---

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended July 31, 2009

OR

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

OR

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

Date of event requiring this shell company report

Commission File Number 0-14884

SAND TECHNOLOGY INC.(formerly Sand Technology Systems International Inc.)

(Exact name of registrant as specified in its charter)

Canada(Jurisdiction of incorporation
or organisation)

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

Sébastien Vézina 1 (514) 877-2964 1 (514) 871-8977
svezina@lavery.qc.ca1 Place
Ville Marie, Suite 4000Montréal, Quebec, Canada H3B
4M4(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.

15,889,619 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. Yes [X]     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 | Other [X]
|--------------- | ----------------------------------------------------------- | ---------
|                |                                                             |          
|                | By the International Accounting
      Standards Board [   ] |          

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 Section 12, 13 or 15(d) of the
Securities Exchange Act of 1939 subsequent to the dfistribution of
securities under a plan confirmed by a court. [   ] 
Yes    [X] No

- ii -

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SAND TECHNOLOGY INC. 
  TABLE OF CONTENTS

|ITEM1.  | IDENTITY OFDIRECTORS, SENIORMANAGEMENT ANDADVISERS      | 2 
|------- | ------------------------------------------------------- | --
|ITEM2.  | OFFERSTATISTICS
      ANDEXPECTEDTIMETABLE              | 2 
|ITEM3.  | KEYINFORMATION                                          | 2 
|A.      | Selected Financial Data                                 | 2 
|B.      | Capitalization and Indebtedness                         | 5 
|C.      | Reasons for the Offer
      and Use of Proceeds         | 5 
|D.      | Risk factors                                            | 6 
|ITEM4.  | INFORMATION ON THECOMPANY                               | 17
|A.      | History and Development of the Company                  | 17
|B.      | Business Overview                                       | 18
|C.      | Organizational Structure                                | 23
|D.      | Property, Plant and Equipment                           | 24
|ITEM4A. | **UNRESOLVED STAFF COMMENTS**                           | 24
|ITEM5.  | OPERATING ANDFINANCIALREVIEW
      ANDPROSPECTS         | 24
|A.      | Operating Results                                       | 24
|B.      | Liquidity and Capital Resources                         | 28
|C.      | Research and Development, Patents and Licenses          | 29
|D.      | Trend Information                                       | 30
|E.      | Off-balance Sheet Arrangements.                         | 31
|F.      | Tabular disclosure of
      contractual obligations.    | 31
|G.      | Safe Harbor.                                            | 31
|ITEM6.  | DIRECTORS, SENIORMANAGEMENT
      ANDEMPLOYEES          | 32
|A.      | Directors and Senior Management                         | 32
|B.      | Compensation                                            | 35
|C.      | Board Practices                                         | 38
|D.      | Employees                                               | 45
|E.      | Share Ownership                                         | 49
|ITEM7.  | MAJORSHAREHOLDERS ANDRELATEDPARTYTRANSACTIONS           | 49
|A.      | Major Shareholders                                      | 49
|B.      | Related Party Transactions                              | 50
|C.      | Interests of Experts and Counsels                       | 51
|ITEM8.  | FINANCIALINFORMATION                                    | 51
|A.      | Consolidated Statements and Other Financial Information | 51
|B.      | Significant Changes                                     | 52
|ITEM9.  | THEOFFER ANDLISTING                                     | 52
|A.      | Offer and listing details                               | 53
|B.      | Plan of distribution                                    | 53
|C.      | Markets                                                 | 53
|D.      | Selling Shareholders                                    | 53
|E.      | Dilution                                                | 53
|F.      | Expenses of the issue                                   | 53
|ITEM10. | **ADDITIONAL INFORMATION**                              | 54
|A.      | Share Capital                                           | 54
|B.      | Memorandum and Articles of Incorporation                | 54
|C.      | Material Contracts                                      | 60
|D.      | Exchange Controls                                       | 60
|E.      | Taxation                                                | 62
|F.      | Dividends and paying agents                             | 66
|G.      | Statements by experts                                   | 66
|H.      | Documents on Display                                    | 66
|I.      | Subsidiary Information                                  | 66

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|ITEM11.  | QUANTITATIVE ANDQUALITATIVEDISCLOSURES
      ABOUTMARKETRISK                  | 67
|-------- | ----------------------------------------------------------------------------- | --
|ITEM12.  | DESCRIPTION OFSECURITIES OTHER
      THANEQUITYSECURITIES                     | 67
|PART II  |                                                                               | 67
|ITEM13.  | DEFAULTS, DIVIDENDARREARAGES
      ANDDELINQUENCIES                           | 67
|ITEM14.  | MATERIALMODIFICATIONS TO THERIGHT
      OFSECURITYHOLDERS ANDUSE OFPROCEEDS   | 67
|ITEM15.  | CONTROLS ANDPROCEDURES                                                        | 68
|A.       | Disclosure Controls and Procedures                                            | 68
|B.       | Managements annual report on internal control
      over financial reporting | 68
|ITEM16A. | AUDITCOMMITTEEFINANCIALEXPERT                                                 | 69
|ITEM16B. | CODEOFETHICS                                                                  | 69
|ITEM16C. | PRINCIPALACCOUNTANTFEESANDSERVICES                                            | 69
|ITEM16D. | EXEMPTIONSFROMTHELISTINGSTANDARDSFORAUDITCOMMITTEES                           | 70
|ITEM16E. | PURCHASESOFEQUITYSECURITIESBYTHEISSUERANDAFFILIATEDPURCHASERS                 | 70
|PART III |                                                                               | 71
|ITEM17.  | FINANCIALSTATEMENTS                                                           | 71
|ITEM 18. | FINANCIAL STATEMENTS                                                          | 71
|ITEM19.  | EXHIBITS                                                                      | 72

- iv -

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In this Annual Report on Form 20-F (the "Report"), unless we
indicate otherwise or the context requires, we, our and us refers to Sand
Technology Inc. ("SAND" or the "Company") and its consolidated subsidiaries.

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, 2009 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,
2009 (included herein at Item 18), July 31, 2008, July 31, 2007 and July 31,
2006 and Deloitte & Touche LLP for the fiscal year ended July 31, 2005. 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
enterity 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 many respects
from generally accepted accounting principles in the United States ("US GAAP").
A discussion of differences between Canadian GAAP and US GAAP is contained in
Note 17 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.

(LEFT INTENTIONALLY BLANK)

- 2 -

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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
      2009
      2008
      2007
      2006
      2005Operating resultsRevenue
      $7,049
      $6,998
      $6,729
      5,477
      $6,096Cost of Sales and
        Product Support
      ($1,396)
      ($1,470)
      ($1,667)
      ($1,554)
      ($1,754)Research and Development Costs
      ($1,960)
      ($1,972)
      ($2,215)
      ($2,442)
      ($3,272)Selling, General and Administrative Expenses
      ($4,507)
      ($4,412)
      ($5,100)
      ($5,221)
      ($8,318)Amortization
      ($64)
      ($187)
      ($201)
      ($248)
      ($277)Loss from Operations
      ($878)
      ($1,043)
      ($2,454)
      ($3,988)
      ($7,525)Other Income (Expense)
      ($314)
      ($229)
      ($72)
      $61
      $162Net Income (Loss)
      ($1,192)
      ($1,272)
      ($2,526)
      ($3,927)
      ($7,363)Financial positionWorking Capital (Deficiency)
      ($363)
      $85
      $238
      $1,852
      $5,820Total Assets
      $2,740
      $2,803
      $2,357
      $3,445
      $7,935Total Liabilities
      $5,113
      $4,063
      $3,239
      $2,508
      $3,100Capital Stock
      $38,530
      $38,530
      $38,530
      $38,024
      $38,024Shareholders' Equity (Deficit)
      ($2,373)
      ($1,260)
      ($882)
      $937
      $4,835Basic and Diluted Weighted Average Number of Shares Outstanding
      14,318,189
      14,318,189
      13,094,288
      12,818,189
      12,860,438Per share data (in dollars per share)Net Loss Per Share
        (Basic and dilutive)
      ($0.08)
      ($0.09)
      ($0.19)
      ($0.31)
      ($0.57)Loss from Operating Per Share (Basic and dilutive)
      ($0.06)
      ($0.07)
      ($0.19)
      ($0.31)
      ($0.59)


(LEFT INTENTIONALLY BLANK)

- 3 -

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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
      2009
      2008
      2007
      2006
      2005Operating resultsRevenue
      $7,049
      $6,998
      $6,729
      5,477
      $6,096Cost of Sales and
        Product Support
      ($1,396)
      ($1,470)
      ($1,667)
      ($1,554)
      ($1,754)Research and Development
        Costs
      ($1,960)
      ($1,972)
      ($2,215)
      ($2,442)
      ($3,272)Selling, General and Administrative Expenses
      ($3,761)
      ($4,698)
      ($5,498)
      ($5,419)
      ($8,318)Amortization
      ($64)
      ($187)
      ($201)
      ($248)
      ($277)Loss from Operations
      ($132)
      ($1,329)
      ($2,852)
      ($4,186)
      ($7,525)Other Income (Expense)
      ($314)
      ($229)
      ($72)
      $61
      $162Net Income (Loss)
      ($446)
      ($1,558)
      ($2,924)
      ($4,125)
      ($7,363)Financial positionWorking Capital
        (Deficiency)
      ($363)
      $85
      $238
      $1,852
      $5,820Total Assets
      $2,740
      $2,803
      $2,357
      $3,445
      $7,935Total Liabilities
      $6,264
      $5,387
      $3,550
      $2,508
      $3,100Capital Stock
      $38,530
      $38,530
      38,530
      38,024
      38,024Shareholders' Equity
        (Deficit)
      ($3,524)
      ($2,584)
      ($1,193)
      $937
      $4,835Basic and Diluted Weighted Average Number of Shares Outstanding
      14,318,189
      14,318,189
      13,094,288
      12,818,189
      12,860,438Per share data (in dollars per share)Net Loss Per Share
        (Basic and dilutive)
      ($0.03)
      ($0.11)
      ($0.22)
      ($0.32)
      ($0.57)Loss from Operations Per Share (Basic and dilutive)
      ($0.01)
      ($0.09)
      ($0.22)
      ($0.33)
      ($0.59)


As of November 12, 2009, the Company had 15,889,619 Class A
Common Shares issued and outstanding. Each common share entitles its holder to
one vote.

(LEFT INTENTIONALLY BLANK)

- 4 -

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Disclosure of the Exchange Rate with Financial Reporting
  Currency

Foreign exchange rate Canadian to US
      dollar:
      Fiscal 2009
      Fiscal
        
        2008
      Fiscal
        
        2007
      Fiscal
        
        2006
      Fiscal
        
        2005Average
    1.1754
    1.0352
    1.1258
    1.1551
    1.2418High | low
    1.2633 | 1.0547
    1.0755
      | 0.7695
    1.1853
      | 1.0372
    1.2187
      | 1.0990
    1.3326
      | 1.1774


Month Ended
      High
      LowOctober 31, 2009
    1.0845
    1.0292September 30, 2009
    1.1065
    1.0613August 30, 2009
    1.1079
    1.0686July
      31, 2009
    1.1655
    1.0790June
      30, 2009
    1.1625
    1.0827May
      31, 2009
    1.1872
    1.0961


Month
      Monthly AverageOctober 2009
    1.0537September 2009
    1.0818August 2009
    1.0878July 2009
    1.1222June 2009
    1.1265May 2009
    1.1479


On November 12, 2009, the noon buying rate for US$1.00 was
CAN$1.0519, the high rate was CAN$1.0577 the low rate was CAN$1.0479 and the
closing rate was $1.0561.

Summary of Differences Between US and Canadian GAAP

A reconciliation of the differences between generally accepted
accounting principles in the United States and Canada is presented in Note 17 of
the audited consolidated financial statements stated in Item 18.

*B.*      
*Capitalization and Indebtedness*

Not applicable.

*C.*      
*Reasons for the Offer and Use of Proceeds*

Not applicable.

- 5 -

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*D.*       *Risk factors*

I. Risk factors that could affect future results:

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

II. Risks specific to the Company:

The following risks are specific to SANDs operations as a
whole.

a) Financial Risks

| | *1.* | *History of losses - We have a
history of losses and may incur future losses.*
| | ---- | ------------------------------------------------------------------------------

Risk:We have
incurred the following net losses between 2004 and 2009,

2004
    ($7,129,930)2005
    ($7,363,054)2006
    ($3,926,921)2007
    ($2,526,524)2008
    ($1,271,950)2009
    ($1,191,695)


Because we have not been profitable, we
have had to fund our losses through raising additional capital by way of a
private placement of convertible debentures and a loan from a major
shareholder.

Factors:

| | i.  | Our losses could continue for the future years as we
      continue to develop market awareness and acceptance of our products,
      expand the scope of our operations, respond to competitive developments,
      continue to attract, retain and motivate qualified personnel, and continue
      to commercialize products incorporating advanced technologies.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                     
| | ii. | Our ability to achieve and maintain profitability and
      positive cash flow is dependant upon our success in locating sufficient
      customers who will purchase our products and use our services, and our
      capacity to generate sufficient revenues.                                                                                                    

Impact:

| | i. | If our revenue grows more slowly than anticipated or if
      our operating expenses are higher than expected, we may not be able to
      achieve, sustain or increase profitability, in which case our financial
      condition will suffer. We cannot assure you that we will be successful in
      addressing these risks, and the failure to do so would have a material
      adverse effect on our business, operating results and financial
      condition.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 6 -

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| | 2. | Insufficient capital - We may need to raise
      additional capital in the future to fund our
  operations
| | -- | -----------------------------------------------------------------------------------------------------------

Risk: We need to raise
additional capital to fund our operating expenses. Our ability to obtain
financing will depend, among other things, on the Companys development efforts,
business plan, operating performance and the condition of the capital markets at
the time we seek financing. Given the current global financial crisis, it will
be very difficult to raise large additional funds through private placements or
the market and there can be no assurance that additional financing will be
available on favourable terms when required, or at all. In the event we raise
additional funds through the issuance of equity, equity-linked or debt
securities, those securities may have rights, preferences or privileges senior
to the rights of the Class A Common Shares, and shareholders may experience
dilution.

Factors:

| | i.  | While we have taken significant actions to reduce our
      operating expenses, most of our current operating expenses, such as
      employee compensation and lease payments for facilities and equipment, are
      relatively stable, and these expense levels are based in part on our
      expectations regarding future revenues.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                          
| | ii. | As a result, any shortfall in our revenues relative to
      our expectations would negatively impact our financial results. We then
      may not have sufficient capital to fund our
operations.                                                                                                                                       

Impact:

| | i.   | Such outcome could adversely impact our ability to
      respond to competitive pressures or could prevent us from conducting all
      or a portion of our planned operations. We may need to undertake
      additional measures to reduce our operating expenses in the
  future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ii.  | Our consolidated financial statements have been prepared
      on the basis of the going concern assumption, meaning that it is
      reasonably assumed that the Company will be able to realize its assets and
      discharge its liabilities in the normal course of operations. In light of
      operating losses suffered in the current and past years, the Companys
      ability to realize its assets and discharge its liabilities depends on the
      continued financial support of its shareholders and creditors and its
      ability to obtain additional financing. We cannot assure you that we will
      be successful in addressing these risks, and the failure to do so would
      have a material adverse effect on our business, operating results and
      financial condition.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | iii. | The carrying amounts of assets, liabilities, revenues and
      expenses presented in the financial statements and the balance sheet
      classification have not been adjusted as it would be required if the going
      concern assumption were not appropriate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | 3. | Quarterly fluctuations - Fluctuations in our
      revenues and operating results may affect our cash resources and result in
      wide fluctuations in the market price of our
  share.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Risk: Our quarterly and
operating results are difficult to predict and have fluctuated in the past, and
may fluctuate in the future.

- 7 -

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Factors:

| | i. | Our quarterly results are affected by a number of
      factors, many of which are outside our control. In particular, we depend
      on customers to demand our technology which may be dependant on their
      systems integrators roadmap for the enterprise-wide implementation of
      business intelligence. In other circumstances, we depend on customers to
      adopt our technology which may be delayed due to internal plans and
      budgets.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impact:

| | i.  | As a result, we may not be able to accurately predict our
      necessary cash expenditures during each quarter or obtain timely financing
      to cover any shortfalls.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ii. | We also believe that period-to-period comparisons of our
      operating results are not meaningful and that one should not rely on any
      such comparisons as an indication of our future performance. It is
      possible that our operating results in some quarters will be below market
      expectations. This may cause the market price of our Common Shares to
      decline. When the market price of a company's shares drops significantly,
      shareholders often institute securities class action lawsuits against that
      company. A lawsuit against us could cause us to incur substantial costs
      and could divert managements attention from our
  business.

|b) Operational Risks
|--------------------
|                    
|                    
|                    
|                    
|                    
|                    

| | i.  | We believe that many companies are not yet fully aware of
      the benefits of enterprise- wide business intelligence solutions, nor have
      such companies yet deployed business intelligence solutions on an
      enterprise-wide basis.                                                                                                                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ii. | Accordingly, the sales cycle associated with the purchase
      of our SAND/DNA Analytics products and our SAND/DNA Access products is
      typically three to twelve months in length. During this period, a
      potential sale is subject to a number of significant risks over which we
      have little or no control, including customers' budgeting constraints and
      internal acceptance review procedures including, in some instances,
      approval by the board of directors of the
customer.

Impact:

| | i. | Based in part upon, among other things, our lengthy sales
      cycle, the timing of sales is difficult to predict and our earnings and
      operating results could vary significantly from quarter to quarter during
      our current fiscal year. As a result of the long sales cycle, it may take
      us a substantial amount of time to generate revenue from our sales
      effort.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 8 -

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| | 2. | Managing growth - If we fail to manage our future
      growth effectively, we may not be able to market and sell our products and
      services successfully
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

Risk:Our future
operating results depend to a large extent on our managements ability to plan
and direct our growth successfully, including training our sales personnel to
become productive and generate revenue, forecasting revenue, controlling
expenses, addressing new markets and maintaining our research and development
efforts.

Factors:

| | i.   | We are moving to secure and maintain effective
      partnerships with systems integrators and application vendorswhich
      may take some time to mature into predictable revenue producers.                                                                                                                    
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                   
| | ii.  | Competition for qualified sales personnelis
      strong. Many of our competitors have substantially greater resources than
      we to hire qualified sales personnel. In addition, turnover among our
      sales force tends to slow sales efforts until replacement personnel are
      recruited and trained.
| |      |                                                                                                                                                                                                                                                                                                                   
| | iii. | Our success in maintaining our indirect channels,
      including value-added resellers, resellers and distributors is important
      to our ability to achieve revenue growth and improved operating margins on
      product sales.                                                                            

Impact:

| | i.   | Our prospects with systems integrators and application
      vendorsare difficult to predict and may change rapidly. You should
      consider the risks, expenses and difficulties that we may encounter or
      incur as a company operating in a rapidly evolving market. Our business
      strategy may not be successful, and we may not successfully address these
      risks.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ii.  | We may not be able to attract and retain the sales and
      marketing personnelwe desire, even after spending significant
      resources to do so, and the failure to do so could have a material adverse
      effect on our business, operating results and financial
  condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | iii. | Despite the fact that we continue to invest resources to
      develop our indirect channels, we may not be able to continue to
      attract and retain additional companies in our indirect channels that will
      be able to market our products effectively and will be qualified to
      provide timely and cost-effective customer support and services. In
      addition, our agreements with companies in our indirect channels do not
      restrict such companies from distributing competing products, and in many
      cases, these agreements may be terminated by either party without cause.
      We may not be able to successfully expand our sales through indirect
      channels, and failure to do so could have a material adverse effect on our
      business, operating results and financial
condition.

c) Risks which may affect the value of
our securities

| | 1. | Volatility in share price - The price of our Class
      A Common Shares on the OTC Bulletin Board may be volatile and could
      fluctuate substantially.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

Risk:Our Class A Common
Shares are currently listed on the OTC Bulletin Board (the "OTCBB") under the
symbol SNDTF.OB. Our share price, which has ranged from a low of

- 9 -

---

US$0.26 to a high of US$0.81 during
the past twelve months, could continue to be subject to wide fluctuations.

Factors:

| | i.  | The volume of trading in our Class A Common Shares on the
      OTCBB has not been substantial. As a result, even small dispositions or
      acquisitions of our Class A Common Shares in the public market could cause
      the market price to fall or increase substantially.                                                                                                                        
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                           
| | ii. | Our share price could also be subject to wide
      fluctuations in response to broad market and industry factors, actual or
      anticipated variations in quarterly operating results, volatile economic
      conditions, new products offered by us or our competitors, changes in
      financial estimates by securities analysts and other events or factors
      that may be beyond our control.

Impact:

| | i. | When the market price of a company's share drops
      significantly, shareholders often institute securities class action
      lawsuits against that company. A lawsuit against us could cause us to
      incur substantial costs and could divert managements attention from our
      business.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Sales of shares - Future sales of our Common Shares
      in the public market could adversely affect our share
  price.
| | -- | ------------------------------------------------------------------------------------------------------------------------

Risk: We are authorized
to issue an unlimited number of Class A Common Shares, of which 15,889,619
shares are outstanding as of November 12, 2009, and we have reserved an
additional 937,000 Class A Common Shares for future issuance. We have granted
rights to purchase 1,144,000 Class A Common Shares to directors, officers,
employees and consultants upon the exercise of options at prices ranging from
US$0.69 to US$6.28 per share. In addition, we have reserved another 652,500
Class A Common Shares for future issuance at an exercise price of $0.001 per
share.

Impact:

| | i.  | The issuance of these authorized or reserved shares could
      substantially dilute the equity interest of our existing shareholders and
      could result in a significant decrease to the market price of our Class A
      Common Shares.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                               
| | ii. | The issuance of shares under the exercise of options
      could also dilute the equity interest of our existing shareholders and
      could result in a significant decrease to the market price of our Class A
      Common Shares.        

| | 3. | Concentrated ownership - Existing shareholders
      continue to exercise effective control over
us.
| | -- | ----------------------------------------------------------------------------------------------------

Risk: Our major
shareholders beneficially own approximately 34.49% 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

- 10 -

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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 6.60% of our
Class A Common Shares.

Impact:

| | i. | These shareholders may, as a practical matter, continue
      to be able to control the election of a majority of the directors of SAND
      and the determination of many corporate actions. This concentration of
      ownership could have the effect of delaying or preventing a change in
      control of SAND.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Class B shares - 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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Risk: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.

Impact:

| | i. | 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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

III. Risks common to the industry:

The following risks are common to companies of the same profile
as SAND and in the similar industry as the one that SAND operates in:

a) Technology Risks

| | 1. | Adoption risk - We depend on enterprises to adopt
      enterprise-wide implementation of business
  intelligence.
| | -- | ------------------------------------------------------------------------------------------------------------------

Risk:We are focusing our
selling efforts increasingly on larger, enterprise-wide implementations of our
SAND/DNA Product Suite and we expect such sales to constitute an increasing
portion of any future revenue growth. To date, our selling efforts have resulted
in limited enterprise-wide implementations of our SAND/DNA Product Suite.

Impact:While we have
devoted resources to promoting market awareness of our products and the needs
our products address (including training our sales personnel and demonstrating
our products at industry conferences and trade shows), we cannot assure you that
these efforts will be sufficient to build market awareness of the need for the
enterprise-wide implementations for business intelligence or acceptance of our
products. Failure of a significant market for enterprise business intelligence
products to fully develop, or failure of enterprise-wide implementations of our
products to achieve broad market acceptance, could have a material adverse
effect on our business, operating results and financial condition.

- 11 -

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| | 2. | Rapidly changing technology risk - We depend on
      enterprises to adopt our technology.
| | -- | ------------------------------------------------------------------------------------------

Risk: The market for our
products is characterized by rapidly changing technology, evolving industry
standards and customer requirements, emerging competition, and frequent new
product introductions. Our products incorporate a number of advanced
technologies, including a proprietary data analysis engine, a distributed
architecture, as well as Web access and delivery technology. We may be required
to change and improve our products in response to changes in operating systems,
applications, networking and connectivity software, computer and communications
hardware, programming tools and computer language technology.

Impact:

| | i.   | As a result, the life cycle of our products is difficult
      to estimate. We attempt to establish and maintain partner alliances with
      influential companies in a variety of core technology areas to help us
      successfully respond to changing technology, identify new product
      opportunities, or develop and bring new products to market in a timely and
      cost-effective manner. Our failure to establish such alliances could have
      a material adverse effect on our business, operating results and financial
      condition.                                                                                                                                                                                                                                                                                                                                                                                    
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ii.  | We have in the past experienced delays in software
      development and there can be no assurance that we will not experience
      delays in connection with our current or future product development
      activities. Our failure, for technological or other reasons, to develop
      and introduce new products and product enhancements on a timely basis
      could have a material adverse effect on our business, operating results
      and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | iii. | In addition, we or our competitors may announce
      enhancements to existing products, or new products that have the potential
      to supplant or provide lower cost alternatives to our existing products.
      The introduction of such enhancements or new products could render our
      existing products obsolete and unmarketable. Furthermore, introduction by
      us of products with reliability, quality or compatibility problems could
      result in reduced orders, delays in collecting accounts receivable, and
      additional service costs. The failure to introduce a new product or
      product enhancement on a timely basis could delay or hinder market
      acceptance. Research and development efforts may require us to expend
      significant capital and other resources. Any such event could have a
      material adverse effect on our business, operating results and financial
      condition.

| | 3. | Complexity of products - Our solutions are highly
      technical and any undetected software errors, failures or viruses in our
      products may be subject to product liability claims for such
      defects.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Risk: Despite our testing
of new products and their use by current and potential customers when first
introduced or when new enhancements are released, we cannot assure you that
there will be no defects or errors in new products or enhancements in our
commercial shipments.

- 12 -

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Impact:

| | i.  | Although we have not experienced material adverse effects
      resulting from any such defects and errors to date, we cannot assure you
      that defects and errors will not be found in new products or enhancements,
      resulting in loss of revenues, delay in market acceptance or damage to our
      reputation, which could have a material adverse effect upon our business,
      operating results and financial condition.                                                                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ii. | While our license agreements with our customers typically
      contain provisions designed to limit our exposure for potential claims
      based on errors or malfunctions of our products, it is possible, however,
      that these provisions may not be effective under the laws of certain
      jurisdictions. Although we have not experienced any product liability
      claims to date, the sale and support of our products entails the risk of
      such claims. Although we carry insurance against product liability risks,
      we cannot assure you that such insurance would be adequate to cover a
      potential claim. A product liability claim brought against us could have a
      material adverse effect on our business, operating results and financial
      condition.

| |    |                                                                            
| | -- | ---------------------------------------------------------------------------
| | 4. | Proprietary rights - There is
limited protection of our proprietary rights.

Risk: We currently rely
mainly 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. We cannot assure you that our patents will not be invalidated,
circumvented or challenged, or that the rights granted under our patents will
provide competitive advantages to us. Others may develop technologies that are
similar or superior to our technology or design around any patent that may be
owned by us.

Impact:

| | i.  | Despite our efforts to protect our proprietary rights,
      unauthorized parties may attempt to copy aspects of our products or to
      obtain and use information that we regard as proprietary. Policing
      unauthorized use of our products is difficult, and while we are unable to
      determine the extent to which piracy of our software products exists, we
      can expect software piracy to be a persistent problem.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ii. | In addition, the laws of some foreign countries do not
      protect our proprietary rights as fully as do the laws of the United
      States and Canada. There can be no assurance that our means of protecting
      our proprietary rights in North America or abroad will be adequate. We
      have entered into source code escrow agreements with a number of our
      customers and indirect channel partners requiring release of source code
      under certain conditions. The provision of source code escrows may
      increase the likelihood of misappropriation by third parties. Although we
      are not currently aware of any claims asserted by third parties that we
      infringe on their intellectual property, we expect that in the future
      software product developers will increasingly be subject to infringement
      claims as the number of products and competitors in our industry segment
      grows and the functionality of products in different industry segments
      overlaps. Any such claims, with or without merit, could be time consuming
      to defend, result in costly litigation, divert management's attention and
      resources, cause product shipment delays or require us to enter into
      royalty or licensing agreements which may not be available on
  terms

- 13 -

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acceptable to us, if at all. In the
event of a successful claim of product infringement against us and our failure
or inability to license the infringed or similar technology, our business,
operating results and financial condition could be materially adversely
affected.

| | 5. | Third Party Software Use 
There may be limited support of third party software
| | -- | -------------------------------------------------------------------------------

Risk:We may rely upon
certain software that we license from third parties, including software that may
be integrated with our internally-developed software and used in our products to
perform key functions. We cannot assure you that these third-party software
licenses will be available to us on terms acceptable to us or indeed that our
suppliers will continue to support their software or remain in business.

Impact:

Our inability to obtain or maintain any
such software licenses could result in shipment delays or reductions until
equivalent software could be developed, identified, licensed and integrated,
which could have a material adverse effect on our business, operating results
and financial condition.

b) Business Risks

| | 1. | Competitive environment - We
operate in a highly competitive environment.
| | -- | -------------------------------------------------------------------------

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

| | o | vendors that offer data warehouse appliances which
      operate specifically with their proprietary platform such as Netezza, NCR
      Teradata and DATAllegro;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                  
| | o | software vendors that offer products which focus on
      structured data archiving such as FileTek and PBS;                                                     
| |   |                                                                                                                                                                  
| | o | other companies that may in the future announce offerings
      of enterprise information management solutions.                                                  

Impact:

| | i. | 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. Over the last year, we
      have been able to establish ourselves as complementary to many of the
      vendors that were seen as competitors with respect to SAND/DNA Analytics.
      We now have offerings that complement SAP BI, Oracle, IBM DB2 and
      Microsoft SQL warehouse. We expect additional competition as other
      established and emerging companies enter into the intelligent information
      management software market and new products and technologies are
      introduced. Increased competition could result in price reductions, fewer
      customer orders, reduced gross margins, longer sales cycles, and loss of
      market share.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 14 -

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| | ii.  | Current and potential competitors may make strategic
      acquisitions or establish cooperative relationships among themselves or
      with third parties, thereby increasing the ability of their products to
      address the needs of our prospective customers. Our current or future
      indirect channel partners including systems integrators and application
      vendors may establish cooperative relationships with our current or
      potential competitors and limit our ability to sell products through
      particular distribution channels. Such competition could have a material
      adverse effect on our ability to enter into new licensing agreements, and
      maintenance and support renewals for existing licensing agreements, with
      respect to our products. Competitive pressures could also require us to
      reduce the price of our products.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | iii. | We compete mainly on the basis of product features, lower
      Total Cost of Ownership (TCO), Return on Investment (ROI), time to market,
      ease of use, product performance, product quality, user scalability, open
      architecture, customer support and price. While we believe we presently
      compete favourably with respect to each of these factors, some potential
      customers may be reluctant to work with us due to our share price or our
      current financial situation.                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | iv.  | We cannot assure you that we will be able to compete
      successfully against current and future competitors, and the failure to do
      so could have a material adverse effect on our business, operating results
      and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |    |                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------
| | 2. | International business - The
international nature of our business exposes us to financial and regulatory
risks.

Risk: Revenues earned
outside North America are expected to remain significant in the future. We have
sales offices in the United Kingdom and Germany. The following table summarizes
the percentage of sales generated outside North America.

2005
    52%2006
    70%2007
    71%2008
    66%2009
    62%


A key component of our strategy is our
planned expansion into additional international markets. To facilitate this
international expansion, we need to localize our products for the additional
foreign markets.

Impact:

| | i. | If the revenues generated by these expanded international
      operations do not offset the expense of establishing and maintaining these
      foreign operations, there could be a material adverse effect on our
      business, operating results and financial condition. We cannot assure you
      that we will be able to successfully localize, market, sell and deliver
      our products in these markets.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 15 -

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| | ii. | There are also additional risks in doing business on an
      international level, such as increased difficulty in controlling operating
      expenses, unexpected changes in regulatory requirements, tariffs and other
      trade barriers, difficulties in staffing and managing foreign operations,
      longer payment cycles, problems in collecting accounts receivable,
      political instability, fluctuations in currency exchange rates, seasonal
      reductions in business activity, and potentially adverse tax consequences.
      These risks could adversely impact the success of our international
      operations. We cannot assure you that one or more of these factors will
      not have a material adverse effect on our future international operations
      and, consequently, on our business, operating results and financial
      condition.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Key personnel - We depend on key
      personnel.
| | -- | -------------------------------------------------

Risk: Our success depends
to a significant degree upon the continued contributions of our research and
development and sales and marketing teams, as well as our management, some of
whom would be difficult to replace.

Impact:

| | i.  | We believe that our future success will depend in large
      part upon our ability to attract and retain highly skilled managerial,
      engineering, sales and marketing, and finance personnel. Competition for
      qualified personnel remains strong, and there can be no assurance that we
      will be successful in attracting and retaining such personnel.                                                                                                                                                   
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ii. | We have in the past experienced difficulties in hiring
      highly qualified sales and engineering personnel. The loss of the services
      of any of our other key personnel, the inability to attract or retain
      qualified personnel in the future or delays in either hiring required
      personnel or the rate at which new people become productive, particularly
      sales personnel and engineers, could have a material adverse effect on our
      business, operating results and financial
condition.

| | 4. | Pressures in the global financial system may
      adversely affect our finances and operations in ways that may be hard to
      predict or to defend against
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent events have demonstrated that
businesses and industries throughout the world are intertwined to a degree that
we do not always realize. Thus, events seemingly unrelated to us or to our
industry may adversely affect us over the course of time. For example, rapid
changes to the foreign currency exchange regime may adversely affect our
financial results. Credit contraction in financial markets may hurt our ability
to access credit in time of need. A reduction in credit, combined with reduced
economic activity, may adversely affect businesses and industries that
collectively constitute a significant portion of our customer base. As a result,
these customers may need to reduce their purchases of our products or services,
or we may experience greater difficulty in receiving payment for the products or
services that these customers purchase from us. Any of these events, or any
other events caused by turmoil in world financial markets, may have a material
adverse effect on our business, operating results, and financial conditions.

- 16 -

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ITEM 4.       
INFORMATION ON THE COMPANY

*A.*      
*History and Development of the Company*

General Background

SAND was incorporated on December 10, 1982 under the Canada
Business Corporations Act(the "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.

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/DNA 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.

SAND now focuses its resources around intelligent information
management and consultative "best practices" leveraging the latest developments
in our SAND/DNA Access and SAND/DNA Analytics platforms.

Packaged around our solution offerings is the concept of
Nearline 2.0, 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. Whereas 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.

- 17 -

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*B.*       *Business Overview*

We are a company with a commitment to a rapidly evolving
industry which seeks to improve the business professional's ability to make
timely, fact-based business decisions and to help large enterprises maintain
cost-effective and timely access to enormous amounts of data.

Our revenues 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.

Products and Services

Overall

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 with orders of magnitude greater and more
efficiently than what is generally possible using more traditional database
products.

These software product solutions have been marketed and are
known as the SAND/DNA Product Suite and arebased on our patented
tokenized database engine. It can best be viewed as an enterprise platform
technology that enables organizations to maximize the business value of
corporate information by supporting better business decisions through intuitive
interactive data access and keeping more data available for analysis. Our
products permit more timely and accurate decisions across the extended
enterprise, making "business intelligence" a key component of operational
excellence.

SAND/DNA Access  Advanced Data Management

In 2004, we introduced patent-protected SAND/DNA Access. This
product builds on SANDs strength in advanced data management to:

| | (a) | create a highly compressed database for storing data that
      is not of immediate need to an organization but that will be required over
      time for either historic analysis, regulatory or compliance
    purposes;                                                                                                
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                           
| | (b) | help manage the data explosion in industry by maintaining
      rapid access to huge volumes of data; and                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                           
| | (c) | includes 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.)

- 18 -

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

SAND/DNA 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/DNA for SAP BI.

During the fiscal year ended on July 31, 2009, SAND/DNA Access
has been extended with the introduction of the DNA/Enhance module to integrate
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. This module is at the base of the SAND/DNA Corporate Information
Memory used as the new approach for data warehouse implementation.

SAND/DNA Analytics  Converting Data into Key Decisions

The SAND/DNA Analytics product, which incorporates SANDs
patent-protected Nucleus database engine and other Nucleus derived products,
facilitates the use of data mining, query, reporting and other classes of
on-line analytical applications, thereby enabling more effective management of
customer relationships, supply chains and other critical business processes.

Our SAND/DNA Analytics product incorporates a number of
advanced technologies. Its development has required substantial investment in
research and development:

| | (a) | During the fiscal year ended on July 31, 2002, important
      advancements were made in the ability to quickly and efficiently load even
      larger volumes of data into the SAND/DNA Analytics product and in the
      ability of the SAND/DNA Analytics product to support an even wider variety
      of applications by more efficient interfacing with industry-standard
      applications and data extraction tools.                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | During the fiscal year ended on July 31, 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.                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | During the fiscal year ended on July 31, 2005, a
      significant update to Version 4 (currently Release 4.2) incorporating many
      features to allow high-performance scalability for multiple users and huge
      amounts of data was released.                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (d) | During the fiscal year ended on July 31, 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 trig anomic
      math functions, snapshots, and Eastern European language and hexadecimal
      characters.

- 19 -

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| | (e) | During the fiscal year ended on July 31, 2009, SAND made
      available release 5.2 of SAND/DNA Analytic. This new version introduced
      three major functionalities. A text search engine has been incorporated
      into the product to enable complex text analytic. A data federation layer
      has been integrated to the core product to enable a distributed
      architecture facilitating the interoperability between the SAND/DNA
      Analytic and Access product. MOLAP functionalities have been added to SQL
      language enabling more complex analytic.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SAND/DNA Platform - Empowering the Users

We have developed a unique data storage and manipulation
architecture now known as the SAND/DNA Platform, 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 the fiscal year ended on July 31, 2009, SAND 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 that deliver high flexibility with limited total cost
of ownership.

Principal Markets

- Our corporate headquarters are located in Montreal, Canada, where we also
  have development and sales resources. We have offices in Kenilworth, New
  Jersey and San Mateo and Pasadena, California, through Sand Technology
  Corporation to provide for the development, sales, marketing and distribution
  of the SAND/DNA Product Suite in the United States.
- Our offices in the United Kingdom are located in Camberley, southwest of
  London where we operate through Sand Technology Limited.
- Our offices in Germany are located in Hamburg where we operate through Sand
  Technology Deutschland GmbH.

We have two key geographic segments  North America and Europe.
The following table summarizes the percentage of our total revenue generated in
the fiscal years 2009, 2008 and 2007 for each of our geographic segments.

2009
    2008
    2007North America
      38%
      34%
      29%Europe
    62%
    66%
    71%


Our customers in North America 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 historic
  data.
| | --- | ----------------------------------------------------------------------------------------------------------------------------

In particular, the SAND/DNA Analytics
Product Suite is already 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, are using our
products in support of strategic corporate initiatives including e-business,
customer relationship management, reporting, supply chain management, risk
analysis and management, product trend and profitability analysis, fraud
detection, emerging markets, 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.

Marketing Channels

Among others, we have alliances or commercial
  relationships with the following companies,

SAP AG
    IBM
    Sun Microsystems Inc.
    Total Tec
    Accenture Ltd.
    Cap Gemini S.A.
    HPInforte 
      Corporation
    Posetiv 
      Limited
    Open Text 
      Corporation
    ATOS Origin
    Oracle 
      Corporation
    TG Energy


SAND is an approved vendor on the
United States General Services Administration (GSA) Supply Schedule.

In addition, we now have marketing,
sales and technical arrangements in place with a number of recognized systems
integration partners who have trained personnel in the marketing and deployment
of our products.

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

Competition

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

- vendors that offer data warehouse appliances which operate specifically
  with their proprietary platform such as Netezza, NCR Teradata and DATAllegro;
- 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/DNA Access and
SAND/DNA for SAP BI we have been able to establish ourselves as complementary to
many of the vendors that we were seen as competitors with respect to SAND/DNA
Analytics. We now have offerings that complement SAP, Oracle, IBM DB2, and
Microsoft SQL warehouses. We expect additional competition as other established
and emerging companies enter into the intelligent information management
software market and new products and technologies are introduced. Increased
competition could result in price reductions, fewer customer orders, reduced
gross margins, longer sales cycles, and loss of market share.

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

Proprietary Rights

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, there 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

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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.

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 Nucleux-based marks and
designs are trademarks of the Company.

Seasonality

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

Impact of Governmental Policies

There is no current governmental economic, fiscal, monetary or
political policy or factor that has materially affected or that could materially
affect the Company's operations or investments by shareholders.

*C.*       *Organizational Structure*

SAND has three wholly-owned subsidiaries: (i) Sand Technology
(Ireland) Limited; (ii) STSI Licensing, LLC; and (iii) Sand Technology
Corporation. 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 heldSand Technology
      Corporation
    Delaware
    100%STSI Licensing,
      LLC
    New
      Jersey
    100%Sand Technology
      (Ireland) Limited
    Ireland
    100%


(LEFT INTENTIONALLY BLANK)

- 23 -

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The following chart illustrates the principal subsidiaries of
SAND, together with the jurisdiction of incorporation of each company and the
significant properties held by each company:



*D.*       *Property,
  Plant and Equipment*

As at July 31, 2009, we leased a total of approximately 14,073
square feet of office space in three cities across North America, and 1,054
square feet in Germany. The weighted average annualized cost per square foot of
the space occupied is $23.77 including real estate taxes and operating expenses.
No lease extends beyond November 30, 2015.

ITEM 4A.     UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 5.        OPERATING
AND FINANCIAL REVIEW AND PROSPECTS

*A.*       *Operating Results*

Compared to the fiscal year ended on July 31, 2008, in the
fiscal year ended on July 31, 2009, there was a reduction in our net loss of 6%.
Disappointingly, sales were only up by 1% with total operating expenses down by
1% having an impact of a reduction in loss from operations of 16%. However, we
sold our solution into five new customers  two are based in North America and
three are based in Europe. We secured a multi-year, multi-million dollar deal
with a distributor, we closed a very important deal with one of the worlds
leading chemical companies and sold additional solutions and licenses into
existing customers that required upgrades. We were expecting a higher increase
in revenue; however due to the overall extremely cautious attitude of
customers,

- 24 -

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information technology budget cuts and further delays caused by
certain systems integrators in releasing the next version of their products as
well as issues being encountered by these same products, these sales have been
further delayed. Although North America showed an increase in revenue of 12%,
there was an increase in net loss of 22%. This was mainly driven by the increase
in professional fees, consulting services, travel to events and overall
weakening of the Canadian dollar against the US dollar of 17%. There was an
opposite effect in Europe; there was a slight decrease in revenue of 5% and an
increase in net earnings of 56%. In Europe, overall there wasnt a significant
movement of the Euro (an increase of 6%) and Pound Sterling (a decrease of 8%)
against the Canadian dollar. So the increase in net earnings was driven by the
reduction in costs and commissions due to lower overall sales.

I. Revenue  Total and
Variation

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

Revenue - Total
        and Variation
      2009
      2008
      2007RevenueRevenue Variation year-over-year
      increase in revenue
    $7,049,237 1%
    $6,998,472 4%
    $6,728,540 23%


Compared to the fiscal year ended on July 31, 2008, the
increase in our revenues for the fiscal year ended on July 31, 2009 was minimal.
Our revenue growth has been 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.

II. Revenue  Segment and
Variation

The Company has two geographical segments. Both North American
and European segments market SAND/DNA Product Suite. The following table
provides a summary of the revenue growth by geographical segments for fiscal
years 2009, 2008 and 2007.

North America
      EuropeRevenue
        - Segment and Variation
      2009
      2008
      2007
      2009
      2008
      2007RevenueRevenue
      $2,688,679
      $2,410,048
      $1,941,034
      $4,360,558
      $4,588,424
      $4,787,506Variation
        year-over-year increase (decrease) inrevenue
      12%
      24%
      19%
      (5%)
      (4%)
      25%


a) North America

Our sales in the fiscal year ended on July 31, 2009 in North
America increased by 12% compared to the fiscal year ended on July 31, 2008 due
to the sale of our software solutions to two new customers and selling
additional licenses and solutions to two existing customers; whereas last year,
we sold our software licenses to two new customers.

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b) Europe

Our sales in the fiscal year ended on July 31, 2009 in Europe
decreased by 5% compared to the fiscal year ended on July 31, 2008. In 2008,
SAND sold two large software licenses in the United Kingdom; whereas none were
sold in 2009. The continued focus in the fiscal year ended on July 31, 2009 was
to build up relationships with customers in order to grow revenues by selling
additional licenses and solutions. In this regard, there was a significant
amount of activity in Germany, which saw an increase in additional software
licenses to existing customers as well as sales of new software licenses.

III. Operating
Expenses

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

2009
      2008
      2007
      As
        a % of2009revenue
      As
        a % of2008revenue
      As
        a % of2007revenueCost of sales and product support
      1,396,224
      1,470,215
      1,666,331
      20%
      21%
      25%Variation year-over-year increase (decrease) incost of sales and
      product support
      (5%)
      (12%)
      7%Research and development, net
      1,960,295
      1,971,813
      2,215,146
      28%
      28%
      33%Variation year-over-year increase (decrease) inresearch and
      development
      (1%)
      (11%)
      (9%)Amortization of
      capital assets and other assets
      63,643
      187,517
      201,274
      1%
      3%
      3%Selling, general and administrative expenses
      4,507,118
      4,411,736
      5,100,057
      64%
      63%
      76%Variation year-over-year increase (decrease) inselling, general and administrative expenses
      2%
      (13%)
      (2%)


a) 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 lesser
costs related to the sale of third-party software, including certain license
fees and royalties.

Compared to the fiscal year ended on July 31, 2008, the cost of
sales remained fairly stable in the fiscal year ended on July 31, 2009. The 5%
decrease was due to the overall reduction in travel and related expenses as well
as the reduction in external consulting.

b) Amortization of Capital Assets and Other Assets

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

The reduction in amortization in the fiscal year ended on July
31, 2009 from the amortization in the fiscal year ended on July 31, 2008, was
due to the contract costs being fully amortized in the fiscal year ended on July
31, 2008.

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c) Selling, General and Administrative Expenses (SG&A)

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

Our SG&A expenses remained stable in the fiscal year ended
on July 31, 2009 compared to the fiscal year ended on July 31, 2008. There is 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.

IV. Net Losses  Total and Variation

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

|Net Loss - Total and Variation                      | 2009         | 2008         | 2007        
|--------------------------------------------------- | ------------ | ------------ | ------------
|Net loss                                            |              |              |             
|Net loss                                            | ($1,191,695) | ($1,271,950) | ($2,526,524)
|Variation year-over-year
      decrease in net loss | 6%           | 50%          | 36%         

In the fiscal year ended on July 31, 2009, our net loss was
reduced by 6% compared to the fiscal year ended on July 31, 2008 due to the
slight increase in revenue of 4%. Although the reduction is lower than expected,
these results reflect the evolving nature of the business and distribution model
of SAND. Any sustained shortfall in our revenues relative to our expectations
will negatively impact our operating results.

V. Net Losses  Segment and Variation

The following table provides a summary of net losses by
geographical segments for fiscal years 2009, 2008 and 2007.

North America
      EuropeNet earnings
        (loss) - Segment and Variation
      2009
      2008
      2007
      2009
      2008
      2007ProfitabilityNet earnings (loss)
      ($2,875,549)
      ($2,352,852)
      ($3,789,146)
      $1,683,854
      $1,080,902
      $1,262,622Variation year-over-year increase (decrease)
        innet
        earnings (loss)
      22%
      (38%)
      (3%)
      56%
      (14%)
      (49460%)


a) North America

Compared to the fiscal year ended on July 31, 2008, the
increase in our net loss for the fiscal year ended on July 31, 2009 of 22% was
mainly due to the increase in professional fees such as audit and legal,
consulting services for various marketing and sales related activities, travel
to events and the overall weakening of the Canadian dollar against the US
dollar.

b) Europe

Compared to the fiscal year ended on July 31, 2008, the
increase in net earnings of 56% was mainly due to the reduction in external
consulting costs and commissions from lower overall sales.

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Inflation

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

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. 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 in Note 15 to the audited consolidated financial
statements.

*B.*       *Liquidity
  and Capital Resources*

The Company used $434,114 to finance operating activities
during the fiscal year ended July 31, 2009, including $993,911 in operating
losses and a decrease of $559,797 in non-cash operating working capital. This
result compares with the cash used in the fiscal year ended July 31, 2008 of
$1,065,329 to finance operating activities including $951,804 in operating
losses and a decrease of $113,525 in non-cash operating working capital.

Accounts receivable was $1,384,199 as at July 31, 2009 compared
to $1,573,867 as at July 31, 2008. Although the sales increased by 1% during the
fiscal year ended July 31, 2009, the drop in accounts receivable of 12% was due
to the prompt collection of some of the outstanding balances before year end.
The reduction in unbilled receivable from $245,184 to $109,414 was due to the
billing and receipt of the amount outstanding.

Accounts payable and accrued liabilities were $1,002,902 as at
July 31, 2009 and $1,327, 575 as at July 31, 2008. The decrease was mainly due
to reduction in accounts payable in the US and Germany as payments were made and
contractors costs were reduced during the year. In addition, at July 31, 2008,
there was a large accrual for sales taxes due in the United Kingdom which was
reduced by 58% during the fiscal year ended on July 31, 2009.

As at July 31, 2009, there was a working capital deficiency of
$362,753 compared to a positive working capital of $85,442 as at July 31, 2008.
Working capital has been calculated by netting current assets and current
liabilities, excluding deferred revenue and deferred credits which are non-cash
items. The deterioration in working capital was driven by the increase in a loan
payable to a major shareholder.

During the year ended July 31, 2009, the Chairman and former
President and Chief Executive Officer of the Company advanced an additional
$749,024 to the Company.

The current indebtedness of the Company is limited to its
outstanding convertible debentures (the debt component of which is more fully
described in Item F hereof) and to the loans made to the Chairman and former
President and Chief Executive Officer of the Company. The Company incurs
indebtedness on a needed basis only.

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Capital expenditures for the fiscal year ended July 31, 2009
were $24,781, compared to $17,315 for the fiscal year ended July 31, 2008. The
expenditures were mostly related to computer equipment. The Company does not
anticipate large increases in capital expenditures in the coming fiscal
year.

Our cash as at July 31, 2009 was $1,065,572 compared to
$775,443 in 2008. The increase is mainly due to additional funding by a major
shareholder during the fiscal year. The additional funds compensated the cash
usage from operating activities of $434,114. Going forward, the cash required to
sustain the business operations will have to come from revenue growth and future
financing. We believe our cost structure will remain stable as SAND has
basically reached its optimal level with respect to headcount and its related
expenses. Given the current global financial crisis it will be very difficult to
raise large additional funds through private placements or the market. Another
impact of the current global financial situation is that potentially customers
will want longer payment terms.

In November 2009, the Corporation completed a non-brokered
private placement where the Company issued 785,715 units for US$0.70 per unit,
for total proceeds of US$550,000 to investors, one of whom is the President and
Chief Executive Officer. Each unit consists of two Class A common shares and one
share purchase warrant, exercisable at a price of US$0.50 per warrant.

The Company believes that its current cash and cash equivalents
may not be sufficient to meet its anticipated cash needs for ongoing operating
expenses and working capital expenditures. If cash generated from operations
becomes insufficient to satisfy its liquidity requirements, the Company may seek
to sell additional equity or debt securities. If additional funds are raised
through the issuance of debt securities, holders of these securities could have
certain rights, preferences and privileges senior to holders of its Common
Shares and the terms of this debt could restrict the Companys operations. The
sale of additional equity or convertible debt securities could result in
additional dilution to the Companys existing shareholders. The Company cannot
be certain that additional financing will be available in amounts or on terms
acceptable to it, if at all. If the Company is unable to obtain additional
financing, it may be required to reduce the scope of its operations, which could
harm its business, financial condition and operating results.

*C.*      
*Research and Development, Patents and Licenses*

Research and Development

The objective of SANDs research and development activities is
to focus on enhancing its current products to exceed customer expectations, and
to develop new products to maintain its competitive advantage in the market.

The Companys research and development activities are central
to fueling its existing and potential business. SAND engages in research and
development activities relating to the introduction of new features,
enhancements and new packaged products. SAND focuses on its two products
-SAND/DNA Access and SAND/DNA Analytics.

The Corporation maintains its main research and development
facility in Montreal, Canada. It also has a network of research and development
technologists in the United States, the United Kingdom and Germany. As of
November 21, 2009, there are 23 technologists. After research and development
tax credits, SAND spent $1.96 million in 2009, $1.97 million in 2008 and $2.25
million in 2007 on research and development.

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The Company will continue to focus on research and development
efforts that are key to responding to current changing technology. The Company
expects to continue to maintain the headcount as at July 31, 2009, as it appears
to be at an adequate level under current circumstances.

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.

Compared to the fiscal year ended on July 31, 2008, the
research and development expenses remained stable in the fiscal year ended on
July 31, 2009.

Please see Item 5A  Operating Results, III. Operating
Expenses a description of the amounts spent by the Company during each of the
last three financial years on Companys sponsored research and development
activities.

*D.*       *Trend
  Information*

The world has experienced severe volatility in the last year.
The Company continues to maintain a prudent attitude as to the future. Based on
the last three years, revenues have been increasing, operating costs have been
decreasing and now remaining stable and thus net losses have been significantly
decreasing. The Companys revenue is dependent on customers information
technology budgets opening up, customers outlook on investing in better, more
long-lasting solutions, and stability of the Company itself.

Sales

The Company will continue to focus its attention on growing
successfully through direct sales, partnerships with key systems integrators and
application vendors and alliances with proven indirect channels. The focus will
be on delivering nearline software solutions and best practices. The focus
will be on converting established relationships into sales.

Operating expenses

The Company will continue to maintain the current headcount, as
it appears to be at an adequate level under current circumstances. It will also
focus on controlling expenses by being cost-conscious; it will spend based on a
sound business case model, train sales personnel to become more productive and
generate revenue in local and international markets, and implement enhanced
systems to closely monitor results.

Cash and financing

The Company will continue to closely monitor its cash needs.
The Company does not plan on spending any significant amounts on capital assets.
Given the current global financial crisis, customers may delay payments to us
and suppliers may put more pressure on us to pay earlier. As well, the financial
environment does not appear to be conducive to raising additional capital.

In summary, future operating results will depend on many
factors, including the demand for our products, the level of product and price
competition, our success in selling our products, namely the SAND/DNA Analytics
products and the SAND/DNA Access products, and establishing our direct

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sales force and distribution channels, the state of the market
for our products and general economic conditions.

There are currently no known trends, uncertainties, demands,
commitments or events for the fiscal year ended on July 31, 2009 that are
reasonably likely to have a material adverse effect on our net revenues, income,
profitability, liquidity or capital resources, or that would cause reported
financial information not necessarily to be indicative of future or operating
results or financial condition.

*E.*       *Off-balance
  Sheet Arrangements.*

There are currently no off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on SAND's financial
condition, changes in financial conditions, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.

*F.*      
*Tabular disclosure of contractual obligations.*

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

$2010
    402,3602011
    259,9912012
    75,0452013
    75,0452014
    75,0452015
    25,015Total
    912,501


The following table sets forth the maturity schedule of our
material contractual financial obligations at July 31, 2009:

|                           |  | Payments
      due by period | 
|-------------------------- |  | ---------------------------- | 
|                           |  |                              | 
|                           |  | Total                        | 
|                           |  |                              | 
|Debt Component of          |  | US$1,777,944                 | 
|Convertible Debentures (1) |  |                              | 

Note (1): The amount above represents the redemption value of
the convertible debentures at the end of the term. Please refer to the audited
consolidated financial statements for the book value as at July 31, 2009.

*G.*       *Safe
  Harbor.*

Certain statements contained in this Report are
"forward-looking statements" within the meaning of the United States Securities
Act of 1933 and of the United States Securities Exchange Act of 1934 (the
"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 of SAND to be materially different from any
future results, performance or achievements expressed or

- 31 -

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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
12, 2009. For a more detailed discussion of these risks and uncertainties and
other business risks, seeItem 3 - "Risk Factors" and Item 5  "Trend
Information". 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.

ITEM 6.        DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES

*A.*      
*Directors and Senior Management*

Directors

The following table sets forth certain information concerning
the directors of the Company, including their beneficial ownership of shares of
the Company as of November 12, 2009. 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 orControlledP. Wayne Musselman (1) (2)Toronto, Ontario,
      Canada Director
    2007
    Accountant and Business Consultant.
    Nil (Nil%)Thomas M. O'Donnell (2) (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%)Douglas S. Pryde (1)
        Mount Royal, Québec, Canada Director
    2001
    Barrister & Solicitor
    Nil (Nil%)Arthur G. Ritchie (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%)Martin Shindler (1)
      Sarasota, Florida, United States Director
    1987
    Accountant and Business Consultant
    5,950 
       
      (0.04%)


- 32 -

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Name, Residence andOffice Held
    DirectorSince
    Principal
      Occupation
    Number andPercentage ofCommon SharesBeneficially Owned orControlledGeorge 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 12, 2009, the directors and officers of the
Company as a group beneficially owned 4,712,559 Common Shares representing
approximately 29.66% 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. 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. 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.

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

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

- 33 -

---

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

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.

Senior Management

The following table shows certain information with respect to
the executive and other officers of the Company:

Name
      Office
      Yearappointedto Office
      Other Positions and BusinessExperienceArthur G. Ritchie
    Former President
      and Chief Executive Officer
    1983(5)
    Principal of LGS Data Processing
      Consultants Inc. (1)Thomas M. ODonnell
    Current President
      and Chief Executive Officer
    2009(5)
    CEO of Edge Specialists LLCZainab A. Schwartz
    Vice-President,
      Finance and Administration and Chief Financial Officer
    2008(2)
    Director of Internal Controls at
      Quebecor World Inc.Sébastien Vézina
    Corporate Secretary
    2008(3)
    Lawyer(4)


Notes:

|(1) | See description of Mr. Arthur G. Ritchie under subsection
      entitled "Directors".                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                   
|(2) | Ms. Zainab A. Schwartz was appointed as Vice-President,
      Finance and Administration of the Company on June 9, 2008, in replacement
      of Mr. Gilles Therrien, who resigned on May 9, 2008.
|    |                                                                                                                                                                                                   
|(3) | Mr. Sébastien Vézina replaced Mr. Georges Dubé as
      Secretary of the Company on January 29, 2008.                                                                                             
|    |                                                                                                                                                                                                   
|(4) | Mr. Vézina is a partner at the law firm Lavery, de Billy,
      L.L.P.                                                                                                                            
|    |                                                                                                                                                                                                   
|(5) | Effective November 1st, 2009, Arthur G.
      Ritchie reitred as President and Chief Executive Officer of SAND and
      Thomas M. ODonnell was appointed to replace him.                        

Ms. Zainab Ahmed Schwartz was previously Director of Internal
Controls at Quebecor World Inc. Previously, she specialized in auditing
technology and telecommunications clients while with Deloitte & Touche LLP,
including two of the largest public Canadian telecommunications companies as
well as private software technology companies. She holds a Graduate Diploma in
Accountancy from Concordia University in Montreal together with a Bachelor of
Commerce from McGill University in Montreal. She is a member of the Institute of
Chartered Accountants of Ontario.

Mr. Sébastien Vézina is currently a Partner of Lavery, de
Billy, L.L.P., where he has been practising as a lawyer since 1999. He holds a
Bachelor of Laws from Laval University in Québec City and is a member of the
Québec Bar since 1999.

There are no family relationships between any director or
executive officer and any other director or executive officer.

- 34 -

---

*B.*      
*Compensation*

Compensation of Directors

During the fiscal year ended July 31, 2009, each director,
other than those directors who are salaried or otherwise compensated officers of
SAND, is paid a basic annual retainer of $15,000 for serving as a director. The
Chairman of the Audit Committee is paid an additional amount of $5,000 per
year.

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 takes into account that it
is a technology company without a history of earnings in the last 5 years.

Determining Compensation

The compensation of the Named Executive Officer 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 Officer, to 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 the adoption by 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 possibility to participate to the collective insurance plans.
There are two variable components  incentive bonus and the grant of common
share stock options 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 a consulting
fee or in shares.

- 35 -

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Incentive Bonus

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

Option-Based or Share-Base Award Plan

The option or share plan is the only long-term incentive plan
(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. Options or awards are made by the Board of
Directors, after recommendation by the Compensation Committee. Options or 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 to be
disclosed in accordance with applicable Canadian and United States securities
regulations during the Company's three financial years ended July 31, 2009, July
31, 2008 and July 31, 2007:

"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, the
bonus, 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, 2009, the end of the most recently completed
financial year of the Company, the Company had two Named Executive Officers,
whose names and positions held within the Company are set out in the summary
compensation table below.

- 36 -

---

Summary Compensation Table

Name and Principal
        Position
      Year
      Annual Compensation
      Long-Term
        CompensationAwards
      PayoutsSalary
        ($)
      Bonus
        ($)
      Other
        ($)
      Share- Based
        Awards ($)
      Option-
        Based **Awards ($)**
      LTIP
        Payouts ($)
      All
        Other Compensation ($)Thomas M.
        ODonnell(3)
        President and 
        Chief Executive 
        Officer
      2009 
        2008 
      2007
      - 
        - 
      -
      - 
        - 
      -
      - 
        - 
      -
      - 
        - 
        -
      - 
        - 
        -
      - 
        - 
      -
      - 
        - 
      -Arthur G. Ritchie(4)
        Former President and Chief 
        Executive Officer
      2009 
        2008 
        2007
      212,153 
        212,153 
        150,000
      50,000 
        50,000 
        50,000
      80,772 
        72,809 
        55,613
      - 
        - 
        -
      - 
        - 
        -
      - 
        - 
        -
      - 
        - 
        -Zainab A. Schwartz (2)
        Vice President, 
        Finance and 
        Administration and 
        Chief Financial Officer
      2009 
        2008 
      2007
      120,000 
        120,000 
      -
      10,000 
        20,000 
      -
      - 
        - 
        -
      - 
        22,173 
      -
      - 
        - 
      -
      - 
        - 
      -
      - 
        - 
      -Gilles Therrien (1)
        Former Vice 
        President, Finance 
        and Administration 
        and Chief 
        Financial Officer
      2009 
        2008 
      2007
      - 
        121,275 
      121,275
      - 
        - 
      -
      - 
        - 
      -
      - 
        - 
      40,000
      - 
        - 
      -
      - 
        - 
      -
      - 
        127,339 
      -


Notes:

|(1) | Mr. Therrien resigned on May 9, 2008.                                                        
|--- | ---------------------------------------------------------------------------------------------
|    |                                                                                              
|(2) | Ms. Schwartz was appointed on June 9, 2008.                                                  
|    |                                                                                              
|(3) | Mr. ODonnell became President and Chief Executive
      Officer of SAND on November 1, 2009.
|    |                                                                                              
|(4) | Mr. Ritchie retired as President and Chief Executive
      Officer on November 1, 2009.      

Outstanding Option-Based Awards

As at July 31, 2009, there are no stock-options outstanding for
the Named Executive Officers.

Outstanding Share-Based Awards

As at July 31, 2009, there are 30,000 share awards that have
been granted to the Vice President, Finance and Administration and Chief
Financial Officer of the Company. The shares can be acquired at no cost after
three years of employment at the Company, i.e. June 9, 2011.

Pension Plan Benefits

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

- 37 -

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Securities Authorized for Issuance under Equity Compensation
Plans

The following tables summarize as of November 12, 2009, the
equity compensation plans pursuant to which equity securities of the Company may
be issued:

Stock-Option 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
    551,000
    0.98
    1,449,000Equity Compensation Plans of the Company not approved
      by the shareholders
    0
    N/A
    0Total:
    551,000
    
    1,449,000


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
    407,500
    0
    592,500Equity Compensation Plans of the Company not approved
      by the shareholders
    0
    N/A
    0Total:
    407,500
    -
    592,500


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
US$5,000,000 per loss per policy period, subject to a deductible of US$250,000
per securities claim and US$250,000 per other claim. The current annual premium
is paid entirely by SAND and amounts to approximately US$134,000. 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

- 38 -

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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) | On April 18, 2008, SAND entered into a Voting Agreement
      with Arthur G. Ritchie and Bradley G. Griffith on behalf of the
      subscribers of debentures issued pursuant to a private placement on April
      24, 2008 for aggregate proceeds of US$1,002,600, whereby SAND 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) | 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 November 1, 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 severance 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 expriy of the term, the remaining
      unpaid balance of the consulting fee will become immediately due and
      payable to Jerart;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (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 loan 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) | On October 31, 2009, Arthur G. Ritchie, Jerart and
      Bradley G. Griffiths entered into a Priority Agreement whereby Bradley G.
      Griffith as fondé de pouvoirfor the holders of debentures agrees
      that the security in interest granted to Arthur Ritchie shall rank
      concurrently and pari passuwith the security granted to the
      holders of debentures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

- 39 -

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Directors Services Contract

During the fiscal year ended July 31, 2009, 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 are 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 November 1, 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, President and
Chief Executive Officer, entered into an employment agreement with SAND. His
base salary is payable by the issuance to him by SAND of 50,000 Class A Common
Shares of its share capital per month (currently valued at $0.35 per share).
There are no other terms or conditions.

The Employment Agreement of Zainab A. Schwartz provides a
severance pay in case of termination without cause of eight (8) weeks.

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
    YesDouglas S. Pryde
    Yes
    Yes


- 40 -

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Martin Shindler
    Yes
    Yes


The Audit Committee is comprised of three directors, each of
whom is 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 Committee members. All the members of the Committee are
"financially literate" and have the ability to read and understand a set of
financial statements.

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,
2009, the Audit Committee held five meetings. All members attended the five
meetings of the Audit Committee held during the last fiscal year.

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;                                                                                                         

- 41 -

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| | (j) | Reviewing and, if deemed advisable, approving all related
      party transactions as defined in the governing legislation of the
      Company;                       
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                        
| | (k) | Monitoring the compliance of the Company with legal and
      regulatory requirements related to financial reporting and
    disclosure;                               
| |     |                                                                                                                                                                        
| | (l) | Monitoring and evaluating the adequacy of the internal
      accounting and audit procedures of the Company;                                                           
| |     |                                                                                                                                                                        
| | (m) | Reviewing and ensuring the acceptability of the
      accounting principles of the Company;                                                                            
| |     |                                                                                                                                                                        
| | (n) | Identifying the principal financial risks of the
      Company;                                                                                                        
| |     |                                                                                                                                                                        
| | (o) | Overseeing reporting on internal controls of management
      and ensuring that management has designed and implemented an effective
      system of internal controls;
| |     |                                                                                                                                                                        
| | (p) | Annually reviewing and reassessing the adequacy of the
      duties and responsibilities of the Audit Committee; and                                                   
| |     |                                                                                                                                                                        
| | (q) | Any other matters that the Audit Committee feels are
      important to its mandate or that the Board chooses to delegate to
    it.                                   

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 (the "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.

- 42 -

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Composition of the Compensation Committee

The Compensation Committee is composed of Messrs. Musselman,
ODonnell and Wicker, all of whom were non-management and independent directors
during the fiscal year ended July 31, 2009. They satisfy the current
requirements of the NASDAQ Stock Market relating to independence.

Compensation Committee Meetings

During the year ended July 31, 2009, 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;                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                 
| | (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

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.

- 43 -

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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, 2009, 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, Thomas O'Donnell, Douglas Pryde, Martin
Shindler and George Wicker. Arthur G. Ritchie was not independent, as he was the
President and Chief Executive Officer of SAND.

Effective November 1, 2009, Arthur G. Ritchie retired as
President and Chief Executive Officer and Thomas ODonnell replaced him. Thomas
M. ODonnell is no longer independent and Arthur G. Ritchie will remain not
independent 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.

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.

- 44 -

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Nomination of Directors

The Board of Directors of the Company does 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.

*D.*      
*Employees*

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.

On July 31, 2007, the Company had 47 employees, including 27
full-time employees with SAND, and 7 full-time employees with Sand USA, 4
full-time employees with Sand UK and 9 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.

- 45 -

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*E.*      
*Share Ownership*

The shareholdings of the directors and officers of the Company
as at November 12, 2009 are as follows:

Name
      Position Held
      Number
        and Percentage ofOutstanding Common SharesOwnedThomas 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%)Martin Shindler
      Director
      5,950
        (0.04%)George Wicker
      Director
      274,950 (1.73%)Total
        Common Shares held by Directors and Executives
      4,712,559 (29.66%)


Notes:

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

The details of the stock options held by any officer or
director of SAND as at November 12, 2009 are as follows:

Name
      Grant Date
      Expiry Date
      Exercise Price
      Number of OptionsWayne Musselman
    N/A
    N/A
    N/A
    NilThomas M.
      ODonnell
    N/A
    N/A
    N/A
    NilDouglas Pryde
    N/A
    N/A
    N/A
    NilArthur G. Ritchie
    N/A
    N/A
    N/A
    NilMartin Shindler
    N/A
    N/A
    N/A
    NilZainab A. Schwartz
    N/A
    N/A
    N/A
    NilSébastien Vézina
    N/A
    N/A
    N/A
    NilGeorge Wicker
    N/A
    N/A
    N/A
    Nil


Except as disclosed above, no director or officer of SAND holds
any shares or options entitling its holder to acquire share in the capital of
SAND. However, under the terms of an employment agreement between the Company
and Thomas O'Donnell, he is entitled to receive 50,000 shares of Class A Common
Shares per month.

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.

- 46 -

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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 Incentive Plan permits the granting of incentive stock options on
terms designed to gain certain advantages under United States Federal income tax
law.

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 (the "Option Plan") pursuant to which the beneficiaries selected by
a committee of the Board of Directors may be granted options to subscribe for
Common Shares. The Option Plan was confirmed, approved and ratified by the
shareholders of the Company at the annual and special meeting of the
shareholders held on December 17, 1996. On November 9, 1999, by resolution, the
directors of the Company amended the Option Plan to increase the maximum
aggregate number of options to purchase Common Shares, which may be granted
under the Option Plan. This resolution of the directors was

- 47 -

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confirmed, approved and ratified by the shareholders of the
Company at the annual and special meeting of the shareholders held on December
17, 1999. The total number of Common Shares of the Company authorized for grants
of options is 900,000 (as adjusted to reflect the share subdivision on a
two-for-one basis on December 31, 1996), subject to adjustment to take into
account changes in the capital structure of the Company.

On November 21, 2005, the Board of Directors approved an
amendment to the 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 each of whose members is a "disinterested person" as
defined under the Exchange Act and an "outside director" as defined in the
United States Internal Revenue Code.

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 12, 2009, 551,000 options had been granted and
remained outstanding under the Option Plan and the Incentive Plan and 1,449,000
options remained available for grant under both plans.

During the fiscal year ended July 31, 2009, no options were
granted and 5,000 options expired. No options were exercised.

During the period August 1, 2009 to November 12, 2009, no
options were granted, cancelled or exercised.

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

- 48 -

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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. As of November 12, 2009,
the Company has awarded 407,500 Common Shares including grants which are
dependant on the award recipients and achieving certain defined objectives.

ITEM 7.        MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

As of November 12, 2009, the Company had 15,889,619 Class A
Common Shares outstanding. Each Class A Common Share entitles its holder to one
vote.

*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 12, 2009:

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
    1,048,000
    4.84%Total Commons Shares Owned, Controlled or
      Directed, Directly or Indirectly by the Major Shareholders
    5,479,659
    32.73%


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 12, 2009, 9,607,607 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.

- 49 -

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*B.*       *Related Party Transactions*

Loan Payable and Inter-Creditor Priority Agreement

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

| | i.   | Under the 2009 loan agreement, a maximum of $250,000 of
      funds is available. As at July 31, 2009, an amount of $188,532 was used
      and is repayable within 30 days of the receipt of a written demand from
      the shareholder. The loan bears interest at 15% and it is payable on the
      last business day of each calendar month.                                                                                                                                                                                                                                                                                                                
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ii.  | Under the 2008 loan agreement, maximum of $400,000 of
      funds is available. As at July 31, 2009, an amount of $68,995 is
      outstanding and is repayable within 30 days of the receipt of a written
      demand from Arthur G. Ritchie. The loan bears interest at 15% and it is
      payable on the last business day of each calendar month.                                                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | iii. | The 2007 loan originated from amounts owed by the Company
      to the shareholder by virtue of his employment contracts. As at July 31,
      2009, an amount of $1,605,616 was outstanding and repayable within 90 days
      of the receipt of a written demand from the shareholder. The loan bears
      interest at 15% and it is payable on the last business day of each
      calendar month. As well, as part of his employment contract, he is
      entitled to a bonus based on the gross revenues resulting from the
      licensing, sale or other disposition of Nucleus software. As at July 31,
      2009, a bonus of $153,582 was outstanding.

On April 18, 2008, SAND entered into a Voting Agreement with
Arthur G. Ritchie and Bradley G. Griffith on behalf of the subscribers of
debentures issued pursuant to a private placement on April 24, 2008 for
aggregate proceeds of US$1,002,600 (the "Debentureholders"), whereby SAND
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.

Also on April 18, 2008, SAND
  entered into an Inter-Creditor Priority Agreement with Arthur G. Ritchie and
  Bradley G. Griffith on behalf of the Debentureholders, whereby Arthur G. Ritchie
  consented to the issue of the debentures by the Company, subject to the fact
  that for each two Canadian dollars paid (whether prior to a default or further
  to a default, including pursuant to realization proceedings) to the
  Debentureholders, SAND shall remit one Canadian dollar to Arthur G. Ritchie for
  the sums representing the principal amount only (excluding specifically any
  interest) owing to Arthur Ritchie as part of the advances, until all sums owing
  to the Debentureholders or to Arthur G. Ritchie has been repaid by SAND. This
  Inter-Creditor Priority Agreement was amended on October 31, 2009 by a priority
  agreement pursuant to which the parties agreed that the sums owing under the
  debentures will be paid by the Company to the Debentureholders and the trustee
  pari passu to the sums owing by the Company to Arthur G. Ritchie, such that for
  every 1$ paid to the Debentureholders, the Company shall remit 1$ to Arthur G.
  Ritchie.

As a result of Arthur G. Ritchies retirement, his loan
agreements have been ratified and a Repayment Agreement was entered into by and
between Arthur G. Ritchie and SAND such that the amounts owing to him will be
repaid in equal instalments over three (3) years commencing January 1, 2011. The
loans will continue to bear interest at 15% per annum and are payable on a
semi-annual basis. In the event of default to pay an amount when due and owing
to Mr. Ritchie hereunder, in addition to all other rights and remedies that he
may have, Mr. Ritchie shall have the

- 50 -

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right, exercisable by way of written notice to the Company, to
convert all outstanding amounts owing to him hereunder into Common Shares of the
Company based on the average closing price of such shares on the OTC Bulletin
Board or on any other exchange, alternative trading system (ATS) or quotation or
trade reporting system (QTRS) for the month immediately preceding the month in
which such right is exercised. The outstanding balance shall be grossed up for
purposes of the conversion by one hundred and ten percent (110%) if such right
is exercised in the calendar year 2011, by one hundred and twenty percent (120%)
if exercised in the calendar year 2012 and by one hundred and thirty percent
(130%) if such right is exercised in the calendar year 2013.

In conjunction with the ratification of the loan agreement
formalized in 2007, the Company also issued to Arthur G. Ritchie 103,061 share
purchase warrants, each warrant entitling the significant shareholder, who was
also the President and Chief Executive Officer, 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.

Private Placements

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 a 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 Copmpany issued 785,715 units for US$0.70 per unit, for
total proceeds of US$550,000 to investors, one of whom is Arthur Ritchie, the
Chairman and former 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 US$0.50 per share.

*C.*      
*Interests of Experts and Counsels*

Not applicable.

ITEM 8.        FINANCIAL
INFORMATION

*A.*      
*Consolidated Statements and Other Financial Information*

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 nonresidents of Canada will 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

- 51 -

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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*

There have been no significant changes since the date of the
consolidated financial statements included in this Report.

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, or before August 5,
2005, on the Nasdaq SmallCap Market System.

Month Ended
      
      High
      
      Low
      
      VolumeOctober 2009
    
    0.50
    
    0.29
    
    73,384September 2009
    
    0.39
    
    0.25
    
    105,670August 2009
    
    0.45
    
    0.31
    
    37,590July 2009
    
    0.45
    
    0.31
    
    49,770June 2009
    
    0.38
    
    0.31
    
    137,301May 2009
    
    0.40
    
    0.30
    
    124,994


Quarter
        Ended
      
      High
      
      Low
      
      VolumeOctober 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


- 52 -

---

Fiscal Year
        Ended(1)
      
      High
      
      Low
      
      VolumeJuly 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.

*C.*      
*Markets*

The Companys Common Shares are listed and 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 have 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.

- 53 -

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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.

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)

- 54 -

---

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.

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.

- 55 -

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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.
- 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

- 56 -

---

- 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. If any cumulative dividends or
    amounts payable on a return of capital in respect of a series of Class B Shares
    are not paid in full, the Class B Shares of all series must participate rateably
    in respect of such dividends, including accumulations, if any, in accordance
    with the sums that would be payable on such shares if all such dividends were
    declared and paid in full, and in respect of any repayment of capital in accordance
    with the sums that would be payable on such repayment of capital if all sums
    so payable were paid in full; provided however, that in the event of there
    being insufficient assets to satisfy in full all such claims to dividends
    and return of capital, the claims of the holders of the Class B Shares with
    respect to repayment of capital must first be paid and satisfied and any assets
    remaining thereafter must be applied towards the payment and satisfaction
    of claims in respect of dividends. The Class B Shares of any series may also
    be given such other preferences over the Common Shares and over any other
    shares ranking junior to the Class B Shares as may be determined in the case
    of such series of Class B Shares.
- Voting Rights: Except as otherwise required by law or in accordance
    with any voting rights which may from time to time be attached to any series
    of Class B Shares, the holders of the Class B Shares as a class are not entitled
    as such to receive notice of, to attend or to vote at any meeting of the shareholders
    of the Company.
- Approval of Holders of Class B Shares: The rights, privileges, restrictions
    and conditions attaching to the Class B Shares as a class may be added to,
    changed or removed but only with the approval of the holders of the Class
    B Shares given as hereinafter specified.

- 57 -

---

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.

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

- 58 -

---

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.

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

- 59 -

---

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 Debentureholders,
  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
  debentures in principal and interest to hypothecate and charge in favour of
  Mr. Griffith and each of the Debentureholders for the sum of three million
  three 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;
- 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).

- 60 -

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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.

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.

- 61 -

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*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 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 12, 2009. 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.

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

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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 holds the shares as "capital property" and
used the shares in carrying on a business in Canada, or if at any time in the
five years immediately preceding the disposition the shareholder owned, either
alone or with persons with whom the shareholder did not deal at arms length,
25% or more of the issued shares of any class of the capital stock of the
Company.

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
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (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 non-resident 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

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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.

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

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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.

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.

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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.

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.

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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 15 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.

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

A shareholder rights plan (the "Rights Plan") was adopted by
the Board of Directors on November 12, 2003 and made effective on November 17,
2003. The Rights Plan was ratified, confirmed and approved by the shareholders
of SAND at the annual and special meeting of the shareholders held on December
16, 2003. The Board of Directors renewed and continued the Rights Plan on
November 21, 2005 and the renewal and continuation of the Rights Plan was
ratified, confirmed and approved by the shareholders of SAND at the annual and
special meeting of the shareholders of SAND held on December 15, 2005. The
Rights Plan expired at the close of the annual meeting of shareholders of the
Company held on January 29, 2008 and was not renewed.

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ITEM 15.     CONTROLS AND
PROCEDURES

*A.*      
*Disclosure Controls and Procedures*

As of July 31, 2009, an evaluation was carried out, under the
supervision of and with the participation of management, including the President
and Chief Executive Officer (the "CEO") and the Vice President Finance and
Administration and Chief Financial Officer (the "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, 2009.

There have been no changes in our internal control over
financial reporting during the fiscal year ended July 31, 2009 that have
materially affected, or are reasonably likely to materially affect our internal
control over financial reporting.

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

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attestation by the Companys registered public accounting firm
pursuant to temporary rules of the S.E.C. that permit the Company to provide
only managements report in this Report.

ITEM 16A.   AUDIT COMMITTEE FINANCIAL EXPERT

Messrs. Musselman, Pryde and Shindler, all of whom are
non-management and unrelated directors, currently comprise the Audit Committee
of the Board of Directors of the Company. Mr. Musselman is 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". Mr. 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, 2009, were
$120,000 ($100,000 in the fiscal year ended July 31, 2008).

(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, 2009 ($4,500 in the fiscal year ended July
31, 2008).

(c)        Tax Fees

The aggregate fees billed for products and services rendered by
Raymond Chabot Grant Thornton LLP for tax compliance, tax advice and tax
planning for the Companys fiscal ended July 31, 2009 were $8,000 ($7,540 in the
fiscal year ended July 31, 2008).

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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, 2009.

(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.

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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 17.
For a history of the exchange rates which were in effect for Canadian dollars
against U.S. dollars, see Section A  Selected Financial Data under Item
3 "Key Information" of this Report.

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ITEM 19.     EXHIBITS

EXHIBIT INDEX

|Exhibit |  | Exhibit Description                                                                                                                                                          
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  |                                                                                                                                                                              
|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    |  | Letter
        Agreement dated May 14, 2008 from SAND to Zainab A. Schwartz.                                                                                                 
|        |  |                                                                                                                                                                              
|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.                                              
|        |  |                                                                                                                                                                              
|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.    

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|Exhibit |  | Exhibit Description                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  |                                                                                                                                                                                            
|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.                              
| |     |                                                                                                                                                                                       
| | (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 -

---



SAND Technology Inc.

Consolidated Financial Statements
  July 31, 2009, 2008 and 2007





---



|Independent Auditors’ Report |  | 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
|---------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

To the Shareholders of SAND Technology Inc.

We have audited the consolidated balance sheets of SAND Technology
  Inc. (the “Corporation”) as at July 31, 2009 and 2008 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,
  2009. These financial statements are the responsibility of the Corporation’s
  management. Our responsibility is to express an opinion on these financial statements
  based on our 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 Corporation as at July 31, 2009 and 2008 and the results of its operations and its cash flows for each of the years in the three-year period ended July 31, 2009 in accordance with Canadian generally accepted accounting principles.

The Corporation 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 Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.



Montréal, Canada, October 9, 2009

(Except for Note 18 which is as of November 12, 2009)

1 Chartered accountant auditor permit no. 20154



Comments by Independent Auditors for U.S. Readers on Canada-U.S. Reporting Differences

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 Corporation’s ability to continue as a going concern, such as those described in Note 2 to the consolidated financial statements of the Corporation. Our report to the shareholders, dated October 9, 2009 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, October 9, 2009

(Except for Note 18 which is as of November 12, 2009)

1 Chartered accountant auditor permit no. 20154

F-1

---

|SAND Technology Inc.                         
|---------------------------------------------
|Consolidated Balance Sheets                  
|July 31, 2009 and 2008                       
|(In Canadian dollars, unless otherwise noted)
|                                             

|                                                                        |  | As at July 31, |   |  | As at July 31, |  
|----------------------------------------------------------------------- |  | -------------- | - |  | -------------- | -
|                                                                        |  | 2009           |   |  | 2008           |  
|                                                                        |  | $              |   |  | $              |  
|ASSETS                                                                  |  |                |   |  |                |  
|Current assets                                                          |  |                |   |  |                |  
|Cash                                                                    |  | 1,065,572      |   |  | 775,443        |  
|Accounts receivable                                                     |  | 1,384,199      |   |  | 1,573,867      |  
|Unbilled receivable                                                     |  | 109,414        |   |  | 245,184        |  
|Prepaid expenses                                                        |  | 97,689         |   |  | 86,224         |  
|                                                                        |  | 2,656,874      |   |  | 2,680,718      |  
|Capital assets
      (Note 5)                                           |  | 83,452         |   |  | 122,314        |  
|                                                                        |  | 2,740,326      |   |  | 2,803,032      |  
|                                                                        |  |                |   |  |                |  
|LIABILITIES                                                             |  |                |   |  |                |  
|Current liabilities                                                     |  |                |   |  |                |  
|Accounts payable and accrued liabilities (Note
      6)                 |  | 1,002,902      |   |  | 1,327,575      |  
|Deferred revenue                                                        |  | 1,682,137      |   |  | 1,111,640      |  
|Due to
      a shareholder (Note 7)                                     |  | 2,016,725      |   |  | 1,267,701      |  
|                                                                        |  | 4,701,764      |   |  | 3,706,916      |  
|Long-term liabilities                                                   |  |                |   |  |                |  
|Deferred credits                                                        |  | 48,895         |   |  | 78,232         |  
|Convertible
      debentures (Note 8)                                   |  | 362,222        |   |  | 278,343        |  
|                                                                        |  | 5,112,881      |   |  | 4,063,491      |  
|                                                                        |  |                |   |  |                |  
|                                                                        |  |                |   |  |                |  
|SHAREHOLDERS' DEFICIENCY                                                |  |                |   |  |                |  
|Share Capital (Note 9)                                                  |  |                |   |  |                |  
|Authorized                                                              |  |                |   |  |                |  
|An unlimited number of
      class "A" common shares, without par value |  |                |   |  |                |  
|Issued                                                                  |  |                |   |  |                |  
|14,318,189 class "A"
      common shares                                |  | 38,530,441     |   |  | 38,530,441     |  
|Equity component of convertible debentures (Note 8)                     |  | 446,027        |   |  | 446,027        |  
|Contributed surplus (Note 9 b, c, and d)                                |  | 832,124        |   |  | 752,525        |  
|Deficit                                                                 |  | (42,181,147    | ) |  | (40,989,452    | )
|                                                                        |  | (2,372,555     | ) |  | (1,260,459     | )
|                                                                        |  | 2,740,326      |   |  | 2,803,032      |  

Basis of presentation (Note 2)
  Commitments (Note 12)

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-2

---

|SAND Technology Inc.                          
|----------------------------------------------
|Consolidated Operations and Comprehensive Loss
|Years ended July 31, 2009, 2008 and 2007      
|(In Canadian dollars, unless otherwise noted) 
|                                              

|                                                      |  | 2009       |   |  | 2008       |   |  | 2007       |  
|----------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                      |  | $          |   |  | $          |   |  | $          |  
|Revenue                                               |  | 7,049,237  |   |  | 6,998,472  |   |  | 6,728,540  |  
|Operating expenses                                    |  |            |   |  |            |   |  |            |  
|Cost of sales and product
      support               |  | 1,396,224  |   |  | 1,470,215  |   |  | 1,666,331  |  
|Research and development costs, net                   |  | 1,960,295  |   |  | 1,971,813  |   |  | 2,215,146  |  
|Amortization of capital assets
      and other assets |  |            |   |  |            |   |  |            |  
|(Note 4)                                              |  | 63,643     |   |  | 187,517    |   |  | 201,274    |  
|Selling, general and
      administrative expenses    |  | 4,507,118  |   |  | 4,411,736  |   |  | 5,100,057  |  
|                                                      |  | 7,927,280  |   |  | 8,041,281  |   |  | 9,182,808  |  
|Loss from operations                                  |  | (878,043   | ) |  | (1,042,809 | ) |  | (2,454,268 | )
|                                                      |  |            |   |  |            |   |  |            |  
|Interest expenses (Note 4)                            |  | (313,652   | ) |  | (229,141   | ) |  | (72,256    | )
|                                                      |  |            |   |  |            |   |  |            |  
|Net loss and comprehensive loss                       |  | (1,191,695 | ) |  | (1,271,950 | ) |  | (2,526,524 | )
|                                                      |  |            |   |  |            |   |  |            |  
|                                                      |  |            |   |  |            |   |  |            |  
|Basic and diluted loss per share (Note 9e)            |  | (0.08      | ) |  | (0.09      | ) |  | (0.19      | )
|                                                      |  |            |   |  |            |   |  |            |  
|Basic and diluted weighted average number of          |  |            |   |  |            |   |  |            |  
|common shares outstanding                             |  | 14,318,189 |   |  | 14,318,189 |   |  | 13,094,288 |  

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

F-3

---

|SAND Technology Inc.                         
|---------------------------------------------
|Consolidated Shareholders Deficiency        
|Years ended July 31, 2009, 2008 and 2007     
|(In Canadian dollars, unless otherwise noted)
|                                             

|                                        |  | Share Capital |  |  |            |   |  |              |  |  |             |  |  |             |  
|--------------------------------------- |  | ------------- |  |  | ---------- | - |  | ------------ |  |  | ----------- |  |  | ----------- | -
|                                        |  |               |  |  |            |   |  | Equity       |  |  |             |  |  |             |  
|                                        |  | Number of     |  |  |            |   |  | component of |  |  | Contributed |  |  |             |  
|                                        |  | shares        |  |  | Amount     |   |  | convertible  |  |  | surplus     |  |  | Deficit     |  
|                                        |  |               |  |  |            |   |  | debentures   |  |  |             |  |  |             |  
|                                        |  |               |  |  | $          |   |  | $            |  |  | $           |  |  | $           |  
|                                        |  |               |  |  |            |   |  |              |  |  |             |  |  |             |  
|Balance as at July 31, 2006             |  | 12,818,189    |  |  | 38,024,756 |   |  |              |  |  | 103,000     |  |  | (37,190,978 | )
|Common share issuance                   |  | 1,500,000     |  |  | 675,795    |   |  |              |  |  |             |  |  |             |  
|Net Loss                                |  |               |  |  |            |   |  |              |  |  |             |  |  | (2,526,524  | )
|Warrants issuance (Note 9)              |  |               |  |  | (170,110   | ) |  |              |  |  | 170,110     |  |  |             |  
|Stock-based compensation (Note 9)       |  |               |  |  |            |   |  |              |  |  | 32,000      |  |  |             |  
|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 (Note 9)       |  |               |  |  |            |   |  |              |  |  | 144,000     |  |  |             |  
|Convertible debentures                  |  |               |  |  |            |   |  |              |  |  |             |  |  |             |  
|issuance (equity component)             |  |               |  |  |            |   |  |              |  |  |             |  |  |             |  
|(Note 8)                                |  |               |  |  |            |   |  | 446,027      |  |  |             |  |  |             |  
|Warrants issuance with the              |  |               |  |  |            |   |  |              |  |  |             |  |  |             |  
|convertible 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 (Note 9) |  |               |  |  |            |   |  |              |  |  | 79,599      |  |  |             |  
|Balance as at July 31, 2009             |  | 14,318,189    |  |  | 38,530,441 |   |  | 446,027      |  |  | 832,124     |  |  | (42,181,147 | )

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

F-4

---

|SAND Technology Inc.                         
|---------------------------------------------
|Consolidated Cash Flows                      
|Years ended July 31, 2009, 2008 and 2007     
|(In Canadian dollars, unless otherwise noted)
|                                             

|                                                      |  | 2009       |   |  | 2008       |   |  | 2007       |  
|----------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                      |  | $          |   |  | $          |   |  | $          |  
|OPERATING ACTIVITIES                                  |  |            |   |  |            |   |  |            |  
|Net loss                                              |  | (1,191,695 | ) |  | (1,271,950 | ) |  | (2,526,524 | )
|Non-cash items                                        |  |            |   |  |            |   |  |            |  
|Amortization of capital assets and other
      assets |  | 63,643     |   |  | 187,517    |   |  | 201,274    |  
|Stock-based compensation                              |  | 79,599     |   |  | 144,000    |   |  | 32,000     |  
|Amortization of the debt component of the             |  |            |   |  |            |   |  |            |  
|convertible debentures
      discount                 |  | 83,879     |   |  | 17,966     |   |  | -          |  
|Amortization of deferred credits                      |  | (29,337    | ) |  | (29,337    | ) |  | (29,337    | )
|Changes in working capital
      items                |  |            |   |  |            |   |  |            |  
|Accounts receivable                                   |  | 189,668    |   |  | 9,090      |   |  | (96,670    | )
|Unbilled
      receivable                             |  | 135,770    |   |  | (245,184   | ) |  | -          |  
|Prepaid expenses                                      |  | (11,465    | ) |  | 64,740     |   |  | (57,738    | )
|Accounts
      payable and accrued liabilities        |  | (324,673   | ) |  | 251,459    |   |  | 365,234    |  
|Deferred revenue                                      |  | 570,497    |   |  | (193,630   | ) |  | 74,176     |  
|Cash flows from operating activities (a)              |  | (434,114   | ) |  | (1,065,329 | ) |  | (2,037,585 | )
|                                                      |  |            |   |  |            |   |  |            |  
|INVESTING ACTIVITIES                                  |  |            |   |  |            |   |  |            |  
|Purchase of capital assets and cash flows from        |  |            |   |  |            |   |  |            |  
|investing activities                                  |  | (24,781    | ) |  | (17,315    | ) |  | (40,730    | )
|                                                      |  |            |   |  |            |   |  |            |  
|FINANCING ACTIVITIES                                  |  |            |   |  |            |   |  |            |  
|Due to a shareholder                                  |  | 749,024    |   |  | 517,557    |   |  | 320,683    |  
|Convertible debentures issuance                       |  | -          |   |  | 1,009,819  |   |  | -          |  
|Share capital
      issuance                          |  | -          |   |  | -          |   |  | 675,795    |  
|Cash flows from financing activities                  |  | 749,024    |   |  | 1,527,376  |   |  | 996,478    |  
|                                                      |  |            |   |  |            |   |  |            |  
|Net increase (decrease) in cash                       |  | 290,129    |   |  | 444,732    |   |  | (1,081,837 | )
|Cash, beginning of
      year                         |  | 775,443    |   |  | 330,711    |   |  | 1,412,548  |  
|Cash, end of year                                     |  | 1,065,572  |   |  | 775,443    |   |  | 330,711    |  
|                                                      |  |            |   |  |            |   |  |            |  
|                                                      |  |            |   |  |            |   |  |            |  
|(a) Additional information                            |  |            |   |  |            |   |  |            |  
|Interest paid                                         |  | 37,171     |   |  | 112,962    |   |  | 29,648     |  

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

F-5

---

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

1 - NATURE OF OPERATIONS

SAND Technology Inc. and its subsidiaries (the Corporation)
  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/DNA 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.

2 - BASIS OF PRESENTATION

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

In light of operating losses suffered in the current and past
  years, the Corporation's ability to realize its assets and discharge its
  liabilities depends on the continued financial support of its shareholders and
  debenture holders, its ability to obtain additional financing and its ability to
  achieve revenue growth. The Corporation is executing a business plan to allow it
  to continue as a going concern which is to continue to search for additional
  sources of debt and equity financing, and achieve profitability through cost
  containment and revenue growth. There can be no assurance that the Corporations
  activities will be successful.

While the financial statements have been prepared on the basis
  of accounting principles applicable to a going concern, current global economic
  turbulence and liquidity crisis cast substantial doubt upon the validity of this
  assumption. If the going concern assumption was not appropriate for these
  financial statements, then adjustments would be necessary in the carrying values
  of the assets and liabilities, the reported net losses and the balance sheet
  classifications used.

F-6

---

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

3 - ACCOUNTING POLICIES

CURRENT ACCOUNTING POLICIES

Accounting estimates

The preparation of financial statements in accordance with
  Canadian GAAP requires management to make estimates and assumptions that affect
  the amounts recorded in the financial statements and notes to financial
  statements. These estimates are based on management's best knowledge of current
  events and actions that the Corporation may undertake in the future. The most
  significant estimates relate to the establishment of fair value of the
  components of convertible debentures, accounting for options, Share Award Plan,
  warrants and evaluation of R&D provision. Actual results may differ from
  these estimates.

Principles of consolidation

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

Revenue recognition

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

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

F-7

---

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

3  ACCOUNTING POLICIES (Continued)

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

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

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

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

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

Capital assets

Capital assets are recorded at cost and are amortized over
  their estimated useful lives using the straight-line method over the following
  periods:

|                        | Periods                              
|----------------------- | -------------------------------------
|Furniture and equipment | 5 years                              
|Computer equipment      | 3 years                              
|Leasehold improvements  | Over the lease term of 10
      years

Other assets

Contract costs were comprised of an amount 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 2008.

F-8

---

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

3  ACCOUNTING POLICIES (Continued)

Impairment of long-lived assets

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

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.

Financing costs 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 Canadian generally accepted accounting principles for
  deferral and amortization. The Corporation has not deferred any such development
  costs to date. Related tax credits are recorded as a reduction of research and
  development costs. These tax credits must be examined and approved by the tax
  authorities and it is possible that the amounts granted will differ from the
  amounts recorded.

Income taxes

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

F-9

---

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

3  ACCOUNTING POLICIES (Continued)

Deferred credits

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

Foreign currency translation

Monetary assets and liabilities in foreign currency of Canadian
  corporations and integrated foreign operations are translated at the exchange
  rate in effect at the balance sheet date. Non-monetary items are translated at
  the historical rate. Revenue and expenses in foreign currency are translated at
  the average rate in effect during the year, with the exception of revenue and
  expenses relating to non-monetary assets and liabilities, which are translated
  at the historical rate. Gains and losses are included in operations for the
  year.

Loss per share

Per share computations are based on the weighted average number
  of shares outstanding during the year. The dilutive effect of options, shares
  from the Share Award Plan, and warrants is determined using the treasury stock
  method. The if-converted method is used with regards to the effect of the
  convertible debentures.

Stock-based compensation and other stock-based
  payments

The Corporation uses the fair value method to account for
  stock-based compensation. This method consists of recording expenses to earnings
  based on the exercise terms and conditions of the options granted. The fair
  value is calculated using the Black-Scholes option pricing model.

For stock options, when options are exercised, any
  consideration paid and any amount recorded under stock-based compensation are
  credited to the share capital. When options are forfeited, any amount recorded
  under stock-based compensation related to the forfeited options is debited to
  the contributed surplus. See Note 9 for additional information.

For the share awards, when the awards are issued, any amounts
  recorded under stock-based compensation are credited to the share capital. When
  the awards are forfeited, any amount recorded under stock-based compensation
  related to the forfeited awards is debited to the contributed surplus. See Note
  9 for additional information.

F-10

---

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

3  ACCOUNTING POLICIES (Continued)

Guarantees

In the normal course of its operations, the Corporation has
  entered into agreements that contain certain features which meet the definition
  of a guarantee under the guidance provided by Accounting Guideline 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 Corporation to compensate a third party
  for certain damages and claims incurred as a result of third-party
  intellectual-property claims arising from these agreements.

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

In addition, the Corporation has provided warranties as part of
  the sale of its subsidiary, ClarityBlue Limited on July 31st, 2003,
  for claims against it related to conditions existing prior to the sale. The
  warranties expire in 2010.

Financial assets and liabilities

On 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 held-for-trading financial assets. It is
      measured at fair value and changes in fair value are recognized in operations.
- Trade accounts receivable and unbilled receivable are classified as loans and receivable. They are measured at amortized cost, which is
      generally the initially recognized amount, less any allowance for doubtful
      accounts.
- Accounts payable and accrued liabilities, due to a shareholder and
      convertible debentures are classified as other financial liabilities.
      They are measured at amortized cost using the effective interest rate method,
      except for due to a shareholder which is at cost. Interest calculated using
      the effective interest method is presented in operations under Interest
      expenses.

F-11

---

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

3 - ACCOUNTING POLICIES (Continued)

ADOPTION OF NEW ACCOUNTING POLICIES

Capital disclosures

The Canadian Institute of Chartered Accountants (CICA) issued CICA HandbookSection 1535, "Capital Disclosures", which establishes
  standards for disclosing information about a companys capital and how it is
  managed. It describes the disclosure of the companys objectives, policies and
  processes for managing capital, the quantitative data about what the company
  regards as capital, whether the company has complied with any capital
  requirements, and, if it has not complied, the consequences of such
  non-compliance. As a result of the adoption of this standard, additional
  disclosures on financial and capital management have been included in Note
  14.

Financial instruments  disclosures

CICA HandbookSection 3862, "Financial Instruments 
  Disclosures", describes the required disclosures for the assessment of the
  significance of financial instruments for a companys financial position and
  performance and of the nature and extent of risk arising from financial
  instruments to which the company is exposed and how the company manages those
  risks. As a result of the adoption of this standard, additional disclosures on
  the risks of certain financial instruments have been included in Note 15.

Financial instruments  presentation

CICA HandbookSection 3863, "Financial Instruments 
  Presentation", establishes standards for the presentation of financial
  instruments and non-financial derivatives. It deals with the classification of
  financial instruments, from the perspective of the issuer, between liabilities
  and equity; the classification of related interest, dividends, losses and gains;
  and the circumstances in which financial assets and financial liabilities are
  offset. The adoption of this standard had no financial impact on the
  Corporations consolidated financial statements.

Credit risk and the fair value of financial assets and
  financial liabilities

In January 2009, the Emerging Issues Committee of the CICA
  issued EIC-173, Credit risk and the fair value of financial assets and
  financial liabilities. EIC-173 provides guidance on how to take into account an
  entitys own credit risk and the credit risk of the counterparty in determining
  the fair value of financial assets and financial liabilities, including
  derivative instruments, for presentation and disclosure purposes. The adoption
  of this standard had no financial impact on the Corporations consolidated
  financial statements.

F-12

---

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

3 - ACCOUNTING POLICIES (Continued)

FUTURE ACCOUNTING CHANGES

Accounting changes (amendment)

In July 2009, the AcSB amended CICA Section 1506, Accounting
  Changes to exclude from its scope, changes in accounting policies upon complete
  replacement of entity's primary basis of accounting, for example, in the change
  to International Financial Reporting Standards. This amendment applies to
  interim and annual financial statements relating to fiscal years beginning on or
  after July 1, 2009.

Financial instruments  disclosures (amendment)

In June 2009, the AcSB amended CICA Section 3862, Financial
  Instruments  Disclosure to include certain requirements related to financial
  instrument disclosure in response to amendments issued by the International
  Accounting Standards Board. The amendments are consistent with its strategy to
  adopt IFRS and to ensure the existing disclosure requirements for financial
  instruments are converged to IFRS to the extent possible. The new disclosure
  standards require disclosure of fair values based on a fair value hierarchy as
  well as enhanced discussion and quantitative disclosure related to liquidity
  risk. The amended disclosure requirements are effective for annual financial
  statements relating to fiscal years ending after September 30, 2009. The
  Corporation is currently evaluating the impact of the adoption of this
  requirement on the consolidated financial statements.

4  INFORMATION ON EARNINGS

Amortization expense of contract costs amounted to $0 in 2009
  ($110,847 in 2008 and $110,846 in 2007). Amortization expense of capital assets
  amounted to $63,643 in 2009 ($76,670 in 2008 and $90,428 in 2007).

|                                          |  | 2009     |   |  | 2008     |   |  | 2007    |  
|----------------------------------------- |  | -------- | - |  | -------- | - |  | ------- | -
|                                          |  | $        |   |  | $        |   |  | $       |  
|                                          |  |          |   |  |          |   |  |         |  
|Amortization of the debt component of the |  |          |   |  |          |   |  |         |  
|convertible debentures discount (Note 8)  |  | (83,880  | ) |  | (17,966  | ) |  | -       |  
|Interest expense - due to shareholders    |  | (220,320 | ) |  | (198,000 | ) |  | (72,256 | )
|Interest expense - other                  |  | (9,452   | ) |  | (13,175  | ) |  | -       |  
|Interest expenses                         |  | (313,652 | ) |  | (229,141 | ) |  | (72,256 | )

F-13

---

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

5 - CAPITAL ASSETS

|                        |  |           |  |  |              |  |  | July
      31, 2009 | 
|----------------------- |  | --------- |  |  | ------------ |  |  | ------------------- | 
|                        |  |           |  |  |              |  |  |                     | 
|                        |  | Cost      |  |  | Accumulated  |  |  | Net Book            | 
|                        |  |           |  |  | amortization |  |  | Value               | 
|                        |  | $         |  |  | $            |  |  | $                   | 
|Furniture and equipment |  | 322,463   |  |  | 322,463      |  |  | -                   | 
|Computer equipment      |  | 668,047   |  |  | 628,710      |  |  | 39,337              | 
|Leasehold improvements  |  | 287,610   |  |  | 243,495      |  |  | 44,115              | 
|                        |  | 1,278,120 |  |  | 1,194,668    |  |  | 83,452              | 

|                        |  |           |  |  |              |  |  | July
      31, 2008 | 
|----------------------- |  | --------- |  |  | ------------ |  |  | ------------------- | 
|                        |  |           |  |  | Accumulated  |  |  | Net Book            | 
|                        |  | Cost      |  |  | amortization |  |  | Value               | 
|                        |  | $         |  |  | $            |  |  | $                   | 
|Furniture and equipment |  | 322,463   |  |  | 320,582      |  |  | 1,881               | 
|Computer equipment      |  | 643,266   |  |  | 598,258      |  |  | 45,008              | 
|Leasehold improvements  |  | 287,610   |  |  | 212,185      |  |  | 75,425              | 
|                        |  | 1,253,339 |  |  | 1,131,025    |  |  | 122,314             | 

6 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|                                |  | 2009      |  |  | 2008      | 
|------------------------------- |  | --------- |  |  | --------- | 
|                                |  | $         |  |  | $         | 
|Trade accounts payable          |  | 675,477   |  |  | 924,656   | 
|Salaries and commission payable |  | 182,362   |  |  | 173,226   | 
|Sales taxes payable             |  | 145,063   |  |  | 229,693   | 
|                                |  | 1,002,902 |  |  | 1,327,575 | 

F-14

---

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

7- DUE TO A SHAREHOLDER

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

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

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

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

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

F-15

---

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

8 - CONVERTIBLE DEBENTURES

On April 18, 2008, the Corporation issued secured convertible
  debentures ("Convertible Debentures") on a private placement basis and received
  proceeds of $1,009,819 (US$1,002,600) for the issue of a total of 1,114 units.
  Each unit consists of one 8% Convertible Debenture due December 31, 2017, having
  a nominal value of US$900, redeemable at the option of the Corporation 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 US$0.45 per share and 1,000 share purchase warrants of the Corporation. Each
  warrant entitles its holder to purchase one additional common share (warrant
  share) of the Corporation at a price of US$0.70 per warrant share at any time
  until the earlier of the close of business on the day which is 36 months from
  April 18, 2008 or the sixtieth consecutive trading day in which the bid price of
  the common shares has been above US$1.50. Interest is calculated at the rate of
  8% per annum, payable in kind, i.e. in common shares at a rate of US$0.45 per
  share. The interest is due on each conversion date (date when that principal
  amount is being converted) subsequent to January 1, 2009, and on the maturity
  date. The financing is secured by a first rank hypothec on all of the
  Corporations property and assets, movable and immovable, corporeal and
  incorporeal, present and future, of every kind and nature for the principal
  amount and accrued interest. The proceeds from the private placement will be
  used to increase marketing and advertising capital needs and expansion.

For accounting purposes, the debenture contains both a
  liability component and an equity component being the share warrants, conversion
  option and the interest payable in shares, which have been separately presented
  in the consolidated balance sheet:

- The liability 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%, which in managements opinion,
    approximated an interest rate applicable to non-convertible secured debt. The
    amount calculated, at the issue date, for the carrying amount of the debt
    component is $260,377. The carrying value of the debentures is being accreted
    to their face value over their life to maturity (December 31, 2017). The
    accretion expense (amortization of the debt component of the convertible
    debentures discount) is included in interest expense in the consolidated
    statement of operations and comprehensive loss. The debt issuance costs have
    been recorded directly against net income. The amortization of the debt
    component of the convertible debentures discount for the year ended July 31,
    2009 is $83,880;

F-16

---

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

8 - CONVERTIBLE DEBENTURES (Continued)

- The carrying amount of the equity component, at the issue date, was valued
    at $749,442, determined by deducting the carrying amount of the liability
    component from the gross proceeds received on the compounded instrument. The
    value of the equity components includes the fair value of the share warrants,
    conversion option and the interest payable in shares. The fair value of the
    warrants was estimated at $303,415. This amount was recorded to contributed
    surplus. The fair value of the warrants at the time the convertible debentures
    were issued 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 balance represents the
  fair value of the conversion option and the interest payable in shares in the
  amount of $446,027. This amount was recorded in a separate caption of
  shareholders deficiency as the equity component of the convertible
  debentures.

9 - SHARE CAPITAL

a) Authorized and issued

2009 transactions

During the fiscal year 2009, the Corporation did not conduct
  any transactions that impacted the share capital.

2008 transactions

During the fiscal year 2008, the Corporation did not conduct
  any transactions that impacted the share capital.

F-17

---

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

9 SHARE CAPITAL (Continued)

2007 transactions

During the fiscal year 2007, the Corporation concluded a
  private placement and issued 1,500,000 common shares at a price of US$0.40 per
  share for a total cash proceeds of $675,795. In addition, the Corporation issued
  750,000 warrants entitling two shareholders to purchase up to 750,000 shares of
  the Corporation at a price of US$0.60 for three years.

The fair value of the warrants at the time they were granted
  was estimated at $170,110. This amount was recorded as contributed surplus. The
  fair value of the warrants at the time they were granted were estimated using
  the Black-Scholes option pricing model with the following assumptions:

|Dividend yield          |  | -       | 
|----------------------- |  | ------- | 
|Expected volatility     |  | 90%     | 
|Risk-free interest rate |  | 4.40%   | 
|Expected life           |  | 3 years | 

b) Warrants

The following table summarizes information about the
  Corporations share warrants described in Notes 7, 8 and 9:

|                                                  |  |           |  |  | July
      31, 2009 | 
|------------------------------------------------- |  | --------- |  |  | ------------------- | 
|                                                  |  |           |  |  | Weighted            | 
|                                                  |  |           |  |  | average             | 
|                                                  |  | Number of |  |  | remaining           | 
|                                                  |  | warrants  |  |  | life
      (years)  | 
|                                                  |  |           |  |  |                     | 
|Outstanding and exercisable, beginning and end of |  |           |  |  |                     | 
|year                                              |  | 1,967,061 |  |  | 1.3                 | 

|                                                        |  |           |  |  | July 31, 2008      | 
|------------------------------------------------------- |  | --------- |  |  | ------------------ | 
|                                                        |  |           |  |  | Weighted           | 
|                                                        |  |           |  |  | average            | 
|                                                        |  | Number of |  |  | remaining          | 
|                                                        |  | warrants  |  |  | life
      (years) | 
|                                                        |  |           |  |  |                    | 
|Outstanding, beginning of year                          |  | 853,061   |  |  | 2.8                | 
|Granted                                                 |  | 1,114,000 |  |  | 2.7                | 
|Granted, outstanding and exercisable, end
      of year |  | 1,967,061 |  |  | 2.3                | 

F-18

---

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

9  SHARE CAPITAL (Continued)

c) Share Award Plan

Effective September 30, 2007, under a Share Award Plan, the
  Corporation may grant class "A" common shares to its regular full-time employees
  and those of its subsidiaries 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, conditioned upon a certain period of continued
  service with the Corporation or other acceptable consideration.

The Share Award Plan is intended to promote the interests of
  the Corporation by (i) aiding the retention and facilitating the recruitment of
  outstanding personnel by providing incentive compensation opportunities; and
  (ii) matching employees financial interests with those of the Corporations
  shareholders. The administrator has the authority to determine terms and
  conditions of each award granted.

The following table presents the share award compensation
  expense included in selling, general and administrative expenses for the year
  ended July 31, 2009 and 2008. The table also presents the assumptions used to
  determine the fair value of the share awards granted during 2008, using the
  Black-Scholes option pricing model:

|                                                         |   | 2009   |  |   | 2008    | 
|-------------------------------------------------------- | - | ------ |  | - | ------- | 
|                                                         |   |        |  |   |         | 
|Compensation cost                                        | $ | 60,026 |  | $ | 44,000  | 
|Fair value                                               | $ | -      |  | $ | 180,000 | 
|                                                         |   |        |  |   |         | 
|Dividend yield                                           |   |        |  |   | -       | 
|Expected volatility (a)                                  |   |        |  |   | 90%     | 
|Risk-free interest rate (a)                              |   |        |  |   | 4.0%    | 
|Expected life (a)                                        |   |        |  |   | 3 years | 
|Vesting period                                           |   |        |  |   | 3 years | 
|Number of common shares granted but not yet
      issued |   |        |  |   | 407,500 | 

(a) Weighted average assumptions.

F-19

---

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

9  SHARE CAPITAL (Continued)

d) Stock option plans

The Corporation has two stock option plans:

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

Under both plans, the exercise price of each option is not less
  than the market price of the Corporations shares on the Over the Counter
  Bulletin Board (OTC BB) on the day prior to the date of grant. Options vest
  equally over a five-year period and the options maximum term is 10 years except
  for three key employees for which management allows an extension of 10 years for
  the options already expired.

Options granted after 2003 fiscal year

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

|                                   |  |           |   |  | 2009     |  |  |           |   |  | 2008     |  |  |           |   |  | 2007     | 
|---------------------------------- |  | --------- | - |  | -------- |  |  | --------- | - |  | -------- |  |  | --------- | - |  | -------- | 
|                                   |  |           |   |  | Weighted |  |  |           |   |  | Weighted |  |  |           |   |  | Weighted | 
|                                   |  |           |   |  | average  |  |  |           |   |  | average  |  |  |           |   |  | average  | 
|                                   |  | Number of |   |  | exercise |  |  | Number of |   |  | exercise |  |  | Number of |   |  | exercise | 
|                                   |  | options   |   |  | price    |  |  | options   |   |  | price    |  |  | options   |   |  | price    | 
|                                   |  | (000s)    |   |  | $ US     |  |  | (000s)    |   |  | $ US     |  |  | (000s)    |   |  | $ US     | 
|Outstanding, beginning of period   |  | 556       |   |  | 1.03     |  |  | 1,169     |   |  | 1.52     |  |  | 1,041     |   |  | 1.59     | 
|Granted                            |  | -         |   |  |          |  |  | -         |   |  |          |  |  | 288       |   |  | 1.00     | 
|Forfeited                          |  | -         |   |  |          |  |  | (577      | ) |  | 1.92     |  |  | (160      | ) |  | 1.00     | 
|Expired                            |  | (5        | ) |  | 6.50     |  |  | (36       | ) |  | 1.92     |  |  | -         |   |  |          | 
|Outstanding, end
      of period   |  | 551       |   |  | 0.98     |  |  | 556       |   |  | 1.03     |  |  | 1,169     |   |  | 1.52     | 
|                                   |  |           |   |  |          |  |  |           |   |  |          |  |  |           |   |  |          | 
|Options exercisable, end of period |  | 404       |   |  | 0.98     |  |  | 359       |   |  | 1.05     |  |  | 728       |   |  | 1.79     | 

F-20

---

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

9  SHARE CAPITAL (Continued)

The following table summarizes significant ranges of exercise
  prices of outstanding options held by directors, officers and employees as of
  July 31, 2009:

|                         |  |           |  |  | Options outstanding |  |  | Options exercisable | 
|------------------------ |  | --------- |  |  | ------------------- |  |  | ------------------- | 
|                         |  |           |  |  | Weighted            |  |  | Weighted            | 
|                         |  | Number of |  |  | average             |  |  | average             | 
|Range of exercise prices |  | Options   |  |  | remaining           |  |  | exercise            | 
|                         |  |           |  |  | life
      (years)  |  |  | price               | 
|                         |  | (000s)    |  |  |                     |  |  | (US$)               | 
|Less than US$1.00        |  | 160       |  |  | 6.97                |  |  | 0.69                | 
|US$1.00 to US$1.49       |  | 380       |  |  | 5.83                |  |  | 1.00                | 
|US$3.00 to US$3.99       |  | 5         |  |  | 8.40                |  |  | 4.00                | 
|US$5.00 to US$5.99       |  | 5         |  |  | 1.17                |  |  | 5.00                | 
|US$6.00 to US$6.99       |  | 1         |  |  | 0.43                |  |  | 6.31                | 
|                         |  | 551       |  |  | 6.14                |  |  | 0.98                | 

The following table presents the stock-based compensation
  expense included in selling, general and administrative expenses for the years
  ended July 31, 2009, 2008 and 2007. The table also presents the assumptions used
  to determine the stock-based compensation expense for the options granted during
  2007, using the Black-Scholes option pricing model:

|                            |   | 2009   |  |   | 2008    |  |   | 2007    | 
|--------------------------- | - | ------ |  | - | ------- |  | - | ------- | 
|                            |   |        |  |   |         |  |   |         | 
|Compensation cost           | $ | 19,573 |  | $ | 100,000 |  | $ | 32,000  | 
|Fair value                  | $ | -      |  | $ | 80,000  |  | $ | 74,300  | 
|                            |   |        |  |   |         |  |   |         | 
|Dividend yield              |   |        |  |   |         |  |   | -       | 
|Expected volatility (a)     |   |        |  |   |         |  |   | 90%     | 
|Risk-free interest rate (a) |   |        |  |   |         |  |   | 4.0%    | 
|Expected life (a)           |   |        |  |   |         |  |   | 7 years | 
|Number of options granted   |   |        |  |   |         |  |   | 287,500 | 

(a) Weighted average assumptions.

F-21

---

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

9  SHARE CAPTIAL (Continued)

e) Loss per share

Shares from Share Award Plan, options, warrants and the effect
  of convertible debentures described in Notes 7, 8 and 9 were not included in the
  diluted loss per share calculation because the Corporation incurred a loss, and
  inclusion would have created an anti-dilutive effect.

10 - RESEARCH AND DEVELOPMENT COSTS

The net amounts of research and development costs presented in
  the consolidated statements of operations and comprehensive loss have been
  determined as follows:

|                                  |  | 2009      |   |  | 2008      |   |  | 2007      |  
|--------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                  |  | $         |   |  | $         |   |  | $         |  
|Research and development expenses |  | 2,120,295 |   |  | 2,205,793 |   |  | 2,315,146 |  
|Government assistance             |  |           |   |  |           |   |  |           |  
|Investment tax credits
      (a)  |  | (160,000  | ) |  | (233,980  | ) |  | (100,000  | )
|                                  |  |           |   |  |           |   |  |           |  
|                                  |  | 1,960,295 |   |  | 1,971,813 |   |  | 2,215,146 |  

|(a) | In fiscal 2008: The Corporations investment tax credit
      claims previously submitted for the fiscal year ended July 31, 2007 were
      reviewed by the tax authorities. Following a positive review, the
      Corporation collected $233,980 more than what had been originally recorded
      and no investment tax receivable had been recorded for the fiscal year
      2008.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-22

---

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

11 - INCOME TAXES

The reconciliation of income taxes at Canadian statutory rates
  with the reported income taxes is as follows:

|                                                      |  | 2009     |   |  | 2008     |   |  | 2007     |  
|----------------------------------------------------- |  | -------- | - |  | -------- | - |  | -------- | -
|                                                      |  | $        |   |  | $        |   |  | $        |  
|Income tax recovery at Canadian statutory
      rates |  | (370,000 | ) |  | (475,000 | ) |  | (785,000 | )
|Non-recording of benefit from losses carried forward  |  | (370,000 | ) |  | (475,000 | ) |  | (785,000 | )
|                                                      |  | -        |   |  | -        |   |  | -        |  

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

|                              |  | 2009        |   |  | 2008        |  
|----------------------------- |  | ----------- | - |  | ----------- | -
|                              |  | $           |   |  | $           |  
|Future income tax assets      |  |             |   |  |             |  
|Losses carried forward        |  | 16,185,000  |   |  | 15,000,000  |  
|Capital assets                |  | 180,000     |   |  | 185,000     |  
|Research and development      |  | 3,786,000   |   |  | 1,700,000   |  
|                              |  | 20,151,000  |   |  | 16,885,000  |  
|Future income tax liabilities |  |             |   |  |             |  
|Convertible debentures        |  | 23,000      |   |  | -           |  
|                              |  | 20,128,000  |   |  | 16,885,000  |  
|Less: valuation allowance     |  | (20,128,000 | ) |  | (16,885,000 | )
|Net future income taxes       |  | -           |   |  | -           |  

As at July 31, 2009, the Corporation has non-capital losses
  carried forward to reduce future taxable income for Canadian federal and
  provincial tax purposes as well as American, British and German tax purposes of
  approximately $12,200,000 and $12,100,000, US$23,200,000, £66,000 and
  €4,300,000, respectively, expiring at various dates to 2028. In addition, the
  Corporation has unclaimed research and development expenditures carried forward
  of approximately $14,700,000, which can be used to reduce taxable income at any
  time in the future, and investment tax credits of approximately $3,540,000,
  which can be applied against future Canadian federal income taxes payable,
  expiring at various dates to 2018. The benefits of these items have not been
  recognized in the consolidated financial statements.

F-23

---

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

12 - COMMITMENTS

The Corporation is committed under operating leases through
  2015 for the rental of buildings for a total amount of $912,501. The minimum
  payments due in each of the forthcoming years are as follows:

$2010
      
      402,3602011
      
      259,9912012
      
      75,0452013
      
      75,0452014
      
      75,0452015
      
      25,015912,501 F-24


---

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

13  SEGMENTED INFORMATION

The Corporation is considered to have only one reportable
  business segment in two geographic areas. Both the North American and European
  areas market the SAND/DNA Product suite. The accounting policies of the
  geographic areas are the same as described in the summary of accounting
  policies. The Corporation evaluates geographic areas performance based on
  income before income taxes. Sales for each geographic area are based on the
  location of the third party customer. All intercompany transactions between
  areas have been eliminated.

|                                        |  | North      |   |  |           |  |  |            |  
|--------------------------------------- |  | ---------- | - |  | --------- |  |  | ---------- | -
|                                        |  | America    |   |  | Europe    |  |  | Total      |  
|                                        |  | $          |   |  | $         |  |  | $          |  
|2009                                    |  |            |   |  |           |  |  |            |  
|Revenue                                 |  | 2,688,679  |   |  | 4,360,558 |  |  | 7,049,237  |  
|Income (loss) before
      income taxes |  | (2,875,549 | ) |  | 1,683,854 |  |  | (1,191,695 | )
|Identifiable assets                     |  | 1,211,600  |   |  | 1,445,274 |  |  | 2,656,874  |  
|Capital assets                          |  | 55,524     |   |  | 27,928    |  |  | 83,452     |  
|                                        |  |            |   |  |           |  |  |            |  
|2008                                    |  |            |   |  |           |  |  |            |  
|Revenue                                 |  | 2,410,048  |   |  | 4,588,424 |  |  | 6,998,472  |  
|Income (loss) before
      income taxes |  | (2,352,852 | ) |  | 1,080,902 |  |  | (1,271,950 | )
|Identifiable assets                     |  | 816,377    |   |  | 1,986,655 |  |  | 2,803,032  |  
|Capital assets                          |  | 90,608     |   |  | 31,706    |  |  | 122,314    |  
|                                        |  |            |   |  |           |  |  |            |  
|2007                                    |  |            |   |  |           |  |  |            |  
|Revenue                                 |  | 1,941,034  |   |  | 4,787,506 |  |  | 6,728,540  |  
|Income (loss) before
      income taxes |  | (3,789,146 | ) |  | 1,262,622 |  |  | (2,526,524 | )
|Identifiable assets                     |  | 795,121    |   |  | 1,562,027 |  |  | 2,357,148  |  
|Capital assets                          |  | 128,395    |   |  | 53,274    |  |  | 181,669    |  
|Other assets                            |  | -          |   |  | 110,847   |  |  | 110,847    |  

F-25

---

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

14  CAPITAL MANAGEMENT

The Corporations capital management objectives are to ensure
  the Corporations ability to continue as a going concern and to provide an
  adequate return to shareholders through the optimization of the debt and equity
  balance. The Corporations capital is described to be due to a shareholder,
  convertible debentures less cash and shareholders equity. The Corporation
  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 the capital structure, the Corporation may return capital to
  the shareholders, issue new shares or issue new debt.

|                                                 |  | July
      31, 2009 |   |  | July
      31, 2008 |  
|------------------------------------------------ |  | ------------------- | - |  | ------------------- | -
|                                                 |  | $                   |   |  | $                   |  
|Due to a shareholder                             |  | 2,016,725           |   |  | 1,267,701           |  
|Convertible debentures                           |  | 362,222             |   |  | 278,343             |  
|Total Debt                                       |  | 2,378,948           |   |  | 1,546,044           |  
|Less Cash                                        |  | 1,065,572           |   |  | 775,443             |  
|Net Debt                                         |  | 1,313,375           |   |  | 770,601             |  
|                                                 |  |                     |   |  |                     |  
|Shareholders' deficiency                         |  |                     |   |  |                     |  
|Share capital                                    |  | 38,530,441          |   |  | 38,530,441          |  
|Equity
      component of convertible debentures |  | 446,027             |   |  | 446,027             |  
|Contributed surplus (Note 9b)                    |  | 832,124             |   |  | 752,525             |  
|Deficit                                          |  | (42,181,147         | ) |  | (40,989,452         | )
|                                                 |  | (2,372,555          | ) |  | (1,260,459          | )
|                                                 |  |                     |   |  |                     |  
|Adjusted Capital                                 |  | (1,059,180          | ) |  | (489,858            | )

15  FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES,
  AND FINANCIAL RISKS

Financial Management

Managements objective is to minimize the risk exposure to the
  Corporation against various financial risks which include credit risk, currency
  risk and liquidity risk. The Corporation does not use derivative financial
  instruments to minimize such risk.

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 rate. The majority of the company's debt is at fixed rates.
  Accordingly, there is limited exposure to cash flow but a risk in changes of
  fair value resulting from interest rate fluctuations.

F-26

---

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

15 - FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES,
  AND FINANCIAL RISKS (Continued)

b) Credit risk

Credit risk is the risk that one party to a financial
  instrument will fail to discharge an obligation and cause the other party to
  incur a financial loss. The Corporations maximum exposure to credit risk is
  limited to the carrying amount of financial assets recognized at the reporting
  date.

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

|                    |  | 2009      |  |  | 2008      | 
|------------------- |  | --------- |  |  | --------- | 
|                    |  | $         |  |  | $         | 
|Cash                |  | 1,065,572 |  |  | 775,443   | 
|Accounts receivable |  | 1,384,199 |  |  | 1,573,867 | 
|Unbilled receviable |  | 109,414   |  |  | 245,184   | 
|                    |  | 2,559,185 |  |  | 2,594,494 | 

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

The credit risk exposure through the Corporations accounts
  receivable is mitigated by selling software licenses, maintenance and consulting
  for invoicing with short credit terms. Software maintenance contracts are
  generally fully paid at the inception of service. In the normal course of
  operations, the Corporation evaluates the financial condition of its customers.
  Since most of the customers are relatively large companies in various
  industries, with a history of payment and all the accounts receivables are
  current, the allowance for doubtful accounts is nominal. In the year ended July
  31, 2009, the Corporation generated approximately 11% of its revenue from one
  customer in Europe. No amounts were outstanding from that customer as at July
  31, 2009. (For the year ended July 31, 2008, one customer in Europe represented
  12% of the revenue (14% in 2007); however only 10% was outstanding as at July
  31, 2008.) As such, management assesses the Corporations credit risk to be
  low.

F-27

---

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

15 - FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES,
  AND FINANCIAL RISKS (Continued)

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
  Corporation operates internationally and is exposed to risk from changes in
  foreign currency rates. The Corporation does not hold any financial instruments
  that mitigate this risk. Management minimizes this risk by paying the
  expenditures incurred in the local operations using the monies received in the
  local currency.

The Corporation is mainly exposed to fluctuations in the U.S.
  dollar, the Pound Sterling and the Euro. The following table details the
  Corporations sensitivity to a 30% strengthening of the U.S. dollar, a 30%
  strengthening of the Pound Sterling and a 20% strengthening of the Euro on net
  earnings and comprehensive income against the Canadian dollar. The sensitivity
  analysis includes foreign currency denominated monetary items and adjusts their
  translation at period end for the changes described above. For a weakening of
  the U.S. dollar, the Pound Sterling and the Euro by the same percentages against
  the Canadian dollar, there would be an equal and opposite impact on net loss and
  comprehensive loss. The sensitivity analysis was based on the fluctuations in
  foreign currency rate over the last 3 years. As such, management assess the
  Corporations currency risk to be high.

|                                                        |  | US Dollar |   |  | UK Pound        |  |  | Euro   | 
|------------------------------------------------------- |  | --------- | - |  | --------------- |  |  | ------ | 
|                                                        |  | Impact    |   |  | Sterling Impact |  |  | Impact | 
|                                                        |  |           |   |  |                 |  |  |        | 
|Net Income (loss) and comprehensive income
      (loss) |  | (202,553  | ) |  | 185,821         |  |  | 95,081 | 

As at July 31, 2009 and July 31, 2008, the Corporation had the
  following monetary assets and liabilities denominated in foreign currencies
  included in its financial statements:

|                |  | July 31, 2009 |  |  | July 31, 2008 | 
|--------------- |  | ------------- |  |  | ------------- | 
|                |  | Current       |  |  | Current       | 
|                |  | assets        |  |  | liabilities   | 
|                |  |               |  |  |               | 
|U.S. Dollars    |  | 295,654       |  |  | 209,832       | 
|Pounds Sterling |  | 992,216       |  |  | 866,932       | 
|Euros           |  | 453,058       |  |  | 818,172       | 

F-28

---

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

15  FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES,
  AND FINANCIAL RISKS (Continued)

d) Liquidity risk

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

The Corporation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
  Corporation controls its liquidity risk by managing its cash and cash flows
  using budgets and cash estimates.

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

|                                         |  | Carrying  |  |  | Due within 1 |  |  | Due within 1 - 3 | 
|---------------------------------------- |  | --------- |  |  | ------------ |  |  | ---------------- | 
|                                         |  | Amount of |  |  | year         |  |  | years            | 
|                                         |  | Liability |  |  |              |  |  |                  | 
|                                         |  | $         |  |  | $            |  |  | $                | 
|Accounts payable and accrued liabilities |  | 1,002,902 |  |  | 1,002,902    |  |  | -                | 
|Due to a shareholder                     |  | 2,016,725 |  |  | 2,016,725    |  |  | -                | 
|Convertible Debentures                   |  | 362,222   |  |  | -            |  |  | -                | 

As at July 31, 2009, there has been no significant change to
  the maturities of financial liabilities as such based on Note 2, management
  assesses the Corporations liquidity risk to be high.

F-29

---

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

16  FINANCIAL INSTRUMENTS

Fair value

Fair value is the amount that willing parties would accept to
  exchange a financial instrument based on the current market for instruments with
  the same risk, principal and remaining maturity. These 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 these instruments were
  settled.

The fair value of cash, accounts receivable, unbilled
  receivable, accounts payable and accrued liabilities approximates their
  respective carrying value given their short-term maturities. The fair value of
  the due to a shareholder could not be determined since it is practically
  impossible to find a financial instrument on the market having substantially the
  same economic characteristics.

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

As at July 31, 2009, the classification of the financial
  instruments, as well as their carrying values and the fair values, are shown in
  the table below:

|                                               |  |           |  |  |             |           |  | Other       |           |  | Total     |           |  |            | 
|---------------------------------------------- |  | --------- |  |  | ----------- | --------- |  | ----------- | --------- |  | --------- | --------- |  | ---------- | 
|                                               |  | Held for  |  |  | Loans and   |           |  | financial   |           |  | carrying  |           |  | Fair value | 
|                                               |  | trading   |  |  | receivables |           |  | liabilities |           |  | value     |           |  |            | 
|                                               |  | $         |  |  | $           |           |  | $           |           |  | $         |           |  | $          | 
|Financial assets                               |  |           |  |  |             |           |  |             |           |  |           |           |  |            | 
|Cash                                           |  | 1,065,572 |  |  |             |           |  |             |           |  | 1,065,572 |           |  | 1,065,572  | 
|Accounts receivable                            |  |           |  |  | 1,384,199   |           |  |             |           |  | 1,384,199 |           |  | 1,384,199  | 
|Unbilled receivable                            |  |           |  |  | 109,414     |           |  |             |           |  | 109,414   |           |  | 109,414    | 
|                                               |  |           |  |  |             |           |  |             |           |  |           |           |  |            | 
|Financial liabilities                          |  |           |  |  |             |           |  |             |           |  |           |           |  |            | 
|Accounts payable and
      accrued liabilities |  |           |  |  |             | 1,002,902 |  |             | 1,002,902 |  |           | 1,002,902 | 
|Due to a shareholder                           |  |           |  |  |             |           |  | 2,016,725   |           |  | 2,016,725 |           |  |            | 
|Convertible debentures                         |  |           |  |  |             |           |  | 362,222     |           |  | 362,222   |           |  | 723,891    | 

F-30

---

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

17 - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE
  WITH CANADIAN GAAP TO U.S. GAAP AND OTHER SUPPLEMENTARY U.S. GAAP
  DISCLOSURES

Differences between Canadian and U.S. GAAP

The material differences between Canadian and U.S. GAAP
  affecting the Corporation's consolidated financial statements are detailed as
  follows:

|                                                  |  | 2009       |   |  | 2008       |  
|------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                  |  | $          |   |  | $          |  
|1) Net loss reconciliation                        |  |            |   |  |            |  
|Net loss - Canadian GAAP                          |  | (1,191,695 | ) |  | (1,271,950 | )
|Adjustments for:                                  |  |            |   |  |            |  
|Stock-based compensation
      (a)                |  | (6,156     | ) |  | (22,653    | )
|Warrants
      (b)                                |  | 215,779    |   |  | (45,834    | )
|Convertible Debentures
      (c)                  |  | 536,596    |   |  | (217,375   | )
|Net loss - U.S. GAAP                              |  | (445,476   | ) |  | (1,557,812 | )
|                                                  |  |            |   |  |            |  
|Basic and diluted loss
      per share, U.S. GAAP |  | (0.03      | ) |  | (0.11      | )
|                                                  |  |            |   |  |            |  
|2) Long-term liabilities
      reconciliation     |  |            |   |  |            |  
|Total long-term liabilities - Canadian GAAP       |  | 362,222    |   |  | 278,343    |  
|Reconciling items                                 |  |            |   |  |            |  
|Warrants (b)                                      |  | 141,488    |   |  | 357,267    |  
|Convertible Debentures (c)                        |  | 1,009,538  |   |  | 966,716    |  
|Total long-term liabilities - U.S. GAAP           |  | 1,513,248  |   |  | 1,602,326  |  
|                                                  |  |            |   |  |            |  
|3) Shareholders' deficiency reconciliation        |  |            |   |  |            |  
|Shareholders' deficiency -
      Canadian GAAP    |  | (2,372,555 | ) |  | (1,260,459 | )
|Adjustments for:                                  |  |            |   |  |            |  
|Net loss
      reconciling items (see above)      |  | 746,219    |   |  | (285,862   | )
|Stock-based compensation
      (a)                |  | 6,156      |   |  | 22,653     |  
|Warrants
      (b)                                |  | (357,267   | ) |  | (311,433   | )
|Convertible Debentures
      (c)                  |  | (1,546,134 | ) |  | (749,341   | )
|Shareholders' deficiency -
      U.S. GAAP        |  | (3,523,581 | ) |  | (2,584,442 | )

F-31

---

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

17 - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE
  WITH CANADIAN GAAP TO U.S. GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES
  (Continued)

a) Stock-based compensation

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

Under U.S. GAAP, effective August 1, 2005, the Corporation
  adopted SFAS No. 123 (revised 2004), "Share-based Payment", which requires that
  share-based payments (to the extent they are compensatory) be recognized based
  on their fair value and the estimated number of shares that the Corporation
  ultimately expects will vest and to be expensed over the applicable vesting
  period. The fair value of the unvested portion of the share-based payments
  granted prior to August 1, 2005 (the Corporations adoption date of SFAS No.
  123(R)) is measured based on the grant date fair value of those awards
  previously calculated under SFAS No. 123, net of estimated forfeitures.

The impact for fiscal year 2009 was an increase in net loss by
  $6,156, an increase in contributed surplus and shareholders equity by $313,572.
  The impact for fiscal year 2008 was an increase in net loss by $22,653 and an
  increase in shareholders deficiency and contributed surplus by $307,416.

b) Share purchase warrants

Under Canadian GAAP, share purchase warrants are classified and
  accounted for as equity in the Corporations consolidated financial statements.

Under U.S. GAAP, SFAS No. 133, "Accounting for Derivative
  Instruments and Hedging Activities" it is required that share purchase warrants
  with an exercise price denominated in a currency other than its functional
  currency be classified and accounted for as a financial liability. As well, any
  gains or losses in fair value are recognized in earnings.

The impact for fiscal year 2009 was a decrease in net loss by
  $215,759, an increase in long-term liabilities by $141,488, a decrease in
  shareholders deficiency by $141,488 and a decrease in contributed surplus by
  $170,110. The impact for fiscal year 2008 was an increase in net loss by
  $45,834, an increase in long-term liabilities by $357,267 and a decrease in
  shareholders deficiency by $357,267 and a decrease in contributed surplus by
  $170,110.

F-32

---

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

17 - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE
  WITH CANADIAN GAAP TO U.S. GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES
  (Continued)

c) Convertible debentures

Under Canadian GAAP, share purchase warrants of the convertible
  debentures are classified and accounted for as equity. Conversion option and the
  interest payable in shares are classified and accounted for as equity component
  of the convertible debentures.

The technical interpretation of U.S. GAAP, in accordance with
  SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
  currently requires that share purchase warrants and conversion option with an
  exercise price denominated in a currency other than Corporations functional
  currency be classified and accounted for as financial derivative liabilities at
  fair value with changes in fair value recognized in net operations.

Under Canadian GAAP, the fair value of the debt component of
  the convertible debentures is required to be calculated and the debt component
  is accounted for as liability; the balance of the debentures issue price over
  the initial carrying amount of the debt component is recognized in equity as
  described above.

Under U.S. GAAP, in accordance with SFAS No. 133, the initial
  carrying amount of the debt component represents the balance of the debentures
  issue price over the initial fair value of the conversion option and share
  purchase warrants. Under both 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 for fiscal year 2009 was to decrease net loss by
  $536,596, decrease equity component by $446,027, increase long-term liabilities
  by $1,009,538, increase shareholders deficiency by $796,672 and decrease
  contributed surplus by $303,415. The impact for fiscal year 2008 was to increase
  net loss by $217,375, decrease equity component by $446,027, increase long-term
  liabilities by $966,717, decrease shareholders deficiency by $966,717 and
  decrease contributed surplus by $303,415.

F-33

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

17 - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE
  WITH CANADIAN GAAP TO U.S. GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES
  (Continued)

Supplementary disclosures

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

|• | Accounts receivable are net of allowance for doubtful
      accounts of $4,140 ($6,756 in 2008).                                                                                                                                                                                                                                                                                                                               
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|• | Under U.S. GAAP, research and development investment tax
      credits (see Note 10) would be classified as a reduction of the income tax
      expense instead of a reduction of the related research and development
      costs.                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|• | Under Canadian GAAP, future income taxes are calculated
      based on enacted or substantially enacted tax rates applicable to future
      years. Under U.S. GAAP, only enacted rates are used in the calculation of
      future income taxes. This difference in GAAP did not result in a
      difference in the financial position, results of operations or cash flows
      of the Corporation for the years presented.

ADOPTION OF NEW ACCOUNTING POLICIES

SFAS No.
  157, "Fair Value Measurement"

In September 2006, in an effort to increase consistency and
  comparability in fair value measurements, the Financial Accounting Standards
  Board (FASB) issued Statement No.157, "Fair Value Measurement, which defines
  fair value, establishes guidelines for measuring fair value and expands
  disclosures regarding fair value measurements. SFAS No. 157 defines fair value
  as the price that would be received for an asset or the exit price that would be
  paid to transfer a liability in the principal or most advantageous market in an
  orderly transaction between participants at the measurement date. The standard
  creates a fair value hierarchy which prioritizes the inputs to valuation
  techniques used to measure fair value into three board levels as follows:

|Level 1 | Inputs to the valuation methodology are based on
      unadjusted quoted prices in active markets for identical assets or
      liabilities;                                                                                          
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                       
|Level 2 | Inputs to the valuation methodology are based on quoted
      prices in markets that are not active or inputs that are observable either
      directly or indirectly for substantially the full term of the asset or
      liability;
|        |                                                                                                                                                                                                                                       
|Level 3 | Inputs to the valuation methodology are based on
      unobservable inputs that reflect the Corporations own assumptions about
      the assumptions market participants would use in pricing asset or
      liability               

F-34

---

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

17 - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE
  WITH CANADIAN GAAP TO U.S. GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES
  (Continued)

Financial assets and liabilities are classified in their
  entirety based on the lowest level of input that is significant to the fair
  value measurement.

In February 2008, the FASB issued FASB Staff Position FAS
  157-2, Effective date of FASB statement No. 157, to provide a one-year
  deferral of the effective date of SFAS 157 for non-financial assets and
  non-financial liabilities, except those that are recognized or disclosed in
  financial statements at fair value on a recurring basis (that is, at least
  annually). For non-financial assets and non-financial liabilities subject to the
  deferral, the effective date of SFAS 157 is postponed to fiscal year beginning
  after November 15, 2008 and to interim periods within those fiscal years.

The Corporations financial instruments consist primarily of
  cash, accounts receivable, unbilled receivable, accounts payable and accrued
  liabilities, due to a shareholder and convertible debentures. Pursuant to SFAS
  No. 157, the fair value of cash is determined based on Level 1 inputs, which
  consist of quoted prices in active markets for identical assets. The Corporation
  believes that the recorded values of accounts receivable, unbilled receivable,
  accounts payable and accrued liabilities approximate their current fair values
  because of the nature and respective maturity dates or durations. The fair value
  of the due to a shareholder could not be determined since it is practically
  impossible to find a financial instrument on the market having substantially the
  same economic characteristics. The fair value of the convertible debentures,
  including the share purchase warrants and the option to convert, is determined
  based on Level 2 inputs, which consists of inputs derived principally from
  observable market data and input into model-derived valuations.

SFAS No. 165, "Subsequent Events"

In May 2009, the FASB issued Statement No. 165 Subsequent
  Events, which establishes general standards of accounting for and disclosure of
  events that occur after the balance sheet date but before the financial
  statements are issued or available to be issued. This Statement sets forth: (i)
  the period after the balance sheet date during which management of a reporting
  entity should evaluate events or transactions that may occur for potential
  recognition or disclosure in the financial statements; (ii) the circumstances
  under which an entity should recognize events or transactions occurring after
  the balance sheet date in its financial statements; and (iii) the disclosures
  that an entity should make about events or transactions that occurred after the
  balance sheet date. This Statement is effective for interim and annual periods
  ending after June 15, 2009.

The adoption of SFAS No.165 did not have an impact on the
  Corporations consolidated financial statements.

F-35

---

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

17 - RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE
  WITH CANADIAN GAAP TO U.S. GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES
  (Continued)

RECENT PRONOUNCEMENTS

SFAS No. 168, "The FASB Accounting Standards Codification
  and the Hierarchy of Generally Accepted Accounting Principles (GAAP)"

In June 2009, the FASB issued Statement No. 168 The FASB
  Accounting Standards Codification and the Hierarchy of Generally Accepted
  Accounting Principles (GAAP). The Codification supersedes all then-existing
  non-SEC accounting and reporting standards to become the single source of
  authoritative non-governmental US GAAP. All other non-grandfathered non-SEC
  accounting literature not included in the Codification will become
  nonauthoritative. SFAS No.168 represents the final standard that the FASB will
  issue in the form of Statements, FASB Staff Positions, or Emerging Issues Task
  Force Abstracts. All subsequent standards will be issued as Accounting Standard
  Updates, which will serve only to update the Codification. The Codification and
  SFAS No.168 are effective for financial statements issued for interim and annual
  periods ending after September 15, 2009. The Corporation is currently evaluating
  the effect that the adoption of SFAS No. 168 will have on its consolidated
  results.

18  SUBSEQUENT EVENTS

Effective November 1, 2009, Arthur G. Ritchie, President and
  Chief Executive Officer retired. He continues to be the Chairman of the board of
  directors. As a result of his retirement, his loan agreements have been ratified
  such that the amounts owing to him will be repaid in equal instalments over 3
  years. The loan will continue to bear interest at 15% per annum and will be paid
  on a semi-annual basis. As well, an amendment was made to the inter-creditor
  priority agreement, whereby the parties agreed that the sums owing under the
  debentures will be paid by the Corporation to debenture holders and the trustee pari passu to the sums owing by the Corporation to the principal
  shareholder. So for every $1 paid to the debenture holders, the Corporation
  shall remit $1 to the principal shareholder.

In November 2009, the Corporation completed a non-brokered
  private placement where the Corporation issued 785,715 units for US$0.70 per
  unit, for total proceeds of US$550,000 to investors, one of whom effective
  November 1, 2009, is the President and Chief Executive Officer. Each unit
  consists of two Class A common share and one share purchase warrant,
  exercisable at a price of US$0.50 per warrant.

F-36

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SIGNATURES

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

SAND TECHNOLOGY INC.

|Dated: November 12, 2009 | By:
      (s) Thomas O'Donnell       
|------------------------ | -------------------------------------
|                         | Thomas O'Donnell,                    
|                         | President and Chief Executive Officer



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