---

****UNITED STATES**SECURITIES AND EXCHANGE COMMISSION**WASHINGTON, D.C. 20549

FORM 20-F

|[ ] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
      (g) OF THESECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------------------
|    | OR                                                                                                 
|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIESEXCHANGE ACT OF 1934          
|    |                                                                                                    
|    | For the fiscal year ended July 31, 2010                                                            
|    | OR                                                                                                 
|[ ] | TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THESECURITIES EXCHANGE ACT OF 1934    
|    | OR                                                                                                 
|[ ] | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
      OF THESECURITIES 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 registrant as specified in its charter)

Canada(Jurisdiction of incorporation or
organisation)

215 Redfern Avenue, Suite 410
Westmount, Quebec, Canada H3Z 3L5(Address of principal executive
offices)

Mr. Tony J. Giuliano (514)
939-3477 tony.giuliano@sand.com
215 Redfern Avenue, Suite 410 Westmount, Quebec, Canada H3Z 3L5(Name, Telephone, Email and/or Facsimile number and Address of Company
Contact Person)

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

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | N/A                                      

---

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.

15,889,620 Class A Common Shares

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act [ ]
Yes     [X] No

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     [X] No

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. [X] Yes    [
] No

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act. (Check one):

|Large accelerated filer | [ ] | Accelerated filer | [ ] | Non-accelerated filer | [X]
|----------------------- | --- | ----------------- | --- | --------------------- | ---

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S. GAAP [ ] | International Financial
      Reporting Standards as issued By the International Accounting Standards
      Board [ ] | Other [X]
|------------- | --------------------------------------------------------------------------------------------------------------------- | ---------

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

Item 17 [ ]     Item 18 [X]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes     [X] No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. [ ]
Yes     [X] No

- ii -

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SAND TECHNOLOGY INC. TABLE OF CONTENTS

|ITEM
      1.  | IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS      | 3 
|-------------- | ---------------------------------------------------------------- | --
|ITEM
      2.  | OFFER
      STATISTICS AND EXPECTED TIMETABLE                    | 3 
|ITEM
      3.  | KEY
      INFORMATION                                            | 3 
|A.             | Selected
      Financial Data                                    | 3 
|B.             | Capitalization
      and Indebtedness                            | 7 
|C.             | Reasons
      for the Offer and Use of Proceeds                  | 7 
|D.             | Risk
      factors                                               | 7 
|ITEM
      4.  | INFORMATION
      ON THE COMPANY                                 | 13
|A.             | History
      and Development of the Company                     | 13
|B.             | Business Overview                                                | 14
|C.             | Organizational
      Structure                                   | 20
|D.             | Property,
      Plant and Equipment                              | 21
|ITEM
      4A. | UNRESOLVED
      STAFF COMMENTS                                  | 21
|ITEM
      5.  | OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS               | 22
|A.             | Operating Results                                                | 22
|B.             | Liquidity and Capital Resources                                  | 24
|C.             | Research
      and Development, Patents and Licenses             | 30
|D.             | Trend Information                                                | 31
|E.             | Off-balance
      Sheet Arrangements.                            | 31
|F.             | Tabular
      disclosure of contractual obligations.             | 31
|G.             | Safe
      Harbor.                                               | 32
|ITEM
      6.  | DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES                 | 33
|A.             | Directors
      and Senior Management                            | 33
|B.             | Compensation                                                     | 36
|C.             | Board
      Practices                                            | 41
|D.             | Employees                                                        | 48
|E.             | Share
      Ownership                                            | 48
|ITEM
      7.  | MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS          | 51
|A.             | Major
      Shareholders                                         | 52
|B.             | Related
      Party Transactions                                 | 52
|C.             | Interests
      of Experts and Counsels                          | 54
|ITEM
      8.  | FINANCIAL
      INFORMATION                                      | 55
|A.             | Consolidated
      Statements and Other Financial Information    | 55
|B.             | Significant
      Changes                                        | 55
|ITEM
      9.  | THE
      OFFER AND LISTING                                      | 56
|A.             | Offer
      and listing details                                  | 56
|B.             | Plan
      of distribution                                       | 56
|C.             | Markets                                                          | 57
|D.             | Selling
      Shareholders                                       | 57
|E.             | Dilution                                                         | 57
|F.             | Expenses
      of the issue                                      | 57
|ITEM
      10. | ADDITIONAL
      INFORMATION                                     | 57
|A.             | Share
      Capital                                              | 57
|B.             | Memorandum
      and Articles of Incorporation                   | 57
|C.             | Material
      Contracts                                         | 63
|D.             | Exchange
      Controls                                          | 64
|E.             | Taxation                                                         | 65
|F.             | Dividends
      and paying agents                                | 69
|G.             | Statements
      by experts                                      | 69
|H.             | Documents
      on Display                                       | 69
|I.             | Subsidiary
      Information                                     | 70
|ITEM
      11. | QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 70

- i -

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|ITEM
      12.  | DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES                      | 70
|--------------- | --------------------------------------------------------------------------------- | --
|                |                                                                                   |   
|PART
      II   |                                                                                   | 70
|                |                                                                                   |   
|ITEM
      13.  | DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES                             | 70
|ITEM
      14.  | MATERIAL
      MODIFICATIONS TO THE RIGHT OF SECURITY HOLDERS AND USE OF PROCEEDS | 71
|ITEM
      15.  | CONTROLS
      AND PROCEDURES                                                     | 71
|A.              | Disclosure
      Controls and Procedures                                          | 71
|B.              | Managements
      annual report on internal control over financial reporting     | 71
|ITEM
      16A. | AUDIT
      COMMITTEE FINANCIAL EXPERT                                            | 72
|ITEM
      16B. | CODE
      OF ETHICS                                                              | 72
|ITEM
      16C. | PRINCIPAL
      ACCOUNTANT FEES AND SERVICES                                      | 72
|ITEM
      16D  | EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  | 73
|ITEM
      16E. | PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      | 73
|                |                                                                                   |   
|PART
      III  |                                                                                   | 74
|                |                                                                                   |   
|ITEM
      17.  | FINANCIAL
      STATEMENTS                                                        | 74
|                |                                                                                   |   
|ITEM
      18.  | FINANCIAL
      STATEMENTS                                                        | 74
|                |                                                                                   |   
|ITEM
      19.  | EXHIBITS                                                                          | 75

- ii -

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In this Annual Report on Form 20-F (the "Report"), unless we
indicate otherwise or the context otherwise requires, we, our, us, SAND
and the Company refer to SAND Technology Inc. and its consolidated
subsidiaries and shares and common shares refer to our Class A Common
Shares. References in this Report to a fiscal year means one of our fiscal years
ending July 31.

Except where otherwise indicated, all dollar amounts stated in
this Annual Report on Form 20-F are Canadian dollars.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A.Selected Financial Data

The following table sets forth
selected consolidated financial information with respect to SAND for the five
(5) years ended July 31, 2010 and is extracted in part from the consolidated
financial statements that have been audited by our auditors, Raymond Chabot
Grant Thornton LLP for the fiscal years ended July 31, 2010 (included herein at
Item 18), July 31, 2009, July 31, 2008, July 31, 2007 and July 31, 2006. 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 consolidated financial statements included in Item 18.

This selected financial data has
been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP") which differs in certain respects from generally
accepted accounting principles in the United States ("U.S. GAAP"). A discussion
of the differences between Canadian GAAP and U.S. GAAP is contained in Note 20
to the audited Consolidated Financial Statements included in Item 18. Any
monetary figure included in this Report is presented consistent with Canadian
GAAP except where otherwise indicated.

- 3 -

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The selected financial data set
forth below is stated in thousands of Canadian dollars (except per share
amounts).

|FIVE YEAR COMPARATIVE SUMMARY OF SELECTED
      FINANCIAL DATA (expressed in thousands of Canadian dollars
      unless otherwise indicated) (In accordance with Canadian
    GAAP)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Years ended July 31                                                                                                                                                                
|Operating results                                                                                                                                                                  
|Revenue                                                                                                                                                                            
|Cost of Sales and Product Support                                                                                                                                                  
|Research and Development Costs                                                                                                                                                     
|Selling, General and Administrative Expenses                                                                                                                                       
|Amortization                                                                                                                                                                       
|Loss from Operations                                                                                                                                                               
|                                                                                                                                                                                   
|Other Income (Expense)                                                                                                                                                             
|                                                                                                                                                                                   
|Net Income (Loss)                                                                                                                                                                  
|Financial position                                                                                                                                                                 
|Working Capital (Deficiency)                                                                                                                                                       
|Total Assets                                                                                                                                                                       
|Total Liabilities                                                                                                                                                                  
|Capital Stock                                                                                                                                                                      
|Shareholders' Equity (Deficit)                                                                                                                                                     
|Basic and Diluted Weighted Average Number of Shares
      Outstanding                                                                                                              
|Per share data (in dollars per share)                                                                                                                                              
|Net Loss Per Share (Basic and dilutive)                                                                                                                                            
|Loss from Operating Per Share (Basic and dilutive)                                                                                                                                 

- 4 -

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The same data, presented in conformity with U.S. GAAP, is shown
in the following table:

|FIVE YEAR COMPARATIVE SUMMARY OF SELECTED
      FINANCIAL DATA (expressed in thousands of Canadian dollars
      unless otherwise indicated) (In accordance with U.S. GAAP)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Years ended July 31                                                                                                                                                        
|Operating results                                                                                                                                                          
|Revenue                                                                                                                                                                    
|Cost of Sales and Product Support                                                                                                                                          
|Research and Development Costs                                                                                                                                             
|Selling, General and Administrative Expenses                                                                                                                               
|Amortization                                                                                                                                                               
|Loss from Operations                                                                                                                                                       
|                                                                                                                                                                           
|Other Income (Expense)                                                                                                                                                     
|                                                                                                                                                                           
|Net Income (Loss)                                                                                                                                                          
|Financial position                                                                                                                                                         
|Working Capital (Deficiency)                                                                                                                                               
|Total Assets                                                                                                                                                               
|Total Liabilities                                                                                                                                                          
|Capital Stock                                                                                                                                                              
|Shareholders' Equity (Deficit)                                                                                                                                             
|Basic and Diluted Weighted Average Number of Shares
      Outstanding                                                                                                      
|Per share data (in dollars per share)                                                                                                                                      
|Net Loss Per Share (Basic and dilutive)                                                                                                                                    
|Income (Loss) from Operations Per Share (Basic)                                                                                                                            

Summary of Differences between Canadian and U.S. GAAP

A reconciliation of the differences between generally accepted
accounting principles in the United States and Canada is presented in Note 20 of
the audited Consolidated Financial Statements included in Item 18.

Issued and Outstanding Class A Common Shares

As of November 16, 2010, the Company had 15,889,620 Class A
Common Shares issued and outstanding. Each common share entitles its holder to
one vote.

Authorized Class B Common Shares

The Company also has authorized Class B, Series A Common
Shares of which none are issued and outstanding as of July 31, 2010.

- 5 -

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Disclosure of U.S. Exchange Rates against Canadian Financial
Reporting Currency

|Foreign exchange rate U.S. to Canadian
    Dollar: | Fiscal 2010    | Fiscal 
    2009 | Fiscal 
    2008 | Fiscal 
    2007 | Fiscal 
    2006
|-------------------------------------------------- | -------------- | ---------------- | ---------------- | ---------------- | ----------------
|Average                                            | 1.0491         | 1.1754           | 1.0352           | 1.1258           | 1.1551          
|High | Low                                         | 1.1072 |0.9988 | 1.2633 |1.0547   | 1.0755 |0.7695   | 1.1853 |1.0372   | 1.2187 |1.0990  

|Month Ended        | High   | Low    | Close 
|------------------ | ------ | ------ | ------
|July 31, 2010      | 1.0650 | 1.0283 | 1.0283
|June 30, 2010      | 1.0646 | 1.0212 | 1.0646
|May 31, 2010       | 1.0700 | 1.0106 | 1.0435
|April 30, 2010     | 1.0176 | 0.9988 | 1.0158
|March 31, 2010     | 1.0416 | 1.0103 | 1.0158
|February 28, 2010  | 1.0745 | 1.0405 | 1.0525
|January 31, 2010   | 1.0693 | 1.0234 | 1.0693
|December 31, 2009  | 1.0703 | 1.0438 | 1.0510
|November 30, 2009  | 1.0778 | 1.0455 | 1.0556
|October 31, 2009   | 1.0845 | 1.0259 | 1.0819
|September 30, 2009 | 1.1048 | 1.0649 | 1.0707
|August 31, 2009    | 1.1072 | 1.0701 | 1.0950

|Month          | Monthly Average
|-------------- | ---------------
|July 2010      | 1.0429         
|June 2010      | 1.0396         
|May 2010       | 1.0403         
|April 2010     | 1.0051         
|March 2010     | 1.0233         
|February 2010  | 1.0559         
|January 2010   | 1.0435         
|December 2009  | 1.0560         
|November 2009  | 1.0594         
|October 2009   | 1.0561         
|September 2009 | 1.0818         
|August 2009    | 1.0889         

On November 16, 2010, the noon rate for U.S.$1.00 was
CDN.$1.0231 and the closing rate was CDN.$1.0222.

- 6 -

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B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of
Proceeds

Not applicable.

D.Risk factors

Our business and an investment in our securities are subject to
a variety of risks. The following risk factors describe the most significant
events, facts or circumstances that could have a material adverse effect upon
our business, financial condition, results of operations, ability to implement
our business plan and the market price for our securities. Many of these events
are outside of our control. These risks and uncertainties are not the only ones
we face. Additional risks not presently known or currently considered
insignificant may also have a material adverse effect upon our business,
financial condition, results of operations, ability to implement our business
plan and the market price for our securities.

RISKS ASSOCIATED WITH OUR BUSINESS:

There exists doubt about our ability to continue as a going
concern.

Our consolidated financial statements for the year ended July
31, 2010 disclose that there is substantial doubt that we will be able to
continue as a going concern. The inclusion of this note in our financial
statements and the accompanying report of our auditor underscores our need to
raise additional financing or become profitable in the short-term to continue
operations. As further discussed below, if we are unable to achieve our
objectives or raise additional capital in the short term, we may be forced to
suspend or cease operations.

We have a history of losses.

We have not experienced a profitable year since fiscal year
2003, when we had a gain from the sale of a subsidiary. On July 31, 2010 we had
a working capital deficiency of $982,935 and an accumulated deficit of
$42,926,696. Our funds on hand, are not sufficient to sustain operations for the
next year. As a result, we need to raise additional capital to sustain our
operations. In order to become profitable, we will need to generate significant
additional revenues to offset our cost of revenues, sales and marketing,
research and development and selling, general and administrative expenses. We
may not achieve or sustain our revenue or profit objectives and our losses may
continue or increase in the future in which case you might lose your entire investment.
If we are not able to fund our operations through product sales and investments
by third parties, we will have to cease operations.

We may not be able to obtain additional financing when
needed or on acceptable terms.

There is no assurance that the additional financing we need
will be available or, if it is, whether it will be available on acceptable
terms. Our inability to obtain additional financing, or the terms on which it
may be available, could have a material adverse effect on our business and
require us to suspend or cease our operations. If we are required to cease our
operations, you could lose your entire investment.

- 7 -

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We have incurred substantial debt which could affect our
ability to obtain additional financing and may increase our vulnerability to
economic and/or business downturns.

On April 18, 2008, the Company issued secured convertible
  debentures ("Convertible Debentures") on a private placement and received gross
  proceeds of $1,009,819 (U.S.$1,002,600) representing a total of 1,114 units.
  Each unit consists of one 8% Convertible Debenture due December 31, 2017, having
  a nominal value of U.S.$900, redeemable at the option of the Company if the bid
  price of the common share has been above U.S.$1.50 for 60 consecutive trading days,
  and convertible at the option of the holder into class "A" common shares at
  U.S.$0.45 per share, and 1,000 share purchase warrants of the Company. Each
  warrant entitles the holder to purchase one additional common share (warrant
  share) of the Company at a price of U.S.$0.70 per warrant share at any time
  until the earlier of the close of business day which is either thirty six (36)
  months from April 18, 2008 or the bid price of the stock has been above
  U.S.$1.50 for sixty (60) consecutive trading days. Interest is calculated at the
  rate of 8% per annum, payable in common shares at a rate of U.S.$0.45 per share.
  The interest is due on each conversion date (date when the principal amount is
  being converted) subsequent to January 1, 2009 or on the maturity date. The
  financing is secured by a first rank hypothec on all of the Companys property
  and assets, movable and immovable, corporeal and incorporeal, present and
  future, for the principal accrued interest amounts. The proceeds from the
  private placement were used for marketing and advertising and for expansion of
  the business.

During fiscal year 2007, the Company formalized the conditions
pertaining to a loan obtained from a significant shareholder, who at the time
was also the President and Chief Executive Officer of the Company. The loan
originated from amounts owed by the Company to the shareholder by virtue of his
previous employment contracts as President and Chief Executive Officer. The loan
was bearing interest at 15% and was repayable on demand. As at July 31, 2009, an
amount of $1,605,616 was owing to the President and Chief Executive Officer and
significant shareholder. The significant shareholder ceased to be President and
Chief Executive Officer on October 31, 2009. The amount owed the former
President and Chief Executive Officer was again formalized in a loan agreement
on October 31, 2009. The total amount owing under the loan agreement at October
31, 2009 was $1,466,677. Under the terms of the loan agreement, the loan is
repayable in three (3) principal annual installments of $488,892 over the next 3
years on January 1, 2011, 2012 and 2013. The loan bears interest at 15% and is
payable semi-annually on January 1 and June 30 of each year. The amount may be
prepaid at any time by the Company without penalty. In the event of default to pay an amount when due, the significant shareholder  has the right to convert all outstanding amounts owed to him hereunder into common shares of the Company based on the average closing price of the shares on the OTC Bulletin Board for the month immediately preceding the month in which such right is exercised. In addition and also upon default, the significant shareholder  has the right to require the Company to purchase all common shares in the capital stock of the Company owned directly or indirectly by the significant shareholder at a purchase price per share equal to the greater of:

| | i)  | the average closing price of the shares on the OTC
      Bulletin Board over the previous 30-day period plus 15%, or
| | --- | --------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                     
| | ii) | the book value of the shares as determined by the
      auditors of the Company.                                    

As at July 31, 2010, an amount of $1,407,874, including accrued
interest of $204,214, was outstanding under the loan agreement.

As a result, we are subject to the risks associated with
substantial indebtedness, including:

- we are required to use a portion of our cash flow  to pay debt service costs;

- it may be more difficult and expensive for us to obtain additional funds through financing, if available at all;

- we are more vulnerable to economic downturns and fluctuations
in interest rates, less able to withstand competitive pressures and less flexible in reacting to changes
in our industry and general economic conditions; and

- 8 -

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- if we default under any of our existing indebtedness or if
our creditors demand payment of a portion or all of our indebtedness, we may not
have sufficient funds to make such payments.

If we default under our Convertible Debentures, we may have
to forfeit our rights to our assets.

We have pledged all of our assets, including the assets of our
subsidiaries, as security to holders of our Convertible Debentures. A default
under our Convertible Debentures, if not waived or cured, would permit the
holders of our Convertible Debentures to foreclose on the collateral and we
could lose all our rights in the collateral, which would have a materially
adverse effect on our business. As a result, we could have to suspend or cease
our operations and you could lose your entire investment.

We may not be able to develop or manage our internal growth.

If we are successful in growing our existing businesses, such
growth may strain our management, human resources and information systems. To
manage our growth successfully, we will have to add managers and employees and
update our operating, financial and other systems, procedures and controls.

We are highly dependent on our executive management and
other key employees.

We rely heavily on our executive management and key employees
for providing services and for continued business development. We have
employment agreements which contain non-competition and non-solicitation
provisions with certain key executive managers and other key employees. Our
business could be materially adversely affected if a number of our executive
managers and other key employees were to leave us and if we were unable to
enforce the non-competition and non-solicitation agreements or to attract and
retain qualified replacements.

If we cannot deliver the features and functionality our
customers demand, we will be unable to attract customers, and that will result
in a loss of income and eventually a termination of our operations.

As a provider of business intelligence management information
technology, our future success depends largely upon our ability to determine the
features and functionality our customers demand and to design and implement
products that meet their needs in a cost efficient manner. Although we have
often been a leader in introducing new products and technologies, maintaining
that leadership while responding to downward pressures on price is an ongoing
challenge. There is no assurance that we will be able to successfully determine
customer requirements or that our current or future products and services will
adequately satisfy customer demands. If we cannot meet our customers' demands,
we will not generate revenues from this business and we may have to cease or
suspend key operations.

Our business depends on the protection of our intellectual
property and proprietary information.

We rely on a combination of trade secrets, confidentiality
procedures, contractual provisions and patent laws to protect our proprietary
rights in our products and technology. These measures may not be adequate to
protect our trade secrets and proprietary technology. As a result, unauthorized
third parties may copy or otherwise obtain and use our products or technology.
To enforce and defend our intellectual property rights and our proprietary
rights, we may have to engage in litigation, either domestically or in other
countries, and we could face substantial costs and diversion of resources,
including managements attention, regardless of the outcome of that litigation.
Our attempts to enforce our intellectual property rights may not be successful, may result in royalties that are
less than the cost of such enforcement efforts or may result in the loss of the
intellectual property altogether. Furthermore, we may not have adequate funds
available to prosecute actions to protect or defend our proprietary rights, in
which case those using our proprietary rights may continue to do so in the
future. Even if we succeeded in protecting our intellectual property, others may
independently develop similar technologies or products that do not infringe on
our intellectual property.

- 9 -

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Third parties may claim that our current or future products
or services infringe their proprietary rights or assert other claims against
us.

Any claims filed against us alleging that we infringe
third-party proprietary rights could result in significant expenses or
restrictions on our ability to provide our products and services. As the number
of entrants into our market increases, the possibility of an intellectual
property or other claim against us grows. Any intellectual property or other
claim, with or without merit, would be time-consuming and expensive to litigate
or settle and could divert managements attention from focusing on our core
business. As a result of such a dispute, we may have to pay damages, incur
substantial legal fees, develop costly non-infringing technology, if possible,
or enter into license agreements, which may not be available on terms acceptable
to us, if at all. As a result, our business and operating results could be
materially adversely affected. No such claims have been filed against us at this
time.

Competitive conditions could materially adversely affect our
businesses.

The markets in which we do, and intend to do business are
highly competitive. Our ability to execute our business strategy depends, in
part, upon our ability to develop and commercialize efficient and effective
products based on our technologies. We compete against established companies as
well as numerous independently owned small businesses. Many of our competitors
are capable of developing products based on similar technology, have developed
and are capable of continuing to develop products based on other technologies,
which are or may be competitive with our products and technologies. There are
many competitors in all market segments in which we operate, some of which have
significantly greater resources or capital than us, or have better reputations
among potential customers in the delivery of particular services or products.
Our competitors may succeed in developing competing products and technologies
that are more effective than our products and technologies, which may render our
existing and new products or technology uncompetitive, uneconomical or
obsolete.

We may be exposed to liability claims.

We have general liability insurance coverage for CDN$5,000,000.
However, if a judgment is rendered against us in excess of the amount of our
coverage, we may have to cease operations. If we are sued for any reason, we
will have to rely on our liability insurance to pay any judgment rendered
against us. Although we maintain a general liability insurance of CDN$5,000,000,
there is no assurance that:

- our insurance will provide adequate coverage against
potential liabilities if a product or a service  we provide causes harm or
fails to perform as promised;

- adequate liability insurance will continue to be available in
the future; or

- our insurance can be maintained on acceptable terms.

The obligation to pay any liability claim in excess of whatever
insurance we are able to obtain would increase our expenses and could greatly
reduce our assets or cause us to cease operations. If a judgment is rendered against us for any amount over our coverage of
CDN$5,000,000, we may have to cease operations.

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Fluctuations in the value of foreign currencies could result
in decreased revenues and increased operating expenses.

While our functional currency is the Canadian dollar and we report our results in Canadian dollars, we have revenues and operating expenses outside of Canada. Fluctuations in the value of the Canadian dollar are difficult to predict and can cause us to incur currency exchange costs. Although, we cannot predict the effect of exchange rate fluctuations on our future operating results, any material changes could cause our operating results to be materially adversely affected.

The sales cycle for our products is lengthy.

The purchase of our products often requires significant,
executive-level investment and system design decisions by our customers. Sales
may take a long time to conclude because we must provide a significant level of
education about the use and benefits of our products. Accordingly, the sales
cycle associated with the purchase of our products is typically between six to
twelve months in length. During this period, a potential sale may be 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.

Our existing shareholders can exercise effective control
over us.

Our major shareholders beneficially own approximately 34.55% of
our Class A Common Shares. Arthur G. Ritchie, Chairman of the Board and a
director of SAND, beneficially owns approximately 22.65% of SANDs Class A
Common Shares. Thomas ODonnell, President and Chief Executive Officer of SAND
and a director of SAND, beneficially owns approximately 5.24% of SANDs Class A
Common Shares. Carol Shattner, the wife of the late Jerome Shattner (Jerome
Shattner was the late Executive Vice President of the Company), beneficially
owns 6.66% 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 also have the effect of delaying or preventing
a change in control of SAND.

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.

RISKS ASSOCIATED WITH OUR COMMON SHARES:

The market for our common shares is limited.

The market for our common shares is limited and you may not be
able to resell your common shares. There is currently only a limited trading
market for our common stock. Our common shares trade on the OTC Bulletin Board
operated by the National Association of Securities Dealers, Inc. under the
symbol "SNDTF". Trading volume of OTC Bulletin Board stocks has been
historically lower and more volatile than stocks traded on an exchange. As a
result, you may not be able to resell your securities in open market
transactions.

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The entry of substantial additional common shares into the
market could cause our share price to fall.

As of November 16, 2010, 15,889,620 shares of our common stock
were outstanding and 4,787,215 shares are issuable upon conversion or exercise
of our outstanding Convertible Debentures, warrants, stock options and share
awards. The entry of this substantial number of shares into the public market,
or the mere expectation of the entry of those shares into the market could
adversely affect the market price of our common shares and could impair our
ability to obtain capital through securities offerings.

Our common shares are subject to penny stock rules which
restricts the liquidity of your investment.

Our common shares are now and may continue to be in the future
subject to the penny stock rules under the Securities Exchange Act of 1934, as
amended (Exchange Act). These rules regulate broker/dealer practices for
transactions in "penny stocks". Penny stocks are generally equity securities
with a price of less than $5.00, subject to certain exceptions. The penny stock
rules require broker/dealers to deliver a standardized risk disclosure document
that provides information about penny stocks and the nature and level of risks
in the penny stock market. The broker/dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker/dealer and its salesperson and monthly account statements showing the
market value of each penny stock held in the customer's account. The bid and
offer quotations and the broker/dealer and salesperson compensation information
must be given to the customer orally or in writing prior to completing the
transaction and must be given to the customer in writing before or with the
customer's confirmation. In addition, the penny stock rules require that prior
to a transaction, the broker and/or dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
additional penny stock disclosure requirements are burdensome, discourage
investor interest, and may reduce the trading activity in the market for our
common stock. As long as the common stock is subject to the penny stock rules,
holders of our common stock may find it more difficult to sell their securities.

Our operating results have and may continue to vary from
quarter to quarter, and as a result, we may fail to meet the expectations of our
investors and analysts, which may cause our stock price to fluctuate or
decline.

As a software vendor, our contract flow is sometimes
unpredictable, and to the extent that we do not generate new business upon
completion of existing contracts, our revenue will decline. Due to these
factors, our revenue and operating results have fluctuated and may continue to
fluctuate from quarter to quarter. Due to these risks, you should not rely on
period-to-period comparisons of our results of operations as an indication of
future performance.

Ineffective internal controls could have a material adverse
effect on our business and operating results and stockholders could lose
confidence in our financial reporting.

Our internal controls over financial reporting may not prevent
or detect mistatements because of their inherent limitations, including the
possibility of human error, the circumvention or overriding of controls, or
fraud. Even effective internal controls can only provide reasonable assurance
with respect to the preparation and fair presentation of financial statements.
If we fail to maintain the adequacy of our internal controls, including the
failure to implement required new or improved controls, or if we experience
difficulties in their implementation, our business and operating results could
be harmed and we could fail to meet our financial reporting obligations, which
could cause investors to lose confidence in our reported financial information
and have a material adverse effect on our stock price.

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ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of
the Company

SAND Technology Inc. was incorporated on December 10, 1982
under the Canada Business Corporations Act ("CBCA") 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. Our principal place of
business is located at 215 Redfern Avenue, Suite 410, Westmount, Quebec, Canada
H3Z 3L5 and our phone number is (514) 939-3477.

Until 1999, 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 Company ("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 and have since maintained our focus on
the design, development, marketing and support of software products,
collectively known as the SAND Product Suite, that enable users to retrieve
usable business information from large amounts of data and on providing
specialized systems integration services in connection with those products.

Initially, SAND offered products mainly 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 Limited
(previously named Sand Technology (U.K.) Limited) ("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. ClarityBlue was sold on July
31, 2003 to a group of investors which included members of the senior management
of ClarityBlue.

We now focus our resources around intelligent information
management and consultative best practices leveraging the latest developments
in our SAND CDBMS platforms.

Our solution offerings include a Nearline 2.0 approach, the
logical evolution of older data warehouse and information lifecycle approaches
that have struggled to maintain acceptable performance levels in the face of the
ever-increasing data volumes. Older archiving solutions based their viability on
the declining prices of hardware and storage and rigid "Nearline 1.0" solutions
were mainly designed to work with transactional systems. Nearline 2.0 embraces the dynamism of a software and services
approach to fully leverage the potential of large enterprise data architectures.

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B. Business Overview

1) Business
Description

SAND is one of the leading sources of business intelligence
management information technology. SAND is involved in the design, development,
marketing and support of software products and services that reduce large
amounts of data into a tiny footprint and enable users to retrieve usable
business information from large amounts of data. The software products,
collectively known as the SAND Product Suite, 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.

Our revenues 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, marketing and the distribution of our products, and generally
support our expanding operations.

2)Products and
Services

Our software product solutions 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 in orders of magnitude greater and with more efficiency than what is generally possible using more traditional database products.

CDBMS is based on our patented tokenized database engine. It is
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 which allows keeping more data
available for analysis. Our products permit more timely and accurate decisions
across an entire organization making "business intelligence" a key component of
operational excellence. Our solution offerings include a Nearline 2.0 approach.
Nearline storage is a software-based technology which represents an intermediate
layer between the online storage of the main database and offline archived
storage.

i)SAND CDBMS

During fiscal 2010, SAND integrated the SAND DNA/Analytic and SAND DNA/Access products to create an additional single market offering named SAND CDBMS. SAND CDBMS 6 was released in September 2010. Using that new offering, the Access component will be available as an option of the core product SAND CDBMS.

ii)SAND/DNA Access - Advanced
Data Management

SAND/DNA Access  built on SAND’s strength in advanced data management by:

a) creating 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 historical analysis, regulatory or compliance purposes;

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b) 	helping manage the data explosion in industry by maintaining rapid access to huge volumes of data; and

c) providing additional new features such as: data encryption,
metadata transformation rules, enhanced analytical capability and performance
for nearline queries (including faster aggregation, HAVING clause, aggregation
of DISTINCT values, CASE expressions, and random sampling of result sets).

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

SAND CDBMS Access 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 for SAP BI.

During fiscal 2009, SAND Access extended its product offerings
with the introduction of the DNA/Enhance module to integrate the data
transformation process executed on compressed data. This new functionality
enables enterprises to maintain an original version of the captured data and use
it to create a business view: data transformed to answer specific business
questions.

During fiscal 2010, a large portion of the R&D work was
associated with SAND CDBMS has been on the extension of the SQL functionalities
to introduce support of multi-tables operation and advanced analytic
functionalities. The introduction of the support of the PMML standard is a major
milestone which enables process complex statistical and mathematical models
inside the database engine. The underlying architecture has been enhanced to
further reduce the application processing footprint and introduce a high
availability architecture at the core. A new SAS market offering has been
introduced to extend the concept of Information Lifecycle Management to the SAS
market, whose first release focuses on the SAS dataset result set management
from its creation up to the end of its life.

iii)SAND - Converting
Data into Key Decisions

The SAND CDBMS 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 CDBMS product incorporates a number of advanced
technologies. Its development has required substantial investment in research
and development:

a) During fiscal 2002, important advancements were made in the
ability to quickly and efficiently load even larger volumes of data into the
SAND product and in the ability of the SAND product to support an even wider
variety of applications by more efficient interfacing with industry-standard
applications and data extraction tools.

b) During fiscal 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.

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c) During fiscal 2005, we released a significant update to
Version 4 incorporating many features to allow high-performance scalability for
multiple users and huge amounts of data.

d) During fiscal 2008, SAND made available Release 5.1 of
SAND/DNA Analytics which was designed to provide superior analytic capabilities
and performance for extremely large (multi-terabyte) databases by enabling
implementation of a distributed architecture. Features included support for
federated databases, virtual tables, UNION operators in nested table
expressions, unstructured free text searches, advanced statistical aggregate
functions and triganometric math functions, snapshots, and Eastern European
language and hexadecimal characters.

e) During fiscal 2009, SAND made available Release 5.2 of
SAND/DNA Analytics. This new version introduced three major functionalities. A
text search engine has been incorporated into the product to enable complex text
analytics. A data federation layer has been integrated to the core product to
enable a distributed architecture facilitating the interoperability. MOLAP
functionalities have been added to the SQL language enabling more complex
analytics.

During fiscal 2010, SAND introduced the support of advanced
data privacy protection. The new functionality is based on internal database
encryption and strict data access mechanism. That type of functionality is
required by organizations that need to comply with industry standards or
government regulations, like PCI in the retail and financial market and HIPPA
regulations for the health care market. The performance of the product has been
enhanced at different levels to take advantage of a new underline algorithm
associated with join operations, extending the use of multithread and
distributed processing. The SQL functionalities have been extended to introduce
new mathematical functions. The manageability of the product has also been
improved with the extension of the background database housekeeping task.

iv)SAND Platform -
Empowering the Users

We have developed unique data storage and manipulation
architecture 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 when and how they need it to perform business operations more effectively
at a lower cost.

During fiscal 2009, we designed a new data warehouse
architecture named the Scalable Corporate Information Factory (SCIF) based on
Access and Analytics products. The SCIF enables large data warehouse
implementations deliver high flexibility with limited total cost of ownership.

During fiscal 2010, SAND introduced a new deployment
architecture based on a private cloud computing. The new architecture enables
high availability, active disaster recovery and on demand processing resource
allocation. The new architecture also provides economies of scale and a dynamic
and agile hardware deployment.

3) Key Business Segments and Uses of
Our Software Solutions

Our customers in Canada, the United States and Europe use
SANDs solutions for:

a) Analytical and operational purposes, including market
segmentation, CRM analytics, Web analytics, Business Performance Management and
strategic planning, and

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b) Regulatory and compliance applications, including efficient
storage and retrieval of large amounts of historical data.

In particular, the SAND CDBMS Analytics Product Suite is
 used to provide fast measurable business benefits in the retail,
finance, healthcare, transportation, telecommunication, manufacturing,
government and insurance sectors. Customers, often at the recommendation of
systems integrators or platform partners, use 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,
information lifecycle management, 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.

4) Business Locations

a) Our corporate headquarters are located in Westmount,  Canada,
where we also have development and sales resources. We have offices in
Kenilworth, New Jersey and San Mateo and Pasadena, California, through our
wholly-owned subsidiary Sand Technology Corporation, to provide for the
development, sales, marketing and distribution of the SAND/DNA Product Suite in
the United States.

b) Our offices in the United Kingdom are located in Camberley,
near London, where we operate through our wholly-owned subsidiary Sand
Technology Limited.

c) Our offices in Germany are located in Hamburg where we
operate through our wholly-owned subsidiary Sand Technology Deutschland GmbH.

5)Key partners

We have the following key alliances or commercial
relationships, among others:

|SAP AG              | IBM             | Sun Microsystems Inc. | Total Tec   | Accenture Ltd.     | Cap Gemini S.A. | HP
|------------------- | --------------- | --------------------- | ----------- | ------------------ | --------------- | --
|Inforte Corporation | Posetiv Limited | Open Text Corporation | ATOS Origin | Oracle Corporation | A1CK            |   

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.

6) Company Strategy

Our long term direction for our high performance analytical and
intelligent information management products has always been to ensure that these
products become a recognized platform for advanced analytical applications and
for managing large data volumes.

SANDs vision is to be the dominant leader in delivering its
products and best practices to customers around the world, in order to provide
them with all the data they need, when and how they need it.

In order to carry out SANDs vision, a four-pillar strategy to
grow the operations will be used:

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| | i.   | Focus on implementing a best practices and service
      offering approach to delivering the solutions.                            
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                    
| | ii.  | Focus on being the preferred partner of choice with
      systems integrators and application vendors delivering the
    solutions.
| |      |                                                                                                                                    
| | iii. | Focus on implementing a TEAM SAND approach to delivering
      the solutions worldwide.                                            
| |      |                                                                                                                                    
| | iv.  | Focus on implementing a continuous improvement approach
      to our internal operations.                                          

a) SAND/DNA Analytics

Version 5 of SAND/DNA Analytics was
brought into production in 2007, version 5.1 in 2008 and version 5.2 in 2009.
SAND/DNA Analytics data repository does not require indexing or specialized
schemas. All the data, down to the most detailed level, is available for
querying immediately after it is loaded, permitting quick and easy access by
business users employing industry-standard Business Intelligence tools or
methods. The Integration of the SAND/DNA Analytic and Access products into a new
offering SAND CDBMS V6 released in September 2010 has been a major product
development in the current fiscal year. That integration enables SAND to deliver
advantages associated with both products in a single offering. The new release
will deliver new advanced analytic functionalities on immense data volume
deployed using an elastic private cloud architecture.

b) SAND CDBMS for SAS

In 2010, SAND introduced a new solution
for the SAS market. The first product development is focusing on Result Set
Management, from its creation up to its end of life. That solution is required
for Information Lifecycle Management and for vertical markets under strict data
and process regulation, like pharmaceuticals. The second product development is
oriented in the overall performance improvement associated with SAS analytic
environment. SAND products could be used to improve the SAS process performance
and at the same time extend the amount of data available for study.

7) Competition

We compete in the highly competitive computer software
industry. 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 Oracle;
- software vendors that offer products which focus on structured data
  archiving such as FileTek and PBS;

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- 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 CDBMS V6, we have
been able to establish ourselves as complementary to many of the vendors that
were seen as competitors. 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.

We compete primarily on the basis of product features, lower total cost of ownership , return on investment , 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.

8) 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 nine
United States patents and thirty-two foreign patents.

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, their 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 nine 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 or national processing which is entailed, give the applicant more time
and better basis for deciding whether and in what countries to further pursue
the application.

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The Company holds registered trademarks and trademarks. SAND
Technology, N-Vector, Sandonline and Nucleus are registered trademarks, and
SAND/DNA Access, SAN 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 the Company.

9) Seasonality

The Company's operations are not seasonal and its operations
are carried out year round.

10) Impact of Governmental Policies

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

C.Organizational Structure

SAND has three wholly-owned subsidiaries: (i) Sand Technology
(Ireland) Limited; (ii) STSI Licensing, LLC; and (iii) Sand Technology Corp.
Sand Technology (Ireland) Limited has itself two wholly-owned subsidiaries, Sand
Technology Deutschland GmbH, an entity existing under the laws of Germany, and
Sand Technology Limited, a company existing under the laws of England:

|Subsidiary                        | Jurisdiction of Incorporation | Percentage of voting securities held
|--------------------------------- | ----------------------------- | ------------------------------------
|Sand Technology Corp.             | Delaware                      | 100%                                
|STSI Licensing, LLC               | New Jersey                    | 100%                                
|Sand Technology (Ireland) Limited | Ireland                       | 100%                                

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The following chart illustrates the principal subsidiaries of
SAND, together with the jurisdiction of incorporation:



D.    Property, Plant and
Equipment

As at July 31, 2010, we leased a total of approximately 14,073 square feet of office space in three cities across North America, and 2,561 square feet in Germany. The weighted average annualized cost per square foot of the space occupied is $21.26 including real estate taxes and operating expenses. No lease extends beyond November 30, 2014.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not Applicable.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.    OPERATING RESULTS

1)Financial Condition

During fiscal 2010, the financial condition of the Company was
such that, as a result of the net loss recorded during the year, and although
much smaller than in previous years, it still needed cash infusions from
shareholders and new private investors to remain as a going concern. Total
assets of $2,117,443 as of July 31, 2010 were 22.7% lower than the previous year
total of $2,740,326. The decrease is attributable to the Cash balance of
$579,270 as of July 31, 2010 being 45.6% lower than the previous year balance of
$1,065,572, Accounts Receivable of $739,144 as of July 31, 2010 being 39.6%
lower than the previous year balance of $1,224,199 and net Capital Assets of
$64,488 as of July 31, 2010 being 22.7% lower than the previous year balance of
$83,452. Such decreases were partially offset by the balance of Research and
Development Tax Credits Receivable of $660,000 as of July 31, 2010 which was
312.5% higher than the previous year balance of $160,000, and mainly due to the
Company taking advantage of an enhanced research and development tax credit
program made available by the Province of Quebec (Canada). Total liabilities of
$4,568,107 as of July 31, 2010 were 10.6% lower than the previous year balance
of $5,112,881. The decrease is mainly attributable to the Deferred Revenues
balance (short-term and long-term) of $1,241,938 as of July 31, 2010 being 26.2%
lower than the previous year balance of $1,682,137 and Due to Shareholders
(short-term and long-term) of $1,874,153 as of July 31, 2009 being 7.1% lower
than the previous year balance of $2,016,725, which is mainly attributable to
repayments to a significant shareholder.

2)Operations

Revenue  Total and Variation

The following table provides a summary of the revenue growth
  for fiscal years 2010, 2009, 2008 and 2007:

|                              |   | Year ended |  |   | Year ended |  |   | Year ended |  |   | Year ended | 
|----------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- |  | - | ---------- | 
|                              |   | July 31,   |  |   | July 31,   |  |   | July 31,   |  |   | July 31,   | 
|Revenue - Total and Variation |   | 2010       |  |   | 2009       |  |   | 2008       |  |   | 2007       | 
|Revenue                       |   |            |  |   |            |  |   |            |  |   |            | 
|Revenue                       | $ | 6,562,411  |  | $ | 7,049,237  |  | $ | 6,998,472  |  | $ | 6,728,540  | 
|Year-over-year variation      |   | -6.9%      |  |   | 0.7%       |  |   | 4.0%       |  |   | 22.8%      | 

Sales were negatively impacted during fiscal 2010 by the
  strengthening of the Canadian dollar against all 3 foreign currencies, the U.S.
  dollar, the U.K. pound and the Euro, in which the Company invoices its customers outside of Canada. Comparing the average rates of
  fiscal 2010 and fiscal 2009, the Canadian dollar increased against the U.S.
  dollar, the U.K. pound and the Euro by 12.1%, 12.0% and 9.8%, respectively. If
  average exchange rates in fiscal 2010 had remained at the same levels as fiscal
  2009, revenues would have been higher by approximately $588,000.

Revenue growth in fiscal year 2010 was much lower than expected
due to (a) customers cut in IT spending due to the slowdown in the economy, (b)
a cautious attitude of customers towards investing in long-term solutions, and
(c) delays by third-party software vendors in releasing the next version of
their products as well as issues being encountered by these same products.

- 22 -

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Revenue  Segment and Variation

The Company has three geographical segments. The Canadian,
  United States and European segments market the SAND/DNA Product Suite. The
  following table provides a summary of the revenue growth by geographical
  segments for fiscal years 2010, 2009 and 2008:

|                                |   | Canada        | 
|------------------------------- | - | ------------- | 
|                                |   | Year ended    | 
|                                |   | July 31,      | 
|Revenue - Segment and Variation |   | 2010          | 
|Revenue                         |   |               | 
|Revenue                         | $ | 1,131,633     | 
|Year-over-year variation        |   | -34.1%        | 
|                                |   |               | 
|                                |   | United states | 
|                                |   | Year ended    | 
|                                |   | July 31,      | 
|Revenue - Segment and Variation |   | 2010          | 
|Revenue                         |   |               | 
|Revenue                         | $ | 812,620       | 
|Year-over-year variation        |   | -16.4%        | 
|                                |   |               | 
|                                |   | Europe        | 
|                                |   | Year ended    | 
|                                |   | July 31,      | 
|Revenue - Segment and Variation |   | 2010          | 
|Revenue                         |   |               | 
|Revenue                         | $ | 4,618,158     | 
|Year-over-year variation        |   | 5.9%          | 

- 23 -

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Operating Expenses

The following table provides a summary of the operating
  expenses for the fiscal years 2010, 2009, 2008 and 2007:

|                                                      |   | Year ended |  |   | Year ended |  |   | Year ended |  |   | Year ended | 
|----------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- |  | - | ---------- | 
|                                                      |   | July 31,   |  |   | July 31,   |  |   | July 31,   |  |   | July 31,   | 
|Operating Expenses                                    |   | 2010       |  |   | 2009       |  |   | 2008       |  |   | 2007       | 
|                                                      |   |            |  |   |            |  |   |            |  |   |            | 
|Cost of sales and product support                     | $ | 1,194,674  |  | $ | 1,396,224  |  | $ | 1,470,215  |  | $ | 1,666,331  | 
|Year-over-year variation                              |   | -14.4%     |  |   | -5.0%      |  |   | -11.8%     |  |   | 7.0%       | 
|Percentage of
      revenues                          |   | 18.2%      |  |   | 19.8%      |  |   | 21.0%      |  |   | 24.8%      | 
|                                                      |   |            |  |   |            |  |   |            |  |   |            | 
|Research and development costs, net                   |   | 1,458,392  |  |   | 1,960,295  |  |   | 1,971,813  |  |   | 2,215,146  | 
|Year-over-year variation                              |   | -25.6%     |  |   | -0.6%      |  |   | -11.0%     |  |   | -9.0%      | 
|Percentage of
      revenues                          |   | 22.2%      |  |   | 27.8%      |  |   | 28.2%      |  |   | 32.9%      | 
|                                                      |   |            |  |   |            |  |   |            |  |   |            | 
|Amortization of capital assets and other
      assets |   | 53,298     |  |   | 63,643     |  |   | 187,517    |  |   | 201,274    | 
|Year-over-year variation                              |   | -16.3%     |  |   | -66.1%     |  |   | -6.8%      |  |   | -19.0%     | 
|Percentage of
      revenues                          |   | 0.8%       |  |   | 0.9%       |  |   | 2.7%       |  |   | 3.0%       | 
|                                                      |   |            |  |   |            |  |   |            |  |   |            | 
|Selling, general and administrative
      expenses    |   | 4,224,677  |  |   | 4,372,067  |  |   | 4,402,613  |  |   | 5,079,390  | 
|Year-over-year variation                              |   | -3.4%      |  |   | -0.7%      |  |   | -13.3%     |  |   | -2.0%      | 
|Percentage of
      revenues                          |   | 64.4%      |  |   | 62.0%      |  |   | 62.9%      |  |   | 75.5%      | 

Cost of Sales and
  Product Support

Cost of sales and product support
  consists mainly of costs related to providing customer implementation and
  support services and the costs related to the sale of third-party software,
  including certain license fees and royalties.

Research and
  Development Costs

Research and development costs consist
  mainly 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.

Amortization of
  Capital Assets and Other Assets

Amortization of capital assets and
  other assets consists of the depreciation of furniture and equipment, computer
  equipment, research and development equipment and leasehold improvements costs
  over their estimated useful lives.

Selling, General
  and Administrative Expenses

Selling, general and administrative
  expenses include salaries, commissions and other personnel-related costs, travel
  expenses, advertising programs and other promotional activities associated with
  the selling and marketing of our products. It excludes foreign exchange gains
  and losses and interest expense.

- 24 -

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We reduced our operating expenses significantly in fiscal 2010 and also took advantage of an enhanced research and development tax credits program offered by the Province of Quebec (Canada). Net research and developments costs, after deducting accrued tax credits, of $1,458,392 for fiscal 2010 were 25.6% lower than the previous year amount of $1,960,295. Selling, General and Administrative expenses of $4,224,677 for fiscal 2010 were 3.4% lower than the previous year amount of $4,372,067. The foreign exchange loss of $80,978 for fiscal 2010 was 40.0% lower than the previous year amount of $135,051. Interest expense of $295,941 for fiscal year 2010 was 5.6% lower than the previous year amount of $313,652.

Our cost of sales for fiscal year 2010 showed a marked
improvement compared to fiscal year 2009. The 14.4% decrease was due to a
continued focus on controlling costs. The reduction in amortization in fiscal
year 2010 from the amortization in the fiscal year 2009 was due to the lower
value of capital assets and minimal capital expenditures. Our selling, general,
and administrative expenses for fiscal 2010 were also lower, again reflecting a
continued focus on controlling costs by keeping the headcount to an optimal
level, and spending selectively on marketing events and activities, travel and
entertainment.

Net Losses  Total and Variation

The following table provides a summary of the net losses for
  fiscal years 2010, 2009, 2008 and 2007:

|                               |   | Year ended |   |   | Year ended |   |   | Year ended |   |   | Year ended |  
|------------------------------ | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                               |   | July 31,   |   |   | July 31,   |   |   | July 31,   |   |   | July 31,   |  
|Net Loss - Total and Variation |   | 2010       |   |   | 2009       |   |   | 2008       |   |   | 2007       |  
|                               |   |            |   |   |            |   |   |            |   |   |            |  
|Net Loss                       | $ | (745,549   | ) | $ | (1,191,695 | ) | $ | (1,271,950 | ) | $ | (2,526,524 | )
|Year-over-year
      variation |   | -37.4%     |   |   | -6.3%      |   |   | -49.7%     |   |   | -35.7%     |  

There was a significant reduction of 37.4% in our net loss from $1,191,695 in fiscal 2009 to $745,549 in fiscal 2010. Total revenues of $6,562,411 for fiscal 2010 were lower by 6.9% compared to total revenuess of $7,049,237 in fiscal 2009. However, we reduced our operating expenses significantly in fiscal 2010 and also took advantage of an enhanced research and development tax credits program offered by the Province of Quebec (Canada). Net research and developments costs, after deducting accrued tax credits, of $1,458,392 for fiscal 2010 were 25.6% lower than the previous year amount of $1,960,295. Selling, General and Administrative expenses of $4,224,677 for fiscal 2010 were 3.4% lower than the previous year amount of $4,372,067. The foreign exchange loss of $80,978 for fiscal 2010 was 40.0% lower than the previous year amount of $135,051. Interest expense of $295,941 for fiscal year 2010 was 5.6% lower than the previous year amount of $313,652.

Our net loss for fiscal year 2009 was reduced by 6.3% compared to the fiscal year 2008 due to the slight increase in revenue of 4%. Although the reduction was lower than expected, the results reflected the evolving nature of our business.

Inflation

Inflation has no material impact on the Company's operations.

- 25 -

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Impact of Foreign Currency

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. Gains and losses 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 in to the audited consolidated financial statements.

Changes in foreign exchange rates had a negative impact on our results of operations for fiscal year 2010. If average exchange rates in fiscal 2010 had remained at the same levels as fiscal 2009, revenues would have been higher by approximately $588,000, cost of sales and product support and operating expenses, before interest expense and foreign exchange, would have been higher by approximately $410,000 resulting in a decrease in the loss from operations by approximately $178,000, from $368,630 to approximately $191,000.

Summary of Quarterly Results

The following tables set forth the unaudited statements of operations for each of the quarters of fiscal years 2010, 2009, 2008 and 2007. The quarterly results, in management’s opinion, have been prepared on a basis consistent with the audited consolidated financial statements and include the adjustments necessary for a fair presentation of the information.

|                                                          |   | Year Ended July 31, 2010 |  |   | Year Ended July 31, 2009 |  
|--------------------------------------------------------- | - | ------------------------ |  | - | ------------------------ | -
|QUARTERLYRESULTS                                          |   | Q4                       |  |   | Q3                       |  
|                                                          |   |                          |  |   |                          |  
|Revenue                                                   | $ | 1,186,041                |  | $ | 966,654                  |  
|Quarter-over-quarter variation                            |   | 22.7%                    |  |   | -49.8%                   |  
|                                                          |   |                          |  |   |                          |  
|Cost of sales and product support                         |   | 215,100                  |  |   | 331,920                  |  
|Quarter-over-quarter
      variation                      |   | -35.2%                   |  |   | -2.5%                    |  
|                                                          |   |                          |  |   |                          |  
|Gross margin                                              |   | 81.9%                    |  |   | 65.7%                    |  
|                                                          |   |                          |  |   |                          |  
|Totalotheroperatingexpenses                               |   | 944,600                  |  |   | 1,809,963                |  
|Quarter-over-quarter variation                            |   | -47.8%                   |  |   | 12.3%                    |  
|                                                          |   |                          |  |   |                          |  
|Profitability                                             |   |                          |  |   |                          |  
|Net income (loss)                                         |   | 26,341                   |  |   | (1,175,229               | )
|Quarter-over-quarter variation in net
      income (loss) |   | -102.2%                  |  |   | 4104.6%                  |  
|Basic and diluted loss
      per common share             |   | 0.00                     |  |   | -0.08                    |  
|                                                          |   |                          |  |   |                          |  
|Weightedaveragenumberofsharesoutstanding                  |   | 15,467,702               |  |   | 15,071,615               |  

- 26 -

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|                                                          |   | Year Ended July 31, 2008 |   |   | Year Ended July 31, 2007 | 
|--------------------------------------------------------- | - | ------------------------ | - | - | ------------------------ | 
|QUARTERLYRESULTS                                          |   | Q4                       |   |   | Q3                       | 
|                                                          |   |                          |   |   |                          | 
|Revenue                                                   | $ | 1,888,042                |   | $ | 1,905,984                | 
|Quarter-over-quarter variation                            |   | -0.9%                    |   |   | 34.3%                    | 
|                                                          |   |                          |   |   |                          | 
|Cost of sales and product support                         |   | 336,960                  |   |   | 333,900                  | 
|Quarter-over-quarter
      variation                      |   | 0.9%                     |   |   | -13.8%                   | 
|                                                          |   |                          |   |   |                          | 
|Gross margin                                              |   | 82.2%                    |   |   | 82.5%                    | 
|                                                          |   |                          |   |   |                          | 
|Totalotheroperatingexpenses                               |   | 2,035,210                |   |   | 1,563,643                | 
|Quarter-over-quarter variation                            |   | 30.2%                    |   |   | 2.6%                     | 
|                                                          |   |                          |   |   |                          | 
|Profitability                                             |   |                          |   |   |                          | 
|Net income (loss)                                         |   | (484,128                 | ) |   | 8,441                    | 
|Quarter-over-quarter variation in net
      income (loss) |   | -5835.4%                 |   |   | -101.7%                  | 
|Basic and diluted loss
      per common share             |   | -0.03                    |   |   | 0.00                     | 
|                                                          |   |                          |   |   |                          | 
|Weightedaveragenumberofsharesoutstanding                  |   | 14,318,189               |   |   | 14,318,189               | 

Sales of the Company's products and services are not subject to seasonal variations. Historically, the Company’s operating results have fluctuated on a quarterly basis. The Company’s revenues, expenses and operating results may vary significantly from quarter-to-quarter because of a number of factors. These factors may include the timing of product sales and the length of the sales cycle. As a result, period-to-period comparisons may not be meaningful comparisons of the Company`s results nor are they necessarily indicative of the future results of the Company.

- 27 -

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B.    Liquidity and Capital
Resources

Our cash balance as at July 31, 2010 was $579,270 compared to $1,065,572 as at July 31, 2009 and $775,443 at July 31, 2008.

We generated a negative cash flow of $573,567 from operating activities in fiscal 2010 as compared to a negative cash flow of $514,471 from operating activities in fiscal 2009, representing a decrease in cash flow of $59,096 in fiscal 2010 as compared to an increase in cash flow from operating activities in fiscal 2009 of $537,415. For fiscal 2010, the decrease in the net loss over fiscal year 2009 by $446,146 was offset by an increase of $500,000 in the balance of research and development tax credits receivable as at July 31, 2010 compared to July 31, 2009, and by a decrease of $440,199 in the balance of deferred revenue (short-term and long-term) as at July 31, 2010 compared to July 31, 2009.

Investing activities represent additions to capital assets which amounted to $34,334 in fiscal 2010 as compared to $24,781 in fiscal 2009 and $17,315 in fiscal 2008.

Financing activities represent funds provided by shareholders and private investors and the issuance of share capital. The Company generated a positive cash flow of $254,867 from financing activities in fiscal 2010 as compared to a positive cash flow of $749,024 from financing activities in fiscal 2009, representing a decrease of $494,157 in fiscal year 2010 as compared to a decrease in fiscal year 2009 of $778,352. For fiscal 2010, the decrease is mainly attributable to significant repayments that were made during fiscal 2010 to Arthur G. Ritchie, our former President and Chief Executive Officer and significant shareholder. The decrease also occurred despite the completion of a private placement on November 6, 2009 which raised U.S.$550,000 from private investors including the current President and Chief Executive Officer.

- 28 -

---

At July 31, 2010, we had a working capital deficiency of $982,935 compared to a working capital deficiency of $1,910,058 as at July 31, 2009, representing a decrease of $927,123 in working capital deficiency in fiscal 2010 as compared to an increase in working capital deficiency in fiscal 2009 of $854,523. Working capital has been calculated as the difference between current assets and current liabilities.

As of July 31, 2010, the Companys long-term debt consisted of
the following:

|a) | Convertible debentures consisting of 1,114 Units issued
      as part of a private placement transaction on April 18, 2008. Each unit
      consists of one 8% Convertible Debenture due December 31, 2017, having a
      nominal value of U.S.$900, redeemable at the option of the Company if the
      bid price of the common share has been above $1.50 for 60 consecutive
      trading days, and convertible at the option of the holder into class "A"
      common shares at U.S.$0.45 per share, and 1,000 share purchase warrants of
      the Company. Each warrant entitles the holder to purchase one additional
      common share (warrant share) of the Company at a price of U.S.$0.70 per
      warrant share at any time until the earlier of the close of business day
      which is either thirty six (36) months from April 18, 2008 or the bid
      price of the stock has been above U.S.$1.50 for sixty (60) consecutive
      trading days. Interest is calculated at the rate of 8% per annum, payable
      in common shares at a rate of U.S.$0.45 per share. The interest is due on
      each conversion date (date when the principal amount is being converted)
      subsequent to January 1, 2009 or on the maturity date. The financing is
      secured by a first rank hypothec on all of the Companys property and
      assets, movable and immovable, corporeal and incorporeal, present and
      future, for the principal accrued interest amounts. The redemption value
      of the convertible debentures on the maturity date, December 31, 2017, is
      U.S.$1,777,944.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|b) | During fiscal year 2007, the Company formalized the
      conditions pertaining to a loan obtained from a significant shareholder,
      who at the time was also the President and Chief Executive Officer of the
      Company. The loan originated from amounts owed by the Company to the
      shareholder by virtue of his previous employment contracts as President
      and Chief Executive Officer. The loan was bearing interest at 15% and was
      repayable on demand. As at July 31, 2009, an amount of $1,605,616 was
      owing to the President and Chief Executive Officer and significant
      shareholder. The significant shareholder ceased to be President and Chief
      Executive Officer on October 31, 2009. The amount owed the former
      President and Chief Executive Officer was again formalized in a loan
      agreement on October 31, 2009. The total amount owing under the loan
      agreement at October 31, 2009 was $1,466,677. Under the terms of the loan
      agreement, the loan is repayable in three (3) principal annual
      installments of $488,892 over the next 3 years on January 1, 2011, 2012
      and 2013. The loan bears interest at 15% and is payable semi-annually on
      January 1 and June 30 of each year. The amount may be prepaid at any time
      by the Company without penalty. In the event of default to pay an amount
      when due, the significant shareholder shall have the right to convert all
      outstanding amounts owing to him hereunder into common shares of the
      Company based on the average closing price of the shares on the OTC
      Bulletin Board for the month immediately preceding the month in which such
      right is exercised. In addition and also upon default, the significant
      shareholder shall have the right to require the Company to purchase all
      common shares in the capital stock of the Company owned directly or
      indirectly by the significant shareholder at a purchase price per share
      equal to the greater of:

| | i)  | the average closing price of the shares on the OTC
      Bulletin Board over the previous 30-day period plus 15%, or
| | --- | --------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                     
| | ii) | the book value of the shares as determined by the
      auditors of the Company.                                    

- 29 -

---

As at July 31, 2010, an amount of
$1,407,874, including accrued interest, was outstanding under the loan
agreement.

We  believe that our current cash and cash equivalents may not be sufficient to meet its anticipated cash needs for ongoing operating expenses and working capital expenditures in the fiscal year 2011. We have  operating losses in the current and past years. We also generated negative cash flows from operations and has a significant working capital deficiency. To successfully grow the business, we must decrease our cash outflows, improve our cash position and succeed in our ability to raise additional capital through a combination of primarily public or private equity offerings or strategic alliances. We are  also dependent on the success of our marketing efforts and continued revenue growth through the sale of our products. Our uncertainty as to our ability to generate sufficient revenue and raise sufficient capital raise significant doubt about our ability to continue as a going concern. We are currently in the process of seeking additional financing for our current operations. We can give no assurance that it will achieve profitability or be capable of sustaining profitable operations.

The following table provides a summary of the contractual
commitments for the next five years.

|2011  | $263,046
|----- | --------
|2012  | 66,000  
|2013  | 65,502  
|2014  | 65,502  
|2015  | 21,834  
|      |         
|Total | $481,884

- 30 -

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C.Research and Development, Patents and
Licenses

Our research and development activities focus on enhancing its current products to exceed customer expectations and to develop new products to maintain our competitive advantage in the market.

Our research and development activities are central to fueling
its existing and potential business. We engage in research and development
activities relating to the introduction of new features, enhancements and new
packaged products. We focus on our two products, SAND/DNA Access and SAND/DNA
Analytics.

We maintain our main research and development facility in Westmount, Canada. We also have a network of research and development technologists in the United States, the United Kingdom and Germany. As of November 16, 2010, there are 28 technologists. After research and development tax credits, SAND spent $1.46 million in 2010, $1.96 million in 2009 and $1.97 million in 2008 on research and development.

We will continue to focus on research and development efforts
that are key to responding to current changing technology.

Research and development expenses consist mainly 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.

With the exception of the Company taking advantage of an enhanced research and development tax credit program made available by the Province of Quebec (Canada), research and development expenses remained stable in the fiscal year ended on July 31, 2010 as compared to the fiscal year ended on July 31, 2009.

D.    Trend Information

Revenue growth in fiscal year 2010 was much lower than expected
due to (a) customers cut in IT spending due to the slowdown in the economy, (b)
a cautious attitude of customers towards investing in long-term solutions, and
(c) delays by third-party software vendors in releasing the next version of
their products as well as issues being encountered by these same products. We
will continue to monitor these trends and factors in the current fiscal year
ending July 31, 2011.

Also, there are currently, in fiscal year 2011, no known
trends, uncertainties, demands, commitments or events that are reasonably likely
to have a material effect on our net revenues, profitability, liquidity or
capital resources, or that would cause reported financial information not
necessarily to be indicative of future operating results or financial condition.

E.    Off-balance Sheet Arrangements

None.

F.    Disclosure of contractual obligations

The following table provides a summary of the contractual
commitments for the next five years.

|2011  | $263,046
|----- | --------
|2012  | 66,000  
|2013  | 65,502  
|2014  | 65,502  
|2015  | 21,834  
|Total | 481,884 

- 31 -

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The following table provides a summary of the material
financial obligations as of July 31, 2010:

|                                                    |   |           |  |   | Payments due by period   |  |   |                     | 
|--------------------------------------------------- | - | --------- |  | - | ------------------------ |  | - | ------------------- | 
|                                                    |   | Total     |  |   | **Less than** **1 year** |  |   | **1 - 3** **years** | 
|                                                    |   |           |  |   |                          |  |   |                     | 
|Debt Component of Convertible Debentures(U.S.$) (1) | $ | 1,777,944 |  |   | -                        |  |   | -                   | 
|                                                    |   |           |  |   |                          |  |   |                     | 
|Due to a significant shareholder (CDN.$)(2)         | $ | 1,407,874 |  | $ | 430,090                  |  | $ | 977,784             | 

| | (1) | - The amount represents the redemption value of the
      convertible debentures on the maturity date, December 31, 2017. Reference
      should be made to the audited consolidated financial statements for the
      book value as at July 31, 2010.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                        
| | (2) | The amount represents the payment obligations under a
      Repurchase Agreement with Mr. Arthur G. Ritchie, the former President and
      Chief Executive Officer of SAND Technology Inc.                                                           

G. Safe Harbor

Certain statements contained in this Report are
"forward-looking statements" within the meaning of the United States Securities
Act of 1934 and of the Exchange Act. 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 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 November 16, 2010. For a more detailed discussion
of these risks and uncertainties and other business risks, seeItem 3 -
"Risk Factors". Although the Company has attempted to identify important risks
and factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be
other factors and risks that cause actions, events or results not to be as
anticipated, estimated or intended. 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 undertake no obligation to
publicly release the result of any revision of these forward-looking statements to reflect events
or circumstances after the date they are made or to reflect the occurrence of
unanticipated events.

- 32 -

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.    Directors and Senior
Management

Directors

The following table sets forth certain information concerning
our directors, including their beneficial ownership of shares of the Company as
of November 16, 2010. Unless otherwise indicated, each nominee holds sole voting
and investment power over his shares.

|Name, Residence andOffice Held                                                                                                            | DirectorSince | Principal Occupation                                                                                         | Number andPercentage
      ofCommon SharesBeneficially Owned orControlled
|----------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------
|P. Wayne Musselman (1)
    Toronto, Ontario, Canada Director                                                                              | 2007          | Accountant and Business
      Consultant.                                                                    | Nil 
    (Nil%)                                                          
|Thomas M. O'Donnell (5)
      Woodstock, Illinois, United States President and Chief
      Executive Officer and Director                 | 2008          | Current President, Chief
      Executive Officer of SAND Chief Executive Officer of Edge
    Specialists LLC | 833,271 (4)(5.24%)                                                       
|Duncan Painter (2)
    Letchworth, Herts, United Kingdom Director                                                                         | 2010          | Executive and Business Consultant                                                                            | Nil 
    (Nil%)                                                          
|Arthur G. Ritchie (1)(2)(5)Westmount, Québec, Canada Former President and Chief
      Executive Officer and current Chairman of the Board | 1983          | Former President, Chief
      ExecutiveOfficer of SAND and Current Chairman of SAND                          | 3,598,388
      (3)(22.65%)                                              
|Daniel Benn (1)Pointe Claire, Quebec, Canada 
    Director                                                                                | 2010          | Executive and Business Consultant                                                                            | Nil 
      (Nil%)                                                        

- 33 -

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|Name, Residence and Office
      Held                                             | Director Since | Principal Occupation                     | Number and Percentage
      of Common Shares Beneficially Owned or Controlled
|--------------------------------------------------------------------------------- | -------------- | ---------------------------------------- | -----------------------------------------------------------------------------
|Michael Pesner(1)Montreal,
      Quebec, Canada Director                          | 2010           | Accountant and Business
      Consultant | Nil (Nil%)                                                                   
|George Wicker
      (2) Palm Beach Gardens, Florida, United
      States Director | 1996           | Attorney and Business Consultant         | 274,950 (1.73%)                                                              

Notes:

|(1) | Member of the Audit Committee.                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Member of the Governance, Nomination, Human Resources and
      Compensation Committee.                                                                                                                       
|(3) | Excludes 625,000 shares of the Company subject to
      exercise of share purchase warrants.                                                                                                                  
|(4) | Excludes a maximum of 668,000 shares of the Company
      subject to conversion of convertible debentures and excludes 334,000
      shares of the Company subject to exercise of share purchase
    warrants.
|(5) | Effective November 1st, 2009, Arthur G.
      Ritchie retired as President and Chief Executive Officer of SAND and
      Thomas M. ODonnell was appointed to replace him.                                    

As of November 16, 2010, the directors and officers of the
Company as a group beneficially owned 4,706,609 Common Shares representing
approximately 29.62% of the outstanding Common Shares of the Company excluding
Common Shares subject to exercise of share purchase warrants or to conversion of
convertible debentures. The information as to Common Shares beneficially owned
or over which control or direction is exercised, not being within the knowledge
of the Company, has been furnished by the respective directors and officers
individually.

Mr. P. Wayne Musselman, BCom (Hon), FCA, retired as a partner
of Deloitte & Touche LLP in 2004 after a career of nearly forty years during
which he served clients in the banking, securities, international trade and
distribution industries. He directed the Japanese Service Group of Deloitte
Canada and served on the Board of Deloittes Global Japanese Services Group. He
is currently the Chairman of the Board of FaithLife Financial and a director and
the Chairman of the Audit Committee of State Bank of India (Canada). Mr. P.
Wayne Musselman is the Chairman of the Audit Committee of SAND.

Mr. Thomas M. O'Donnell has an extensive career in the software
and financial markets. He is Chief Executive Officer, founder and majority owner
of Edge Specialists LLC, which is an independent software vendor with extensive
United States patent protection providing derivative trading tools including
options, stocks and futures trading. He is a co-inventor of two extensive
trading software patents, a C.P.A. and a graduate of Harvard Business School. In
addition, Mr. O'Donnell was a Designated Primary Market Maker on the Chicago
Board of Options Exchange and has extensive experience in the financial markets.
Effective November 1, 2009, Thomas M. ODonnell was appointed President and
Chief Executive Officer of SAND, as Arthur G. Ritchie retired. In connection with our sale of the Convertible Debetures, we entered into a Voting Agreement dated 18, 2008, with Arthur G. Ritchie and Bradley G. Griffith on behalf of the subscribers of the convertible debentures, whereby we granted the holders of such convertible debentures holding a majority of the aggregate principal amount of the debentures outstanding the right to designate one member to be nominated as director of SAND and which provided that this member would initially be Thomas M. O'Donnell.

Mr. Daniel Benn is the founder and former Chief Executive
Officer of a technology company. He is skilled and experienced in setting
strategic direction, business and tactical planning and execution, initiating
and driving growth strategies, managing bottom-line profitability, acquisitions
and divestitures, direct and channel sales and marketing, research and product
development, project management and operational infrastructure.

- 34 -

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Mr. Arthur G. 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. Effective November 1, 2009, Arthur G. Ritchie retired as President and
Chief Executive Officer of SAND but remains the Chairman of the Board of
Directors of SAND.

Mr. Duncan Painter most recently led both the U.K. Marketing
Services and Global Marketing Services Consulting and Delivery businesses at
Experian Plc. He has extensive experience with SAND Technology, having headed up
the Company`s European operations for a number of years.

Mr. Michael Pesner has extensive experience in financial
advisory services and investment banking, including mergers and acquisitions,
restructuring, divestitures and debt and equity financing. He spent 26 years
with KPMG, was Chairman of Thorne Ernst & Whinney Inc. and served on the
Board of Directors of Peat Marwick Thorne. Mr. Michael Pesner serves on the
Board of Directors of five Canadian and U.S. public companies.

Mr. George Wicker held executive level positions in general
management, program management and finance with Lockheed Martin Corporation and
its predecessor corporations during a thirty-three year career. Mr. Wicker holds
a B.A. in Political Sciences, an MBA in Financial Management from the University
of Santa Clara and a Juris Doctor degree from Pepperdine University. Mr. George
Wicker is the Chairman of the Compensation Committee of SAND.

Senior Management

The following table shows certain information with respect to our executive and other officers:

|Name                | Office                                                                                               | Yearappointedto Office | Other Positions and BusinessExperience                                   
|------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------- | -------------------------------------------------------------------------
|Arthur G. Ritchie   | Former President and Chief
      Executive Officer                                                   | 1983(5)                | Principal of LGS Data (1)
      Processing Consultants Inc.              
|Thomas M. ODonnell | Current President and Chief
      Executive Officer                                                  | 2009(5)                | CEO of Edge Specialists LLC                                              
|Michael Pilcher     | Chief Operating Officer                                                                              | 2010(4)                | Senior executive at multiple
      large companies and start-up companies
|Tony J. Giuliano    | Vice-President, Finance and
      Administration and Chief Financial Officer and Corporate Secretary | 2010(2)(3)             | Chief Financial Officer at
Avensys Corporation                           

Notes:

|(1) | See description of Mr. Arthur G. Ritchie under subsection
      entitled "Directors".                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                  
|(2) | Mr. Tony J. Giuliano was appointed as Vice-President,
      Finance and Administration of the Company on October 4, 2010 as
      replacement of Ms. Zainab A. Schwartz who resigned on September 15,
      2010.
|    |                                                                                                                                                                                                                  
|(3) | Mr. Tony J. Giuliano was appointed as Corporate Secretary
      of the Company on November 16, 2010 as replacement of Ms. Zainab A. Schwartz who resigned on
  September 15, 2010.                               

- 35 -

---

|(4) | Mr. Pilcher was appointed Chief Operating Officer of the
      Company on April 1, 2010.                                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                           
|(5) | Effective November 1st, 2009, Arthur G.
      Ritchie retired as President and Chief Executive Officer of SAND and
      Thomas M. ODonnell was appointed to replace him.

Michael Pilcher was previously Sales Director Hiring Solutions,
EMEA at LinkedIn Corporation, the largest professional network in the world.
Prior to LinkedIn, he worked at Oracle Corporation where he led the U.K.
insurance group, at Sybase where he ran U.K. Financial Services and at Tenfold
Corporation where, as world-wide Vice-President Sales, he completed a highly
successful IPO. He brings the experience of working in large public companies
and dynamic start-ups from across multiple industries and geographic sectors.

Mr. Tony Giuliano was previously Director, Financial Management
at Unisource Canada Inc. Previously, he was Chief Financial Officer at Avensys
Corporations, a U.S. public company involved in high-tech manufacturing, and
Chief Financial Officer at Starlink Aviation Inc, involved in the private
aviation business. He holds a Graduate Diploma in Accountancy from McGill
University in Montreal together with a Bachelor of Commerce from Concordia
University in Montreal. He is a member of the Quebec Institute of Chartered
Accountants.

There are no family relationships between any directors and
executive officers of the Company.

B.    Compensation

Compensation of Directors

For the period from August 1, 2009 to December 31, 2009, P.
Wayne Musselman, George Wicker and former directors Martin Shindler and Douglas
S. Pryde were paid an annual retainer of $15,000 for serving as a director.
Subject to shareholder approval of our 2010 Stock Incentive Plan, we intend to
award all non-management directors shall be compensated with stock options from
the 2010 Stock Incentive Plan which was approved by the Board of Directors on
November 16, 2010. Each non-management director will be entitled to receive
50,000 stock options per calendar year with the Chairman of the Audit Committee
and Chairman of the Compensation Committee will be entitled to receive an
additional 15,000 stock options per calendar year. Such stock options shall be
granted by the Board of Directors before the end of the 2010 calendar year.

Executive Compensation Analysis

General Principles of Executive Compensation

Although the Company has not adopted a formal compensation program, remuneration plays an important role to attract, motivate and retain key members of the management team required for its success and to drive strategic growth. Compensation is designed so as to constitute adequate reward for services and incentive for the executive management team to implement strategies aimed at increasing share value and creating economic value. The compensation is also established according to the duties and responsibilities that rest on the individuals and their own level of performance. The total compensation package is designed in a manner that takes into account the constraints under which the Company operates and that it is a technology company without a history of earnings.

- 36 -

---

Determining Compensation

The compensation of the Named Executive Officers is established
by the Board, upon the recommendation of the Governance, Nomination, Human
Resources and Compensation Committee (Compensation Committee) (please refer to
section C  Board Practices for more details on the role and responsibility of
this committee). The compensation of the Named Executive Officers, with the
exception of the President and Chief Executive Officer, is proposed by the
President and Chief Executive Officer to the Compensation Committee, which
recommends the adoption by the Board of Directors. The compensation of the
President and Chief Executive Officer is established by the Compensation
Committee which recommends adoption to the Board of Directors.

Components of Overall Compensation

When assessing total direct annual compensation, the Company
focuses on four key components which are intended to collectively make up most
of an executive total compensation opportunity. There are two fixed components 
base salary and participation in the collective insurance plans. There are two
variable components  incentive bonus and the grant of common share stock
options or common share awards of the Company.

Base Salary

The Named Executive Officers receive a base salary which is
based primarily on the level of responsibility of the position, the
qualifications and experience of the officer and market conditions. The base
salary may be paid to the Named Executive Officer in the form of cash, a
consulting fee or in shares.

Incentive Bonus

The amount of bonus is based on factors relating to both
corporate and individual performance, including business development and
profitability.

Option-Based or Share-Base Award Plans

The stock option or share plans are the only long-term
incentive plans (LTIP) of the Company. Stock options or share awards ensure that
the Named Executive Officers are motivated to achieve long-term growth of the
Company and increases in shareholder value, and provide capital accumulation
linked directly to the Companys performance. Stock options or share awards are
made by the Board of Directors, after recommendation by the Compensation
Committee. Stock options or share awards are established, among other things,
according to the role and responsibilities associated with the participants
position and his or her influence over appreciation in shareholder value. The
terms of the plans are described below under section E  Share Ownership.

Other Compensation

The Named Executive Officers have the right to receive the
benefits from any collective insurance plans in force of the Company.

Compensation of Executive Management

The following table sets forth information concerning the
compensation paid to the Company's President and Chief Executive Officer and
named executive officers (the "Named Executive Officers") as required disclosure in accordance with applicable Canadian securities
regulations during the Company's three financial years ended July 31, 2010, July
31, 2009 and July 31, 2008:

- 37 -

---

"Named Executive Officers" or "NEOs" means the following
individuals:

| | (a) | each Chief Executive Officer;                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                               
| | (b) | each Chief Financial Officer;                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                               
| | (c) | each of the Company's three most highly compensated
      executive officers, other than the Chief Executive Officer and the Chief
      Financial Officer, who were serving as executive officers at the end of
      the most recently completed financial year and whose total salary and
      bonus exceeds $150,000; and
| |     |                                                                                                                                                                                                                                                                                                                               
| | (d) | any additional individuals for whom disclosure would have
      been provided under (c) except that the individual was not serving as an
      officer of the Company at the end of the most recently completed financial
      year-end.                                                                                     

Such information includes the following: the salary earned, bonus and any other compensation, including the specific benefits and other personal benefits, the options granted under the stock option plan of the Company and any other compensation which is not disclosed elsewhere.

As at July 31, 2010, the end of the most recently completed
financial year of the Company, the Company had three Named Executive Officers,
whose names and positions held within the Company are set out in the summary
compensation table below.

- 38 -

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Summary Compensation Table

|Name and Principal Position                                                                                      |                     | Annual Compensation            | Long-Term
      Compensation |                            
|---------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------ | ---------------------------- | ---------------------------
|Awards                                                                                                           | Payouts            
|
|Year                                                                                                             | Salary($)           | Bonus($)                       | Other($)                     | Share- BasedAwards
    ($) 
|Thomas M. ODonnell(2)President and Chief
      Executive Officer                                                | 2010 
    2009 2008 | - 
    - -                     | - 
    - -                   | - 
    - -                 
|Michael Pilcher(4)Chief Operating Officer                                                                        | 2010 
    2009 2008 | 82,555 
    - -                | - 
    - -                   | - 
    - -                 
|Arthur G. Ritchie(3)
      Former President and Chief Executive Officer                                          | 2010 
    2009 2008 | 54,538 
      212,153 212,153  | 12,500 
      50,000 50,000  | 11,804 
      80,772 72,809
|Zainab A. Schwartz (1)
      Former Vice President, Finance and Administration and
      Chief Financial Officer | 2010 
    2009 2008 | 120,000 
      120,000 120,000 | 10,000 
      10,000 20,000  | -
    - -                  

Notes:

|(1) | Ms. Schwartz resigned on September 15, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | Mr. O’Donnell became President and Chief Executive Officer of SAND on November 1, 2009. For the period from November 1, 2009 to July 31, 2010, Mr. O’Donnell shall be compensated with stock options from the 2010 Stock Incentive Plan which was approved by the Board of Directors on November 16, 2010. Subject to shareholder approval of the 2010 Stock Incentive Plan, Mr. O’Donnell is entitled to receive 50,000 stock options per month while serving as President and Chief Executive Officer. Our Board of Directors intends to grant such stock options before the end of the 2010 calendar year. Mr. O’Donnell has no other formal compensation arrangement with the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) | Mr. Ritchie retired as President and Chief Executive Officer on October 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(4) | Mr. Pilcher became Chief Operating Officer on April 1,
      2010. Subject to shareholder approval of the 2010 Stock Incentive Plan,
      Mr. Pilcher is entiltled to receive 219,426 stock options from the 2010
      Stock Incentive Plan which was approved by the Board of Directors on
      November 16, 2010. Our Board of Directors intends to grant such stock
      options before the end of the 2010 calendar year.                                                                                                                                                                                                                                                         

- 39 -

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Outstanding Option-Based Awards

As at July 31, 2010, there are no stock-options outstanding for
  the Named Executive Officers.

Pension Plan Benefits

No pension or retirement benefit plans have been instituted and
  none are proposed at this time.

Securities Authorized for Issuance under Equity Compensation
  Plans

The following tables summarize as of November 16, 2010, the
  equity compensation plans pursuant to which equity securities of the Company may
  be issued:

Stock-Option Plans Information

Plan Category
      Number of
        CommonShares to be Issued Upon Exercise of
          OutstandingOptions
      Weighted
        Average Exercise Price of Outstanding Options
      Number of
        Common Shares Remaining Available for Future Issuance Under the Equity Compensation PlansEquity Compensation Plans 
        of the Company approved
        by
        the shareholders
      357,000
      1.00
      1,643,000Equity Compensation Plans
        of the Company not approved 
        by the shareholders (1)
      0
      N/A
      3,000,000Total:
      357,000
      
      4,643,000


Note:
         (1) The 2010 Stock Incentive Plan was approved by the
  Board of Directors on November 16, 2010 and shall be subject to a vote at a
  special meeting of shareholders on January 25, 2011.

Share Award Plan Information

Plan Category
      Number of Common Shares to be Issued Upon Exercise of Outstanding Options
      Weighted Average Exercise Price of Outstanding Options
      Number of Common Shares Remaining Available for Future Issuance Under the Equity Compensation PlansEquity Compensation Plans 
        of the Company
        approved by 
        the shareholders
      302,500
      0
      697,500Equity Compensation Plans 
        of the Company not
        approved 
        by the shareholders
      N/A
      N/A
      N/ATotal:
      302,500
      -
      697,500


- 40 -

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Directors and Officers Liability Insurance

The Company maintains Directors and Officers liability insurance. The policy contains standard industry exclusions, and no claims have been made thereunder to date. The policy provides coverage with a limit of U.S.$5,000,000 per loss per policy period, subject to a deductible of U.S.$100,000 per securities claim and U.S.$100,000 per other claim. The current annual premium is paid entirely by SAND and amounts to U.S.$85,000. SAND has entered into an indemnification agreement with each of its directors and senior officers.

C. Board Practices

Date of expiration of current term of office

Pursuant to 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.

SAND has entered into the following arrangements with its
  directors mentioned above:

| | (a) | (a)	On April 18, 2008, we entered into a Voting Agreement with Arthur G. Ritchie and Bradley G. Griffith on behalf of the subscribers of the Convertible Debentures issued pursuant to a private placement on April 24, 2008 for aggregate proceeds of US$1,002,600, whereby we granted the right to holders of such debentures holding a majority of the aggregate principal amount of the debentures outstanding to have the right to designate one member to be nominated as director of SAND and which provided that this member shall initially be Thomas M. O’Donnell;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | Effective November 1, 2009, Arthur G. Ritchie, SAND and
      Jerart Financial Services Limited (a company wholly-owned by Arthur G.
      Ritchie) (Jerart) entered into a Marketing and Sales Assistance
      Agreement. Jerart agreed to provide SAND with partner services such as
      identifying potential customers, leading the sale through establishing the
      primary relationship to the influencers and decision makers, submitting
      proposals and developing the business case. The fees are based on a
      percentage of the sales. The percentage is based on the type of level of
      partner services as defined in the contract;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | (c)	On August 1, 2007, a consulting agreement was entered by and between Arthur G. Ritchie, SAND and Jerart. Jerart agreed to provide SAND with corporate management services through the person of Arthur G. Ritchie himself and which provides that Arthur G. Ritchie shall act as President and Chief Executive Officer of SAND. Effective October 31, 2009, Arthur G. Ritchie retired as President and Chief Executive Officer of SAND. As a result, a new ‘Consulting Agreement’ was entered into between Arthur G. Ritchie, SAND and Jerart as part of his retirement package. Jerart agreed to provide SAND with corporate management services through the person of Arthur G. Ritchie himself. The agreement commences on November 1, 2009 and will continue for a term of two years. The Company will pay Jerart an annual consulting fee in the amount of $250,000 payable on the first business day of every month in monthly instalments of $20,833 plus all applicable taxes. If the agreement is terminated by the Company for any reason whatsoever prior to the expiry of the term, the remaining unpaid balance of the consulting fee will become immediately due and payable to Jerart;

- 41 -

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| | (d) | Certain loan agreements between Arthur G. Ritchie, SAND
      and Jerart, prior to November 1, 2009, have been replaced on such date by
      a Repayment Agreement. Pursuant to such Repayment Agreement, the amounts owed by SAND to Arthur G. Ritchie
      will be repaid in equal instalments over three (3) years commencing
      January 1, 2011. The amounts due under the Repayment Agreement will
      continue to bear interest at 15% per annum and is payable on a semi-annual
      basis. Please see Item 7B  Related Party Transactions for more details;
    and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (e) | (e)	On October 31, 2009, Arthur G. Ritchie, Jerart and Bradley G. Griffith entered into a Priority Agreement whereby Bradley G. Griffith asfondé de pouvoir for the holders of the Convertible Debentures agreed that the security in interest granted to Arthur G. Ritchie shall rank concurrently and pari passu with the security granted to the holders of the Convertible Debentures.                                                                                                                                                                                          

Officers Services Contract

During the fiscal year ended July 31, 2010, the Company had
  Employment Agreements with Arthur G. Ritchie and Zainab A. Schwartz, whereby
  Arthur G. Ritchie agreed to provide his services as President and Chief
  Executive Officer and Zainab A. Schwartz agreed to provide her services as Vice
  President, Finance and Administration and Chief Financial Officer.

The Employment Agreement of Arthur G. Ritchie provided that he
  would 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. In the event the
  Employment Agreement of Arthur G. Ritchie (i) was terminated by SAND for any
  reason other than for Cause (as defined in the Employment Agreement) or death or
  (ii) was terminated by Arthur G. Ritchie for Good Reason (as defined in the
  Employment Agreement), Arthur G. Ritchie would have been 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 Arthur G. Ritchie would have continued for a
  period of two (2) years to participate in all benefit plans and programs of SAND
  to the extent such participation was possible, and, if such continued
  participation was barred, to receive amounts equal to the out-of-pocket costs of
  participation in plans and programs providing substantially similar benefits.
  Effective October 31, 2009, Arthur G. Ritchie retired as President and Chief
  Executive Officer of SAND and was replaced by Thomas M. ODonnell. As a result,
  the Employment Agreement was replaced by a Consulting Agreement, for the
  severance payout, which has been entered by and between Arthur G. Ritchie, SAND
  and Jerart. Please see Item 6A  Directors, for details of this agreement.

Effective November 1, 2009, Thomas M. O’Donnell became President and Chief Executive Officer. Subject to shareholder approval, Mr. O’Donnell shall be compensated with stock options from the 2010 Stock Incentive Plan which was approved by the Board of Directors on November 16, 2010.  Mr. O’Donnell is entitled to receive 50,000 stock options per month while serving as President and Chief Executive Officer. Our Board of Directors intends to grant such stock options before the end of the 2010 calendar year. Mr. O’Donnell has no other formal compensation arrangement with the Company.

Michael Pilcher was appointed Chief Operating Officer effective April 1, 2010. The Employment Agreement of Michael Pilcher provides that he is entitled to  an annual base salary and 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. Subject to shareholder approval, Mr. Pilcher shall also be compensated with 219,426 stock options from the 2010 Stock Incentive Plan which was approved by the Board of Directors on November 16, 2010. Our Board of Directors intends to grant such stock options before the end of the 2010 calendar year.

- 42 -

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The Employment Agreement of Zainab A. Schwartz provided that
  she would be paid an annual base salary and 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.
  Zainab A. Schwartz resigned from the Company effective September 15, 2010 and
  was provided a severance pay  of eight (8)
  weeks.

Tony J. Giuliano was appointed Vice President, Finance and
  Administration and Chief Financial Officer effective October 4, 2010. The
  Employment Agreement of Tony J. Giuliano provides that he would be paid an
  annual base salary and 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. Subject to
  shareholder approval, Tony J. Giuliano shall also be compensated with 100,000
  stock options from the 2010 Stock Incentive Plan which was approved by the Board
  of Directors on November 16, 2010. Our Board of Directors intends to grant such
  stock options before the end of the 2010 calendar year.

Audit Committee

Audit Committee Charter

The Audit Committee of the Board of Directors of SAND (the
  "Audit Committee") has a formal charter setting out its mandate and
  responsibilities of the Audit Committee that has been reviewed and adopted as
  amended on June 14, 2005, the text of which was included as Exhibit 15.1 of the
  Annual Report on Form 20-F for the fiscal year ended July 31, 2005.

Composition of Audit Committee

Name
      Independent
      Financially LiterateP. Wayne Musselman
      Yes
      YesDaniel Benn
      Yes
      YesArthur G. Ritchie
      No
      YesMichael Pesner
      Yes
      Yes


The Audit Committee is comprised of four directors, three of
  whom are independent under applicable Canadian requirements and the rules of the
  United States Securities and Exchange Commission (the "S.E.C."). Based on their
  profiles (please see Item 6A  Directors, for more details), the education and
  experience of each Audit Committee member is relevant to the performance of his
  responsibilities as a Committee member. All the members of the Committee are
  "financially literate" and have the ability to read and understand a set of
  financial statements. P. Wayne Musselman is the Chairman of the Audit Committee.

Audit Committee Meetings

The Audit Committee meets on a quarterly basis and holds
  special meetings as circumstances require. During the year ended on July 31,
  2010, the Audit Committee held five meetings. All members attended the five
  meetings of the Audit Committee held during the last fiscal year.

- 43 -

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Audit Committee Responsibilities

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                                                                                                                              

- 44 -

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| | (q) | Any other matters that the Audit Committee feels are
      important to its mandate or that the Board chooses to delegate to
      it.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------

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

Charter of the Governance, Nomination, Human Resources and
  Compensation Committee

The Governance, Nomination, Human Resources and Compensation
  Committee of the Board ("Compensation Committee") is governed by a formal
  charter that details its mandate, the text of which was included as Exhibit 15.2
  of the Annual Report on Form 20-F for the fiscal year ended July 31, 2005.

Composition of the Compensation Committee

The Compensation Committee is composed of Arthur G. Ritchie,
  Duncan Painter and George Wicker, all of whom, except Arthur G. Ritchie were
  non-management and independent directors during the fiscal year ended July 31,
  2010 and satisfy the current requirements of The NASDAQ Stock Market relating to
  independence. George Wicker is the Chairman of the Compensation Committee.

Compensation Committee Meetings

During the year ended July 31, 2010, the Compensation Committee
  did not meet.

Compensation Committee Responsibilities

The 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;                                                                                                     

- 45 -

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| | (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.                                                                                                                                                                                                                

Statement of Corporate Governance Practices

The Company has reviewed its corporate governance practices in
  light of the guidelines contained in

Regulation 58-101 respecting Disclosure of Corporate
  Governance Practice("Regulation 58-101") of the Canadian Securities
  Administrators. A description of the Companys corporate governance practices is
  set out below in response to the requirements of Regulation 58-101.

Board of Directors Delegation

The Board has delegated to the Chief Executive Officer and
  senior management the responsibility for day-to-day management of the business
  of the Company, subject to compliance with the plans approved from time to time
  by the Board of Directors. In addition to those matters, which must by law or by
  the Articles of the Company be approved by the Board, the Board retains
  responsibility for significant changes in the Companys affairs such as approval
  of major capital expenditures, debt and equity financing arrangements and
  significant acquisitions and divestitures.

The Board oversees the identification of the principal risks of
  the Company's business and the implementation by management of appropriate
  systems to manage such risks. The Board reviews from time to time organizational
  matters such as succession planning.

During the fiscal year ended July 31, 2010, the following
  directors are "independent" pursuant to National Policy 58-201 Corporate
    Governance Guidelines ("NP 58-201") as they qualify as "independent"
  directors, as such term is defined in Regulation 52-110 respecting Audit
    Committees: Wayne Musselman, Michael Pesner, Daniel Benn, Duncan Painter and
  George Wicker. Arthur G. Ritchie was not independent, as he was the President
  and Chief Executive Officer of SAND.

Effective October 31, 2009, Arthur G. Ritchie retired as President and Chief Executive Officer and Thomas M. O’Donnell replaced him. Thomas M. O’Donnell is no longer independent and Arthur G. Ritchie will remain non-independent for a period of 3 years from the date of his retirement as he was an employee of the Company in the last three years.

Directorships

None of the directors is presently a director of any other
  issuer that is a reporting issuer (or the equivalent) in any jurisdiction.

Orientation and Continuing Education

The Board of Directors of the Company takes the following steps
  to ensure that all new directors receive orientation regarding the role of the
  Board, its committees and its directors, and the nature and operation of the
  Company.

- 46 -

---

The first step is to assess a new director's set of skills and
  professional background. This allows the orientation to be customized to that
  director's needs since different information regarding the nature and operations
  of the Company's business will be necessary and relevant to each new director.
  Once determined, one or more existing directors, who may be assisted by the
  Company's management, provide the new director with the appropriate orientation
  through a series of meetings, telephone calls and other correspondence.

Orientation and education of directors is an ongoing matter. As
  such, ongoing informal discussions between management and members of the Board
  are encouraged and visits to the Companys operations are organized.

Ethical Business Conduct

The Company is committed to promote the highest standard of
  ethic and integrity in the pursuance of all of its activities. Furthermore, the
  directors, officers and employees of the Company are expected to act and to hold
  their office within the best interests of the Company. The Company expects that
  all directors shall act in compliance of all laws and regulations applicable to
  their office as director of the Company.

In the event any transactions or agreements occur in respect of
  which a director or executive officer has a material interest, the matter must
  be initially reviewed by the Audit Committee and is then submitted to the Board
  of Directors. The Board may implement any measures that it finds necessary in
  order to ensure the exercise of independent judgment. In the event a director
  has a material interest in any transaction or agreement, such Director will
  abstain from voting in that regard.

Nomination of Directors

The Board of Directors of the Company do not feel it is
  necessary to increase the number of directors on the Board at this time.

The Compensation Committee seeks qualified candidates to be
  considered for nomination as directors. Proposed nominations are subject to
  review and approval by the Board.

Any new appointees or nominees to the Board of Directors must
  have a favourable track record in general business management, special expertise
  in areas of strategic interest to the Company, the ability to devote the time
  required and a willingness to serve as a director.

Compensation

The Compensation Committee evaluates the adequacy of
  compensation of the directors and the Companys management. After sufficient
  review and analysis, the Compensation Committee recommends the compensation of
  the directors and the Companys management to the Board for approval.

Other Board Committees

As of the date hereof, the Audit Committee and the Compensation
  Committee are the only Board committees created by the Board of Directors.

Assessments

The Compensation Committee is responsible for assessing the
  individual and collective effectiveness of the Board and selecting new
  directors.

- 47 -

---

D. Employees

On July 31, 2010, the Company had 44 employees, including 23
  full-time employees and 1 part-time employee with SAND Canada, and 6 full-time
  employees and 1 part-time employee with Sand USA, 3 full-time employees and 1
  part-time employee with Sand UK and 8 full-time employees and 1 part-time
  employee with Sand Germany.

On July 31, 2009, the Company had 44 employees, including 25
  full-time employees and 1 part-time employee with SAND, and 5 full-time
  employees with Sand Technology Company ("Sand USA"), 3 full-time employees with
  Sand Technology Limited ("Sand UK") and 9 full-time employees and 1 part-time
  employee with Sand Technology Deutschland GmbH ("Sand Germany").

On July 31, 2008, the Company had 42 employees, including 26
  full-time employees with SAND, and 5 full-time employees with Sand USA, 3
  full-time employees with Sand UK and 7 full-time employees and 1 part-time
  employee 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

The shareholdings of the directors and officers of the Company
  as at November 16, 2010 are as follows:

Name
      Position Held
      Number and Percentage of Outstanding Common Shares OwnedThomas M. O'Donnell (1)
      President, Chief Executive Officer 
        and Director
      833,271 (5.24%)Arthur G. Ritchie (1)
      Former President, Chief Executive
        Officer and Chairman of the Board of 
        Directors
      3,598,388 (22.65%)George Wicker
      Director
      274,950 (1.73%)Total Common Shares held by Directors and
        Executives
      4,706,609 (29.62%)


|Notes: |                                                                                                                                                         
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)    | As of October 31, 2009, Arthur G. Ritchie retired as President and Chief Executive Officer of SAND and Thomas M. O’Donnell was appointed to replace him.

No director or officer of SAND holds any stock options.
  However, the directors and officers of SAND are entitled to receive the stock
  options described in Item 6.B "Compensation", subject to shareholder approval of
  the 2010 Stock Incentive Plan.

Arrangements Involving the Employees in the Capital of the
  Company

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.

- 48 -

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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 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 became 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 administered by the Compensation
  Committee of the Board of Directors. The former Options Committee has been
  dissolved.

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

1996 Stock Option Plan

On July 8, 1996, the Board of Directors adopted the 1996 Stock
  Option Plan ("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 in the Company. 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.

- 49 -

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On November 21, 2005, the Board of Directors approved an
  amendment to the Option Plan to extend the life of the Option Plan and of the
  options granted and outstanding under the 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
  became exercisable for a period of ten (10) years from July 7, 2006 with
  immediate vesting for all those outstanding options which had vested on or prior
  to July 7, 2006.

The Option Plan is administered by the Compensation Committee
  of 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 Compensation 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 Compensation 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 November 16, 2010, 357,000 options had been granted and
  remained outstanding under the Option Plan and the Incentive Plan and 1,643,000
  options remained available for grant under both plans.

During the fiscal year ended July 31, 2010, no stock options
  were granted, 21,000 stock options expired and 173,000 stock options were
  forfeited. No stock options were exercised.

During the period August 1, 2010 to November 16, 2010, no stock
  options were granted, exercised, expired or forfeited.

Share Award Plan

On November 2, 2006, the Board of Directors of SAND established
  a Share Award Plan pursuant to which up to 1,000,000 Common Shares of the
  Company are issuable through direct and immediate issuances without any
  intervening option grants. Each such share issuance shall be evidenced by a
  Share Award Agreement that complies with the terms and conditions of the Share
  Award Plan, and which state the number of Common Shares being awarded, the
  restrictions imposed on the shares awarded under such Share Award Agreement and
  such other representations, agreements, terms or conditions as may be required
  or desirable by the Board of Directors of the Company. The award recipient shall
  obtain the rights and obligations of a shareholder of the Company with respect
  to the Common Shares of the Company award under the Share Award Agreement only
  upon vesting of the award.

On August 28, 2007, the Board of Directors of the Company
  authorized the award of up to 665,000 Common Shares. On September 30, 2007, the
  Company granted 402,500 share awards which are dependant on the award recipients
  achieving certain defined objectives including continued employment with the
  Company for a period of 3 years. As of September 30, 2010, following the 3-year
  employment period and after taking into account terminations and
  resignations, 302,500 share awards became eligible for issuance to recipients.
  Such Common Shares will be issued during the fiscal year 2011.

- 50 -

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2010 Stock Incentive Plan

On November 16, 2010,the Board of Directors of SAND
  established the 2010 Stock Incentive Plan ("Incentive Plan") pursuant to which
  the beneficiaries selected by a committee of the Board of Directors may be
  granted stock options or share awards in the Company. The Incentive Plan will be
  subject to confirmation, approval and ratification by the shareholders of the
  Company at a special meeting of the shareholders to be held on January 25, 2011.
  The maximum number of Common Shares of the Company that may be issued resulting
  from stock options or share awards granted under the Incentive Plan is 3,000,000
  subject to adjustment to take into account changes in the capital structure of
  the Company.

The Incentive Plan is administered by the Compensation
  Committee of the Board of Directors.

The term and number of Common Shares covered by each stock
  option or share award, as well as the permitted frequency of exercise of such
  stock options or share awards, will be determined by the Compensation Committee at
  the time the stock options or share awards are granted to the recipients. The
  number of Common Shares which may be subject to stock options or share awards in
  favour of a single recipient may not exceed 5% of the outstanding Common Shares
  of the Company. Stock options or share awards granted under the Incentive Plan
  may not be assigned or pledged. No financial assistance is available to
  recipients in connection with the exercise of a stock option or share award.
  Stock options or share awards which expire or are terminated or surrendered or
  unexercised are thereafter available for the granting of other stock options or
  share awards. The Company may terminate the Incentive Plan at any time subject
  to vested rights.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

As of November 16, 2010, the Company had 15,889,620 Class A
  Common Shares outstanding. Each Class A Common Share entitles its holder to
  one vote.

- 51 -

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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 percent (5%) of the votes attached to Class A Common Shares of the Company
  at November 16, 2010:

Approximate Number of Class
        A Common Shares Owned, Controlled or Directed,
          Directly or Indirectly
      Percentage of Class A Common Shares Owned, Controlled or DirectedArthur G. Ritchie
      3,598,388
      22.65%Thomas M. O'Donnell
      833,271
      5.24%Carol Shattner
      1,058,600
      6.66%Total Common Shares Owned, Controlled or Directed, Directly or Indirectly by the MajorShareholders
      5,479,659
  34.55%


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 November 16, 2010, 11,291,900 Class A
  Common Shares were held of record by 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.

B.   Related Party Transactions

1)   Arthur G. Ritchie

The Company has entered into the following agreements with
  Arthur G. Ritchie, a major shareholder and its Chairman and former President and
  Chief Executive Officer, as follows:

|(a) | During fiscal year 2007, the Company formalized the
      conditions pertaining to a loan obtained from Arthur G. Ritchie who at the
      time was the President and Chief Executive Officer of the Company. The
      loan originated from amounts owed by the Company to Arthur G. Ritchie by
      virtue of his previous employment contracts as President and Chief
      Executive Officer. The loan was bearing interest at 15% and was repayable
      on demand. As at July 31, 2009, an amount of $1,605,616 was owed to Arthur
      G. Ritchie. Arthur G. Ritchie ceased to be President and Chief Executive
      Officer on October 31, 2009. The amount owed Arthur G. Ritchie was again
      formalized in a loan agreement on October 31, 2009. The total amount owing
      under the loan agreement at October 31, 2009 was $1,466,677. Under the
      terms of the loan agreement, the loan is repayable in three (3) principal
      annual instalments of $488,892 over the next 3 years on January 1, 2011,
      2012 and 2013. The loan bears interest at 15% that is payable semi-
      annually on January 1 and June 30 of each year. The amount may be prepaid
      at any time by the Company without penalty. In the event of default to pay
      an amount when due, Arthur G. Ritchie shall have the right to convert all
      outstanding amounts owing to him hereunder into common shares of the
      Company based on the average closing price of the shares on the OTC
      Bulletin Board for the month immediately preceding the month in which such
      right is exercised. In addition and also upon default, Arthur G. Ritchie
      shall have the right to require the Company to purchase all common shares
      in the capital stock of the Company
      owned directly or indirectly by Arthur G. Ritchie at a purchase price per
      share equal to the greater of:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 52 -

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| | iii) | the average closing price of the shares on the OTC
      Bulletin Board over the previous 30-day period plus 15%, or
| | ---- | --------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                     
| | iv)  | the book value of the shares as determined by the
      auditors of the Company.                                    

|    | As at July 31, 2010, an amount of $1,407,874, including
      accrued interest of $204,214, was outstanding under the loan agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company also signed, effective November 1, 2009, a
      consulting agreement and a marketing and sales assistance agreement with
      Arthur G. Ritchie. The consulting agreement provides for a fixed payment
      on the first of each month in the amount of $20,833 and expires on October
      31, 2011. Payments made under the consulting agreement during fiscal year
      2010 amounted to $189,117. Under the marketing and sales assistance
      agreement, the Company and Arthur G. Ritchie may identify prospective
      customers for the Company`s products and agree to designate such prospects
      as a registered opportunity. The marketing and sales assistance agreement
      provides for the payment of funds based on a percentage of sales proceeds
      received from a registered opportunity and which were received within a
      stipulated period following the date of registration of the opportunity.
      The marketing and sales assistance agreement expires on October 31, 2010.
      There were no payments made under the marketing and sales assistance
      agreement during fiscal year 2010.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | In conjunction with the original loan agreement in 2007,
      the Company also issued 103,061 warrants to Arthur G. Ritchie, with each
      warrant entitling the holder to purchase one class "A" common share of the
      Company at a price of US$0.44 per share and each warrant being valid for
      the term of the agreement. These warrants expired during the fiscal year
      2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(b) | Arthur G. Ritchie was entitled, under his previous
      employment contracts, to bonuses based on the achievement of gross
      revenues resulting from the licensing, sale or other disposition of the
      Companys Nucleus software products. The bonuses terminated effective
      October 31, 2009 when he ceased to be the President and Chief Executive
      Officer. At July 31, 2010 and 2009, bonuses payable amounted to
    $165,386 and $153,582, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(c) | During fiscal year 2009, the Company obtained a
      loan from Arthur G. Ritchier, who at the time, was also the President and
      Chief Executive Officer of the Company. Arthur G. Ritchie ceased to be
      President and Chief Executive Officer on October 31, 2009. Under the loan
      agreement, a maximum of $250,000 of funds was available. As at July 31,
      2009, an amount of $188,532 was outstanding under the loan facility. Under
      the terms of the loan agreement, the loan was repayable within 30 days of
      receipt of a written demand from Arthur G. Ritchie. The loan bore interest
      at 15% and was payable on the last business day of each calendar month.
      During the first quarter of fiscal year 2010, such loan, including accrued
      interest, was repaid by the Company to Arthur G. Ritchie.                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(e) | During fiscal year 2008, the Company obtained a loan from
      Arthur G. Ritchie, who at the time was also the President and Chief
      Executive Officer of the Company. Mr. Ritchie ceased to be President and
      Chief Executive Officer on October 31, 2009. Under the loan agreement, a
      maximum of $400,000 of funds was available. As at July 31, 2009, an amount
      of $68,995 was outstanding under the loan facility. Under the terms of the
      loan agreement, the loan was repayable within 30 days of receipt of a
      written demand from Mr. Ritchie. The loan bore interest at 15% and was
      payable on the last business day of each calendar month. During the first
      quarter of fiscal year 2010, such loan, including accrued interest, was
      repaid by the Company to Arthur G. Ritchie.                                                                                                                                                                                                                                                                                                                 

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During fiscal year 2008, an Inter-Creditor Priority Agreement
  was signed between Arthur G. Ritchie and Bradley G. Griffith on behalf of the
  holders of the secured convertible debentures (collectively the parties), at
  the time when the Company issued the secured convertible debentures. The parties
  agreed that the sums owing under the secured convertible debentures will be paid
  by the Company to the convertible debenture holders in priority to the sums owed
  by the Company to Arthur G. Ritchie. Specifically, for every $2 paid to the
  convertible debenture holders, the Company shall remit $1 to Arthur G. Ritchie,
  representing the repayment of principal only. The Inter-Creditor Priority
  Agreement was amended on October 31, 2009 pursuant to which the parties agreed
  that the sums owing under the convertible debentures will be paid by the Company
  to the holders of the convertible debentures pari passu to the sums owing by the
  Company to Arthur G. Ritchie, such that for every $1 paid to the convertible
  debenture holders, the Company shall remit $1 to Arthur G. Ritchie.

On April 18, 2008, SAND entered into a Voting Agreement with
  Arthur G. Ritchie and Bradley G. Griffith on behalf of the subscribers of the
  convertible debentures, whereby SAND granted the right to holders of such
  convertible debentures holding a majority of the aggregate principal amount of
  the debentures outstanding to have the right to designate one member to be
  nominated as director of SAND and which provided that this member shall
  initially be Thomas M. O'Donnell.

2) Thomas M. O’Donnell

During fiscal year 2010, we obtained various loans from our President and Chief Executive Officer, Thomas M. O’Donnell, who is also a shareholder, in the form of Promissory Notes for a total amount of $299,893 (U.S.$285,000). Under the terms of the Promissory Notes, the amounts are repayable within 30 days of receipt of a written demand from Thomas M. O’Donnell. The loans bear interest at 10%  payable on the last business day of each calendar month. At July 31, 2010, an amount of $300,893, including accrued interest of $2,927, was outstanding on the Promissory Notes.

In May 2007, the Company completed a non-brokered private
  placement where the Company issued 1,500,000 Common Shares at a price of US$0.40
  share for total cash proceeds of $675,795. In addition, the Company issued
  750,000 share purchase warrants entitling two shareholders to purchase up to
  750,000 shares of the Company at a price of US$0.60 for three years. One of
  these shareholders is Arthur G. Ritchie, the Chairman and former President and
  Chief Executive Officer of the Company.

In November 2009, the Company completed a non-brokered private placement where the Company issued 785,715 units for U.S.$0.70 per unit, for total gross proceeds of U.S.$550,000 to investors, one of whom is Thomas M. O’Donnell, the current President and Chief Executive Officer of the Company. Each unit consists of two Class A Common Shares and one warrant to purchase one Class A Common Share for an exercise price of U.S.$0.50 per share.

D. Interests of Experts and
Counsels

Not applicable.

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ITEM 8.FINANCIAL INFORMATION

A.Consolidated Statements and Other
  Financial Information

Consolidated Financial Statements

The Companys consolidated financial statements are set out
  under Item 18.

Legal Proceedings

There are no on-going legal proceedings.

Dividend Record and Policy

The Company has never paid any dividend on its Common Shares.
  The Companys present policy is to retain any earnings to finance future growth.
  Dividends on the Common Shares paid to non-residents of Canada would generally
  be subject to withholding tax under the Income Tax Act (Canada) at the
  rate of 25%. Such rate may be subject to reduction under the provisions of a tax
  treaty between Canada and the country in which the recipient is resident. The
  Canada-U.S. Income Tax Convention (1980) (the "Convention") provides for a
  general reduction in the rate of withholding tax to 15% on dividends paid on
  shares of a Company resident in Canada (such as the Company) to a resident of
  the United States, and also provides for a further reduction to 5% where the
  beneficial owner of the dividend is a Company, resident in the United States,
  which owns at least 10% of the voting shares of the Company paying the dividend.

B.Significant Changes

Subsequent to July 31, 2010, the Company received additional
  investment funds from private investors, including U.S.$40,000 from the
  President and Chief Executive Officer, for a total amount of U.S.$350,290. This
  amount along with other amounts invested by the President and Chief Executive
  Officer described in Note 8 and U.S.$25,000 received from another private
  investor before the year-end date will be part of a Private Placement to be
  completed during fiscal year 2011.

On September 30, 2010, the share awards issued to certain
  employees on September 30, 2007, became eligible for issuance following the
  successful completion of the 3-year employment condition with the Company. The
  Company will issue 302,500 shares to these employees during fiscal year 2011.

On November 16, 2010, the Board of Directors of the Company
  approved the 2010 Stock Incentive Plan pursuant to which beneficiaries selected
  by a committee of the Board of Directors may be granted stock options or share
  awards. The maximum number of Common Shares of the Company that may be issued
  resulting from stock options or share awards granted under the 2010 Stock
  incentive Plan is 3,000,000.

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ITEM 9.     THE OFFER AND LISTING

A.     Offer and listing details

The following tables sets forth the price ranges and volume of
  Common Shares during the periods indicated on the OTCBB, and before August 5,
  2005, on the Nasdaq SmallCap Market System.

Quarter Ended
        
        High
        
        Low
        
        VolumeOctober 31, 2010
        
        0.46
        
        0.25
        
        215,699July 31, 2010
        
        0.56
        
        0.26
        
        174,174April 30, 2010
        
        0.53
        
        0.32
        
        305,235January 31, 2010
        
        0.50
        
        0.29
        
        234,468October 31, 2009
        
        0.50
        
        0.25
        
        216,644July 31, 2009
        
        0.45
        
        0.30
        
        312,065April 30, 2009
        
        0.40
        
        0.26
        
        273,716January 31, 2009
        
        0.57
        
        0.28
        
        642,333October 31, 2008
        
        0.81
        
        0.48
        
        345,400July 31, 2008
        
        0.85
        
        0.70
        
        539,300April 30, 2008
        
        0.55
        
        0.31
        
        648,500January 31, 2008
        
        0.50
        
        0.31
        
        578,400October 31, 2007
        
        0.55
        
        0.40
        
        599,400July 31, 2007
        
        0.58
        
        0.35
        
        667,400April 30, 2007
        
        0.65
        
        0.40
        
        361,600January 31, 2007
        
        0.70
        
        0.40
        
        460,900October 31, 2006
        
        0.48
        
        0.38
        
        348,500


Fiscal Year Ended(1)
        
        High
        
        Low
        
        VolumeJuly 2010
        
        0.56
        
        0.25
        
        930,521July 2009
        
        0.81
        
        0.26
        
        1,573,394July 2008
        
        0.85
        
        0.31
        
        2,365,600July 2007
        
        0.70
        
        0.35
        
        1,838,400July 2006
        
        0.85
        
        0.22
        
        3,228,200July 2005(1)
        
        1.08
        
        0.43
        
        3,702,500July 2004(2)
        
        1.61
        
        0.75
        
        8,921,600


|Notes: |                                                                                           
|------ | ------------------------------------------------------------------------------------------
|(1)    | As traded on The Nasdaq SmallCap Market System
      or after August 9, 2005 on the OTCBB.
|(2)    | As traded on The Nasdaq SmallCap Market System.                                           

B.Plan of distribution

Not applicable.

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C.    Markets

The Companys Common Shares have been traded in the United
  States on the OTCBB since August 9, 2005, under the symbol "SNDTF". Before
  August 9, 2005, the Company's Common Shares were listed on the Nasdaq SmallCap
  Market System.

In 2008, the management of SAND had learned that its Common
  Shares had been listed for trading on the Berlin-Bremen Stock Exchange (the
  "Berlin Exchange") under the symbol "SD1A", without the Company's prior
  knowledge, consent or authorization. Any authorized broker may list a company on
  the Berling Exchange by filing an application with the administration of the
  exchange for a permit to trade a company's stock already listed on and regulated
  by other markets. SAND does not anticipate that this will materially affect the
  price of its Common Shares.

On January 30, 2008, SAND applied to the Autorité des
  marchés financiers (the "AMF"), the securities regulatory authority in the
  Province of Québec in Canada to become reporting issuer in the Province of
  Québec in order to allow its securities to be freely tradeable in the province
  (subject to applicable resale restriction periods). On April 15, 2008, the
  application was granted and SAND became a reporting issuer in the Province of
  Québec and is now subject to the disclosure requirements of the AMF.

D.    Selling Shareholders

Not applicable.

E.   Dilution

Not applicable.

F.Expenses of the issue

Not applicable.

ITEM 10.     ADDITIONAL INFORMATION

A.    Share Capital

Not applicable.

B.    Memorandum and Articles of
Incorporation

SAND was incorporated on December 10, 1982 under the provisions
  of 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.

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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 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.

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.

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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.

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 Shares 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.

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- 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.
- 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
    any other distribution of the assets of the Company among its shareholders for
    the purpose of winding-up its affairs.

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- 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, 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 then issuable
  upon the conversion of the Class B, Series A Shares into Class A Common Shares
  and to vote together with the holders of Class A Common Shares of the Company.

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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 Class A 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 the S.E.C. 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.

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.

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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 Class
  A 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 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 Class A 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 Class
  A 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) Class A Common Shares
  of the Company (or options or rights or purchase such Class A 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

The material contracts concluded by the Company for the two
  years immediately preceding publication of this Report are as follows:

- Deed of Hypothec to Secure Payment of Debentures entered into by and between SAND and Mr. Bradley G. Griffith, on behalf of the holders of the Convertible Debenturers, before Mr. Sandor Steinberg, Notary for the Province of Québec, on April 24, 2008, whereby SAND agreed for the purposes of securing the payment of the Convertible Debentures in principal and interest to hypothecate and charge in favour of Mr. Griffith and each of the holders of the Convertible Debentures for the sum of three million two hundred and ninety-eight thousand and six hundred and forty-four Canadian dollars ($3,298,644), with interest at the rate of eight percent (8%) per annum, the universality of all of its property, movable and immovable, personal and real, corporeal and incorporeal, tangible and intangible, present and future, of whatever nature and wherever situated;

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- Please see Item 6A  Directors and Senior Management and Item 6B -
    Compensation and Item 7B - Related Party Transactions for contracts entered
    into by SAND with its directors and officers.

D.    Exchange Controls

Other than as provided in the Investment Canada Act (Canada) (the "Investment Act"), there are currently no limitations imposed by
  Canadian laws, decrees or regulations that restrict the import or export of
  capital, including foreign exchange controls, or that affect the remittance of
  dividends to non-resident holders of the Companys securities. However, any such
  remittances of dividends paid to United States residents are subject to
  withholding tax at a rate equal to a maximum of 15% of the amount paid (see
  Section E  Taxation under Item 10  Additional Information).

The following discussion summarises the material features of
  the Investment Act, in its present form, for a non-resident of Canada who
  proposes to acquire Common Shares of the Company. The Investment Act regulates
  the acquisition of control of a Canadian business by a non-Canadian as defined
  under the Investment Act. With respect to the Company, an acquisition of control
  is considered to be the acquisition of the majority of its Common Shares.
  However, if a non-Canadian acquires more than one-third of the voting shares of
  the Company, but less than a majority, there is a presumed acquisition of
  control unless it can be established that the Company is not controlled in fact
  by the acquirer. All acquisitions of control of a Canadian business are
  notifiable (which requires that a notification form be submitted to Investment
  Canada within thirty days after the implementation of the investment) unless the
  investment is reviewable. If the investment is reviewable, the investment may
  not be implemented until the Minister responsible for the Investment Act is, or
  has been deemed to be, satisfied that the investment is likely to be of net
  benefit to Canada.

Where either the acquirer is, or the Company is presently
  controlled by, a WTO investor (as that term is defined in the Investment Act), a
  direct acquisition of control of the Company will only be reviewable if the
  value of the Companys assets, as shown on its audited financial statements for
  the most recently completed fiscal year, is equal to or greater than $223
  million. This amount varies each year based on the rate of growth in Canadian
  gross domestic product. Other direct acquisitions of control are reviewable if
  the value of the assets of the Company, as calculated above, is equal to or
  greater than $5 million. The $5 million threshold for review also applies with
  respect to the acquisition of control of any Canadian business that provides any
  financial services or transportation services, is a cultural business, or is
  engaged in the production of uranium and owns an interest in or producing
  uranium property in Canada.

Indirect acquisitions of control (acquisitions of control of an
  entity which in turn controls the Company) are not reviewable under the
  Investment Act if the acquirer is a WTO investor or if the Company is controlled
  by a WTO investor. Otherwise, an indirect acquisition will be reviewable if the
  value of the Companys assets is $50 million or more, or if the value of the
  Companys assets acquired in the total transaction are in Canada or the
  acquisition is not effected through the acquisition of control of a foreign
  Company.

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Certain types of transactions are exempt from application of
  the Investment Act including acquisitions of control of the Company:

| | (a) | by the acquisition of voting shares or the voting
      interests by any person in the ordinary course of that persons business
      as a trader or dealer in securities;                                                           
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                       
| | (b) | in connection with the realization of security granted
      for a loan or other financial assistance and not for any purpose related
      to the Investment Act;                                                                    
| |     |                                                                                                                                                                                                                                       
| | (c) | for facilitating its financing and not for any purpose
      related to the Investment Act on the condition that the acquirer divest
      control within two years after control was acquired; and                                   
| |     |                                                                                                                                                                                                                                       
| | (d) | by reason of an amalgamation, merger, consolidation or
      corporate reorganization following which the ultimate or indirect control
      in fact of the Company through the ownership of voting interests remains
      unchanged.

There are currently no limitations on the right of foreign or
  non-resident owners of Common Shares to hold or vote such securities imposed by
  Canadian law or the Companys charter or other constituent documents.

E.    Taxation

Certain Canadian Federal Income Tax Consequences

The discussion under this heading summarises the material
  Canadian federal income tax consequences of acquiring, holding and disposing of
  Common Shares of the Company for a shareholder of the Company who is not
  resident in Canada but is resident in the United States who benefits from the
  provisions of the Convention and who will acquire and hold Common Shares of the
  Company as capital property for the purpose of the Income Tax Act (Canada) (the "Tax Act"). This summary does not apply to a shareholder who
  carries on business in Canada through a "permanent establishment" situated in
  Canada or who has a fixed tax base regularly available to him through which he
  or she performs independent personal services in Canada if the shareholders
  holding in the Company is effectively connected with such permanent
  establishment or fixed base. This summary is based on the provisions of the Tax
  Act and the regulations thereunder and on the Companys understanding of the
  administrative practices of the Canada Revenue Agency and takes into account all
  specific proposals to amend the Tax Act or regulations made by the Minister of
  Finance of Canada to November 16, 2010. It has been assumed that there will be
  no other relevant amendment of any governing law although no assurance can be
  given in this respect. This discussion is general only and is not a substitute
  for independent advice from a shareholders own Canadian and U.S. tax advisors.

The provisions of the Tax Act are subject to income tax
  treaties to which Canada is a party, including the Convention and the Protocols
  to the Convention.

Dividends on Common Shares

Under the Tax Act, a non-resident of Canada is generally
  subject to Canadian withholding tax at the rate of 25% on dividends paid or
  deemed to have been paid to him by a Company resident in Canada. The Convention
  limits the rate to 15% if the shareholder is resident in the United States and
  the dividends are beneficially owned by and paid to him, and to 5% if the
  shareholder is a company that beneficially owns at least 10% of the voting
  shares of the payer company. The Convention generally exempts from Canadian
  income tax dividends paid to a religious, scientific, literary, educational or
  charitable organisation or to an organisation constituted and operated
  exclusively to administer a pension, retirement or employee benefit fund or
  plan, if the organisation is resident in the United States and is exempt from
  income tax under the laws of the United States.

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Disposition of Common Shares

Under the Tax Act, a taxpayers capital gain or capital loss
  from a disposition of Common Shares of the Company is the amount, if any, by
  which his proceeds of disposition exceed (or are exceeded by, respectively) the
  aggregate of his adjusted cost base of the share and reasonable expenses of
  disposition. One-half of a capital gain (the "taxable capital gain") is included
  in income, and one-half of a capital loss in a year (the "allowable capital
  loss") is deductible from taxable capital gains realized in the same year. The
  amount by which a shareholders allowable capital loss exceeds the taxable
  capital gain in a year may be deducted from a taxable capital gain realized by
  the shareholder in the year or in the three previous or any subsequent year,
  subject to certain restrictions in the case of a corporate shareholder.

In the case of a shareholder that is a company, the amount of
  any capital loss otherwise determined may be reduced, in certain circumstances,
  by the amount of dividends previously received in respect of the shares disposed
  of, unless the company owned the shares for at least 365 days prior to
  sustaining the loss and (together with companies, persons and other entities
  with whom the company was not dealing at arms length) did not, at the time the
  dividends were received, own more than 5% of the shares of any class of the
  capital stock of the company from which the dividend was received. These loss
  limitation rules may also apply where a company is a member of a partnership or
  a beneficiary of a trust that owned the shares disposed of.

A non-resident of Canada is not subject to tax under the Tax
  Act in respect of a capital gain realized upon the disposition of shares unless
  the shares represent "taxable Canadian property". Common shares of the Company
  will not generally constitute taxable Canadian property. Common shares of the
  Company will constitute taxable Canadian property of a shareholder at a
  particular time if the shareholder used or held the shares in carrying on a
  business in Canada, or if more than 50% of the fair market value of the shares
  was derived directly or indirectly from one or any combination of:

| | a) | Real or immovable property in Canada                           
| | -- | ---------------------------------------------------------------
| | b) | Canadian resource properties                                   
| | c) | Timber resource properties; and                                
| | d) | Options in respect of any property described in a) to
      c).

Where a United States resident realises a capital gain on a
  disposition of shares that constitute "taxable Canadian property", the
  Convention relieves the United States resident from liability for Canadian tax
  on such capital gains unless:

| |  | (a) | the value of the shares is derived principally from "real
      property" in Canada, including the right to explore for or exploit natural
      resources and rights to amounts computed by reference to
      production,                                                                                                                                                                                                                                                 
| |  | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | (b) | the shareholder was resident in Canada for 120 months
      during any period of 20 consecutive years preceding the disposition, was
      resident in Canada at any time during the 10 years immediately preceding
      the disposition, the shares were owned by him when he ceased to be
      resident in Canada and the shares were not property that the shareholders
      was treated as having alienated by reason of ceasing to be a resident of
      Canada, or

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| |  | (c) | the shares formed part of the business property of a
      "permanent establishment" that the shareholder has or had in Canada within
      the 12 months preceding the disposition.
| |  | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Notwithstanding the potential exemption from Canadian tax
  provided under the Convention, where a nonresident of Canada disposes of Common
  Shares of the Company that are "taxable Canadian property", the non-resident is
  required to file a Canadian income tax return in respect of any such
  dispositions.

Certain United States Federal Income Tax Considerations

The following discussion summarises the material United States
  federal income tax consequences to certain U.S. Holders (as defined below) of
  the acquisition, ownership and disposition of the Companys Common Shares. This
  discussion assumes such holders hold the Common Shares as capital assets for
  United States Federal income tax purposes. This discussion does not address
  consequences peculiar to persons subject to special provisions of federal income
  tax law, such as tax-exempt organisations, qualified retirement plans, financial
  institutions, life insurance companies, real estate investment trusts, regulated
  investment companies, broker-dealers, non-resident alien individuals or foreign
  companies, shareholders actually or constructively owning Common Shares
  representing 10% of the vote and value of the Company, a person that holds
  shares as part of a straddle or hedging or conversion transaction, or a person
  liable for alternative minimum tax. In addition, this discussion does not
  address any state, local or foreign tax consequences.

The following discussion is based upon the Internal Revenue
  Code of 1986, as amended (the "Code"), final, temporary and proposed Treasury
  Regulations promulgated thereunder, published Internal Revenue Service ("IRS")
  rulings, published administrative positions of the IRS and court decisions that
  are currently applicable, any or all of which could be materially and adversely
  changed, possibly on a retroactive basis. In addition, this discussion does not
  consider the potential effects, both adverse and beneficial of recently proposed
  legislation which, if enacted, could be applied, possibly on a retroactive
  basis, at any time. The following discussion is for general information only and
  is not intended to be, nor should it be construed to be, legal or tax advice to
  any holder or prospective holder of the Companys Common Shares and no opinion
  or representation with respect to the United States federal income tax
  consequences, to any such holder or prospective holders is made. Accordingly,
  holders and prospective holders of the Companys Common Shares should consult
  their own tax advisors about the federal, state, local foreign tax consequences
  of purchasing, owning and disposing of shares of Common Shares of the Company.

U.S. Holders

As used in this Report, the term "U.S. Holder" means a
  beneficial owner of Common Shares that is (i) a citizen or resident individual
  of the United States, (ii) a corporation or partnership created or organised
  under the laws of the United States, or any political subdivision thereof, (iii)
  an estate the income of which is subject to United States federal income tax
  regardless of source, or (iv) a trust subject to the primary supervision of a
  United States court and which has one or more United States persons who have the
  authority to control all substantial decisions of the trust.

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Distributions on Common Shares

Dividends (without reduction for Canadian income tax withheld)
  paid to a noncorporate U.S. Holder in taxable years beginning before January 1,
  2011 that constitute qualified dividend income will be taxable to such holder at
  a maximum tax rate of 15% provided that the noncorporate U.S. Holder holds
  shares for more than 60 days during the 121 day period beginning 60 days before
  the ex-dividend date and meets other holding period requirements. A U.S. Holder
  must include the dividend in its taxable income when the holder receives the dividend, actually or constructively.
  The dividend will not be eligible for the dividends-received deduction generally
  allowed to U.S. corporations in respect of dividends received from other U.S.
  corporations. The amount of the dividend distribution that a U.S. Holder must
  include in its income will be the U.S. dollar value of the payments made,
  determined at the spot rate on the date of the dividend distribution, regardless
  of whether the payment is in fact converted into U.S. dollars. Generally, any
  gain or loss resulting from currency exchange fluctuations during the period
  from the date the U.S. Holder includes the dividend payment in income to the
  date it converts the payment into U.S. dollars will be treated as ordinary
  income or loss and will not be eligible for the special tax rate applicable to
  qualified dividend income. The gain or loss generally will be income or loss
  from sources within the U.S. for foreign tax credit limitation purposes.
  Distributions in excess of current and accumulated earnings and profits, as
  determined for U.S. federal income tax purposes, will be treated as a
  non-taxable return of capital to the extent of U.S. Holders basis in the shares
  and thereafter as capital gain.

Subject to certain limitations, the Canadian tax withheld will
  be creditable against a U.S. Holders United States federal income tax
  liability. Special rules apply in determining the foreign tax credit limitation
  with respect to dividends that are subject to the maximum 15% tax rate. To the
  extent a refund of the tax withheld is available to a U.S. Holder, the amount of
  tax withheld that is refundable will not be eligible for credit against the U.S.
  Holder United States federal income tax liability.

Disposition of Common Shares

A U.S. Holder will recognize United States source gain or loss
  upon the sale of Common Shares equal to the difference, if any, between (i) the
  amount of cash plus the fair market value of any property received, and (ii) the
  shareholders tax basis in the Common Shares. This gain or loss will be capital
  gain or loss if the shares are a capital asset in the hands of the U.S. Holder,
  and such gain or loss will be long-term capital gain or loss if the U.S. Holder
  has held the Common Shares for more than one year. Gains and losses are netted
  and combined according to special rules in arriving at the overall capital gain
  or loss for a particular tax year. Prior to January 1, 2001, the net long-term
  capital gain of non-corporate U.S. Holders generally will be subject to tax at a
  maximum rate of 15%. Deductions for net capital losses are subject to
  significant limitations.

Other Considerations

In the following circumstance, the above discussion may not
  describe the United States federal income tax consequences resulting from the
  holding and disposition of the Companys Common Shares:

Passive Foreign Investment Company

Special rules are applicable to U.S. Holders owning shares in a
  passive foreign investment company (a "PFIC"). A foreign company will be
  classified as a PFIC if at least 75% of its gross income for the taxable year is
  passive income or if the value of assets held by it during the taxable year
  which produce passive income represents at least 50% of the value of its assets.
  In determining whether a foreign company is a PFIC, if the foreign company owns
  25% or more (by value) of the stock of another company, the foreign company is
  treated as if it (i) held its proportionate share of the assets of such other
  company, and (ii) received directly its proportionate share of the income of
  such other company. In general, "passive income" includes the excess of gains
  over losses from certain commodities transactions, including transactions
  involving gold and other precious metals.

Based on the nature of the income, assets and activities of the
  Company, it is not certain whether the Company could be classified as a PFIC for
  any taxable year. While the Company believes that it presently not a PFIC, the
  application of the relevant provisions of the Code and accompanying prior and
  current regulations to the Company is not. Further, the operations and
  business plans of the Company may change in subsequent taxable years. Therefore,
  no assurances can be made regarding the present of future status of the Company.

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If the Company was treated as a PFIC at any time during a U.S.
  Holders holding period for the Common Shares, such U.S. Holder might be subject
  to additional tax as well as certain interest charges in respect of the deferral
  of tax for the period during which such Common Shares were held. Any such
  additional tax and interest charges would apply to the disposition of the Common
  Shares or the receipt of certain dividends that are considered "excess
  distributions" under the Code. Additionally, any gain realized on the
  disposition of such Common Shares would be treated as ordinary income rather
  than as capital gain and the tax basis of the Common Shares held by a U.S.
  Holder generally would not be stepped up to fair market value at death. U.S.
  Holders and prospective holders of Common Shares should consult their own tax
  advisors regarding the possible application of the PFIC rules to the Company.

Backup Withholding

Certain non-corporate U.S. Holders may be subject to backup
  withholding at a rate of 28% on taxable distributions with respect to the Common
  Shares and the proceeds of a disposition of the Common Shares. Backup
  withholding will apply only if the U.S. Holder (i) fails to furnish its Taxpayer
  Identification Number ("TIN") which, in the case of an individual, would be his
  or her social security number, (ii) furnishes an incorrect TIN, (iii) is
  notified by the IRS that it has failed to properly report payments of interest
  or dividends or (iv) under certain circumstances, fails to certify, under the
  penalty of perjury, that it has furnished a correct TIN and has not been
  notified by the IRS that it is subject to backup withholding. Under newly issued
  U.S. Treasury regulations, in the case of interest paid after December 31, 1999,
  a U.S. Holder generally will be subject to backup withholding at a 28% rate
  unless certain IRS certification procedures are complied with, directly or
  through an intermediary. U.S. Holders should consult their tax advisors
  regarding their qualification for exemption from backup withholding and the
  procedure for obtaining such an exemption if applicable.

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 Exchange Act, and in accordance therewith, files reports and
  other information with the S.E.C. 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 S.E.C.
  You may read and copy any of these documents at the S.E.C.'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
  S.E.C. at (800) SEC-0330. The S.E.C. maintains an internet site that contains
  reports, proxy and information statements and other information regarding issuers that file
  electronically with the S.E.C. The address of that site is http://www.sec.gov.

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Any shareholder may also inspect any of the documents or
  Exhibits referred to in this Report or any other disclosure by making a request
  to the Company in writing.

I.Subsidiary Information

Information relating to the Companys subsidiaries is described
  in  Information on the Company  particularly under "Organizational Structure"
  in Item 4 and in "Exhibit 8.1" hereof.

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
  MARKET RISK

We are subject to credit risk as a result of our cash and
  accounts receivable balance. We minimize this risk by placing our cash with
  major banks that are considered to be at low risk of loss and we sell software
  licenses, maintenance and consulting with short credit terms. On a regular
  basis, we also monitor the financial condition of our customers.

We are subject to currency risk as we are an international
  company. 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. We minimize this risk by paying the expenditures
  incurred in the local operations using the monies received in the local
  currency.

We are subject to liquidity risk, the risk that we may not be
  able to meet our financial obligations as they fall due. We manage this risk by
  regulary evaluating the liquid resources available to fund the current and
  long-term obligations in a cost-effecitve manner using budgets and cash flow
  estimates.

We are not subject to fluctuations in cash flow due to interest
  rate risk, as a majority of the companys debt is at fixed rates.

Please see Note 18 in the audited consolidated financial
  statements for more details on each of the risks above.

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY
  SECURITIES

Not applicable.

PART II

ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

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

None.

ITEM 15.    CONTROLS AND PROCEDURES

A.Disclosure Controls and Procedures

As of July 31, 2010, an evaluation was carried out, under the
  supervision of and with the participation of management, including the President
  and Chief Executive Officer ("CEO") and the Vice-President Finance and
  Administration and Chief Financial Officer ("CFO"), of the effectiveness of the
  Companys disclosure controls and procedures as defined in National Instrument
  52-109 -Certification of Disclosure in Issuers' Annual and Interim
    Filing and in Rule 13a-15 or 15d-15 under the Exchange Act.

Based upon that evaluation, our CEO and our CFO concluded that
  our disclosure controls and procedures were effective in ensuring that
  information required to be disclosed by the Company in the reports that it files
  or submits under the Exchange Act is recorded, processed, summarized and
  reported within the time periods specified in the S.E.C.s rules and forms, and
  that information required to be disclosed by the Company in the reports that it
  files or submits under the Exchange Act is accumulated and communicated to the
  Companys management, including its CEO and CFO, or persons performing similar
  functions, as appropriate to allow timely decisions regarding required
  disclosure.

B.Managements Annual Report on Internal
  Control over Financial Reporting

Our management is responsible for establishing and maintaining
  adequate internal control over financial reporting for the Company. Internal
  control over financial reporting is a process designed to provide reasonable
  assurance regarding the reliability of our financial reporting for external
  purposes in accordance with Canadian generally accepted accounting principles.
  Internal control over financial reporting includes maintaining records that in
  reasonable detail accurately and fairly reflect the transactions and disposition
  of our assets; providing reasonable assurance that transactions are recorded as
  necessary for preparation of our financial statements; providing reasonable
  assurance that receipts and expenditures of the Company are made in accordance
  with management authorization; and providing reasonable assurance that
  unauthorized acquisition, use or disposition of Company assets that could have a
  material effect on our financial statements would be prevented or detected on a
  timely basis. Because of its inherent limitations, internal control over
  financial reporting is not intended to provide absolute assurance that a
  misstatement of our financial statements would be prevented or detected. Also,
  projections of any evaluation of effectiveness to future periods are subject to
  the risk that controls may become inadequate because of changes in conditions,
  or that the degree of compliance with the policies or procedures may
  deteriorate.

Management conducted an evaluation of the effectiveness of our
  internal control over financial reporting based on the framework inInternal
    Control - Integrated Framework issued by the Committee of Sponsoring
  Organizations of the Treadway Commission. Based on this evaluation, management
  concluded that the Company's internal control over financial reporting was
  effective as of July 31, 2010.

There have been no changes in our internal control over
  financial reporting during the fiscal year ended July 31, 2010 that have
  materially affected, or are reasonably likely to materially affect our internal
  control over financial reporting.

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This Report does not include an attestation report of the
  Companys registered public accounting firm regarding internal control over
  financial reporting. Managements report was not subject to attestation by the
  Companys registered public accounting firm pursuant to the Dodd-Frank Wall
  Street Reform and Consumer Protection Act.

ITEM 16A.     AUDIT COMMITTEE FINANCIAL EXPERT

P. Wayne Musselman, Michael Pesner, Arthur G. Ritchie, and
  Daniel Benn, all of whom are non-management and unrelated directors, currently
  comprise the Audit Committee of the Board of Directors of the Company. P. Wayne
  Musselman is the Chairman of the Audit Committee.

Based on the qualifications summarized in his profile in Item
  6A  Directors, the Board of Directors of SAND has determined that Mr. Musselman
  qualifies as an "audit committee financial expert". P. Wayne Musselman is
  independent as defined under Regulation 52-110 respecting Audit
    Committees and under the rules of the NASDAQ Stock Market.

ITEM 16B.    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 Comany that
  immediately follows the grant of such waiver. No waiver has been granted to
  date. A copy of the "Standards of Ethical Conduct" is filed as an exhibit to
  this Report.

ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a)    Audit Fees

The aggregate fees billed for professional services rendered by
  Raymond Chabot Grant Thornton LLP, the principal accountant for the Company, for
  the audit of the Companys annual financial statements and services normally
  provided by such accountants in connection with the Companys statutory and
  regulatory filings for the Companys fiscal year ended July 31, 2010, were
  $95,000 ($120,000 in the fiscal year ended July 31, 2009).

(b)    Audit-Related Fees

There were $4,500 in fees billed for assurance and related
  services by Raymond Chabot Grant Thornton LLP that are reasonably related to the
  performance of the audit or review of the Companys financial statements for the
  Companys fiscal year ended July 31, 2010 ($4,500 in the fiscal year ended July
  31, 2009).

(c)    Tax Fees

The aggregate fees billed for products and services rendered by
  Deloitte & Touche LLP for tax compliance, tax advice and tax planning for
  the Companys fiscal ended July 31, 2010 were $10,000 ($8,000 in the fiscal year
  ended July 31, 2009).

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(d)    All Other Fees

There were no fees billed for professional services rendered by
  Raymond Chabot Grant Thornton LLP other than the fees reported in this Item 16C.
  above during the Companys two fiscal years ended July 31, 2010.

(e)    Audit Committees Pre-Approval Policies

The Audit Committee approves the engagement terms for all audit
  and non-audit services to be provided by the Companys accountants before such
  services are provided to the Company or any of its subsidiaries.

The Audit Committee approved one hundred percent (100%) of the
  services provided to the Company and its subsidiaries described in Items 16C (a)
  through 16C (d) above.

(f)    Auditors Use of Non-Permanent Employees

None of the hours expended by Raymond Chabot Grant Thornton LLP
  on its engagement to audit the Companys financial statements for the fiscal
  year ended July 31, 2009, were performed by persons other than full-time
  permanent employees of Raymond Chabot Grant Thornton LLP.

Interest of Auditors

Raymond Chabot Grant Thornton LLP are the Independent
  Registered Chartered Accountants of the Company and are independent within the
  meaning of the Code of Ethics of the Ordre des comptables agréés du
    Québec.

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

None.

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

None.

ITEM 16F.    CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G.    CORPORATE GOVERNANCE

Not applicable, as the securities of SAND are not listed on a
  national securities exchange.

- 73 -

---

PART III

ITEM 17.    FINANCIAL STATEMENTS

Not applicable.

ITEM 18.    FINANCIAL STATEMENTS

The Audited Consolidated Financial Statements of the Company
  are included in this Report beginning on page F-1.

These financial statements were prepared in accordance with
  generally accepted accounting principles in Canada and are expressed in Canadian
  dollars. Such financial statements have been reconciled to U.S. GAAP in Note 20.
  For a history of the exchange rates which were used for Canadian dollars against
  U.S. dollars, see Section A  Selected Financial Data under Item 3 "Key
  Information" of this Report.

- 74 -

---

SAND Technology Inc.

Consolidated Financial Statements 
  July 31, 2010, 2009 and
  2008

---



Independent Auditors Report

|To the Shareholders of 
      SAND Technology Inc. | Raymond Chabot Grant Thornton
      LLP
|-------------------------------------------------- | ---------------------------------------
|Suite 2000                                        
|National Bank Tower                               
|600 De La Gauchetière Street West                 
|Montréal, Québec H3B 4L8                          
|                                                  
|Telephone: 514-878-2691                           
|Fax: 514-878-2127                                 
|www.rcgt.com                                      

We have audited the consolidated balance sheets of SAND
  Technology Inc. (the "Company") as at July 31, 2010 and 2009 and the
  consolidated statements of operations and comprehensive loss, shareholders
  deficiency and cash flows for each of the years in the three-year period ended
  July 31, 2010. These financial statements are the responsibility of the
  Company's management. Our responsibility is to express an opinion on these
  financial statements based on our audits.

We conducted our audits in accordance with Canadian generally
  accepted auditing standards and the standards of the Public Company Accounting
  Oversight Board (United States). These standards require that we plan and
  perform an audit to obtain reasonable assurance whether the financial statements
  are free of material misstatement. An audit includes examining, on a test basis,
  evidence supporting the amounts and disclosures in the financial statements. An
  audit also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall financial
  statement presentation.

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  July 31, 2010 and 2009 and the results of its operations and its cash flows for
  each of the years in the three-year period ended July 31, 2010 in accordance
  with Canadian generally accepted accounting principles.

The Company is not required to have, nor were we engaged to
  perform, audits of its internal control over financial reporting. Our audits
  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
  Company's internal control over financial reporting. Accordingly, we express no
  such opinion.



Montréal, Canada, November 16, 2010

___________________________________________________
  1Chartered accountant auditor permit no. 20154

Chartered AccountantsMember of Grant Thornton
    International Ltd

F-1

---



|Comments by Independent Auditors for U.S. Readers on Canada-U.S. Reporting Differences | Raymond Chabot Grant Thornton
      LLP
|-------------------------------------------------------------------------------------- | ---------------------------------------
|Suite 2000                                                                            
|National Bank Tower                                                                   
|600 De La Gauchetière Street West                                                     
|Montréal, Québec H3B 4L8                                                              
|                                                                                      
|Telephone: 514-878-2691                                                               
|Fax: 514-878-2127                                                                     
|www.rcgt.com                                                                          

In the United States, the standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph (following the opinion paragraph) when the consolidated financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 2 to the consolidated financial statements of the Company. Our report to the shareholders, dated November 16, 2010 is expressed in accordance with Canadian reporting standards, which do not require a reference to such events and conditions in the independent auditors’ report when the events and conditions are properly accounted for and adequately disclosed in the financial statements.



Montréal, Canada, November 16, 2010

___________________________________________________
  1Chartered accountant auditor permit no. 20154

Chartered AccountantsMember of Grant Thornton
International Ltd

F-2

---

|SAND Technology Inc.                                    
|--------------------------------------------------------
|Consolidated Balance Sheets                             
|July 31, 2010 and 2009                                  
|(Expressed in Canadian Dollars, unless otherwise stated)

|                                                                                                                                                                                                                                                                                                                                                                                                   |   | As at July 31, |   |   | As at July 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | - | - | -------------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2010           |   |   | 2009           |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                |   |   |                |  
|ASSETS                                                                                                                                                                                                                                                                                                                                                                                             |   |                |   |   |                |  
|Current Assets                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |                |  
|Cash                                                                                                                                                                                                                                                                                                                                                                                               | $ | 579,270        |   | $ | 1,065,572      |  
|Accounts receivable                                                                                                                                                                                                                                                                                                                                                                                |   | 739,144        |   |   | 1,224,199      |  
|Research and development tax
      credits receivable (Note 13)                                                                                                                                                                                                                                                                                                                                    |   | 660,000        |   |   | 160,000        |  
|Unbilled receivable                                                                                                                                                                                                                                                                                                                                                                                |   | -              |   |   | 109,414        |  
|Prepaid expenses                                                                                                                                                                                                                                                                                                                                                                                   |   | 74,541         |   |   | 97,689         |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2,052,955      |   |   | 2,656,874      |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                |   |   |                |  
|Capital assets, net (Note 6)                                                                                                                                                                                                                                                                                                                                                                       |   | 64,488         |   |   | 83,452         |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                |   |   |                |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2,117,443      |   |   | 2,740,326      |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                |   |   |                |  
|LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                        |   |                |   |   |                |  
|Current Liabilities                                                                                                                                                                                                                                                                                                                                                                                |   |                |   |   |                |  
|Accounts payable and accrued liabilities (Note
      7)                                                                                                                                                                                                                                                                                                                                            |   | 984,149        |   |   | 1,002,902      |  
|Deferred revenue                                                                                                                                                                                                                                                                                                                                                                                   |   | 1,135,814      |   |   | 1,517,968      |  
|Deferred lease inducements                                                                                                                                                                                                                                                                                                                                                                         |   | 19,558         |   |   | 29,337         |  
|Due to shareholders (Note 8)                                                                                                                                                                                                                                                                                                                                                                       |   | 896,369        |   |   | 2,016,725      |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | 3,035,890      |   |   | 4,566,932      |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                |   |   |                |  
|Deferred revenue                                                                                                                                                                                                                                                                                                                                                                                   |   | 106,124        |   |   | 164,169        |  
|Due to shareholders (Note 8)                                                                                                                                                                                                                                                                                                                                                                       |   | 977,784        |   |   | -              |  
|Deferred lease inducements                                                                                                                                                                                                                                                                                                                                                                         |   | -              |   |   | 19,558         |  
|Convertible debentures (Note 9)                                                                                                                                                                                                                                                                                                                                                                    |   | 448,309        |   |   | 362,222        |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | 4,568,107      |   |   | 5,112,881      |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                |   |   |                |  
|SHAREHOLDERS' DEFICIENCY                                                                                                                                                                                                                                                                                                                                                                           |   |                |   |   |                |  
|Share capital (Note 11) 
        
      Authorized 
             An unlimited number of
      class "A" common shares, without par value 
             An unlimited number of class "B"
      common shares, without par value 
          Issued and
      outstanding 
              15,889,620
      class "A" common shares 
               (July 31, 2009 -
      14,318,189 shares) (Note 11) |   | 38,976,108     |   |   | 38,530,441     |  
|Equity component of convertible debentures (Note 9)                                                                                                                                                                                                                                                                                                                                                |   | 446,027        |   |   | 446,027        |  
|Contributed surplus (Note 12)                                                                                                                                                                                                                                                                                                                                                                      |   | 1,053,897      |   |   | 832,124        |  
|Deficit                                                                                                                                                                                                                                                                                                                                                                                            |   | (42,926,696    | ) |   | (42,181,147    | )
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | (2,450,664     | ) |   | (2,372,555     | )
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                |   |   |                |  
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2,117,443      |   |   | 2,740,326      |  

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

On behalf of the Board,

|                                  |  |                                
|--------------------------------- |  | -------------------------------
|                                  |  |                                
|Arthur G. Ritchie,
      Director |  | Wayne
      Musselman, Director

F-3

---

|SAND Technology Inc.                                    
|--------------------------------------------------------
|Consolidated Operations and Comprehensive Loss          
|Years ended July 31, 2010, 2009 and 2008                
|(Expressed in Canadian Dollars, unless otherwise stated)

|                                                                 |   | Year ended |   |   | Year ended |   |   | Year ended |  
|---------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                 |   | July 31,   |   |   | July 31,   |   |   | July 31,   |  
|                                                                 |   | 2010       |   |   | 2009       |   |   | 2008       |  
|                                                                 |   |            |   |   |            |   |   |            |  
|Revenue                                                          | $ | 6,562,411  |   | $ | 7,049,237  |   | $ | 6,998,472  |  
|                                                                 |   |            |   |   |            |   |   |            |  
|Cost of sales and product
      support                          |   | 1,194,674  |   |   | 1,396,224  |   |   | 1,470,215  |  
|                                                                 |   |            |   |   |            |   |   |            |  
|Gross profit                                                     |   | 5,367,737  |   |   | 5,653,013  |   |   | 5,528,257  |  
|                                                                 |   |            |   |   |            |   |   |            |  
|Operating Expenses                                               |   |            |   |   |            |   |   |            |  
|Research and development costs,
      net (Note 13)              |   | 1,458,392  |   |   | 1,960,295  |   |   | 1,971,813  |  
|Amortization of
      capital assets and other assets            |   | 53,298     |   |   | 63,643     |   |   | 187,517    |  
|Sellling, general and
      administrative                       |   | 4,224,677  |   |   | 4,372,067  |   |   | 4,402,613  |  
|                                                                 |   | 5,736,367  |   |   | 6,396,005  |   |   | 6,561,943  |  
|                                                                 |   |            |   |   |            |   |   |            |  
|Loss from operations before
      the undernoted items           |   | (368,630   | ) |   | (742,992   | ) |   | (1,033,686 | )
|                                                                 |   |            |   |   |            |   |   |            |  
|Foreign exchange
      loss                                      |   | 80,978     |   |   | 135,051    |   |   | 9,123      |  
|Interest expense (Note 5)                                        |   | 295,941    |   |   | 313,652    |   |   | 229,141    |  
|                                                                 |   | 376,919    |   |   | 448,703    |   |   | 238,264    |  
|                                                                 |   |            |   |   |            |   |   |            |  
|Net loss and comprehensive
      loss                            | $ | (745,549   | ) | $ | (1,191,695 | ) | $ | (1,271,950 | )
|                                                                 |   |            |   |   |            |   |   |            |  
|Basic and diluted loss per
      share                           | $ | (0.05      | ) | $ | (0.08      | ) | $ | (0.09      | )
|                                                                 |   |            |   |   |            |   |   |            |  
|Basic and diluted weighted
      average number of common shares |   | 15,467,702 |   |   | 14,318,189 |   |   | 14,318,189 |  

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

F-4

---

|SAND Technology Inc.                                    
|--------------------------------------------------------
|Consolidated Shareholders Deficiency                   
|Years ended July 31, 2010, 2009 and 2008                
|(Expressed in Canadian Dollars, unless otherwise stated)

|                                                                                 |  | Share Capital |  |   |            |  |   |              |  |   |             |  |   |             |  
|-------------------------------------------------------------------------------- |  | ------------- |  | - | ---------- |  | - | ------------ |  | - | ----------- |  | - | ----------- | -
|                                                                                 |  |               |  |   |            |  |   | Equity       |  |   |             |  |   |             |  
|                                                                                 |  | Number of     |  |   |            |  |   | component of |  |   |             |  |   |             |  
|                                                                                 |  | class "A"     |  |   |            |  |   | convertible  |  |   | Contributed |  |   |             |  
|                                                                                 |  | common shares |  |   | Amount     |  |   | debentures   |  |   | surplus     |  |   | Deficit     |  
|                                                                                 |  |               |  |   |            |  |   |              |  |   |             |  |   |             |  
|Balance as at July 31, 2007                                                      |  | 14,318,189    |  | $ | 38,530,441 |  |   |              |  | $ | 305,110     |  | $ | (39,717,502 | )
|Net loss                                                                         |  |               |  |   |            |  |   |              |  |   |             |  |   | (1,271,950  | )
|Stock-based compensation                                                         |  |               |  |   |            |  |   |              |  |   | 144,000     |  |   |             |  
|Convertible debentures issuance 
            (equity component) (Note 9)         |  |               |  |   |            |  |   | 446,027      |  |   |             |  |   |             |  
|Warrants issuance as part of
      c
             onvertible debentures (Note 9) |  |               |  |   |            |  |   |              |  |   | 303,415     |  |   |             |  
|                                                                                 |  |               |  |   |            |  |   |              |  |   |             |  |   |             |  
|Balance as at July 31, 2008                                                      |  | 14,318,189    |  |   | 38,530,441 |  |   | 446,027      |  |   | 752,525     |  |   | (40,989,452 | )
|Net loss                                                                         |  |               |  |   |            |  |   |              |  |   |             |  |   | (1,191,695  | )
|Stock-based compensation                                                         |  |               |  |   |            |  |   |              |  |   | 79,599      |  |   |             |  
|                                                                                 |  |               |  |   |            |  |   |              |  |   |             |  |   |             |  
|Balance as at July 31, 2009                                                      |  | 14,318,189    |  |   | 38,530,441 |  |   | 446,027      |  |   | 832,124     |  |   | (42,181,147 | )
|                                                                                 |  |               |  |   |            |  |   |              |  |   |             |  |   |             |  
|Net loss                                                                         |  |               |  |   |            |  |   |              |  |   |             |  |   | (745,549    | )
|Stock-based compensation                                                         |  |               |  |   |            |  |   |              |  |   | 79,605      |  |   |             |  
|Common shares issued as part 
            of private placement (Note 10)         |  | 1,571,431     |  |   | 445,667    |  |   |              |  |   |             |  |   |             |  
|Warrants issuance as part of 
            private placement (Note 10)            |  |               |  |   |            |  |   |              |  |   | 142,168     |  |   |             |  
|                                                                                 |  |               |  |   |            |  |   |              |  |   |             |  |   |             |  
|Balance as at July 31, 2010                                                      |  | 15,889,620    |  | $ | 38,976,108 |  | $ | 446,027      |  | $ | 1,053,897   |  | $ | (42,926,696 | )

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

F-5

---

|SAND Technology Inc.                                    
|--------------------------------------------------------
|Consolidated Cash Flows                                 
|Years ended July 31, 2010, 2009 and 2008                
|(Expressed in Canadian Dollars, unless otherwise stated)

|                                                            |   | Year Ended |   |   | Year Ended |   |   | Year Ended |  
|----------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                            |   | July 31,   |   |   | July 31,   |   |   | July 31,   |  
|                                                            |   | 2010       |   |   | 2009       |   |   | 2008       |  
|                                                            |   |            |   |   |            |   |   |            |  
|                                                            |   |            |   |   |            |   |   |            |  
|OPERATING ACTIVITIES                                        |   |            |   |   |            |   |   |            |  
|Net loss                                                    | $ | (745,549   | ) | $ | (1,191,695 | ) | $ | (1,271,950 | )
|Non-cash items                                              |   |            |   |   |            |   |   |            |  
|Amortization of
      capital assets and other assets       |   | 53,298     |   |   | 63,643     |   |   | 187,517    |  
|Stock-based compensation                                    |   | 79,605     |   |   | 79,599     |   |   | 144,000    |  
|Accretion of
      debt component of convertible debentures |   | 86,087     |   |   | 83,879     |   |   | 17,966     |  
|Amortization of deferred lease
      inducement             |   | (29,337    | ) |   | (29,337    | ) |   | (29,337    | )
|Changes in
      working capital items                      |   |            |   |   |            |   |   |            |  
|Accounts receivable                                         |   | 524,935    |   |   | 244,896    |   |   | (215,870   | )
|Research
      and development tax credits receivable       |   | (500,000   | ) |   | (160,000   | ) |   | 233,980    |  
|Unbilled receivable                                         |   | 112,515    |   |   | 142,445    |   |   | (246,332   | )
|Prepaid
      expenses                                      |   | 26,545     |   |   | (10,096    | ) |   | 64,421     |  
|Accounts payable and
      accrued liabilities              |   | 198,380    |   |   | (316,566   | ) |   | 246,102    |  
|Deferred
      revenue                                      |   | (380,046   | ) |   | 578,761    |   |   | (182,383   | )
|Cash flows from operating activities (a)                    |   | (573,567   | ) |   | (514,471   | ) |   | (1,051,886 | )
|                                                            |   |            |   |   |            |   |   |            |  
|INVESTING ACTIVITIES                                        |   |            |   |   |            |   |   |            |  
|Purchase of capital assets                                  |   | (34,334    | ) |   | (24,781    | ) |   | (17,315    | )
|Cash flows from investing activities                        |   | (34,334    | ) |   | (24,781    | ) |   | (17,315    | )
|                                                            |   |            |   |   |            |   |   |            |  
|FINANCING ACTIVITIES                                        |   |            |   |   |            |   |   |            |  
|Due to shareholders                                         |   | 299,893    |   |   | 749,024    |   |   | 517,557    |  
|Repayments of due
      to shareholders                     |   | (659,484   | ) |   | -          |   |   | -          |  
|Advance from a shareholder                                  |   | 26,623     |   |   | -          |   |   | -          |  
|Issuance of
      convertible debentures                    |   | -          |   |   | -          |   |   | 1,009,819  |  
|Issuance of units                                           |   | 587,835    |   |   | -          |   |   | -          |  
|Cash flows from financing activities                        |   | 254,867    |   |   | 749,024    |   |   | 1,527,376  |  
|                                                            |   |            |   |   |            |   |   |            |  
|Effect of exchange rate changes on cash                     |   | (133,268   | ) |   | (29,057    | ) |   | (13,443    | )
|                                                            |   |            |   |   |            |   |   |            |  
|Net increase (decrease) in cash                             |   | (486,302   | ) |   | 180,715    |   |   | 444,732    |  
|                                                            |   |            |   |   |            |   |   |            |  
|Cash, beginning of year                                     |   | 1,065,572  |   |   | 775,443    |   |   | 330,711    |  
|                                                            |   |            |   |   |            |   |   |            |  
|Cash, end of year                                           | $ | 579,270    |   | $ | 956,158    |   | $ | 775,443    |  
|                                                            |   |            |   |   |            |   |   |            |  
|                                                            |   |            |   |   |            |   |   |            |  
|(a) Additional information                                  |   |            |   |   |            |   |   |            |  
|Interest paid                                               | $ | 300,977    |   | $ | 37,171     |   | $ | 112,962    |  

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

F-6

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

1 - NATURE OF BUSINESS

SAND Technology Inc. (Company) is incorporated under the
  Canada Business Corporations Act. The Companys common shares are listed on the
  Over-the-Counter (OTC) Bulletin Board in the United States. SAND Technology
  Inc. and its wholly-owned subsidiaries are involved in the design, development,
  marketing and support of software products and services that reduce large
  amounts of data into a small footprint and enable users to retrieve usable
  business information from large amounts of data. The 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 and
  efficient inquiries of large databases without the intervention of specialist
  information technology professionals.

2 -GOING CONCERN

The consolidated financial statements have been prepared in
  accordance with Canadian generally accepted accounting principles (GAAP) and
  on the basis of the going concern assumption, which considers the realization of
  assets and the settlement of liabilities and commitments in the normal course of
  business.

The Company has incurred operating losses in the current and
  past years. The Company has also generated negative cash flows from operations
  and has a significant working capital deficiency. To successfully grow the
  business, the Company must decrease its cash outflows, improve its cash position
  and succeed in its ability to raise additional capital through a combination of
  primarily public or private equity offerings or strategic alliances. The Company
  is also dependent on the success of its marketing efforts and continued revenue
  growth through the sale of its products. The Companys uncertainty as to its
  ability to generate sufficient revenue and raise sufficient capital, raise
  significant doubt about the entitys ability to continue as a going concern.

Subsequent to the year-end, the Company has obtained additional
  financing from private investors (Note 22), and is continuing its efforts to
  obtain additional financing for its current operations. The Company can give no
  assurance that it will achieve profitability or be capable of sustaining
  profitable operations. The accompanying consolidated financial statements do not
  include any adjustments relating to the recoverability and classification of the
  carrying amounts of assets or the amount and classification of liabilities that
  might result if the Company is unable to continue as a going concern.

3-SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES

This summary of significant accounting policies is provided to
  assist the reader in understanding the Companys consolidated financial
  statements. The consolidated financial statements and notes thereto are the
  representations of the Companys management. The Companys management is
  responsible for their integrity and objectivity. These accounting policies
  conform to GAAP and have been consistently applied in the preparation of the
  consolidated financial statements.

F-7

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

Basis of Presentation

These consolidated financial statements and related notes are
  presented in accordance with Canadian GAAP and are expressed in Canadian
  Dollars. Certain Canadian GAAP principles used in these consolidated financial
  statements differ from United States GAAP as described in Note 20. The Companys
  fiscal year-end is July 31.

Accounting Changes

On August 1, 2009, in accordance with the applicable
  transitional provisions, the Company adopted the new recommendations of the
  Canadian Institute of Chartered Accountants (CICA) Handbook Section 3064
  Goodwill and Intangible Assetsand revision release No. 54, which,
  among others, contains several amendments to Sections 3862, Financial
    Instruments  Disclosures.

Goodwill and Intangible Assets

Section 3064, Goodwill and Intangible Assets, replaces
  Section 3062, Goodwill and Other Intangible Assets and Section 3450,
  Research and Development Costs. This Section establishes standards for
  the recognition, measurement and disclosure of goodwill and intangible assets.
  The provisions of this Section, relating to the definition and initial
  recognition of intangible assets, are equivalent to the corresponding provisions
  under International Financial Reporting Standards (IFRS). Section 1000,
  Financial Statement Concepts, was also amended to provide consistency
  with this new Section. This Section applies to interim and annual consolidated
  financial statements relating to fiscal years beginning on or after October 1,
  2008. The adoption of this Section had no material effect on the Companys
  consolidated financial result and position.

Financial Instruments Disclosures and Presentation

Revisions release No. 54, includes several amendments to
  Section 3862 Financial Instruments -Disclosures. This Section has been
  amended to primarily include additional disclosure requirements with respect to
  the fair value measurements of financial instruments and liquidity risk. The
  amendments to this Section apply to annual consolidated financial statements for
  fiscal years ending on or after September 30, 2009. The Company included the
  additional disclosures in Note 19 to these consolidated financial statements.
  Comparative disclosures were not included and are not required for the first
  year of adoption.

Basis of Consolidation

The consolidated financial statements include the accounts of
  the Company and its wholly-owned subsidiaries, Sand Technology Deutschland GmbH,
  located in Germany, Sand Technology Limited, located in the United Kingdom, Sand
  Technology Ireland Limited, located in Ireland and Sand Technology Corp. and
  STSI Licensing, LLC, located in the United States. All intercompany transactions
  and accounts have been eliminated on consolidation.

Accounting Estimates

The preparation of the consolidated financial statements in
  conformity with Canadian GAAP requires management to make certain estimates and
  assumptions that affect the reported amounts of assets and liabilities at the
  date of the financial statements and the reported amounts of revenues and
  expenses during the reporting year. The most significant estimates relate to the
  establishment of the fair values of the components of the convertible debentures, the accounting for
  stock options, share awards, warrants and the evaluation of the research and
  development tax credits. Actual results may differ from these estimates.

F-8

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company
  considers all highly liquid debt instruments, with a maturity of three months or
  less, to be cash equivalents. There were no cash equivalents as of July 31, 2010
  and 2009.

Allowance for Doubtful Accounts

Management of the Company makes judgements as to its ability to
  collect outstanding receivables and provide allowances for the portion of
  receivables when collection becomes doubtful. Provisions are made based upon a
  specific review of all outstanding invoices. As of July 31, 2010, the allowance
  for doubtful accounts was nil ($4,140 as at July 31, 2009).

Capital Assets

Capital assets are recorded at cost less accumulated
  amortization and provisions for write-downs. Amortization is calculated using
  the straight-line method over the estimated useful lives of the assets as
  follows:

|Furniture and equipment            | 5 years               
|---------------------------------- | ----------------------
|Computer equipment                 | 3 years               
|Research and development equipment | 3 years               
|Leasehold improvements             | Lease term of 10 years

Other Assets

Other assets consist of contract costs that were paid to a
  vendor upon the transfer of a long-term service contract and were amortized
  rateably over the term of the contract which ended in fiscal year 2008.

Impairment of Long-Lived Assets

Capital assets 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 is recognized and is calculated
  as the excess of the carrying amount of the long-lived asset over its fair
  value.

Basic and Diluted Income (Loss) per Common Share

Basic net income (loss) per share (Basic EPS) includes no
  dilution and is computed by dividing net income (loss) available to common
  shareholders by the weighted average number of common shares outstanding for the
  year.

Diluted earnings per share is computed by dividing net income
  by the weighted average number of shares outstanding and, when, dilutive,
  potential shares from stock options and share awards, stock warrants to purchase
  common stock using the treasury method, and conversions of outstanding
  convertible debt using the if converted method. A net loss was reported in
  2010, 2009 and 2008, and accordingly, in those years, the denominator for the Basic EPS calculation was equal to the
  weighted average of outstanding shares with no consideration for outstanding
  stock options, share awards and warrants to purchase shares of the Company's
  common stock because to do so would have been anti-dilutive.

F-9

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

The following number of stock options, share awards, share
  warrants and shares issuable upon conversion of the convertible debentures were
  not included in the computation of diluted earnings per share because to do so
  would have been anti-dilutive for the periods presented:

2009
      2008
      2007Stock options
      357,000
      551,000
      556,000Share awards
      302,500
      402,500
      407,500Warrants
      1,899,715
      1,967,061
      1,967,061Convertible debentures
      2,228,000
      2,228,000
      2,228,0004,787,215
      5,148,561
      5,158,561


Income Taxes

The Company uses the liability method of accounting for income
  taxes under which deferred tax assets and liabilities are recognized for the
  estimated future tax consequences attributable to differences between the
  financial statement carrying amounts of existing assets and liabilities and
  their respective tax bases and operating loss and tax credit carryforwards.
  Deferred tax assets and liabilities are measured using enacted or substantially
  enacted tax rates in effect for the year in which those temporary differences
  are expected to be recovered or settled. The effect on deferred tax assets and
  liabilities of a change in tax rates is recognized as part of the provision for
  income taxes in the period that includes the enactment date. Valuation
  allowances are established when it is more likely than not that some or all of
  the deferred tax assets will not be realized in the future.

Deferred Lease Inducements

Deferred lease inducements are being amortized on a
  straight-line basis over the term of the lease as a deduction of lease expense.

Foreign Currency Translation

The Companys functional and reporting currency is the Canadian
  dollar and each of the Companys wholly-owned subsidiaries is considered an
  integrated foreign operation. Accordingly, transactions denominated in
  currencies other than the functional currency are converted into Canadian
  dollars using the exchange rate in effect at the date of the transaction or the
  average rate for the period in the case of recurring revenue and expense
  transactions. Monetary assets and liabilities are revalued into the functional
  currency at each balance sheet date using the exchange rate in effect at the
  balance sheet date, with any resulting exchange gains or losses being credited
  or charged to the statement of operations. Non-monetary assets and liabilities
  are recorded in the functional currency using the exchange rate in effect at the
  date of the transaction and are not revalued for subsequent changes in exchange
  rates.

F-10

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

Revenue Recognition

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

Revenue from the sale of software licence agreements is
  recognized upon delivery of the 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 Company 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 over the term of the contract.

Revenues from sales with extended payment terms are recognized
  when collectability is reasonably assured.

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

Amounts received in advance of the delivery of products or the
  performance of services are classified as deferred revenue. Revenues recognized
  in advance of invoicing to the customer are recorded as unbilled receivables
  where the collection of the receivable is probable.

Share Issuance Costs

Costs directly identifiable with the raising of share capital
  financing are charged against share capital. Share issuance costs incurred in
  advance of share subscriptions are recorded as non-current deferred assets.
  Share issuance costs related to uncompleted share subscriptions are charged to
  operations.

F-11

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

Financing and Transaction Costs

Financing costs associated with the issuance of debt are
  recorded directly against net income. Transaction costs, such as legal fees,
  that are directly attributable to the acquisition of financial assets or
  incurrence of financial liabilities are recorded directly against net income.

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 GAAP for deferral and amortization. The Company has not
  deferred any such development costs to date. Related tax credits are recorded as
  a reduction of research and development costs. These tax credits are
  periodically examined by the tax authorities and, as a result of such
  examinations, the amounts ultimately granted may differ from the amounts
  recorded.

Stock-Based Compensation

The Company estimates the fair value of share-based payment
  awards made to employees, officers and directors, including stock options and
  share awards related to employee stock purchase plans, on the date of grant
  using an option-pricing model. The value of the portion of the award that is
  ultimately expected to vest is recognized as an expense ratably over the
  requisite service periods. The Company uses the Black-Scholes option pricing
  model to determine the fair value of the stock-based compensation that it grants
  to employees and non-employees. The Company is required to make certain
  assumptions in connection with this determination, the most important of which
  involves the calculation of volatility with respect to the price of its common
  stock. The computation of volatility is intended to produce a volatility value
  that is representative of the Companys expectations about the future volatility
  of the price of its common stock over an expected term. The Company used its
  share price history to determine volatility and cannot predict how the price of
  its common shares of common stock will react on the open market in the future.
  As a result, the volatility value that the Company calculated may differ from
  the future volatility of the price of its shares of common stock.

Upon the exercise of stock options, any consideration received
  and the amounts previously recorded under stock-based compensation are credited
  to share capital. Upon the issuance of shares resulting from share awards,
  amounts previously recorded under stock-based compensation are credited to share
  capital.

Guarantees

In the normal course of its operations, the Company enters into
  agreements that contain certain features which meet the definition of a
  guarantee under the guidance provided by Accounting Guideline AcG14 Disclosure
  of Guarantees.

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

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

F-12

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

In addition, the Company provided warranties as part of the
  sale of a former subsidiary, ClarityBlue Limited, which occurred on July 31,
  2003, for claims against it related to conditions existing prior to the sale.
  The warranties expired on January 31, 2010.

Financial Assets and LiabilitiesOn initial
  recognition, all financial assets and liabilities are measured and recognized at
  their fair value. Subsequently, financial assets and liabilities are measured
  and recognized as follows:

- Cash is classified as a held-for-trading financial asset. It is
    measured at fair value and changes in fair value are recognized in operations.
- Accounts receivable and unbilled receivable are classified as loans and
    receivable. They are measured at amortized cost, which is generally the
    amount initially recognized, less any allowance for doubtful accounts.
- Accounts payable and accrued liabilities (excluding sales tax payable),
    due to shareholders and convertible debentures are classified as other
      financial liabilities. They are measured at amortized cost using the
    effective interest rate method, except for accounts payable and accrued
    liabilities and due to shareholders which are at cost. Interest calculated
    using the effective interest method is presented in operations as interest
    expense.

Fair Value MeasurementsThe Company determines fair
  value using a fair value hierarchy that distinguishes between market participant
  assumptions developed based on market data (observable inputs) obtained from
  sources independent of the reporting entity, and a reporting entitys own
  assumptions (unobservable inputs) about market participant assumptions developed
  based on the best information available in the circumstances.

Fair value is the price that would be received to sell an asset
  or paid to transfer a liability in the Companys principal or most advantageous
  market for the asset or liability in an orderly transaction between market
  participants at the measurement date, essentially the exit price.

A financial instruments level within the fair value hierarchy
  is based on the lowest level of any input that is significant to the fair value
  measurement. However, the determination of what constitutes observable
  requires significant judgment by the Company.

The levels of fair value hierarchy are as follows:

- Level one  Unadjusted quoted market prices in active markets for
    identical assets or liabilities;
- Level two  Inputs other than level one inputs that are either directly or
    indirectly observable; and
- Level three  Unobservable inputs developed using estimates and
    assumptions, which are developed by the reporting entity and reflect those
    assumptions that a market participant would use.

Level 1 investments are valued based on quoted market prices in
  active markets. Level 2 investments are valued based on quoted prices in markets
  that are not active, broker or dealer quotations, or alternative pricing sources
  with reasonable levels of price transparency.

F-13

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

4 RECENT ACCOUNTING PRONOUNCEMENTS

Business Combinations

Section 1582, Business Combinations replaces Section 1581, of
  the same title. This Section establishes new standards for the accounting for a
  business combination. This Section constitutes the Canadian GAAP equivalent to
  the corresponding standard under International Financial Reporting Standards
  (IFRS). This Section shall be applied prospectively to business combinations
  for which the acquisition date is on or after the beginning of the first annual
  reporting period beginning on or after January 1, 2011 and the Company will
  adopt this new Section upon its conversion to IFRS. Earlier application is
  permitted. The Company is currently evaluating the impact of the adoption of
  this new Section on its consolidated financial statements and on future business
  combinations.

Consolidated Financial Statements

Section 1601, Consolidated Financial Statements and Section
  1602, Non-Controlling Interests together replace Section 1600, Consolidated
  Financial Statements. Section 1601 establishes standards for the preparation of
  consolidated financial statements. Section 1602 establishes standards for
  accounting for a non-controlling interest in a subsidiary in the consolidated
  financial statements subsequent to a business combination. These Sections
  constitute the Canadian GAAP equivalent to the corresponding standard under
  IFRS. These Sections apply to interim and annual financial statements relating
  to fiscal years beginning on or after January 1, 2011 and the Company will adopt
  these new Sections upon its conversion to IFRS. Earlier adoption is permitted as
  of the beginning of a fiscal year. The Company is currently evaluating the
  impact of the adoption of these new Sections on its consolidated financial
  statements.

5INFORMATION ON
  EARNINGS

|                                                            |   | Year ended |  |   | Year ended |  |   | Year ended | 
|----------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- | 
|                                                            |   | July 31,   |  |   | July 31,   |  |   | July 31,   | 
|                                                            |   | 2010       |  |   | 2009       |  |   | 2008       | 
|Interest Expense                                            |   |            |  |   |            |  |   |            | 
|Accretion of debt component
      of convertible debentures | $ | 86,087     |  | $ | 83,879     |  | $ | 17,966     | 
|Interest expense - due to shareholders                      |   | 185,045    |  |   | 220,320    |  |   | 198,000    | 
|Interest expense - other                                    |   | 24,809     |  |   | 9,453      |  |   | 13,175     | 
|                                                            |   |            |  |   |            |  |   |            | 
|                                                            | $ | 295,941    |  | $ | 313,652    |  | $ | 229,141    | 

Amortization expense of other assets amounted to $0 in 2010 ($0
  in 2009 and $110,847 in 2008). Amortization expense of capital assets amounted
  to $53,298 in 2010 ($63,643 in 2009 and $76,670 in 2008).

F-14

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

|                                   |   |           |  |   |              |  |   | July 31, | 
|---------------------------------- | - | --------- |  | - | ------------ |  | - | -------- | 
|                                   |   |           |  |   |              |  |   | 2010     | 
|                                   |   |           |  |   | Accumulated  |  |   | Net Book | 
|                                   |   | Cost      |  |   | amortization |  |   | Value    | 
|                                   |   |           |  |   |              |  |   |          | 
|Furniture and equipment            | $ | 569,433   |  | $ | 546,563      |  | $ | 22,870   | 
|Computer equipment                 |   | 325,132   |  |   | 307,120      |  |   | 18,012   | 
|Research and development equipment |   | 161,565   |  |   | 154,527      |  |   | 7,038    | 
|Leasehold improvements             |   | 294,287   |  |   | 277,719      |  |   | 16,568   | 
|                                   |   |           |  |   |              |  |   |          | 
|                                   | $ | 1,350,417 |  | $ | 1,285,929    |  | $ | 64,488   | 
|                                   |   |           |  |   |              |  |   |          | 
|                                   |   |           |  |   |              |  |   | July 31, | 
|                                   |   |           |  |   |              |  |   | 2009     | 
|                                   |   |           |  |   | Accumulated  |  |   | Net Book | 
|                                   |   | Cost      |  |   | amortization |  |   | Value    | 
|                                   |   |           |  |   |              |  |   |          | 
|Furniture and equipment            | $ | 546,180   |  | $ | 538,588      |  | $ | 7,592    | 
|Computer equipment                 |   | 320,027   |  |   | 297,341      |  |   | 22,686   | 
|Research and development equipment |   | 155,589   |  |   | 148,412      |  |   | 7,177    | 
|Leasehold improvements             |   | 294,287   |  |   | 248,290      |  |   | 45,997   | 
|                                   |   |           |  |   |              |  |   |          | 
|                                   | $ | 1,316,083 |  | $ | 1,232,631    |  | $ | 83,452   | 

7 -ACCOUNTS PAYABLE AND ACCRUED
  LIABILITIES

July 31,
      
      
      July 31,2010
      
      
      2009Trade accounts payable and accrued
        liabilities
      $
      834,371
      
      $
      675,477Salaries and commission payable
      
      57,186
      
      
      182,362Sales tax payable
      
      66,884
      
      
      145,063Advance from a shareholder (Note 22)
      
      25,708
      
      
      -$
      984,149
      
      $
      1,002,902


F-15

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

8 -DUE TO SHAREHOLDERS

|                                                                                                                                                                                                                                |   | July 31,  |  |   | July 31,  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------- |  | - | --------- | 
|                                                                                                                                                                                                                                |   | 2010      |  |   | 2009      | 
|Loan from the President and Chief Executive
      Officer, 
      repayable on demand, bearing interest at 10%, interest 
      payable monthly (a)                                                                             |   | $ 300,893 |  |   | $ -       | 
|Loan from a significant shareholder, bearing interest 
      at 15%, interest payable semi-annually, principle of 
      $488,892
      payable annually starting January 1, 2011, 
      maturing on January 1, 2013
      (b) |   | 1,407,874 |  |   | 1,605,616 | 
|Compensation payable to a significant
      shareholder (c)                                                                                                                                                                     |   | 165,386   |  |   | 153,582   | 
|Loan from a significant shareholder (e)                                                                                                                                                                                         |   | -         |  |   | 68,995    | 
|Loan from a significant shareholder (d)                                                                                                                                                                                         |   | -         |  |   | 188,532   | 
|                                                                                                                                                                                                                                |   | 1,874,153 |  |   | 2,016,725 | 
|Less: Current portion                                                                                                                                                                                                           |   | 896,369   |  |   | 2,016,725 | 
|                                                                                                                                                                                                                                | $ | 977,784   |  | $ | -         | 

| | (a) | During fiscal year 2010, the Company obtained various
      loans from the current President and Chief Executive Officer, who is also
      a shareholder, in the form of Promissory Notes for a total amount of
      $299,893 (U.S.$285,000). Under the terms of the Promissory Notes, the
      amounts are repayable within 30 days of receipt of a written demand from
      the noteholder. The loans bear interest at 10% that is payable on the last
      business day of each calendar month. As at July 31, 2010, an amount of
      $300,893, including accrued interest of $2,927, was outstanding on the
      Promissory Notes.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-16

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

| | (b) | During fiscal year 2007, the Company formalized the
      conditions pertaining to a loan obtained from a significant shareholder,
      who at the time was also the President and Chief Executive Officer of the
      Company. The loan originated from amounts owed by the Company to the
      shareholder by virtue of his previous employment contracts as President
      and Chief Executive Officer. The loan was bearing interest at 15% and was
      repayable on demand. As at July 31, 2009, an amount of $1,605,616 was owed
      to the President and Chief Executive Officer and significant shareholder.
      The significant shareholder ceased to be President and Chief Executive
      Officer on October 31, 2009. The amount owed the former President and
      Chief Executive Officer was again formalized in a loan agreement on
      October 31, 2009. The total amount owing under the loan agreement at
      October 31, 2009 was $1,466,677. Under the terms of the loan agreement,
      the loan is repayable in three (3) principal annual instalments of
      $488,892 over the next 3 years on January 1, 2011, 2012 and 2013. The loan
      bears interest at 15% that is payable semi-annually on January 1 and June
      30 of each year. The amount may be prepaid at any time by the Company
      without penalty. In the event of default to pay an amount when due, the
      significant shareholder shall have the right to convert all outstanding
      amounts owing to him hereunder into common shares of the Company based on
      the average closing price of the shares on the OTC Bulletin Board for the
      month immediately preceding the month in which such right is exercised. In
      addition and also upon default, the significant shareholder shall have the
      right to require the Company to purchase all common shares in the capital
      stock of the Company owned directly or indirectly by the significant
      shareholder at a purchase price per share equal to the greater
      of:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | i)  | the average closing price of the shares on the OTC
      Bulletin Board over the previous 30-day period plus 15%, or
| | --- | --------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                     
| | ii) | the book value of the shares as determined by the
      auditors of the Company.                                    

As at July 31, 2010, an amount of
  $1,407,874, including accrued interest of $204,214, was outstanding under the
  loan agreement.

The Company also signed, effective
  November 1, 2009, a consulting agreement and a marketing and sales assistance
  agreement with the former President and Chief Executive Officer. The consulting
  agreement provides for a fixed payment on the first of each month in the amount
  of $21,013 and expires on October 31, 2011. Payments made under the consulting
  agreement during fiscal year 2010 amounted to $189,117. Under the marketing and
  sales assistance agreement, the Company and the former President and Chief
  Executive Officer may identify prospective customers for the Company`s products
  and agree to designate such prospects as a registered opportunity. The marketing
  and sales assistance agreement provides for the payment of funds based on a
  percentage of sales proceeds received from a registered opportunity and which
  were received within a stipulated period following the date of registration of
  the opportunity. The marketing and sales assistance agreement expires on October
  31, 2010. There were no payments made under the marketing and sales assistance
  agreement during fiscal year 2010.

In conjunction with the original loan
  agreement in 2007, the Company also issued 103,061 warrants to the significant
  shareholder, with each warrant entitling the holder to purchase one class "A"
  common share of the Company at a price of US$0.44 per share and each warrant
  being valid for the term of the agreement. The residual valuation method was
  used to allocate the proceeds between the debt and equity components of the
  shareholder loan. It was determined that the value of the debt component would
  comprise the entire face value of the loan since the loan had no maturity date.
  Hence, the value of the equity component was determined to be nil. These
  warrants expired during the fiscal year 2010.

F-17

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

| | (c) | The former President and Chief Executive Officer was
      entitled, under his previous employment contracts, to bonuses based on the
      achievement of gross revenues resulting from the licensing, sale or other
      disposition of the Companys Nucleus software products. The bonuses
      terminated effective October 31, 2009 when he ceased to be the President
      and Chief Executive Officer. As at July 31, 2010 and 2009, bonuses payable
      amounted to $165,386 and $153,582, respectively.                                                                                                                                                                                                                                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (d) | During fiscal year 2009, the Company obtained a loan from
      a significant shareholder, who at the time, was also the President and
      Chief Executive Officer of the Company. The significant shareholder ceased
      to be President and Chief Executive Officer on October 31, 2009. Under the
      loan agreement, a maximum of $250,000 of funds was available. As at July
      31, 2009, an amount of $188,532 was outstanding under the loan facility.
      Under the terms of the loan agreement, the loan was repayable within 30
      days of receipt of a written demand from the shareholder. The loan bore
      interest at 15% and was payable on the last business day of each calendar
      month. During the first quarter of fiscal year 2010, such loan, including
      accrued interest, was repaid by the Company to the shareholder.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (e) | During fiscal year 2008, the Company obtained a loan from
      a significant shareholder, who at the time was also the President and
      Chief Executive Officer of the Company. The significant shareholder ceased
      to be President and Chief Executive Officer on October 31, 2009. Under the
      loan agreement, a maximum of $400,000 of funds was available. As at July
      31, 2009, an amount of $68,995 was outstanding under the loan facility.
      Under the terms of the loan agreement, the loan was repayable within 30
      days of receipt of a written demand from the shareholder. The loan bore
      interest at 15% and was payable on the last business day of each calendar
      month. During the first quarter of fiscal year 2010, such loan, including
      accrued interest, was repaid by the Company to the shareholder.  

During fiscal year 2008, an inter-creditor priority agreement
  was signed between the former President and Chief Executive Officer and
  significant shareholder and the holders of the secured convertible debentures
  (collectively the parties), at the time when the Company issued the secured
  convertible debentures described in Note 9. The parties agreed that the sums
  owing under the secured convertible debentures will be paid by the Company to
  the convertible debenture holders in priority to the sums owed by the Company to
  the principal shareholder. Specifically, for every $2 paid to the convertible
  debenture holders, the Company shall remit $1 to the significant shareholder,
  representing the repayment of principal only. The inter-creditor priority
  agreement was amended on October 31, 2009 pursuant to which the parties agreed
  that the sums owing under the convertible debentures will be paid by the Company
  to the holders of the convertible debentures pari passu to the sums owing by the
  Company to the significant shareholder, such that for every $1 paid to the
  convertible debenture holders, the Company shall remit $1 to the significant
  shareholder.

9 -CONVERTIBLE DEBENTURES

On April 18, 2008, the Company issued secured convertible
  debentures ("Convertible Debentures") on a private placement basis and received
  gross proceeds of $1,009,819 (U.S.$1,002,600) representing a total of 1,114
  units. Each unit consists of one 8% Convertible Debenture due December 31, 2017,
  having a nominal value of U.S.$900, redeemable at the option of the Company if
  the bid price of the underlying common share has been above U.S.$1.50 for 60
  consecutive trading days, and convertible at the option of the holder into class
  "A" common shares at U.S.$0.45 per share, and 1,000 share purchase warrants of
  the Company. Each warrant entitles the holder to purchase one additional common
  share (warrant share) of the Company at a price of U.S.$0.70 per warrant share
  at any time until the earlier of the close of business day which is thirty six
  (36) months from April 18, 2008 or the date on which the bid price of the stock
  has been above U.S.$1.50 for sixty (60) consecutive trading days. Interest is
  calculated at the rate of 8% per annum, payable in common shares at a rate of U.S.$0.45 per share. The interest
  is due on each conversion date (date when the principal amount is being
  converted) subsequent to January 1, 2009 or on the maturity date. The financing
  is secured by a first rank hypothec on all of the Companys property and assets,
  movable and immovable, corporeal and incorporeal, present and future, for the
  principal accrued interest amounts. The proceeds from the private placement were
  used for marketing and advertising and for expansion of the business.

F-18

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

For accounting purposes, the debenture contains both a debt
  component and an equity component being the share warrants, the conversion
  option and the interest payable in shares:

| | The debt component of the Convertible Debentures was
      originally calculated using the present value of the cash flows of
      principal and interest payments using a discount rate of 15%. The amount
      calculated, at the issue date, for the carrying amount of the debt
      component was $260,377. The carrying value of the debt component is being
      accreted to its face value over its life to maturity. The accretion
      expense, being the amortization of the convertible debentures discount, is
      included in interest expense in the statement of operations. The debt
      issuance costs were expensed directly against net income. The amortization
      of the debt component of the convertible debentures for the periods ended
      July 31, 2010, 2009 and 2008 was $86,087, $83,879 and $17,966,
      respectively.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The amount calculated for the carrying amount of the
      equity component, at the issue date, was $749,442, determined by deducting
      the carrying amount of the debt component from the gross proceeds
      received. The value of the equity component includes the fair value of the
      share warrants, the conversion option and the interest payable in shares.
      The fair value of the warrants was estimated at $303,415 and was recorded
      in contributed surplus. The fair value of the warrants at the time of
      issue the Convertible Debentures was estimated using the Black-Scholes
      option pricing model with the following assumptions:                                                                                                                                                                                    

| | Dividend yield          |  |        | 
| | ----------------------- |  | ------- | 
| | Expected volatility     |  | 90%     | 
| | Risk-free interest rate |  | 3.25%   | 
| | Expected life           |  | 3 years | 

The remaining equity component balance,
  in the amount of $446,027, represents the fair value of the conversion option
  and the interest payable in shares and has been presented separately in
  shareholders deficiency.

10 PRIVATE PLACEMENT

On November 6, 2009, the Company received gross proceeds of
  U.S.$550,000 (CDN.$587,835) from private investors, including U.S.$150,000 from
  the current President and Chief Executive Officer, which represented
  participation in a Non-Brokered Private Placement Subscription Agreement
  (Private Placement) for Units in the Company at a price of U.S.$0.70 per Unit,
  resulting in the issuance of 785,715 Units. Each Unit consists of two class A
  common shares and one share purchase warrant (Warrant) of the Company. Each
  Warrant entitles the holder to purchase one additional common share (Warrant
  Share) of the Company at a price of U.S.$0.50 per Warrant Share at any time
  until the earlier of the close of business day which is either thirty six (36)
  months from the closing date, November 6, 2009, or the date on which the bid
  price of the stock has been above U.S.$1.50 for sixty (60) consecutive trading days. The
  private placement resulted in the issuance of 1,571,431 common shares and
  785,715 warrants of the Company.

F-19

---

SAND Technology Inc.Notes to Consolidated
    Financial Statements 
    July 31, 2010(Expressed in Canadian Dollars,
    unless otherwise stated)

The Company allocated the proceeds from the issuance of the
  Units between the common shares and the warrants according to their relative
  fair value, using the Black-Scholes option pricing model to determine the fair
  value of the warrants. The fair value allocated to the common shares was
  estimated at $445,667 and was recorded in share capital. The fair value
  allocated to the warrants was estimated at $142,168 and was recorded in
  contributed surplus. The fair value of the warrants at the time of issue of the
  Private Placement was estimated using the Black-Scholes option pricing model
  with the following assumptions:

Dividend yield
      -Expected volatility
      103%Risk-free interest rate
      1.81Expected life
      3 years


11-SHARE CAPITAL

2010 transactions

On November 6, 2009, the Company issued 785,715 Units which
  included 1,571,431 common shares relating to a Non-Brokered Private Placement
  Subscription Agreement, as described in Note 10, for an amount of $587,835.

2009 transactions

During fiscal year 2009, the Company did not record any
  transactions that impacted the share capital.

Common shares reserved for future issuance as of July 31, 2010
  are as follows:

As at July 31,2010Stock options outstanding
      
      357,000Share awards outstanding
      
      302,500Warrants outstanding
      
      1,899,715Convertible debentures
      
      2,228,0004,787,215


12 STOCK OPTIONS, SHARE AWARDS AND WARRANTS

a)Stock Option Plans

The Company has two stock option plans:

F-20

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

|1. | Under the 1996 Stock Incentive Plan, the Company may
      grant options to full-time employees up to a maximum of 1,100,000 class
      "A" common shares;                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                       
|2. | Under the 1996 Stock Option Plan, the Company may grant
      options to its full-time employees and non- employee directors up to a
      maximum of 900,000 class "A" common shares.

Under both plans, the exercise price of each option is not less
  than the market price of the Companys shares, as traded on the OTC Bulletin
  Board, on the day prior to the grant date. Stock options vest equally over a
  five-year period and their maximum term is 10 years except for three key
  employees who were provided a maximum term of 20 years.

The following table summarizes information about the Companys
  stock options:

|                                             |  | July 31, 2010 |   |  | July 31, 2009  |  
|-------------------------------------------- |  | ------------- | - |  | -------------- | -
|                                             |  |               |   |  | Weighted       |  
|                                             |  |               |   |  | average        |  
|                                             |  | Number of     |   |  | exercise       |  
|                                             |  | options       |   |  | price          |  
|                                             |  |               |   |  | (U.S. dollars) |  
|                                             |  |               |   |  |                |  
|Options outstanding,
      beginning of year |  | 551,000       |   |  | 0.98           |  
|Granted                                      |  | -             |   |  | -              |  
|Expired                                      |  | (21,000       | ) |  | (4.97          | )
|Forfeited                                    |  | (173,000      | ) |  | (1.00          | )
|                                             |  |               |   |  |                |  
|Options outstanding , end of year            |  | 357,000       |   |  | 1.00           |  
|                                             |  |               |   |  |                |  
|Options exercisable, end of year             |  | 214,200       |   |  | 1.00           |  

The following table summarizes significant ranges of exercise
  prices of outstanding and exercisable options held by employees, officers and
  directors as of July 31, 2010:

F-21

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

|          |  | July 31, 2010       |  |  | July 31, 2010       | 
|--------- |  | ------------------- |  |  | ------------------- | 
|          |  | Options Outstanding |  |  | Options Exercisable | 
|          |  |                     |  |  | Weighted            | 
|          |  |                     |  |  | average             | 
|          |  | Number of           |  |  | remaining           | 
|          |  | options             |  |  | life
      (years)  | 
|          |  |                     |  |  |                     | 
|          |  |                     |  |  |                     | 
|U.S.$1.00 |  | 357,000             |  |  | 6.06                | 
|          |  |                     |  |  |                     | 
|          |  | 357,000             |  |  | 6.06                | 

Stock-based compensation expense included in selling, general
  and administrative expenses for the years ended July 31, 2010, 2009 and 2008 was
  $19,577, $19,573 and $100,000, respectively.

b)Warrants

The following table summarizes information about the Companys
  share warrants:

|                           |  | July 31, 2010 |   |  | July 31, 2009      | 
|-------------------------- |  | ------------- | - |  | ------------------ | 
|                           |  |               |   |  | Weighted           | 
|                           |  |               |   |  | average            | 
|                           |  | Number of     |   |  | remaining          | 
|                           |  | warrants      |   |  | life
      (years) | 
|                           |  |               |   |  |                    | 
|                           |  |               |   |  |                    | 
|Balance, beginning of year |  | 1,967,061     |   |  | 1.30               | 
|Granted                    |  | 785,715       |   |  | 3.00               | 
|Expired                    |  | (853,061      | ) |  | -                  | 
|Forfeited                  |  | -             |   |  | -                  | 
|                           |  |               |   |  |                    | 
|Balance, end of year       |  | 1,899,715     |   |  | 1.40               | 

c)Share Awards

Under a Share Award Plan, the Company was eligible to grant
  class "A" common shares to its full-time employees up to a maximum of 1,000,000
  class "A" common shares, at a value not to exceed the fair market value of the
  class "A" common shares at the time of grant and conditional upon a period of
  continued employment service with the Company by the employees.

The Share Award Plan is intended to promote the interests of
  the Company by (i) aiding the retention of employees and facilitating the
  recruitment of personnel by providing incentive compensation opportunities; and
  (ii) matching employees financial interests with those of the Companys
  shareholders. The

F-22

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

administrator of the Share award Plan has the authority to
  determine the terms and conditions of each award granted. The Company granted
  407,500 share awards on September 30, 2007 upon the one condition that the
  recipient remain employed with the Company for a period of 3 years. As at July
  31, 2010, as a result of terminations and resignations, there remained 302,500
  shares that may be issued, subject to continued employment by the employees
  until September 30, 2010, under the Share Award Plan.

The share award compensation expense included in selling,
  general and administrative expenses for the years ended July 31, 2010, 2009 and
  2008 was $60,028, $60,026 and $44,000, respectively. The table also presents the
  assumptions in the Black-Scholes option pricing model used to determine the fair
  value of the share awards granted during fiscal year 2008:

|                        |  | 2008    | 
|----------------------- |  | ------- | 
|Dividend yield          |  | -       | 
|Expected volatility     |  | 90%     | 
|Risk-free interest rate |  | 4.0%    | 
|Expected life           |  | 3 years | 

13 -RESEARCH AND DEVELOPMENT COSTS

Research and development costs presented in the consolidated
  statements of operations and comprehensive loss have been determined as
  follows:

|                               |   | Year ended |   |   | Year ended |   |   | Year ended |  
|------------------------------ | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                               |   | July 31,   |   |   | July 31,   |   |   | July 31,   |  
|                               |   | 2010       |   |   | 2009       |   |   | 2008       |  
|                               |   |            |   |   |            |   |   |            |  
|Research and development costs | $ | 2,164,938  |   | $ | 2,120,295  |   | $ | 2,205,793  |  
|Government assistance          |   |            |   |   |            |   |   |            |  
|Investment tax credits (a),(b) |   | (706,546   | ) |   | (160,000   | ) |   | (233,980   | )
|                               |   |            |   |   |            |   |   |            |  
|                               | $ | 1,458,392  |   | $ | 1,960,295  |   | $ | 1,971,813  |  

(a) During fiscal year 2010, the Company received an additional
  amount of tax credits in the amount of $69,401 relating to the fiscal year ended
  July 31, 2008. This amount related to an enhanced program for tax credits
  offered by the Province of Quebec (Canada) and which came into effect in the
  fourth quarter of fiscal 2008. The tax credits for fiscal year 2010 also include
  an accrual for benefits under the same enhanced program for tax credits relating
  to the years ended July 31, 2010 and 2009.

(b)During fiscal year 2008, the Companys investment tax credit
  claims previously submitted for the fiscal years ended July 31, 2007 and 2006
  were reviewed by the tax authorities. Following the review, the Company was
  entitled to receive additional tax credits of $233,980 from what had been
  originally recorded. The additional tax credits were recorded in fiscal year
  2008.

F-23

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

14 -INCOME TAXES

The reconciliation of the income tax recovery, based on
  reported taxable income (loss) and using Canadian statutory tax rates, with the
  reported income tax expense for the years ended July 31, 2010, 2009 and 2008 is
  as follows:

|                                                       |   | Year ended |   |   | Year ended |   |   | Year ended |  
|------------------------------------------------------ | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                       |   | July 31,   |   |   | July 31,   |   |   | July 31,   |  
|                                                       |   | 2010       |   |   | 2009       |   |   | 2008       |  
|                                                       |   |            |   |   |            |   |   |            |  
|Income tax recovery at
      Canadian statutory rates  | $ | (223,000   | ) | $ | (370,000   | ) | $ | (475,000   | )
|Non-recorded benefit from losses carried
      forward |   | (223,000   | ) |   | (370,000   | ) |   | (475,000   | )
|                                                       |   |            |   |   |            |   |   |            |  
|                                                       | $ | -          |   | $ | -          |   | $ | -          |  

The significant components of the Companys future income tax
  assets and liabilities are as follows:

|                              |   | July 31,    |   |   | July 31,    |  
|----------------------------- | - | ----------- | - | - | ----------- | -
|                              |   | 2010        |   |   | 2009        |  
|                              |   |             |   |   |             |  
|Future income tax assets      |   |             |   |   |             |  
|Losses carried forward        | $ | 15,590,000  |   | $ | 16,185,000  |  
|Capital assets                |   | 182,000     |   |   | 180,000     |  
|Research and development      |   | 4,136,000   |   |   | 3,786,000   |  
|                              |   | 19,908,000  |   |   | 20,151,000  |  
|Future income tax liabilities |   |             |   |   |             |  
|Convertible
      debentures  |   | 51,000      |   |   | 23,000      |  
|                              |   | 19,857,000  |   |   | 20,128,000  |  
|                              |   |             |   |   |             |  
|Less: Valuation allowance     |   | (19,857,000 | ) |   | (20,128,000 | )
|                              |   |             |   |   |             |  
|                              | $ | -           |   | $ | -           |  

As at July 31, 2010, the Company has non-capital losses carried
  forward to reduce future taxable income expiring at various dates to 2029, as
  follows:

F-24

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

July 31,2010(CDN. Dollars)Canada
      $
      14,200,000United States
      
      25,200,000United Kingdom
      
      -Germany
      
      5,600,000$
      45,000,000


In addition, the Company has unclaimed research and development
  expenditures carried forward of approximately $14,016,000, which can be used to
  reduce taxable income at any time in the future, and investment tax credits of
  approximately $3,813,000, which can be applied against future Canadian federal
  income taxes payable, expiring at various dates to 2019. The benefits from these
  unclaimed amounts have not been recognized in the consolidated financial
  statements.

15-COMMITMENTS

The Company is committed under operating leases, through 2015,
  for the lease of office space for a total amount of $481,884. The minimum
  payments due in each of the years are as follows:

2011
      $
      263,0462012
      
      66,0002013
      
      65,5022014
      
      65,5022015
      
      21,834$
      481,884


16 SEGMENTED INFORMATION

For purposes of segmented information, the Company has
  identified one reportable business segment and three main geographic areas. The
  geographic areas of Canada, United States and Europe market the SAND/DNA product
  suite. The accounting policies of the Company are consistently applied in the
  geographic areas of Canada, United States and Europe. Sales for each geographic
  area are based on the location of the third party customers with customers in
  areas other than Canada, United States and Europe

F-25

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

included in the geographic area where the sales invoice is
  initiated. All intercompany transactions between areas have been eliminated.

|                         |   |           |  |   | United    |  |   |           |  |   |           | 
|------------------------ | - | --------- |  | - | --------- |  | - | --------- |  | - | --------- | 
|                         |   | Canada    |  |   | States    |  |   | Europe    |  |   | Total     | 
|2010                     |   |           |  |   |           |  |   |           |  |   |           | 
|Revenue                  | $ | 1,131,633 |  | $ | 812,620   |  | $ | 4,618,158 |  | $ | 6,562,411 | 
|Current assets           |   | 1,190,955 |  |   | 121,285   |  |   | 740,715   |  |   | 2,052,955 | 
|Net capital
      assets |   | 25,033    |  |   | 8,551     |  |   | 30,904    |  |   | 64,488    | 
|                         |   |           |  |   |           |  |   |           |  |   |           | 
|2009                     |   |           |  |   |           |  |   |           |  |   |           | 
|Revenue                  |   | 1,716,902 |  |   | 971,777   |  |   | 4,360,558 |  |   | 7,049,237 | 
|Current assets           |   | 915,910   |  |   | 295,690   |  |   | 1,445,274 |  |   | 2,656,874 | 
|Net capital assets       |   | 55,524    |  |   | -         |  |   | 27,928    |  |   | 83,452    | 
|                         |   |           |  |   |           |  |   |           |  |   |           | 
|2008                     |   |           |  |   |           |  |   |           |  |   |           | 
|Revenue                  |   | 1,247,149 |  |   | 1,162,899 |  |   | 4,588,424 |  |   | 6,998,472 | 
|Current assets           |   | 580,682   |  |   | 235,695   |  |   | 1,986,655 |  |   | 2,803,032 | 
|Net capital
      assets |   | 90,608    |  |   | -         |  |   | 31,706    |  |   | 122,314   | 

F-26

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

17 CAPITAL MANAGEMENT

The Companys capital management objectives are to ensure the
  Companys ability to continue as a going concern and to provide an adequate
  return to its shareholders through the optimization of the Companys debt and
  equity balances. The Companys capital consists of the total of due to
  shareholders and convertible debentures, reduced by cash and shareholders
  deficiency. The Company manages its capital structure and makes adjustments to
  it in the light of its expected business growth and changes in economic
  conditions. In order to maintain or adjust its capital structure, the Company
  may issue new shares or return capital to shareholders or issue new debt or pay
  down existing debt.

July 31,
      
      
      July 31,2010
      
      
      2009Due to shareholders
      $
      1,874,153
      
      $
      2,016,725Convertible debentures
      
      448,309
      
      
      362,222Total Debt
      
      2,322,462
      
      
      2,378,947Less Cash
      
      579,270
      
      
      1,065,572Net Debt
      
      1,743,192
      
      
      1,313,375Shareholders' deficiencyShare
        capital
      
      38,976,108
      
      
      38,530,441Equity component of
        convertible debenture
      
      446,027
      
      
      446,027Contributed surplus
      
      1,053,897
      
      
      832,124Deficit
      
      (42,926,696
      )
      
      (42,181,147
      )(2,450,664
      )
      
      (2,372,555
      )Adjusted Capital
      $
      (707,472
      )
      $
      (1,059,180
      )


18 FINANCIAL RISKS

Financial Risk Management

The objective of the Companys financial risk management is to
  minimize its risk exposure against various financial risks, which include
  interest rate risk, credit risk, currency risk and liquidity risk. The Company
  does not use derivative financial instruments to minimize such risks.

a) Interest rate risk

Interest rate risk is the risk that the future cash flows or
  the fair value of a financial instrument will fluctuate because of changes in
  market interest rates. The Company's debt is at fixed rates thereby limiting the
  exposure to cash flow resulting from interest rate fluctuations. However,
  changes in interest rates may have an impact on the fair value of the debt.
  Management assesses the Companys credit risk to be low.

F-27

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

b) Credit risk

Credit risk is the risk that one party to a financial
  instrument will fail to discharge its obligation and cause the other party to
  incur a financial loss. The Companys maximum exposure to credit risk is limited
  to the carrying amount of financial assets recorded at the balance sheet
  date.

The Companys credit risk exposure is detailed as follows:

July 31,
      
      
      July 31,2010
      
      
      2009Cash
      $
      579,270
      
      $
      1,065,572Accounts receivable
      
      739,144
      
      
      1,224,199Unbilled receivable
      
      -
      
      
      109,414$
      1,318,414
      
      $
      2,399,185


The Company minimizes its exposure to credit risk by placing
  its cash with major banks. Management considers these major banks to be at low
  risks of loss.

The credit risk exposure of the Companys accounts receivable
  is mitigated by issuing invoices for software licenses, maintenance and
  consulting services with short credit terms which are generally net 30 days.
  Software maintenance contracts are generally fully paid at the inception of the
  service period. In the normal course of operations, the Company evaluates the
  financial condition of its customers. Since most of the Companys customers are
  relatively large companies in various industries and with a strong history of
  payment, the allowance for doubtful accounts is nominal. For the year ended July
  31, 2010, the Company generated approximately 23% of its revenues from two
  customers in Europe and $89,024 was outstanding from one of those customers as
  at July 31, 2010 (for the year ended July 31, 2009, one customer in Europe
  represented 11% of the revenues and no amounts were outstanding from that
  customer as at July 31, 2009). Management assesses the Companys credit risk to
  be low.

c)Currency risk

Currency risk is the risk that the value of a financial
  instrument will fluctuate due to changes in foreign exchange rates. The Company
  operates internationally and is exposed to risk from changes in foreign currency
  rates. The Company does not hold any financial instruments that mitigate this
  risk. Management minimizes this risk by paying expenditures in the currency of
  the local operation through which funds are generated as a result of local
  revenue invoicing. However, the Company is still highly exposed to risks from
  fluctuations in foreign currency rates with respect to the financial statement
  translation of foreign operations denominated in the U.S. dollar, the Pound
  Sterling and the Euro. The following table details the Companys sensitivity to
  a 30% strengthening of the U.S. dollar, a 30% strengthening of the Pound
  Sterling and a 21% strengthening of the Euro against the Canadian dollar on the
  net income (loss) of the Company. The sensitivity analysis includes adjustments
  to foreign currency denominated monetary assets and liabilities and revenues and
  expenses for the changes described above. For a weakening of the U.S. dollar,
  the Pound

F-28

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

Sterling and the Euro by the same percentages against the
  Canadian dollar, there would be an equal and opposite impact on net income
  (loss) of the Company. For this reason, management assesses the Companys
  currency risk to be high.

|                                                                                     |  | U.S. Dollar |   |  | U.K. Pound      |   |  | Euro      |  
|------------------------------------------------------------------------------------ |  | ----------- | - |  | --------------- | - |  | --------- | -
|                                                                                     |  | Impact      |   |  | Sterling Impact |   |  | Impact    |  
|                                                                                     |  |             |   |  |                 |   |  |           |  
|Net income (loss) and
      comprehensive 
      income (loss) - in Canadian dollars |  | $ (14,499   | ) |  | $ (57,446       | ) |  | $ (71,990 | )

As at July 31, 2010 and July 31, 2009, the Company had the
  following monetary assets and liabilities denominated in foreign currencies
  included in its consolidated financial statements:

|                |  | July 31, 2010 |  |  | July 31, 2009 | 
|--------------- |  | ------------- |  |  | ------------- | 
|                |  | Current       |  |  | Current       | 
|                |  | Assets        |  |  | Liabilities   | 
|                |  |               |  |  |               | 
|U.S. Dollars    |  | 117,917       |  |  | 164,947       | 
|Pounds Sterling |  | 343,111       |  |  | 461,540       | 
|Euros           |  | 138,540       |  |  | 405,958       | 

d)Liquidity risk

Liquidity risk is the risk that the Company is not able to meet
  its financial obligations as they fall due or can do so only at excessive cost.
  The Company manages this risk by regularly evaluating its liquid resources to
  fund its current and long-term obligations in a cost-effective manner.

The Companys exposure to liquidity risk is mitigated through
  its continued ability to sell software licenses, services and software
  maintenance contracts and the prompt collection of accounts receivable. The
  Company controls its liquidity risk by managing its cash and cash flows using
  budgets and cash estimates.

The table below summarizes the Companys financial liabilities
  and their due dates:

|                                                   |  | Carrying  |  |  |              |  |  |                   |  |  |               | 
|-------------------------------------------------- |  | --------- |  |  | ------------ |  |  | ----------------- |  |  | ------------- | 
|                                                   |  | Amount of |  |  | Due within   |  |  | Due within        |  |  | Due beyond    | 
|                                                   |  | Liability |  |  | 1
      year |  |  | 2 -
      5 years |  |  | 5
      years | 
|                                                   |  |           |  |  |              |  |  |                   |  |  |               | 
|Accounts payable and accrued liabilities
      (a) |  | 917,265   |  |  | 917,265      |  |  | -                 |  |  | -             | 
|Due to shareholders (b)                            |  | 1,874,153 |  |  | 1,058,594    |  |  | 1,390,104         |  |  | -             | 
|Convertible debentures (c)                         |  | 448,309   |  |  | -            |  |  | -                 |  |  | 1,777,944     | 

(a) Excludes sales taxes payable

F-29

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

| | (b) Includes contractual interest expense to be paid               
| | -------------------------------------------------------------------
| | (c) includes accretion and interest expense up until
      maturity

As at July 31, 2010, there has been no significant change to
  the maturities of financial liabilities as compared to the previous year. As
  such, and in addition to the disclosures in Note 2, management assesses the
  Companys liquidity risk to be high.

19 FINANCIAL INSTRUMENTS

Fair value

Fair value is the estimated amount that parties dealing at
  arms length would accept to exchange in settlement of a financial instrument
  based on the current market for instruments with the same risk, principal and
  maturity date. These fair value estimates are affected by assumptions made about
  the amount and timing of estimated future cash flows, discount rates and terms
  of the contract. As a result, the fair values are not necessarily the net
  amounts that would be realized if such financial instruments were settled.

The fair value, as at July 31, 2010 and 2009, of cash, accounts
  receivable, unbilled receivable, accounts payable and accrued liabilities
  approximates their respective carrying value given their short-term maturities.

The Company utilizes various types of financing to fund its
  business needs including convertible notes with warrants attached. The Company
  reviews these transactions of securities issued, including its warrants and
  conversion features, to properly determine their proper classification between
  the debt and equity components and whether they are classified as a liability at
  each reporting period until the amount is settled and reclassified into equity
  with changes, if applicable, in fair value recognized in current earnings. At
  July 31, 2010 and 2009, the Company did not have any assets or liabilities
  measured at fair value on a recurring basis associated with the units consisting
  of convertible notes. The Canadian GAAP measurement of these instruments differs
  from the United States GAAP measurements and this is more fully explained in
  Note 20.

The fair value of the debt component of the convertible
  debentures was determined by discounting future cash flows using rates that the
  Company would otherwise use for convertible debentures with similar terms,
  conditions and maturity dates.

As at July 31, 2010, the classification of financial
  instruments, as well as their carrying values and the fair values, is as
  follows:

F-30

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

|20 -RECONCILIATION OF FINANCIAL RESULTS
      BETWEEN CANADIAN AND U.S. GAAP
|----------------------------------------------------------------------------

| | 1) | The material differences between Canadian and U.S. GAAP
      impacting the Companys consolidated financial statements are as
      follows:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                             |   | July 31,   |   |   | July 31,   |   |   | July 31,   |  
|-------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                                             |   | 2010       |   |   | 2009       |   |   | 2008       |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|A - Net Loss Reconciliation                                                                  |   |            |   |   |            |   |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Net loss -
      Canadian GAAP                                                               | $ | (745,549   | ) | $ | (1,191,695 | ) | $ | (1,271,950 | )
|Adjustments for:                                                                             |   |            |   |   |            |   |   |            |  
|Stock-based compensation (a)                                                                 |   | (2,128     | ) |   | (6,156     | ) |   | (22,653    | )
|Gain (loss) on
      change in derivative liability - Warrants (b)                           |   | 141,488    |   |   | 215,779    |   |   | (45,834    | )
|Accretion expense - Debt component of convertible debentures (c)                             |   | 43,425     |   |   | 40,637     |   |   | 9,592      |  
|Gain (loss) on
      change in derivative liability - Warrants on convertible debentures (b) |   | 469,285    |   |   | (83,459    | ) |   | (226,967   | )
|Gain on change in derivative liability - Warrants on private
      placement (b)             |   | (212,390   | ) |   | -          |   |   | -          |  
|                                                                                             |   | 439,680    |   |   | 166,801    |   |   | (285,862   | )
|                                                                                             |   |            |   |   |            |   |   |            |  
|Net loss - U.S. GAAP                                                                         |   | (305,869   | ) |   | (1,024,894 | ) |   | (1,557,812 | )
|                                                                                             |   |            |   |   |            |   |   |            |  
|Basic and diluted loss per
      common share, U.S. GAAP                                     |   | (0.02      | ) |   | (0.03      | ) |   | (0.11      | )
|                                                                                             |   |            |   |   |            |   |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|B - Liabilities Reconciliation                                                               |   |            |   |   |            |   |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Total
      liabilities - Canadian GAAP                                                      |   |            |   |   |            |   |   |            |  
|Carrying value -
      Convertible debentures (long term) (c)                                |   | 448,309    |   |   | 362,222    |   |   |            |  
|Other liabilities                                                                            |   | 4,119,798  |   |   | 4,750,659  |   |   |            |  
|                                                                                             |   | 4,568,107  |   |   | 5,112,881  |   |   |            |  
|Adjustments for:                                                                             |   |            |   |   |            |   |   |            |  
|Derivative
      liability - Warrants (short term) (b)                                       |   | -          |   |   | 141,488    |   |   |            |  
|Carrying value - Convertible debentures (long term) (c)                                      |   | (262,486   | ) |   | (219,061   | ) |   |            |  
|Derivative
      liability - Warrants on convertible debentures (short term) (b)             |   | 759,314    |   |   | 1,228,599  |   |   |            |  
|Derivative liability - Warrants on private placement (short term)
      (b)                  |   | 212,390    |   |   | -          |   |   |            |  
|                                                                                             |   | 709,218    |   |   | 1,151,026  |   |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Total liabilities - U.S. GAAP                                                                |   | 5,277,325  |   |   | 6,263,907  |   |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|C - Shareholders' Deficiency Reconciliation                                                  |   |            |   |   |            |   |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Shareholders'
      deficiency - Canadian GAAP                                               |   | (2,450,664 | ) |   | (2,372,555 | ) |   |            |  
|Adjustments for:                                                                             |   |            |   |   |            |   |   |            |  
|Cumulative net income (loss) reconciling items (see above)                                   |   | (275,476   | ) |   | (715,156   | ) |   |            |  
|Cumulative
      stock-based compensation (see above) (a)                                    |   | 315,700    |   |   | 313,572    |   |   |            |  
|Convertible debentures equity component (b)                                                  |   | (749,442   | ) |   | (749,442   | ) |   |            |  
|                                                                                             |   | (709,218   | ) |   | (1,151,026 | ) |   |            |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Total shareholders' deficiency -
      U.S. GAAP                                             | $ | (3,159,882 | ) | $ | (3,523,581 | ) |   |            |  

F-31

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

a)Stock-based compensation

Under Canadian GAAP, effective August 1, 2005, stock-based
  compensation expense was accounted for using the fair value based method.

Under U.S. GAAP, effective August 1, 2005, the Company adopted
  the standard with respect to share-based payments which requires that stock
  option payments, to the extent they are compensatory, be recognized based on the
  fair value the of the options granted by the Company and expensing such amounts
  over the applicable vesting period. The fair value of the unvested portion of
  the stock option granted prior to August 1, 2005 was determined based on the
  fair value of those options on the grant date , net of forfeitures.

The impact on the statement of operations for years ended July
  31, 2010, 2009 and 2008 was an increase in the net loss by $2,128, $6,156 and
  $22,653, respectively, with a corresponding increase in contributed surplus
  under shareholders deficiency.

b) Share purchase warrants and convertible debentures
  conversion option

Under Canadian GAAP, share purchase warrants and the
  convertible debentures conversion option are classified as equity, more
  specifically as contributed surplus for the share purchase warrants and as a
  separate equity component for the convertible debentures conversion option, in
  the shareholders deficiency section of the Companys consolidated balance
  sheet.

Under U.S. GAAP, SFAS No.133, share purchase warrants with an
  exercise price denominated in a currency other than the functional currency,
  which in the case of the Company is the Canadian dollar, and the convertible
  debentures conversion option must be accounted for as a derivative liability. As
  well, any changes in the fair value of these derivative liabilities, under U.S.
  GAAP, is recognized in earnings during the reporting period as a gain or loss on
  derivative liability.

The impact for years ended July 31, 2010, 2009 and 2008 was a
  decrease in the net loss by $398,383 a decrease in the net loss by $132,320 and
  an increase in the net loss by $272,801, respectively, and the impact on the
  balance sheet was an increase to current liabilities by $971,704 and $1,370,087,  respectively.

c) Convertible debentures

Under Canadian GAAP, the fair value of the debt component
  relating to the convertible debentures is determined using the present value of
  the cash flows of principal and interest payments using an applicable discount
  rate and is disclosed as a long-term liability.

Under U.S. GAAP, the initial carrying amount of the debt
  component is calculated as the balance of the convertible debenture proceeds
  after deducting the initial fair value of the share purchase warrants and the
  conversion option. Under both Canadian and U.S. GAAP, the carrying amount of the
  debt component is accreted to its face value over the contractual period of the
  debentures by using the effective interest method.

The impact on the statement of operations for the years ended
  July 31, 2010, 2009 and 2008 was a decrease in the net loss by $43,425, $40,637
  and $9,592, respectively, and the impact on the balance sheet was a decrease to
  long term liabilities by $262,486 and $219,061, respectively.

F-32

---

|SAND Technology Inc.                                          
|--------------------------------------------------------------
|Notes to Consolidated Financial Statements                    
|July 31, 2010                                                 
|(Expressed in Canadian Dollars, unless otherwise
      stated)

21 COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform
  with the presentation adopted in the current year.

22 -SUBSEQUENT EVENTS

Subsequent to July 31, 2010, the Company received additional
  investment funds from private investors, including U.S.$40,000 from the
  President and Chief Executive Officer, for a total amount of U.S.$350,290. This
  amount along with other amounts invested by the President and Chief Executive
  Officer described in Note 8 and U.S.$25,000 received from another private
  investor before the year-end date will be part of a private placement to be
  completed during fiscal year 2011.

On September 30, 2010, the share awards issued to certain
  employees on September 30, 2007 became eligible for issuance following the
  successful completion of the 3-year employment condition with the Company. The
  Company will issue 302,500 shares to these employees during fiscal year
  2011.

On November 16, 2010, the Board of Directors of the Company
  approved the 2010 Stock Incentive Plan pursuant to which beneficiaries selected
  by a committee of the Board of Directors may be granted stock options or share
  awards. The maximum total number of common shares of the Company that may be
  issued resulting from stock options or share awards granted under the 2010 Stock
  Incentive Plan is 3,000,000.

F-33

---

ITEM 19. EXHIBITS

EXHIBIT INDEX

|Exhibit |                                                                                                                                                                         
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Exhibit Description                                                                                                                                                     
|        |                                                                                                                                                                         
|1.1     | Articles of Incorporation, as
      amended on December 20, 1996 and December 31, 1996(A).                                                                              
|        |                                                                                                                                                                         
|1.2     | Amendment to Articles of
      Incorporation dated January 1, 2000(B).                                                                                                  
|        |                                                                                                                                                                         
|1.3     | By-Laws approved, confirmed and
      ratified by the shareholders on December 17, 2002(C).                                                                             
|        |                                                                                                                                                                         
|4.1     | SAND 1996 Stock Incentive Plan
      as amended(D).                                                                                                                     
|        |                                                                                                                                                                         
|4.2     | SAND 1996 Stock Option Plan as
      amended(E).                                                                                                                        
|        |                                                                                                                                                                         
|4.3     | SAND Share Award Plan dated
      November 2, 2006 and Share Award Agreement thereunder(F).                                                                             
|        |                                                                                                                                                                         
|4.5     | Voting Agreement by and between
      SAND, Arthur G. Ritchie and Bradley G. Griffith on behalf of the
      Debentureholders dated April 18, 2008(K).                  
|        |                                                                                                                                                                         
|4.6     | Inter-Creditor Priority
      Agreement by and between SAND, Arthur G. Ritchie and Bradley G. Griffith
      on behalf of the Debentureholders, dated April 18, 2008(L).
|        |                                                                                                                                                                         
|4.7     | Deed of Hypothec to Secure
      Payment of Debentures by and between SAND and Bradley G. Griffith on
      behalf of the Debentureholders, dated April 24, 2008(M).    
|        |                                                                                                                                                                         
|4.8     | Repayment Agreement by and
      between Arthur G. Ritchie, SAND and Jerart Financial Services Ltd.                                                                     
|        |                                                                                                                                                                         
|4.9     | Consulting Agreement by and
      between Arthur G. Ritchie, SAND and Jerart Financial Services Ltd.                                                                    
|        |                                                                                                                                                                         
|4.10    | Marketing and Sales Assistance
      Agreement by and between Arthur G. Ritchie and SAND.                                                                               
|        |                                                                                                                                                                         
|4.11    | Priority Agreement by and
      between Jerart Financial Services Limited, Arthur G. Ritchie and Bradley
      G. Griffith.                                             
|        |                                                                                                                                                                         
|4.12    | Form of Convertible Debenture.                                                                                                                                          
|        |                                                                                                                                                                         
|4.13    | Form of Warrant.                                                                                                                                                        
|        |                                                                                                                                                                         
|4.14    | SAND 2010 Stock Incentive Plan                                                                                                                                          
|        |                                                                                                                                                                         
|4.15    | Employment Agreement of Michael
      Pilcher                                                                                                                           
|        |                                                                                                                                                                         
|4.16    | Employment Agreement of Tony
      Giuliano                                                                                                                             
|        |                                                                                                                                                                         
|6.1     | Statement detailing computation
      of per share earnings.                                                                                                            
|        |                                                                                                                                                                         
|8.1     | Subsidiaries.                                                                                                                                                           
|        |                                                                                                                                                                         
|11.1    | Standards of Ethical
      Conduct(G).                                                                                                                                  
|        |                                                                                                                                                                         
|12.1    | Certification of the Chief
      Executive Officer of SAND pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.                                             

- 72 -

---

|Exhibit                 | Exhibit Description                                                                                                                                                                    
|----------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number                  |                                                                                                                                                                                        
|12.2                    | Certification of the Vice
      President Finance and Administration and Chief Financial Officer of SAND
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.              
|                        |                                                                                                                                                                                        
|13.1                    | Certification of Chief
      Executive Officer of SAND pursuant to 18 U.S.C. Section 1350  as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                 
|                        |                                                                                                                                                                                        
|13.2                    | Certification of Vice President
      Finance and Administration of SAND pursuant to 18 U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|                        |                                                                                                                                                                                        
|15.1                    | Consent of Raymond Chabot Grant
      Thornton LLP.                                                                                                                                    
|                        |                                                                                                                                                                                        
|15.2                    | Amended and Restated Audit
      Committee Charter(H).                                                                                                                                 
|                        |                                                                                                                                                                                        
|15.3                    | Governance, Nomination, Human
      Resources and Compensation Committee Charter(I).                                                                                                   
|                        |                                                                                                                                                                                        
|15.4                    | Board of Directors
      Charter(J).                                                                                                                                                   
|                        |                                                                                                                                                                                        
|Notes to Exhibit Index:
|                       
|(A)                     | Previously filed as exhibit to SAND's Annual
      Report on Form 20-F for the year ended July 31, 1996 and incorporated
      herein by reference.                                    
|                        |                                                                                                                                                                                        
|(B)                     | Previously filed as exhibit to SAND's Amendment
      No. 1 to SAND's Form F-2 Registration Statement (333-12216) filed on
      August 18, 2000 and incorporated herein by reference. 
|                        |                                                                                                                                                                                        
|(C)                     | Previously filed as exhibit 3.3 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 2002 and
      incorporated herein by reference.                                
|                        |                                                                                                                                                                                        
|(D)                     | Previously filed as exhibit 4.1 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 2005 and
      incorporated herein by reference.                                
|                        |                                                                                                                                                                                        
|(E)                     | Previously filed as exhibit 4.2 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 1996 and
      incorporated herein by reference.                                
|                        |                                                                                                                                                                                        
|(F)                     | Previously filed as exhibit 4.6 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 2007 and
      incorporated herein by reference.                                
|                        |                                                                                                                                                                                        
|(G)                     | Previously filed as exhibit 11.1 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 2005 and
      incorporated herein by reference.                               
|                        |                                                                                                                                                                                        
|(H)                     | Previously filed as exhibit 15.1 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 2005 and
      incorporated herein by reference.                               
|                        |                                                                                                                                                                                        
|(I)                     | Previously filed as exhibit 15.2 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 1996 and
      incorporated herein by reference.                               
|                        |                                                                                                                                                                                        
|(J)                     | Previously filed as exhibit 14.3 to SAND's
      Annual Report on Form 20-F for the year ended July 31, 2003 and
      incorporated herein by reference.                               

- 73 -

---

|(K) | Previously filed as exhibit 4.5 to SAND's Annual Report
      on Form 20-F for the year ended July 31, 2008 and incorporated by
      reference.       
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                        
|(L) | Previously filed as exhibit 4.6 to SAND's Annual Report
      on Form 20-F for the year ended July 31, 2008 and incorporated herein by
      reference.
|    |                                                                                                                                                        
|(M) | Previously filed as exhibit 4.7 to SAND's Annual Report
      on Form 20-F for the year ended July 31, 2008 and incorporated herein by
      reference.

- 73 -

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
  U.S. Securities Exchange Act of 1934, 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.                 
|--------------------------- | -------------------------------------
|                            |                                      
|Dated:    November 26, 2010 | By:
      /s/ THOMAS M. O’DONNELL    
|                            | Thomas M. O’Donnell                  
|                            | President and Chief Executive Officer

- 74 -

---