SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ending September 30, 2000
Commission File Number 0-16423
SAN Holdings, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-0907969
(State of incorporation) (I.R.S. Employer ID Number)
900 W. Castleton Road, Suite 100, Castle Rock, CO 80104
(Address of principal executive offices) (zip code)
(303) 660-3880
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of Securities Exchange Act of 1934
during the preceding 12 months (or for such a shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of November 14, 2000, 9,221,152 common shares, no par value per share, were
outstanding.
<PAGE>
SAN Holdings, Inc.
(formerly Citadel Environmental Group, Inc.)
INDEX
Part I FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets, December 31, 1999 and
September 30, 2000 (Unaudited) 3
Consolidated Income Statement for the Three Months
Ended September 30, 1999 and 2000 (Unaudited) 5
Consolidated Income Statement for the Nine Months
Ended September 30, 1999 and 2000 6
Consolidated Statement of Stockholders' Equity for the
Nine Months Ended September 30, 2000 (Unaudited) 7
Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1999 and 2000 (Unaudited) 8
Notes to Unaudited Consolidated Financial Statements 9
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default on Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Part III SIGNATURES 16
Exhibit 27
2
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED BALANCE SHEET
December 31, 1999 and September 30, 2000
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
1999 2000
---- ----
<C> <S> <S>
Current assets:
Cash and cash equivalents $2,789,170 $ 357,706
Certificate of deposit (Note 3) - 1,000,000
Accounts receivable, less allowance for doubtful
accounts of $326,987 (1999) and $20,000 (2000) 4,156,227 5,999,649
Notes receivable (Note 6) - 261,836
Inventory - 582,053
Prepaid expenses 32,271 108,192
Investment securities available for sale (Note 5) - 1,995,070
Income taxes receivable - 35,830
Deferred income taxes (Note 4) 66,000 -
---------- -----------
Total current assets 7,043,668 10,340,336
Property and equipment:
Furniture and fixtures 15,311 400,211
Office equipment 6,108 252,654
Leasehold improvements 2,491 2,491
---------- -----------
23,910 655,356
Less accumulated depreciation and amortization 1,770 210,067
---------- -----------
Net property and equipment 22,140 445,289
Other assets:
Goodwill, net of accumulated amortization of
$107,384 (Note 2) - 2,578,964
Cost of purchased contracts, less accumulated
amortization of $120,000 (1999) and $180,000 (2000) 380,000 320,000
Deposits 2,000 2,000
---------- -----------
Total other assets 382,000 2,900,964
---------- -----------
$7,447,808 $13,686,589
========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED BALANCE SHEET
December 31, 1999 and September 30, 2000
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 2000
---- ----
<C> <S> <S>
Current liabilities:
Accounts payable $3,837,162 $ 3,000,034
Income taxes payable (Note 4) 85,253 -
Accrued expenses 452,125 444,808
Accrued expenses - related parties 195,000 402,500
Deferred revenue (Note 6) - 123,035
Short-term notes payable - related party 50,000 -
Short-term notes payable (Notes 2 and 3) - 1,006,298
---------- -----------
Total current liabilities 4,619,540 4,976,675
Long-term debt:
Long-term debt (Note 2) - 215,000
Deferred income taxes payable (Note 4) 6,000 -
---------- -----------
Total long-term debt 6,000 215,000
Stockholders' equity (Note 2):
Preferred stock; no par value, 10,000,000 shares
authorized:
Preferred AA stock; 1,550,800 shares (1999) and
no shares (2000) issued and outstanding 2,042,985 -
Preferred AAA stock; 133,600 shares (1999) and
no shares (2000) issued and outstanding 352,000 -
Common stock; no par value, 25,000,000 shares
authorized, issued and outstanding: 3,800,000 shares
(1999) and 9,221,152 shares (2000) 364,505 9,788,277
Retained earnings 62,778 (1,293,363)
---------- -----------
Total stockholders' equity 2,822,268 8,494,914
---------- -----------
$7,447,808 $13,686,589
========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months ended September 30, 2000
(Unaudited)
September 30, September 30,
1999 2000
---- ----
Revenues $1,453,290 $ 5,173,333
Cost of revenues 1,117,031 3,812,984
---------- -----------
Gross profit 336,259 1,360,349
General and administrative expenses 355,558 2,789,278
Amortization of goodwill - 46,176
---------- -----------
Income (loss) from operations (19,299) (1,475,105)
Other income (expense):
Interest expense (15,786) (30,908)
Interest income 66,586 22,803
---------- -----------
Total other income (expenses) 50,800 (8,105)
---------- -----------
Income before income taxes 31,501 (1,483,210)
Income taxes 11,813 (9,777)
---------- -----------
Net income (loss) $ 19,688 $(1,473,433)
========== ===========
Basic earnings per common share $ 0.01 $ (0.17)
========== ===========
Diluted earnings per common share $ 0.01 $ (0.17)
========== ===========
See accompanying notes.
5
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months ended September 30, 1999 and 2000
(Unaudited)
September 30, September 30,
1999 2000
---- ----
Revenues $7,800,348 $12,453,375
Cost of revenues:
Cost of revenues 6,844,183 9,737,278
Settlement of disputed payable - (477,572)
---------- -----------
Total cost of revenues 6,844,183 9,259,706
---------- -----------
Gross profit 956,165 3,193,669
General and administrative expenses 751,896 4,407,142
Amortization of goodwill - 107,384
---------- -----------
Income (loss) from operations 204,269 (1,320,857)
Other income (expense):
Interest expense (37,324) (105,234)
Interest income 84,533 129,950
---------- -----------
Total other income (expenses) 47,209 24,716
---------- -----------
Income before income taxes 251,478 (1,296,141)
Income taxes 94,304 60,000
----------- -----------
Net income (loss) $ 157,174 $(1,356,141)
=========== ===========
Basic earnings per common share $ 0.05 $ (0.19)
=========== ===========
Diluted earnings per common share $ 0.04 $ (0.19)
=========== ===========
See accompanying notes.
6
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Retained
AA Preferred stock AAA Preferred stock Common stock earnings
Shares Amount Shares Amount Shares Amount (deficit)
------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 1,550,800 $2,042,985 133,600 $ 352,000 3,800,000 $ 364,505 $ 62,778
Stock issued in reorganization
with Citadel (Note 2) - - - 951,789 (18,337) -
Issuance of stock to CoComp
(Note ) - - - 88,888 153,332 -
Issuance of Series AA preferred
stock (Note 2) 1,134,526 1,530,291 - - - - -
Issuance of Series AAA preferred
stock (Note 2) - - 363,734 898,350 - - -
Sale of common stock in a private
placement - - - - 170,667 515,001 -
Exercise of stock warrants - - - - 912,148 3,547,650 -
Conversion of Series AA and
Series AAA preferred stock
to common (2,685,326) (3,573,276) (497,334) (1,250,350) 3,182,660 4,823,626 -
Issuance of common stock for
acquision of Value Tech (Note 2) - - - - 115,000 402,500 -
Net loss for the nine months
ended September 30, 2000 - - - - - - (1,356,141)
---------- ---------- -------- ---------- --------- ---------- ----------
Balance, September 30, 2000 - $ - - $ - 9,221,152 $9,788,277 $(1,293,363)
=========== ========== ========= ========== ========= ========== ===========
</TABLE>
See accompanying notes.
7
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months ended September 30, 1999 and 2000
(Unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
1999 2000
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 157,174 $(1,356,141)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,000 300,109
Deferred income taxes - 60,000
Changes in assets and liabilities:
Accounts receivable (459,531) (2,182,069)
Inventory 1,144 (427,071)
Prepaid expenses (22,391) (33,881)
Accounts payable 463,039 (1,821,674)
Income taxes payable 94,304 (121,083)
Accrued expenses 82,423 53,683
Deferred revenue - 123,035
--------- -----------
Total adjustments 160,988 (4,048,951)
---------- -----------
Net cash provided by (used in) operating
activities 318,162 (5,405,092)
Cash flows from investing activities:
Purchase of property and equipment (21,575) (448,616)
Purchase of certificate of deposit - (1,000,000)
Purchase of contract (500,000) -
Notes receivable - (261,836)
Acquisition of CoComp - (1,817,510)
Acquisition of Value Tech - (220,000)
--------- ----------
Net cash used in investing activities (521,575) (3,747,962)
Cash flows from financing activities:
Proceeds from issuance of preferred stock - 2,428,641
Stock and warrant proceeds - 4,062,651
Proceeds from short-term borrowings 500,000 1,025,000
Payments on notes payable (25,000) (794,702)
--------- ----------
Net cash provided by financing activities 475,000 6,721,590
--------- ----------
Net increase (decrease) in cash and cash
equivalents 271,587 (2,431,464)
Cash and cash equivalents at beginning of period 224,963 2,789,170
--------- ----------
Cash and cash equivalents at end of period $ 496,550 $ 357,706
========= ==========
See accompanying notes.
</TABLE>
8
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
1. Basis of presentation
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of Management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. The results of operations for
any interim period are not necessarily indicative of results for the year.
These statements should be read in conjunction with the financial statements
and related notes included in the Company's Annual Report to shareholders on
Form 10-KSB/A for the year ended December 31, 1999, and Forms 8-K relating to
the acquisition of Storage Area Networks, Inc. and Co Comp, Inc.
Upon completion of the reverse acquisition between SAN and Citadel, SAN
previously had a year end of November 30 and has changed its year end to
December 31 effective December 31, 1999.
2. Changes in securities
On January 7, 2000, the Company acquired 100% of the outstanding stock
of Storage Area Networks, Inc. (SAN), a data storage solutions and
services business, by issuing 3,800,000 shares of the Company's Series BB
convertible preferred stock to the shareholders of Storage Area Networks.
The shares of Series BB preferred stock were converted into 3,800,000
shares of common stock on March 10, 2000. The share exchange with SAN has
been treated as a reverse acquisition for accounting purposes with SAN as
the acquirer of Citadel Environmental Group, Inc. for 631,789 shares of
common stock. A finders fee equal to 320,000 shares of the Company's common
stock was issued on March 10, 2000. Following the closing of this
acquisition the Company issued 1,134,526 and 363,734 shares of Series AA and
Series AAA convertible preferred stock for $1.50 and $3.00 per share,
respectively, generating net proceeds of $2,428,641 (net of offering costs of
$364,350).
On January 21, 2000, in exchange for $1,079,000 in cash, $951,000
in promissory notes and 88,888 shares of Citadel common stock valued
at $153,332, Citadel acquired all the outstanding stock of Co Comp, Inc.,
a provider of data storage systems and services based in Colorado. The
notes are payable $251,000 on June 30, 2000, $500,000 on January 21,
2001 and $200,000 on January 21, 2002, including interest at 12% per
annum. The Citadel common shares were to be issued within 15 days from the
effective date of the proposed 1 for 36 reverse stock split. The Company
also paid $408,000 in dividends to the prior owners of Co Comp in January
2000, prior to the acquisition and $408,729 under an earn out provision
to the former shareholders of Co Comp. As of June 30, 2000, the Company is
contingently liable for an additional $56,271 under the earn out provision.
In connection with this transaction, the Company recorded goodwill
of $2,065,748, which is being amortized over 15 years, the period estimated
by management to be benefited.
9
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
2. Changes in securities (continued)
On March 1, 2000, the shareholders of the Company approved a 1 for 36
common stock reverse split. All numbers of shares have been adjusted to
reflect the reverse split.
During March and April, 2000, the Company completed a private placement
of 170,667 shares of common stock with a third party for net proceeds
of $515,001 (net of offering costs of $55,000). The agreement provides
common stock warrants with an exercise price of $9.00 per share and
expiring in three periods: 200,000 in December, 2000, 400,000 in June, 2001,
and 400,000 in December, 2001.
On April 4, 2000, all of the outstanding Series AA and AAA preferred
stock were converted into common stock at the rate of one share of common
stock for each preferred share.
Between March and September 2000, the Company received net proceeds
of $3,547,650 from the exercise of warrants to purchase 912,148 shares of
common stock.
On June 27, 2000, the Company purchased the business of Value
Technologies, Inc. for $130,000 in cash and 115,000 shares of common
stock valued at $402,500 ($3.50 per share). If the closing bid price of the
Company's stock is below $15 anytime during the 20 days prior to December
31, 2000, the Company agreed to issue 28,750 additional shares of its
common stock in this transaction. The Company also entered into a two year
employment agreement with an employee of Value Technologies, Inc. which
calls for the payment of salary and commissions. The Company has agreed
to issue this individual 15,000 options to purchase common stock of the
Company at the closing bid price of the stock on the date of closing of the
agreement. The options vest one-half at the end of each year of employment
under the agreement. The agreement calls for substantial payments if the
employee is terminated without cause. The Company incurred costs and
finders fees of $90,000. The assets recorded included $1,900 of equipment and
goodwill of $620,600.
Unaudited results of operations of Value Technologies, Inc. are as follows:
Six months Year ended
Ended June 30, December 31,
2000 1999
------------- -----------
Revenues $1,692,418 $4,135,273
Cost of sales 1,515,258 3,767,764
Gross profit 177,160 367,509
Net income (loss) before income taxes (4,364) 243,493
10
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
2. Changes in securities (continued)
Stock option plan:
On March 1, 2000, shareholders of the Company approved the 2000
Incentive Stock Option Plan. The total number of shares of common stock
subject to options under the 2000 Plan may not exceed 1,500,000.
On June 9, 2000, the Company issued 15,000 options to directors of
the Company. The options are exercisable for five years at $10.82 per share.
3. Note payable
On March 16, 2000, the Company borrowed $1,000,000 from a bank
payable $86,500 monthly including interest at 6.9% with the balance due on
March 10, 2001, secured by a certificate of deposit. As of September 30, 2000,
the loan balance was $506,298.
4. Income taxes
As of December 31, 1999 and June 30, 2000, total deferred tax assets
and valuation allowance are as follows:
1999 2000
---- ----
Deferred tax asset $ 66,000 $597,300
Deferred tax liability (6,000) (20,000)
Valuation allowance - (577,300)
-------- --------
Net deferred tax asset $ 60,000 $ -
======== ========
5. Settlement of accounts receivable
During the quarter ended March 31, 2000, the Company settled a
delinquent account receivable with a book value of $1,995,070 (net of
related bad debt reserve) for common stock of another company. In addition,
the customer has agreed upon the payment of certain other obligations
to another of its vendors, to redeem the shares held by the Company at $.35
per share before September 28,2000, at the greater of $.52 per share or the
then current market price on or after September 28, 2000. Proceeds from the
customer's (1) sale of a division, (2) 50% of net earnings or (3) 50%
of any capital contributions or loans are to be used to redeem the shares.
The market value of the stock held at September 30, 2000 was $1,162,825.
Therefore, the value of the recorded asset is subject to change should the
financial condition of the customer deteriorate.
11
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
6. Notes receivable
During the quarter ended March 31, 2000, the Company sold equipment to
XS Data Solutions, Inc. (XSDS) for $3,261,939. The Company has tried to
assist XSDS in securing lease financing but without success. During the
quarter ended June 30, 2000, the Company advanced XSDS $215,331 evidenced by
a note receivable due June 26, 2001 bearing interest at the rate of 10% per
annum. XSDS also entered into a note for the payment of the $3,261,939
amount invoiced due June 30, 2001 bearing interest at the rate of 10% per
annum. The Company has deferred the potential revenue of $468,935 on this
transaction. During the quarter ended September 30, 2000, the Company
advanced XSDS an additional $150,000 and received a refund of leasing
fees incurred of $103,495 resulting in a loan balance of $261,836. During
the quarter ended September 30, 2000, the Company received a $700,000 payment
from XSDS and the sale of equipment was reclassified from a note
receivable to an account receivable.
7. Commitments
During the quarter ended September 30, 2000, the Company entered into
various leases for office space. As of September 30, 2000, the Company
had the following lease commitments.
2001 $224,695
2002 231,967
2003 198,387
2004 64,390
--------
$719,439
========
12
<PAGE>
SAN HOLDINGS, INC.
(formerly Citadel Environmental Group, Inc.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
In the fiscal quarter ended September 30, 2000, the Company was primarily
engaged in the development of its data storage solutions business. The
Company plans to expand sales and grow by acquisition of similar data storage
services businesses as detailed in its Form 10-KSB for the period ended
December 31, 1999.
RESULTS OF OPERATIONS
The historical reporting for the year ended 1999 is inclusive of Storage
Area Networks only. These values are the un-audited results of the single
company and are provided for presentation purposes only. While the financial
data is accurate, the strategic direction, market position and prospects of
SANS HOLDING, after the combination of Citadel, SAN, CoComp, and Value
Technology, are markedly different from that of any of these companies as
individually operated.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1999
Revenues for the three-month period ended September 30, 2000, were
$5,173,333 as compared to $1,453,290 for the three months ended September 30,
1999. Revenue for the current three months was impacted by: (1) the
repositioning of product mix of the acquired companies and (2) the disruptions
associated with integrating the businesses and personnel of Citadel, SAN and
CoComp,and Value Technology.
The cost of revenues for the three months ended September 30, 2000, were
$3,812,984 as compared to $1,117,031 for the three months ended September 30,
1999. The gross profit increased to 26.30% for the period ended September 30,
2000 from the 23.14% gross profit for 1999. Higher gross profit margins are
due to favorable changes in product and service mix.
General and administrative expenses for the three months ended September
30, 2000, were $2,789,278, or 53.92% of revenues, as compared to $355,558, or
24.47% of revenues, for the three months ended September 30, 1999. The
September 2000 figure includes a one-time charge of $420,000 for severance
costs associated with management restructuring. The increase in general and
administrative expenses reflects the emphasis placed on increasing the number
and experience of the engineering support function. The Company believes that
its investment in broad engineering competence is and will be a major
competitive advantage.
Other income decreased to $(8,105) in the three months ended September
30, 2000, as compared to $50,800 in the prior year due to the decreased cash
balance of the Company.
13
<PAGE>
The Company had a net loss before tax of $(1,483,210) in the three months
ended September 30, 2000, compared to net income before tax of $31,501 in the
three months ended September 30, 1999. The decrease is attributable to both
an increase in general and administration costs, a one time charge for
severance costs associated with management restructuring, as well as the
adjustment to product mix and disruptions associated with integrating business
and personnel.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1999
Revenues for the nine-month period ended September 30, 2000, were
$12,453,375 as compared to $7,800,348 for the nine months ended September 30,
1999. Revenue for the current nine months was directly affected by the
repositioning of product mix after the acquisition of Value Technology, Inc.
into Citadel, SAN and CoComp.
The costs of revenues for the nine months ended September 30, 2000, were
$9,737,278 as compared to $6,844,183 for the nine months ended September 30,
1999. This resulted in an increase in gross profit margin for the period
ended September 30, 2000 of 21.81% compared to 12.26% in the prior year.
Higher gross profit margins are due to favorable changes in product and
service mix. This analysis ignores the one time settlement of a disputed
payable in the amount of $477,572.
General and administrative expenses for the nine months ended September
30, 2000, were $4,407,142 as compared to $751,896 for the nine months ended
September 30, 1999. The September 2000 includes a one-time charge of $420,000
for severance costs associated with management restructuring. The increase in
general and administrative expenses reflects the emphasis placed on increasing
the number and experience of the engineering support function.
Other income in the nine months ended September 30, 2000 decreased to
$24,716 as compared to $47,209 in the prior year due a decrease in the cash
balance of the Company.
The Company had a net loss before tax of $(1,296,141) in the nine months
ended September 30, 2000, compared to net income before tax of $251,478 in the
nine months ended September 30, 1999. The decrease is attributable to the
increase in general and administrative expenses costs, a one time charge for
severance costs associated with management restructuring, as well as the
adjustment to product mix and disruptions associated with integrating business
and personnel.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $5,363,661 at September 30, 2000, as
compared to $2,424,128 at December 31, 1999. The increase in working capital
was primarily due to the proceeds from the sale of the preferred stock and
exercise of warrants during the nine months ended September 30, 2000.
During the nine months ended September 30, 2000, cash used in operating
activities was $(5,405,092) compared to cash provided of $318,162 for the nine
months ended September 30, 1999. The primary reason for the large increase in
cash used in operating activities was the $2,182,069 increase in accounts
receivable, and the $427,071 increase in inventory, offset by a decrease in
accounts payable of $1,821,674 and a net loss of $1,356,141.
14
<PAGE>
Cash used in investing activities during the nine months ended September
30, 2000, was $(3,747,962) as compared to $(521,575) during the nine months
ended September 30, 1999. During the nine months ended September 30, 2000,
the Company paid $1,817,510 for CoComp, Inc., purchased a $1,000,000
certificate of deposit, advanced $261,836 to XS Data Solutions, Inc, and paid
$220,000 for Value Technology.
Cash provided by financing activities during the nine months ended
September 30, 2000, was $6,721,590 as compared to $475,000 for the comparable
period in 1999. The Company received $3,547,650 from the exercise of common
stock warrants and $1,025,000 from short-term loans in the nine months ended
September 30, 2000, less payments of $794,702 on the notes payable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
During the period from March through August 2000, the Company received
$3,547,650 in net proceeds from the exercise of 912,148 outstanding warrants.
The warrants were exercised by overseas and U.S. accredited investors pursuant
to the exemption provided by Section 4(2) and Rule 506. Each warrantholder
completed a subscription form in which he represented that he was purchasing
the shares for investment only and not for the purpose of resale or
distribution.
ITEM 3. DEFAULTS OF SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K dated June 28, 2000, related
to the acquisition of Value Technology, Inc., which reported on Items 2 and 7.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SAN HOLDINGS, INC.
By:/s/ Catherine Shrode
Date: November 16, 2000 Catherine Shrode, Chief Financial
Officer
16
