN CANADIAN DOLLARS
-----------------------------
AS AT AS AT
OCT. 31, 2007 JULY 31, 2007
------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $ 92,947 $ 330,711
Accounts Receivable, Net $ 1,694,536 $ 1,582,957
Prepaid Expenses $ 214,124 $ 150,964
----------------------------
$ 2,001,607 $ 2,064,632
Capital Assets, Net $ 160,312 $ 181,669
Other Assets, Net $ 83,135 $ 110,847
----------------------------
$ 2,245,054 $ 2,357,148
============================
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Liabilities $ 1,007,481 $ 1,076,116
Deferred Revenue $ 1,332,027 $ 1,305,270
Due to a Shareholder $ 992,182 $ 750,144
Deferred Credits $ 100,235 $ 107,569
----------------------------
$ 3,431,925 $ 3,239,099
----------------------------
SHAREHOLDERS' EQUITY
Common Stock $ 38,530,441 $ 38,530,441
Contributed Surplus $ 305,110 $ 305,110
Deficit $(40,022,422) $(39,717,502)
----------------------------
$ (1,186,871) ($881,951)
----------------------------
$ 2,245,054 $ 2,357,148
============================
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SAND TECHNOLOGY INC.
CONSOLIDATED STATEMENT OF OPERATIONS - (UNAUDITED)
IN CANADIAN DOLLARS
-----------------------------------
3 MONTHS ENDED 3 MONTHS ENDED
OCTOBER 31, 2007 OCTOBER 31, 2006
-----------------------------------
Revenues $ 1,784,925 $ 1,470,407
------------------------------
Operating expenses
Cost of Sales and Product Support $ (412,164) $ (433,675)
Research and Development Costs $ (592,497) $ (575,866)
Amortization of capital assets and
acquired technology $ (49,069) $ (51,020)
Selling, general and administrative
expenses $ (993,774) $(1,246,715)
------------------------------
Total operating expense $(2,047,504) $(2,307,276)
------------------------------
Operating Income (Loss) $ (262,579) $ (836,869)
Interest Income, Net $ (42,341) $ 337
------------------------------
Net Earnings (Loss) $ (304,920) $ (836,532)
==============================
Earnings (Loss) per share ($0.02) ($0.06)
Weighted average number of shares
outstanding 14,318,189 12,818,189
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SAND TECHNOLOGY INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTERLY REPORT
FIRST QUARTER ENDED OCTOBER 31, 2007
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MANAGEMENT'S DISCUSSION AND ANALYSIS - OCTOBER 31, 2007
THIS MANAGEMENT DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
ATTACHED OCTOBER 31, 2007 UNAUDITED CONSOLIDATED BALANCE SHEET, CONSOLIDATED
STATEMENTS OF OPERATIONS, CONSOLIDATED STATEMENT OF CASH FLOWS AND RELATED NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. READERS SHOULD ALSO REFER TO
SAND TECHNOLOGY INC'S (SAND) 2007 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ON PAGES 7 TO 27 OF SAND'S 2007
ANNUAL REPORT.
CERTAIN STATEMENTS CONTAINED IN THIS DISCUSSION ARE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE UNITED STATES SECURITIES ACT OF 1933 AND OF THE UNITED
STATES SECURITIES EXCHANGE ACT OF 1934. THE FORWARD-LOOKING STATEMENTS ARE
INTENDED TO BE SUBJECT TO THE SAFE HARBOUR PROTECTION PROVIDED BY THESE ACTS. WE
HAVE BASED THESE FORWARD-LOOKING STATEMENTS ON OUR CURRENT EXPECTATIONS AND
PROJECTIONS ABOUT FUTURE RESULTS, LEVELS OF ACTIVITY, EVENTS, TRENDS OR PLANS.
SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES AND ARE SUBJECT TO KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF SAND TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING
STATEMENTS BY TERMINOLOGY SUCH AS "GUIDANCE", "MAY", "WILL", "SHOULD", "COULD",
"WOULD", "EXPECT", "PLAN", "ANTICIPATE", "BELIEVE", "ESTIMATE", "CONTINUE", OR
THE NEGATIVE OF SUCH TERMS OR OTHER SIMILAR EXPRESSIONS. ALL FORWARD-LOOKING
STATEMENTS INCLUDED IN THIS DISCUSSION ARE BASED ON CURRENT EXPECTATIONS AND ON
INFORMATION AVAILABLE TO THE CORPORATION ON JANUARY 21, 2007. FOR A MORE
DETAILED DISCUSSION OF THESE RISKS AND UNCERTAINTIES AND OTHER BUSINESS RISKS,
SEE SAND'S CURRENT ANNUAL REPORT AND ITS REPORTS TO THE SECURITIES AND EXCHANGE
COMMISSION. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. WE UNDERTAKE NO OBLIGATION TO
PUBLICLY RELEASE THE RESULT OF ANY REVISION OF THESE FORWARD-LOOKING STATEMENTS
TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE THEY ARE MADE OR TO REFLECT
THE OCCURRENCE OF UNANTICIPATED EVENTS.
SAND REPORTS ITS UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS IN CANADIAN
DOLLARS AND IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP).
ALL FINANCIAL FIGURES ARE IN CANADIAN DOLLARS UNLESS OTHERWISE NOTED. SAND
REPORTS ITS UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS IN CANADIAN DOLLARS AND
IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).
OVERVIEW
During the 2007 fiscal year, SAND continued its process, started in
previous years, of engaging integrator and systems partners in active sales
situations for its high-performance analytical application products. In
particular, the SAND Searchable Archive product (now named SAND/DNA Access)
began to gain traction and mindshare as a method for managing growth in data
warehouse environments in a fashion that is very complementary to existing
industry standards. In conjunction with partners like SAP, the company has
readied specific application offerings, using this exciting product, to make it
easy to adopt. During 2007, the company launched the SAND/DNA brand for its
7
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products in conjunction with the SAP offering with high interest from industry
analysts, partners, and prospective customers.
Despite the growing conditioning of the market to its new solutions to
intelligent information management, the company recognizes the potentially
lengthy sales cycles required to gain strong market acceptance of these new
approaches, and therefore significantly lowered its expense rate. At the same
time it engaged refined skills in the area of Marketing and Business Development
geared towards the SAND/DNA applications.
The result in the first quarter of this Fiscal Year (2008) was the
continuation of progressive sales and a significant reduction in operating
losses. While we expect that our new solutions will only start contributing to
revenues and profits later this year and the beginning of the next fiscal year,
we are encouraged by the trends in our financial performance which should only
improve further as they come to stream.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2008 COMPARED WITH FIRST QUARTER OF FISCAL 2007
Revenue
Our sales for the first quarter ended October 31, 2007 were $1,784,925, an
increase of 21% from sales of $1,470,407 for the first quarter ended October 31,
2006.
In North America, sales were $709,669, an increase of 20% from sales of
$590,772 in the first quarter of fiscal 2007. In Europe, sales in the first
quarter of fiscal 2008 were $1,075,256 an increase of 22% from sales of $879,635
in the first quarter of fiscal 2007.
In North America the increase in our revenues can be explained primarily by
the increased sales from our alliances during the first quarter of fiscal 2008.
In Europe the increase is associated primarily to progress in the procurement
process from some opportunities.
We recognize revenues from software licenses in accordance with the
provisions of the American Institute of Certified Public Accountants Statement
of Position 97-2, which requires that companies defer revenue and profit
recognition if four specified criteria of a sale are not met. In addition, we
are required to allocate revenue to multiple element arrangements. We typically
contract professional services on a time-and-materials basis and such revenues
are recognized as services when they are performed. Revenues from support and
maintenance are recognized rateably over the term of the applicable support and
maintenance agreement.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include salaries, commissions
and other personnel-related costs, the impact of foreign exchange gains and
losses, travel expenses, advertising programs and other promotional activities
associated with the selling and marketing of our products
8
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and services. Selling, general and administrative expenses decreased by 20% to
$993,774 for the first quarter ended October 31, 2007 from $1,246,715 for the
first quarter ended October 31, 2006. This decrease is attributable to cost
cutbacks over the first quarter of Fiscal 2008 and preceding periods.
Research and Development Expenses
Research and development expenses consist primarily of salaries and other
personnel-related costs of technical and engineering personnel associated with
our research and product development activities, including the enhancement and
localization of existing products, quality assurance and testing as well as the
cost of materials and equipment used in research and development activities.
Research and development expenses increased by 3% to $592,497 for the first
quarter ended October 31, 2007 from $575,866 for the first quarter ended October
31, 2006. For the remainder of fiscal 2008, we expect that Research and
Development expenditures will not vary significantly in absolute dollars.
Cost of Sales
Cost of sales consists primarily of the costs related to the sale of
third-party software, including certain license fees and royalties, as well as
the costs related to systems architects who assist clients to implement systems
and provide support services. Cost of sales decreased by 5% to $412,164 for the
first quarter ended October 31, 2007 from $433,675 for the first quarter ended
October 31, 2006. Cost of revenues from services may vary due to the mix of
services provided by SAND's personnel relative to services provided by outside
consultants and to varying levels of expenditures necessary to build the service
sector as well as the compensation paid to third parties for supplying some
products.
Operations
SAND generated a net loss of $304,920 in the first quarter ended October
31, 2007 as compared to a net loss of $836,532 in the first quarter ended
October 31, 2006. The improvement over last year's results is indicative of the
movement towards profitability that the Company is aiming to achieve. We
recognize that the transitional statute of the business and distribution model
of SAND, is still in progress. We believe that this transition is likely to
continue during the next few quarters.
Liquidity and Capital Resources
Cash and investments as at October 31, 2007 were $92,947 compared with
$694,083 as at October 31, 2006. SAND does not have a line of credit with a
commercial bank. In light of operating losses suffered in the current and past
years, the Corporation's ability to realize its assets and discharge its
liabilities depends on the continued financial support of its shareholders and
creditors and its ability to obtain additional financing. The Corporation's
management will continue to search for additional sources of debt and equity
financing. There can be no assurance that the Corporation's activities will be
successful and as a result there is doubt regarding the going concern
assumption.
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SAND TECHNOLOGY INC.
QUARTERLY REPORT
FIRST QUARTER ENDED OCTOBER 31, 2007
10
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SAND TECHNOLOGY INC.
CONSOLIDATED BALANCE SHEETS
(IN CANADIAN DOLLARS)
<Table>
<Caption>
AS AT AS AT
OCTOBER 31, JULY 31,
2007 2007
- ----------------------------------------------------------------------------------------------
$ $
(UNAUDITED) (audited)
ASSETS
Current assets
Cash and cash equivalents 92,947 330,711
Accounts receivable, net 1,694,536 1,582,957
Prepaid expenses 214,124 150,964
- ----------------------------------------------------------------------------------------------
2,001,607 2,064,632
Capital assets, net (Note 2) 160,312 181,669
Other assets, net (Note 3) 83,135 110,847
- ----------------------------------------------------------------------------------------------
2,245,054 2,357,148
==============================================================================================
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 1,007,481 1,076,116
Deferred revenue 1,332,027 1,305,270
Due to a Shareholder (Note 4) 992,182 750,144
Deferred credits 100,235 107,569
- ----------------------------------------------------------------------------------------------
3,431,925 3,239,099
- ----------------------------------------------------------------------------------------------
Commitments (Note 7)
SHAREHOLDERS' DEFICIENCY
Common stock (Note 5)
Authorized
An unlimited number of Class "A" common shares,
without par value
Issued and outstanding
14,318,189 common shares (14,318,189 as at July 31, 2007) 38,530,441 38,530,441
Contributed surplus 305,110 305,110
Deficit (40,022,422) (39,717,502)
- ----------------------------------------------------------------------------------------------
(1,186,871) (881,951)
- ----------------------------------------------------------------------------------------------
2,245,054 2,357,148
==============================================================================================
</Table>
See notes to the consolidated financial statements.
11
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SAND TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN CANADIAN DOLLARS)
(UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
- ---------------------------------------------------------------------------
$ $
REVENUE 1,784,925 1,470,407
- ---------------------------------------------------------------------------
Operating expenses
Cost of sales and product support (412,164) (433,675)
Research and development, net (592,497) (575,866)
Amortization of capital and other assets (49,069) (51,020)
Selling, general and administrative expenses (993,774) (1,246,715)
- ---------------------------------------------------------------------------
Total operating expenses (2,047,504) (2,307,276)
- ---------------------------------------------------------------------------
Loss from operations (262,579) (836,869)
- ---------------------------------------------------------------------------
Interest income (expense), net (42,341) 337
- ---------------------------------------------------------------------------
NET LOSS (304,920) (836,532)
Deficit at beginning of period (39,717,502) (37,190,978)
- ---------------------------------------------------------------------------
DEFICIT AT END OF PERIOD (40,022,422) (38,027,510)
===========================================================================
Basic and diluted earnings (loss) per share (0.02) (0.06)
===========================================================================
Weighted average number of shares outstanding 14,318,189 12,818,189
===========================================================================
See notes to the consolidated financial statements.
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SAND TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN CANADIAN DOLLARS)
(UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
- -------------------------------------------------------------------------
$ $
OPERATING ACTIVITIES
Net loss (304,920) (836,532)
Items not affecting cash
Amortization of capital and other assets 49,069 51,020
Changes in non-cash operating working
capital items (Note 10) (216,617) 94,861
- -------------------------------------------------------------------------
(472,468) (690,651)
- -------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets -- (20,480)
- -------------------------------------------------------------------------
-- (20,480)
- -------------------------------------------------------------------------
FINANCING ACTIVITIES
Due to a Shareholder 242,038 --
Deferred credits (7,334) (7,334)
- -------------------------------------------------------------------------
234,704 (7,334)
- -------------------------------------------------------------------------
Decrease in cash and cash equivalents (237,764) (718,465)
Cash & cash equivalents,
beginning of period 330,711 1,412,548
- -------------------------------------------------------------------------
CASH & CASH EQUIVALENTS,
END OF PERIOD 92,947 694,083
=========================================================================
The Corporation is involved in the design, development, marketing and support of
software products and services that enable users to retrieve usable business
information from large amounts of data. The software products, collectively
known as the SAND/DNA and the SAND/DNA Analytics, are designed to provide an
efficient and cost-effective way for business users to make fast easy inquiries
of large databases without the intervention of specialist Information Technology
professionals. The Corporation is considered to have only one reportable
business segment.
See notes to the consolidated financial statements.
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SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with Canadian
generally accepted accounting principles and on the basis of the going
concern assumption, meaning that it is reasonably assumed that the
Corporation will be able to realize its assets and discharge its
liabilities in the normal course of operations.
In light of operating losses suffered in the current and past years, the
Corporation's ability to realize its assets and discharge its liabilities
depends on the continued financial support of its shareholders and
creditors and its ability to obtain additional financing. The Corporation's
management will continue to search for additional sources of debt and
equity financing.
There can be no assurance that the Corporation's activities will be
successful and as a result there is doubt regarding the "going concern"
assumption. These consolidated financial statements do not reflect
adjustments that would be necessary if the "going concern" assumption was
not appropriate. The adjustments to the carrying values of the assets and
liabilities, the reported expenses and the balance sheet classifications,
which could be material, may be necessary for these consolidated financial
statements.
USE OF ESTIMATES
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
These unaudited interim financial statements do not include all disclosures
required for annual financial statements and should be read in conjunction
with the most recent annual financial statements as at and for the year
ended July 31, 2007.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated.
REVENUE RECOGNITION
The Corporation generates revenues principally through two sources:
software licences and services. Software licence revenues are normally
generated from licensing the perpetual use of the Corporation's software
products. Service revenues are generated from sales of maintenance,
implementation, consulting and training services performed for customers
that licence the Corporation's products.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
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SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
Revenue from the sale of software licence agreements are recognized upon
delivery of software if persuasive evidence of an arrangement exists,
collection is probable, the fee is fixed or determinable and
vendor-specific evidence of an arrangement exists to allocate the total fee
to the different elements of an arrangement. Vendor-specific objective
evidence is typically based on the price charged when an element is sold
separately, or, in the case of an element not yet sold separately, the
price established by management, if it is probable that the price, once
established, will not change before market introduction.
In circumstances where the implementation services are essential to the
functionality of the software or where the software requires significant
customization, the Corporation recognizes software licence revenue using
the percentage-of-completion method over the implementation period. The
percentage-of-completion is measured by the percentage of implementation
hours incurred to date to estimated implementation hours. Past experience
has shown expended hours to be the best measure of progress.
Revenues from maintenance services for licences previously sold and
implemented are recognized rateably over the terms of the contract.
Revenue from consulting and training services, not considered as part of
the implementation of software licences, are recognized as the services are
provided.
Amounts received in advance of the delivery of products or performance of
services are classified as deferred revenue.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include unrestricted cash and highly liquid
investments.
CAPITAL ASSETS
Capital assets are recorded at cost and are amortized over their estimated
useful lives using the straight-line method over the following periods:
Furniture and equipment 5 years
Computer equipment 3 years
Leasehold Improvements over the lease term
OTHER ASSETS
Other assets comprise contract costs and acquired technology.
(i) Contract costs
Contract costs are comprised of an amount paid to the vendor upon the
transfer of a long-term service contract and is amortized rateably
over the term of the contract.
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SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS(CONTINUED)
(ii) Acquired technology
The Corporation records its acquired technology at cost and amortizes
such assets over their estimated useful lives using the straight-line
method at an annual rate of 20%.
RESEARCH AND DEVELOPMENT COSTS
Research costs are charged to operations in the period in which they are
incurred. Development costs are expensed as incurred unless a project meets
the criteria under Canadian generally accepted accounting principles for
deferral and amortization. The Corporation has not deferred any such
development costs to date. Related tax credits are recorded as a reduction
of research and development expenses.
INCOME TAXES
Income taxes are accounted for using the liability method of tax
allocation. Future income tax assets and liabilities are determined based
on deductible or taxable temporary differences between the financial
statement values and tax values of assets and liabilities, using enacted
income tax rates expected to be in effect for the year in which the
differences are expected to reverse.
DEFERRED CREDITS
Deferred credits include deferred lease inducements, which are amortized on
a straight-line basis over the term of the lease.
FOREIGN EXCHANGE TRANSLATION
Revenue, expenses and acquisition of non-monetary assets denominated in
foreign currencies are translated into Canadian dollars at rates prevailing
on the transaction dates. Monetary assets and liabilities are translated at
rates in effect at the balance sheet date.
The accounts of the subsidiaries included in the consolidated financial
statements are translated into Canadian dollars using the temporal method.
Under this method, monetary items are translated at exchange rates in
effect at the balance sheet dates; non-monetary items are translated at
historical exchange rates. Revenue and expenses are translated at average
exchange rates for the period, with the exception of amortization of
assets, which is translated at the same historical exchange rates as the
related assets. Translation losses and gains are included in operations.
LOSS PER SHARE
Per share computations are based on the weighted average number of shares
outstanding during the period. The dilutive effect of options is determined
using the treasury stock method.
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SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
The Corporation accounts for stock-based compensation under the
recommendations of Section 3870 of the Canadian Institute of Chartered
Accountants (CICA) Handbook, STOCK-BASED COMPENSATION AND OTHER
STOCK-BASED PAYMENTS, which sets standards for recognizing, measuring
and disclosing stock-based compensation and other stock-based payments
made in exchange for goods and services. The standards require the
Corporation to use a fair-value based method for all stock-based
awards and the recognition of an expense in the financial statements.
See Note 4, stock option plan, for additional information.
GUARANTEES
In the normal course of its operations, the Corporation has entered
into agreements that contain certain features which meet the
definition of a guarantee under the guidance provided by Accounting
Guideline 14.
Certain agreements with its customers include intellectual-property
indemnification obligations that are customary in the industry. These
obligations would generally require the Corporation to compensate a
third party for certain damages and claims incurred as a result of
third-party intellectual-property claims arising from these
agreements.
The nature of these obligations prevents the Corporation from making a
reasonable estimate of the maximum potential amount it could be
required to pay. Historically, the Corporation has not made any
payments under such obligations. The adoption of these recommendations
did not have an impact on the Corporation's consolidated financial
statements.
NEW ACCOUNTING POLICIES ADOPTED
STOCK-BASED COMPENSATION FOR EMPLOYEES ELIGIBLE TO RETIRE BEFORE THE
VESTING DATE
In July 2006, the Emerging Issues Committee (EIC) of the CICA issued
EIC-162, "Stock-based Compensation for Employees Eligible to Retire
before the Vesting Date". EIC-162 clarifies the accounting for
compensation costs relating to stock-based awards granted to
employees. EIC-162 requires that i) compensation costs attributable to
stock-based awards granted to employees who are eligible to retire on
the grant date be recognized on the grant date, and ii) compensation
cost attributable to stock-based awards granted to employees who will
become eligible to retire during the vesting period be recognized over
the period from the grant date to the date of retirement eligibility.
This abstract is to be applied retroactively, with restatement of
prior periods, and is effective for interim periods beginning on or
after December 1, 2006. The adoption of EIC-162 did not have a
material impact on the Corporation's financial statements
17
<Page>
SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
2. CAPITAL ASSETS
JULY 31,
OCTOBER 31, 2007 2007
----------------------------------- --------
ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
--------- ------------ -------- --------
$ $ $ $
Furniture and equipment 320,113 320,002 111 111
Computer equipment 628,301 560,539 67,762 81,762
Leasehold improvements 287,610 195,171 92,439 99,796
------------------------------------------------------------------------
1,236,024 1,075,712 160,312 181,669
========================================================================
3. OTHER ASSETS
JULY 31,
OCTOBER 31, 2007 2007
----------------------------------- --------
ACCUMULATED NET BOOK NET BOOK
COST AMORTIZATION VALUE VALUE
--------- ------------ -------- --------
$ $ $ $
Contract costs 471,100 387,965 83,135 110,847
========================================================================
4. DUE TO A SHAREHOLDER
During the year 2007, the Corporation formalized the conditions pertaining
to a loan obtained from a significant shareholder who is also the President
and Chief Executive Officer. The loan is repayable within 90 days of the
receipt of a written demand from the shareholder. The loan bears interest
at 15%. In conjunction with the ratification of the loan agreement, the
Corporation also issued 103,061 warrants, each warrant entitling to
purchase one class "A" common share of the Corporation at a price of
US$0.44 per share and is valid for the term of the agreement. The residual
valuation method was used to allocate the proceeds between the liability
component and the equity component. The value of the liability component
was determined to be the face value of the debt because there is no
maturity date and by difference, the value of the equity instrument was
determined to be nil.
5. COMMON STOCK
(A) AUTHORIZED
Unlimited number of Class "A" common shares without par value.
(B) STOCK OPTION PLANS
The company has two stock option plans. Under the 1996 Stock Incentive
Plan, the Company may grant options to its regular full-time employees and
those of its subsidiaries for up to a maximum of 1,100,000 common shares.
Under the 1996 Stock Option Plan, the Company may grant options to its
regular full-time employees directors and those of its subsidiaries for up
to a maximum of 900,000 common shares. Under both plans, the exercise price
of each option is not less than the market price of the Company's shares on
the day prior to the date of grant. Options vest rateably over a five year
period and the option's maximum term is 10 years.
18
<Page>
SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
5. COMMON STOCK (CONTINUED)
Activity in the stock option plans for the three months period ended
October 31, 2007 and fiscal 2007 was as follows:
THREE MONTHS ENDED
OCTOBER 31, 2007 JULY 31, 2007
------------------ ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE
(000) PRICE (000) PRICE
---------------------------------------
# $US # $US
Outstanding, beginning of period 1,169 1.52 1,041 1.59
Granted -- -- 288 1.00
Exercised -- -- -- --
Forfeited 232 1.17 160 1.00
----- ---- ----- ----
Outstanding, end of period 937 1.61 1,169 1.52
===== ==== ===== ====
Options exercisable
at end of period 622 1.89 728 1.79
===== ==== ===== ====
The following table summarizes the outstanding options held by directors,
officers, and employees as of October 31, 2007:
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------ -------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGES OF EXERCISE OPTIONS LIFE EXERCISE OPTIONS EXERCISE
PRICES ($US) (000) (YEARS) PRICE (000) PRICE
---------------------------------------------------
# $US # $US
< 1.00 160 8.72 0.69 160 0.69
1.00 to 1.99 621 17.11 1.02 309 1.04
3.00 to 3.99 20 8.72 3.37 20 3.37
4.00 to 4.99 30 10.24 4.63 30 4.63
5.00 to 5.99 96 14.19 5.08 93 5.08
6.00 to 6.99 10 11.81 6.28 10 6.28
------------------------------ ------------------
937 14.92 1.61 622 1.89
============================== ==================
</Table>
19
<Page>
SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
6. INCOME TAXES
There was no income tax accrued during the three-month period ended October
31, 2007.
7. COMMITMENTS
The Corporation is committed under operating leases for a total amount of
approximately $1,090,005. The minimum payments due in each of the
forthcoming years are as follows:
$
2008 407,498
2009 275,317
2010 244,314
2011 162,876
8. SEGMENTED INFORMATION
The Corporation is considered to have only one business segment.
The Corporation has two geographic reportable segments. Both the North
American and European segments market the SAND/DNA and the SAND/DNA
Analytics. The accounting policies of the segments are the same as
described in the summary of significant accounting policies. The Company
evaluates segment performance based on earnings before income taxes. Sales
for each segment are based on the location of the third party customer. All
intercompany transactions between segments have been eliminated.
As at and for the three months ended October 31,
----------------------------------------------------------------
NORTH AMERICA EUROPE
----------------------------------------------------------------
2007
Net sales 709,669 1,075,256
(Loss) before income taxes (1,076,836) 771,916
Identifiable assets 1,272,613 972,441
----------------------------------------------------------------
2006
Net sales 590,772 879,635
(Loss) earnings before income taxes (882,585) 46,054
Identifiable assets 1,229,839 1,022,470
----------------------------------------------------------------
20
<Page>
SAND TECHNOLOGY INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
(UNAUDITED)
9. FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
As at October 31, 2007, the estimated fair market value of cash and cash
equivalents, accounts receivable, loan and accounts payable and accrued
liabilities is equal to the book value, given the short-term nature of
these items.
CREDIT RISK
The Corporation's exposure to credit risk as of October 31, 2007, is equal
to the carrying amount of its financial assets.
CONCENTRATION OF CREDIT RISK
Credit risk concentration with respect to trade receivables is limited due
to the relatively large size of the Corporation's customers.
CURRENCY RISK
The Corporation operates internationally and is exposed to market risk
principally from changes in foreign currency rates. The Corporation does
not hold any financial instruments that mitigate this risk.
10. CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS
THREE MONTHS THREE MONTHS
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
----------------------------------------------------------------------
$ $
Accounts receivable (111,579) 468,880
Prepaid expenses (63,160) (25,073)
Deferred revenue 26,757 (208,818)
Accounts payable and accrued liabilities (68,635) (140,128)
----------------------------------------------------------------------
Changes in non-cash operating working
capital items (216,617) 94,861
======================================================================
11. COMPARATIVE FIGURES
Certain figures for the prior period have been reclassified in order to
conform to the presentation adopted in the current period.
21
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 6-K to be signed on its behalf by
the undersigned, thereunto duly authorized.
SAND TECHNOLOGY INC.
January 30, 2008 /s/ Arthur G. Ritchie
----------------------------------------
Arthur G. Ritchie
Chairman of the Board, President
and Chief Executive Officer
22