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AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON OCTOBER 13, 2000 REGISTRATION NO. 333-12216
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM F-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------------------------------------
Sand Technology Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CANADA NOT APPLICABLE
(PROVINCE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.,
INCORPORATION OR ORGANIZATION) IF APPLICABLE)
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4141 SHERBROOKE STREET WEST, SUITE 410, WESTMOUNT, QUEBEC, CANADA H3Z 1B8
(514) 939-3477
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SAND TECHNOLOGY SYSTEMS, INC.
555 WOODBRIDGE TOWERS, ROUTE 1 SOUTH ISELIN, NEW JERSEY 08830
(732) 750-4848
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT
FOR SERVICE IN THE UNITED STATES)
-----------------------------------------------
Copies to:
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GEORGES DUBE, LAVERY, DE BILLY, 1 PLACE VILLE-MARIE, BRIAN S. NORTH, BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
SUITE 4000, MONTREAL, QUEBEC, CANADA H3B 3A4 (514) 877-2989 14TH FLOOR,1835 MARKET STREET, PHILADELPHIA, PA USA 19103-6933
(215) 665-3828
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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================================== =================== ======================== =========================== ================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED TO BE REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
================================== =================== ======================== =========================== ================
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Class A Common Shares Up to 6,857,142(1) (2) US$30,000,000(3) US$ 9,090.91
================================== =================== ======================== =========================== ================
Class A Common Shares(4) 1,061,351 (4) US$ 4,643,410(1) US$ 1,407.40
================================== =================== ======================== =========================== ================
Total Up to 7,918,493(1) US$34,643,410(1) US$10,558.31
================================== =================== ======================== =========================== ================
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933.
(2) The price per share will vary based upon the volume-weighted average daily
price of the Registrant's shares during the drawdown periods provided for
in the common share purchase agreement described in this registration
statement.
(3) This represents the maximum purchase price that Sundowner Investments
Limited is obligated to pay the Registrant under the common share purchase
agreement.
(4) The remainder of the shares to be registered may be offered for sale and
sold from time to time during the period the registration statement remains
effective, for the account of the selling shareholders identified in this
registration statement. The proposed maximum offering price per share has
been established solely for the purpose of calculating the registration fee
pursuant to Rule 457(c). The proposed maximum aggregate offering price for
these shares is based upon the high and low reported price of the
Registrant's shares on June 21, 2000.
In accordance with Rule 416, this Registration Statement also covers such
indeterminate number of Class A common shares as may become issuable to prevent
dilution resulting from stock splits, stock dividends and similar transactions
as set forth in the warrants referred to above.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective as provided in Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
===============================================================================
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PROSPECTUS
CLASS A COMMON SHARES
SAND TECHNOLOGY INC.
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission using a "shelf " registration process. This
means:
o we may issue up to $30,000,000 of our Class A common shares from time
to time - we will circulate a prospectus supplement each time we plan
to issue Class A common shares;
o 315,789 Class A common shares may be offered and sold from time to
time by AMRO International, S.A., who originally purchased these
shares from us in a private placement transaction;
o 315,789 Class A common shares may be offered and sold from time to
time by AMRO International, S.A., who may, if at all, receive these
shares pursuant to certain repricing features of the shares originally
purchased by it in the private transaction;
o 32,609 Class A common shares may be offered and sold from time to time
by AMRO International, S.A., who will originally receive these shares
upon the exercise of warrants;
o 182,278 Class A common shares may be offered and sold from time to
time by Sundowner Investments Limited, who will originally receive
these shares upon the exercise of warrants; and
o 214,886 Class A common shares may be offered and sold from time to
time by Ladenburg Thalmann & Co. Inc., who will originally receive
these shares upon the exercise of warrants.
Under our equity line of credit with Sundowner Investments Limited, for a
period of 12 months beginning on the date the registration statement is declared
effective by the Securities and Exchange Commission, if certain conditions are
satisfied, we will have the right to require Sundowner Investments Limited to
purchase our Class A common shares in an aggregate amount up to $30,000,000.
Sundowner Investment Limited may resell these shares using this prospectus.
Sundowner Investments Limited is an underwriter of any such shares.
We will not receive any proceeds from the sale of shares by AMRO
International, S.A. or Sundowner Investments Limited. The price of the Class A
common shares and other terms of the offering
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by those selling shareholders are set forth in the prospectus supplement
accompanying this prospectus.
Our Class A common shares are listed on the NASDAQ National Market under
the symbol "SNDT." On October 11, 2000, the last sale price of our Class A
common shares on the NASDAQ National Market was US$3.50.
INVESTING IN OUR CLASS A COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR
INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANYONE TO TELL YOU
OTHERWISE.
The date of this prospectus is October 13, 2000.
2
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUMMARY...........................................................4
ABOUT THIS PROSPECTUS........................................................4
SAND TECHNOLOGY INC..........................................................4
THE OFFERING.................................................................5
RISK FACTORS.................................................................6
Risks Associated With Our Financial Results...............................6
Risks Associated With Our Business And Operations.........................7
Risks Which May Affect The Value Of Your Shares..........................13
WHERE YOU CAN GET MORE INFORMATION..........................................15
FORWARD-LOOKING STATEMENTS..................................................15
ENFORCEMENT OF LEGAL PROCESS................................................17
SERVICE OF PROCESS..........................................................17
NOTE REGARDING CURRENCY.....................................................17
RECENT DEVELOPMENTS.........................................................19
USE OF PROCEEDS.............................................................25
SELLING SHAREHOLDERS........................................................25
PLAN OF DISTRIBUTION........................................................26
DESCRIPTION OF SECURITIES...................................................28
LEGAL MATTERS...............................................................29
EXPERTS.....................................................................29
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3
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PROSPECTUS SUMMARY
THIS SUMMARY PROVIDES AN OVERVIEW OF SELECTED INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT
MAY BE IMPORTANT TO YOU. BEFORE MAKING YOUR INVESTMENT DECISION, YOU SHOULD READ
THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED INFORMATION REGARDING US
AND THE CLASS A COMMON SHARES THAT ARE BEING SOLD IN THIS OFFERING. SUCH
INFORMATION APPEARS ELSEWHERE IN THIS PROSPECTUS AND IN SELECTED PORTIONS OF OUR
ANNUAL REPORT ON FORM 20-F AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION THAT WE HAVE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PROVIDED IN THIS
PROSPECTUS IS IN CANADIAN DOLLARS.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the
United States Securities and Exchange Commission. You should rely only on the
information provided in this prospectus or incorporated by reference into this
prospectus. We have not authorized anyone to provide you with information
different from that contained in or incorporated by reference into this
prospectus. We and the selling shareholders are offering to sell, and seeking
offers to buy, Class A common shares only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of Class A common shares. Applicable SEC rules
may require us to update this prospectus in the future.
SAND TECHNOLOGY INC.
We design, develop, market and support software products that enable users
to retrieve content-oriented information from enormous amounts of data, upon
demand and without having to design a system which accomplishes only
pre-specified requirements. Our software products, known as the "Nucleus
Series," are designed to provide an efficient and cost-effective way to make
inquiries of large databases. They facilitate the use of data mining, data
marts, data warehouses, and on-line analytical processing, thereby enabling
effective e-commerce, B2B, B2C, B2E, CRM, supply chain management and other
critical web-enabled systems. Our Nucleus products permit more timely and
accurate decision processing by desktop, workgroup, departmental and enterprise
computing systems turning "business intelligence" into "customer intelligence."
We were incorporated in 1983 under the Canada Business Corporations Act
under the name Sand Technology Systems (Canada) Inc. From 1988 until 1999 we
used the name Sand Technology Systems International Inc. On January 1, 2000, we
changed our name to Sand Technology Inc.
Our head office is located at 4141 Sherbrooke Street West, Suite 410,
Westmount, Quebec, Canada H3Z 1B8 and our telephone number is (514) 939-3477.
Our world-wide web address is www.sandtechnology.com. Information contained on
our website should not be considered part of this prospectus.
4
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THE OFFERING
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Shares Offered Up to $30,000,000 of Class A common shares which may
be issued under our common share purchase agreement with
Sundowner Investments Limited.
In addition, up to 1,061,351 Class A common shares which we
originally issued to AMRO International, S.A, which AMRO
International, S.A. may obtain pursuant to the repricing
provisions which apply to the shares originally purchased by
it, or which AMRO International, S.A., Sundowner Investments
Limited, or Ladenburg Thalman & Co. Inc. may in the future
purchase under warrants they hold.
Class A Common 9,627,145 Class A common shares, which does not include
Shares Currently 1,391,773 Class A common shares issuable upon exercise of
Outstanding outstanding warrants and other purchase rights.
NASDAQ National SNDT
Market Symbol
Risk Factors Investing in our Class A common shares involves certain
risks. You should carefully consider all the information in
this prospectus. In particular, you should read the section
entitled "Risk Factors" for a description of certain of the
risks you should consider before investing in our shares.
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5
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RISK FACTORS
AN INVESTMENT IN OUR CLASS A COMMON SHARES INVOLVES A SIGNIFICANT DEGREE OF
RISK, INCLUDING THE RISKS DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE
RISK FACTORS AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE MAKING AN
INVESTMENT DECISION. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES THAT MAY
EXIST. IF ANY OF THE FOLLOWING EVENTS DO OCCUR, OUR BUSINESS, OPERATING RESULTS
AND FINANCIAL CONDITION COULD BE SERIOUSLY HARMED. THIS PROSPECTUS ALSO CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING THE RISKS DESCRIBED
BELOW AND ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD READ THE SECTION ENTITLED
"FORWARD-LOOKING STATEMENTS" FOR A FURTHER DISCUSSION OF THESE FACTORS.
RISKS ASSOCIATED WITH OUR FINANCIAL RESULTS
WE HAVE NOT BEEN PROFITABLE IN OUR LAST THREE FISCAL YEARS AND WE HAVE SOLD
SOME OF OUR LIQUID INVESTMENTS AND NON-CORE ASSETS TO FUND OUR BUSINESS
OPERATIONS. WE MAY HAVE TO OBTAIN ADDITIONAL FINANCING TO FUND OUR FUTURE
OPERATIONS.
Because we have not been profitable in the past three years, we have had
to fund our losses through a combination of sales of our liquid investments
and non-core assets. We incurred losses of $906,722 in fiscal 1998,
$4,960,964 in fiscal 1999, and $2,866,907 for the fiscal year ended July 31,
2000. We expect to continue to incur losses in the near future and possibly
longer. If we are not successful in increasing net revenues, or if there is a
material increase in our expenses, we may be unable to achieve profitability
in the future. If we do not achieve profitability in the future, we would
have to obtain additional financing to fund our operations.
We plan to increase our operating expenses significantly in the foreseeable
future and our operating results will be adversely affected if our revenues do
not increase. We must, among other things, obtain market awareness and
acceptance of our products, increase the scope of our operations, respond to
competitive developments, continue to attract, retain and motivate qualified
personnel and continue to commercialize products incorporating advanced
technologies. These efforts may prove more expensive than we currently
anticipate. We cannot assure you that we will be successful in addressing these
risks, and the failure to do so would have a material adverse effect on our
business, operating results and financial condition.
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO RAISE ANY ADDITIONAL FUNDING
NEEDED TO FINANCE OPERATIONS.
On July 31, 1999, we had cash reserves of $1,009,518. Our cash reserves
were $2,387,112 on July 31, 2000. If we do not have sufficient capital to
fund our operations, we may be forced to discontinue product development,
reduce our sales and marketing efforts or forego attractive businesses
opportunities. Any of these outcomes could adversely impact our ability to
respond to competitive pressures or prevent us from conducting all or a
portion of our planned operations. If our available cash and existing sources
of revenue are insufficient to fund our operations, we may need to raise
additional funds, and additional financing may not be available on acceptable
terms, if at all. If we issue additional equity securities to raise funds,
your ownership percentage of Sand will be reduced.
6
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We may not be able to draw down all $30 million under the common share
purchase agreement with Sundowner Investments Limited if our stock price and
trading volumes do not reach certain levels. The maximum amount we may
request for any draw down is subject to a formula based on the
volume-weighted average price and average trading volume of our Class A
common shares. Based upon the application of that formula, the maximum amount
available to us under our first request for a draw down was US$600,000. In
addition, business and economic conditions may not make it feasible to draw
down under the agreement at every opportunity, and drawdowns are available
only every 22 trading days.
Our placement agreement with Ladenburg Thalmann & Co. Inc. restricts us
from raising investment capital until March 15, 2001 except through Ladenburg
Thalmann & Co. Inc., with limited exceptions. Our common share purchase
agreement with Sundowner Investments Limited also limits our ability to sell our
securities for cash at a discount to market price for 12 months from the
effective date of the registration statement of which this prospectus is a part.
If we need capital but are unable to draw down under the common share purchase
agreement for any reason, we may need to separately negotiate with Ladenburg
Thalmann & Co. Inc. and Sundowner Investments Limited to lift those restrictions
so we can obtain capital from other sources.
On July 15, 1994, we entered into an agreement with Nucleus
International Corporation under which we acquired all of the rights in the
Nucleus System software, hardware, and intellectual property. On July 31,
2000 Nucleus International Corporation agreed to modify the terms our
agreement by permitting us to defer the payment of US$350,038 until November
15, 2000 and by accepting 263,150 Class A common shares in lieu of future
payments in the amount of US$1,250,000.
OUR INABILITY TO ACCURATELY FORECAST OUR RESULTS FROM QUARTER TO QUARTER
MAY AFFECT OUR CASH RESOURCES AND RESULT IN WIDE FLUCTUATIONS IN THE MARKET
PRICE OF OUR STOCK.
Our operating results have varied on a quarterly basis in the past and may
fluctuate significantly in the future as a result of a variety of factors
outside of our control. As a result, we may not be able to accurately predict
our necessary cash expenditures during each quarter or obtain timely financing
to cover any shortfalls. We also believe that period-to-period comparisons of
our operating results may not be meaningful and one should not rely on any such
comparisons as an indication of our future performance. In addition, it is
likely that in one or more future quarters, our operating results will fall
below the expectations of securities analysts and investors. In such event, the
trading price of our Class A common shares could be materially harmed.
THE MARKET PRICE OF OUR CLASS A COMMON SHARES IS LIKELY TO BE VOLATILE,
WHICH MAY RESULT IN LITIGATION THAT COULD BE COSTLY AND DIVERT RESOURCES.
Stock markets have recently experienced extreme price and volume
fluctuations, particularly for the shares of technology companies. These
fluctuations are often unrelated to the operating performance of particular
companies. The broad market fluctuations may adversely affect the market price
of our Class A common shares. When the market price of a company's stock drops
significantly, shareholders often institute securities class actions lawsuits
against that company. A lawsuit against us could cause us to incur substantial
costs and could divert the time and attention of our management and other
resources.
RISKS ASSOCIATED WITH OUR BUSINESS AND OPERATIONS
BECAUSE WE HAVE A LIMITED OPERATING HISTORY AS A DEVELOPER AND MARKETER OF
SOFTWARE, IT MAY BE DIFFICULT FOR YOU TO EVALUATE OUR BUSINESS AND ITS
PROSPECTS.
Your evaluation of our business will be more difficult because of our
limited operating history as a developer and marketer of software. Our prospects
are difficult to predict and may change rapidly. When making your investment
decision, you should consider the risks, expenses and difficulties that we may
encounter or incur as a company now operating in a new and rapidly evolving
market, including our substantial dependence on a single line of products and
our need to manage expanding operations. Our business strategy may not be
successful, and we may not successfully address these risks.
7
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WE PLAN TO INCREASE OUR DIRECT SALES FORCE.
We have historically sold our products primarily through a distribution
network of value-added resellers, resellers and distributors located in the
United States, Canada and the United Kingdom. Direct sales have not played a
large role in our past. We intend to increase our direct sales force. This will
require additional personnel which will increase our expenses. Competition for
sales personnel qualified for these positions is intense. Many of our
competitors have substantially greater resources than we do or have dedicated
greater resources to hiring qualified sales personnel. In addition, we may
experience a significant turnover of our sales force. Turnover tends to slow
sales efforts until replacement personnel are recruited and trained. We cannot
assure you that we will be able to attract and retain adequate sales and
marketing personnel, even after spending significant resources to do so, and the
failure to do so could have a material adverse effect on our business, operating
results and financial condition.
WE DEPEND ON KEY PERSONNEL AND THE HIRING OF ADDITIONAL PERSONNEL.
Our success depends to a significant degree upon the continued
contributions of our key management, engineering, sales and marketing personnel,
many of whom would be difficult to replace. We have an employment contract with
and maintain "key person" life insurance on only one employee, Arthur G.
Ritchie, our Chairman of the Board, President and Chief Executive Officer. We do
not believe the proceeds of Mr. Ritchie's life insurance would adequately
compensate us for his loss. We believe our future success will also depend in
large part upon our ability to attract and retain highly skilled managerial,
engineering, sales and marketing, and finance personnel. Competition for such
personnel is intense, and there can be no assurance that we will be successful
in attracting and retaining such personnel. We have in the past experienced
difficulties in hiring highly qualified sales and engineering personnel, and we
believe that we may have difficulty in attracting such personnel with equity
incentives given that we are a public company. For example, as a result of
market forces, companies in the enterprise software industry have historically
experienced significant fluctuations in their market valuations. To the extent
that our Class A common shares trade at a premium relative to historical
industry averages or to other companies in the enterprise software industry, we
may experience difficulty in attracting qualified personnel. The loss of the
services of any of our key personnel, the inability to attract or retain
qualified personnel in the future or delays in either hiring required personnel
or the rate at which new people become productive, particularly sales personnel
and engineers, could have a material adverse effect on our business, operating
results and financial condition.
OUR PRODUCT SALES CYCLE IS LENGTHY.
The purchase of our products often requires significant, executive-level
investment and system design decisions by our customers. Sales take a long time
to conclude because we must provide a significant level of education about the
use and benefits of our products. We believe that most companies currently are
not yet aware of the benefits of enterprise-wide business intelligence solutions
or of our products and capabilities, nor have such companies deployed business
intelligence solutions on an enterprise-wide basis. Accordingly, the sales cycle
associated with the purchase of our enterprise business intelligence products is
typically three to nine months in length. During this period, a potential sale
is subject to a number of significant risks over which we have little or no
control, including customers' budgeting constraints and internal acceptance
review procedures. Additionally, the sales cycle for our products in the United
Kingdom has historically been, and is expected to continue to be shorter than
the sales cycle in the United States and Canada. However, as we expand into
Europe, we expect that the sales cycle will be longer than it has been in the
United Kingdom. Based in part upon, among other things, our lengthy sales cycle,
we believe that our quarterly revenues and operating results could vary
8
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significantly in the future, and that excessive delay in product sales could
have a material adverse effect on our business, operating results and financial
condition.
WE MUST CONTINUE TO DEVELOP OUR INDIRECT SALES CHANNELS
Although we plan to expand our direct sales force, our success in
maintaining our indirect channels, value-added resellers, resellers and
distributors will determine our ability to achieve revenue growth and improved
operating margins on product sales, as well as increased worldwide sales, in the
future. Despite the fact that we continue to invest significant resources to
develop our indirect channels, we cannot assure you that we will be able to
continue to attract and retain additional companies in our indirect channels
that will be able to market our products effectively and will be qualified to
provide timely and cost-effective customer support and services. We also cannot
assure you that we will be able to manage conflicts within our indirect channels
or that increasing sales through our indirect channels will not divert
management resources and attention from direct sales. In addition, our
agreements with companies in our indirect channels do not restrict such
companies from distributing competing products, and in many cases may be
terminated by either party without cause. We cannot assure you that we will be
able to successfully expand our indirect channels or that any such expansion
will result in an increase in revenues, and failure to do so could have a
material adverse effect on our business, operating results and financial
condition.
WE OPERATE IN A HIGHLY COMPETITIVE MARKET.
Our market is developing and intensely competitive. It is highly fragmented
and characterized by rapidly changing technology and evolving standards. Our
current and potential competitors offer a variety of software solutions and
generally fall within four categories:
o vendors of business intelligence software such as Brio Technology,
Inc., Cognos, Business Objects, S.A., Seagate, and Andyne;
o vendors offering alternative approaches to delivering analysis
capabilities to users, such as MicroStrategy, Cognos and Business
Objects S.A.;
o database vendors that offer products which operate specifically with
their proprietary database, such as Microsoft, IBM, Oracle Corporation
or Arbor; and
o other companies that may in the future announce offerings of
enterprise business intelligence solutions.
Our competitive position in our market is uncertain, due principally to the
variety of current and potential competitors and the emerging nature of the
market. We have experienced and we expect to experience increased competition
from current and potential competitors, many of whom have significantly greater
financial, technical, marketing and other resources than we do. Our competitors
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements or devote greater resources to the development,
promotion and sales of products than we can. We expect additional competition as
other established and emerging companies enter into the business intelligence
software market and new products and technologies are introduced. Increased
competition could result in price reductions, fewer customer orders, reduced
gross margins, longer sales cycles and loss of market share, any of which could
have a material adverse effect on our business, operating results and financial
9
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condition.
Current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing the ability of their products to address the needs of our
prospective customers. Our current or future indirect channel partners may
establish cooperative relationships with our current or potential competitors
and limit our ability to sell products through particular distribution channels.
Accordingly, it is possible that new competitors or alliances among current and
new competitors may emerge and rapidly gain significant market share. Such
competition could have a material adverse effect on our ability to enter into
new licenses, and maintenance and support renewals for existing licenses, of our
products on favorable terms. Competitive pressures may also require us to reduce
the price of our products, which could have a material adverse effect on our
business, operating results and financial condition.
We compete primarily on the basis of product features, time to market, ease
of use, product performance, product quality, analytical capability, user
scalability, open architecture, customer support and price. While we believe we
presently compete favorably with respect to each of these factors, our market is
evolving at a rapid pace.
We cannot assure you that we will be able to compete successfully against
current and future competitors, and the failure to do so could have a material
adverse effect on our business, operating results and financial condition.
AS WE EXPAND BEYOND NORTH AMERICA, WE WILL BE EXPOSED TO CERTAIN RISKS
INHERENT IN DOING BUSINESS ON AN INTERNATIONAL LEVEL.
Sales to customers outside of the United States and Canada, including
sales generated by our U.K. subsidiary, represented 0%, 6% and 67% of our
total revenue for fiscal 1998, 1999 and 2000, respectively. We have a direct
sales office in the United Kingdom.
A key component of our strategy is our planned expansion into additional
international markets. To facilitate this international expansion, we need to
localize our products for the additional foreign markets. If the revenues
generated by these expanded international operations do not offset the expense
of establishing and maintaining these foreign operations, there could be a
material adverse effect on our business, operating results and financial
condition. To date, we have only limited experience in developing localized
versions of our products and marketing and distributing our products
internationally. We cannot assure you that we will be able to successfully
localize, market, sell and deliver our products in these markets.
There are also additional risks in doing business on an international
level, such as increased difficulty in controlling operating expenses,
unexpected changes in regulatory requirements, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable, political
instability, fluctuations in currency exchange rates, seasonal reductions in
business activity, and potentially adverse tax consequences. These risks
could adversely impact the success of our international operations. It is
important to realize that our international sales are generally denominated
and collected in foreign currencies, and we have not historically undertaken
foreign exchange hedging transactions to cover the potential foreign currency
exposure. In fiscal 2000, we incurred a gain on foreign currency translations
from our foreign subsidiaries in an amount of approximately $47,753. We
cannot assure you that one or more of these factors will not have a material
adverse effect on our future international operations and,
10
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consequently, on our business, operating results and financial condition.
WE CURRENTLY DEPEND ON THE SALE OF THE NUCLEUS PRODUCTS TO GENERATE MOST OF
OUR REVENUE AND IF WE ARE UNABLE TO SELL THESE PRODUCTS WE MAY NEVER BECOME
PROFITABLE.
We expect the sale of our Nucleus products to constitute most of our
revenue for the foreseeable future. If customers do not purchase these products,
we do not currently offer any other products or services that would enable us to
become profitable.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO DEVELOP NEW PRODUCTS THAT MEET
CHANGING CUSTOMER REQUIREMENTS RESULTING FROM RAPID TECHNOLOGICAL CHANGE
AND EVOLVING INDUSTRY STANDARDS.
The market for our products is characterized by rapidly changing
technology, evolving industry standards and customer requirements, emerging
competition and frequent new product introductions. Our products incorporate a
number of advanced technologies, including a proprietary data analysis engine, a
distributed architecture, as well as Web access and delivery technology. As a
result, we may be required to change and improve our products in response to
changes in operating systems, applications, networking and connectivity
software, computer and communications hardware, programming tools and computer
language technology. As a result, the life cycle of our products is difficult to
estimate. Our ability to make such changes and improvements will be affected by
our ability to hire and retain highly qualified engineering personnel. In
addition, we attempt to establish and maintain partner alliances with
influential companies in a variety of core technology areas. Our failure to
establish such alliances with leading companies in particular technology areas
could have a material adverse effect on our business, operating results and
financial condition. We cannot assure you that we can successfully respond to
changing technology, identify new product opportunities or develop and bring new
products to market in a timely and cost-effective manner.
We have in the past experienced delays in software development and there
can be no assurance that we will not experience delays in connection with our
current or future product development activities. In particular, development
efforts in the UNIX server environment are complex, and we have in the past
encountered delays in developing products for this environment. Delays and
difficulties associated with new product introductions or product enhancements
could have a material adverse effect on our business, operating results and
financial condition. Our failure, for technological or other reasons, to develop
and introduce new products and product enhancements on a timely basis that are
compatible with industry standards and that satisfy customer requirements would
have a material adverse effect on our business, operating results and financial
condition.
In addition, we or our competitors may announce enhancements to existing
products, or new products embodying new technologies, industry standards or
customer requirements that have the potential to supplant or provide lower cost
alternatives to our existing products. The introduction of such enhancements or
new products could render our existing products obsolete and unmarketable. We
cannot assure you that the announcement or introduction of new products by us or
our competitors or any change in industry standards will not cause customers to
defer or cancel purchases of existing products, which could have a material
adverse effect on our business, operating results and financial condition.
Furthermore, introduction by us of products with reliability, quality or
compatibility problems could result in reduced orders, delays in collecting
accounts receivable and additional service costs. The failure to introduce a new
product or product enhancement on a timely basis could delay or hinder market
acceptance. Research and development efforts may require us to expend
significant capital and other resources. Any such event could have a material
adverse effect on our business, operating results and
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financial condition.
WE DEPEND ON THE EMERGING MARKET FOR ENTERPRISE BUSINESS INTELLIGENCE AND
WE CANNOT BE ASSURED OF MARKET ACCEPTANCE OF ENTERPRISE BUSINESS
INTELLIGENCE PRODUCTS.
We are focusing our selling efforts increasingly on larger, enterprise-wide
implementations of our products, and we expect such sales to constitute an
increasing portion of our future revenue growth, if any. To date, our selling
efforts have resulted in limited enterprise-wide implementations of the our
products. We believe that most companies currently are not yet aware of the
benefits of enterprise-wide business intelligence solutions or of our products
and capabilities, nor have such companies deployed business intelligence
solutions on an enterprise-wide basis. While we have devoted resources to
promoting market awareness of our products and the needs our products address
(including training our sales personnel and demonstrating our products at
industry conferences and trade shows), we cannot assure you that these efforts
will be sufficient to build market awareness of the need for enterprise business
intelligence or acceptance of our products. Failure of a significant market for
enterprise business intelligence products to develop, or failure of
enterprise-wide implementations of our products to achieve broad market
acceptance, would have a material adverse effect on our business, operating
results and financial condition.
AS A RESULT OF THEIR COMPLEXITY, OUR PRODUCTS MAY CONTAIN UNDETECTED
ERRORS, FAILURES OR VIRUSES AND WE MAY BE SUBJECT TO PRODUCT LIABILITY
CLAIMS FOR SUCH DEFECTS.
Despite our testing of new products and their use by current and potential
customers when first introduced or new enhancements are released, we cannot
assure you that there will be no defects or errors in new products or
enhancements after we commence commercial shipments. Although we have not
experienced material adverse effects resulting from any such defects and errors
to date, we cannot assure you that defects and errors will not be found in new
products or enhancements after we commence commercial shipments, resulting in
loss of revenues, delay in market acceptance or damage to our reputation, which
could have a material adverse effect upon our business, operating results and
financial condition. While our license agreements with our customers typically
contain provisions designed to limit our exposure for potential claims based on
errors or malfunctions of our products, it is possible, however, that these
provisions may not be effective under the laws of certain jurisdictions.
Although we have not experienced any product liability claims to date, the sale
and support of our products entails the risk of such claims. Although we carry
insurance against product liability risks, we cannot assure you that such
insurance would be adequate to cover a potential claim. A product liability
claim brought against us could have a material adverse effect on our business,
operating results and financial condition.
THERE IS LIMITED PROTECTION OF OUR PROPRIETARY RIGHTS.
We currently rely primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect our proprietary rights. We also believe that factors such as the
technological and creative skills of our personnel, new product developments,
frequent product enhancements, name recognition and reliable product maintenance
are essential to establishing and maintaining a technology leadership position.
We seek to protect our software, documentation and other written materials under
trade secret and copyright laws, which afford only limited protection. We
currently have five United States patents and one patent application. We cannot
assure you that our patent application will result in the issuance of a patent,
or that our patents or our patents applications, if granted, will not be
invalidated, circumvented or challenged, or that the rights granted thereunder
will provide competitive advantages to us or that any of our future patent
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<PAGE>
applications, if any, will be issued with the scope of the claims sought by us,
if at all. Furthermore, we cannot assure you that others will not develop
technologies that are similar or superior to our technology or design around any
patent that may come to be owned by us. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary.
Policing unauthorized use of our products is difficult, and while we are unable
to determine the extent to which piracy of our software products exists, we can
expect software piracy to be a persistent problem.
In addition, the laws of some foreign countries do not protect our
proprietary rights as fully as do the laws of the United States and Canada.
There can be no assurance that our means of protecting our proprietary rights in
North America or abroad will be adequate or that competitors will not
independently develop similar technology. We have entered into source code
escrow agreements with a number of our customers and indirect channel partners
requiring release of source code under certain conditions. Such agreements
provide that such parties will have a limited, non-exclusive right to use such
code in the event that there is a bankruptcy proceeding by or against us, if we
cease to do business or, in some cases, if we fail to meet our contractual
obligations. The provision of source code escrows may increase the likelihood of
misappropriation by third parties.
Although we are not currently aware of any claims asserted by third parties
that we infringe on their intellectual property, in the future, we expect that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in our industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
shipment delays or require us to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on terms
acceptable to us, if at all. In the event of a successful claim of product
infringement against us and our failure or inability to license the infringed or
similar technology, our business, operating results and financial condition
would be materially adversely affected.
Finally, in the future, we may rely upon certain software that we may
license from third parties, including software that may be integrated with our
internally developed software and used in our products to perform key functions.
We cannot assure you that these third-party software licenses will be available
to us on commercially reasonable terms or indeed that their suppliers will
remain in business. Our inability to obtain or maintain any such software
licenses could result in shipment delays or reductions until equivalent software
could be developed, identified, licensed and integrated, which could have a
material adverse effect on our business, operating results and financial
condition.
RISKS WHICH MAY AFFECT THE VALUE OF YOUR SHARES
SHARES ELIGIBLE FOR FUTURE SALE.
Sales of a substantial number of shares of our Class A common shares in the
public market following this offering could adversely affect the market price
for our shares.
THE EXERCISE OF EXISTING OUTSTANDING WARRANTS AND OPTIONS AND THE NUMBER OF
SHARES AVAILABLE FOR FUTURE ISSUANCE MAY SUBSTANTIALLY DILUTE THE VALUE OF
OUR CLASS A COMMON SHARES.
We are authorized to issue an unlimited number of Class A common
shares, of which 9,627,145 were outstanding on July 31, 2000, and we have
reserved an additional 1,391,773 shares for future issuance. The issuance of
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<PAGE>
these authorized or reserved shares could substantially dilute the equity
interest of our existing shareholders and could result in a significant
decrease to the market price of our Class A common shares. As of July 31,
2000, we have issued warrants and granted options and rights to purchase:
o 429,773 Class A common shares upon exercise of warrants at a prices
ranging from US$5.678 to US$10.00 per share; and
o 962,000 Class A common shares to directors, officers, employees and
consultants upon exercise of options and similar arrangements at
prices ranging from US$0.69 to US$8.63 per share.
THE PRICE OF OUR CLASS A COMMON SHARES ON THE NASDAQ NATIONAL MARKET HAS
BEEN AND CONTINUES TO BE VOLATILE.
The trading price of our Class A common shares on the NASDAQ National
Market has been and continues to be volatile. During the past twelve months
our stock price has ranged from a high of US$12 to a low of US$3.312. The
market price may be affected by, among other things, announcements of new
products by our competitors, fluctuations in our operating results and
changes in our financial position.
OUR CLASS A COMMON SHARES HAVE A LIMITED MARKET AND MAY BE ADVERSELY
AFFECTED BY THE INFLUX INTO THE MARKET OF THE SHARES COVERED BY THIS
PROSPECTUS.
The trading market for our Class A common shares may be adversely affected
by the influx into the market of the Class A common shares covered by this
prospectus. Although it is impossible to predict market influences and
prospective values for securities, it is possible that, in and of itself, the
increase in the number of shares available for public sale could have a
depressive effect on the market and the price of our Class A common shares.
INVESTORS MAY HAVE DIFFICULTY STARTING LEGAL PROCEEDINGS AND ENFORCING
JUDGMENTS AGAINST US AND OUR DIRECTORS AND OFFICERS.
We are incorporated in Canada, a majority of our directors and officers
live in Canada, and most of our assets are located in Canada. As a result, it
may be more difficult for investors to serve legal documents, including claims
upon non-United States resident directors and officers or to enforce judgements
of United States courts. Accordingly, investors may be unable to subject us, or
our non United States directors or officers or experts named in this prospectus
to liability based upon the civil liability provisions of the federal securities
laws of the United States, in actions in Canadian courts.
EXISTING STOCKHOLDERS WILL CONTINUE TO EXERCISE EFFECTIVE CONTROL OVER US.
Upon consummation of this offering, our executive officers and directors,
together with entities affiliated with such individuals, will beneficially own
approximately 34.71% of our Class A common shares. Arthur G. Ritchie, our
Chairman of the Board, President and Chief Executive Officer and a director of
Sand, will beneficially own approximately 22.54% of Sand's Class A common
shares, and his wife, Susan Waxman, Vice-President, Finance & Administration of
Sand, will beneficially own approximately 0.43% of Sand's Class A common shares.
Jerome Shattner, President of one of our United States subsidiaries, will
beneficially own 11.56% of our Class A common shares. These shareholders may, as
a practical matter, continue to be able to control the election of a majority of
Sand's directors and the determination of all corporate actions after this
offering. This concentration of ownership could have
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<PAGE>
the effect of delaying or preventing a change in control of Sand.
THE OFFER AND SALE OF OUR CLASS A COMMON SHARES TO SUNDOWNER INVESTMENTS
LIMITED UNDER OUR EQUITY LINE OF CREDIT MIGHT VIOLATE THE REGISTRATION
REQUIREMENTS OF THE SECURITIES LAWS.
In a transaction like the sale of our Class A common shares to Sundowner
Investments Limited, an issuer of such securities generally may register the
resale of securities by the investor prior to their issuance if the issuer
has completed a valid exempt sale of the securities to the investor, and the
investor is at market risk at the time of the filing of the registration
statement. Because Sundowner Investments Limited might not be deemed to be at
market risk at the time of filing of the registration statement, the sale to
Sundowner Investments Limited might not qualify for an exemption from the
registration requirements of Securities Act of 1933. If it was determined
that the sale to Sundowner Investments Limited violated the Securities Act of
1933, Sundowner Investments Limited would have the right, for a period of up
to one year from the date of its purchase of the Class A common shares, to
recover the cash it paid, or, if it has already sold the stock, sue for
damages resulting from its purchase. These damages could total up to the full
purchase price paid by Sundowner Investments Limited for the Class A common
shares purchased under the equity line of credit. If this occurs, our
business, results of operations and financial condition would be harmed. Such
an occurrence would have a material adverse effect on our liquidity and our
ability to meet our obligations and we may not be able to secure alternative
financing on favorable terms or at all.
WE FACE UNCERTAINTIES AND RISKS RELATING TO OUR NASDAQ LISTING
Our Class A common shares are currently listed on the Nasdaq National
Market. On June 12, 2000, the staff of The Nasdaq Stock Market, Inc. notified
us that we no longer met the minimum US$4,000,000 net tangible assets
requirement for continued listing on the Nasdaq National Market based upon
our financial condition as of April 30, 2000. The letter also indicated that
Nasdaq's staff was reviewing our eligibility for continued listing on the
Nasdaq National Market. Since that date we have provided the staff with a
variety of information with respect to our plans and this offering. As of
July 31, 2000 we met the minimum US$4,000,000 net tangible assets
requirement. However, there is no assurance that The Nasdaq Stock Market,
Inc. will not take action to delist our Class A common shares from the
National Market. Nor is there any assurance that we would be able to satisfy
the criteria for listing our Class A common shares on the Nasdaq SmallCap
Market in the event our shares were delisted from the National Market.
The delisting of our shares from the National Market would result in a
significantly less active market for our Class A common shares. You could
find it more difficult to dispose of your shares than if our Class A common
shares were listed on the National Market. Any inability to have our shares
listed on the National Market or SmallCap Market would permit Sundowner
Investments Limited to terminate the equity line of credit described in this
prospectus.
WHERE YOU CAN GET MORE INFORMATION
We file annual reports and other information with the SEC. You may read and
copy any of these documents at the SEC's Public Reference Room at 450 Fifth
Street NW, Washington, D.C. 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at (800) SEC-0330. The SEC
maintains an internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov.
We have filed with the SEC a registration statement on Form F-2 to register
the Class A common shares being offered. This prospectus is part of that
registration statement and, as permitted by the SEC's rules, does not contain
all the information included in the registration statement. For further
information about us and our Class A common shares, you should refer to the
registration statement and to the exhibits and schedules filed as part of the
registration statement, as well as the documents discussed below.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update or supersede that information.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
We incorporate by reference the documents listed below:
o Annual report on Form 20-F for the fiscal year ended July 31, 2000,
as amended by our Form 20-F/A dated September 29, 2000.
The information incorporated by reference is an important part of this
prospectus. We will provide to each person, including any beneficial owner,
to whom a prospectus is delivered, a copy of any or all of the information
that has been incorporated by reference in this prospectus but not delivered
with this prospectus. You may request a copy of any of these filings, orally
or in writing, by contacting Susan Waxman, our Vice-President, Finance &
Administration, at 4141 Sherbrooke Street West, Suite 410, Westmount, Quebec,
Canada H3Z 1B8, telephone (514) 939-3477. Copies will be provided at no cost
to you.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements that involve risks and
uncertainties. These statements relate to future events or our future financial
performance. We use words like "believe,"
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"anticipate," "expect," "may," "will," "should," "plan," "estimate," "predict,"
"potential," "continue," and similar expressions to help identify these
forward-looking statements. These statements are only predictions. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of many factors, including the risks we face described in
"Risk Factors" and elsewhere in this prospectus.
Forward-looking statements contained in this prospectus include, for
example, statements concerning our plans to market the Nucleus product suite;
plans for on-going research and development; our plans for funding our future
capital requirements and the amounts of those capital requirements; developments
with respect to market conditions and their impact on our existing or planned
product offerings; our estimates of the investments required to realize the
potential of the markets in which we operate and the manner in which we plan to
finance those investments; our strategic goals; our planned product offerings
and partnerships, our expectations about the availability of funds to meet our
funding requirements on favorable terms; our expectations as to the timely and
successful conclusion of negotiations regarding new credit facilities and the
impact of those credit facilities on our financial condition; our expectations
regarding the exchange rate for U.S. dollars and British pounds, the currencies
in which our subsidiaries will generate revenue; and other discussions of our
future plans and strategies, anticipated developments and other matters that
involve predictions of future events.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors described
above, as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our shares, you should be aware that the occurrence of the
events described in these risk factors and elsewhere in this prospectus could
have a material adverse effect on our business, operating results and financial
condition. These risks and uncertainties, some of which may be beyond our
control, include the following:
o our ability to successfully market our products,
o our results of our ongoing research and development activities,
o our ability to obtain debt or equity financing as needed and on
favorable terms,
o our ability to receive dividends and other inter-company cash flows
from our subsidiaries,
o political, economic, legal or regulatory changes that negatively
affect our operations,
o our ability to compete effectively in a rapidly evolving marketplace
characterized by intense competition,
o our ability to attract and retain key personnel,
o the impact of technological changes,
o the potential for equipment failure or the occurrence of a natural
disaster, foreign exchange risks, and
o a change of control of Sand.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect the forward-looking statements contained in this
prospectus. Before you invest in our shares, you should
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carefully consider the information provided in the "Risk Factors" section and
the other information in this prospectus. You should be aware that the
occurrence of the events described in these risk factors and elsewhere in
this prospectus could have a material adverse effect on our business,
operating results and financial condition. Except as required by applicable
laws, we do not intend to publish updates or revisions of any forward-looking
statement we make to reflect new information, future events or otherwise.
ENFORCEMENT OF LEGAL PROCESS
We are incorporated under the laws of Canada. A majority of our directors
and officers and our independent chartered accountants named in this prospectus
are non-residents of the United States. Most of our assets are located outside
of the United States. As a result, it may be difficult for you to effect service
of legal process within the United States upon those people who are not
residents of the United States predicated upon civil liabilities under the
federal securities laws of the United States. We have been advised by Lavery, de
Billy, general partnership, our Canadian counsel, that (a) in Quebec, where our
principal office is located and where our independent chartered accountants, as
well as some of our officers and directors are domiciled, a Quebec court of
competent jurisdiction will, other than in certain limited circumstances,
recognize and declare enforceable a final and enforceable judgment of a United
States court having jurisdiction as determined under the Civil Code of Quebec
which declares such a liability of Sand or of any of our directors, officers or
independent chartered accountants for a sum of money assessed as compensatory
damages and which is sought to be enforced in Quebec; and (b) an original action
predicated upon civil liabilities contemplated by the federal securities laws of
the United States against Sand or our directors, officers or independent
chartered accountants domiciled in Quebec could be instituted in Quebec, except
where the exclusive jurisdiction of another court or arbitrator has been agreed
upon by the parties, or the Quebec court, upon application of a party, declares
jurisdiction on the ground that it considers the courts of another jurisdiction
to be in a better position to decide the issue. Although we have been advised by
counsel that, as a general rule, in any such original action, a Quebec court of
competent jurisdiction would apply the law of the place where the injurious act
occurred or the law of the place where the person who committed the injurious
act should have foreseen that the damage would occur, counsel is unable to
affirm that, in all circumstances, all provisions of the federal securities laws
of the United States would be applied by the Quebec court.
SERVICE OF PROCESS
We have irrevocably appointed our United States subsidiary, Sand Technology
Systems Inc., as our agent for service of process in any suit, action or
proceeding with respect to the Class A common shares and for actions brought
under the federal or state securities laws. Its address is 555 Woodbridge
Towers, Route 1, South Iselin, New Jersey 08830 and its telephone number is
(732) 750-4848.
NOTE REGARDING CURRENCY
Unless otherwise noted, financial information in this prospectus is
expressed in Canadian dollars. The following table sets forth the high and low
noon exchange rates, the average rates (average of the exchanges rates on the
last day of each month during the period) and the end period rates for Canadian
dollars, expressed in United States dollars (the number of Canadian dollars
needed to purchase one United States dollar), during the indicated periods, as
reported by the Federal Reserve Bank of New York.
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<TABLE>
<CAPTION>
YEAR ENDED JULY 31
------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
High.................. 1.3822 1.3995 1.5112 1.5770 1.5079
Low................... 1.3285 1.3310 1.3713 1.4512 1.4350
Average............... 1.3612 1.3690 1.4336 1.5120 1.4726
Period End............ 1.3747 1.3820 1.5112 1.5070 1.4880
</TABLE>
On September 29, 2000, the inverse of the noon buying rate was US$0.6655 =
$1.00.
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RECENT DEVELOPMENTS
PRIVATE PLACEMENT
On June 1, 2000, we sold to AMRO International, S.A. 315,789 Class A common
shares and warrants to purchase an additional 32,609 Class A common shares. All
or part of the warrants may be exercised from time to time during the period
beginning on June 1, 2000 and ending on May 31, 2003 at an exercise price of
US$10.00 per share. The exercise price and the number of shares covered by the
warrant are subject to adjustment in the event of stock splits, stock dividends
and similar dilutive events described in the warrant.
The Class A common shares were sold to AMRO International, S.A. for a
purchase price of US$4.75 per share. Under the terms of the agreement governing
the sale of these shares, this purchase price may be adjusted at the option of
AMRO International, S.A. during the period ending on November 28, 2000 in the
event that the average of the bid prices for 20 consecutive trading days is less
than US$5.938 per share. This adjustment in the purchase price is to be made in
accordance with a formula set forth in the agreement. We are required to satisfy
the adjusted purchase price by issuing additional Class A common shares, unless
we would be required to issue more than 902,424 Class A common shares (including
common shares issued upon exercise of the warrants by AMRO International, S.A.).
In that event, we can satisfy the purchase price adjustment by a cash payment.
EQUITY LINE OF CREDIT
OVERVIEW
Sundowner Investments and we signed a common share purchase agreement dated
May 26, 2000 for the future issuance and purchase of our Class A common shares.
The transaction closed on June 1, 2000. The common share purchase agreement
establishes what is sometimes called an equity line of credit. In general, it
operates in the following manner. Sundowner Investments Limited has committed to
purchase up to US$30,000,000 of our Class A common shares over a 12 month
period. Once every 22 trading days, we may request a draw down of up to
US$3,000,000 of that money, subject to a formula based on the volume-weighted
average price and average trading volume of our Class A common shares. At the
end of a 22 day trading period following our draw down request, we and Sundowner
Investments Limited will calculate the amount of money that Sundowner
Investments Limited will provide to us and the number of shares we will issue to
Sundowner Investments Limited in return for that money, based upon the formula
in the common share purchase agreement.
Sundowner Investments Limited will receive a ten percent (10%) discount to
the volume weighted average market price for the 22 day period and we will
receive the amount of the draw down less an escrow agent fee of US$1,500 and a
six percent (6%) cash placement fee to the placement agent, Ladenburg Thalmann &
Co. Inc. Ladenburg Thalmann & Co. Inc. is not required to purchase any of our
shares, but as an additional placement fee, we have issued to Ladenburg Thalmann
& Co. Inc. warrants to purchase 182,278 Class A common shares at an exercise
price of $5.6781 per share. We have also issued to Sundowner Investments Limited
warrants to purchase 182,278 of our Class A common shares at an exercise price
of US$5.6781 per share. The Class A common shares issuable upon exercise of
those warrants is included in the registration statement of which this
prospectus is a part. In addition, the remainder of the shares being
registered may be offered for sale from time to time during the period the
registration statement remains effective, by or for the accounts of the
selling shareholders identified in
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this prospectus.
The facility is based on a "use-it-or-lose-it" principle. We are under no
obligation to request a draw for any period. However, if we do not request a
draw for a given period, we may never to be able to draw those funds again. We
may make up to a maximum of twelve (12) draws; however, the aggregate total of
all draws cannot exceed US$30,000,000 and no single draw can be less than
US$250,000 or more than US$3,000,000.
Based on a review of our trading volume and stock price history and the
number of drawdowns we estimate making, we are registering 6,857,142 Class A
common shares for possible issuance under the common share purchase agreement
and 364,556 shares underlying the warrants for common shares delivered to
Sundowner Investments Limited and Ladenburg Thalmann & Co. Inc. The listing
requirements of The Nasdaq National Market prohibit us from issuing 20% or more
of our issued and outstanding common shares in a single transaction if the
shares may be issued for less than the greater of market value or book value.
Based on shares of common stock issued and outstanding on June 1, 2000, the date
of closing of the common share purchase agreement, we may not issue more than
1,867,999 shares under the common share purchase agreement, the Sundowner
Investments warrant and the Ladenburg Thalmann warrant, without the approval of
our shareholders. Because 364,556 of these shares are committed to the Sundowner
Investments warrant and the Ladenburg Thalmann warrant, if we wish to draw
amounts under the common share purchase agreement which would cause an issuance
of more than 1,503,443 shares under the common share purchase agreement, we must
receive shareholder approval prior to any such drawdown.
THE DRAWDOWN PROCEDURE AND SHARE PURCHASES
We may request a drawdown by faxing a drawdown notice to Sundowner
Investments, stating the amount of the drawdown we wish to exercise and the
minimum threshold price, if any, at which we are willing to sell the shares. The
next 22 trading days immediately following the drawdown notice are used to
determine the actual amount of money Sundowner Investments will provide and the
number of shares we will issue in return. The 23rd trading day is the drawdown
exercise date when the amount of the draw and the number of shares to be issued
are calculated and delivered based on the formulas below.
AMOUNT OF THE DRAWDOWN
The amount of the drawdown is the amount we have requested, except that the
amount is capped based on the following formula:
o Average daily trading volume for the 45 trading days immediately prior
to the date we give notice of the drawdown, multiplied by 22;
multiplied by
o The average of the volume-weighted average daily prices for the 22
trading days immediately prior to the date we give notice of the
drawdown;
multiplied by
o 20%.
20
<PAGE>
If the volume-weighted average daily price for any given trading day is
below the threshold price set by us in the drawdown notice during the 22 trading
days immediately following the date we give notice, then the drawdown amount
that Sundowner is obligated to pay us is correspondingly reduced by 1/22 for
each day that is below the threshold price. Thus, if the daily price for a day
is below the threshold price we will not issue any shares and Sundowner will not
purchase any shares for that day.
NUMBER OF SHARES
To determine the number of shares we must issue in connection with a
drawdown, take 1/22 of the draw down amount and for each of the 22 trading days
immediately following the date we give notice of the drawdown, divide it by 90%
of the volume-weighted average daily trading price of our common stock on such
date. The 90% accounts for Sundowner's 10% discount. The sum of these 22 daily
calculations produces the number of common shares we will issue, unless the
volume-weighted average daily price for any given trading day is below the
threshold amount, in which case that day is not part of the sum.
The delivery of the requisite number of shares and payment of the draw will
take place through an escrow agent, Epstein, Becker & Green, P.C. of New York.
The escrow agent pays 94% of the draw to us -- after subtracting its escrow fee
-- and 6% to Ladenburg Thalmann & Co. Inc., our placement agent, in satisfaction
of placement agent fees. Only one drawdown can occur during this 22-day draw
down period
NECESSARY CONDITIONS BEFORE SUNDOWNER IS OBLIGED TO PURCHASE OUR SHARES
Our ability to require Sundowner Investments Limited to purchase our Class
A common shares is subject to certain conditions and limitations, including, but
not limited to, the following:
o the registration statement, of which this prospectus is a part, must
have been declared effective by the Securities and Exchange Commission
and remain effective as of the date of the sale;
o our representations and warranties to Sundowner Investments Limited
must be true and correct as of the date of the sale;
o we must have performed our obligations under the common shares
purchase agreement;
o no statute, rule, regulation, executive order, decree, ruling, or
injunction shall exist which prohibits the transactions under the
common share purchase agreement;
o no action, suit, or proceeding shall have been commenced, and no
governmental investigation shall have been threatened seeking to
restrain, prevent, or change the transactions under the common share
purchase agreement or seeking damages in connection with those
transactions;
o trading of our Class A common shares shall not have been suspended by
the Securities and Exchange Commission or our principal market
(currently The Nasdaq National Market);
21
<PAGE>
o there shall not exist on the date of the sale any adverse effect on
our business, operations, properties, or financial condition that is
material to us and our subsidiaries or anything that would materially
interfere with our ability to perform our obligations to Sundowner
Investments Limited;
o we shall not have effected any merger or consolidation with another
company or transferred substantially all of our assets to another
company
o there may be no more than 12 sales to Sundowner Investments Limited
under the common share purchase agreement; and
o each sale must be for US$250,000 or more, but no more than
US$3,000,000.
Sundowner Investments Limited has the right to review this registration
statement and our records and properties to obtain information about us and the
accuracy of this registration statement and prospectus.
We cannot assure you that we will satisfy all conditions required to sell
our shares under the common share purchase agreement.
RESTRICTIONS ON FUTURE FINANCINGS
The common share purchase agreement limits our ability to raise money by
selling our securities for cash at a discount to the market price until the
earlier of 12 months from the effective date of the registration statement of
which this prospectus is a part or the date which is 60 days after Sundowner has
purchased the number of shares it is required to purchase under the agreement
and we can no longer make drawdowns.
There are exceptions to this limitation for securities sold in the
following situations:
o in a registered public offering which is underwritten by one or more
established investment banks;
o in one or more private placements where the purchasers do not have
registration rights;
o pursuant to any presently existing or future employee benefit plan
which plan has been or is approved by our stockholders;
o pursuant to any compensatory plan for a full-time employee or key
consultant; o in connection with a strategic partnership or other
business transaction, the principal purpose of which is not simply to
raise money; and
o a transaction to which Sundowner Investments gives its written
approval.
COSTS OF CLOSING THE TRANSACTION
At the closing of the transaction on June 1, 2000, we paid the escrow
agent, Epstein Becker &
22
<PAGE>
Green P.C., $35,000 for subsequent payment to Ladenburg Thalmann & Co. Inc. for
its expenses. Ladenburg Thalmann also received warrants to purchase 182,278
Class A common shares at an exercise price of US$5.6781 per share. Ladenburg
Thalmann is not obligated to purchase any of our shares pursuant to the
warrants.
TERMINATION OF THE COMMON SHARE PURCHASE AGREEMENT
Sundowner Investments may terminate the equity draw down facility under the
common share purchase agreement if any of the following events occur:
o We suffer a material adverse change in our business, operations,
properties, or financial condition;
o Our common shares are delisted from The Nasdaq National Market unless
such delisting is in connection with the listing of such shares on the
Nasdaq SmallCap Market, the New York Stock Exchange, or the American
Stock Exchange; or
o We file for protection from creditors.
INDEMNIFICATION OF SUNDOWNER INVESTMENTS
Sundowner Investments is entitled to customary indemnification from us for
any losses or liabilities suffered by it based upon material misstatements or
omissions from the registration statement and the prospectus, except as they
relate to information supplied by Sundowner to us for inclusion in the
registration statement and prospectus.
We have filed a registration statement, of which this prospectus forms a
part, to permit Sundowner Investments Limited to resell the Class A common
shares it purchases from us under the common shares purchase agreement and any
Class A common shares it receives upon the exercise of its warrant.
LADENBURG THALMANN & CO. INC. WARRANTS
On June 1, 2000, we issued to Ladenburg Thalmann & Co. Inc. warrants to
purchase 32,608 Class A common shares. All or part of the warrants may be
exercised from time to time during the period beginning on June 1, 2000 and
ending on May 31, 2003 at an exercise price of US$5.678 per share. The exercise
price and the number of shares covered by the warrant are subject to adjustment
in the event of stock splits, stock dividends and similar dilutive events
described in the warrant. These warrants were issued to Ladenburg Thalmann & Co.
Inc. in connection with the private placement transaction with AMRO
International S.A described above.
On June 1, 2000, we issued to Ladenburg Thalmann & Co, Inc. warrants to
purchase 182,278 Class A common shares at an exercise price of US$5.678 prior
to June 1, 2003. The exercise price and the number of shares covered by the
warrant are subject to adjustment in the event of stock splits, stock
dividends and similar dilutive events described in the warrant. These
warrants were issued to Ladenburg Thalmann & Co. Inc. as placement agent for
the sale of Class A common shares to Sundowner Investments Limited.
23
<PAGE>
APPOINTMENT OF NEW PRESIDENT OF U.S. SUBSIDIARY
On February 1, 2000, Jerome Shattner became the President of our wholly
owned United States subsidiary, Sand Technology Systems, Inc. Mr. Shattner was
one of the founders of LGS Group, a computer consulting company, and of Sand. He
was an officer of Sand from the early 1980s until Sand formed a joint venture in
Canada with National Advanced Systems Inc. in 1987. At that time, Mr. Shattner
was appointed President of NAS Canada Inc. which was subsequently renamed
Hitachi Data Systems Inc. He held that position until the end of 1999. Mr.
Shattner's experience in building a direct sales organization during his years
with Hitachi Data Systems Inc. will be valuable to us as we seek to increase our
sales in the United States.
NASDAQ NOTICE
By letter dated June 12, 2000, NASDAQ provided us with notice that it
had determined that we no longer met the minimum US$4,000,000 net tangible
assets requirement for continued listing on the Nasdaq National Market based
upon our financial condition as of April 30, 2000. The letter also indicated
that NASDAQ's staff was reviewing our eligibility for continued listing on
the Nasdaq National Market. Since that date we have provided the staff with a
variety of information with respect to our plans and this offering. As of
July 31, 2000 we met the minimum US$4,000,000 net tangible assets
requirement. However, there is no assurance that The Nasdaq Stock Market,
Inc. will not take action to delist our Class A common shares from the
National Market. Nor is there any assurance that we would be able to satisfy
the criteria for listing our Class A common shares on the Nasdaq SmallCap
Market in the event our shares were delisted from the National Market.
The delisting of our shares from the National Market would result in a
significantly less active market for our Class A common shares. You could
find it more difficult to dispose of your shares than if our Class A common
shares were listed on the National Market. Any inability to have our shares
listed on the National Market or SmallCap Market would permit Sundowner
Investments Limited to terminate the equity line of credit described in this
prospectus.
24
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the Class A common shares will be received
directly by the selling shareholders. We will not receive any of those proceeds.
However, we will receive the sale price from any sale of our Class A common
shares to Sundowner Investments Limited under the common share purchase
agreement. As determined under the agreement, the sale price will be 90% of the
daily volume weighted average price of our shares over the 22 trading days prior
to the date of the sale. We will also receive the proceeds, if any, from the
exercise of the warrants granted to AMRO International, S.A, Sundowner
Investments Limited, and Ladenburg Thalmann & Co. Inc.. All proceeds from the
sale of Class A common shares under the common shares purchase agreement and
warrants will be used for general corporate purposes. We will bear the expenses
relating to this registration other than discounts and commissions, which will
be paid by the selling shareholder. The costs of this offering are estimated to
be approximately US$131,558.31.
SELLING SHAREHOLDERS
The Class A common shares offered under this prospectus are being sold
for the account of the selling shareholders named in the following table. The
table also contains information relating to the selling shareholders'
beneficial ownership of our Class A common shares as of June 23, 2000, and as
adjusted to give effect to the sale of the shares. To our knowledge, the
selling shareholders have not held any position or office and have not had
any material relationship or material arrangement with us or any parties
related to us within the past three years.
The "Number of Shares to be Sold" and "Shares Owned After Offering" columns
assume no sales are effected by the selling shareholders during the offering
period other than those registered under this registration statement.
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Issuable from Number of
Owned Prior to Exercise of Shares to Shares Owned
Name of Selling Shareholder Offering Warrants be Sold(1) After Offering
--------------------------- -------- -------- ---------- --------------
<S> <C> <C> <C> <C>
Sundowner Investments Limited(1) 0 182,278 7,039,420 0
AMRO International, S.A.(2) 315,789 32,609 348,398 0
Ladenburg Thalmann & Co. Inc. 214,896 214,896 0
</TABLE>
(1) Assumes that all shares acquired pursuant to the common share purchase
agreement and warrant issued to Sundowner Investments Limited in connection
with the agreement are sold pursuant to this prospectus and based upon the
upon the high and low reported price of the Registrant's shares on June 21,
2000.
(2) Consists of 315,789 Class A common shares presently held by AMRO
International S.A. and 32,609 Class A common shares issuable upon exercise
of the warrant issued to AMRO International S.A in connection with its
purchase of Class A common shares.
25
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders and their pledgees, donees, transferees and other
subsequent owners, may offer their shares at various times in transactions on
the NASDAQ National Market System or in privately negotiated transactions. Sales
may be made at prevailing market prices at the time of sale, at prices related
to those prevailing market prices, at negotiated prices or at fixed prices. The
selling shareholders may also sell the shares under Rule 144 instead of under
this prospectus if Rule 144 is available for those sales. If any Class A common
shares are transferred to any pledgee or donee, such person will be named in a
supplement to this prospectus as a selling shareholder.
The transactions in the Class A common shares covered by this prospectus
may be effected by one or more of the following methods:
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o purchases by a broker or dealer as principal, and the resale by that broker
or dealer for its account under this prospectus, including resale to
another broker or dealer;
o block trades in which the broker or dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal in
order to facilitate the transaction; or
o negotiated transactions between selling shareholders and purchasers
without a broker or dealer.
Sundowner Investments Limited is an underwriter with respect to any
shares sold by it. The other selling shareholders and any broker-dealers or
other persons acting on the behalf of parties that participate in the
distribution of the shares may also be deemed to be underwriters. Any
commissions or profits they receive on the resale of the shares may be deemed
to be underwriting discounts and commissions under the Securities Act.
As of the date of this prospectus, there is no agreement, arrangement or
understanding between any broker or dealer and any of the selling shareholders
with respect to the offer or sale of the common shares registered under this
prospectus.
We have advised the selling shareholders that during the time they are
engaged in distributing shares covered by this prospectus, they must comply
with the requirements of the Securities Act and Rule 10b-5 and Regulation M
under the Exchange Act. Under those rules and regulations, they:
o may not engage in any stabilization activity in connection with our
securities;
o must furnish each broker which offers common shares covered by this
prospectus with the number of copies of this prospectus which are required
by each broker; and
o may not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under the
Securities Exchange Act of 1934.
A prospectus supplement will be prepared and filed each time we make a draw
down under the
26
<PAGE>
common share purchase agreement with Sundowner Investments Limited,
disclosing the number of shares purchased and the price paid. The price at
which we will issue our Class A common shares to Sundowner under the common
share purchase agreement will be 90% of the volume-weighted average daily
price for each day in the pricing period with respect to each drawdown
request. Assuming we use the entire US$30,000,000 of financing available
under the common share purchase agreement, the underwriting compensation for
Sundowner based upon the discounted price will be $3,000,000, plus warrants
to purchase 182,278 Class A common shares at an exercise price of $5.6781.
We have agreed to bear the expenses incident to the registration of the
shares, other than selling discounts and commissions.
27
<PAGE>
DESCRIPTION OF SECURITIES
Our equity capital consists of one class of stock - Class A common
shares, without par value. We are authorized to issue an unlimited number of
Class A common shares. On July 31, 2000, we had issued and outstanding
9,627,145 Class A common shares. On that date, there were an additional
1,391,773 Class A common shares reserved for the following possible future
issuances:
o 429,773 Class A common shares upon exercise of warrants at a prices ranging
from US$5.68 to US$10.00 per share; and
o 962,000 Class A common shares upon exercise of options and similar
arrangements held by directors, officers, employees and consultants at
prices ranging from US$0.69 to US$8.63 per share.
The holders of our Class A common shares are entitled to receive dividends
if, as and when declared by our board of directors out of funds legally
available therefor.
The holders of our Class A common shares are entitled to one vote for each
Class A common share held at all meetings of our shareholders. The CANADA
BUSINESS CORPORATIONS ACT provides that the rights and provisions attached to
any class of shares may not be modified, amended or varied unless consented to
by special resolution passed by a majority of not less than two-thirds of the
votes cast in person or by proxy by holders of shares of that class. Our By-laws
provide that a quorum of shareholders is present at our annual or special
meeting of shareholders, irrespective of the number of persons actually present
at the meeting, if the holders of not less than ten per cent (10%) in number of
the outstanding shares of Sand carrying voting rights are present in person or
represented by proxy.
There are no limitations on the right of non-resident or foreign owners to
hold or vote the Class A common shares under Canadian legislation or our
organizational documents. Under the CANADA BUSINESS CORPORATIONS ACT, a majority
of our directors must be Canadian residents.
We are a resident of Canada under the INCOME TAX ACT (Canada) and any
dividends paid by us to non-residents of Canada are subject to withholding. The
general rate of withholding tax on dividends paid by a company to non-residents
is 25% unless reduced by tax treaty.
Under the present Canada-United States Income Tax Convention (1980), as
amended, if the non-resident does not carry on business in Canada through a
permanent establishment or if the Class A common shares are not effectively
connected with a permanent establishment, the rate of withholding tax is reduced
to:
o 5% if the beneficial owner is a company residing in the United States which
owns at least 10% of our voting stock; and
o 15% in all other cases.
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<PAGE>
Upon consummation of this offering, our executive officers and directors,
together with entities affiliated with such individuals, will beneficially own
approximately 34.71% of our Class A common shares. Arthur G. Ritchie, our
Chairman of the Board, President and Chief Executive Officer and a director of
Sand, will beneficially own approximately 22.54% of Sand's Class A common
shares, and his wife, Susan Waxman, Vice-President, Finance & Administration of
Sand, will beneficially own approximately 0.43% of Sand's Class A common shares.
Jerome Shattner, President of one of our United States subsidiaries, will
beneficially own approximately 11.56% of our Class A common shares. These
shareholders may, as a practical matter, continue to be able to control the
election of a majority of Sand's directors and the determination of all
corporate actions after this offering. This concentration of ownership could
have the effect of delaying or preventing a change in control of Sand.
LEGAL MATTERS
The validity of the Class A common shares offered in this prospectus will
be passed upon for us by Lavery, de Billy, General Partnership, Montreal,
Quebec, Canada. Georges Dube, a partner in Lavery, de Billy, is a director of
Sand and beneficially owns 3,000 Class A common shares. Certain matters under
United States law will be passed upon for us by Buchanan Ingersoll Professional
Corporation, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements, including the related notes to
those statements, as of, and for the fiscal years ended July 31, 2000, 1999
and 1998 have been incorporated by reference in this prospectus and elsewhere
in the registration statement in reliance on the report of Deloitte & Touche,
independent chartered accountants, and upon the authority of said firm as
experts in accounting and auditing.
The Reconciliation of Financial Statements to United States Generally
Accepted Accounting Principles in Accordance with Item 18 of Form 20-F has been
included herein in reliance upon the report of Deloitte & Touche, independent
chartered accountants, appearing below, and upon the authority of said firm as
experts in accounting and auditing.
29
<PAGE>
CLASS A COMMON SHARES
SAND TECHNOLOGY INC.
PROSPECTUS
________ ___, 2000
30
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which we will pay in
connection with the issuance and distribution of the securities being registered
on this registration statement. The selling shareholders will not incur any of
the expenses set forth below. All amounts shown are estimates in United States
Dollars.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $10,558.31
Legal Fees and Expenses $78,000.00
Accounting Fees and Expenses $29,000.00
Miscellaneous Expenses $14,000.00
-----------
Total $131,558.31
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the CANADA BUSINESS CORPORATIONS ACT (the "CBCA") and our By-Laws, we
are permitted to indemnify our directors and officers, former directors or
officers or a person who acts or acted at our request as a director or officer
of another company, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment if (1) such director or officer
acted honestly and in good faith with a view to the best interests of Sand and
(2) in the case of a criminal or administrative action, the director or officer
had reasonable grounds for believing that his or her conduct was lawful.
The right to indemnification is more limited, however, in the event
directors and officers are sued by Sand or on its behalf by a shareholder of
Sand. In those cases, Sand may, with the approval of a court, indemnify a
director or officer against all costs, charges and expenses but not the amount
of the judgment or settlement of an action, provided that such director or
officer fulfils the conditions of (1) and (2) above. A director or officer must
be indemnified for costs, charges and expenses if such director or officer is
substantially successful on the merits in his or her defense and fulfils the
conditions of (1) and (2) above.
Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to directors and officers and persons controlling Sand,
Sand understands that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the said Act and is, therefore,
unenforceable.
Sand maintains directors' and officers' liability insurance with an
aggregate policy coverage of US$2,000,000 in each policy year, subject to a
corporate reimbursement deductible of US$100,000 per loss except for losses
resulting from securities legislation when the deductible is US$200,000 for
indemnifiable claims for wrongful acts by insured persons. In addition, Sand has
entered into
31
<PAGE>
indemnification agreements with its directors and executive officers under which
Sand is required, among other things, to indemnify such directors and executive
officers against certain liabilities and associated expenses arising from their
service with Sand and to reimburse certain related and other expenses
substantially as permitted by the CBCA.
Currently, there is no pending litigation or proceeding where a current or
past director, officer or employee is seeking indemnification, nor are we aware
of any threatened litigation that may result in claims for indemnification.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
<S> <C>
2.1+ Common Share Purchase Agreement dated May 26, 2000 between Registrant and
Sundowner Investments Limited
2.2+ Registration Rights Agreement dated May 26, 2000 between Registrant and
Sundowner Investments Limited
2.3+ Escrow Agreement dated May 26, 2000 between
Registrant, Sundowner Investments Limited, and Epstein Becker & Green, P.C.
2.4+ Letter Agreement dated March 15, 2000 between Registrant and Ladenburg
Thalmann & Co. Inc.
2.5+ Share Purchase Warrant dated May 30, 2000 issued to Sundowner Investments Limited
2.6+ Share Purchase Warrant dated May 30, 2000 issued to Ladenburg Thalmann & Co.
Inc. (182,278 shares)
2.7+ Common Shares and Warrants Purchase Agreement dated May 24, 2000 between the Registrant
and AMRO International, S.A.
2.8+ Registration Rights Agreement dated May 24, 2000 between the Registrant and AMRO International,
S.A.
2.9+ Escrow Agreement dated May 24, 2000 between the Registrant, AMRO International, S.A., and
Epstein, Becker & Green, P.C.
2.10+ Share Purchase Warrant dated May 24, 2000 issued to AMRO International, S.A.
2.11+ Share Purchase Warrant dated May 24, 2000 issued to Ladenburg Thalmann & Co. Inc.
(32,608 shares)
2.12+ Amendment to Common Share Purchase Agreement dated June 26, 2000 between the Registrant
and Sundowner Investments Limited
2.13* Agreement with Nucleus International Corporation dated July 31, 2000
3.1** Articles of Incorporation, as amended on December 20, 1996 and December 31, 1996
3.2+ Amendment to Articles of Incorporation dated January 1, 2000
5.1+ Opinion of Lavery de Billy as to legality of securities
10.1*** Sand Technology Systems International Inc. 1996 Stock Option Plan
10.2**** Sand Technology Systems International Inc. 1998 Stock Incentive Plan
11.1* Statement detailing computation of per share earnings
21.1* Subsidiaries
23.2 Consent of Deloitte & Touche
23.3 Consent of Lavery, de Billy (included in Exhibit 5.1)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
24.1+ Powers of Attorney of certain directors and officers of Sand Technology Inc.
99.1+ Form 20-F for the fiscal year ended July 31, 1999
99.2+ Form 6-K dated November 22, 1999 (financial information for fiscal quarter
ended October 31, 1999)
99.3+ Form 6-K dated March 15, 2000 (financial information for fiscal quarter
ended January 31, 2000)
99.4+ Form 6-K/A dated May 17, 2000
99.5+ Form 6-K dated June 6, 2000 (financial information for fiscal quarter
ended April 30, 2000)
99.6+ Management Proxy Circular for Shareholder Meeting dated December 17, 1999
(not incorporated by reference into the registration statement)
99.7+ 1999 Annual Report (filed solely for the information of the Commission and not
incorporated by reference into the registration statement)
</TABLE>
-----------
+ Previously filed
* Incorporated by reference from the registrant's Form 20-F for July 31,
2000
** Incorporated by reference from the registrant's Form 20-F for July 31,
1996
*** Incorporated by reference from the registrant's Form S-8 (333-7462)
**** Incorporated by reference from the registrant's Form S-8 (333-8538)
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424 (b) if, in the aggregate the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) To file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 at the start of any
delayed offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a) (3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a) (4) and other information
33
<PAGE>
necessary to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a post-effective
amendment need not be filed to include financial statements and information
required by Section 10(a) (3) of the Act or Rule 3-19 of this chapter if such
financial statements and information are contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer of controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement at the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to which the prospectus is sent or
given, the registrant's latest filing on Form 20-F, Form 40-F, or Form 10-K, and
any filing on Form 10-Q, Form 8-K or form 6-K incorporated by reference into the
prospectus.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Sand
Technology Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form F-2 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Westmount,
Province of Quebec, Canada, on the 13th day of October, 2000.
SAND TECHNOLOGY INC.
By: /s/ Arthur G. Ritchie
--------------------------------
Name: Arthur G. Ritchie
Title: President and Chief Executive Officer
35
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Arthur G. Ritchie
--------------------------------------------
Arthur G. Ritchie President and Chief Executive October 13, 2000
Officer and Chairman of the
Board (principal executive officer)
*
--------------------------------------------
Susan Waxman Chief Financial Officer October 13, 2000
(principal financial and accounting
officer)
*
--------------------------------------------
Georges Dube Director October 13, 2000
*
--------------------------------------------
Josephine Munroe Director October 13, 2000
*
--------------------------------------------
Martin Shindler Director October 13, 2000
*
--------------------------------------------
George Wicker Director October 13, 2000
</TABLE>
----------
* By Arthur G. Ritchie, Attorney-in-Fact
36
<PAGE>
