799097--4/17/2007--SAN_HOLDINGS

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{capital, credit, financial}

{stock, price, operating}

{product, market, service}

{personnel, key, retain}

{interest, director, officer}

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{competitive, industry, competition}

{regulation, government, change}

{acquisition, growth, future}

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Our ability to continue as a going concern is in doubt and we may not be successful in generating revenue and gross profit at levels sufficient to cover our operating costs and cash investment requirements. We expect to need to raise additional capital to fund our operations. Due to the project based nature of our Storage Solutions segment and early stage of our EarthWhere segment, we have difficulty predicting revenue for future periods, which may result in expense levels unsupported by actual revenues. A material portion of our sales are to the U.S. Federal government, and if we lost the ability to sell to the government our sales would decline significantly. Our operations currently rely on continued access to bank debt and trade credit from suppliers. If we lose access to such debt, our operations may be significantly impaired. We have experienced a material weakness in our internal controls. If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which would negatively impact the value of our common stock. Deemed dividends related to the beneficial conversion feature of our outstanding convertible series A preferred stock adversely affected earnings for the March 2006 quarter and may adversely affect earnings in future periods. There are risks associated with introducing new products. If we are not successful with those product introductions, we will not realize on our investment in developing those products. Our ability to grow our business depends on relationships with others. If we were to lose those relationships, we could lose our ability to sell certain of our products. We are a relatively small company with limited resources compared to some of our current and potential competitors, which may hinder our ability to compete effectively. We may be unable to hire and retain key personnel. We have a single controlling shareholder, who has the power to elect a majority of our board of directors and control the strategic direction of SANZ. Sales of common stock by our controlling shareholder may result in a change of control. We have a thinly-traded stock and public sale of shares by Sun Solunet could cause the market price of our shares to drop significantly. The sale of securities by investors in the 2006 private placement could cause dilution of existing holders of our common stock by decreasing the price of our common stock. Our common stock price could be affected by the ability of holders of our common stock to sell their stock. We could issue preferred stock that could adversely affect the rights of our common stockholders. Deemed dividends related to beneficial conversion feature of our outstanding convertible series A preferred stock may adversely affect the price of our common stock. Future issuances of securities could adversely affect the interests of our existing shareholders. The resale of our common stock by investors may be limited because of its low price which could make it more difficult for broker/dealers to sell our common stock. We do not expect to pay cash dividends in the foreseeable future.

Full 10-K form ▸

799097--4/17/2007--SAN_HOLDINGS_INC