VLKAY » Topics » 7- DUE TO A SHAREHOLDER

This excerpt taken from the VLKAY 20-F filed Dec 7, 2009.

7- DUE TO A SHAREHOLDER

During the fiscal year 2009, the Corporation obtained an additional loan from a significant shareholder who is also the President and Chief Executive Officer. Under the loan agreement, a maximum of $250,000 of funds is available. As at July 31, 2009, an amount of $188,532 was used and is repayable within 30 days of the receipt of a written demand from the shareholder. The loan bears interest at 15% and it is payable on the last business day of each calendar month.

During the fiscal year 2008, the Corporation obtained a loan from a significant shareholder who is also the President and Chief Executive Officer. Under the loan agreement, a maximum of $400,000 of funds is available. As at July 31, 2009, an amount of $68,995 is outstanding and is repayable within 30 days of the receipt of a written demand from the shareholder. The loan bears interest at 15% and it is payable on the last business day of each calendar month.

During the fiscal year 2007, the Corporation received a loan from a significant shareholder who is also the President and Chief Executive Officer. The loan originated from amounts owed by the Company to the shareholder by virtue of his employment contracts. As at July 31, 2009, an amount of $1,605,616 was outstanding and repayable within 90 days of the receipt of a written demand from the shareholder. The loan bears interest at 15% and it is payable on the last business day of each calendar month. As well, as part of his employment contract, he is entitled to a bonus based on the gross revenues resulting from the licensing, sale or other disposition of Nucleus software. As at July 31, 2009, an amount of $153,582 was outstanding.

In conjunction with the ratification of the loan agreement formalized in 2007, the Corporation also issued 103,061 warrants, each warrant entitling the significant shareholder to purchase one class "A" common share of the Corporation at a price of US$0.44 per share and each warrant being valid for the term of the agreement. (Please see Note 9 for additional information.) The residual valuation method was used to allocate the proceeds between the liability component and the equity component. The value of the liability component was determined to be the face value of the debt because there is no maturity date and by difference, the value of the equity instrument was determined to be nil.

During the fiscal year 2008, an inter-creditor priority agreement was signed when the Corporation issued the secured convertible debentures described in Note 8. The parties agreed that the sums owing under the debentures will be paid by the Corporation to debenture holders and the trustee in priority to the sums owing by the Corporation to the principal shareholder subject to the fact that for each $2 paid to the debenture holders, the Corporation shall remit $1 to the principal shareholder as repayment for the sums representing the principal amount only.

F-15



SAND Technology Inc.
Notes to Consolidated Financial Statements
July 31, 2009
(In Canadian dollars, unless otherwise noted)
 
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