<Page>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 20-F

     [   ]     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

     [ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                         THE SECURITIES EXCHANGE ACT OF 1934

     For the fiscal year ended July 31, 2006

                                       OR

     [   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                         THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

     [   ]     SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

     Date of event requiring this shell company report_______________________

     Commission file number :  0-14884

                              SAND TECHNOLOGY INC.
              (FORMERLY SAND TECHNOLOGY SYSTEMS INTERNATIONAL INC.)
           (Exact name of the registrant as specified in its charter)

                                     CANADA
                         (Jurisdiction of Incorporation)

                          215 REDFERN AVENUE, SUITE 410
                        WESTMOUNT, QUEBEC, CANADA H3Z 3L5
                    (Address of principal executive offices)

                            TELEPHONE (514) 939-3477

     Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

     Securities registered pursuant to Section 12(g) of the Act:

                              CLASS A COMMON SHARES

     Securities for which there is a reporting obligation pursuant to
     Section 15(d) of the Act:

                                      NONE

     Indicate the number of outstanding shares of each of the issuer's classes
     of capital or common stock as of the close of the period covered by the
     annual report.

                       CLASS A COMMON SHARES - 12,818,189

     Indicate by check mark if the registrant is a well-known seasoned issuer,
     as defined in Rule 405 of the Securities Act


                 Yes _____                             No __X__


                                       1


<page>


     If this report is an annual or transition report, indicate by check mark if
     the registrant is not required to file reports pursuant to Section 13 or
     15(d) of the Securities Exchange Act of 1934.

                 Yes _____                             No __X__

     Indicate by check mark whether the registrant: (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such 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 _____


     Indicate by check mark whether the registrant is a large accelerated filer,
     an accelerated filer, or a non-accelerated filer.


     Large accelerated filer __  Accelerated __  Non-accelerated filer __X__
                                 filer

     Indicate by check mark which financial statement item the registrant has
     selected to follow.

                 Item 17 _____                         Item 18 __X__

     If this report is an annual report, indicate by check mark whether the
     registrant is a shell company.

                  Yes ____                              No __X__


                                       2


<page>


                                Table of contents
<Table>
<Caption>

<S>     <C>           <C>                                                                                    <C>
PART I.........................................................................................................4
         ITEM 1.       IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS...................................4
         ITEM 2.       OFFER STATISTICS AND EXPECTED TIMETABLE.................................................4
         ITEM 3.       KEY INFORMATION.........................................................................4
         ITEM 4.       INFORMATION ON THE COMPANY.............................................................17
         ITEM 4 A.     UNRESOLVED STAFF COMMENTS..............................................................23
         ITEM 5.       OPERATING AND FINANCIAL REVIEW AND PROSPECTS...........................................23
         ITEM 6.       DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.............................................32
         ITEM 7.       MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS......................................43
         ITEM 8.       FINANCIAL INFORMATION..................................................................44
         ITEM 9.       THE OFFER AND LISTING..................................................................45
         ITEM 10.      ADDITIONAL INFORMATION.................................................................46
         ITEM 11.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................58
         ITEM 12.      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.................................58

PART II.......................................................................................................59
         ITEM 13.      DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES........................................59
         ITEM 14.      MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS...........59
         ITEM 15.      CONTROLS AND PROCEDURES................................................................62
         ITEM 16 A.    AUDIT COMMITTEE FINANCIAL EXPERT.......................................................62
         ITEM 16 B.    CODE OF ETHICS.........................................................................63
         ITEM 16 C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.................................................63
         ITEM 16 D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.............................64
         ITEM 16 E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.................64

PART III......................................................................................................65
         ITEM 17.      FINANCIAL STATEMENTS...................................................................65
         ITEM 18.      FINANCIAL STATEMENTS...................................................................65
         ITEM 19.      EXHIBITS...............................................................................93
</Table>

                                       3

<page>



            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements contained in this Annual Report on Form 20-F are
"forward-looking statements" within the meaning of the United States Securities
Act of 1933 and of the United States Securities Exchange Act of 1934. The
forward-looking statements are intended to be subject to the safe harbour
protection provided by these Acts. We have based these forward-looking
statements on our current expectations and projections about future results,
levels of activity, events, trends or plans. Such forward-looking statements are
not guarantees and are subject to known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Sand Technology Inc.("SAND") to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "guidance", "may", "will", "should", "could", "would",
"expect", "plan", "anticipate", "believe", "estimate", "continue", or the
negative of such terms or other similar expressions. All forward-looking
statements included in this discussion are based on current expectations and on
information available to us on March 12, 2007. For a more detailed discussion of
these risks and uncertainties and other business risks, see Item 3 - "Risk
Factors" and Item 5 - "Trend Information". Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
the date made. Except as required by applicable laws, we do not intend to
publish updates or revisions of any forward-looking statement we make to
reflect new information, future events or otherwise.

                                     * * *

     SAND Technology, N-Vector, Sandonline and Nucleus are registered
trademarks, and SAND/DNA, SAND/DNA Access, SAND DNA Analytics, SAND Dynamic
Nearline Access, SAND Dynamic Nearline Analytics, SAND Dynamic Nearline
Architecture, SAND Analytic Server, SAND Searchable Archive and all related SAND
- and Nucleus-based marks and designs are trademarks of Sand Technology Inc. All
other trademarks are the property of their respective owners. All other product
and service names mentioned are the trademarks of their respective companies.


                                     PART I

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

            Not Applicable

ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

            Not Applicable

ITEM 3.     KEY INFORMATION



                                       4
<Page>


A.  SELECTED FINANCIAL DATA

     Our audited consolidated financial statements for the 2006 fiscal year and
the notes relating to them (the "Financial Statements"), which are included at
Item 18 are presented in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). The monetary figures throughout this Annual Report
on Form 20-F are presented consistent with Canadian GAAP except where otherwise
indicated.

     The following data expressed in Canadian dollars are derived from the
Financial Statements that have been audited by our auditors Raymond Chabot Grant
Thornton LLP for the fiscal year ended July 31, 2006 and Deloitte & Touche LLP
for the fiscal years ended July 31, 2005, July 31, 2004, July 31, 2003 and
July 31, 2002. The information set forth below is not necessarily indicative of
the results of future operations and should be read in conjunction with, and is
qualified in its entirety by, the Financial Statements found elsewhere in this
Annual Report on Form 20-F.

<Table>
<Caption>

                                           (Dollars in Thousands (000's) except for Per Share Data and Rates of Exchange)
                                                                          FISCAL YEAR ENDED
                                         ----------------------------------------------------------------------------------
                                             7/31/06          7/31/05         7/31/04           7/31/03          7/31/02
                                         --------------   --------------   --------------   --------------   --------------
                                               CA                CA              CA                CA               CA
<S>                                       <C>               <C>             <C>               <C>            <C>
Rates of exchange
   At period end - US$                       $1.13             $1.22            $1.33             $1.40           $1.58
   Average for the period                    $1.15             $1.24            $1.34             $1.50           $1.57

Results of Operations
   Revenue                                  $5,477            $6,096           $5,349           $31,683         $13,922
   Research and Development Costs          ($2,442)          ($3,272)         ($3,309)          ($3,311)        ($4,888)
   Selling, General and Administrative
   Expenses                                ($5,221)          ($8,318)         ($7,605)         ($16,582)       ($16,033)
   Amortization                              ($248)            ($277)           ($242)          ($1,077)        ($1,505)
   Cost of Sales and Product Support       ($1,554)          ($1,754)         ($1,652)         ($12,510)        ($6,474)
   Loss from operations                    ($3,988)          ($7,525)         ($7,459)          ($1,797)       ($14,978)

Other Income (Expense)                         $61              $162             $329             ($167)           $166

Equity and Gain on Sale of
   Subsidiaries                                                                                 $11,757

Net Income (Loss)                          ($3,927)          ($7,363)         ($7,130)           $9,793        ($14,812)

Financial Position
   Working Capital                            $484            $4,205          $11,523           $19,133          $7,562
   Total Assets                             $3,445            $7,935          $15,991           $24,026         $15,528
   Total Liabilities                        $2,508            $3,100           $3,632            $4,344          $5,584
   Shareholders' Equity                       $937            $4,835          $12,359           $19,682          $9,944

Basic and diluted earnings (Loss)           ($0.31)           ($0.57)          ($0.55)            $0.74          ($1.12)
   per Share
Weighted Average Number of Shares
outstanding during each period (000's)      12,818            12,860           13,080            13,189          13,186

</Table>


The same data, presented in conformity with US GAAP, is shown on the next page.



                                       5
<Page>


<Table>
<Caption>


                                           (Dollars in Thousands (000's) except for Per Share Data and Rates of Exchange)
                                                                         FISCAL YEAR ENDED
                                         ----------------------------------------------------------------------------------
                                             7/31/06          7/31/05         7/31/04           7/31/03          7/31/02
                                         --------------   --------------   --------------   --------------   --------------
                                               CA                CA              CA                CA               CA
<S>                                       <C>               <C>             <C>               <C>            <C>
Rates of exchange
   At period end - US$                        $1.13            $1.22            $1.33            $1.40             $1.58
   Average for the period                     $1.15            $1.24            $1.34            $1.50             $1.57

Results of Operations
   Revenue                                   $5,477           $6,096           $5,349          $31,683           $13,922
   Research and Development Costs           ($2,442)         ($3,272)         ($3,309)         ($3,311)          ($4,888)
   Selling, General and Administrative
   Expenses                                 ($5,419)         ($8,318)         ($7,605)        ($16,582)         ($16,033)
Amortization                                  ($248)           ($277)           ($242)         ($1,077)          ($1,505)
   Cost of Sales and Product Support        ($1,554)         ($1,754)         ($1,652)        ($12,510)          ($6,474)
   Loss from Operations                     ($4,186)         ($7,525)         ($7,459)         ($1,797)         ($14,978)

Other Income (Expense)                          $61             $162             $329            ($167)             $166

Equity and Gain on Sale of
   Subsidiaries                                                                                $11,757

Net Income (Loss)                           ($4,125)         ($7,363)         ($7,130)          $9,793          ($14,812)

Financial Position
   Working Capital                             $484           $4,205          $11,523          $19,133            $7,562
   Total Assets                              $3,445           $7,935          $15,991          $24,026           $15,528
   Total Liabilities                         $2,508           $3,100           $3,632           $4,344            $5,584
   Shareholders' Equity                        $937           $4,835          $12,359          $19,682            $9,944

Basic and diluted earnings (Loss)
    per Share                                ($0.32)          ($0.57)          ($0.55)           $0.74            ($1.12)

Weighted Average Numbers of Shares
   outstanding during each period (000's)    12,818           12,860           13,080           13,189            13,186
</Table>



Canadian Equivalent of U.S. $1.00
<Table>
<Caption>

Month Ended                                               High                                     Low
-----------                                               ----                                     ---

<S>                                                    <C>                                     <C>
February 28, 2007                                      $ 1.1855                                $ 1.1591
January 31, 2007                                       $ 1.1827                                $ 1.1636
December 31, 2006                                      $ 1.1654                                $ 1.1403
November 30, 2006                                      $ 1.1473                                $ 1.1290
October 31, 2006                                       $ 1.1404                                $ 1.1152
September 30, 2005                                     $ 1.1287                                $ 1.1045
August 31, 2006                                        $ 1.1307                                $ 1.1053
July 31, 2006                                          $ 1.1413                                $ 1.1068
</Table>



                                       6
<Page>


<Table>
<Caption>
                                                   Year Ended July 31
                          ---------------------------------------------------------------------
                           2006            2005           2004            2003            2002
                          ------          ------         ------          ------          ------

<S>                        <C>            <C>             <C>             <C>             <C>
Average                    $1.15          $1.24           $1.34           $1.50           $1.57
</Table>

On March 12, 2007, the exchange rate was CDN $1.1702 for U.S.$1.00.


B.  CAPITALIZATION AND INDEBTEDNESS

          Not applicable.


C.  REASONS FOR THE OFFER AND USE OF PROCEEDS

          Not applicable.


D.  RISK FACTORS

     In addition to the other information in this Report, the following factors
should be considered in evaluating SAND and our business. The risks and
uncertainties described below are not the only ones facing us. Additional risks
and uncertainties of which we are not presently aware or that we currently
consider immaterial, may also impair our business, our operating results and
financial condition.

RISKS ASSOCIATED WITH OUR FINANCIAL RESULTS

o    WE HAVE NOT BEEN PROFITABLE IN FOUR OUT OF OUR LAST FIVE FISCAL YEARS AND
     WE HAVE SOLD SOME LIQUID INVESTMENTS AND ASSETS TO FUND OUR OPERATIONS.

     Because we have not been profitable in four out of our last five fiscal
years, we have had to fund our losses through a combination of sales of liquid
investments and assets. We incurred losses of $14,812,001 in the fiscal 2002,
$7,129,930 in fiscal 2004, $7,363,054 for the fiscal year ended July 31, 2005
and $3,926,921,for the fiscal year ended July 31, 2006. Although, fiscal year
2003 was profitable, the profit was due to the gain from the sale of
ClarityBlue, which amounted to $11,757,280. Had we not sold ClarityBlue, we
would have shown a loss of $1,964,199. We expect to continue to incur losses in
the near future and possibly longer. Although our expenses materially decreased
as a result of the sale of ClarityBlue, so did our revenue base and additional
efforts will have to be made to grow our sales force and build our marketing
efforts to address the North American and international markets as well as other
specific markets in order to achieve future sales growth. If our efforts are not
successful in continuing to create additional revenues, we may


                                       7
<Page>


be unable to achieve profitability in the future.

     We expect to continue to incur substantial operating expenses in the
foreseeable future in relation to our revenue base and our operating results
will be adversely affected if our revenues do not increase. We must, among other
things, continue to develop 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.

o    WE NEED ADDITIONAL CAPITAL TO FUND OUR OPERATIONS

     We need to raise additional capital to fund our operating expenses.
Additional capital may not be available to us due to the many risks inherent in
an investment in our securities. Additional equity financing, if available, will
likely be dilutive to our shareholders and any additional equity securities may
have rights, preferences and privileges senior to those of the holders of Class
A common shares.


o    OUR DIFFICULTY IN ACCURATELY FORECASTING 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 are not meaningful and that 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. When the
market price of a company's stock drops significantly, shareholders often
institute securities class action 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

o    BECAUSE WE ARE NOW SEEKING TO SECURE EFFECTIVE PARTNERSHIPS WITH SYSTEMS
     INTEGRATORS AND APPLICATION VENDORS, IT MAY BE DIFFICULT FOR YOU TO
     EVALUATE OUR BUSINESS AND ITS PROSPECTS.

     Your evaluation of our business is more difficult because we are moving to
secure effective partnerships with systems integrators and application vendors
which may take some time to mature into predictable revenue producers. Our
prospects are difficult to predict and may change rapidly. You should consider
the risks, expenses and difficulties that we may encounter or incur as a company
now operating in a 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.



                                       8
<Page>



o    WE PLAN TO FURTHER DEVELOP OUR DIRECT SALES FORCE.

     Though we plan to continue to sell our products through a distribution
network of value-added resellers, resellers and distributors located in the
United States, Canada, the United Kingdom and Germany, direct sales will still
play an important role in developing important reference accounts in new
markets. 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, turnover among our sales force tends to slow sales efforts until
replacement personnel are recruited and trained. We may not be able to attract
and retain the sales and marketing personnel we desire, 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.

o    WE DEPEND ON KEY 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. During 2006 we
suffered the loss of a key executive Jerome Shattner, our former Executive
Vice President and director. We believe that our future success will depend
in large part upon our ability to attract and retain highly skilled
managerial, engineering, sales and marketing, and finance personnel.
Competition for qualified personnel remains 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. The loss of the services of any of
our other 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.

o    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 many companies are not yet
fully aware of the benefits of enterprise-wide business intelligence solutions,
nor have such companies yet deployed business intelligence solutions on an
enterprise-wide basis. Accordingly, the sales cycle associated with the purchase
of our SAND/DNA Analytics products and our SAND/DNA Acces 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 including, in some instances, approval by the board of directors of
the customer. Based in part upon, among other things, our lengthy sales cycle,
the timing of sales is



                                       9
<Page>



difficult to predict and our earnings and operating results could vary
significantly from quarter to quarter during our current fiscal year. As a
result of the long sales cycle, it may take us a substantial amount of time to
generate revenue from our sales effort.

o    WE MUST CONTINUE TO MAINTAIN AND GROW OUR INDIRECT SALES CHANNELS.

     Our success in maintaining our indirect channels, value-added resellers,
resellers and distributors is important to our ability to achieve revenue growth
and improved operating margins on product sales. Despite the fact that we
continue to invest significant resources to develop our indirect channels, we
may not be able to continue to attract and retain additional companies in our
indirect channels that will be able to market our SAND/DNA Analytics products
and SAND/DNA Access products effectively and will be qualified to provide timely
and cost-effective customer support and services. In addition, our agreements
with companies in our indirect channels do not restrict such companies from
distributing competing products, and in many cases, these agreements may be
terminated by either party without cause. We may not be able to successfully
expand our sales through indirect channels, and failure to do so could have a
material adverse effect on our business, operating results and financial
condition.

o    WE OPERATE IN A HIGHLY COMPETITIVE MARKET.

     We compete in the highly competitive computer software industry as a result
of bringing our SAND/DNA Analytics products, SAND/DNA Access and more
recently our SAND/DNA for SAP BI products to market. The market in which we
operate is still developing and is intensively competitive, highly
fragmented, and characterized by rapidly changing technology and evolving
standards. Our current and potential competitors offer a variety of solutions
and generally fall within several categories:

-     vendors that offer data warehouse appliances which operate specifically
      with their proprietary platform such as Netezza, NCR Teradata and
      DAT Allego;

-     software vendors that offer products which focus on structured data
      archiving such as FileTek and PBS;

-     other companies that may in the future announce offerings of enterprise
      information management solutions.

     Our competitive position in our market is uncertain and changing due
principally to the variety of current and potential competitors and the
emerging nature of the market. With the release of SAND/DNA Access and
SAND/DNA for SAP BI, we have been able to establish ourselves as
complementary to many of the vendors that were seen as competitors with
respect to SAND/DNA Analytics. We now have offerings that complement SAP,
Oracle, IBM DB2 and Microsoft SQL warehouse. We expect additional competition
as other established and emerging companies enter into the intelligent
information management 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.

                                       10
<Page>


     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 including
systems integrators and application vendors may establish cooperative
relationships with our current or potential competitors and limit our ability to
sell products through particular distribution channels. Such competition could
have a material adverse effect on our ability to enter into new licensing
agreements, and maintenance and support renewals for existing licensing
agreements, with respect to our products. Competitive pressures could also
require us to reduce the price of our products.

     We compete primarily on the basis of product features, lower Total Cost
of Ownership (TCO), Return on Investment (ROI), time to market, ease of use,
product performance, product quality, user scalability, open architecture,
customer support and price. While we believe we presently compete favourably
with respect to each of these factors, some potential customers may be
reluctant to work with us due to our fluctuating stock price or our financial
condition.

     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.

o    AS WE EXPAND BEYOND NORTH AMERICA, WE ARE EXPOSED TO CERTAIN RISKS
     INHERENT IN DOING BUSINESS ON AN INTERNATIONAL LEVEL.

     Revenues earned outside North America are expected to remain
significant in the future. Sales to customers outside of North America,
including sales generated by our U.K. subsidiary, represented
72%, 52% and 70% of our total revenue for fiscal 2004, 2005 and 2006
respectively. We have sales offices in the United Kingdom and
Germany.

     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. We cannot assure you that one or more
of these factors will



                                       11
<Page>


not have a material adverse effect on our future international operations and,
consequently, on our business, operating results and financial condition.

o    WE CURRENTLY DEPEND ON SALES OF SAND/DNA ANALYTICS PRODUCTS AND SAND/DNA
     ACCESS PRODUCTS TO GENERATE MOST OF OUR REVENUE.

     We expect sales of our SAND/DNA Analytics products and SAND/DNA Access
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.

     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. 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. We attempt
to establish and maintain partner alliances with influential companies in a
variety of core technology areas to help us successfully respond to changing
technology, identify new product opportunities, or develop and bring new
products to market in a timely and cost-effective manner. Our failure to
establish such alliances could have a material adverse effect on our business,
operating results and financial condition.

     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. Our failure, for
technological or other reasons, to develop and introduce new products and
product enhancements on a timely basis could 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 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. 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 financial
condition.


                                       12
<Page>


o    WE DEPEND ON THE MARKET FOR ENTERPRISE BUSINESS INTELLIGENCE.

     We are focusing our selling efforts increasingly on larger, enterprise-wide
implementations of our SAND/DNA Analytics products, our SAND/DNA Access products
and our SAND/DNA Product Suite and we expect such sales to constitute an
increasing portion of any future revenue growth. To date, our selling efforts
have resulted in limited enterprise-wide implementations of our SAND/DNA
Analytics products, our SAND/DNA Access products and our SAND/DNA Product Suite.
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 the enterprise-wide implementations for business intelligence or
acceptance of our products. Failure of a significant market for enterprise
business intelligence products to fully develop, or failure of enterprise-wide
implementations of our products to achieve broad market acceptance, could have a
material adverse effect on our business, operating results and financial
condition.

o    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 when new enhancements are released, we cannot
assure you that there will be no defects or errors in new products or
enhancements in our 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, 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.

o    THERE IS LIMITED PROTECTION OF OUR PROPRIETARY RIGHTS.

     We currently rely primarily on a combination of copyright and trademark
laws, patents, trade secrets, confidentiality procedures and contractual
provisions to protect our proprietary rights. 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 eight United States
patents and thirty-two foreign patents. We cannot assure you that our patents
will not be invalidated, circumvented or challenged, or that the


                                       13
<Page>


rights granted under our patents will provide competitive advantages to us.
Others may develop technologies that are similar or superior to our technology
or design around any patent that may 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.
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. 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, we expect that in the future 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 which 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
could be materially adversely affected.

     Finally, we may rely upon certain software that we 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 terms
acceptable to us or indeed that our suppliers will continue to support their
software or 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.

o    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 BUSINESS OPPORTUNITIES.

     In order to help ensure that we would have sufficient capital to take
advantage of our core business opportunities, we have taken significant actions
to reduce our operating expenses. However, most of our operating expenses, such
as employee compensation and lease payments for facilities and equipment, are
relatively stable, and these expense levels are based in part on our
expectations regarding future revenues. As a result, any sustained shortfall in
our revenues relative to our expectations would negatively impact our operating
results. We may not have sufficient capital to fund our operations.


                                       14
<Page>


     Such outcome could adversely impact our ability to respond to competitive
pressures or could prevent us from conducting all or a portion of our planned
operations. We may need to undertake additional measures to reduce our operating
expenses in the future.

     Our consolidated financial statements have been prepared on the basis of
the going concern assumption, meaning that it is assumed that the Company
will be able to realize its assets and discharge its liabilities in the
normal course of operations.

     In light of operating losses suffered in the current and past years, the
Company's ability to realize its assets and discharge its liabilities depends on
the continued financial support of its shareholders and creditors and its
ability to obtain additional financing. We 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, the ownership
percentage of existing shareholders will be reduced. If we incur debt, the
debt will rank senior to our common shares, we will incur debt service costs
and we will likely have to enter into agreements that will restrict our
operations in some respects and our ability to declare dividends to the
holders of our common shares.

The carrying amounts of assets, liabilities, revenues and expenses presented in
the financial statements and the balance sheet classification have not been
adjusted as it would be required if the going concern assumption were not
appropriate.

RISKS WHICH MAY AFFECT THE VALUE OF OUR CLASS A COMMON SHARES

o    SHARES ELIGIBLE FOR FUTURE SALE.

     Sales of a substantial number of our Class A common shares in the public
market could adversely affect the market price for our Class A common shares.

     We are authorized to issue an unlimited number of Class A common shares, of
which 12,818,189 shares are outstanding as of March 13, 2007, and we have
reserved an additional 1,154,000 Class A common shares for future issuance. The
issuance of 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. We have granted
rights to purchase 1,154,000 Class A common shares to directors, officers,
employees and consultants upon the exercise of options at prices ranging from
US$0.69 to US$7.00 per share.

O    THE PRICE OF OUR CLASS A COMMON SHARES ON THE OTC BULLETIN BOARD IS LIKELY
     TO BE VOLATILE.

     Our Class A common shares are currently listed on the OTC Bulletin Board
("OTCBB") under the symbol SNDTF.OB.


                                       15
<Page>


Our share price, which has ranged from a low of US$0.35 to a high of US$0.85
during the past twelve months, could continue to be subject to wide
fluctuations. The volume of trading in our Class A common shares on the OTCBB
has not been substantial. As a result, even small dispositions or
acquisitions of our Class A common shares in the public market could cause
the market price to fall or increase substantially. Our share price could
also be subject to wide fluctuations in response to broad market and industry
factors, actual or anticipated variations in quarterly operating results,
volatile economic conditions, new products offered by us or our competitors,
changes in financial estimates by securities analysts and other events or
factors that may be beyond our control.

o    EXISTING STOCKHOLDERS WILL CONTINUE TO EXERCISE EFFECTIVE CONTROL OVER US

     Our senior management and directors, together with entities affiliated with
those individuals, beneficially own approximately 29.2% of our Class A common
shares. Arthur G. Ritchie, our Chairman of the Board, President and Chief
Executive Officer and a director of SAND, beneficially owns approximately 18.3%
of SAND's Class A common shares. The Estate of Jerome Shattner (Jerome Shattner
was Executive Vice President of the Company), beneficially owns 8.2% of our
Class A common shares, while George Wicker, a director of SAND, beneficially
owns 2.1% of our Class A common shares. Other senior management or directors own
approximately 0.6% 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 the directors of SAND and the determination of many corporate actions.
This concentration of ownership could have the effect of delaying or
preventing a change in control of SAND.

o    OUR ABILITY TO ISSUE CLASS B SHARES COULD MAKE IT MORE DIFFICULT FOR A
     THIRD PARTY TO ACQUIRE US TO THE DETRIMENT OF HOLDERS OF CLASS A COMMON
     SHARES.

     Our articles of incorporation provide for an unlimited number of Class B
shares which, if ever they are issued, may make it difficult for a third party
to acquire control of us, even if a change in control would be beneficial to our
shareholders. Our board has the authority to attach special rights, including
voting or dividend rights, to the Class B shares. However, the voting rights of
a Class B share cannot exceed those of a Class A common share. Class B
shareholders who possess these rights could make it more difficult for a third
party to acquire our company.

o    THE RIGHTS THAT MAY HAVE BEEN AND MAY IN FUTURE BE GRANTED TO OUR
     SHAREHOLDERS MAY ALLOW OUR BOARD AND MANAGEMENT TO DETER A POTENTIAL
     ACQUISITION OF OUR COMPANY

     Our Board of Directors adopted a shareholder rights plan which was ratified
by our shareholders on December 16, 2003. The approval of the renewal and
confirmation of the shareholder rights plan by the directors on November 21,
2005 was ratified, confirmed and approved by the shareholders at the Annual and
Special Meeting of Shareholders on December 15, 2005. Under the plan, rights to
purchase Class A common shares have been issued to holders of Class A common
shares. The rights become exercisable under certain


                                       16
<Page>

circumstances in which someone acquires 20% or more of our outstanding Class A
common shares. As a result of the plan, anyone wishing to take-over the Company
may be forced under certain circumstances to negotiate a transaction with our
Board of Directors and management or comply with certain bid criteria in order
not to trigger the exercise of rights. This could prolong the take-over process
and, arguably, deter a potential bidder.


ITEM 4.     INFORMATION ON THE COMPANY

A.  HISTORY AND DEVELOPMENT OF THE COMPANY

     SAND was incorporated on December 10, 1982 under the Canada Business
Corporations Act and carried on business under the name Sand Technology Systems
(Canada) Inc. until 1988. 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.

     Some years ago, an important part of our business was the sale and service
of mainframe peripheral products manufactured by Hitachi, Ltd. of Japan, through
Hitachi Data Systems Inc. ("HDS Canada"). HDS Canada marketed a broad range of
information processing solutions, including enterprise servers, storage
subsystems, peripheral products and professional services. SAND was the legal
and beneficial owner of 40% of the issued and outstanding shares of HDS Canada;
Hitachi Data Systems Corporation ("HDSC") of Santa Clara, California was the
legal and beneficial owner of the remaining 60%. In August 1999, SAND sold its
interest in HDS Canada to HDSC and withdrew from the mainframe computer market
and the peripheral hardware market.

     We then fully shifted our focus to the design, development, marketing and
support of software products that enable users to retrieve usable business
information from large amounts of data and to providing specialized systems
integration services related to those products. Our software products,
collectively known as the SAND/DNA Product Suite are designed to provide an
efficient and cost-effective way for business users to make fast easy inquiries
of large databases without the intervention of Information Technology
professionals, and to store that data with orders of magnitude greater and more
efficiently than what is generally possible using more traditional database
products. The SAND/DNA Analytics product, which incorporates SAND's
patent-protected Nucleus database engine and other Nucleus derived products,
facilitates the use of data mining, query, reporting and other classes of
on-line analytical applications, thereby enabling more effective management of
customer relationships, supply chains and other critical business processes. Our
products permit more timely and accurate decisions across the extended
enterprise, making "business intelligence" a key component of operational
excellence. Customers in Europe and North America now use SAND's
solutions for both analytical and operational purposes, including, amongst
others, market segmentation CRM analytics, Web analytics, Business Performance
Management and strategic planning. The addition in late 2004 of the SAND/DNA
Access product to our portfolio, itself incorporating a number of patents,



                                       17
<Page>


enhances our ability to deliver in these areas and adds capability in the
efficient storage and retrieval of large amounts of historic data, facilitating
regulatory and compliance applications.

     Initially SAND offered products primarily as part of a systems integration
model. At the end of the 2002 fiscal year, we consolidated the systems
integration portion of our business which had been growing in importance and
subsequently re-branded it with the name ClarityBlue. ClarityBlue concentrated
on developing a strong competitive practice utilizing the SAND/DNA Analytics
precursor product as an engine for its Customer Analytic offering, and was able
to attract high profile customers particularly in the Telecommunications and
Financial Services markets in the United Kingdom.

Sale of ClarityBlue

     With the growth of ClarityBlue's successes in the market place, we were
faced with ever-increasing demands for resources to fuel that growth. Often,
ClarityBlue contracts involved investment in staff and infrastructure on our
part that would only be recovered from the client over multiple years. At the
same time, while ClarityBlue was generating strong reference customers for SAND
products and proving their effectiveness as a platform for systems integrators
to competitively stage large projects - our preferred distribution channel - the
systems integration community - was wary of our "in-house" competition.

     Meanwhile, industry analysts we consulted, who understood the need for us
to initially "seed" ClarityBlue in order to provide "proof statements" of our
product capabilities, began questioning, as did our management, whether a
company of our size had the resources to both grow an integrator division and
capitalize on the opportunity presented by the growing market acceptance of the
SAND Analytic Server products.

     As a result, the decision was taken to sell the ClarityBlue division by
means of a management buyout to the management team operating ClarityBlue, which
was completed in fiscal 2003.

B.  BUSINESS OVERVIEW

     We should be viewed as a Company which has established its commitment to a
rapidly evolving industry which seeks to improve the business professional's
ability to make timely, fact-based business decisions and to help large
enterprises maintain cost-effective and timely access to enormous amounts of
data.

     Our revenues will continue to consist of license fees for software products
and fees for a range of associated services, including software maintenance and
support, training and system implementation consulting. Our plans to achieve
profitability in the future will continue to require us to devote substantial
financial resources to grow our work force, improve our infrastructure, continue
the development, the marketing and the distribution of our products, and
generally support our expanding operations.


                                       18
<Page>


Products and Services

     We have developed a unique data storage and manipulation architecture now
known as the SAND/DNA Analytics product, which allows user-driven queries on
large amounts of data to be performed efficiently and cost-effectively. This
patented breakthrough in the storage and integration of data, and in the speed
and flexibility at which data can be analyzed by business users, represents the
"next step" in the drive to empower managers across an organization by providing
them with the data they need to be better managers.


     Our SAND/DNA Analytics products, based on our patented tokenized database
engine, can best be viewed as an enterprise platform technology that enables
organizations to maximize the business value of corporate information by
supporting better business decisions through intuitive interactive data access.
The SAND/DNA Analytics products or the Nucleus products upon which they are
based, are already being used to provide fast measurable business benefits in
the retail, finance, healthcare, transportation, telecommunication,
manufacturing, government and insurance sectors. These customers, often at the
recommendation of systems integrators, are using our products in support of
strategic corporate initiatives including e-business, customer relationship
management, reporting, supply chain management, risk analysis and management,
product trend and profitability analysis, fraud detection, emerging markets,
competitive analysis and quality control. Increasingly as organizations shift
the competitive landscape from operations to intelligence, these information
intensive decisions are not stand-alone, but a core part of an integrated
information management infrastructure.

     Our SAND/DNA Analytics product incorporates a number of advanced
technologies. Its development has already required and will continue to require
substantial investment in research and development. For example, substantial
work and expenditures were required to develop the Intel-based Microsoft WIN/NT
and WIN/95 versions of Nucleus. In fiscal 1999, development work was completed
on an advanced version of the Nucleus Prototype Warehouse/Mart. The Nucleus
Massively Parallel Server Option (MPSO), a major architectural enhancement to
the Nucleus Product Suite, was made available in December 1999. During fiscal
2002, important advancements were made in the ability to quickly and efficiently
load even larger volumes of data into the SAND/DNA Analytics product and in the
ability of the SAND/DNA Analytics product to support an even wider variety of
applications by more efficient interfacing with industry-standard applications
and data extraction tools.

     In 2004, we made available Release 3.2 of our high-performance SAND
Analytic Server. Release 3.2 augmented the proven scalability and query speed of
previous versions of the Nucleus data management technology on which it is
based, by significantly enhancing the speed of loading and updating data for
analysis as well as adding further support for open industry-standard business
intelligence tools through more flexible open database connectivity. This was
followed in 2005 by a significant update to Version 4 (currently Release 4.2)
incorporating many features to allow high-performance scalability for multiple
users and huge amounts of data.



                                       19
<Page>


     In 2004, we introduced a second patent protected product, the SAND
Searchable Archive now known as the SAND/DNA Access product. This product builds
on SAND's strength in advanced data management to create a highly compressed
database for storing data that is not of immediate need to an organization but
that will be required over time for either historic analysis or regulatory or
compliance purposes, and to generally help manage the data explosion in industry
by maintaining rapid access to huge volumes of "nearline" data.

     The SAND/DNA Access product is substantially smaller than a traditional
relational database but can be searched directly by business users using
standard "business intelligence" tools. This is a breakthrough product and
technology and has particular impact on the current information technology
environment where volumes of corporate data are growing at an exponential rate.

     The SAND/DNA Access product works with data from any corporate database and
over time is suitable for version customization to support particular third
party vendors' products. During 2006, a SAND/DNA Access product received its
initial certification with the release of SAND/DNA for SAP BI.

     The SAND/DNA Product Suite incorporates a number of advanced technologies.
Their development has already required, and will continue to require,
substantial investment in research and development.

     Sales of the Company's products and services are not subject to seasonal
variations.

     Other than government regulations of general application, no government
body has specific authority to regulate the business of the Company.

Marketing and Sales

     Our corporate headquarters are located in Montreal, Canada, where we also
have development and sales resources. We have offices in Kenilworth, New Jersey
and Pasadena, California, through Sand Technology Corporation to provide for the
development, sales, marketing and distribution of the SAND/DNA product suite in
the United States.

     Our offices in the United Kingdom are located in Camberley, southwest of
London. We have an office in Hamburg, Germany, through Sand Technology
Deutschland GmbH.

     Sales to customers outside North America, including sales generated by our
U.K. subsidiary, represented 72%, 52% and 70% of our total revenue for fiscal
2004, 2005 and 2006, respectively.

     We have alliances or commercial relationships with, among others, SAP, IBM,
Sun Microsystems, Network Appliance, Total Tec, Accenture, Business Objects,
Open Text,



                                       20
<Page>

Information Builders, Atos Origin, Microsoft, Oracle, Hyperion Software,
DunnHumby, and TopEnd Solutions. The United States General Services
Administration (GSA) has officially approved the addition of the SAND Analytic
Server and the SAND Searchable Archive to a GSA Supply Schedule. In addition, we
now have marketing, sales and technical arrangements in place with a number of
recognized systems integration partners who have trained personnel in the
marketing and deployment of our products.

     Our long term direction for our high performance analytical and intelligent
information management products is to ensure that these products become a
recognized platform for advanced analytical applications and managing large data
volumes through strategic systems integration assignments. While we will
continue to a limited degree to pioneer vertical and application markets through
our own direct sales efforts, our long term distribution strategy is to engage a
network of industry-leading solutions providers, both application vendors and
systems integrators, to incorporate the SAND/DNA Product Suite as a key part of
their offering.

Competition

     We compete in the highly competitive computer software industry as a result
of bringing our SAND/DNA Analytics products, Sand/DNA Access and more recently
our SAND/DNA for SAP BI products to market. The market in which we operate is
still developing and is intensively competitive, highly fragmented, and
characterized by rapidly changing technology and evolving standards. Our current
and potential competitors offer a variety of solutions and generally fall within
several categories:

-    vendors that offer data warehouse appliances which operate specifically
     with their proprietary platform such as Netezza, NCR Teradata and
     DATAllego;

-    software vendors that offer products which focus on structured data
     archiving such as FileTek and PBS;

-    other companies that may in the future announce offerings of enterprise
     information management solutions.

     Our competitive position in our market is uncertain and changing due
principally to the variety of current and potential competitors and the emerging
nature of the market. With the release of SAND/DNA Access and SAND/DNA for SAP
BI we have been able to establish ourselves as complementary to many of the
vendors that we were seen as competitors with respect to SAND/DNA Analytics. We
now have offerings that complement SAP, Oracle, IBM DB2, and Microsoft SQL
warehouses. We expect additional competition as other established and
emerging companies enter into the intelligent information management 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.

                                       21
<Page>


     We compete primarily on the basis of product features, lower Total Cost of
Ownership (TCO), Return On Investment (ROI), time to market, ease of use,
product performance, product quality, user scalability, open architecture,
customer support and price. While we believe we presently compete favourably
with respect to each of these factors, our market is evolving at a rapid pace.

Proprietary Rights

     In 1994, SAND acquired all the rights, title and interest in the Nucleus
Database Engine Subsystem. In addition to trademarks, trade names and other
proprietary rights, these interests included patents related to bit vector
compression and boolean operation processing capability.

     In October 1997, SAND acquired the Advanced Technology Group of XDB
Systems, Inc. as well as the rights to the source code of Quantum Leap. Quantum
Leap was designed to provide a more flexible architecture for customization and
incorporation of new technology quickly and effectively using small footprint
engines.

     The Company has been issued eight United States patents and thirty-two
foreign patents which provide protection for the SAND Analytic Server and the
SAND Searchable Archive which incorporate the Nucleus database engine and other
Nucleus derived products.

     The Company has also filed applications in accordance with the Patent
Cooperation Treaty (the "PCT"). The PCT is a multilateral treaty that was
concluded in Washington in 1970 and entered into force in 1978. It is
administered by the International Bureau of the World Intellectual Property
Organization (the "WIPO"), headquartered in Geneva, Switzerland. The PCT
facilitates the obtaining of protection for inventions where such protection is
sought in any or all of the PCT contracting states. It provides for the filing
of one patent application (the "international application"), with effect in
several contracting states, instead of filing several separate national and/or
regional patent applications. At the present time, an international application
may include designation for regional patents in respect of contracting states
party to regional patent treaties. The PCT does not eliminate the necessity of
prosecuting the international application in the national phase of processing
before the national or regional offices, but it does facilitate such prosecution
in several important respects by virtue of the procedures carried out first on
all international applications during the international phase of processing
under the PCT. The formalities check, the international search and (optionally)
the international preliminary examination carried out during the international
phase, as well as the automatic deferral of national processing which is
entailed, give the applicant more time and a better basis for deciding whether
and in what countries to further pursue the application.

     The Company holds registered trademarks and trademarks. SAND Technology and
Nucleus are registered trademarks, and Nucleus Server, N:VECTOR, Nucleus
Exploration Warehouse, Nucleus Exploration Mart, Nucleus Exploration Data
Warehouse, Nucleus Octopus, SAND Online and MPSO are registered trademarks of
Sand


                                       22
<Page>

Technology Inc. and Nucleus Virtual Database (VDB), NUCLEUS POWERED!, Nucleus
Adviser, SAND Analytic Server, SAND Searchable Archive, SAND/DNA, SAND Analytic
Warehouse, SAND/DNA Access, SAND/DNA Analytics, SAND Dynamic Nearline Access,
SAND Dynamic Nearline Analytics, SAND Dynamic Nearline Architecture, See what's
on the Horizon, analytics @ the speed of business, and all related SAND and
Nucleus-based marks and designs are trademarks of Sand Technology Inc.


C.  ORGANIZATIONAL STRUCTURE

     The Company owns and controls the following active subsidiaries and Sand
Technology Ireland Limited owns 100% of the voting securities of Sand Technology
Deutschland GmbH, an entity existing under the laws of Germany, and of Sand
Technology Limited, a company existing under the laws of England:

<Table>
<Caption>

                                                                               PERCENTAGE OF VOTING
                     SUBSIDIARY             JURISDICTION OF INCORPORATION         SECURITIES HELD
                     ----------             -----------------------------      --------------------
<S>                                                <C>                               <C>
       Sand Technology Corporation                    Delaware                         100%

       STSI Licensing, LLC                           New Jersey                        100%

       Sand Technology Ireland Limited                Ireland                          100%
</Table>



D. PROPERTY, PLANTS AND EQUIPMENT

     As at July 31, 2006, we leased a total of approximately 17,073 square feet
of office space in 3 cities across North America, approximately 90 square feet
in the United Kingdom and 828 square feet in Germany. The weighted average
annualized cost per square foot of the space occupied is $23.90 including real
estate taxes and operating expenses. No lease extends beyond March 31, 2011.


ITEM 4A     UNRESOLVED STAFF COMMENTS

Not applicable


ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.  OPERATING RESULTS

     The following discussion should be read in conjunction with the
consolidated financial statements beginning at page F-1, the Cautionary
Statement Regarding Forward-Looking Statements above and the Risk Factors
described in Item 3 above.

                                       23
<Page>

CRITICAL ACCOUNTING POLICIES

     We periodically review our financial reporting and disclosure practices and
accounting policies to ensure that our financial reporting and disclosure system
provides accurate and transparent information relative to the current economic
and business environment. As part of the process, we have reviewed our
selection, application and communication of critical accounting policies and
financial disclosures. We note that we have determined that our critical
accounting policies relating to our core ongoing business activities are
primarily those that relate to revenue recognition. Other significant accounting
policies are described in Note 2 to our consolidated financial statements.
Recent and future accounting pronouncements are described and discussed in Notes
2 and 13 of our consolidated financial statements.

REVENUE RECOGNITION

SOURCES OF REVENUE

     In the fiscal year ended July 31, 2006, our revenue was primarily derived
from the licensing of our products, the provision of related services, including
installation, training and maintenance support. We recognize revenue from our
license agreements when all the following conditions are met:

o    We have an executed license agreement with the customer;
o    We have delivered the software product to the customer;
o    The amount of the fees to be paid by the customer is fixed and
     determinable; and
o    Collection of these fees is deemed probable.

     Often, software license agreements are multiple-element arrangements since
they include related maintenance and implementation fees. In those cases, where
implementation and maintenance fees are significant components, the entire
arrangement fee is allocated to each element based on the relative fair values
of license, maintenance and implementation.

PRODUCT REVENUE

     Currently, product revenue consists of the following:

o    Fixed License Fee - one-time license fee in exchange for a license with a
     perpetual term or a time-limited term or for a fixed number of copies. We
     typically recognize the license fees in the period during which the
     contract is executed and delivered, provided that we have vendor-specific
     objective evidence of fair value and all revenue recognition criteria are
     met.

o    Reseller Arrangements - the reseller generally pays a non-refundable
     licensing fee for our software. We recognize revenue associated with a
     non-refundable license fee when we have met our revenue recognition
     criteria.


                                       24
<Page>


     During fiscal 2006, there were no revenues for solution sales as opposed to
the software and services models. For all contracts we make a determination as
to whether the service element is essential to the functionality of the other
elements of the arrangement. We also make a determination, including the
contractual commitment to refund or pay penalties, related to the successful
delivery under each agreement. Where the service element is essential or where
the arrangement involves significant customization or modification of the
software, recognition of revenue is based on using the percentage of completion
method based on inputs or on outputs as dictated by the specific contracts. For
those contracts, there will likely be an increase in the time between when the
contract is signed and when we record the revenue.

     SAND reports the revenue on a gross basis only if it acts as the principal
in the transaction and assumes the risks and rewards of ownership, such as the
risk of loss for collection, delivery, and returns. In cases where these
conditions are not met, we record the revenue based on the net amount retained.

     Our customers have traditionally been and continue to be reluctant to make
large commitments in up-front license fees, especially in a tight capital budget
allocation process that our customers generally face internally. Therefore, our
revenues from license and maintenance arrangements have been and are expected to
be lower until our customers begin to increase their levels of capital
expenditures. The lack of a sufficient quantity of customer transactions may
make it difficult for us to allocate specific revenue amounts to license sales
of new products. As a result, we will be using the residual method to record
revenues for such new product sales. Under this method, for arrangements where
we have undelivered elements, which are typically services and maintenance, we
will record the remaining value of the contract as license revenue after
allocating full value to the undelivered elements.

SERVICE REVENUE

IMPLEMENTATION AND CUSTOMER SERVICE FEES

     Revenue from implementation and customer services include fees for
implementation of our product offerings, consulting and training services. We
currently rely, and expect to continue to rely, upon a combination of our own
resources and third-party consulting organizations to deliver these services to
our customers. Customers are charged a fee based on time and expenses. Depending
on the circumstances of specific contracts, revenues from implementation and
customer service fees are recognized as the services are performed or as
contractual milestones and acceptance criteria are met.

MAINTENANCE FEES

     We receive revenue from maintaining and servicing our products for
customers. The maintenance fee is typically equal to a specified percentage of
the customer's license fee. If associated with the fixed-fee license model, the
maintenance


                                       25
<Page>

revenues received will be recorded as deferred revenue and recognized on a
straight-line basis over the contract period.


RESULTS OF OPERATIONS

FISCAL 2006 COMPARED WITH FISCAL 2005

Revenue

     Our sales in fiscal 2006 were $5,477,485, a decrease of 10% from sales of
$6,096,033 in fiscal 2005.

     Our sales in fiscal 2006 in North America were $1,634,977, a decrease of
44% from sales of $2,899,252 in fiscal 2005. In Europe, sales in fiscal 2006
were $3,842,508, an increase of 20% from sales of $3,196,781 in fiscal 2005.

     The decrease in our revenues for fiscal 2006 is associated primarily with a
longer than anticipated sales cycle with some key partners and customers in the
North American Market. In Europe, a growing acceptance of our products was
shown in the German Market.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses include salaries, commissions
and other personnel-related costs, the impact of foreign exchange gains and
losses, travel expenses, advertising programs and other promotional activities
associated with the selling and marketing of our products. Selling, general and
administrative expenses decreased by 37% to $5,220,443 for the fiscal year ended
July 31, 2006 from $8,317,831 for the fiscal year ended July 31, 2005. The
decrease is primarily due to the impact of the cost reduction measures
implemented at the end of fiscal 2005. During fiscal 2007, we anticipate that
selling, general and administrative expenses will decline as a percentage of
revenues.

Research and Development Expenses

     Research and development expenses consist primarily of salaries and other
personnel-related costs of technical and engineering personnel associated with
our research and product development activities, including the enhancement and
localization of existing products, quality assurance, and testing. Research and
development expenses decreased by 25% to $2,441,950 for the fiscal year ended
July 31, 2006 compared to $3,272,102 for the fiscal year ended July 31, 2005.
This cost reduction reflects the cost reduction measures implemented at the end
of fiscal 2005. This level of expenditures also reflects the current stage of
development of the SAND/DNA Analytics products and the SAND/DNA Access products.
We believe that significant investment for research and development is important
to maintain product and technical leadership and expect that we will continue to
commit


                                       26
<Page>

significant resources to research and development in the future. For fiscal
2007, we expect that research and development expenditures will remain constant
in absolute dollars.

Cost of Sales

     Cost of sales consists primarily of the costs related to the sale of
third-party software, including certain license fees and royalties, and costs
related to providing support services. Cost of sales decreased by 11% to
$1,554,313 for the fiscal year ended July 31, 2006 from $1,754,138 for the
fiscal year ended July 31, 2005. This decrease, which reflects the decrease in
revenue, is primarily due to reduced costs associated with software licenses and
salaries and other personnel-related expenses incurred in providing support and
maintenance services. Cost of sales may vary due to the mix of services provided
by SAND's personnel relative to those provided by outside consultants and to
varying levels of expenditures necessary to build the service sector.

Operations

     Losses from operations were lower for the fiscal year ended July 31, 2006,
reaching an amount of $3,987,676 as compared to a loss of $7,525,314 for the
fiscal year ended July 31, 2005. These results continue to reflect the
transitional nature of the business and distribution model of SAND. At the end
of fiscal 2005, we took measures to reduce our overall cost base to enable us to
lower the level at which we will be profitable. Once profitability is reached,
we will start reinvesting in commercial activities to a level that will favour
growth in revenues and profitability. Also, the Company incurred expenditures in
improving the SAND/DNA Analytics products, and bringing our SAND/DNA Access
products to market and in establishing the infrastructure associated with our
direct sales force in different industry segments. Any sustained shortfall in
our revenues relative to our expectations would negatively impact our operating
results. Future operating results will depend on many factors, including the
demand for our products, the level of product and price competition, our success
in selling our products, namely the SAND/DNA Analytics products and the SAND/DNA
Access products, and establishing our direct sales force and distribution
channels, the state of the market for our products and general economic
conditions.

FISCAL 2005 COMPARED WITH FISCAL 2004

Revenue

     Our sales in fiscal 2005 were $6,096,033, an increase of 14% from sales of
$5,349,214 in fiscal 2004.

     Our sales in fiscal 2005 in North America were $2,899,252, an increase
of 93% from sales of $1,503,184 in fiscal 2004. In Europe, sales in fiscal 2005
were $3,196,781, a decrease of 17% from sales of $3,846,030 in fiscal 2004.

                                       27
<Page>

     The increase in our revenues for fiscal 2005 was associated primarily
with the implementation of our change in SAND's business model. In North
America the increase in revenue stemmed mostly from sales of product upgrades
to existing customers and professional services, while we continued to fully
engage other opportunities through our partners. In fiscal 2004 our newly
established United Kingdom Office was in a transitional stage and primarily
focusing on positioning itself following the sale of ClarityBlue and selling
product upgrades to our existing client base. In fiscal 2005, the United
Kingdom office was restarting its business development process to get new
customers and the selling process was longer than anticipated, thus creating
a shortfall in the overall European revenues. This shortfall was partially
offset by increased revenues from our German operations.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses include salaries, commissions
and other personnel-related costs, the impact of foreign exchange gains and
losses, travel expenses, advertising programs and other promotional activities
associated with the selling and marketing of our products. Selling, general and
administrative expenses increased by 9% to $8,317,831 for the fiscal year ended
July 31, 2005 from $7,604,541 for the fiscal year ended July 31, 2004. The
increase was primarily due to higher sales related costs such as commissions and
marketing efforts to address different industry segments in North America
and at the international level.

Research and Development Expenses

     Research and development expenses consist primarily of salaries and other
personnel-related costs of technical and engineering personnel associated with
our research and product development activities, including the enhancement and
localization of existing products, quality assurance, and testing. Research and
development expenses remained relatively stable at $3,272,102 for the fiscal
year ended July 31, 2005 compared to $3,308,789 for the fiscal year ended July
31, 2004. The relatively constant amount devoted to research and development
expenses in absolute dollars reflected an actual reduction in costs of over 6%
offset by a lower level of tax incentives received. This level of expenditures
also reflected the current stage of development of the SAND Analytic Server and
the SAND Searchable Archive.

Cost of Sales

     Cost of sales consists primarily of the costs related to the sale of
third-party software, including certain license fees and royalties, and costs
related to providing support services. Cost of sales increased by 6% to
$1,754,138 for the fiscal year ended July 31, 2005 from


                                       28
<Page>

$1,652,369 for the fiscal year ended July 31, 2004. This increase, which
reflected the increase in revenue, was primarily due to increased costs
associated with software licenses and salaries and other personnel-related
expenses incurred in providing support and maintenance services. Cost of
sales may vary due to the mix of services provided by SAND's personnel
relative to those provided by outside consultants and to varying levels of
expenditures necessary to build the service sector.

Operations

     Losses from operations were higher for the fiscal year ended July 31, 2005,
reaching an amount of $7,525,314 as compared to a loss of $7,458,973 for the
fiscal year ended July 31, 2004. These results continued to reflect the
transitional nature of the business and distribution model of SAND. During 2005,
we took measures to reduce our overall cost base to enable us to lower the level
at which we will be profitable. Once profitability is reached, we will start
reinvesting in commercial activities to a level that will favour growth in
revenues and profitability. Also, the Company incurred expenditures in improving
our SAND Analytic Server, bringing our SAND Searchable Archive to market and in
establishing the infrastructure associated with our direct sales force in
different industry segments.


B.  LIQUIDITY AND CAPITAL RESOURCES

     Cash and investments at July 31, 2006 were $1,412,548 compared with
$5,615,912 at July 31, 2005. The decrease is mainly due to operating activities
which used cash in an amount of $4,101,787. Investing activities used cash in an
amount of $72,240 while financing activities used $29,337. We need and are
seeking additional financing in order to successfully execute our business
plan and fund our operations.

     We are not subject to material market risk exposures, except for risks
related to interest rate fluctuations and foreign currency exchange rates.

     Our exposure to market rate risk for changes in interest rates relates
primarily to our investment portfolio. We have not used derivative financial
instruments in our investment portfolio. We invest in high quality issuers and
limit the amount of our credit exposure with any one issuer. We are averse to
principal loss and ensure the safety and preservation of our invested funds by
limiting default, market and reinvestment risk. We do not make use of a bank
line of credit and do not have any long-term debt.

                                       29
<Page>

     Our international sales are generally denominated and collected in foreign
currencies. We have not historically undertaken foreign exchange hedging
transactions to cover the potential foreign currency exposure. In fiscal 2006,
we incurred a loss on foreign currency translations from our foreign
subsidiaries in an amount of $17,919.

     On October 15, 2002, we announced an open market share repurchase program
under which it could repurchase, up to a maximum of 692,345 of its
outstanding Class A common shares from October 23, 2002 to October 23, 2003.
During this period, a total of 115,200 Class A common shares had been
repurchased at an average price of US$1.03 per share.

     On December 17, 2003, we announced a new share repurchase program under
which it could repurchase up to a maximum of 654,710 of its outstanding Class
A common shares from December 22, 2003 to December 22, 2004. During this
period, a total of 276,038 Class A common shares had been repurchased at an
average price of US$0.88 per share.

     The impact of inflation has not been material to the business of the
Company over the past five years.

     The Company has no material capital commitments for the current fiscal
year.


C.  RESEARCH AND DEVELOPMENT

     Our strategy emphasizes developing and introducing on a timely and
cost-effective basis products that offer functionality and performance equal to
or better than competitive product offerings. We believe that our future success
depends upon our ability to develop and market products which meet changing user
needs, and to successfully anticipate or respond to changes in technology and
standards on a cost-effective and timely basis.

     Research and development expenses consist primarily of salaries and other
personnel-related costs of technical and engineering personnel associated with
our research and product development activities, including the enhancement and
localization of existing products, quality assurance, and testing. Research and
development expenses decreased by 25% to $2,441,950 for the fiscal year ended
July 31, 2006 compared to $3,272,102 for the fiscal year ended July 31, 2005.
The reduction reflects the cost reduction measures implemented at the end of
fiscal year 2005. The level of expenditures also reflects the current stage of
development of the SAND/DNA Analytics products and the SAND/DNA Access products.
We believe that significant investment for research and development is essential
to maintain product and technical leadership and expect that we will continue to
commit substantial resources to research and development in the future. For
fiscal 2007, we expect that research and development expenditures will remain
constant in absolute dollars.

                                       30
<Page>


D. TREND INFORMATION

     At the end of the 2002 fiscal year and during the 2003 fiscal year, we
further consolidated the systems integration portion of our business, which had
been growing in importance over fiscal 2002. In order to actively pursue major
systems integration assignments in parallel with developing marketing
relationships with other major systems integrators whereby they would employ the
SAND Analytic Server (now known as the SAND/DNA Analytics product) in their
initiatives, and to do so in a manner that was not seen by potential systems
integration partners as direct competition, we rebranded our own systems
integration division under the operating name ClarityBlue. ClarityBlue
concentrated on developing a strong competitive practice and associated
intellectual property base on assignments utilizing the SAND Analytic Server
(now known as the SAND/DNA Analytics product). The product division, operating
as Sand Technology, continued to develop and market the SAND Analytic Server
(now known as the SAND/DNA Analytics product)and other Nucleus derived products
directly and through distribution undertakings. Thus, during fiscal 2003,
revenues included solution sales in addition to software and solutions models.

     We sold ClarityBlue on July 31, 2003 to a group of investors which included
members of senior management of ClarityBlue. SAND is now able to focus its
resources around the SAND/DNA Analytics products and the SAND/DNA Access
products set while considerably reducing its operational run-rate.

     As a result of this shift in focus, we should be viewed as a company which
has redoubled its commitment to a rapidly evolving industry which seeks to
improve the business professional's ability to make timely, fact-based business
decisions. Our long term direction for our high performance analytical
infrastructure products is to insure that these products become a recognized
platform for advanced analytical applications and strategic systems integration
assignments. While we will continue to a limited degree to pioneer vertical and
application markets through our own direct sales efforts, our long term
distribution strategy is to engage a network of industry-leading analytical
solutions providers, both application vendors and systems integrators, to
incorporate the SAND/DNA Analytics products and the SAND/DNA Access products as
a key part of their offering. Our revenues will continue to consist of license
fees for software products and fees for a range of associated services,
including software maintenance and support, training and system implementation
consulting. It is anticipated that the proportion of revenue from service fees
will continue to expand more rapidly than that related to software licenses. The
state of the order book and costs and selling prices do not present any
significant trend since the latest financial year. Our plans to achieve
profitability in the future will continue to require us to devote substantial
financial resources to grow our work force, improve our infrastructure, continue
the development and the marketing and distribution of our products, and
generally support our operations.

     The purchase of the SAND/DNA Analytics products and the SAND/DNA Access
products often requires significant executive-level investment and system design
decisions by our customers. Our product sales cycle is therefore lengthy and the
timing of sales is difficult to predict as well as by the analytical solution
providers, both application vendors and systems integrators, with whom we work.
This situation is expected to continue


                                       31
<Page>

to prevail. We believe that quarterly period-to-period comparisons of our
operating results are not meaningful and one should not rely on such comparisons
as an indication of our future performance.

     We are not aware of any other trends, uncertainties, demands, commitments
or events which are reasonably likely to have a material effect upon our net
sales or revenues, income from continuing operations, profitability, liquidity
or capital resources.

E. OFF-BALANCE SHEET ARRANGEMENTS

     The Company does not have any off-balance sheet arrangements that have had,
or are reasonably likely to have, a current or future effect on the Company's
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

     The Company is committed under operating leases for a total amount of
approximately $1,368,898. The minimum payments due in each of the following
years are as follows:

<Table>
<Caption>

                                 $
                               ------
      <S>                     <C>
      2007                    382,665
      2008                    308,136
      2009                    270,907
      2010                    244,314
      2011                    162,876
      After 2011                    0
</Table>


ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.  DIRECTORS AND SENIOR MANAGEMENT

     The following table sets forth information as of March 13, 2007
concerning the directors and senior management of the Company:


<Table>
<Caption>

                                                                       CLASS A COMMON SHARES
                                                                       BENEFICIALLY OWNED OR      % CLASS A COMMON SHARES
                                                        DIRECTOR       OVER WHICH CONTROL OR        OWNED, CONTROLLED OR
         NAME              PRINCIPAL OCCUPATION         SINCE        DIRECTION IS EXERCISED               DIRECTED
         ----              --------------------         --------     -----------------------      -----------------------
<S>                     <C>                                <C>               <C>                            <C>
Arthur G. Ritchie       Director, Chairman of the          1983              2,348,388                      18.3%
                        Board, President and Chief
                        Executive Officer of Sand
</Table>
                                       32
<Page>

<Table>
<Caption>

                                                                       CLASS A COMMON SHARES
                                                                       BENEFICIALLY OWNED OR      % CLASS A COMMON SHARES
                                                        DIRECTOR       OVER WHICH CONTROL OR        OWNED, CONTROLLED OR
         NAME              PRINCIPAL OCCUPATION         SINCE        DIRECTION IS EXERCISED               DIRECTED
         ----              --------------------         --------     -----------------------      -----------------------
<S>                     <C>                                <C>               <C>                            <C>
Marc Malouin            Treasurer and Director of          2005                      -                        *
                        Financial Services, STM

Douglas S. Pryde        Director, Barrister and            2001                      -                        *
                        Solicitor

                                                                                                              *

Martin Shindler         Director, Accountant and           1987                  5,950                        *
                        Business Consultant

George Wicker           Director, Attorney and             1996                274,950                      2.1%
                        Business Consultant


Gilles Therrien         Vice-President, Finance and        ---                   1,000                        *
                        Administration and Chief
                        Financial Officer, Sand

Michael McCool          Chief Scientist for Nucleus,       ---                       -                        *
                        Sand

Georges Dube            Corporate Secretary, Sand          ---                  19,000                        *
</Table>
*   Less than one percent

     Arthur Ritchie has been a director and Chief Executive Officer of SAND
since he co-founded the Company in 1983. Prior to the inception of SAND, he was
one of four principals of LGS Data Processing Consultants Inc., a Canadian
information processing consulting firm. Prior to 1979, he was employed by IBM in
South Africa, Europe and Canada, in successive capacities as a systems
engineering professional and in a variety of management and marketing roles.

     Marc Malouin is Treasurer and Director of Financial Services, Societe de
transport de Montreal (STM). He was with Ernst & Young for ten years before
assuming senior financial positions with Algo Group Inc., Bombardier Inc.,
Quebecor Inc. and Provigo. Mr. Malouin holds CA and CPA degrees and he is the
Chairman of the Audit Committee of SAND

     Douglas Pryde was a member and a partner of the law firm of Lavery, de
Billy and its predecessor firms from 1965 to 2001.

     Martin Shindler has since 1964 been the president of a firm of accountants
and business consultants located in Florida.

     George Wicker held executive level positions in general management, program
management and finance with Lockheed Martin Corporation and its predecessor
corporations during a thirty-two year career. Mr. Wicker holds a B.A. in
Political Sciences, an MBA in

                                       33
<Page>

Financial Management from the University of Santa Clara and a Juris Doctor
degree from Pepperdine University.

     Gilles Therrien is the former Vice-President, Finance and Administration of
M3i Systems Inc., a software company formerly majority-owned by Hydro-Quebec.
Following the sale of M3i Systems Inc., Mr. Therrien held the position of
Treasurer of the purchaser, Cognicase Inc., in addition to his position at M3i
Systems Inc. Mr. Therrien is a member of the Canadian Institute of Chartered
Accountants and he served for many years as an Audit Professional with
accounting firms, including Deloitte & Touche, following his studies in
Management and Public Accountancy at McGill University in Montreal.

     Michael McCool has been Chief Scientist of SAND since 1993 where he has
been charged with the successful commercialization of a software-only version of
Nucleus. From 1987 to 1992, he was a Senior Systems Architect with Nucleus
International Corporation. In prior years, he was a software engineer (SMTS)
with Teledyne Controls (1986-1987), a systems analyst/programmer with Optical
Research Associates (1984-1986) and an embedded systems programmer with Applied
Research Laboratories (1982-1984).

     Georges Dube is currently and has been a Partner of Lavery, de Billy, a law
firm, for more than ten years. Mr. Dube served as a director of SAND from 1996
to 2001.

     During the year and in the ordinary course of business, we consulted and
continue to consult with Lavery, de Billy.

     There is no arrangement or understanding between any director or executive
officer and any other person pursuant to which the director was elected or the
executive officer was appointed.

     There are currently two vacancies on the Board of Directors as a result of
the death of Jerome Shattner on December 5, 2006 and the resignation of Tom
Ivaskiv on January 31, 2007.


B.  COMPENSATION

     For the fiscal year ended July 31, 2006, the aggregate cash remuneration
including salaries and bonuses earned by five (5) executive officers for
services rendered in all capacities to the Company and its subsidiaries during
all or part of the fiscal year as applicable, was $659,843.

     At the end of fiscal year 2006, among the five (5) executive officers,
Michael McCool held options to purchase 160,000 Class A common shares at an
exercise price of US$0.69 per share which were granted on July 8, 1996 and
expire on July 7, 2016 and Gilles Therrien held options to purchase 20,000 Class
A common shares at an exercise price of US$1.00 per share which were granted on
January 6, 2003 and expire on January 5, 2023. No options were exercised by
either individual during fiscal year 2006 nor during the period August 1, 2006
to March 12, 2007.

     During the fiscal year 2006, each director, other than those directors who
are salaried or otherwise compensated officers of SAND, is paid a basic annual
retainer of $15,000 for serving as a director. The Chairman of the Audit
Committee is paid an additional amount of $5,000 per year.

     The aggregate value of other compensation did not exceed the lesser of
$10,000 times the number of executive officers or ten percent (10%) of the cash
compensation paid to such executive officers.

                                       34
<Page>

     No amounts have been set aside or accrued by the Company or its
subsidiaries to provide pension, retirement or similar benefits to its directors
or executive officers.

Employment Agreement

     Arthur G. Ritchie, Chairman of the Board, President and Chief Executive
Officer and a Director of SAND, entered into an employment agreement ("the
Agreement") with SAND upon the expiry of his previous employment agreement on
December 31, 1993. The Agreement, effective January 1, 1994 was for an initial
term of five (5) years and is automatically extended for additional periods of
twelve (12) months each unless SAND or Mr. Ritchie shall have given the other a
notice of termination of the Agreement not less than three (3) months prior to
the end of its term. The Agreement provides that Mr. Ritchie shall be paid an
annual base salary, such bonuses as may from time to time be payable pursuant to
any bonus program which is offered to senior officers or as may from time to
time be payable at the discretion of the Board of Directors and a fee of one
percent (1%) of the gross revenues resulting from the licensing, sale or other
disposition of the Nucleus Data Base System for so long as the System is
delivered as a stand-alone product of the Company. Mr. Ritchie was paid a base
salary of $150,000, $218,153 and $218,153 during each of the fiscal years ended
July 31, 2006, 2005 and 2004 respectively and the Board of Directors approved
the payment of a cash bonus of $395,973 to Mr. Ritchie for the fiscal year ended
July 31, 2003, of which $252,000 was paid during fiscal 2006. Mr. Ritchie does
not hold any outstanding stock options, which have not been exercised under the
1996 Stock Incentive Plan or the 1996 Stock Option Plan of the Company. No
payments have been made to date relative to the licensing, sale or other
dispositions of the Nucleus Data Base Systems. In the event the employment of
Mr. Ritchie (i) is terminated by SAND for any reason other than for Cause (as
defined in the Agreement) or death or (ii) is terminated by Mr. Ritchie for Good
Reason (as defined in the Agreement), Mr. Ritchie will be entitled to receive,
among other things, a lump sum payment equivalent to two (2) times the sum of
his then current annual base salary and the amount of the bonuses received by
him in the immediate past year and Mr. Ritchie shall continue for a period of
two (2) years to participate in all benefit plans and programs of SAND to the
extent such participation is possible, and, if such continued participation is
barred, to receive amounts equal to the out-of-pocket costs of participation in
plans and programs providing substantially similar benefits. On January 1, 2007,
the employment of Mr. Ritchie was automatically extended to January 1, 2008 on
terms similar to those in the Agreement.

Employee Compensation Plan

     The Company has an informal employee compensation plan, which also applies
to management, pursuant to which, if employees fulfil stated goals with respect
to sales revenue, new account penetration, profit contribution and other
criteria, their incomes will increase proportionately above the guaranteed base
until the specified target income is earned or exceeded. The informal employee
compensation plan is not based upon a mathematical formula in the case of
management, but is rather subject to individual negotiation.

                                       35
<Page>

1996 STOCK INCENTIVE PLAN

     On July 8, 1996, the Board of Directors adopted the 1996 Stock Incentive
Plan (the "Incentive Plan") pursuant to which the beneficiaries selected by a
committee of the Board of Directors may be granted options to subscribe for
Common Shares. The Incentive Plan was confirmed, approved and ratified by the
shareholders of the Company at the Annual and Special Meeting of the
shareholders held on December 17, 1996. On November 9, 1999, by resolution, the
directors of the Company amended the Incentive Plan to increase the maximum
aggregate number of options to purchase Common Shares which may be granted under
the Incentive Plan. This resolution of the directors was confirmed, approved and
ratified by the shareholders of the Company at the Annual and Special Meeting of
the shareholders held on December 17, 1999. The total number of Common Shares of
the Company authorized for grants of options is 1,100,000 (as adjusted to
reflect the share subdivision on a two-for-one basis on December 31, 1996)
subject to adjustment to take into account changes in the capital structure of
the Company.

     On November 21, 2005, the Board of Directors approved an amendment to the
1996 Stock Incentive Plan to extend the life of the 1996 Stock Incentive Plan
for an additional period of ten (10) years. This amendment was confirmed,
approved and ratified by the shareholders of the Company at the Annual and
Special Meeting of the Shareholders held on December 15, 2005. On October 3,
2006, the Board of Directors provided for the amendment of each Stock Incentive
Agreement between an Optionee and the Company whereby the options granted and
outstanding thereunder shall be exercisable for a period of ten (10) years from
July 7, 2006 with immediate vesting for all those outstanding options which have
vested on or prior to July 7, 2006.

     The Incentive Plan is now administered by the Governance, Nomination, Human
Resources and Compensation Committee of the Board of Directors each of whose
members is a "disinterested person" as defined under the UNITED STATES
SECURITIES AND EXCHANGE ACT OF 1934 and an "outside director" as defined in the
UNITED STATES INTERNAL REVENUE CODE. The former Options Committee has been
dissolved. The Incentive Plan permits the granting of incentive stock options on
terms designed to gain certain advantages under United States Federal income tax
law. During fiscal year 2006, the duties of the Governance, Nomination, Human
Resources and Compensation Committee were performed by the Board of Directors.

     The term and number of Common Shares covered by each option, as well as the
permitted frequency of exercise of such options, are determined by the Committee
at the time the options are granted to the recipients. The number of Common
Shares which may be subject to option in favour of a single recipient may not
exceed 5% of the outstanding Common Shares of the Company. The exercise price of
each option for Common Shares may not be less than the closing price of the
Common Shares on the trading day prior to the day the option is granted or,
if there was no transaction on that day, the average of the bid and ask
prices on that day, less any discount as decided by the Board of Directors
within the extent permitted by the applicable regulatory provisions. Options
granted under the Incentive Plan may not be assigned or pledged. No financial
assistance is available to recipients in

                                       36
<Page>

connection with the exercise of an option. The Company may terminate the
Incentive Plan at any time, subject to vested rights.

     As at February 28, 2007, 534,500 options had been granted and remained
outstanding under the Incentive Plan and 541,500 options remained available for
grant.

     During the fiscal year ended July 31, 2006, the Committee granted options
to purchase an aggregate of 100,000 Common Shares to one (1) employee at an
exercise price of US$1.00 per share which were not less than the respective
closing price of the Common Shares on the OTC Bulletin Board on the day prior to
the grant. 66,000 options were cancelled. No options were exercised.

     During the period August 1, 2006 to February 28, 2007, the Committee
granted options to purchase an aggregate of 92,500 Common Shares to five (5)
employees at an exercise price of US$1.00 per share which was not less than
the closing price of the Common Shares on the OTC Bulletin Board on the day
prior to each grant. 125,000 options were cancelled. No options were
exercised.

1996 STOCK OPTION PLAN

     On July 8, 1996, the Board of Directors adopted the 1996 Stock Option Plan
(the "Option Plan") pursuant to which the beneficiaries selected by a committee
of the Board of Directors may be granted options to subscribe for Common Shares.
The Option Plan was confirmed, approved and ratified by the shareholders of the
Company at the Annual and Special Meeting of the shareholders held on December
17, 1996. On November 9, 1999, by resolution, the directors of the Company
amended the Option Plan to increase the maximum aggregate number of options to
purchase Common Shares, which may be granted under the Option Plan. This
resolution of the directors was confirmed, approved and ratified by the
shareholders of the Company at the Annual and Special Meeting of the
shareholders held on December 17, 1999. The total number of Common Shares of the
Company authorized for grants of options is 900,000 (as adjusted to reflect the
share subdivision on a two-for-one basis on December 31, 1996), subject to
adjustment to take into account changes in the capital structure of the Company.

     On November 21, 2005, the Board of Directors approved an amendment to the
1996 Stock Option Plan to extend the life of the 1996 Stock Option Plan and of
the options granted and outstanding under the Stock option Plan for an
additional period of ten (10) years. This amendment was confirmed, approved and
ratified by the shareholders of the Company at the Annual and Special Meeting of
the Shareholders held on December 15, 2005. On October 3, 2006, the Board of
Directors provided for the amendment of each Stock Option Agreement between an
Optionee and the Company whereby the options granted and outstanding thereunder
shall be exercisable for a period of ten (10) years from July 7, 2006 with
immediate vesting for all those outstanding options which have vested on or
prior to July 7, 2006.

                                       37
<Page>

     The Option Plan is now administered by the Governance, Nomination, Human
Resources and Compensation Committee of the Board of Directors each of whose
members is a "disinterested person" as defined under the UNITED STATES
SECURITIES AND EXCHANGE ACT OF 1934 and an "outside director" as defined in the
UNITED STATES INTERNAL REVENUE CODE. During fiscal year 2006, the duties of the
Governance, Nomination, Human Resources and Compensation Committee were
performed by the Board of Directors.

     The term and number of Common Shares covered by each option, as well as the
permitted frequency of exercise of such options, are determined by the Committee
at the time the options are granted to the recipients. The number of Common
Shares which may be subject to option in favour of a single recipient may not
exceed 5% of the outstanding Common Shares of the Company. The exercise price of
each option for Common Shares may not be less than the price of the Common
Shares as determined by the Committee within the extent permitted by the
applicable regulatory provisions. Options granted under the Option Plan may
not be assigned or pledged. No financial assistance is available to
recipients in connection with the exercise of an option. Options which expire
or are terminated or surrendered or unexercised are thereafter available for
the granting of other options. The Company may terminate the Option Plan at
any time subject to vested rights.

     As at February 28, 2007, 619,500 options had been granted and remained
outstanding under the Option Plan and 104,500 options remained available for
grant.

     During the fiscal year ended July 31, 2006, the Committee granted options
to purchase an aggregate of 330,000 Common Shares to two (2) employees at an
exercise price of US$1.00 per share which was not less than the respective
closing prices of the Common Shares on the OTC Bulletin Board on the day prior
to each grant. 147,000 options were cancelled. No options were exercised.

     During the period August 1, 2006 to February 28, 2007, the Committee
granted options to purchase an aggregate of 170,000 Common Shares to nineteen
(19) employees at an exercise price of US$1.00 per share which was not less
than the closing price of the Common Shares on the OTC Bulletin Board on the
day prior to the grant. 25,000 options were cancelled. No options were
exercised.

C.  BOARD PRACTICES

     Governance processes of the Company are subject to ongoing review and
assessment by the Board of Directors so as to maintain high standards of
corporate governance in a rapidly changing environment.

     The Board of Directors and management believe that good corporate
governance practices are an important factor to insure the overall success of
the Company.


                                       38
<Page>

BOARD OF DIRECTORS

     Pursuant to the CANADA BUSINESS CORPORATIONS ACT (the "CBCA"), directors of
the Company hold office until the close of the next annual meeting of
shareholders and until their successors are elected and qualified or until their
earlier resignation or removal. The CBCA requires that twenty-five percent (25%)
of the members of the Board of Directors must be resident Canadians. In
addition, the Board may not transact business at a meeting unless one-quarter of
the directors participating in the meeting are Canadian residents. Officers
serve at the pleasure of the Board of Directors, subject to the terms of
employment agreements, if any, and applicable employment laws.

     Pursuant to the CBCA, the Board of Directors is required to manage, or
supervise the management of, the affairs and business of the Company. The
principal responsibilities of the Board are to supervise and evaluate
management, to oversee the conduct of the business of the Company, to set
policies appropriate for the business of the Company and to approve corporate
strategies and goals. The Board is to carry out its mandate in a manner
consistent with the fundamental objective of enhancing shareholder value.

     The Board of Directors has adopted a Charter which sets out the duties and
responsibilities of the Board of Directors.

     The Board of Directors has also adopted Standards of Ethical Conduct which
apply to all directors and officers of the Company.

     During fiscal 2006, the Board of Directors held nine (9) meetings.

     In discharging its duty of stewardship over the Company, the Board
has the following specific duties and responsibilities: (i) adopting,
supervising and providing guidance on the strategic planning process of the
Company and approving a strategic plan which takes into account, among other
things, the opportunities and risks of the business of the Company; (ii)
identifying the principal risks of the business of the Company and ensuring
the implementation of appropriate risk management systems; (iii) ensuring
that the Company has management of the highest calibre and maintaining
adequate and effective succession planning for senior management; (iv)
placing limits on authority of management; (v) overseeing the integrity of
the internal control and management information systems of the Company; (vi)
overseeing the communications policy of the Company with its shareholders and
with the public generally; (vii) providing for the independent functioning of
the Board; and (viii) adopting, monitoring and, where appropriate, granting
waivers from the Standards of Ethical Conduct that governs the behaviour of
directors, officers and employees of the Company.

COMMITTEES OF THE BOARD OF DIRECTORS

     The Board has established two committees: the Audit Committee and the
Governance, Nomination, Human Resources and Compensation Committee, which is
empowered to carry out the duties of the former Options Committee which has been

                                       39
<Page>

dissolved. Committee members are appointed annually following the annual meeting
of the shareholders of the Company.

AUDIT COMMITTEE

     Messrs. Malouin, Pryde and Shindler, all of whom are non-management and
unrelated directors, currently comprise the Audit Committee. Mr. Malouin is
Chairman of the Audit Committee. Messrs. Malouin, Pryde and Shindler satisfy the
current requirements of The Nasdaq Stock Market, Inc. relating to the
independence and the qualification of the members of the Audit Committee.

     The Audit Committee reviewed its Charter and adopted on June 14, 2005 an
amended and restated Charter that details its mandate.

     During fiscal 2006, the Audit Committee held four (4) meetings.

     The Audit Committee assists the Board in its oversight functions as they
relate to the accounting, financial reporting, auditing, risk management and
internal controls of the Company. The Audit Committee has the following duties
and responsibilities: (a) reviewing the audited financial statements of the
Company and recommending whether such statements should be approved by the
Board; (b) reviewing and approving the unaudited interim financial statements of
the Company; (c) recommending to the Board the firm of independent auditors to
be nominated for appointment by shareholders at each annual general meeting of
the Company and, where necessary, the removal of the independent auditors of the
Company; (d) reviewing the scope and adequacy of audits to be conducted by the
independent auditors of the Company; (e) adopting and annually reassessing
formal terms of reference for the independent auditors of the Company; (f)
monitoring and evaluating the independence and performance of the independent
auditors of the Company; (g) pre-approving all non-audit services to be provided
to the Company by its independent auditors prior to the commencement of such
services; (h) reviewing all post-audit management letters containing the
recommendations of the independent auditors of the Company and the response or
follow-up thereto from management; (i) reviewing and monitoring the integrity,
adequacy and timeliness of the financial reporting and disclosure practices of
the Company; (j) reviewing, and if deemed advisable, approving all related party
transactions as defined in the governing legislation of the Company; (k)
monitoring the compliance of the Company with legal and regulatory requirements
related to financial reporting and disclosure; (l) monitoring and evaluating the
adequacy of the internal accounting and audit procedures of the Company; (m)
reviewing and ensuring the acceptability of the accounting principles of the
Company; (n) identifying the principal financial risks of the Company;
(o) overseeing reporting on internal controls of management and ensuring that
management has designed and implemented an effective system of internal
controls; (p) annually reviewing and reassessing the adequacy of the duties and
responsibilities of the Audit Committee; and (q) any other matters that the
Audit Committee feels are important to its mandate or that the Board chooses to
delegate to it.

                                       40
<Page>

     The Audit Committee has established procedures for the receipt, retention
and treatment of complaints regarding accounting, internal accounting controls
or auditing matters and the confidential, anonymous submission by employees of
complaints or concerns regarding questionable accounting or auditing matters.
Any employee of the Company or its affiliates may submit a good faith complaint
regarding accounting or auditing matters to the management of the Company
without fear of dismissal or retaliation of any kind.

     It is the responsibility of the Audit Committee to maintain an open avenue
of communication between itself, the Auditor and Management of the Company. In
performing its role, the Audit Committee is empowered to investigate any matter
brought to its attention, with full access to all books, records, accounts,
facilities and personnel of the Company. The Audit Committee is also empowered
to instruct and retain outside counsel or other experts as necessary.

GOVERNANCE, NOMINATION, HUMAN RESOURCES AND COMPENSATION COMMITTEE

     The Governance, Nomination, Human Resources and Compensation Committee is
governed by a formal Charter that details its mandate. Messrs. Ivaskiv (who
ceased to be a director on January 31, 2007), Pryde and Shindler, all of whom
are non-management and unrelated directors, comprise the Governance,
Nomination, Human Resources and Compensation Committee.

     The Governance, Nomination, Human Resources and Compensation Committee has
the following duties and responsibilities: (a) developing, monitoring and
ensuring the effectiveness of the corporate governance policies and practices of
the Company; (b) identifying and selecting nominees for election of the Board of
Directors of the Company and identifying and proposing to the Board of Directors
candidates to fill in the vacancies on the Board of Directors; (c) ensuring the
independence of the Board of Directors; (d) evaluating the effectiveness and
performance of individual directors, the Board of Directors and its committees;
(e) assisting the Board in setting the objectives for the Chief Executive
Officer of the Company and evaluating his performance; (f) establishing human
resources policies and practices, including compensation and recruitment
policies and practices for senior management, as well as establishing levels of
salary, bonus, benefits and incentives provided to executive officers of the
Company and its affiliates; and (g) various other matters related to the
foregoing as set out in the Charter of the Committee.

     During fiscal 2006, the Governance, Nomination, Human Resources and
Compensation Committee was not active and did not meet.

                                       41
<Page>

D.  EMPLOYEES

     On July 31, 2006, the Company had 56 employees, including 29 full-time
employees with SAND, and 7 full-time employees with Sand Technology Corporation
("Sand USA), 4 full-time employees with Sand Technology Limited ("Sand UK") and
15 full-time employees with Sand Technology Deutschland GmbH ("Sand Germany").
Moreover, the Company had 1 part-time employee with Sand Germany.

     On July 31, 2005, the Company had 55 employees, including 36 full-time
employees with SAND, and 9 full-time employees with Sand Technology Corporation
("Sand USA), 4 full-time employees with Sand Technology Limited ("Sand UK") and
4 full-time employees with Sand Technology Deutschland GmbH ("Sand Germany").
Moreover, the Company had 3 part-time employees, 1 with Sand USA, 1 with Sand
UK, and 1 with Sand Germany.

     On July 31, 2004, the Company had 70 employees, including 39 full-time
employees with SAND, and 18 full-time employees with Sand Technology Corporation
("Sand USA), 3 full-time employees with Sand Technology Limited ("Sand UK") and
5 full-time employees with Sand Technology Deutschland GmbH ("Sand Germany").
Moreover, the Company had 5 part-time employees, 2 with Sand, 1 with Sand USA, 1
with Sand UK and 1 with Sand Germany.

     No employee of the Company is represented by a labour union or is covered
by a collective bargaining agreement. Since inception, the Company has not
suffered any disruptions as a result of labour problems or employee disputes.

E.  SHARE OWNERSHIP

     Information as to the share ownership of the directors and executive
officers of the Company is found under Item 6 - "Directors, Senior Management
and Employees" under "Directors and Senior Management" under "Compensation" -
"1996 Stock Incentive Plan" and "1996 Stock Option Plan", and under Item 7 -
"Major Shareholders".

                                       42
<Page>


ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.  MAJOR SHAREHOLDERS

     The following are the only persons who, to our knowledge, beneficially own
or exercise control or direction over shares carrying more than five (5%)
percent of the votes attached to Class A Common Shares of the Company at
March 13, 2007:

<Table>
<Caption>
                                      APPROXIMATE NUMBER OF CLASS        PERCENTAGE OF CLASS A
                                       A SHARES OWNED, CONTROLLED         COMMON SHARES OWNED,
                                              OR DIRECTED                CONTROLLED OR DIRECTED
                                     -----------------------------      ------------------------
<S>                                            <C>                               <C>
Arthur G. Ritchie                              2,348,388                         18.3%
Estate of Jerome Shattner                      1,048,000                          8.2%
</Table>


     The total number of Class A Common Shares owned, controlled or directed by
the senior management and directors of SAND as a group, to our knowledge, is
2,649,288, or approximately 20.7%, at March 13, 2007.

     The voting rights of the Class A Common Shares held by the persons
identified or referred to above are the same as the voting rights of the Class A
Common Shares held by all other shareholders.

     To our knowledge, as of March 13, 2007, 9,445,271 Class A Common Shares
were held of record by 460 persons whose registered addresses were in the
United States. Many of our Class A Common Shares are held in the name of
intermediaries.

     Except as set forth above, to our knowledge, the Company is not directly or
indirectly owned or controlled by another company, by any foreign government or
by any other national or legal person severally or jointly.

     There are no known contractual arrangements which may result in a change of
control of the Company at a subsequent date.


                                       43
<Page>

B.  RELATED PARTY TRANSACTIONS

     On July 31, 2003, SAND sold its wholly-owned subsidiary, ClarityBlue
Limited (previously named Sand Technology (U.K.) Limited), for total proceeds of
approximately $20 million to a group of investors which included members of
senior management of the subsidiary and Duncan Painter who was a member of the
Board of Directors of SAND. The Company provided warranties for claims against
ClarityBlue Limited for matters existing prior to the sale. The warranties for
tax matters expire in calendar 2010 and expired in calendar 2005 for other
warranties.

     SAND maintains directors' and officers' liability insurance which, subject
to the provisions and exclusions contained in the policy, protects the directors
and officers, as such, against any claims made during the term of their office
against any of them for a wrongful act, provided they acted honestly and in good
faith with a view to the best interests of SAND. The policy provides coverage
with a limit of US$5,000,000 per loss per policy period, subject to a deductible
of US$250,000 per securities claim and US$250,000 per other claim. The current
annual premium is paid entirely by SAND and amounts to approximately US$140,000.
To the extent permitted by law, SAND has entered into an indemnification
agreement with each of its directors and senior officers.

      Following the fiscal year ended July 31, 2006, Arthur G. Ritchie, a
director and officer of the Company, advanced the sum of $200,000 to the Company
in December 2006 by way of the return of his earnings for the calendar year 2006
and made a further advance of the sum of $401,150 to the Company in January
2007. These sums are non-interest bearing and are reimbursable upon demand.


C.  INTERESTS OF EXPERTS AND COUNSEL

     Not applicable.


ITEM 8.     FINANCIAL INFORMATION

A.  CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     The Consolidated Financial Statements of the Company are included in this
Annual Report on Form 20-F beginning on page 66.

B.  SIGNIFICANT CHANGES

     No significant change has occurred since the date of the annual financial
statements.


                                       44
<Page>

ITEM 9.     THE OFFER AND LISTING

A.  OFFER AND LISTING DETAILS

     The following table presents the closing high and low sales prices of our
Class A Common Shares stated in United States dollars as reported by the OTC
Bulletin Board for the following periods:

<Table>
<Caption>
                                              U.S. $
                                              ------
Month Ended                        High                Low
-----------                        ----               -----
<S>                               <C>                 <C>
To March 12, 2007                 $0.56               $0.52
February 28, 2007                 $0.65               $0.55
January 31, 2007                  $0.58               $0.43
December 31,2006                  $0.55               $0.43
November 30, 2006                 $0.70               $0.40
October 31, 2006                  $0.48               $0.40
September 30, 2006                $0.48               $0.39
August 31, 2006                   $0.45               $0.38
July 31, 2006                     $0.58               $0.35
</Table>

<Table>
<Caption>
                                              U.S. $
                                              ------
Quarter Ended                      High                Low
-------------                      ----               -----
<S>                                <C>                <C>
January 31, 2007                   $0.70              $0.40
October 31, 2006                   $0.48              $0.38
July 31, 2006                      $0.82              $0.35
April 30, 2006                     $0.85              $0.58
January 31, 2006                   $0.72              $0.25
October 31, 2005                   $0.55              $0.22
July 31, 2005                      $0.80              $0.43
April 30, 2005                     $0.85              $0.58
January 31, 2005                   $0.72              $0.25
October 31, 2004                   $0.55              $0.22
</Table>

                                       45
<Page>


<Table>
<Caption>

                                              U.S. $
                                              ------
Fiscal Year Ended July 31            High                Low
-------------------------            ----               -----
<S>                                <C>                <C>
2006                                 $0.85              $0.22
2005                                 $1.08              $0.43
2004                                 $1.61              $0.75
2003                                 $1.35              $0.52
2002                                 $4.27              $0.89
</Table>


C.  MARKETS

     Our Class A Common Shares are listed on the OTC Bulletin Board and trade
under the symbol SNDTF. There is no non-United States trading market for our
Class A Common Shares.


ITEM 10.    ADDITIONAL INFORMATION


A.  SHARE CAPITAL

     Not applicable.


B.  MEMORANDUM AND ARTICLES OF ASSOCIATION

     SAND was incorporated on December 10, 1982 under the provisions of the
Canada Business Corporation Act (the "CBCA"). The Articles of the Company place
no restrictions upon the Company's objects and purposes.

DIRECTORS' POWERS

     Pursuant to the Articles and the By-laws of the Company and the
requirements of the CBCA, the board of directors must consist of not fewer than
three (3) and not more than eleven (11) directors. A majority of the number of
directors appointed constitutes a quorum at any meeting of directors, provided,
however, that no business may be transacted at a meeting of directors unless at
least one-quarter of the directors present are resident Canadians. The duty of
the directors is to manage or supervise the management of the business of the
Company.

     There is no provision in the By-laws that imposes a requirement in respect
of a director's power to vote on a proposal, arrangement or contract in which
the director is materially interested. The CBCA provides that a director must
disclose to the Company, in

                                       46
<Page>

writing or by requesting to have it entered in the minutes of meetings of
directors or of meetings of committees of directors, the nature and extent of
any interest that he or she has in a material contract or material transaction,
whether made or proposed, with the Company, if the director (a) is a party to
the contract or transaction; (b) is a director, or an individual acting in a
similar capacity of a party to the contract or transaction; or (c) has a
material interest in a party to the contract or transaction.

     The By-laws of the Company state that the directors may fix the
remuneration of the directors and that the directors shall be paid such
remuneration for their services as the board may from time to time determine.
The directors are also entitled to be reimbursed for travel and other expenses
properly incurred by them in attending meetings of the board or any committee of
the board of directors. Nothing in the By-laws precludes any director from
serving the Company in any other capacity and receiving remuneration for such
services.

     The Articles of the Company state that without limiting the borrowing
powers of the Company as set forth in the CBCA, the board may from time to time
on behalf of the Company without authorization of the shareholders (a) borrow
money upon the credit of the Company; (b) issue, reissue, sell or pledge debt
obligations of the Company; (c) to the extent permitted by the CBCA, give a
guarantee on behalf of the Company to secure performance of an obligation of any
person; and (d) mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of the Company owned or subsequently acquired to
secure any obligation of the Company.

     The directors may, by resolution, make, amend or repeal any By-laws that
regulate the business or affairs of the Company. Any resolution making, amending
or repealing any By-laws of the Company must be submitted to the next following
shareholders meeting for ratification by the shareholders who may by ordinary
resolution confirm, reject or amend the By-law, amendment or repeal.

     The powers of the directors set forth in the Articles of the Company may be
amended by special resolution. A special resolution is a resolution passed by a
majority of not less than two-thirds (2/3) of the votes cast by shareholders of
the Company who being entitled to do so, vote in person or by proxy at an annual
or special meeting of shareholders of the Company. Under the CBCA, an ordinary
resolution of shareholders requires approval by a majority of the votes cast at
a meeting of shareholders, present in person or represented by proxy.

ELECTION AND QUALIFICATIONS OF DIRECTORS

     The directors of the Company stand for election at the annual meeting of
shareholders and there are no staggered terms. There is no cumulative voting for
directors of the Company. There is no provision in the Articles or By-laws that
imposes a requirement for retirement or non-retirement of directors.

                                       47
<Page>

     There is no provision in the Company's Articles or By-laws that a director
be required to hold a share in the capital of the Company as a qualification for
his office, but he must be qualified to become or act as a director as required
by the CBCA. The CBCA provides that no person is qualified to act as a director
if that person is less than 18 years of age; is a person who has been found to
be a person of unsound mind by a court in Canada; a person who is not an
individual; or is a person who has the status of bankrupt.

     The CBCA provides that a director of a Company may be removed if the
shareholders by ordinary resolution at a special meeting vote to remove a
director or directors from office.

MEETINGS

     The CBCA provides that the Company must call an annual meeting of its
shareholders not later than 15 months after holding the last preceding annual
meeting but no later than 6 months after the end of the Company's preceding
financial year. The Company must give notice of any meeting to its shareholders
entitled to receive notice not more than 60 days prior to and not less than 21
days before the date of meeting. The CBCA requires the directors of a company to
provide with the notice of a general meeting a form of proxy for use by every
member entitled to vote at such meeting as well as an information circular
containing prescribed information regarding the matters to be dealt with and the
conduct of the meeting.

     Under the CBCA, the directors of the Company may call a meeting of
shareholders and one or more shareholders holding not less than 5% of the issued
voting shares of the Company may give notice to the directors requiring them to
call and hold a meeting.

LIMITATIONS ON OWNERSHIP OF SECURITIES

     Except as described below under "Exchange Controls," there are no
limitations on the right to own securities imposed by foreign law to the
Company's knowledge or by the Articles of the Company.

CHANGE IN CONTROL OF COMPANY

     There are no provisions in the Company's Articles or By-laws that would
have the effect of delaying, deferring, or preventing a change in control of the
Company and that would operate only with respect to a merger, acquisition or
corporate restructuring of the Company or its subsidiaries.

     A shareholder rights plan (the "Rights Plan") was adopted by the Board of
Directors on November 12, 2003 and made effective on November 17, 2003. The
Rights Plan was ratified, confirmed and approved by the shareholders of SAND at
the Annual and Special Meeting of Shareholders held on December 16, 2003. The
Board of Directors renewed and continued the Rights Plan on November 21, 2005
and the renewal and


                                       48
<Page>

continuation of the Rights Plan was ratified, confirmed and approved by the
shareholders of SAND at the Annual and Special Meeting of Shareholders of SAND
held on December 15, 2005.


OWNERSHIP THRESHOLD

     There are no provisions in the Articles or By-laws governing the ownership
threshold above which shareholder ownership must be disclosed.

DESCRIPTION OF SHARE CAPITAL

     The authorized share capital of the Company consists of an unlimited number
of Class A Common Shares, all without par value, and, an unlimited number of
Class B Shares, issuable in series, all without par value, of which Class B,
Series A have been authorized.

Class A Common Shares

     The Class A Common Shares of the Company have the following rights,
privileges, restrictions and conditions:

     Dividends. Subject to the prior rights of the holders of the Class B Shares
     and any other shares ranking senior to the Class A Common Shares with
     respect to priority in the payment of dividends, the holders of Class A
     Common Shares are entitled to receive dividends and the Company must pay
     dividends thereon, as and when declared by the Board of Directors of the
     Company out of moneys properly applicable to the payment of dividends, in
     such amount and in such form as the Board of Directors of the Company may
     from time to time determine and all dividends which the Board of Directors
     of the Company may declare on the Class A Common Shares must be declared
     and paid in equal amounts per share on all Class A Common Shares at the
     time outstanding.

     Dissolution. In the event of the dissolution, liquidation or winding-up of
     the Company, whether voluntary or involuntary, or any other distribution of
     assets of the Company among its shareholders for the purpose of winding-up
     its affairs, subject to the prior rights of the holders of the Class B
     Shares and any other shares ranking senior to the Class A Common Shares
     with respect to priority in the distribution of assets upon dissolution,
     liquidation, winding-up or distribution for the purpose of winding-up, the
     holders of the Class A Common Shares are entitled to receive the remaining
     property and assets of the Company.

                                       49
<Page>

     Voting Rights. The holders of the Class A Common Shares are entitled to
     receive notice of and to attend all meetings of the shareholders of the
     Company and have one vote for each Class A Common Share held at all
     meetings of the shareholders of the Company, except meetings at which only
     holders of another specified class or series of shares of the Company are
     entitled to vote separately as a class or series.

     There are no redemption or sinking fund provisions relating to the Class A
Common Shares and the Class A Common Shares are fully paid and non-assessable.

Class B Shares

     The Class B Shares, as a class, have the following rights, privileges,
restrictions and conditions:

     Directors' Authority to Issue in One or More Series. The Board of Directors
     of the Company may issue the Class B Shares at any time and from time to
     time in one or more series. Before the first shares of a particular series
     are issued, the Board of Directors of the Company must fix the limited or
     unlimited number of shares in such series and must determine, subject to
     the limitations set out in the articles, the designation, rights,
     privileges, restrictions and conditions to be attached to the shares of
     such series including, without limitation, the rate or rates, amount or
     method or methods of calculation of dividends thereon, the time and place
     of payment of dividends, whether cumulative or non-cumulative or partially
     cumulative and whether such rate, amount or method of calculation shall be
     subject to change or adjustment in the future, the currency or currencies
     of payment of dividends, the consideration and the terms and conditions of
     any purchase for cancellation, retraction or redemption rights (if any)
     (but in no event shall the voting rights attributable to a Class B Share
     exceed those attributable to a Class A Common Share), the conversion or
     exchange rights attached thereto (if any), the voting rights attached
     thereto (if any), and the terms and conditions of any share purchase plan
     or sinking fund with respect thereto. Before the issue of the first shares
     of a series, the Board of Directors of the Company shall send to the
     Director (as defined in the CBCA) articles of amendment containing a
     description of such series including the designation, rights, privileges,
     restrictions and conditions determined by the Board of Directors of the
     Company.

     Ranking of Class B Shares. No rights, privileges, restrictions or
     conditions attached to a series of Class B Shares may confer upon a series
     a priority in respect of dividends or return of capital over any other
     series of Class B Shares then outstanding. The Class B Shares are entitled
     to priority over the common shares of the Company and over any other shares
     of the Company ranking junior to the Class B Shares with respect to
     priority in the payment of dividends and the distribution of assets in the
     event of the liquidation, dissolution or winding-up of the Company, whether
     voluntary or involuntary, or


                                       50
<Page>

     any other distribution of the assets of the Company among its shareholders
     for the purpose of winding-up its affairs. If any cumulative dividends or
     amounts payable on a return of capital in respect of a series of Class B
     Shares are not paid in full, the Class B Shares of all series must
     participate rateably in respect of such dividends, including accumulations,
     if any, in accordance with the sums that would be payable on such shares if
     all such dividends were declared and paid in full, and in respect of any
     repayment of capital in accordance with the sums that would be payable on
     such repayment of capital if all sums so payable were paid in full;
     provided however, that in the event of there being insufficient assets to
     satisfy in full all such claims to dividends and return of capital, the
     claims of the holders of the Class B Shares with respect to repayment of
     capital must first be paid and satisfied and any assets remaining
     thereafter must be applied towards the payment and satisfaction of claims
     in respect of dividends. The Class B Shares of any series may also be given
     such other preferences over the common shares and over any other shares
     ranking junior to the Class B Shares as may be determined in the case of
     such series of Class B Shares.

     Voting Rights. Except as otherwise required by law or in accordance with
     any voting rights which may from time to time be attached to any series of
     Class B Shares, the holders of the Class B Shares as a class are not
     entitled as such to receive notice of, to attend or to vote at any meeting
     of the shareholders of the Company.

     Approval of Holders of Class B Shares. The rights, privileges, restrictions
     and conditions attaching to the Class B Shares as a class may be added to,
     changed or removed but only with the approval of the holders of the Class B
     Shares given as hereinafter specified.

     The approval of the holders of Class B Shares to add to, change or remove
any right, privilege, restriction or condition attaching to the Class B Shares
as a class or to any other matter requiring the consent of the holders of the
Class B Shares as a class may be given in such manner as may then be required by
law, subject to a minimum requirement that such approval shall be given by
resolution passed by the affirmative vote of at least two-thirds of the votes
cast at a meeting of the holders of Class B Shares duly called for that purpose.
The formalities to be observed in respect of the giving of notice of any such
meeting or any adjourned meeting and the conduct thereof shall be those from
time to time required by the CBCA (as from time to time amended, varied or
replaced) and prescribed in the by-laws of the Company with respect to meetings
of shareholders. On every poll taken at a meeting of holders of Class B Shares
as a class, each holder entitled to vote thereat shall have one vote in respect
of each Class B Share held by him.

Class B, Series A Shares

     The first series of the Class B Shares of the Company consists of
20,000,000 shares and no more and is designated as the Class B, Series A Shares
(the "Class B,



                                       51
<Page>

Series A Shares") and in addition to the preferences, rights, privileges,
restrictions and conditions attaching to all of the Class B Shares as a class,
the rights, privileges, restrictions and conditions attaching to the Series A
Shares are as follows:

     VOTING RIGHTS

          Each holder of Class B, Series A Shares shall be entitled to receive
     notice of and to attend all meetings of shareholders of the Company, except
     meetings at which only holders of other classes or series of shares are
     entitled to attend, and at all such meetings shall be entitled to a number
     of votes equal to the number of Class A Common Shares of the Company (the
     "Common Shares") then issuable upon the conversion of the Class B, Series A
     Shares into Common Shares and to vote together with the holders of Class A
     Common Shares of the Company.

     CUMULATIVE DIVIDENDS

          The holders of the Class B, Series A Shares shall be entitled to
     receive and the Company shall pay to them, always in preference and
     priority to any payment of dividends on the Common Shares of the Company
     and any other Shares of the Company ranking junior to the Class B, Series A
     Shares, as and when declared by the board of directors of the Company out
     of moneys of the Company properly applicable to the payment of dividends,
     fixed, cumulative cash dividends at the annual rate per share of 7% of the
     amount equal to the amount recorded in the stated capital account
     maintained in respect of the Class B, Series A Shares outstanding payable
     quarterly, by cheque of the Company or in kind. Such dividend on any
     particular Class B, Series A Share shall accrue and be cumulative from the
     date of issue of such Class B, Series A Share. In the event the price of
     the Common Shares of the Company is more than 200% of the conversion price
     of the Class B, Series A Shares for thirty (30) consecutive trading days,
     and provided that a Registration Statement has been declared effective by
     the Securities and Exchange Commission of the United States or 365 days
     have passed since the initial issue of the Class B, Series A Shares, the
     Company shall cease paying dividends.

     LIQUIDATION, DISSOLUTION OR WINDING-UP

          In the event of the liquidation, dissolution or winding-up of the
     Company, whether voluntary or involuntary, or any other distribution of
     assets of the Company among its shareholders for the purpose of winding-up
     its affairs, the holders of the Class B, Series A Shares shall be entitled
     to receive the amount received by the Company upon initial issue in respect
     of each Class B, Series A Share plus all accrued and unpaid cumulative
     dividends before any amount shall be paid to the holders of the Common
     Shares or any other shares ranking junior to the Class B, Series A Shares.
     Except as provided above, the holders of the Class B, Series A Shares shall
     not be entitled to any further participation in the assets of the Company.

                                       52
<Page>

     MODIFICATION PROCEDURE

          The rights, privileges, restrictions and conditions attached to the
     Class B, Series A Shares may be added to, changed or removed only with the
     prior approval of the holders of the Class B, Series A Shares given as
     specified herein, in addition to any vote or authorization required by law
     or the articles of the Company.

          Any approval of the holders of Class B, Series A Shares with respect
     to the modification of the rights, privileges, restrictions and conditions
     attached to the Class B, Series A Shares or to any other matter requiring
     the consent of the holders of the Class B, Series A Shares shall be given
     in such manner as may then be required by law, subject to a minimum
     requirement that such approval be given by resolution passed by the
     affirmative vote of at least two-thirds of the votes cast by the holders of
     Class B, Series A Shares who voted in respect of that resolution at a
     meeting of the holders of the Class B, Series A Shares duly called for that
     purpose at which the holders of at least fifty per cent (50%) of the
     outstanding Class B, Series A Shares are present in person or represented
     by proxy, or, if such quorum is not present at such meeting, at an
     adjournment thereof at which the holders of twenty-five per cent (25%)
     Class B, Series A Shares then present in person or represented by proxy
     shall constitute a quorum for all purposes. The formalities to be observed
     with respect to proxies, the giving of notice and the conduct of any such
     meeting or any adjourned meeting shall be those from time to time
     prescribed by the articles and by-laws of the Company or otherwise
     prescribed by law with respect to meetings of shareholders. On every poll
     taken at every meeting of holders of Class B, Series A Shares, each holder
     entitled to vote thereat shall be entitled to one vote for each Class B,
     Series A Share held by such holder.

     CONVERSION RIGHTS

          The holders of the Class B, Series A Shares shall have the right at
     any time to convert the Class B, Series A Shares into a number of Common
     Shares of the Company equal to the amount received by the Company upon the
     initial issue of each Class B, Series A Share plus all accrued and unpaid
     cumulative dividends divided by the conversion price of $0.40 per Class B,
     Series A Share (the "Conversion Price").

          The conversion privilege herein provided for may be exercised by
     notice in writing given to the Company at its registered office,
     accompanied by the certificate or certificates representing the Class B,
     Series A Shares in respect of which the holder thereof desires to exercise
     such right of conversion. Such notice shall be signed by such holder or his
     duly authorized attorney and shall specify the number of Class B, Series A
     Shares which the holder desires to have converted. If less than all the
     Class B, Series A Shares represented by a certificate or certificates
     accompanying any such notice are to be converted, the holder shall be
     entitled to receive, at the expense of the Company, a new certificate
     representing the number of Class B, Series A Shares comprised in the
     certificate or certificates surrendered as aforesaid which are not to be
     converted.

          On any conversion of Class B, Series A Shares the share certificates
     for Common Shares of the Company resulting therefrom shall be issued in the
     name of the registered holder of the Class B, Series A Shares converted or
     in such name or names as


                                       53
<Page>

     such registered holder may direct in writing, provided that such
     registered holder shall pay any applicable security transfer taxes. In
     either instance the transfer form on the back of the certificates in
     question shall be endorsed by the registered holder of the Class B,
     Series A Shares or his duly authorized attorney, with signature
     guaranteed in a manner satisfactory to the Company, provided that the
     Company may wave the requirement for any such guarantee.

          In the event that the Company issues Common Shares, Class B Shares or
     other securities at a price which is less than the then current conversion
     price of the Class B, Series A Shares, the conversion price of the Class B,
     Series A Shares shall be reduced to the price at which the Common Shares,
     Class B Shares or other securities are issued. The following issuances of
     securities shall not bring about the foregoing reduction in the conversion
     price: (i) securities issued upon the conversion of any Class B, Series A
     Shares; (ii) securities issued upon the conversion of any debenture,
     warrant, option or other convertible security; and (iii) Common Shares of
     the Company (or options or rights or purchase such Common Shares) issued
     or issuable to employees, directors, officers or consultants pursuant a
     plan approved by the Board of Directors of the Company.

Change of Rights of Shareholders

     The CBCA requires the consent by special resolution of a majority of not
less than two-thirds (2/3) of the votes cast by the shareholders entitled to
vote in order to change the rights of holders of shares, including the
designation of all or any shares, and any addition, change or removal of rights,
privileges, restrictions and conditions, including rights to accrued dividends,
in respect of all or any shares, whether issued or unissued.


C.  MATERIAL CONTRACTS

     On July 31, 2003, SAND sold its wholly-owned subsidiary, ClarityBlue
Limited (previously named Sand Technology (U.K.) Limited), for total proceeds of
approximately $20 million to a group of investors which included members of
senior management of the subsidiary and Duncan Painter who was a member of the
Board of Directors of SAND. The Company provided warranties for claims against
ClarityBlue Limited for matters existing prior to the sale. The warranties for
tax matters expire in calendar 2010 and in calendar 2005 for other warranties.

     SAND entered into a Shareholder Rights Plan Agreement dated as of November
17, 2003 with CIBC Mellon Trust Company, as rights agent. The continued
existence of the Rights Plan was confirmed by the shareholders of SAND on
December 15, 2005. Information as to the shareholder rights plan of SAND is
found under Item 10 - "Additional Information" under "Change in Control of
Company".

                                       54
<Page>


D.  EXCHANGE CONTROLS

     There are no governmental laws, decrees, or regulations in Canada relating
to restrictions on the export or import of capital, or affecting the remittance
of interest, dividends, or other payments to non-resident holders on the
Company's Class A Common Shares, other than withholding tax requirements. Any
remittances of dividends to United States residents are subject to a 15%
withholding tax (5% if the shareholder is a company owning at least 10% of the
outstanding voting shares of the Company) pursuant to Article X of the
reciprocal tax treaty between Canada and the United States. See Item 10 -
"Additional Information" - "E, - Taxation".

     To the knowledge of the Company, except as provided in the INVESTMENT
CANADA ACT (the "Act") enacted on June 20, 1985, as amended, as further amended
by the NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) IMPLEMENTATION ACT (Canada)
and the WORLD TRADE ORGANIZATION (WTO) AGREEMENT IMPLEMENTATION ACT, there are
no limitations specific to the rights of non-Canadians to hold or vote the
common shares of the Company under the laws of Canada or the Province of Quebec
or in the charter documents of the Company.

     Management of the Company considers that the following general summary
fairly describes those provisions of the Act pertinent to an investment by an
American investor in the Company.

     The Act requires a non-Canadian making an investment which would result in
the acquisition of control of a Canadian business, the gross value of the assets
of which exceed certain threshold levels or the business activity of which is
related to Canada's cultural heritage or national identity, to either notify, or
file an application for review with the Director of Investments, Industry Canada
who administers provisions of the Act. Under the Act, control of a company is
deemed to be acquired through the acquisition of a majority of the voting shares
of a company, and is presumed to be acquired where one-third or more, but less
than a majority of the voting shares of a company are acquired, unless it can be
established that the Company is not controlled in fact through the ownership of
voting shares.

     The notification procedure involves a brief statement of information about
the investment on a prescribed form which is required to be filed with
Investment Canada by the investor at any time up to 30 days following
implementation of the investment. It is intended that investments requiring only
notification will proceed without government intervention unless the investment
is in a specific type of business activity related to Canada's cultural heritage
and national identity.

     If an investment is reviewable under the Act, an application for review in
the form prescribed is required to be filed with Investment Canada prior to the
investment taking place and the investment may not be implemented until the
review has been completed and the Minister responsible for Investment Canada is
satisfied that the investment is likely to be of net benefit to Canada. If the
Minister is not satisfied that the investment is likely to be of

                                       55
<Page>

net benefit to Canada, the non-Canadian must not implement the investment or, if
the investment has been implemented, may be required to divest himself of
control of the business that is the subject of the investment.


E.  TAXATION

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

     The following summary of certain Canadian federal income tax considerations
generally applicable in respect of the Company's Class A Common Shares reflects
the Company's opinion. The tax consequences to any particular holder of Class A
Common Shares will vary according to the status of that holder as an individual,
trust, corporation or member of a partnership, the jurisdictions in which that
holder is subject to taxation, the place where that holder is resident and,
generally, according to that holder's particular circumstances. This summary is
applicable only to holders who are resident in the United States, have never
been resident in Canada for tax purposes, deal at arm's length with the Company,
hold their Class A Common Shares as capital property and who will not use or
hold the Class A Common Shares in carrying on business in Canada.

     This summary is based upon the provisions of the Income Tax Act of Canada
and the regulations thereunder (collectively, the "Tax Act", or "ITA") and the
Canada-United States Tax Convention as amended by the Protocols thereto (the
"Tax Convention") as at the date of this Form 20-F and the current publicly
known administrative practices of the Canada Revenue Agency. This summary does
not take into account Canadian provincial income tax considerations.

     This summary is not exhaustive of all possible income tax considerations
pertaining to the Class A Common Shares. It is not intended as legal or tax
advice to any particular holder of Class A Common Shares and should not be so
construed. Each holder should consult his own tax advisor with respect to the
income tax consequences applicable to him in his own particular circumstances.

DISPOSITION OF CLASS A COMMON SHARES

     Under the Tax Act, a gain from the disposition of Common Shares by a
non-resident of Canada will generally not be subject to Canadian tax, provided
the shareholder (and/or persons who do not deal at arm's length with the
shareholder) have not held a "substantial interest" in the Company (25% or more
of the shares of any class of the Company's share capital) at any time in the
five years preceding the disposition. Even if a gain would have been taxable
under the Tax Act, generally, the Tax Convention will exempt from Canadian
taxation any capital gain realized by a resident of the United States, provided
that the value of the Class A Common Shares is not derived principally from real
property situated in Canada. It is likely that this exemption would apply to the
Class A Common Shares of the Company.

                                       56
<Page>

     Where a holder disposes of Class A Common Shares to the Company (unless the
Company acquired the common shares in the open market in the manner in which
shares would normally be purchased by any member of the public), this will
result under the TAX ACT in a deemed dividend to the holder equal to the amount
by which the consideration paid by the Company exceeds the paid-up capital of
such shares. The amount of such dividend will be subject to withholding tax as
described below.

DIVIDENDS

     In the case of any dividends paid to non-residents of Canada, the Canadian
tax is withheld by the Company, which remits only the net amount of such
dividend to the shareholder. By virtue of Article X of the Tax Convention, the
rate of tax on dividends paid to residents of the United States is generally
limited to 15% of the gross dividend (or 5% in the case of certain corporate
shareholders owning shares of the Company entitling the shareholder to at least
10% of the Company's voting shares). In the event the provisions of the Tax
Convention are not applicable, the rate of Canadian withholding tax imposed on
non-residents according to the TAX ACT is 25% of the gross dividend.


F.  DIVIDENDS AND PAYING AGENTS

     Not applicable.


G.  STATEMENTS BY EXPERTS

     Not applicable.


H.  DOCUMENTS ON DISPLAY

     The Company is subject to certain of the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports and other information with the SEC. As a
foreign private issuer, the Company is exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements, and its
officers, directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of the Exchange
Act. As a foreign private issuer, the Company is not required to publish
financial statements as frequently or as promptly as United States companies.

     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 Judiciary
Plaza, 100 F Street N.E., 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

                                       57
<Page>

regarding issuers that file electronically with the SEC. The address of that
site is http://www.sec.gov.


I.  SUBSIDIARY INFORMATION

     Not applicable.


ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are not subject to material market risk exposures, except for risks
related to interest rate fluctuations and foreign currency exchange rates.

     Our exposure to market rate risk for changes in interest rates relates
primarily to our investment portfolio. We have not invested in market risk
sensitive instruments such as derivative financial instruments or derivative
commodity instruments. We invest in high quality issuers and limit the amount of
our credit exposure with any one issuer. We are averse to principal loss and
ensure the safety and preservation of our invested funds by limiting default,
market and reinvestment risk. We do not make use of a bank line of credit and we
do not have any long term debt.

     Since we currently earn revenues and incur expenses in United States
dollars, British pounds, Euros and Canadian dollars, exchange rates for these
and other local currencies in countries where we may operate in the future may
fluctuate in relation to the Canadian dollar and such fluctuations may have an
adverse effect on our earnings or assets when United States dollars, British
pounds, Euros or local currencies are exchanged for Canadian dollars. We have
not entered into forward foreign exchange contracts. Losses and gains resulting
from the translation of revenue and expenses denominated in United States
dollars, British pounds, or Euros into Canadian dollars have been included in
our results of operations.


ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.


                                       58
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                                     PART II


ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None.


ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
            OF PROCEEDS

     A shareholder rights plan (the "Rights Plan") was adopted by the Board of
Directors on November 12, 2003 and made effective on November 17, 2003. The
Rights Plan was ratified, confirmed and approved by the shareholders of SAND at
the Annual and Special Meeting of Shareholders held on December 16, 2003. The
Board of Directors renewed and continued the Rights Plan on November 21, 2005
and the renewal and continuation of the Rights Plan was ratified, confirmed and
approved by the shareholders of SAND at the Annual and Special Meeting of
Shareholders of SAND held on December 15, 2005.

Summary of the Rights Plan

     The principal terms of the Rights Plan are summarized below. Capitalized
terms used but not defined in this summary are used as defined in the Rights
Agreement. The summary is qualified by reference to the actual provisions of the
Rights Agreement.

Rights

     One Right will be issued and will attach to each outstanding Common Share
of the Company. A Right only becomes exercisable upon the occurrence of a
Flip-In Event, which is a transaction by which a person becomes an Acquiring
Person and which otherwise does not meet the requirements of a Permitted Bid.
Prior to a Flip-In Event, the Rights are priced at CDN$100 per share. If a
Flip-In Event occurs, each Right issued under the Rights Plan thereafter will
entitle all holders, other than the Acquiring Person, to purchase that number of
Common Shares of the Company having an aggregate market value equal to twice
CDN$100 per share for CDN$100 per share. This purchase will cause substantial
dilution to the person or group of persons attempting to acquire control of the
Company, other than by way of a Permitted Bid. The Rights expire on the
termination of the Rights Plan, unless redeemed before such time.

Acquiring Person

     An Acquiring Person is generally a person who becomes the beneficial owner
of 20% or more of the outstanding Common Shares of the Company. Under the Rights
Plan, there are various exceptions to the definition of Acquiring Person,
including:

                                       59
<Page>

     o    a person who acquires 20% or more of the outstanding Common Shares due
          to (i) acquisitions of Common Shares by the Company, (ii) pro rata
          distributions of Common Shares by the Company, (iii) acquisitions of
          Common Shares upon exercise of Convertible Securities acquired
          pursuant to certain exempt transactions, (iv) an amalgamation, merger
          or other statutory procedure requiring shareholder approval, or (v)
          the issuance of Common Shares on an exempt private placement basis
          (subject to certain limits); and

     o    underwriters who obtain Common Shares for the purpose of a public
          distribution.

Beneficial Ownership

     The thresholds for triggering the Rights Plan are based on the percentage
of shares that are Beneficially Owned by a person or its Affiliates or
Associates. This is defined in terms of legal or equitable ownership of common
shares. In addition, a person is deemed to be the Beneficial Owner of Common
Shares in circumstances where that person or its Affiliates or Associates, and
any other person acting jointly or in concert with such person, has a right to
acquire Common Shares within 60 days. There are various exceptions to this
definition set forth in the Rights Plan.

Permitted Bid

     If a Take-over Bid is structured as a Permitted Bid, a Flip-In Event will
not occur and the Rights will not become exercisable. Permitted Bids must be
made by means of a take-over bid circular and comply with the following:

     o    the Take-over Bid must be made to all shareholders other than the
          bidder;

     o    the Take-over Bid must not permit the bidder to take up any Common
          Shares that have been tendered pursuant to the Take-over Bid prior to
          the expiry of a period not less than 60 days after the Take-over Bid
          is made, and then only if at such time more than 50% of the Common
          Shares held by the Independent Shareholders (which term generally
          includes shareholders other than the bidder, its Affiliates,
          Associates and persons acting jointly or in concert with the bidder),
          have been tendered pursuant to the Take-over Bid and not withdrawn;

     o    the Take-over Bid must contain an irrevocable and unqualified
          provision that, unless it is withdrawn, Common Shares may be tendered
          at any time during the 60 day period referred to in the immediately
          preceding paragraph and that any Common Shares deposited pursuant to
          the Take-over Bid may be withdrawn until they have been taken up and
          paid for; and

     o    the Take-over Bid must contain an irrevocable and unqualified
          provision that, if more than 50% of the Common Shares held by
          Independent Shareholders are


                                       60
<Page>


          tendered pursuant to the Take-over Bid within the 60-day period, then
          the bidder must make a public announcement of that fact and the
          Take-over Bid must then remain open for an additional 10 business
          days from the date of such public announcement.

     The Rights Plan also allows a Competing Permitted Bid to be made while a
Permitted Bid is in existence. A Competing Permitted Bid is a Take-over Bid that
is made after a Permitted Bid has been made, but prior to its expiry, that
satisfies all of the requirements of a Permitted Bid, except that (i) no Common
Shares will be taken up or paid for until the later to occur of the date which
is generally 35 days after the date the Take-over Bid is made and the 60th day
after the date of the Permitted Bid that is then outstanding, and (ii) at the
close of business on the date Common Shares are first taken up or paid for, more
than 50% of the then outstanding Common Shares held by Independent Shareholders
have been tendered in such Take-over Bid and not withdrawn. If this 50%
requirement is satisfied, the applicable bidder must make a public announcement
of that fact and the Take-over Bid must remain open for tenders of Common Shares
for at least ten business days after the date of such public announcement.

     The requirements of a Permitted Bid and a Competing Permitted Bid enable
shareholders to decide whether the Take-over Bid or any Competing Permitted Bid
is adequate on its own merits, without being influenced by the likelihood that a
Take-over Bid will succeed. Moreover, if there is sufficient support for a
Take-over Bid such that at least 50% of the Common Shares held by Independent
Shareholders have been tendered to it, a shareholder who has not yet tendered to
that bid will have a further 10 business days in which to decide whether to
withdraw its Common Shares from a Competing Take-over Bid, if any, and whether
to tender to the Take-over Bid.

Waiver and Redemption

     Until the occurrence of a Flip-In Event as to which the Board of Directors
has not issued a waiver, the Board of Directors may elect to redeem all but not
less than all of the then outstanding Rights at a redemption price of $0.0001
(subject to adjustment) per Right. In addition, until the occurrence of a
Flip-In Event as to which the Board of Directors has not issued a waiver, the
Board of Directors may determine to waive the application of the Rights Plan to
any Flip-In Event.

     The Board of Directors may also waive the application of the Rights Plan to
any Flip-In Event if the Board determines that the Person became an Acquiring
Person by inadvertence and without any intention to become, or knowledge that it
would become, an Acquiring Person and such Person has reduced its Beneficial
Ownership of Common Shares such that at the time of the granting of a waiver,
such Person is no longer an Acquiring Person. The Board of Directors will be
deemed to have redeemed the Rights at the Redemption Price on the date that the
Person making the Permitted Bid, Competing Permitted Bid or Take-over Bid in
respect of which the Board of Directors has waived or been deemed to waive the
application of the Rights Plan, has taken up and paid for the Common Shares
pursuant to the applicable bid.

                                       61
<Page>

Termination

     The Rights Plan will expire, subject to certain conditions, at the close of
the annual meeting of shareholders of the Company in 2007 and every two year
anniversary thereafter and so on unless the continuation of the Rights Plan for
each such two year period (or other period approved by the Independent
Shareholders) is approved by the Independent Shareholders of the Company.


ITEM 15.    CONTROLS AND PROCEDURES

     "Disclosure controls and procedures" are controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports we file with the Securities and Exchange Commission is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms and that the information is accumulated and communicated
to our management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the fiscal year covered
by this Annual Report on Form 20-F. This evaluation was carried out under the
supervision and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer. Based upon that evaluation,
our Chief Executive Officer and our Chief Financial Officer concluded that our
disclosure controls and procedures are effective. There have been no significant
changes in our disclosure controls and procedures which could significantly
affect these controls and procedures subsequent to the end of our most recent
fiscal year.


ITEM 16 A.  AUDIT COMMITTEE FINANCIAL EXPERT

     Messrs. Malouin, Pryde and Shindler, all of whom are non-management and
unrelated directors, currently comprise the Audit Committee. Mr. Malouin is
Chairman of the Audit Committee. Messrs. Malouin, Pryde and Shindler satisfy the
current requirements of The Nasdaq Stock Market, Inc., relating to the
independence and the qualification of the members of the Audit Committee.

     Marc Malouin is Treasurer and Director of Financial Services of Societe de
transport de Montreal (STM). He was with Ernst & Young for ten years before
assuming senior financial positions with Algo Group Inc., Bombardier Inc.,
Quebecor Inc. and Provigo. Mr. Malouin holds CA and CPA degrees.

     Our Board of Directors has determined that Mr. Malouin qualifies as an
"audit committee financial expert".

                                       62
<Page>


ITEM 16 B.  CODE OF ETHICS

     As part of its stewardship responsibilities, the Board of Directors has
approved formal "Standards of Ethical Conduct" that govern the behaviour of the
directors, officers and employees of the Company. The Board monitors compliance
with these standards and is responsible for the granting of any waivers from
these standards to directors or officers. Disclosure will be made by the Company
of any waiver from these standards granted to the directors or officers of the
Company in the quarterly report of the Company that immediately follows the
grant of such waiver. No waiver has been granted to date.


ITEM 16 C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Deloitte & Touche LLP served as our auditors for the fiscal year ended
July 31, 2005 and had been appointed as our auditors for the fiscal year ended
July 31, 2006.

Audit Fees and Audit-Related Fees

     Deloitte & Touche LLP billed the Company $117,627 in fiscal 2006 ($128,651
in fiscal 2005) for professional services rendered for the audit of the Annual
Consolidated Financial Statements and the review of financial statements
included in statutory and regulatory filings. Of that amount, $2,500 was related
to the current fiscal year while $115,127 was related to previous fiscal years
(compared to $6,365 and $122,286 respectively in fiscal 2005).

Tax Fees

     Deloitte & Touche LLP billed the Company $31,057 in fiscal 2006 ($38,017 in
fiscal 2005) for professional services rendered for tax compliance, tax advice,
and tax planning. The taxation advisory services provided related primarily to
the preparation of corporate tax returns and specific tax advice on research and
development tax credit payments and corporate international tax planning.

Other Fees

     Other than the audit and tax services described above, Deloitte & Touche
LLP did not provide other services to the Company in fiscal 2006 ($1,200 in
fiscal 2005).

     The Audit Committee has considered whether the provision of these services
is compatible with maintaining the independence of Deloitte & Touche LLP. The
Audit Committee is of the opinion that the provision of these services does not
compromise the independence of the Auditor. All audit and non-audit services
provided by Deloitte & Touche LLP must be approved by the Audit Committee.

                                       63
<Page>

     Deloitte & Touche LLP resigned as our auditors on August 2, 2006. There
have been no reportable disagreements between the Company and Deloitte & Touche
LLP and no qualified opinions or denials of opinions by Deloitte & Touche LLP.
In the circumstances, the Audit Committee and the Board of Directors resolved on
August 15, 2006 to appoint Raymond Chabot Grant Thornton LLP as auditors of the
Company for the fiscal year ended July 31, 2006 to replace Deloitte & Touche
LLP, subject to ratification at the forthcoming Annual Meeting of the
Shareholders of the Company.


ITEM 16 D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

     None.


ITEM 16 E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
            PURCHASERS

     No repurchases of our Class A common shares were made by or on behalf of
us or any affiliated purchaser during the fiscal year ended July 31, 2006.


                                       64
<Page>

                                                      PART III

ITEM 17.    FINANCIAL STATEMENTS

     Not Applicable.


ITEM 18.    FINANCIAL STATEMENTS

     The Consolidated Financial Statements of the Company are included in this
Annual Report on Form 20-F beginning on page 66.


                                       65
<Page>



                         SAND TECHNOLOGY INC.

                   CONSOLIDATED FINANCIAL STATEMENTS
                            JULY 31, 2006


<Table>

<S>                                                             <C>
Report of Independent Registered Chartered Accountants          67 - 68

Comments by Independent Registered Chartered
Accountants for U.S. Readers on
Canada-U.S. Reporting Differences                                    69

Financial Statements
    Consolidated Balance Sheets                                      70

    Consolidated Operations                                          71

    Consolidated Shareholders' Equity                                72

    Consolidated Cash Flows                                          73

    Notes to Consolidated Financial Statements                  74 - 92

</Table>




                                       66


<Page>



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS



To the Shareholders and Board of Directors of
SAND Technology Inc.


We have audited the accompanying consolidated balance sheet of SAND Technology
Inc. and subsidiaries (the "Corporation") as at July 31, 2006 and the
consolidated statements of operations, shareholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing
standards and standards of the Public Company Accounting Oversight Board
(United States). These standards require that we plan and perform
an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Corporation is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Corporation's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.


                                       67


<Page>

In our opinion, consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Corporation as
at July 31, 2006 and the results of its operations and its cash flows for the
year then ended in accordance with Canadian generally accepted accounting
principles.

The financial statements as at July 31, 2005 and for the years ended July 31,
2005 and 2004 were audited by other auditors who expressed an opinion without
reservation on those statements in their report dated September 16, 2005.


/s/ Raymond Chabot Grant Thornton LLP


Independent Registered Chartered Accountants

Montreal
September 8, 2006



                                       68

<Page>



COMMENTS BY INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS FOR
U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCES


The standards of the Public Company Accounting Oversight Board (United States)
require the addition of an explanatory paragraph (following the opinion
paragraphs) when there are changes in accounting principles that have been
implemented such as those described in Note 2 to the consolidated financial
statements as at July 31, 2006 and for the year then ended of SAND Technology
Inc. and subsidiaries (the "Corporation") and when the consolidated financial
statements are affected by conditions and events that cast substantial doubt on
the Corporation's ability to continue as a going concern, such as those
described in Note 1 to the consolidated financial statements of the Corporation.
Our report to the shareholders and Board of Directors, dated September 8, 2006,
is expressed in accordance with Canadian reporting standards, which do not
require a reference to such changes in accounting principles or such events and
conditions in the report of independent registered chartered accountants when
the changes or events and conditions are properly accounted for and adequately
disclosed in the financial statements.


/s/ Raymond Chabot Grant Thornton LLP


Independent Registered Chartered Accountants

Montreal
September 8, 2006


                                       69

<Page>


SAND TECHNOLOGY INC.
CONSOLIDATED BALANCE SHEETS
July 31, 2006
(In Canadian dollars)
<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       2006              2005
                                                                                                          $                 $
<S>                                                                                               <C>               <C>
 ASSETS
 Current assets
     Cash and cash equivalents                                                                    1,412,548         5,615,912
     Accounts receivable                                                                          1,486,287         1,561,613
     Prepaid expenses                                                                                93,226           127,731
                                                                                            ---------------   ----------------
                                                                                                  2,992,061         7,305,256
 Capital assets (Note 3)                                                                            231,367           296,735
 Other assets (Note 4)                                                                              221,693           332,540
                                                                                            ---------------   ----------------
                                                                                                  3,445,121         7,934,531
                                                                                            ===============   ================

 LIABILITIES
 Current liabilities
     Accounts payable and accrued liabilities                                                     1,140,343         1,485,597
     Deferred revenue                                                                             1,231,094         1,447,992
                                                                                            ---------------   ----------------
                                                                                                  2,371,437         2,933,589
 Deferred credits                                                                                   136,906           166,243
                                                                                            ---------------   ----------------
                                                                                                  2,508,343         3,099,832
                                                                                            ---------------   ----------------
 Commitments (Note 8)

 SHAREHOLDERS' EQUITY
 Common stock (Note 5)
     Authorized
         Unlimited number of class "A" common shares, without par value
     Issued and outstanding
         12,818,189 class "A" common shares (12,818,189 in 2005)                                 38,024,756        38,024,756
     Contributed surplus (Note 5b)                                                                  103,000            74,000
 Deficit                                                                                        (37,190,978)      (33,264,057)
                                                                                            ---------------   ----------------
                                                                                                    936,778         4,834,699
                                                                                            ---------------   ----------------
                                                                                                  3,445,121         7,934,531
                                                                                            ===============   ================
-----------------------------------------------------------------------------------------------------------------------------------
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.

On behalf of the Board,

<Table>
<S>                                                             <C>
/s/ Arthur G. Ritchie                                           /s/ Marc Malouin
--------------------------------------------------------------  -------------------------------------------------------------
Arthur G. Ritchie, Director                                     Marc Malouin, Director
</Table>



                                       70

<Page>


SAND TECHNOLOGY INC.
CONSOLIDATED OPERATIONS
Years ended July 31, 2006
(In Canadian dollars)
<Table>
<Caption>

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                    2006               2005              2004
                                                                         ----------------   ---------------   ---------------
                                                                                       $                  $                 $
<S>                                                                           <C>                <C>               <C>
 REVENUE                                                                       5,477,485          6,096,033         5,349,214
                                                                         ----------------   ---------------   ---------------
 Operating expenses
     Cost of sales and product support                                         1,554,313          1,754,138         1,652,369
     Research and development, net (Note 6)                                    2,441,950          3,272,102         3,308,789
     Amortization of capital assets and other assets (Notes 3 and 4)             248,455            277,276           242,488
     Selling, general and administrative expenses                              5,220,443          8,317,831         7,604,541
                                                                         ----------------   ---------------   ---------------
                                                                               9,465,161         13,621,347        12,808,187
                                                                         ----------------   ---------------   ---------------
 Loss from operations                                                         (3,987,676)        (7,525,314)       (7,458,973)
 Interest income                                                                  60,755            162,260           329,043
                                                                         ----------------   ---------------   ---------------
 NET LOSS                                                                     (3,926,921)        (7,363,054)       (7,129,930)
                                                                         ================   ===============   ===============

 Basic and diluted loss per share (Note 5)                                        (0.31)             (0.57)            (0.55)
                                                                         ================   ===============   ===============

 Basic and diluted weighted average number of common shares
 outstanding                                                                  12,818,189         12,860,438        13,079,649
                                                                         ================   ===============   ===============

-----------------------------------------------------------------------------------------------------------------------------------
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       71

<Page>


SAND TECHNOLOGY INC.
CONSOLIDATED SHAREHOLDERS' EQUITY
Years ended July 31, 2006
(In Canadian dollars)
<Table>
<Caption>

-----------------------------------------------------------------------------------------------------------------------------------

                                                                          Common stock
                                                      ----------------------------------
                                                           Number of            Amount       Contributed           Deficit
                                                              shares                             surplus
                                                      ----------------  ----------------  ----------------  ----------------
                                                                                      $                 $                 $
<S>                                                        <C>               <C>                                <C>
 Balance as at July 31, 2003                               13,164,327        39,051,564                         (19,369,906)
 Net loss                                                                                                        (7,129,930)
 Stock-based compensation (Note 5b)                                                                49,000
 Share repurchase                                            (166,776)         (494,736)                            253,230
                                                      ----------------  ----------------  ----------------  ----------------
 Balance as at July 31, 2004                               12,997,551        38,556,828            49,000       (26,246,606)
 Net loss                                                                                                        (7,363,054)
 Stock-based compensation (Note 5b)                                                                25,000
 Share repurchase                                            (179,362)         (532,072)                            345,603
                                                      ----------------  ----------------  ----------------  ----------------
 Balance as at July 31, 2005                               12,818,189        38,024,756            74,000       (33,264,057)
 Net loss                                                                                                        (3,926,921)
 Stock-based compensation (Note 5b)                                                                29,000
                                                      ----------------  ----------------  ----------------  ----------------
 Balance as at July 31, 2006                               12,818,189        38,024,756           103,000       (37,190,978)
                                                      ================  ================  ================  ================
-----------------------------------------------------------------------------------------------------------------------------------
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       72

<Page>


SAND TECHNOLOGY INC.
CONSOLIDATED CASH FLOWS
Years ended July 31, 2006
(In Canadian dollars)
<Table>
<Caption>

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                    2006               2005              2004
                                                                         ----------------   ---------------   ---------------
                                                                                       $                  $                 $
<S>                                                                           <C>                <C>               <C>
 OPERATING ACTIVITIES
 Net loss                                                                     (3,926,921)        (7,363,054)       (7,129,930)
 Non-cash items
     Amortization of capital assets and other assets                             248,455            277,276           242,488
     Stock-based compensation                                                     29,000             25,000            49,000
     Changes in working capital items
         Accounts receivable                                                      75,326            803,042           (23,787)
         Prepaid expenses                                                         34,505             60,949            14,651
         Accounts payable and accrued liabilities                               (345,254)          (395,516)       (1,098,530)
         Deferred revenue                                                       (216,898)          (106,793)          415,176
                                                                         ----------------   ---------------   ---------------
 Cash flows from operating activities                                         (4,101,787)        (6,699,096)       (7,530,932)
                                                                         ----------------   ---------------   ---------------

 INVESTING ACTIVITIES
 Purchase of capital assets                                                      (72,240)           (70,578)          (58,642)
 Balance of sale price receivable                                                                                     588,483
 Increase in other assets                                                                                            (471,100)
                                                                         ----------------   ---------------   ---------------
 Cash flows from investing activities                                            (72,240)           (70,578)           58,741
                                                                         ----------------   ---------------   ---------------

 FINANCING ACTIVITIES
 Purchase of common shares                                                                         (186,469)         (241,506)
 Deferred credits                                                                (29,337)           (29,338)          (29,336)
                                                                         ----------------   ---------------   ---------------
 Cash flows from financing activities                                            (29,337)          (215,807)         (270,842)
                                                                         ----------------   ---------------   ---------------
 NET DECREASE IN CASH AND CASH EQUIVALENTS                                    (4,203,364)        (6,985,481)       (7,743,033)
 Cash and cash equivalents, beginning of year                                  5,615,912         12,601,393        20,344,426
                                                                         ----------------   ---------------   ---------------
 Cash and cash equivalents, end of year                                        1,412,548          5,615,912        12,601,393
                                                                         ================   ===============   ===============
</Table>

 There was no amount of interest paid and no income taxes paid during the
 three-year period ended July 31, 2006.


The accompanying notes are an integral part of the consolidated financial
statements.

                                       73


<Page>

SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

-------------------------------------------------------------------------------

1 - GOVERNING STATUTES AND NATURE OF OPERATIONS

SAND Technology Inc. and subsidiaries (the "Corporation") is involved in the
design, development, marketing and support of software products and services
that enable users to retrieve usable business information from large amounts of
data. The software products, collectively known as the SAND Analytic Server and
the SAND Searchable Archive, are designed to provide an efficient and
cost-effective way for business users to make fast and easy inquiries of large
databases without the intervention of specialist information technology
professionals. The Corporation is considered to have only one reportable
business segment.

The financial statements have been prepared in accordance with Canadian
generally accepted accounting principles and on the basis of the going concern
assumption, meaning that it is assumed that the Corporation will be able to
realize its assets and discharge its liabilities in the normal course of
operations.

In light of operating losses suffered in the current and past years, the
Corporation's ability to realize its assets and discharge its liabilities
depends on the continued financial support of its shareholders and creditors and
its ability to obtain additional financing. The Corporation's management has
adopted a cost reduction plan to address this situation and is confident it will
obtain the necessary financing through public offerings or private placements.

The carrying amounts of assets, liabilities, revenues and expenses presented in
the financial statements and the balance sheet classification have not been
adjusted as it would be required if the going concern assumption were not
appropriate.

2 - ACCOUNTING POLICIES

ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts recorded in the financial statements and
notes to financial statements. These estimates are based on management's best
knowledge of current events and actions that the Corporation may undertake in
the future. Actual results may differ from these estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of SAND Technology
Inc. and its wholly-owned subsidiaries which are located in Germany,
United Kingdom, Ireland and United States. All intercompany transactions
and balances have been eliminated.

REVENUE RECOGNITION

The Corporation generates revenues principally through two sources: software
licences and services. Software licence revenues are normally generated from
licensing the perpetual use of the Corporation's software products. Service
revenues are generated from sales of maintenance, implementation, consulting and
training services performed for customers that licence the Corporation's
products.


                                       74

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

2 - ACCOUNTING POLICIES (CONTINUED)

Revenue from the sale of software licence agreements is recognized upon delivery
of software if persuasive evidence of an arrangement exists, collection is
probable, the fee is fixed or determinable and vendor-specific evidence of an
arrangement exists to allocate the total fee to the different elements of an
arrangement. Vendor-specific objective evidence (VSOE) is typically based on the
price charged when an element is sold separately or, in the case of an element
not yet sold separately, the price established by management if it is probable
that the price, once established, will not change before market introduction. If
VSOE of all undelivered elements exists but evidence does not exist for one or
more delivered elements, then revenue is recognized using the residual method.
Under the residual method, the fair value of the undelivered elements is
deferred, and the remaining portion of the agreement fee related to the
delivered elements is recognized as revenue provided that all other revenue
recognition criteria are met. If evidence of fair value of one or more
undelivered elements cannot be established, revenue is deferred and recognized
ratably over the last undelivered element.

In circumstances where the implementation services are essential to the
functionality of the software or where the software requires significant
customization, the Corporation recognizes software licence revenue using the
percentage-of-completion method over the implementation period. The
percentage-of-completion is measured by the percentage of implementation hours
incurred to date to total estimated implementation hours. Past experience has
shown expended hours to be the best measure of progress.

Revenues from maintenance services for licences previously sold and implemented
are recognized ratably over the term of the contract.

Revenues from consulting and training services not considered as part of the
implementation of software licences are recognized as the services are provided.

Amounts received in advance of the delivery of products or performance of
services are classified as deferred revenue.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include unrestricted cash and highly liquid
investments purchased with an original maturity of three months or less.


                                       75

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

2 - ACCOUNTING POLICIES (CONTINUED)


CAPITAL ASSETS

Capital assets are recorded at cost and are amortized over their estimated
useful lives using the straight-line method over the following periods:
<Table>
                                                                                           Periods
                                                                                    ----------------
<S>                                                                                     <C>
 Furniture and equipment                                                                   5 years
 Computer equipment                                                                        3 years
                                                                                          Over the
                                                                                        shorter of
                                                                                         the lease
                                                                                           term or
 Leasehold improvements                                                                   10 years
</Table>


OTHER ASSETS

CONTRACT COSTS

Contract costs are comprised of an amount paid to a vendor upon the transfer of
a long-term service contract and is amortized ratably over the term of the
contract ending in 2008.

IMPAIRMENT OF LONG-LIVED ASSETS

Capital assets and intangible assets subject to amortization are tested for
recoverability when events or changes in circumstances indicate that their
carrying amount may not be recoverable. The carrying amount of a long-lived
asset is not recoverable when it exceeds the sum of the undiscounted cash flows
expected from its use and eventual disposal. In such a case, an impairment loss
equivalent to the excess of the carrying amount of a long-lived asset over its
fair value must be recognized.

RESEARCH AND DEVELOPMENT COSTS

Research costs are charged to operations in the period in which they are
incurred. Development costs are expensed as incurred unless a project meets the
criteria under Canadian generally accepted accounting principles for deferral
and amortization. The Corporation has not deferred any such development costs to
date. Related tax credits are recorded as a reduction of research and
development expenses.

INCOME TAXES

The Corporation uses the liability method of accounting for income taxes. Under
this method, future income tax assets and liabilities are determined according
to differences between the carrying amounts and tax bases of assets and
liabilities. They are measured by applying enacted or substantively enacted tax
rates and laws at the date of the financial statements for the years in which
the temporary differences are expected to reverse. The Corporation records a
valuation allowance for future income tax assets if, based on available
information, it is more likely than not that some or all of the future income
tax assets will not be realized.


                                       76

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

2 - ACCOUNTING POLICIES (CONTINUED)


DEFERRED CREDITS

Deferred credits include deferred lease inducements, which are amortized on a
straight-line basis over the term of the lease as a deduction of lease expense.

FOREIGN CURRENCY TRANSLATION

Revenue, expenses and acquisition of non-monetary assets denominated in foreign
currencies are translated into Canadian dollars at the exchange rate in effect
at the transaction date. Monetary assets and liabilities are translated at the
rate in effect at the balance sheet date.

The accounts of the subsidiaries included in the consolidated financial
statements are translated into Canadian dollars using the temporal method. Under
this method, monetary items are translated at the exchange rate in effect at the
balance sheet date. Non-monetary items are translated at the historical rate.
Revenue and expenses in foreign currency are translated at the average rate in
effect during the year, with the exception of revenue and expenses relating to
non-monetary assets and liabilities, which are translated at the historical
rate. Gains and losses are included in operations for the year.

LOSS PER SHARE

Per share computations are based on the weighted average number of shares
outstanding during the year. The dilutive effect of options is determined using
the treasury stock method.

STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS

The Corporation early-adopted the recommendations CICA Handbook section 3870,
STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS, on a prospective basis,
effective August 1, 2003, as permitted by the standard. The adoption of this
amendment resulted in stock-based compensation in the amount of $49,000 included
in selling, general and administrative expenses with a corresponding credit to
contributed surplus (see Note 5b).

Prior to August 1, 2003, the Corporation recorded no compensation cost on stock
options granted to employees (see Note 5b).

GUARANTEES

In the normal course of its operations, the Corporation has entered into
agreements that contain certain features which meet the definition of a
guarantee under the guidance provided by Accounting Guideline No. 14.

Certain agreements with customers include intellectual-property indemnification
obligations that are customary in the industry. These obligations would
generally require the Corporation to compensate a third party for certain
damages and claims incurred as a result of third-party intellectual-property
claims arising from these agreements.


                                       77

<Page>

SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

2 - ACCOUNTING POLICIES (CONTINUED)


The nature of these obligations prevents the Corporation from making a
reasonable estimate of the maximum potential amount it could be required to pay.
Historically, the Corporation has not made any payments under such obligations.

In addition, the Corporation has provided warranties as part of the sale of its
subsidiary for claims against it related to conditions existing prior to the
sale.

ASSET RETIREMENT OBLIGATIONS

As of dateMonth8Day1Year2004August 1, 2004, the Corporation adopted Handbook
section 3110, ASSET RETIREMENT OBLIGATIONS, which focuses on the recognition and
measurement of liabilities for obligations associated with the retirement of
property, plant and equipment when those obligations result from the
acquisition, construction, development or normal operation of the assets. The
adoption of this recommendation did not have an impact on the Corporation's
consolidated financial statements.

ADOPTION OF A NEW ACCOUNTING POLICY

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

The Accounting Guideline No. 15 (AcG-15), CONSOLIDATION OF VARIABLE INTEREST
ENTITIES, presents the views of the Accounting Standards Board on the
application of consolidation principles to certain entities that are subject to
control and on a basis other than ownership of voting interests. This guideline
is to be applied for years beginning on or after November 1, 2004. The
adoption of AcG-15 did not have an impact on the Corporation's results from
operations or financial position.

FINANCIAL INSTRUMENTS - DISCLOSURE AND PRESENTATION

The CICA issued revisions to section 3860 of the CICA Handbook, FINANCIAL
INSTRUMENTS - DISCLOSURE AND PRESENTATION. The revisions change the accounting
for certain financial instruments that have liability and equity
characteristics. These revisions come into effect for years beginning on or
after January 1, 2005. The Corporation does not have any instruments with
these characteristics at this time.

NON-MONETARY TRANSACTIONS

The CICA issued revisions to section 3831 of the CICA Handbook, NON-MONETARY
TRANSACTIONS. The revisions replace the current exception from measurement of a
non-monetary transaction at fair value for non-monetary exchanges which do not
represent the culmination of the earnings process, with an exception based on
whether the transaction has commercial substance. These revisions apply to all
non-monetary transactions initiated in periods beginning on or after
January 1, 2006. The revisions did not have an impact on the Corporation's
consolidated financial statements.


                                       78

<Page>

SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

2 - ACCOUNTING POLICIES (CONTINUED)


FUTURE ACCOUNTING CHANGES

FINANCIAL INSTRUMENTS - RECOGNITION AND MEASUREMENT

The CICA issued CICA Handbook section 3855, FINANCIAL INSTRUMENTS - RECOGNITION
AND MEASUREMENT. The section is effective for annual and interim periods
beginning on or after October 1, 2006. It describes the standards for
recognizing and measuring financial assets, financial liabilities
and non-financial derivatives. This section requires that i) all financial
assets be measured at fair value, with some exceptions such as loans and
investments that are classified as held-to-maturity, ii) all financial
liabilities be measured at fair value when they are derivatives or classified as
held for trading purposes (other financial liabilities are measured at their
carrying value), and iii) all derivative financial instruments be measured at
fair value, even when they are part of a hedging relationship. The Corporation
is currently evaluating the impact of this section on the consolidated financial
statements.

HEDGES

The CICA recently issued CICA Handbook section 3865, HEDGES. The section is
effective for annual and interim periods beginning on or after
October 1, 2006. It describes when and how hedge accounting may be
applied. Hedging is an activity used by a company to change an exposure
to one or more risks by creating an offset between changes in the fair
value of a hedged item and a hedging item, changes in the cash flows
attributable to a hedged item and a hedging item, or changes resulting from a
risk exposure relating to a hedged item and a hedging item. Hedge accounting
changes the normal basis for recording the gains, losses, revenues and expenses
associated with a hedged item or a hedging item in a company's statement of
operations. It ensures that all offsetting gains, losses, revenues and expenses
are recorded in the same period. The Corporation is currently evaluating the
impact of this section on the consolidated financial statements.

COMPREHENSIVE INCOME

The CICA recently issued CICA Handbook section 1530, COMPREHENSIVE INCOME. The
section is effective for annual and interim periods beginning on or after
October 1, 2006. It describes how to report and disclose comprehensive income
and its components.

Comprehensive income is the change in a company's net assets that results from
transactions, events and circumstances from sources other than the company's
shareholders. It includes items that would be excluded from net earnings, such
as changes in the currency translation adjustment relating to self-sustaining
foreign operations, the unrealized gains or losses on available-for-sale
investments and the additional minimum liability for pension obligations.

The CICA also made changes to CICA Handbook section 3250, SURPLUS, and reissued
it as section 3251, EQUITY. The section is also effective for years beginning on
or after October 1, 2006. The changes in how to report and disclose equity
and changes in equity are consistent with the new requirements of section
1530, COMPREHENSIVE INCOME.


                                       79

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

2 - ACCOUNTING POLICIES (CONTINUED)


Adopting these sections on August 1, 2007 will require the
Corporation to begin reporting, to the extent that they are relevant,
the following items in the consolidated financial statements:

- Comprehensive income and its components;
- Accumulated other comprehensive income and its components.

ACCOUNTING CHANGES

The CICA issued revisions to section 1506 of the CICA Handbook, ACCOUNTING
CHANGES. The revisions established criteria for changing accounting policies,
together with the accounting treatment and disclosure of changes in accounting
policies and estimates, and correction of errors. The revisions are effective
for annual and interim periods statements relating to years beginning on or
after January 1, 2007.

The Corporation is currently evaluating the impact of this section on the
consolidated financial statements.

3 - CAPITAL ASSETS
<Table>
<Caption>

                                                                                                                        2006
                                                                         ----------------------------------------------------
                                                                                   COST       ACCUMULATED               NET
                                                                                             AMORTIZATION
                                                                         ----------------   ---------------   ---------------
                                                                                       $                  $                 $
<S>                                                                            <C>                  <C>              <C>
 Furniture and equipment                                                         320,113            320,002               111
 Computer equipment                                                              587,571            485,540           102,031
 Leasehold improvements                                                          287,610            158,385           129,225
                                                                         ----------------   ---------------   ---------------
                                                                               1,195,294            963,927           231,367
                                                                         ================   ===============   ===============
</Table>

<Table>
<Caption>
                                                                                                                         2005
                                                                         ----------------------------------------------------
                                                                                   Cost       Accumulated               Net
                                                                                             amortization
                                                                         ----------------   ---------------   ---------------
                                                                                       $                  $                 $
<S>                                                                            <C>                  <C>              <C>
 Furniture and equipment                                                         320,113            317,189             2,924
 Computer equipment                                                              515,331            380,173           135,158
 Leasehold improvements                                                          287,610            128,957           158,653
                                                                         ----------------   ---------------   ---------------
                                                                               1,123,054            826,319           296,735
                                                                         ================   ===============   ===============
</Table>

Amortization expense of capital assets amounted to $137,608 in 2006 ($166,248 in
2005).

4 - OTHER ASSETS
<Table>
<Caption>
                                                                                                                     2006
                                                                         ----------------------------------------------------
                                                                                    COST        ACCUMULATED               NET
                                                                                               AMORTIZATION
                                                                         ----------------   ---------------   ---------------
                                                                                       $                  $                 $
<S>                                                                            <C>                  <C>              <C>
 Contract costs                                                                  471,100            249,407           221,693
                                                                         ================   ===============   ===============
</Table>


                                       80

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

4 - OTHER ASSETS (CONTINUED)



<Table>
<Caption>
                                                                                                                         2005
                                                                         ----------------------------------------------------
                                                                                    Cost        Accumulated               Net
                                                                                               amortization
                                                                         ----------------   ---------------   ---------------
                                                                                       $                  $                 $
<S>                                                                             <C>                 <C>              <C>
 Contract costs                                                                  471,100            138,560           332,540
                                                                         ================   ===============   ===============
</Table>

Amortization expense of contract costs amounted to $110,847 in 2006 ($110,848 in
2005).

5 - COMMON STOCK

a) AUTHORIZED

2005 TRANSACTIONS

The Corporation repurchased 276,038 class "A" common shares for $316,307 under
the program adopted on December 17, 2003, including 179,362 class "A" common
shares for $186,469 from August 1, 2004 to December 22, 2004.

2004 TRANSACTIONS

During the year, the Corporation repurchased 70,100 class "A" common shares for
$111,668 under the program adopted on October 15, 2002. On December 17, 2003,
the Corporation announced that its Board of Directors had authorized a share
repurchase program under which it may repurchase up to a maximum of 654,710 of
its outstanding class "A" common shares from December 22, 2003 to December 22,
2004. The Corporation repurchased 96,676 class "A" common shares for $129,838
under this program from December 22, 2003 to July 31, 2004.

b) STOCK OPTION PLANS

The Corporation has two stock option plans. Under the 1996 Stock Incentive Plan,
the Corporation may grant options to its regular full-time employees and those
of its subsidiaries up to a maximum of 1,100,000 common shares. Under the 1996
Stock Option Plan, the Corporation may grant options to its regular full-time
employees and non-employee directors and those of its subsidiaries up to a
maximum of 900,000 common shares. Under both plans, the exercise price of each
option is not less than the market price of the Corporation's shares on the OTC
BB on the day prior to the date of grant. Options vest equally over a five-year
period and the options' maximum term is 10 years.


                                       81


<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

5 - COMMON STOCK (CONTINUED)



Activity in the stock option plans for 2006, 2005 and 2004 was as follows:
<Table>
<Caption>

                                                          2006                            2005                             2004
                                   -----------------------------  ------------------------------  -------------------------------
                                                      WEIGHTED                        Weighted                         Weighted
                                   NUMBER OF           AVERAGE     Number of           average     Number of            average
                                     OPTIONS    EXERCISE PRICE       options    exercise price       options     exercise price
                                   -----------  ----------------  ------------  ----------------  ------------  ----------------
                                      (000S)               $US        (000s)               $US        (000s)               $US
<S>                                     <C>               <C>           <C>               <C>           <C>               <C>
 Outstanding, beginning of year         1,121             2.10          1,478             2.15          1,247             2.41
 Granted                                  133             1.00            163             1.00            261             1.16
                                   -----------                    ------------                    ------------
                                        1,254                           1,641                           1,508
 Forfeited                                213             3.95            520             1.89             30             4.58
                                   -----------                    ------------                    ------------
 Outstanding, end of year               1,041             1.59          1,121             2.10          1,478             2.15
                                   ===========                    ============                    ============

 Options exercisable, end of year         609             1.84            622             2.61            592             2.83
                                   ===========                    ============                    ============
</Table>


                                       82


<Page>

SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

5 - COMMON STOCK (CONTINUED)


The following table summarizes significant ranges of exercise prices of
outstanding options held by directors, officers and employees as of
July 31, 2006:
<Table>
<Caption>

                                                                  Options outstanding                  Options exercisable
                                   ----------------------------------------------------   ----------------------------------
                                                           Weighted
                                                            average           Weighted                              Weighted
                                        Number of         remaining            average          Number of            average
 Range of exercise prices                 options      life (years)      exercise price           options     exercise price
 --------------------------------  ----------------  ----------------   ----------------   ---------------   ----------------
                                           (000s)                a)               US$            (000s)                US$
<S>                                       <C>                  <C>                <C>            <C>                  <C>
 Less than US$1.00                           160                                  0.69              160               0.69
 US$1.00 to US$1.49                          716               7.27               1.02              306               1.04
 US$3.00 to US$3.99                           20                                  3.37               20               3.37
 US$4.00 to US$4.99                           30               1.49               4.63               30               4.63
 US$5.00 to US$5.99                          105               5.49               5.07               83               5.09
 US$6.00 to US$6.99                           10               3.06               6.28               10               6.28
                                   ----------------                                       ---------------
                                           1,041               5.62               1.59              609               1.84
                                   ================                                       ===============
</Table>

a)   After the end of the 2006 fiscal year, the Corporation has extended the
     term of both the Stock Incentive Plan and the Stock Option Plan for an
     additional 10 years. Moreover, the Corporation has extended the term of the
     outstanding options as of July 8, 2006, under both plans, by an additional
     10 years.

The following table presents the weighted average assumptions used to determine
the stock-based compensation expense included in selling, general and
administrative expenses for the years ended July 31, 2006, 2005 and 2004, using
the Black-Scholes option-pricing model:
<Table>
<Caption>
                                                                                   2006              2005              2004
                                                                         ----------------   ---------------   ---------------
<S>                                                                             <C>               <C>               <C>
 Compensation cost                                                              $29,000           $25,000           $49,000
 Fair value                                                                     $31,350           $92,170          $247,607
 Dividend yield                                                                -                  -                 -
 Expected volatility                                                                90%               90%               52%
 Risk-free interest rate                                                           3.5%              3.3%              4.4%
 Expected life                                                                  7 YEARS           7 years           7 years
 Number of options granted                                                      133,000           162,500           261,000
</Table>

                                       83

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

5 - COMMON STOCK (CONTINUED)


For stock options granted to employees during 2003, had the Corporation
determined compensation cost based on the fair value of the stock options at
grant dates consistently with the method recommended under CICA Handbook section
3870, the Corporation's earnings would have been reported at the pro-forma
amounts indicated below:
<Table>
<Caption>
                                                                        2006               2005              2004
                                                             ----------------   ---------------   ---------------
                                                                            $                  $                 $
<S>                                                               <C>                <C>               <C>
 Net loss, as reported                                            (3,926,921)        (7,363,054)       (7,129,930)
 Fair value of stock-based compensation                              (56,796)          (103,603)          (93,686)
                                                             ----------------   ---------------   ---------------
 Pro-forma net loss                                               (3,983,717)        (7,466,657)       (7,223,616)
                                                             ================   ===============   ===============

 Pro-forma basic and diluted loss per share                           (0.31)             (0.58)            (0.55)
                                                             ================   ===============   ===============
</Table>

The fair value of stock options granted during 2003 was estimated using the
Black-Scholes option pricing model using the following weighted average
assumptions:
<Table>

<S>                                                                                                   <C>
 Dividend yield                                                                                        -
 Expected volatility                                                                                  87%
 Risk-free interest rate                                                                             4.8%
 Expected life                                                                                    7 years
</Table>

c)  LOSS PER SHARE

Options described above were not included in the diluted loss per share
calculation because the Corporation incurred a loss, and inclusion would have
created an anti-dilutive effect.

6 - RESEARCH AND DEVELOPMENT

The net amounts of research and development expenses presented in the
consolidated statements of operations have been determined as follows:
<Table>
<Caption>
                                                                                    2006               2005              2004
                                                                         ----------------   ---------------   ----------------
                                                                                       $                  $                 $
<S>                                                                            <C>                <C>               <C>
 Research and development expenses                                             2,541,950          3,472,102         3,679,285
 Government assistance
     Investment tax credits                                                     (100,000)          (200,000)         (370,496)
                                                                         ----------------   ---------------   ----------------
                                                                               2,441,950          3,272,102         3,308,789
                                                                         ================   ===============   ================
</Table>

Investment tax credits in accounts receivable as at July 31, 2006 amounted to
$100,000. There were no amounts receivable as at July 31, 2005.

                                       84

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

7 - INCOME TAXES


The reconciliation of income taxes at Canadian statutory rates with the reported
income taxes is as follows:
<Table>
<Caption>
                                                                                    2006               2005              2004
                                                                         ----------------   ---------------   ----------------
                                                                                       $                  $                 $
<S>                                                                           <C>                <C>               <C>
 Income tax recovery at Canadian statutory rates                              (1,257,000)        (2,368,000)       (2,266,000)
 Non-recording of benefit from losses carried forward                         (1,257,000)        (2,368,000)       (2,266,000)
                                                                         ----------------   ---------------   ----------------
                                                                               -                  -                 -
                                                                         ================   ===============   ================
</Table>

The significant components of the Corporation's future income tax assets and
liabilities are as follows:
<Table>
<Caption>
                                                                                                       2006              2005
                                                                                            ---------------   ---------------
                                                                                                          $                 $
<S>                                                                                              <C>               <C>
 Future tax assets
     Losses carried forward                                                                      15,000,000        14,908,000
     Capital assets                                                                                 150,000           142,000
     Research and development                                                                     3,400,000         3,400,000
                                                                                            ---------------   ---------------
                                                                                                 18,550,000        18,450,000
 Future tax liabilities
     Investment tax credits                                                                          64,000            64,000
                                                                                            ---------------   ---------------
                                                                                                 18,486,000        18,386,000
 Less: valuation allowance                                                                      (18,486,000)      (18,386,000)
                                                                                            ---------------   ---------------
 Net future income taxes                                                                          -                 -
                                                                                            ===============   ===============
</Table>

The Corporation has non-capital losses carried forward to reduce future taxable
income for Canadian federal and provincial tax purposes as well as American,
British and German tax purposes of approximately $14,000,000 and $12,000,000,
US$21,000,000, L700,000 and E3,800,000, respectively, expiring at various dates
to 2020. In addition, the Corporation has research and development expenditures
carried forward of approximately $10,000,000, which can be used to reduce
taxable income at any time in the future, and investment tax credits of
approximately $2,500,000, which can be applied against future federal income
taxes payable, expiring at various dates to 2016. The benefits of these items
have not been recognized in the financial statements.


                                       85

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)

8 - COMMITMENTS

The Corporation is committed under operating leases for a total amount of
$1,368,898. The minimum payments due in each of the forthcoming years are as
follows:
<Table>
<Caption>
                                                                                   $
                                                                     ----------------
<S>                                                                        <C>
 2007                                                                        382,665
 2008                                                                        308,136
 2009                                                                        270,907
 2010                                                                        244,314
 2011                                                                        162,876
                                                                     ----------------
                                                                           1,368,898
                                                                     ================
</Table>

9 - SEGMENTED INFORMATION

The Corporation is considered to have only one business segment.

The Corporation has two reportable geographic segments. Both the North American
and European segments market the SAND Analytical Server and the SAND Searchable
Archive. The accounting policies of the segments are the same as described in
the summary of significant accounting policies. The Corporation evaluates
segment performance based on income before taxes. Sales for each segment are
based on the location of the third party customer. All intercompany transactions
between segments have been eliminated.
<Table>
<Caption>
                                                                                 Canada            Europe              Total
                                                                         ----------------   ---------------   ----------------
                                                                                       $                  $                 $

<S>                                                                           <C>                <C>               <C>
 2006
     Revenue                                                                   1,634,977          3,842,508         5,477,485
     Loss before income taxes                                                 (3,924,363)            (2,558)       (3,926,921)
     Identifiable assets                                                       1,630,133          1,814,988         3,445,121
 2005
     Revenue                                                                   2,899,252          3,196,781         6,096,033
     Loss before income taxes                                                 (5,965,661)        (1,397,393)       (7,363,054)
     Identifiable assets                                                       6,538,484          1,396,047         7,934,531
 2004
     Revenue                                                                   1,503,184          3,846,030         5,349,214
     Loss before income taxes                                                 (6,799,588)          (330,342)       (7,129,930)
     Identifiable assets                                                      12,077,507          3,913,194        15,990,701
</Table>

10 - SIGNIFICANT CUSTOMERS

For the year ended July 31, 2006, the Corporation generated approximately 10% of
its revenue from one customer (20% from one customer in 2005 and 36% from two
customers in 2004).


                                       86

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)


11 - FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of the short-term financial assets and liabilities approximates
their carrying amount given that they will mature shortly.

CREDIT RISK

The Corporation's exposure to credit risk as of July 31, 2006 is equal to the
carrying amount of its financial assets.

CONCENTRATION OF CREDIT RISK

Credit risk concentration with respect to trade receivables is limited due to
the relatively large size of the Corporation's customers. As at July 31, 2006,
two customers represented 27% and 28% (three customers represented 55% in 2005)
of accounts receivable.

CURRENCY RISK

The Corporation operates internationally and is exposed to market risk
principally due to changes in foreign currency rates. The Corporation does not
hold any financial instruments that mitigate this risk.

As at July 31, 2006 and 2005, the Corporation's current assets (liabilities)
denominated in foreign currencies are as follows:
<Table>
<Caption>
                                                                                   2006                                2005
                                                      ----------------------------------  ----------------------------------
                                                              CURRENT           CURRENT           Current           Current
                                                               ASSETS       LIABILITIES            assets       liabilities
                                                      ----------------  ----------------  ----------------  ----------------
                                                                    $                 $                 $                 $
<S>                                                         <C>                <C>                <C>               <C>
 U.S. dollars                                                 115,133           226,494           614,563           488,362
 Pounds sterling                                            1,379,555           912,955           943,625           907,427
 Euros                                                        489,476           307,795           164,321           238,445
</Table>

                                       87

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)


12  - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO U.S. GAAP AND OTHER SUPPLEMENTARY
      U.S. GAAP DISCLOSURES

Differences between Canadian and U.S. GAAP are not material in the Corporation's
consolidated financial statements with the exception of the following:

STOCK-BASED COMPENSATION

In December 2004, the FASB issued SFAS No. 123 (R), SHARE-BASED PAYMENT, which
is a revision of SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123
(R) requires all share-based payments to employees, including grants of employee
stock options, to be valued at fair value on the date of grant and to be
expensed over the applicable vesting period. Effective August 1, 2005, the
Corporation adopted SFAS No. 123 (R) using the modified prospective transition
method. Under this transition method, stock-based compensation is recognized for
all stock-based awards granted on or after August 1, 2005. In addition,
companies must also recognize compensation expense related to any awards that
are not fully vested as of August 1, 2005. Compensation expense for the unvested
awards are measured based on the fair value of the awards previously calculated
in accordance with the provisions of SFAS No. 123.

The impact of adopting SFAS No. 123 (R) was to increase the stock-based
compensation expense by $37,519 and increase net loss by the same amount in
2006.

The following table provides a reconciliation of the net loss and the
contributed surplus and deficit under Canadian GAAP to U.S. GAAP:
<Table>
<Caption>

                                                                                                        $
                                                                                          ----------------
<S>                                                                                            <C>
 Net loss in accordance with Canadian GAAP                                                     (3,926,921)
 Additional compensation expense under SFAS No. 123 (R)                                          (198,191)
                                                                                          ----------------
 Net loss in accordance with U.S. GAAP                                                         (4,125,112)
                                                                                          ================

 Basic and diluted loss per share, U.S. GAAP                                                       (0.32)
                                                                                          ================

 Contributed surplus in accordance with Canadian GAAP                                             103,000
 Additional compensation expense under SFAS No. 123 (R)                                           198,191
                                                                                          ----------------
 Contributed surplus in accordance with U.S. GAAP                                                 301,191
                                                                                          ================

 Deficit in accordance with Canadian GAAP                                                     (37,190,978)
 Additional compensation expense under SFAS No. 123 (R)                                          (198,191)
                                                                                          ----------------
 Deficit in accordance with U.S. GAAP                                                         (37,389,169)
                                                                                          ================
</Table>

The following items present other supplementary disclosures required under
U.S. GAAP.

Accounts receivable are net of allowance for doubtful accounts of nil ($18,909
in 2005).


                                       88

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)


12  - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO U.S. GAAP AND OTHER SUPPLEMENTARY
      U.S. GAAP DISCLOSURES    (CONTINUED)

Accounts payable and accrued liabilities are comprised of the following:
<Table>
<Caption>
                                                                                    2006              2005
                                                                         ---------------   ---------------
                                                                                       $                 $
<S>                                                                            <C>               <C>
 Trade accounts                                                                  471,492           594,026
 Accrued payroll payable and related expenses                                    533,992           844,095
 Other                                                                           134,859            47,476
                                                                         ---------------   ---------------
                                                                               1,140,343         1,485,597
                                                                         ===============   ===============
</Table>

The amortization expense of contract costs for the next years will be $110,848
for 2007 and $110,845 for 2008.

Under U.S. GAAP, research and development investment tax credits (see Note 6)
would be classified as a reduction of the income tax expense instead of a
reduction of the related research and development expenses.

Under Canadian GAAP, future income taxes are calculated based on enacted or
substantially enacted tax rates applicable to future years. Under U.S. GAAP,
only enacted rates are used in the calculation of future income taxes. This
difference in GAAP did not result in a difference in the financial position,
results of operations or cash flows of the Corporation for the years presented.

COMPREHENSIVE INCOME

The Corporation has adopted Statement of Financial Accounting Standards (SFAS)
No. 130, REPORTING COMPREHENSIVE INCOME. There are no material differences
between the Corporation's net loss as reported and its comprehensive income as
defined by SFAS No. 130. Accordingly, a separate statement of comprehensive
income has not been presented.

STOCK-BASED COMPENSATION

The Corporation accounts for its stock-based compensation for options granted
prior to August 1, 2003 using the intrinsic value method prescribed by the
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES. U.S. GAAP required companies that follow this method to make
pro-forma disclosures of net income and earnings per share, as if the fair value
based methodology prescribed by SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, had been applied for the periods presented. For options granted as
of August 1, 2003, the Corporation has adopted the fair value method, on a
prospective basis.

                                       89

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)


12  - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO U.S. GAAP AND OTHER SUPPLEMENTARY
      U.S. GAAP DISCLOSURES     (CONTINUED)


The following table presents net loss and net loss per share in accordance with
U.S. GAAP on a pro-forma basis, giving effect to the pro-forma compensation
expense relating to stock options granted to employees after July 1, 1994 and
prior to August 1, 2003, in accordance with SFAS No. 123.
<Table>
<Caption>
                                                                                                       2005              2004
                                                                                            ---------------   ---------------
                                                                                                          $                 $
<S>                                                                                              <C>               <C>
 Net loss, as reported                                                                           (7,363,054)       (7,129,930)
 Pro-forma expense                                                                                 (460,948)         (615,749)
                                                                                            ---------------   ---------------
 Pro-forma net loss                                                                              (7,824,002)       (7,745,679)
                                                                                            ===============   ===============

 Pro-forma basic and diluted loss per share                                                          (0.61)            (0.59)
                                                                                            ===============   ===============
</Table>

SFAS No. 123 requires that the pro-forma compensation expense be recognized over
the service period based on the fair value of options granted to employees. The
pro-forma compensation expense presented above has been estimated using the
Black-Scholes option pricing model. In order to perform the calculation, the
following weighted average assumptions were used for fiscal year 2003:
<Table>

<S>                                                                                                                <C>
 Risk-free interest rate                                                                                                4.8%
 Dividend yield                                                                                                     -
 Volatility factor of the expected market price of the Corporation's common stock                                        87%
 Expected life                                                                                                       7 years
</Table>

ADOPTION OF NEW ACCOUNTING POLICIES

INVENTORY COSTS - AN AMENDMENT OF ACCOUNTING RESEARCH BULLETIN

In November 2004, the FASB issued SFAS No. 151, INVENTORY COSTS - AN AMENDMENT
OF ACCOUNTING RESEARCH BULLETIN (ARB) NO. 43, CHAPTER 4. The provisions of SFAS
No. 151 will be effective beginning in the first quarter of fiscal 2006. The
adoption of SFAS No. 151 did not have an impact on the Corporation's
consolidated financial statements.

ACCOUNTING FOR CONDITIONAL ASSET RETIREMENT OBLIGATIONS - AN INTERPRETATION OF
FASB STATEMENT NO. 143

In March 2005, the FASB issued FIN 47, ACCOUNTING FOR CONDITIONAL ASSET
RETIREMENT OBLIGATIONS - AN INTERPRETATION OF FASB STATEMENT NO. 143 (FIN 47),
which required an entity to recognize a liability for the fair value of a
conditional asset retirement obligation when incurred if the liability's fair
value can be reasonably estimated. FIN 47 is effective for fiscal years ending
after December 15, 2005 and is required to be adopted by the Corporation in the
first quarter of fiscal 2006. The adoption of FIN 47 did not have an impact on
the Corporation's consolidated financial statements.


                                       90

<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)


12  - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO U.S. GAAP AND OTHER SUPPLEMENTARY
      U.S. GAAP DISCLOSURES     (CONTINUED)

In December 2004, the FASB issued SFAS No. 153, EXCHANGES OF NON-MONETARY ASSETS
- AN AMENDMENT OF APB OPINION NO. 29. This standard eliminates the exception
from fair value measurement for non-monetary exchanges of similar productive
assets. The standard is applicable for fiscal periods beginning after June 15,
2005. The adoption of SFAS No. 153 did not have an impact on the Corporation's
consolidated financial statements.

RECENT PRONOUNCEMENTS

In May 2005, the FASB issued SFAS No. 154, ACCOUNTING CHANGES AND ERROR
CORRECTIONS, which replaces Accounting Principles Board Opinion No. 20,
ACCOUNTING CHANGES, AND SFAS NO. 3, REPORTING ACCOUNTING CHANGES IN INTERIM
FINANCIAL STATEMENTS - AN AMENDMENT OF APB OPINION NO. 28. SFAS No. 154 provides
guidance on the accounting for and reporting of accounting changes and error
corrections. It establishes retrospective application, or the latest practicable
date, as the required method for reporting a change in accounting principle and
the reporting of a correction of an error. SFAS No. 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005 and is required to be adopted by the Corporation in the
first quarter of fiscal 2007. The Corporation is currently evaluating the effect
that the adoption of SFAS No. 154 will have on its consolidated results of
operations and financial condition but does not expect it to have a material
impact.

In June 2006, the FASB issued FIN 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES
- AN INTERPRETATION OF FASB STATEMENT NO. 109. FIN 48 clarifies SFAS No. 109,
ACCOUNTING FOR INCOME TAXES, to indicate a criterion that an individual tax
position would have to meet for some or all of the benefit of that position to
be recognized in an entity's financial statement. FIN 48 is effective for fiscal
year beginning after December 15, 2006. The Corporation is currently evaluating
the effect that the adoption of FIN 48 will have on its consolidated results of
operations and financial condition.

In September 2006, in an effort to increase consistency and comparability in
fair value measurements, the FASB recently issued SFAS No.157, FAIR VALUE
MEASUREMENT, which defines fair value, establishes guidelines for measuring fair
value and expands disclosures regarding fair value measurements. SFAS No. 157
does not require any new instruments to be recognized at fair value. SFAS No.
157 is effective for financial statements issued for fiscal year beginning after
November 15, 2007. The Corporation is currently evaluating the effect that the
adoption of SFAS No. 157 will have on its consolidated results.


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<Page>


SAND TECHNOLOGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2006
(In Canadian dollars)


12  - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO U.S. GAAP AND OTHER SUPPLEMENTARY
      U.S. GAAP DISCLOSURES     (CONTINUED)


In September 2006, the SEC released Staff Accounting Bulletin (SAB) 108,
CONSIDERING THE EFFECTS OF PRIOR YEAR MISSTATEMENTS WHEN QUANTIFYING
MISSTATEMENTS IN CURRENT YEAR FINANCIAL STATEMENTS. SAB 108 expresses the SEC
staff's views on the process of quantifying potential financial statement
misstatements. In general, entities have used two common approaches to quantify
errors. The SEC staff believes that registrants should quantify errors using
both a balance sheet and an income statement approach (a "dual approach"). Thus
entities must adjust the financial statements when either approach results in
quantifying a misstatement that is deemed material after considering all
relevant quantitative and qualitative factors. SAB 108 is effective for fiscal
years ending after November 15, 2006. The adoption of the SAB 108 will not have
any impact on the Corporation's consolidated financial statements.


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<Page>

ITEM 19.    EXHIBITS

<Table>
<Caption>

EXHIBITS
<S>           <C>
  1.1(1)      Articles of Incorporation, as amended on December 20, 1996 and
              December 31, 1996

  1.2(2)      Amendment to Articles of Incorporation dated January 1, 2000.

  1.3(5)      By-Laws approved, confirmed and ratified by the shareholders on
              December 17, 2002

  4.1(6)      Sand Technology Inc. 1996 Stock Incentive Plan as amended

  4.2(6)      Sand Technology Inc. 1996 Stock Option Plan as amended

  4.3(4)      Agreement dated July 31, 2000 between the Registrant and Nucleus
              International Corporation

  4.4(3)      Purchase and Sale Agreement dated July 31, 2003 between Sand
              Technology Inc. and ClarityBlue Holdings Limited

  4.5(3)      Shareholder Rights Plan Agreement between Sand Technology Inc.
              and CIBC Mellon dated November 17, 2003

  5.1         Statement detailing computation of per share earnings

  8.1         Subsidiaries

</Table>


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<Page>

<Table>
<S>           <C>
 11.1(6)      Standards of Ethical Conduct

 12.1         Certification of Chief Executive Officer Pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002

 12.2         Certification of Chief Financial Officer Pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002

 13.1         Certification of Periodic Financial Report Pursuant to Section 906 of
              the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

 13.2         Certification of Periodic Financial Report Pursuant to Section 906 of
              the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

 15.1         Consent of Independent Registered Chartered Accountants

 15.2(6)      Amended and Restated Audit Committee Charter

 15.3(6)      Governance, Nomination, Human Resources and Compensation
              Committee Charter

 15.4(3)      Board of Directors Charter

</Table>

----------
(1)  Incorporated by reference from the Registrant's Form 20-F Annual Report
     for the fiscal year ending July 31, 1996.

(2)  Incorporated by reference from Amendment No. 1 to the Registrant's Form
     F-2 Registration Statement (333-12216) filed on August 18, 2000.

(3)  Incorporated by reference from the Registrant?s Form 20-F Annual Report
     for the fiscal year ending  July 31, 2003.

(4)  Incorporated by reference from the Registrant's Form 20-F Annual Report
     for the fiscal year ending July 31, 2000.

(5)  Incorporated by reference from the Registrant's Form 20-F Annual Report
     for the fiscal year ending July 31, 2002.

(6)  Incorporated by reference from the Registrant's Form 20-F Annual Report
     for the fiscal year ending July 31, 2005.


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<Page>




                                   SIGNATURES


The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this Annual Report on Form 20-F on its behalf.



                                     SAND TECHNOLOGY INC.





                                     /s/ Arthur G. Ritchie
                                     -----------------------------------------
March 13, 2007                        Arthur G. Ritchie
                                     Chairman of the Board,
                                     President and Chief Executive Officer


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