<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the Month Ended April 30th, 2009 Commission File Number 0-14884
SAND TECHNOLOGY INC.
(Translation of registrant's name in English)
215 REDFERN, SUITE 410
WESTMOUNT, QUEBEC, CANADA H3Z 3L5
(Address of principal executive offices)
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 if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): / /
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): / /
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant 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 .
<Page>
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).
2
<Page>
[SAND(TM) TECHNOLOGY LOGO]
MEDIA NORTH AMERICA, GERMAN/CENTRAL INVESTOR RELATIONS
Linda Arens UK/ WESTERN EUROPEAN PRESS de Jong & Associates
SAND Technology EUROPEAN PRESS Richard T. Lane sndt@dejong.org
pr@sand.com Linda Arens IMC International +1 760 943-9065
+1 650 726-7539 SAND Technology Marketing
+1 650 726-7539 Communications
lane@imc-pr.de
+49 61 31 / 89 13 89
SAND TECHNOLOGY ANNOUNCES SECOND QUARTER RESULTS FOR FISCAL 2009
MONTREAL, APRIL 1, 2009: SAND Technology Inc. (OTCBB:SNDTF), an international
provider of data management software and best practices, today reported a loss
for the three-month period ended January 31, 2009. The Company reported a net
loss for the second quarter of fiscal year 2009 of $127,415 on revenues of
$1,747,384 compared with a net loss of $491,343 on revenues of $1,419,521 for
the second quarter of fiscal year 2008. All figures are in Canadian dollars.
"Our second quarter has shown an improvement compared to our first quarter this
year as well as over the second quarter of last year," notes Arthur Ritchie,
President and Chief Executive Officer of SAND. "While we see the positive impact
of closing some of the orders that were delayed, we still remain challenged by
customers who have adopted a more cautious attitude to spending by decreasing
and/or delaying the placing of orders and conserving their cash. However, we
believe that the value of SAND/DNA products as an enabling technology that
increases efficiency and saves costs will remain intact over the long-term.
These strengths may prove to be real opportunities in a time when budgets are
being cut. Despite the macro factors affecting our business, we continue to make
positive strides in attracting new business directly from customers and
indirectly through our systems integrators and application vendors."
About SAND Technology
SAND Technology provides Data Management Software and Best Practices for
storing, accessing, and analyzing large amounts of data on-demand while lowering
TCO, leveraging existing infrastructure and improving operational performance.
SAND/DNA solutions include CRM analytics, and specialized applications for
government, healthcare, financial services, telecommunications, retail,
transportation, and other business sectors. SAND/DNA has achieved "Certified for
SAP NetWeaver" status and SAND Nearline Integration Controller has achieved
"Powered by SAP NetWeaver" status.
SAND Technology has offices in the United States, Canada, the United Kingdom and
Central Europe.
- --------------------------------------------------------------------------------
SAND Technology, Nucleus, N-Vector, and MPSO are registered trademarks, and
SAND/DNA, SAND/DNA Access, SAND/DNA Analytics, SAND/DNA aCRM, SAND Analytic
Server, SAND Searchable Archive, SAND Extensible Warehouse, and all related
SAND-, SAND/DNA, and Nucleus-based marks and designs, are trademarks of SAND
Technology Inc. Other trademarks remain the property of their respective owners.
<Page>
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 and the Private Securities
Litigation Reform Act of 1995 and following the Quebec Securities Act. 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 (filed on EDGAR at www.sec.gov) and the
Canadian securities authorities (filed on SEDAR at www.sedar.com). You are
cautioned not to place undue reliance on forward-looking statements, which speak
only as of the date made. Except as required by applicable laws, 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.
4
<Page>
FINANCIAL HIGHLIGHTS
The following data expressed in Canadian dollars are derived from the Financial
Statements for the three month period ended January 31, 2009, and 2008. The
information set forth below is not necessarily indicative of the results of
future operations and should be read in conjunction with, and is qualified in
its entirety by, the Financial Statements. All amounts are in Canadian dollars
in thousands (000's) except for Per Share Data.
<Table>
<Caption>
THREE MONTHS THREE MONTHS
ENDED JANUARY ENDED JANUARY
RESULTS OF OPERATIONS 31, 2009 31, 2008
- -------------------------------------------------------------------------------------------------------------
Net Sales $ 1,747 $ 1,420
--------------------------------
Cost of Sales and Product Support $ 406 $ 387
Research and Development Costs $ 504 $ 498
Selling, General and Administrative Expenses $ 912 $ 926
Amortization $ 16 $ 47
--------------------------------
Operating Income (Loss) $ (91) $ (438)
Other Income (Expenses) $ (36) $ (53)
================================
Net Income (Loss) $ (127) $ (491)
<Caption>
JANUARY 31, JULY 31,
FINANCIAL POSITION AS AT 2009 2008
- -------------------------------------------------------------------------------------------------------------
Working Capital (a) $ (859) $ 85
Total Assets $ 2,205 $ 2,803
Total Liabilities $ 4,546 $ 4,063
Shareholders' Equity (Deficiency) $ (2,340) $ (1,260)
Earnings (Loss) per Share $ (0.01) $ (0.02)
Weighted Average Number of Shares outstanding during each period (000's) 14,318 14,318
</Table>
(a) Working capital has been calculated by netting current assets and current
liabilities, excluding deferred revenue and deferred credits which are
non-cash items.
5
<Page>
[SAND(TM) TECHNOLOGY LOGO]
SAND Technology Inc.
Management's Discussion & Analysis
Quarterly Report
Second Quarter Ended January 31, 2009
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
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THIS MANAGEMENT'S DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
ATTACHED JANUARY 31, 2009 UNAUDITED CONSOLIDATED BALANCE SHEET, CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME AND DEFICIT, CONSOLIDATED
STATEMENT OF CASH FLOWS AND RELATED NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS. READERS SHOULD REFER TO SAND TECHNOLOGY INC'S (SAND) 2008
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ON PAGES 4 TO 40 OF SAND'S 2008 ANNUAL REPORT.
CERTAIN STATEMENTS CONTAINED IN THIS DISCUSSION ARE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE UNITED STATES SECURITIES ACT OF 1933, OF THE UNITED
STATES SECURITIES EXCHANGE ACT OF 1934 AND THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 AND FOLLOWING THE QUEBEC SECURITIES ACT. 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
MARCH 25, 2009. FOR A MORE DETAILED DISCUSSION OF THESE RISKS AND UNCERTAINTIES
AND OTHER BUSINESS RISKS, SEE "RISK FACTORS THAT MAY AFFECT FUTURE RESULTS"
BELOW AND THE CORPORATION'S REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION
(FILED ON EDGAR AT www.sec.gov) AND THE CANADIAN SECURITIES AUTHORITIES (FILED
ON SEDAR AT www.sedar.com). READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. EXCEPT
AS REQUIRED BY APPLICABLE LAWS, 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.
ALL FIGURES GIVEN IN THIS DISCUSSION 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).
7
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
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A. PROFILE & STRATEGY
CORPORATION PROFILE AND OVERALL PERFORMANCE
CORPORATION OVERVIEW
SAND Technology provides Data Management Software and Best Practices for
storing, accessing, and analyzing large amounts of data on-demand while lowering
TCO, leveraging existing infrastructure and improving operational performance.
SAND/DNA solutions include CRM analytics, and specialized applications for
government, healthcare, financial services, telecommunications, retail,
transportation, and other business sectors. SAND/DNA has achieved "Certified for
SAP NetWeaver" status and SAND Nearline Integration Controller has achieved
"Powered by SAP NetWeaver" status.
SAND Technology has offices in the United States, Canada, the United Kingdom
and Central Europe.
OVERALL PERFORMANCE
The worsening of the global financial crisis has significantly impacted our
business. Unfortunately, our sales for the six month period ended January 31,
2009, were weaker-than-expected as customers restrict their ordering patterns to
place orders only to satisfy short term demand. Given that a portion of our
revenues are from maintenance services and our increasing focus on providing
professional services, we are partly insulated from the reduction in sales of
software licenses.
a) FINANCIAL CONDITION
During the three-month period ended January 31, 2009, the financial
condition of the Corporation weakened given its cash position at the end of
fiscal 2008. Total assets decreased by 21% from $2,803,032 as at July 31,
2008 to $2,205,354 as at January 31, 2009, mostly due to the decrease in
the cash balance and the accounts receivable balance. There was a reduction
in capital assets due to amortization of those assets. Total liabilities
increased by 12% from $4,063,491 as at July 31, 2008 to $4,545,663 as at
January 31, 2009, mostly due to the increase in the loan by a shareholder.
The additional financing obtained, through the shareholder, was expected in
order to fund operations.
b) RESULTS OF OPERATIONS
Our net loss in the second quarter of fiscal 2009 was $127,415, compared to
our net loss in the second quarter in fiscal 2008 of $491,343. There was a
decrease in our net loss of 74%. Overall the positive impact is due to an
increase in revenue of 23%. We achieved revenue of $1,747,384 in the second
quarter of fiscal 2009, compared to $1,419,521 in the second quarter of
fiscal 2008. SAND sold its solutions to two new customers, additional
solutions to two existing customers and additional consulting to customers
in the second quarter of fiscal 2009. In the second quarter of fiscal 2008,
SAND sold its solutions to one
8
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
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new customer only. Although, the global financial crisis and worsening
economic outlook caused customers to reduce their budgets and hence reduce
or delay orders and conserve cash, some of these delayed orders were
finally executed in the second quarter of fiscal 2009. In North America,
there was an increase in revenue of 55% and in Europe there was an increase
in revenue of 4%.
c) CASH FLOWS
For the three-month period ended January 31, 2009 the use of cash for
operations was $619,788, compared to the three-month period ended January
31, 2008 the use of cash for operations was $192,885. There was an increase
in the use of cash for operations of 221% mainly due to the smaller
increase in accounts payable and accrued liabilities as SAND paid more of
its payables during the current quarter versus the larger increase as SAND
paid less of its payables in the same quarter last year. The increase is
also due to the increase in accounts receivable, as there were more
billings during the current quarter versus collections and fewer billings
in the same quarter last year. For the three-month period ended January 31,
2009 the use of cash for investing was nil, compared to the three-month
period ended January 31, 2008 the use of cash for investing was $3,520.
There was a decrease in the use of cash for investing of 100% as there were
no capital purchases during the quarter. For the three month-period ended
January 31, 2009 the source of cash from financing was $367,775, compared
to the three-month period ended January 31, 2008 the source of cash from
financing was $166,101. There was an increase in the cash flows from
financing of 121% as the shareholder loaned more to the Corporation for the
three-month period ended January 31, 2009 than in the same period last
quarter.
STRATEGY AND MARKETS
VISION AND STRATEGY
Since July 31, 2008, there were no significant changes to our Vision and
Strategy. Please refer to our 2008 Annual Report for more details.
DEVELOPMENTS FOR THE THREE-MONTH PERIOD ENDED JANUARY 31, 2009
Since July 31, 2008, there were no significant developments made to our
products.
9
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
B. KEY RESOURCES
CASH AND FINANCING
LIQUIDITY AND CAPITAL RESOURCES
The Corporation used $619,788 to finance operating activities during the
three-month period ended January 31, 2009, including $87,243 in operating losses
and an increase in $532,545 in non-cash operating working capital. This result
compares with the cash used in the same quarter last year of $192,885 to finance
operating activities including $451,988 in operating losses and a decrease in
$259,103 in non-cash operating working capital. Higher accounts receivable,
lower accounts payable and lower deferred revenue accounted for the changes in
the non-cash working capital.
Accounts receivable was $1,437,367 as at January 31, 2009 compared to $1,573,867
as at July 31, 2008. The decrease of 9% is mainly due to the reduction in
revenue during the six-month period ended January 31, 2009 and amounts collected
from balances owing to SAND as at July 31, 2008.
Prepaid expenses were $139,514 as at January 31, 2009 compared to $86,224 as at
July 31, 2008. The increase of 62% is mainly due to the upfront payment for
insurance for the fiscal year 2009.
Accounts payable and accrued liabilities were $1,192,285 as at January 31, 2009
compared to $1,327,575 at July 31, 2008. The decrease of 10% is mainly due to
the payment of invoices.
At January 31, 2009, there was a working capital deficit of $858,813 compared to
a positive working capital of $85,442 as at July 31, 2008. Working capital has
been calculated by netting current assets and current liabilities, excluding
deferred revenue and deferred credits which are non-cash items. The decrease in
working capital is mainly due to the decrease in cash, decrease in accounts
receivable, decrease in accounts payable and accrued liabilities and increase in
the loan payable to shareholders.
During the three-month period ended January 31, 2009, the President and Chief
Executive Officer of the Corporation advanced an additional $307,586 to the
Corporation.
Capital expenditures for the three-month period ended January 31, 2009 were nil,
compared to $3,520 for the same quarter last year. The Corporation does not
anticipate any significant further capital expenditures for the remaining fiscal
year.
10
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
The following table provides a summary of the contractual commitments for the
next five years (there are no contractual commitments after 2011).
<Table>
<Caption>
$
-----------
2009 283,260
2010 244,314
2011 162,876
-----------
690,450
===========
</Table>
11
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
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Our cash as at January 31, 2009 was $308,122 compared to our cash and
investments at the same quarter last year of $62,643. The increase is mainly due
to issue of convertible debentures for cash proceeds of $1,009,819 in April 2008
which impacted the opening cash balance for the fiscal year 2009 as well as the
increase in shareholder loans. Going forward, the cash required to sustain the
business operations will have to come from revenue growth and future financing.
The cost structure will remain stable as SAND has basically reached its optimal
level with respect to headcount and its related expenses. Given the current
global financial crisis it will be very difficult to raise additional funds
through private placements or the market except through an increase in loans
from a major shareholder. Another impact of the current global financial
situation is that customers are reducing their internal budgets to spend in
order to conserve the cash and if they do, they will want longer payment terms.
The Corporation believes that its current cash may not be sufficient to meet its
anticipated cash needs for ongoing operating expenses and working capital
expenditures. If cash generated from operations becomes insufficient to satisfy
its liquidity requirements, the Corporation may seek to sell additional equity
or debt securities. If additional funds are raised through the issuance of debt
securities, holders of these securities could have certain rights, preferences
and privileges senior to holders of its common shares and the terms of this debt
could restrict the Corporation's operations. The sale of additional equity or
convertible debt securities could result in additional dilution to the
Corporation's existing shareholders. The Corporation cannot be certain that
additional financing will be available in amounts or on terms acceptable to it,
if at all. If the Corporation is unable to obtain additional financing, it may
be required to reduce the scope of its operations, which could harm its
business, financial condition and operating results.
TRANSACTIONS WITH RELATED PARTIES
There are three types of loans that are due to a major shareholder who is also
the President and the Chief Executive Officer.
i. During the fiscal year 2009, the Corporation obtained an additional
loan from a significant shareholder who is also the President and
Chief Executive Officer. Under the loan agreement, maximum of
$250,000 of funds is available. An amount of $250,000 was used and
is repayable within 30 days of the receipt of a written demand from
the shareholder. The loan bears interest at 15% and is payable on
the last business day of each calendar month.
ii. During the fiscal year 2008, the Corporation obtained an additional
loan from a significant shareholder who is also the President and
Chief Executive Officer. Under the loan agreement, the maximum of
$400,000 of funds is available. As at January 31, 2009, an amount of
$90,228 was outstanding and is repayable within 30 days of the
receipt of a written demand from the shareholder. The loan bears
interest at 15% and is payable on the last business day of each
calendar month.
12
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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iii. Based on another agreement formalized in 2007, during the six month
period ended January 31, 2009, the Corporation obtained an
additional loan of $240,943 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%. The loan originated
from amounts owed by the Company to the shareholder by virtue of his
employment contracts.
iv. In conjunction with the ratification of the loan agreement
formalized in 2007, 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.
The proceeds from the loan are being used to cover general expenses incurred by
SAND.
OUTSTANDING SHARE DATA
Since July 31, 2008, there have been no significant changes to the Corporation's
outstanding shares. Please refer to the 2008 Annual Report for more details.
13
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MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
C. PERFORMANCE ANALYSIS
RESULTS OF OPERATIONS
I. REVENUE - TOTAL AND VARIATION
The following table provides a summary of the revenue growth for the three-month
periods ended January 31, 2009 and 2008,
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------
Revenue - Total and Variation Q2-09 Q2-08
- ---------------------------------------------------------------------------------------------
Revenue
Revenue $ 1,747,384 $ 1,419,521
Variation year-over-year increase (decrease) in revenue 23% (24)%
- ---------------------------------------------------------------------------------------------
</Table>
Our sales in the second quarter of fiscal 2009 were $1,747,384, an increase of
23% from sales of $1,419,521 in second quarter of fiscal 2008. The increase is
mainly due to the sale of SAND solutions to two new customers, additional sale
of solutions to two existing customers and additional sale of consulting
services to customers in the second quarter of fiscal 2009. Although, the global
financial crisis and worsening economic outlook caused customers to reduce their
budgets and hence reduce or delay orders and conserve cash, some of these
delayed orders were finally executed in the second quarter of fiscal 2009.
II. REVENUE - SEGMENT AND VARIATION
The Corporation has two geographical segments. Both North American and European
segments market SAND/DNA Product Suite. The following table provides a summary
of the revenue growth by geographical segments for the three-month periods ended
January 31, 2009 and 2008,
<Table>
<Caption>
--------------------------------------------------------
North America Europe
- ---------------------------------------------------------------------------------------------------------------------
Revenue - Segment and Variation Q2-09 Q2-08 Q2-09 Q2-08
- ---------------------------------------------------------------------------------------------------------------------
Revenue
Revenue $ 823,240 $ 530,646 $ 924,144 $ 888,875
Variation year-over-year increase (decrease) in revenue 55% 57% 4% (42)%
- ---------------------------------------------------------------------------------------------------------------------
</Table>
a) NORTH AMERICA
Our sales in North America were $823,240 in the second quarter of fiscal 2009,
an increase of 55% from sales of $530,646 in the second quarter of fiscal 2008.
The increase is due to the sales of SAND solutions to two new customers and
additional sale of consulting services to customers. Although the global
financial crisis and worsening economic outlook that caused customers to reduce
their budgets and hence reduce or delay orders and conserve cash, some of these
delayed orders were finally executed in the second quarter of fiscal 2009.
14
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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b) EUROPE
In Europe, sales were $924,144 in the second quarter of fiscal 2009, an increase
of 4% from sales of $888,875 in the second quarter of fiscal 2008. The increase
is due to the higher value of sales to existing customers. Although the global
financial crisis and worsening economic outlook that caused customers to reduce
their budgets and hence reduce or delay orders and conserve cash, some of these
delayed orders were finally executed in the second quarter of fiscal 2009.
III. OPERATING EXPENSES
The following table provides a summary of the operating expenses for the
three-month periods ended January 31, 2009 and 2008,
<Table>
<Caption>
----------------------------------------------------------
As a % of As a % of
Q2-09 Q2-08
Q2-09 Q2-08 revenue revenue
- ----------------------------------------------------------------------------------------------------------------------
Cost of sales and product support 405,632 387,191 23% 27%
Variation year-over-year increase (decrease) in cost of
sales and product support 5% (17)%
- ----------------------------------------------------------------------------------------------------------------------
Research and development, net 504,653 498,179 29% 35%
Variation year-over-year increase (decrease) in research
and development 1% (15)%
- ----------------------------------------------------------------------------------------------------------------------
Amortization of capital assets and other assets 15,937 46,689 1% 3%
- ----------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 912,393 926,242 52% 65%
Variation year-over-year increase (decrease) in selling,
general and administrative expenses (1)% (26)%
- ----------------------------------------------------------------------------------------------------------------------
</Table>
a) COST OF SALES AND PRODUCT SUPPORT
Cost of sales and product support consists mainly of costs related to providing
support services and the costs related to the sale of third-party software,
including certain license fees and royalties.
Our cost of sales was $405,632 in the second quarter of fiscal 2009, an increase
of 5% from cost of sales of $387,191 in the second quarter of fiscal 2008. The
increase is due to the increase in travel and related expenses and commissions
earned resulting from the increased sales activity.
b) RESEARCH AND DEVELOPMENT
Research and development expenses consist mainly 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.
15
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MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Our research and development expenses were $504,653 in the second quarter of
fiscal 2009, an increase of 1% from $498,179 in the second quarter of fiscal
2008. The stability of the expenses is a reflection of the maturity of SAND/DNA
Analytics and SAND/DNA Access products.
c) AMORTIZATION OF CAPITAL ASSETS AND OTHER ASSETS
Amortization of capital assets and other assets consists of the depreciation of
furniture and equipment, computer equipment and leasehold improvements and
contract costs over their estimated useful lives.
Our amortization was $15,937 in the second quarter of fiscal 2009, a decrease of
66% from amortization of $46,689 in the second quarter of fiscal 2008. The
reduction is due to the full amortization of the other assets by the end of
fiscal 2008.
d) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)
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.
Our SG&A expenses were $912,393 in the second quarter of fiscal 2009, a decrease
of 1% from SG&A expenses of $926,242 in the second quarter of fiscal 2008. The
decrease is mainly due to the reduction in headcount from the second quarter of
fiscal 2008 to fiscal 2009.
IV. NET LOSS - TOTAL AND VARIATION
The following table provides a summary of the net loss for the three-month
periods ended January 31, 2009 and 2008,
<Table>
<Caption>
- -------------------------------------------------------------------------------------------
Net Loss - Total and Variation Q2-09 Q2-08
- -------------------------------------------------------------------------------------------
Net loss
Net loss $ (127,415) $ (491,343)
Variation year-over-year increase (decrease) in net loss (74)% 0%
- -------------------------------------------------------------------------------------------
</Table>
Our net loss was $127,415 in the second quarter of fiscal 2009, a decrease of
74% from net loss of $491,343 in the second quarter of fiscal 2008. The decrease
in net loss is mainly due to the increase in our sales.
16
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
V. NET LOSS - SEGMENT AND VARIATION
The following table provides a summary of net loss by geographical segments for
the three-month periods ended January 31, 2009 and 2008,
<Table>
<Caption>
-----------------------------------------------------------------
North America Europe
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) - Segment and Variation Q2-09 Q2-08 Q2-09 Q2-08
- -----------------------------------------------------------------------------------------------------------------------------
Profitability
Net earnings (loss) $ (133,672) $ (226,188) $ 6,257 $ (265,155)
Variation year-over-year increase (decrease) in net
earnings (loss) (41)% (65)% (102)% (276)%
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
a) NORTH AMERICA
In North America, net loss was $133,672 in the second quarter of fiscal 2009, a
decrease of 41% from net loss of $226,188 in the second quarter of fiscal 2008.
The reduction in net loss is mainly due to the overall increase in sales in
North America.
b) EUROPE
In Europe, net earnings was $6,257 in the second quarter of fiscal 2009, a
decrease of 102% from net loss of $265,155 in the second quarter of fiscal 2008.
The reduction in net loss is mainly due to the reduction in headcount from the
second quarter of fiscal 2008 and a slight increase in sales revenue from
maintenance contracts.
17
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
SUMMARY OF QUARTERLY RESULTS
The following table shows selected consolidated financial data of SAND for the
eight most recently completed quarters. The information has been prepared on the
same basis as the annual consolidated financial statements, but is unaudited.
These operating results are not necessarily indicative of results for any future
period. You should not rely on them to predict our future performance.
<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------
Q2-09 Q1-09 Q4-08 Q3-08 Q2-08 Q1-08 Q4-07 Q3-07
- -----------------------------------------------------------------------------------------------------------------------------------
Revenue
Revenue $ 1,747,384 $ 1,223,928 $ 1,888,042 $ 1,905,984 $ 1,419,521 $ 1,784,925 $ 1,837,068 $ 1,559,407
Quarter-over-
quarter revenue
growth
(reduction) 43% (35)% (1)% 34% (20)% (3)% 18% (16)%
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of sales and
product support $ 405,632 $ 321,388 336,960 333,900 387,191 412,164 $ 368,019 $ 398,322
Gross margin 77% 74% 82% 82% 73% 77% 80% 74%
- -----------------------------------------------------------------------------------------------------------------------------------
Total Research and
development,
amortiztion of
capital assets,
and selling,
general and
administrative
expenses and net
interest income
or expense $ 1,432,983 $ 1,892,390 $ 2,035,210 $ 1,563,643 $ 1,523,673 $ 1,677,681 $ 1,916,506 $ 1,914,525
- -----------------------------------------------------------------------------------------------------------------------------------
Profitability
Net earnings
(loss) $ (127,415) $ (989,850) $ (484,128) $8,441 $ (491,343) $ (304,920) $ (447,457) $ (753,440)
Basic and
diluted
earnings (loss)
per share $ (0.01) $ (0.07) $ (0.03) $0.00 $ (0.03) $ (0.02) $ (0.03) $ (0.06)
Quarter-over-
quarter
decrease
(increase) in
net earnings
(loss) 87% (104)% 5835% 102% (61)% 32% 41% (54)%
Net margin (7)% (81)% (26)% 0% (35)% (17)% (24)% (48)%
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 14,318,189 14,318,189 14,318,189 14,318,189 14,318,189 14,318,189 13,094,288 12,818,189
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
CRITICAL ACCOUNTING POLICIES
The Corporation's significant accounting policies are described in Note 3 to the
July 31, 2008 audited consolidated financial statements.
These interim consolidated financial statements have been prepared using the
same accounting policies and methods of their application as the annual
consolidated financial statements for the year ended July 31, 2008, except for
new accounting policies that have been adopted effective August 1, 2008.
CHANGES IN ACCOUNTING POLICIES
The Canadian Institute of Chartered Accountants ("CICA") issued the following
new Handbook Sections, which were effective for interim periods beginning on or
after August 1, 2008,
FINANCIAL INSTRUMENT - DISCLOSURES
CICA Handbook Section 3862, "FINANCIAL INSTRUMENTS - DISCLOSURES", describes the
required disclosures for the assessment of the significance of financial
instruments for a company's financial position and performance and of the nature
and extent of risk arising from financial instruments to which the company is
exposed and how the company manages those risks. This section and Section 3863,
"FINANCIAL INSTRUMENTS - PRESENTATION" replaced Section 3861 "FINANCIAL
INSTRUMENTS - DISCLOSURE AND PRESENTATION".
18
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENT - PRESENTATION
CICA Handbook Section 3863, "FINANCIAL INSTRUMENTS - PRESENTATION", establishes
standards for the presentation of financial instruments and non-financial
derivatives.
CAPITAL DISCLOSURES
CICA Handbook Section 1535, "CAPITAL DISCLOSURES", establishes standards for
disclosing information about a company's capital and how it is managed. It
describes the disclosure of the company's objectives, policies and processes for
managing capital, the quantitative data about what the company regards as
capital, whether the company has complied with any capital requirements, and, if
it has not complied, the consequences of such non-compliance.
The additional disclosures required as a result of the adoption of these
standards, have been included in Note 11 to the consolidated financial
statements for the quarter ended January 31, 2009.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
Since July 31, 2008, there were no significant changes to the Corporation's use
of financial instruments.
19
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
D. OUTLOOK
The outlook for the future remains relatively uncertain due to the turbulent
worldwide financial crisis and its impact on demand for goods and services.
Looking forward we see that the environment is more challenging than we
previously anticipated and customers have adopted a more cautious attitude to
place orders due to the uncertainty related to the current global economic
situation.
While we are concerned about uncertainties in the macro-economic environment, we
believe that the value of SAND/DNA products as an enabling technology that
increases efficiency and saves costs will remain intact over the long-term.
These strengths may prove to be real opportunities in a time when budgets are
being cut. Despite the macro factors affecting our business, we continue to make
positive strides in attracting new business directly from customers and
indirectly through our systems integrators and application vendors.
We will continue to focus on reducing operating costs rigorously, at the same
time making necessary investments to take advantage of this opportunity and grow
our sales. We will closely continue to monitor our cash needs. The financial
environment does not appear to be conducive to raising additional capital. We do
not plan on spending any significant amounts on capital assets.
E. RISKS
Since July 31, 2008, there have been no significant changes to the risks and
uncertainties that could affect the Corporation's ability to achieve its growth
objectives and raise additional capital. Please refer to the 2008 Annual Report
for more details.
F. CONTROLS AND PROCEDURES
No changes have been made to our internal controls over financial reporting
during the quarter ended January 31, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
20
<Page>
SAND TECHNOLOGY INC.
NOTICE TO READERS OF THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
The unaudited interim consolidated financial statements of SAND Technology Inc.
for the six-month period ended January 31, 2009 have not been reviewed by the
Corporation's external auditors.
[SAND(TM) TECHNOLOGY LOGO]
SAND Technology Inc.
Quarterly Report
Second Quarter Ended January 31, 2009
21
<Page>
SAND TECHNOLOGY INC.
CONSOLIDATED BALANCE SHEETS
(In Canadian dollars, unless otherwise noted)
- --------------------------------------------------------------------------------
<Table>
<Caption>
As at January 31, As at July 31,
2009 2008
------------------------------------
$ $
(unaudited) (audited)
ASSETS
Current assets
Cash 308,122 775,443
Accounts receivable 1,437,367 1,573,867
Unbilled receivable 214,131 245,184
Prepaid expenses 139,514 86,224
- ----------------------------------------------------------------------------------------------------------
2,099,134 2,680,718
Capital assets (Note 4) 106,220 122,314
- ----------------------------------------------------------------------------------------------------------
2,205,354 2,803,032
==========================================================================================================
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 1,192,285 1,327,575
Deferred revenue 1,223,058 1,111,640
Due to a shareholders (Note 5) 1,765,662 1,267,701
- ----------------------------------------------------------------------------------------------------------
4,181,005 3,706,916
Long-term liabilities
Deferred credits 63,564 78,232
Convertible debentures (Note 6) 301,094 278,343
- ----------------------------------------------------------------------------------------------------------
4,545,663 4,063,491
SHAREHOLDERS' DEFICIENCY
Share Capital (Note 7)
Authorized
An unlimited number of class "A" common shares, without par value
Issued
14,318,189 class "A" common shares 38,530,441 38,530,441
Equity component of convertible debentures (Notes 6, 7) 446,027 446,027
Contributed surplus (Note 7b) 789,940 752,525
Deficit (42,106,717) (40,989,452)
- ----------------------------------------------------------------------------------------------------------
(2,340,309) (1,260,459)
- ----------------------------------------------------------------------------------------------------------
2,205,354 2,803,032
==========================================================================================================
</Table>
Basis of presentation (Note 2)
Commitments (Note 8)
- --------------------------------------------------------------------------------
See notes to the interim unaudited consolidated financial statements
22
<Page>
SAND TECHNOLOGY INC.
CONSOLIDATED OPERATIONS, COMPREHENSIVE INCOME AND DEFICIT
(In Canadian dollars, unless otherwise noted)
(unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Three months Three months Six months Six months
ended January ended January ended January ended January
31, 2009 31, 2008 31, 2009 31, 2008
---------------------------------------------------------------------
$ $ $ $
Revenue 1,747,384 1,419,521 2,971,312 3,204,446
---------------------------------------------------------------------
Operating expenses
Cost of sales and product support 405,632 387,191 727,020 799,355
Research and development costs, net 504,653 498,179 1,026,711 1,090,676
Amortization of capital assets and other assets (Note 4) 15,937 46,689 33,388 95,758
Selling, general and administrative expenses 912,393 926,242 2,178,015 1,920,016
---------------------------------------------------------------------
1,838,615 1,858,301 3,965,134 3,905,805
---------------------------------------------------------------------
(Loss) from operations (91,231) (438,780) (993,823) (701,359)
Interest income (expenses)
Amortization of the debt component of the convertible
debentures discount (Note 6) (11,695) - (22,751) -
Interest expense - due to shareholders (46,088) (50,839) (97,625) (92,531)
Interest expense (income) - other 21,599 (1,724) (3,067) (2,373)
---------------------------------------------------------------------
Net (loss) and comprehensive (loss) (127,415) (491,343) (1,117,265) (796,263)
Deficit, beginning of period (41,979,302) (40,022,422) (40,989,452) (39,717,502)
---------------------------------------------------------------------
Deficit, end of period (42,106,717) (40,513,765) (42,106,717) (40,513,765)
---------------------------------------------------------------------
Basic and diluted loss per share (Note 7) (0.01) (0.03) (0.08) (0.05)
=====================================================================
Basic and diluted weighted average number of common shares
outstanding 14,318,189 14,318,189 14,318,189 14,318,189
=====================================================================
</Table>
- --------------------------------------------------------------------------------
See notes to the interim unaudited consolidated financial statements
23
<Page>
SAND TECHNOLOGY INC.
CONSOLIDATED CASH FLOWS
(In Canadian dollars, unless otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Three months Three months Six months Six months
ended January ended January ended January ended January
31, 2009 31, 2008 31, 2009 31, 2008
--------------------------------------------------------------------
$ $ $ $
OPERATING ACTIVITIES
Net loss and comprehensive loss (127,415) (491,343) (1,117,265) (796,263)
Non-cash items
Amortization of capital assets and other assets 15,937 46,689 33,388 95,758
Stock-based compensation 19,874 37,415 -
Amortization of the debt component of the convertible
debentures discount 11,695 22,751 -
Amortization of deferred credits (7,334) (7,334) (14,668) (14,668)
Changes in working capital items
Accounts receivable (633,079) 26,476 136,500 (85,103)
Unbilled receivable 31,053 - 31,053 -
Prepaid expenses 53,555 33,936 (53,290) (29,224)
Accounts payable and accrued liabilities 77,310 144,471 (135,290) 75,836
Deferred revenue (61,384) 54,220 111,418 80,977
- ------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities (a) (619,788) (192,885) (947,988) (672,687)
INVESTING ACTIVITIES
Purchase of capital assets and cash flows from investing
activities - (3,520) (17,294) (3,520)
FINANCING ACTIVITIES
Due to shareholder and cash flows from financing
activities 367,775 166,101 497,961 408,139
- ------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH (252,013) (30,304) (467,321) (268,068)
Cash, beginning of year 560,135 92,947 775,443 330,711
- ------------------------------------------------------------------------------------------------------------------------------
Cash, end of year 308,122 62,643 308,122 62,643
==============================================================================================================================
(a) Additional information
Interest paid 8,030 52,563 10,227 94,904
==============================================================================================================================
</Table>
- --------------------------------------------------------------------------------
See notes to the interim unaudited consolidated financial statements
24
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
SAND Technology Inc. and subsidiaries (the "Corporation") is involved in the
design, development, marketing and support of software products and services
that reduce large amounts of data into a tiny footprint and enable users to
retrieve usable business information from large amounts of data. The software
products, collectively known as the SAND/DNA Product suite, are designed to
provide an efficient and cost effective way for business users to make fast and
easy inquiries of large databases without the intervention of specialist
information technology professionals.
2. BASIS OF PRESENTATION
The financial statements have been prepared in accordance with Canadian
generally accepted accounting principles ("GAAP") 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 debenture
holders, its ability to obtain additional financing and its ability to achieve
revenue growth. The Corporation is executing a business plan to allow it to
continue as a going concern which is to continue to search for additional
sources of debt and equity financing, and achieve profitability through cost
containment and revenue growth. There can be no assurance that the Corporation's
activities will be successful.
While the financial statements have been prepared on the basis of accounting
principles applicable to a going concern, current global economic turbulence and
liquidity crisis cast substantial doubt upon validity of this assumption. If the
going concern assumption was not appropriate for these financial statements,
then adjustments would be necessary in the carrying values of the assets and
liabilities, the reported net losses and the balance sheet classifications used.
3. ACCOUNTING POLICIES
The interim consolidated financial statements for the six months ended January
31, 2009 and 2008 are unaudited, and have been prepared in accordance with
Canadian GAAP applicable to interim consolidated financial statements. These
unaudited interim consolidated financial statements do not include all
disclosures required for annual financial statements and should be read in
conjunction with the Corporation's most recent annual consolidated financial
statements as at and for the year ended July 31, 2008.
25
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
These interim consolidated financial statements have been prepared using the
same accounting policies and methods of their application as the annual
consolidated financial statements for the year ended July 31, 2008, except for
new accounting policies that have been adopted effective August 1, 2008.
CHANGES IN ACCOUNTING POLICIES
The Canadian Institute of Chartered Accountants ("CICA") issued the following
new Handbook Sections, which are effective for the Corporation for interim
periods beginning on or after August 1, 2008,
FINANCIAL INSTRUMENT - DISCLOSURES
CICA Handbook Section 3862, "FINANCIAL INSTRUMENTS - DISCLOSURES", describes the
required disclosures for the assessment of the significance of financial
instruments for a company's financial position and performance and of the nature
and extent of risk arising from financial instruments to which the company is
exposed and how the company manages those risks. This section and Section 3863,
"FINANCIAL INSTRUMENTS - PRESENTATION" replaced Section 3861 "FINANCIAL
INSTRUMENTS - DISCLOSURE AND PRESENTATION".
FINANCIAL INSTRUMENT - PRESENTATION
CICA Handbook Section 3863, "FINANCIAL INSTRUMENTS - PRESENTATION", establishes
standards for the presentation of financial instruments and non-financial
derivatives.
CAPITAL DISCLOSURES
CICA Handbook Section 1535, "CAPITAL DISCLOSURES", establishes standards for
disclosing information about a company's capital and how it is managed. It
describes the disclosure of the company's objectives, policies and processes for
managing capital, the quantitative data about what the company regards as
capital, whether the company has complied with any capital requirements, and, if
it has not complied, the consequences of such non-compliance.
The additional disclosures required as a result of the adoption of these
standards, have been included in Note 11 Financial and Capital Management.
26
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
4. CAPITAL ASSETS
<Table>
<Caption>
January 31, 2009 July 31, 2008
--------------------------------------------------------------------
Accumulated
Cost amortization Net Book Value Net Book Value
--------------------------------------------------------------------
$ $ $
Furniture and equipment 322,463 321,974 489 1,881
Computer equipment 660,560 615,539 45,021 45,008
Leasehold improvements 287,610 226,900 60,710 75,425
- ------------------------------------------------------------------------------------------------------------------------------
1,270,633 1,164,413 106,220 122,314
==============================================================================================================================
</Table>
27
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
5. DUE TO SHAREHOLDER
During the fiscal year 2009, the Corporation obtained an additional loan from a
significant shareholder who is also the President and Chief Executive Officer.
Under the loan agreement, maximum of $250,000 of funds is available. An amount
of $250,000 was used and is repayable within 30 days of the receipt of a written
demand from the shareholder. The loan bears interest at 15% and is payable on
the last business day of each calendar month.
During the fiscal year 2008, the Corporation obtained an additional loan from a
significant shareholder who is also the President and Chief Executive Officer.
Under the loan agreement, maximum of $400,000 of funds is available. As at
January 31, 2009 an amount of $90,228 is outstanding and is repayable within 30
days of the receipt of a written demand from the shareholder. The loan bears
interest at 15% and is payable on the last business day of each calendar month.
Based on another agreement formalized in 2007, during the six months ended
January 31, 2009, the Corporation obtained an additional loan of $240,943 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%. The loan originated from amounts
owed by the Corporation to the shareholder by virtue of his employment contract.
In conjunction with the ratification of the loan agreement formalized in 2007,
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.
During the fiscal year 2008, an inter-creditor priority agreement was signed
when the Corporation issued the secured convertible debentures described in Note
6. The parties agreed that the sums owing under the debentures will be paid by
the Corporation to debenture holders and the trustee in priority to the sums
owing by the Corporation to the principal shareholder subject to the fact that
for each C$2 paid to the debenture holders, the Corporation shall remit C$1 to
the principal shareholder as repayment for the sums representing the principal
amount only.
28
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
6. CONVERTIBLE DEBENTURES
On April 18th 2008, the Corporation issued secured convertible debentures
("Convertible Debentures") on a private placement basis and received proceeds of
$1,009,819 (US$1,002,600) for a total of 1,114 units. Each unit consists of one
8% Secured Convertible Debenture due December 31st, 2017, redeemable and
convertible at the option of the Corporation if the bid price of the stock has
been above US$1.50 for sixty consecutive trading days and convertible at the
option of the holder into class "A" common shares at US$0.45 per share, and one
thousand share purchase warrants of the Corporation. Each warrant entitles its
holder to purchase one additional common share (warrant share) of the
Corporation at a price of US$0.70 per warrant share at any time until the
earlier of the close of business on the day which is thirty-six months from
April 18th 2008 or the sixtieth consecutive trading day in which the bid price
of the common shares has been above US$1.50. Interest is calculated at the rate
of 8% per annum, payable in kind, i.e. in common shares at a rate of $0.45 per
share. The interest is due on each Conversion Date (date when that principal
amount is being converted) subsequent to January 1st, 2009, and on the Maturity
Date. The financing is secured by a first rank hypothec on all of the
Corporation's property and assets, movable and immovable, corporeal and
incorporeal, present and future, of ever kind and nature for the principal
amount and accrued interest. The proceeds from the private placement are being
used to increase marketing and advertising capital needs and expansion.
For accounting purposes, the debenture contains both a liability component and
an equity component being the share warrants, conversion option and the interest
payable in shares, which has been separately presented in the consolidated
balance sheet.
The liability component of the Convertible Debentures is calculated using
the present value of the expected future cash flows of principal and
interest payments using a discount rate of 15%, which in management's
opinion, approximates an interest rate applicable to non-convertible
secured debt. The amount calculated, at the issue date, for the carrying
amount of the debt component is $260,377. The carrying value of the
debentures will be accreted to their face value over their life to maturity
(December 31, 2017). The accretion expense will be included in interest
expense in the consolidated statement of operations. The debt issuance
costs have been recorded directly against net income. The interest expense
accrued for the debt component for the three months ended January 31, 2009
is $11,695 and for the six months ended January 31, 2009 is $22,751 and has
been included as part of interest expenses on the consolidated statement of
operations and comprehensive loss statement.
29
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
6. CONVERTIBLE DEBENTURES (CONTINUED)
The carrying amount of the equity component, at the issued date, was valued
at $749,442, determined by deducting the carrying amount of the liability
component from the gross proceeds received on the compounded instrument.
The value of the equity contains the fair value of the share warrants,
conversion option and interest payable in shares. The fair value of the
warrants was estimated at $303,415. This amount was recorded to contributed
surplus. The fair value of the warrants at the time the convertible
debentures were issued were estimated using the Black-Scholes option
pricing model with the following assumptions:
<Table>
Dividend yield -
Expected volatility 90%
Risk-free interest rate 3.25%
Expected life 3 years
</Table>
The remaining balance represents the fair value of the conversion option and
interest payable in shares in the amount of $446,027. This amount was
recorded as equity component of the convertible debentures.
30
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
7. SHARE CAPITAL
a) AUTHORIZED
Unlimited number of Class "A" common shares without par value.
b) WARRANTS
The following table summarizes information about the Corporation's share
warrants described in Notes 5 and 6:
<Table>
<Caption>
Six months ended January 31, 2009
-------------------------------------------
Weighted Weighted
average average
Number of remaining life exercise
warrants (years) price
-------------------------------------------
US$
Outstanding and exercisable, beginning and end of period 1,967,061 1.8 0.65
============
<Caption>
July 31, 2008
-------------------------------------------
Weighted Weighted
average average
Number of remaining life exercise
warrants (years) price
-------------------------------------------
US$
Outstanding, beginning of year 853,061 2.8 0.58
Granted 1,114,000 2.7 0.70
------------
Granted, outstanding and exercisable, end of year 1,967,061 2.3 0.65
============
</Table>
31
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
7. SHARE CAPITAL (CONTINUED)
c) SHARE AWARD PLAN
For the three months ended January 31, 2009, an amount of $15,006 was recorded
as share based compensation expense and for the six months ended January 31,
2009, an amount of $27,584 was recorded as share based compensation expense. The
share based compensation expense is included in selling, general and
administrative expenses. The following table presents the assumptions used to
determine the fair value of the share awards granted during 2008, using the
Black-Scholes option-pricing model,
<Table>
Dividend yield -
Expected volatility (a) 90%
Risk-free interest rate (a) 4.0%
Expected life (a) 3 years
Vesting period 3 years
Number of common shares granted but not yet issued 407,500
</Table>
(a) Weighted average assumption
d) STOCK OPTION PLANS
The Corporation has two stock option plans. The following table summarizes
information about the Corporation's stock options:
<Table>
<Caption>
January 31, July 31,
2009 2008
---------------------------- ----------------------------
Weighted Weighted
Number of average Number of average
options exercise price options exercise price
- ---------------------------------- ---------------------------- ----------------------------
(000s) $US (000s) $US
Outstanding, beginning of period 556 1.03 1,169 1.52
Forfeited - (577) 1.92
Expired - (36) 1.92
----------- ----------
Outstanding, end of period 556 1.03 556 1.03
=========== ==========
Options exercisable, end of period 407 1.05 359 1.05
=========== ==========
</Table>
32
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
7. SHARE CAPITAL (CONTINUED)
The following table summarizes significant ranges of exercise prices of
outstanding options held by directors, officers and employees as at January 31,
2009:
<Table>
<Caption>
Options outstanding Options exercisable
----------------------------------------------- ------------------------------
Weighted
average Weighted Weighted
Number of remaining life average Number of average
Range of exercise prices Options (years) exercise price options exercise price
- ------------------------------------- ----------------------------------------------- ------------------------------
(000s) (US$) (000s) (US$)
Less than US$1.00 160 7.47 0.69 160 0.69
US$1.00 to US$1.49 380 6.33 1.00 231 1.00
US$3.00 to US$3.99 5 8.90 4.00 5 4.00
US$5.00 to US$5.99 5 1.67 5.00 5 5.00
US$6.00 to US$6.99 6 0.27 6.46 6 6.46
----------------------------------------------- ------------------------------
556 6.57 1.03 407 1.05
=============================================== ==============================
</Table>
For the three months ended January 31, 2009, an amount of $4,867 was recorded as
stock-based compensation expense and for the six months ended January 31, 2009,
an amount of $9,831 was recorded as stock-based compensation expense. The
stock-based compensation expense is included in selling, general and
administrative expenses. The following table presents the assumptions used to
determine the stock-based compensation expense using the Black-Scholes
option-pricing model,
<Table>
<Caption>
2007 2006
-----------------------------
Dividend yield - -
Expected volatility (a) 90% 90%
Risk-free interest rate (a) 4.0% 3.5%
Expected life (a) 7 years 7 years
Number of options granted 287,500 133,000
</Table>
(a) Weighted average assumption
e) LOSS PER SHARE
Shares from the Share Award Plan, options and warrants described in Notes 5, 6
and 7 were not included in the diluted loss per share calculation because the
Corporation incurred a loss, and inclusion would have created an anti-dilutive
effect.
33
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
8. COMMITMENTS
The Corporation is committed under operating leases through 2011 for the rental
of buildings for a total amount of $690,450. The minimum payments due in each of
the forthcoming years are as follows:
<Table>
<Caption>
$
-----------
2009 283,260
2010 244,314
2011 162,876
-----------
690,450
===========
</Table>
9. SEGMENTED INFORMATION
The Corporation is considered to have only one reportable business segment in
two geographic areas. Both North America and Europe market the SAND/DNA Product
suite. The accounting policies of the geographic areas are the same as described
in the summary of accounting policies. The Corporation evaluates their
performance based on income before income taxes. Sales for each area are based
on the location of the third party customer. All intercompany transactions
between geographic areas have been eliminated.
<Table>
<Caption>
North America Europe Total
-----------------------------------------------
$ $ $
2009
Revenue 823,240 924,144 1,747,384
Loss before income taxes (133,672) 6,257 (127,415)
Identifiable assets 1,251,077 954,277 2,205,354
2008
Revenue 530,646 888,875 1,419,521
Loss before income taxes (226,188) (265,155) (491,343)
Identifiable assets 1,112,731 998,438 2,111,169
</Table>
As at and for the six months ended January 31,
<Table>
<Caption>
North America Europe Total
-----------------------------------------------
$ $ $
2009
Revenue 1,251,392 1,719,920 2,971,312
Loss before income taxes (1,022,421) (94,844) (1,117,265)
Identifiable assets 1,251,077 954,277 2,205,354
2008
Revenue 1,240,315 1,964,131 3,204,446
Loss before income taxes (1,303,024) 506,761 (796,263)
Identifiable assets 1,112,731 998,438 2,111,169
</Table>
34
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
10. INCOME TAXES
There was no income tax accrued during the six month period ended January 31,
2009.
11. FINANCIAL AND CAPITAL MANAGEMENT
FINANCIAL MANAGEMENT
Management's objective is to minimize the risk exposure to the Corporation
against various financial risks which include credit risk, currency risk and
liquidity risk. The Corporation does not use derivative financial instruments to
minimize such risk.
a) INTEREST RATE RISK
The Corporation is not exposed to interest rate risk.
b) CREDIT RISK
Credit risk is the risk that the customer will be unable to pay amounts in full
when due as well as the risk that there is a large amount due from a small
number of customers. With respect to the risk that the customer is unable to
pay, the Corporation sets up allowances for potential losses. However, since
most of the customers are relatively large companies with a history of payment
and all the accounts receivables are current and neither past due nor impaired,
the allowance is not significant. With respect to the concentration of credit
risk, the Corporation has accounts receivable from relatively large customers
engaged in various industries. As well, the Corporation minimizes its exposure
to credit risk by placing its cash with major banks. As such, management
assesses the Corporation's credit risk to be low.
c) CURRENCY RISK
The Corporation operates internationally and is exposed to risk from changes in
foreign currency rates. The Corporation does not hold any financial instruments
that mitigate this risk. Management minimizes this risk by paying the
expenditures incurred in the local operations using the monies received in the
local currency.
The Corporation is mainly exposed to fluctuations in the U.S. dollar, the Pound
Sterling and the Euro. The following table details the Corporation's sensitivity
to a 28% strengthening of the U.S. dollar, a 30% strengthening of the Pound
Sterling and a 21% strengthening of the Euro on net earnings and comprehensive
income against the Canadian dollar. The sensitivity analysis includes foreign
currency denominated monetary items and adjusts their translation at period end
for the changes described above. For a weakening of the U.S. dollar, the Pound
Sterling and the Euro by the same percentages against the Canadian dollar, there
would be an equal and opposite impact on net loss and comprehensive loss. The
sensitivity analysis was based on the fluctuations in foreign currency rate over
the last 3 years. As such, management assess the Corporation's currency risk to
be high.
35
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
UK Pound
US Dollar Sterling Euro
Impact Impact Impact
-------------------------------------------
Net Income (Loss) and comprehensive income (loss) (7,246,441) 80,480 (1,519,972)
</Table>
11. FINANCIAL AND CAPITAL MANAGEMENT (CONTINUED)
As at January 31, 2009 and July 31, 2008, the Corporation's current assets and
liabilities denominated in foreign currencies are as follows:
<Table>
<Caption>
January 31, 2009 July 31, 2008
---------------------------------------------------------------
Current Current Current Current
assets liabilities assets liabilities
---------------------------------------------------------------
U.S. Dollars 163,512 147,819 245,573 293,213
Pounds Sterling 222,867 381,160 1,436,050 1,143,269
Euros 517,889 775,344 791,303 825,074
</Table>
d) LIQUIDITY RISK
Liquidity risk is the risk that the Corporation is not able to meet its
financial obligations as they fall due or can do so only at excessive cost.
SAND's growth is financed through a combination of the cash flow from operations
and raising additional capital through debt and equity. One of management's
primary goal is to ensure that is has the necessary funds to fulfill its
obligations through active management of assets and liabilities as well as the
cash flows by using budgets and cash estimates. As at January 31, 2009, there
has been no significant change to the maturities of financial liabilities as
disclosed in Notes 5 and 8. Based on Note 2, as such management assesses the
Corporation's liquidity risk to be high.
FAIR VALUE
Fair value is the amount that willing parties would accept to exchange a
financial instrument based on the current market for instruments with the same
risk, principal and remaining maturity. These estimates are affected by
assumptions made about the amount and timing of estimated future cash flows,
discount rates and terms of the contract. As a result, the fair values are not
necessarily the net amounts that would be realized if these instruments were
settled.
36
<Page>
SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at January 31, 2009 and 2008
(in Canadian dollars)
(unaudited)
- --------------------------------------------------------------------------------
The carrying value of all financial instruments approximates fair value except
as otherwise noted in the following table,
<Table>
<Caption>
January 31, 2009 July 31, 2008
-------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------------------------------------------------------
Convertible debentures 301,094 434,172 278,343 278,343
</Table>
11. FINANCIAL AND CAPITAL MANAGEMENT (CONTINUED)
CAPITAL MANAGEMENT
The Corporation's capital management objectives are to ensure the Corporation's
ability to continue as a going concern and to provide an adequate return to
shareholders through the optimization of the debt and equity balance. The
capital structure of the Corporation consists of due to shareholders,
convertible debentures, shareholders' equity comprising of deficit and capital
stock and cash. The Corporation manages its capital structure and makes
adjustments to it in the light of its expected business growth and changes in
economic conditions. In order to maintain or adjust the capital structure, the
Corporation may return capital to the shareholders, issue new shares or issue
new debt.
<Table>
<Caption>
January 31, July 31,
2009 2008
-----------------------------
Due to shareholders 1,765,662 1,267,701
Convertible debentures 301,094 278,343
-----------------------------
Total Debt 2,066,756 1,546,044
Less Cash 308,122 775,443
-----------------------------
Net Debt 1,758,634 770,601
Shareholders' deficiency
Share capital 38,530,441 38,530,441
Equity component of convertible debentures 446,027 446,027
Contributed surplus (Note 9b) 789,940 752,525
Deficit (42,106,717) (40,989,452)
-----------------------------
(2,340,309) (1,260,459)
Adjusted Capital (581,675) (489,858)
</Table>
12. COMPARATIVE FIGURES
Certain figures for the prior period have been reclassified in order to conform
to the presentation adopted in the current period.
37
<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.
April 1, 2009 /s/ Arthur G. Ritchie
----------------------------------
Arthur G. Ritchie
Chairman of the Board, President
and Chief Executive Officer
38