0001062993-19-003905.txt : 20191015 0001062993-19-003905.hdr.sgml : 20191015 20191015154432 ACCESSION NUMBER: 0001062993-19-003905 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 63 CONFORMED PERIOD OF REPORT: 20190831 FILED AS OF DATE: 20191015 DATE AS OF CHANGE: 20191015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Security Devices International Inc. CENTRAL INDEX KEY: 0001354866 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 711050654 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-132456 FILM NUMBER: 191150926 BUSINESS ADDRESS: STREET 1: 107 AUDUBON ROAD STREET 2: BLDG 2, SUITE 201 CITY: WAKEFIELD STATE: MA ZIP: 01880 BUSINESS PHONE: 978-868-5011 MAIL ADDRESS: STREET 1: 107 AUDUBON ROAD STREET 2: BLDG 2, SUITE 201 CITY: WAKEFIELD STATE: MA ZIP: 01880 10-Q 1 form10q.htm FORM 10-Q Security Devices International Inc. - Form 10-Q - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2019

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

For the transition period from _______ to _______

Commission File Number: 333-132456

SECURITY DEVICES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware 71-1050654
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

107 Audubon Road, Bldg 2, Suite 201
Wakefield, MA 01880
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number including area code: (978) 868-5011

N/A
Former name, former address, and former fiscal year, if changed since last report

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

Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share SDEV OTC QB
Common Stock, par value $0.001 per share SDZ.CN Canadian Securities Exchange

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]      No [   ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Larger accelerated filer  [   ] Accelerated filer                   [   ]
Non-accelerated filer     [   ] Smaller reporting company [X]

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]        No [X]

As of October 13, 2019, the Company had 104,177,837 issued and outstanding shares of common stock.


SECURITY DEVICES INTERNATIONAL, INC.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2019

(Amounts expressed in US Dollars)
(Unaudited)

TABLE OF CONTENTS

Page No
   
Condensed Interim Consolidated Balance Sheets as at August 31, 2019 and November 30, 2018 1
   
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss for the nine months and three months ended August 31, 2019 and 2018 2
   
Condensed Interim Consolidated Statements of Cash Flows for the nine months ended August 31, 2019 and 2018 3
   
Condensed Interim Consolidated Statements of Changes in Stockholders’ (Deficiency) Equity for the nine months ended August 31, 2019 and 2018 4
   
Notes to Condensed Interim Consolidated Financial Statements 5-27


SECURITY DEVICES INTERNATIONAL, INC.
Condensed Interim Consolidated Balance Sheets
As at August 31, 2019 and November 30, 2018
(Amounts expressed in US Dollars) (Unaudited)

    August 31,     November 30,  
    2019     2018  
    $     $  
ASSETS    
CURRENT ASSETS            
Cash and cash equivalents   1,881,377     1,182,387  
Accounts receivable   112,140     18,914  
Inventory (Note 10)   666,912     129,121  
Deferred cost (Note 14)   55,862     -  
Prepaid expenses and other receivables (Note 13)   793,420     901,247  
             
Total Current Assets   3,509,711     2,231,669  
Patent rights (Note 12)   100,835     106,334  
Deposit for equipment (Note 3)   227,781     205,664  
Property and equipment (Note 3)   274,109     113,418  
             
TOTAL ASSETS   4,112,436     2,657,085  
             
LIABILITIES    
CURRENT LIABILITIES            
Accounts payable and accrued liabilities (Note 6)   862,400     397,309  
Deferred revenue   13,320     -  
Secured convertible debentures (Note 9)   -     978,361  
Convertible notes (Note 9)   1,924,957     -  
Derivative liabilities (Note 9)   214,200     957,301  
Total Current Liabilities   3,014,877     2,332,971  
Long term convertible notes (Note 9)   1,277,676     167,077  
Total Liabilities   4,292,553     2,500,048  
Going Concern (Note 2)            
Related Party Transactions (Note 6)            
Commitments (Notes 7 and 9)            
Subsequent Events (Note 15)            
STOCKHOLDERS' (DEFICIENCY) EQUITY    
Capital stock (Note 4)            
Preferred stock, $0.001 par value, 5,000,000 shares authorized, Nil issued and outstanding (November 30, 2018 - nil).
Common stock, $0.001 par value 300,000,000 shares authorized, 104,021,837 issued and outstanding (November 30, 2018: 101,976,900)
  104,022     101,977  
Additional paid-in capital   35,752,050     33,341,695  
Shares to be issued (Note 6)   20,000     -  
Accumulated deficit   (35,941,684 )   (33,252,338 )
Accumulated other comprehensive loss   (114,505 )   (34,297 )
             
Total Stockholders' (Deficiency) Equity   (180,117 )   157,037  
             
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY   4,112,436     2,657,085  

See accompanying notes to the condensed interim consolidated financial statements.

1


SECURITY DEVICES INTERNATIONAL, INC.
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss
For the Nine Months and Three Months Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

    For the     For the     For the     For the  
    nine     nine     three     three  
    months     months     months     months  
    ended     ended     ended     ended  
    August 31,     August 31,     August 31,     August 31,  
    2019     2018     2019     2018  
    $     $     $      
                         
SALES   423,977     220,115     307,101     53,257  
COST OF SALES   (328,512 )   (148,515 )   (247,679 )   (29,302 )
GROSS PROFIT   95,465     71,600     59,422     23,955  
                         
EXPENSES:                        
Depreciation (Note 3)   24,869     12,138     7,848     5,379  
Amortization of patent rights (Note 12)   5,499     1,833     1,833     1,833  
Foreign currency translation (gain) loss   (15,372 )   (17,498 )   349     (5,898 )
Selling, general and administration   2,582,406     1,091,424     755,545     385,556  
TOTAL OPERATING EXPENSES   2,597,402     1,087,897     765,575     386,870  
LOSS FROM OPERATIONS   (2,501,937 )   (1,016,297 )   (706,153 )   (362,915 )
Accretion (Note 9)   (672,517 )   (88,102 )   (367,457 )   (29,991 )
Change in fair value of derivative liabilities (Note 9)   742,106     245,852     96,339     307,201  
Other expense- interest (Note 9)   (256,998 )   (100,125 )   (109,572 )   (32,946 )
LOSS BEFORE INCOME TAXES   (2,689,346 )   (958,672 )   (1,086,843 )   (118,651 )
Income taxes   -     -     -     -  
NET LOSS   (2,689,346 )   (958,672 )   (1,086,843 )   (118,651 )
Foreign exchange translation adjustment for the period   (80,208 )   (7,175 )   (52,089 )   (4,922 )
COMPREHENSIVE LOSS   (2,769,554 )   (965,847 )   (1,138,932 )   (123,573 )
                         
Loss per share - basic and diluted   (0.026 )   (0.010 )   (0.010 )   (0.001 )
Weighted average number of common shares outstanding   103,386,825     93,559,755     104,071,705     94,357,643  

See accompanying notes to the condensed interim consolidated financial statements.

2


SECURITY DEVICES INTERNATIONAL, INC.
Condensed Interim Consolidated Statements of Cash Flows
For the Nine Months Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

    For the nine     For the nine  
    months ended     months ended  
    August 31, 2019     August 31, 2018  
    $     $  
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss for the period   (2,689,346 )   (958,672 )
Items not involving cash:            
Stock-based compensation expense (included in selling, general and administration expenses)   191,532     45,387  
Accretion   672,517     88,102  
Foreign currency translation gain   (15,372 )   (17,498 )
Change in fair value of derivative liabilities   (742,106 )   (245,852 )
Issue of common shares for services   314,339     212,500  
Cancellation of shares for services   (19,998 )   -  
Shares to be issued for services   20,000     -  
Issue of convertible debentures for services   112,500     -  
Depreciation   24,869     12,138  
Amortization of patent rights   5,499     1,833  
Changes in non-cash working capital:            
Accounts receivable   (97,072 )   1,252  
Prepaid expenses and other receivables   103,670     (98,296 )
Deferred revenue   13,320     -  
Deferred costs   (55,862 )   -  
Inventory   (559,197 )   (2,435 )
Accounts payable and accrued liabilities   476,225     (96,455 )
NET CASH USED IN OPERATING ACTIVITIES   (2,244,482 )   (1,057,996 )
CASH FLOWS FROM INVESTING ACTIVITIES            
Purchase of patents   -     (110,000 )
Deposit for equipment   (22,117 )   (180,000 )
Purchase of property and equipment   (185,560 )   (98,349 )
NET CASH USED IN INVESTING ACTIVITIES   (207,677 )   (388,349 )
CASH FLOWS FROM FINANCING ACTIVITIES            
Proceeds from convertible debentures   4,250,265     -  
Repayment of secured convertible debentures   (1,035,930 )   -  
Repayment of unsecured convertible debentures   -     (40,357 )
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES   3,214,335     (40,357 )
Effects of foreign currency exchange rate changes   (63,186 )   (4,440 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE PERIOD   698,990     (1,491,142 )
Cash and cash equivalents, beginning of period   1,182,387     1,965,043  
CASH AND CASH EQUIVALENTS, END OF PERIOD   1,881,377     473,901  
             
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:            
INCOME TAXES PAID   -     -  
INTEREST PAID   67,007     67,179  

See accompanying notes to the condensed interim consolidated financial statements.

3


SECURITY DEVICES INTERNATIONAL, INC.
Condensed Interim Consolidated Statement of Changes in Stockholders’ (Deficiency) Equity
For the Nine Months Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

                                  Accumulated        
    Number of     Common       Additional       Shares           Other        
    Common     Shares     Paid-in     to be     Accumulated       Comprehensive        
    Shares     Amount     Capital     Issued     Deficit     Loss     Total  
    #     $     $     $     $     $     $  
                                           
Balance as of November 30, 2017   93,014,134     93,014     31,365,097     -     (31,098,864 )   (32,624 )   326,623  
Stock-based compensation   -     -     45,387     -     -     -     45,387  
Issue of common shares for services   1,479,954     1,480     211,020     -     -     -     212,500  
Net loss for the period   -     -     -     -     (958,672 )   -     (958,672 )
Foreign currency translation   -     -     -     -     -     (7,175 )   (7,175 )
Balance as of August 31, 2018   94,494,088     94,494     31,621,504     -     (32,057,536 )   (39,799 )   (381,337 )
                                           
Balance as of November 30, 2018   101,976,900     101,977     33,341,695     -     (33,252,338 )   (34,297 )   157,037  
Stock-based compensation   -     -     191,532     -     -     -     191,532  
Shares issued for services   2,179,875     2,180     312,159     -     -     -     314,339  
Cancellation of shares   (134,938 )   (135 )   (19,861 )                     (19,996 )
Shares to be issued   -     -     -     20,000     -     -     20,000  
Issuance of warrants   -     -     1,926,525     -     -     -     1,926,525  
Net loss for the period   -     -     -     -     (2,689,346 )   -     (2,689,346 )
Foreign currency translation   -     -     -     -     -     (80,208 )   (80,208 )
Balance as of August 31, 2019   104,021,837     104,022     35,752,050     20,000     (35,941,684 )   (114,505 )   (180,117 )

See accompanying notes to the condensed interim consolidated financial statements.

4


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

1.

BASIS OF PRESENTATION

   

The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (GAAP); however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods.

   

The unaudited condensed interim consolidated financial statements should be read in conjunction with the financial statements and notes thereto together with management’s discussion and analysis of financial condition and results of operations contained in Security Devices International Inc.’s (“SDI” or the “Company”) annual report on Form 10-K for the year ended November 30, 2018. In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company at August 31, 2019 and November 30, 2018, the results of its operations for the nine and three month periods ended August 31, 2019 and August 31, 2018, and its cash flows for the nine month periods ended August 31, 2019 and August 31, 2018. The results of operations for the nine and three-month periods ended August 31, 2019 are not necessarily indicative of results to be expected for the full year.

   

The Company was incorporated under the laws of the state of Delaware on March 1, 2005. On February 3, 2014, the Company incorporated a wholly owned subsidiary in Canada, Security Devices International Canada Corp. On March 1, 2018, the Company acquired all the shares of a company in South Africa, Byrna South Africa (Pty) Ltd. The condensed unaudited interim consolidated financial statements for the period ended August 31, 2019 include the accounts of Security Devices International, Inc., and its subsidiaries Security Devices International Canada Corp. and Byrna South Africa (Pty) Ltd. All material inter-company accounts and transactions have been eliminated.

   
2.

NATURE OF OPERATIONS AND GOING CONCERN

   

The Company is a less-lethal defense technology company, specializing in innovative next generation solutions for security situations that do not require the use of lethal force. SDI has implemented manufacturing partnerships to assist in the deployment of their patented and patent pending family of 40mm and .68 caliber products. These products consist of the current manufacture of Blunt Impact Projectile 40mm (BIP) line of products, a line of 12 gauge less-lethal products, and a .68 caliber handheld personal security device called the Byrna.

   

These condensed unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.

   

The Company’s activities are subject to risk and uncertainties including:

   

The Company has not earned adequate revenue and has used cash in its operations. Therefore, the Company will need additional financing to continue its operations if it is unable to generate substantial revenue growth.

5


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

2.

NATURE OF OPERATIONS AND GOING CONCERN-Cont’d

   

The Company has incurred a cumulative loss of $35,941,684 from inception to August 31, 2019. The Company has funded operations through the issuance of capital stock, warrants, convertible debentures and convertible notes. The Company has started to generate revenue from operations. However, it still expects to incur significant losses before becoming profitable. The Company’s future success is dependent upon its ability to raise sufficient capital or generate adequate revenue, to cover its ongoing operating expenses, and also to continue to develop and be able to profitably market its products. There can be no assurance that such revenue will be generated or financing will be available at all or on favorable terms. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty; such adjustments could be material.

   
3.

PROPERTY AND EQUIPMENT

   

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is provided commencing in the month following acquisition using the following annual rate and method:


  Computer Equipment and Software 30% declining balance method
  Furniture and Fixtures 30% declining balance method
  Leasehold Improvements   straight line over period of lease
  Moulds 20% straight line over 5 years

      August 31, 2019     November 30, 2018  
            Accumulated           Accumulated  
      Cost     Amortization     Cost     Amortization  
      $     $     $     $  
  Computer equipment and software   81,893     51,469     77,382     46,837  
  Furniture and fixtures   22,722     20,519     20,998     18,763  
  Leasehold improvements   26,471     26,471     26,471     26,471  
  Moulds   470,922     229,440     291,599     210,961  
      602,008     327,899     416,450     303,032  
                           
  Net carrying amount       $ 274,109         $ 113,418  
                           
  Depreciation expense for nine- month period $  24,869     (August 31, 2019 ) $  12,138     (August 31, 2018 )

As of August 31, 2019, the Company has deposits of $227,781 (November 30, 2018 - $205,664) with vendors primarily for supply of moulds and equipment. As of August 31, 2019, the vendors had not completed the supply of these moulds and equipment.

6


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

4.

CAPITAL STOCK


  a)

Authorized

300,000,000* Common shares, $0.001 par value

And

5,000,000 Preferred shares, $0.001 par value

* On October 6, 2017, the Company filed with the Secretary of the State of Delaware a certificate of amendment (the “Amendment”) to the Company’s certificate of incorporation. The Amendment increased the number of authorized shares of the Company’s common stock, par value $0.001, from 100,000,000 to 200,000,000 common shares.

* On March 21, 2019, the Company filed with the Secretary of the State of Delaware a certificate of amendment (the “Amendment”) to the Company’s certificate of incorporation. The Amendment increased the number of authorized shares of the Company’s common stock, par value $0.001, from 200,000,000 to 300,000,000 common shares.

The Company’s Articles of Incorporation authorize its Board of Directors to issue up to 5,000,000 shares of preferred stock having par value of $0.001. The provisions in the Articles of Incorporation relating to the preferred stock allow the directors to issue preferred stock with multiple votes per share and dividend rights, which would have priority over any dividends paid with respect to the holders of SDI’s common stock.

  b)

Issued

104,021,837 common shares (November 30, 2018: 101,976,900 common shares)

7


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

4.

CAPITAL STOCK-Cont’d


  c)

Changes to Issued Share Capital

Nine months ended August 31, 2019

In January 2019, the Company made a share issuance to Paul Jensen (“Jensen”) pursuant to his employment agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of $20,000, due January 15, 2019.

In January 2019, the Company made a share issuance to Bryan Ganz (“Ganz”) pursuant to a consulting agreement. The Company issued 500,000 common shares at a price of $0.1482 for a total consideration of $74,100, due December 15, 2018.

In January 2019, the Company made a share issuance to a corporation owned and controlled by Dean Thrasher (“Thrasher”), executive chairman of the Company, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.1482 for a total consideration of $26,676 due January 15, 2019.

In January 2019, the Company made a share issuance to Lisa Wager (“Wager”), the Chief Legal Officer (“CLO”), pursuant to a consulting agreement. The Company issued 166,666 common shares at a price of $0.1482 for a total consideration of $24,700, due January 15, 2019.

In January 2019, the Company made a share issuance to a consultant in South Africa, pursuant to a consulting agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of $19,998 due January 15, 2019. These shares were cancelled in June 2019, and the Company subsequently paid the consultant $19,998 in cash.

On April 1, 2019, the Company made a share issuance to Ganz, pursuant to a consulting agreement. The Company issued 333,333 common shares at a price of $0.14 per share to satisfy payment for $46,665, due April 15, 2019.

On April 1, 2019, the Company made a share issuance to Wager for services, pursuant to board resolution. The Company issued 250,000 common shares at a price of $0.14 per share to satisfy payment for $35,000, due April 15, 2019.

On April 1, 2019, the Company made a share issuance to a corporation owned and controlled by Thrasher, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.14 for a total consideration of $25,200, due April 15, 2019.

On May 22, 2019, the Company made a share issuance to a consultant pursuant to a consulting agreement for services. The Company issued 300,000 common shares at a price of $0.14 per share for a total consideration of $42,000.

8


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

4.

CAPITAL STOCK-Cont’d

   

Year ended November 30, 2018

   

In March 2018, the Company made a share issuance to Northeast Industrial Partners (“NEIP”) pursuant to a consulting agreement. SDI issued 507,550 common shares at a price of $0.1231 per share to satisfy the payment of $62,500 due in December 2017.

   

In March 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 339,370 common shares at a price of $0.1473 per share to satisfy the payment of $50,000, due January 15, 2018.

   

In May 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 334,154 common shares at a price of $0.1496 per share to satisfy the payment of $50,000, due April 15, 2018.

   

In July 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 298,880 common shares at a price of $0.1673 per share to satisfy the payment of $50,000, due July 15, 2018.

   

In November 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 136,146 common shares at a price of $0.1469 per share to satisfy the payment of $20,000, due October 15, 2018.

   

In November 2018, the Company made a share issuance to Ganz pursuant to a consulting agreement. SDI issued 500,000 common shares at a price of $0.1451 per share for a total consideration of $72,573 to satisfy the payment for services for the fiscal third quarter.

   

In November 2018, the Company made a share issuance to a corporation owned by Thrasher under the consulting agreement. SDI issued 180,000 common shares at a price of $0.1533 per share for a total consideration of $27,600 due September 15, 2018.

   

In November 2018, the Company made a share issuance of 6,666,666 common shares to FinTekk AP, LLC (“FinTekk”) at a price of $0.15 per share. The shares are issued pursuant to a debt settlement agreement, to retire certain debt owing by the Company to FinTekk, in connection with a sponsorship agreement (the “Sponsorship Agreement”). The Sponsorship Agreement details a marketing campaign for the launch of the Company’s new ByrnaTM HD product over the 2018 and 2019 fiscal years. The Company recognized $750,000 as a prepaid expense as at November 30, 2018 (See note 13).

9


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

5.

STOCK BASED COMPENSATION AND WARRANTS

   

Effective May 31, 2013, the Company adopted an incentive stock option plan (the “2013 Stock Option Plan”) which replaced the prior stock option and stock bonus plans, as ratified by the Company’s shareholders at the Company’s 2015 annual meeting of shareholders. A maximum of 9,379,857 common shares were reserved for issuance under the 2013 Stock Option Plan.

   

The Board approved a revised stock option plan (the “Revised Stock Option Plan”) and received stockholder approval at the annual meeting held on December 19, 2017, that increased the number of shares reserved for issuance under the stock option plan from 9,379,857 to 18,993,274.

   
 

The material terms of the Revised Stock Option Plan are as follows:

   

(a) While the shares are listed on the Exchange (as defined in the Revised Stock Option Plan), options may be granted to employees, senior officers, directors and consultants of the Company or a subsidiary of the Company and to corporations wholly owned by such an employee, senior officer, director or consultant.

   

(b) The maximum number of common shares which can be issued under the Revised Stock Option Plan is 18,993,274, provided that, so long as the Company is listed on the Exchange, this maximum will be reduced to 20% of the issued and outstanding common shares on December 19, 2017.

   

(c) The term of any option granted under the Revised Stock Option Plan will be fixed by the board of directors at the time such option is granted, provided that options will not be permitted to exceed a term of ten years.

   

(d) The exercise price of any options granted under the Revised Stock Option Plan will be determined by the board of directors, in its sole discretion, but shall not be less than the closing price of the shares on the stock exchange on the day preceding the day on which the directors grant such options.

   
 

(e) While the shares are listed on the Exchange, options will be non-assignable and non-transferable.

   

(f) So long as the shares are listed on the Exchange, options on no more than 2% of the issued shares may be granted to any one consultant, or in aggregate to all persons performing investor relations activities, in any 12- month period.

   

(g) If the option holder ceases to be someone eligible to receive a grant of options under the Revised Stock Option Plan, then that holder’s existing options shall expire on the earlier of (i) the expiry date fixed at the time of the option grant, and (ii) ninety days after the date that the option holder ceases to be eligible to receive a grant of options under the Revised Stock Option Plan.

10


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

5.

STOCK BASED COMPENSATION AND WARRANTS-Cont’d

   

Year ended November 30, 2018

   

Warrants

   

On October 22, 2018, the Company entered into a securities purchase agreement with several accredited investors to sell $1,275,000 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before the five year anniversary of the issuance. The Company issued 5,100,000 warrants. The relative grant date fair value of these warrants was estimated at $524,089 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:


  Risk free rate   3.05%  
  Expected dividends   0%  
  Expected volatility   159%  
  Expected life   5 years  
  Market price of the Company’s common stock on date of grant of warrants $  0.14  

Stock Options

On March 27, 2017, the board of directors granted options to Dean Thrasher to acquire a total of 1,150,000 common shares. These options were issued at an exercise price of CAD $0.13 ($0.10) per share and vest thirty-three and one-third (33 1/3) percent every six months commencing January 1, 2017, with an expiry term of five years. The Company expensed stock-based compensation expense of $39,046 regarding the vesting of options during the year ended November 30, 2018, leaving a balance of $nil as unvested stock- based compensation expense.

On April 13, 2018, the board of directors granted 1,500,000 options for shares of the Company’s common stock to the Chief Technology officer (“CTO”), Buys, with exercise price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company’s stock price must close above the trigger price for 20 days in order for the option to be vested. The options shall have a seven-year life from grant date and Buys must remain employed by the Company for three years for the options to vest. The grant date fair value of the options used for the purpose of estimating the stock compensation is estimated using the Binomial Lattice option pricing model with the following assumptions:

  Risk free rate   2.77%  
  Expected dividends   0%  
  Expected forfeiture rate   0%  
  Expected volatility   190%  
  Expected life   7 years  
  Market price of the Company’s common stock on date of grant of options $  0.15  
  Stock-based compensation cost expensed during the year $  10,568  
  Unvested stock-based compensation expense $  40,159  

11


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

5.

STOCK BASED COMPENSATION AND WARRANTS-Cont’d

   

On October 22, 2018, the board of directors granted 400,000 options to directors and 250,000 options to a consultant for a total of 650,000 options. These options were issued at an exercise price of CAD $0.19 ($0.14) per share and vest immediately with an expiry term of five years. The fair value of each option used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:


  Risk free rate   2.00%  
  Expected dividends   0%  
  Expected forfeiture rate   0%  
  Expected volatility   133%  
  Expected life   5 years  
  Market price of the Company’s common stock on date of grant of options $  0.14  
  Stock-based compensation cost expensed during the year $  79,185  
  Unvested stock-based compensation expense $  Nil  

As of November 30, 2018, there was $40,159 of unrecognized expense related to non-vested stock-based compensation arrangements granted.

Nine months ended August 31, 2019

Warrants

On December 3, 2018, the Company issued 750,000 warrants each to two consultants (the “incentive warrants”) to purchase common shares of the Company at a strike price equal to the average trading price of the Company on the OTC QB during the 20 business days proceeding such approval. 50% of the incentive warrants vested upon issuance and the balance will vest on December 31, 2019. The incentive warrants shall have a three-year life. These warrants were issued pursuant to the contracts executed with these two consultants. The grant date fair value of each warrant used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:

  Risk free rate   2.00%  
  Expected dividends   0%  
  Expected forfeiture rate   0%  
  Expected volatility   149%  
  Expected life   3 years  
  Market price of the Company’s common stock on date of grant of warrants $  0.16  
  Stock-based compensation cost expensed $  164,230  
  Unvested stock-based compensation expense $  29,860  

12


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

5.

STOCK BASED COMPENSATION AND WARRANTS-Cont’d

   

On April 22, 2019 and May 20, 2019, the Company entered into a securities purchase agreement with several accredited investors to sell a total of $2,080,265 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest secured convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before October 22, 2023. The Company issued 8,321,058 warrants. The relative grant date fair value of these warrants was estimated at $888,444 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:


  Risk free rate   2.21-2.39%  
  Expected forfeiture rate   0%  
  Expected dividends   0%  
  Expected volatility   155-156%  
  Expected life   4.5 years  
  Market price of the Company’s common stock on date of grant of warrants $  0.15  

On July 22, 2019, the Company entered into a securities purchase agreement with several investors to sell a total of $2,282,500 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest secured convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. The Company issued 9,130,000 warrants. The relative grant date fair value of these warrants was estimated at $1,038,081 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:

  Risk free rate   1.8%  
  Expected forfeiture rate   0%  
  Expected dividends   0%  
  Expected volatility   154%  
  Expected life   4.5 years  
  Market price of the Company’s common stock on date of grant of warrants $  0.16  

Stock Options

On April 13, 2018, the board of directors granted 1,500,000 options for shares of the Company’s common stock to Buys, with an exercise price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company expensed stock-based compensation of $12,681 during the nine-month period ended August 31, 2019.

13


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

5.

STOCK BASED COMPENSATION AND WARRANTS-Cont’d

   

On May 21, 2019, the Company granted 120,000 options to an employee. These options were issued at an exercise price of CAD $0.19 ($0.14) per share and vested immediately with an expiry term of five years. The grant date fair value of each option used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:


  Risk free rate   2.00%  
  Expected dividends   0%  
  Expected forfeiture rate   0%  
  Expected volatility   133%  
  Expected life   5 years  
  Market price of the Company’s common stock on date of grant of options $  0.14  
  Stock-based compensation cost expensed $  14,621  
  Unvested stock-based compensation expense $  Nil  

As of August 31, 2019, there was $57,337 of unrecognized expense related to non-vested stock-based compensation arrangements granted.

14


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

6.

RELATED PARTY TRANSACTIONS

The following transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by related parties.

Nine months ended August 31, 2019

The Company expensed $66,667 for services provided by Jensen as CEO through March 31, 2019, which includes an obligation of the Company to issue shares for $20,000.

The Company expensed $50,000 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which the CFO has an ownership interest.

The Company expensed $43,200, which includes $25,200 for the issuance of 180,000 common shares for services, pursuant to a consulting contract, for services provided by Thrasher, a former director of the Company.

The Company expensed $90,000 for services provided by Andre Buys ("Buys"), CTO of the Company, and an additional $8,333 for royalties. The Company expensed $12,681 for the value of that portion of his 1,500,000 options that vested during this period. As at August 31, 2019, the Company owes Buys $16,333.

The Company expensed $136,374 for services provided by Ganz, President of the Company and, effective April 1, 2019, CEO of the Company, which includes $46,667 for issuance of 333,333 common shares and $52,500 for issuance of convertible notes.

The Company expensed $119,385 for services provided for Wager, CLO of the Company, which includes $35,000 for issuance of 250,000 common shares and $42,500 for issuance of convertible notes.

The Company expensed $16,200 for office rent including services to a corporation owned and controlled by Ganz, President and, effective April 1, 2019 CEO of the Company. As of August 31, 2019, the Company has a payable due to that corporation of $8,120.

Current directors and officers of the Company participated in the April 22, 2019, May 20, 2019 and July 22, 2019 financing for 316 units for total proceeds of $315,588, of which $70,000 was issued for services rendered.

Amounts owing to related parties are unsecured, non-interest bearing and due on demand.

15


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

6.

RELATED PARTY TRANSACTIONS-Cont’d

Nine months ended August 31, 2018

As of August 31, 2018, there were no amounts receivable from related parties.

As of August 31, 2018, the Company had a payable of $103,906 to related parties to be settled by issuance of stock.

The Company expensed $150,000 for services provided by Jensen, COO and President of the Company through July 13, 2018 and, CEO of the Company effective July 13, 2018.

The Company expensed $34,875 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which Malhotra has an ownership interest, in accordance with his consulting contract.

The Company expensed $116,575 which includes $18,000 for issuance of proportionate shares per his contract, for services provided by Dean Thrasher as CEO of the Company through July 13,2018 and as Executive Chairman of the Company effective July 13, 2018, which was paid to a corporation in which the CEO has an ownership interest, in accordance with the consulting contract (see also note 7). The Company also expensed $39,046 for the value of that portion of his 1,150,000 options that vested during this period.

The Company issued 507,550 common shares to NEIP at a price of $0.12 per share to satisfy the payment of $62,500 for services rendered due in December 2017.

On April 13, 2018, the Company employed Buys as the CTO with compensation of $10,000 per month over a three-year period and granted Buys options to acquire a total of 1,500,000 common shares. The Company expensed $46,667 paid to Buys, and expensed $6,341 for the value of that portion of his 1,500,000 options that vested during this period. See Note 7(a).

Effective June 1, 2018 the Company entered into a consulting agreement (the “Consulting Agreement”) with Bryan Ganz pursuant to which Mr. Ganz served as President of the Company. By the terms of the Consulting Agreement, Mr. Ganz was to be paid annually $200,000 in the Company’s common shares for his services and subject to stock exchange approval. For the Company’s fiscal third and fourth quarters Ganz was to be paid 500,000 common shares for each quarter, ending March 31, 2019. The Company accrued expenses of $72,573 as the cost of shares issued to Ganz for services.

Effective December 1, 2017, the Company leased office premises at Wakefield, Massachusetts, USA for rent of $700 per month from a corporation owned and controlled by a director of the Company. The Company expensed $6,300 as office rent for the nine-months ended August 31, 2018. As of August 31, 2018, the Company had a payable for $3,940 for the rent.

16


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

7.

COMMITMENTS


  a)

Consulting agreements

On April 13, 2018, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with André Buys, (“Buys”) a resident of South Africa, pursuant to which the Company purchased from Buys a portfolio of registered patent rights and other intellectual property relating to air and/or gas fired long guns or pistols, including pump action launchers and munitions used with such pistols and long guns, including self-stabilizing shaped or “finned” rounds (the “Portfolio”). As consideration for the Portfolio, the Company (i) paid Buys $100,000, (ii) agreed to pay Buys either $500,000 in cash or $750,000 worth of Company stock within two years (the “Second Payment”) at Buys’ discretion and (iii) agreed to pay Buys certain royalty payments for sales of products by the Company using technology covered by the Portfolio. In addition, the Company employed Buys as the CTO and for services issued 1,500,000 options for shares of the Company’s common stock to Buys with a strike price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company’s stock price must close above the trigger price for 20 days in order for the option to be triggered. The options shall have a seven-year life from grant date and Buys must remain employed by the Company for three years in order for the options to vest. Until the earlier of, the second anniversary or the date the Second Payment is made, the royalty will be 10% of the Net Sales Price (“NSP”). The royalty will then be reduced to 4% till the sixth anniversary, 3% till the eighth anniversary, and 2% till the last expiration date of any of the intellectual property in the Portfolio. Until the royalty exceeds $25,000 per year, the Company is committed to a minimum payment of $25,000 per year effective on the earlier of one year from closing or upon Buys relocation to Boston. In the event that the Company fails to make the Second Payment, the Portfolio would revert to Buys, but the Company would retain perpetual, irrevocable, exclusive and non-exclusive licenses to use technology with respect to the Portfolio and any technology developed within two years of April 13, 2018. As the substance of the purchase and sale agreement has been determined to be an option agreement, the Company has not recorded any amount related to the Second Payment. The Company agrees that it will not terminate Buys except for cause prior to April 2021. As a result, the minimal commitment relating to the employment contract is $320,000 payable over a period of 32 months.

Effective November 1, 2018, the Company entered into consulting agreements (the “Consulting Agreements”) with two consultants. The consultants will each be paid $7,500 per month commencing November 1, 2018 and to be increased to $10,000 per month subsequent to the month the Company begins shipping the Byrna HD product to customers. The term of the contracts with the consultants continue until December 31, 2019.

  b)

Lease commitments


  1.

The Company has commitments for leasing office premises in Wakefield, Massachusetts, USA to June 27, 2019, at a monthly rent of $700 (see note 6).

  2.

The Company has commitments for leasing warehouse space in Fort Wayne, Indiana, USA to February 28, 2020, at a monthly rent of $2,472.

  3.

The Company has commitments for leasing office premises in Pretoria East, South Africa to December 19, 2020, at a monthly rent of $968 (Rand 14,750).

17


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

8.

EXCLUSIVE SUPPLY AND PURCHASE AGREEMENTS

   

The Company entered a Development, Supply and Manufacturing Agreement with the BIP manufacturer on August 1, 2017. This agreement provides the Company to order and purchase only from the BIP manufacturer certain BIP assemblies and components for use by the Company to produce less-lethal and training projectiles as described in the agreement in North America. The agreement is for a term of four years with an automatic extension for additional one- year terms if neither party has given written notice of termination at least sixty (60) days prior to the end of the then- current term.

   

The Company entered a License and Supply Agreement with Safariland, LLC on May 1, 2017. This agreement provides the Company to license and sell only to Safariland, LLC for certain BIP standard payloads for integration with and production of certain less-lethal impact munitions in North America. This agreement is for a term of four years with an automatic extension for an additional one-year term if neither party has given written notice of termination at least ninety (90) days prior to the end of the then-current term.

   
9.

CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS

            a)        Secured Convertible Debentures $Nil (November 30, 2018: $978,361)

The CAD$1,363,000 ($1,015,026) of Series B Secured Convertible Debentures (Subordinate Secured Debentures) were issued pursuant to the Trust Indenture agreement dated December 7, 2016 (the “Indenture”) in exchange for the Unsecured Debentures in equal principal amount and an additional CAD$36,000 ($26,640) of Series B Secured Convertible Debentures were issued pursuant to the Indenture in payment of accrued interest. These debentures mature on June 6, 2019 and bear interest at 12% per annum, payable semi-annually. The debentures are secured by all the assets of the Company. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of the Company’s common stock at a conversion price of $0.24 (CAD $0.31) per share subject to anti-dilution protection with a minimum conversion price of $0.135 and for capital reorganization events. The debentures also embody certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company has concluded that the embedded conversion option is not indexed to its stock because it did not pass all eight conditions of equity classification provided in ASC 815. The embedded conversion option is subject to classification in the financial statements in liabilities at fair value both at inception and subsequently.

The Company has evaluated the terms and conditions of the debentures under the guidance of ASC 815. All three criteria under ASC 815-15-25-1 are met, therefore, the conversion feature requires classification and measurement as derivative financial instruments. Accordingly, the evaluation resulted in the conclusion that this derivative financial instrument requires bifurcation and liability classification, at fair value. Current standards contemplate that the classification of financial instruments requires evaluation at each report date.

18


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

9.

CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS-Cont’d

The following table reflects the allocation of the purchase on December 7, 2016:


  Secured convertible debentures   Face Value  
  (CAD $1,399,000) $  1,041,835  
  Proceeds   1,041,835  
  Embedded derivative   (285,612 )
  Carrying value $  756,223  

The carrying value of these debentures at November 30, 2018 was CAD $1,301,359 ($978,361). Effective May 31, 2019, the Company repaid these debentures for CAD $1,399,000 ($1,035,930) plus accrued interest.

Discounts (premiums) on the convertible debentures arise from (i) the allocation of basis to other instruments issued in the transaction, (ii) fees paid directly to the creditor and (iii) initial recognition at fair value, which is lower than face value. Discounts (premiums) are amortized through charges (credits) to interest expense over the term of the debt agreement. Amortization of debt discounts (premiums) amounted to CAD $98,924 ($73,201) during the nine months ended August 31, 2019 and CAD$112,064 ($88,102) during the prior nine months ended August 31, 2018. During the nine months ended August 31, 2019, the Company recorded interest expense for $67,007 (August 31, 2018: $99,090).

b)        Convertible Notes - $3,202,633, (November 30, 2018: $167,077)

1. On October 22, 2018, the Company entered into a Securities Purchase Agreement with several accredited investors to sell $1,275,000 of units, with each $1,000 of unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due April 15, 2020, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before the five year anniversary of the issuance. The notes are secured secondary by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. As a result of the repayment of the November 2016 Subordinate Secured Debentures on May 31, 2019, these convertible notes entered senior security position. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share subject to anti-dilution protection. The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the embedded conversion option is not indexed to the Company’s stock because it did not pass all eight conditions of equity classification provided in ASC 815. Therefore, the embedded conversion option is subject to classification in the financial statements in liabilities at fair value both at inception and subsequently.

The Company evaluated the terms and conditions of the Notes under the guidance of ASC 815. All three criteria under ASC 815-15-25-1 are met, therefore, the conversion feature requires classification and measurement as derivative financial instruments. Accordingly, the evaluation resulted in the conclusion that this derivative financial instrument requires bifurcation and liability classification, at fair value. Current standards contemplate that the classification of financial instruments requires evaluation at each report date.

19


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

9.

CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS-Cont’d

The following table reflects the allocation of the purchase on October 22, 2018:


  Proceeds $  1,275,000  
         
  Convertible notes $  (131,547 )
         
  Derivative liability-convertible promissory notes $  (619,364 )
         
  Additional paid in capital (equity warrants) $  (524,089 )

In conjunction with the October 22, 2018 note placement, the Company issued 5,100,000 warrants. The relative fair value of these warrants was estimated at $524,089 using the Binomial Lattice option pricing model and reflected in additional paid-in capital. Discounts (premiums) on the convertible notes arise from (i) the allocation of basis to other instruments issued in the transaction, (ii) fees paid directly to the creditor and (iii) initial recognition at fair value, which is lower than face value. Discounts (premiums) are amortized through charges (credits) to interest expense over the term of the debt agreement. Amortization of debt discounts (premiums) amounted to $322,897 during the nine months ended August 31, 2019 (August 31, 2018: $Nil) resulting in the carrying value of convertible notes at $489,974 as at August 31, 2019 (November 30, 2018: $167,077). During the nine months ended August 31, 2019, the Company recorded interest expense for $93,115 (August 31, 2018: $Nil).

2. On April 22, 2019 and May 20, 2019, the Company entered into a securities purchase agreement with several accredited investors to sell a total of $2,080,265 of units, with each $1,000 unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due April 15, 2020, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before October 22, 2023. The notes are secured secondary by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share. The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the Notes meet the definition of conventional convertible debt provided in ASC 815 and the embedded conversion option is not subject to bifurcation and classification in the financial statements in liabilities at fair value. In connection with the issuance of the Notes, the Company issued the holders warrants to purchase the common stock. The warrant is exercisable until October 23, 2023 for 8,321,058 of shares at a purchase price of $0.25 per share. The Company concluded that the warrants are indexed to the stock and, accordingly, the analysis resulted in the conclusion that these warrants achieved equity classification in the financial statements. As a result of the repayment of the November 2016 Subordinate Secured Debentures on May 31, 2019, these convertible notes entered senior security position.

20


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

9. CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS-Cont’d
   

The Company accounted for this transaction as a financing transaction, wherein the net proceeds received were allocated to the financial instruments issued which resulted in a discount. The warrants were valued at $888,444 and the balance of the convertible debt for $1,191,821. The discount is being charged to interest and is being accreted over the term of the note using the effective interest method. During the nine-month period ended August 31, 2019 (August 31, 2018: $Nil) the Company recorded $243,162 in interest from the accretion of the discount. In addition, the Company recorded interest expense for $71,862 for the nine-month period ended August 31, 2019 (August 31, 2018: $Nil). Prior to making the accounting allocation, the Company evaluated for proper classification under ASC 480 Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 Derivatives and Hedging (“ASC 815”). This debt agreement did not contain any embedded terms or features that require classification as derivatives. The Company was required to consider whether the hybrid contract embodied a beneficial conversion feature (“BCF”). The calculation of the effective conversion amount did not result in a BCF because the effective conversion price was equal to the Company’s stock price on the date of issuance.

 

 

3. On July 22, 2019, the Company entered into a securities purchase agreement with several investors to sell a total of $2,282,500 of units, with each $1,000 of unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due June 30, 2021, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. The notes are secured pari passu with the October 2018 and April/May 2019 notes, by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. However, the principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share. The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the Notes meet the definition of conventional convertible debt provided in ASC 815 and the embedded conversion option is not subject to bifurcation and classification in the financial statements in liabilities at fair value. In connection with the issuance of the Notes, the Company issued the holders warrants to purchase the Company’s common stock. The warrants are exercisable until January 22, 2024 for 9,130,000 of shares at a purchase price of $0.25 per share. The Company concluded that the warrants are indexed to the stock and, accordingly, the analysis resulted in the conclusion that these warrants achieved equity classification in the financial statements.

 

 

The Company accounted for this transaction as a financing transaction, wherein the net proceeds received were allocated to the financial instruments issued which resulted in a discount. The warrants were valued at $1,038,081 and the balance of the convertible debt for $1,244,419. The discount is being charged to interest and is being accreted over the term of the note using the effective interest method. During the nine-month period ended August 31, 2019 (August 31, 2018: $Nil) the Company recorded $33,257 in interest from the accretion of the discount. In addition, the Company recorded interest expense for $25,014 for the nine-month period ended August 31, 2019 (August 31, 2018: $Nil). Prior to making the accounting allocation, the Company evaluated for proper classification under ASC 480 Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 Derivatives and Hedging (“ASC 815”). This debt agreement did not contain any embedded terms or features that require classification as derivatives. The Company was required to consider whether the hybrid contract embodied a beneficial conversion feature (“BCF”). The calculation of the effective conversion amount did not result in a BCF because the effective conversion price was equal to the Company’s stock price on the date of issuance.

21


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

9.

CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS-Cont’d

   

Derivative Liabilities

   

The carrying values of the embedded derivative liabilities is reflected on the balance sheet, with changes in the carrying value being recorded as a change in fair value of derivative liabilities on the statement of operations.

   

The components of the embedded derivative as of August 31, 2019 are:


      Indexed          
  Financings giving rise to derivative financial instruments   Shares       Fair Value  
  Convertible Notes October 22, 2018   8,500,000     $  214,200  
      8,500,000     $  214,200  

The components of the embedded derivative as of November 30, 2018 are:

        Indexed          
  Financings giving rise to derivative financial instruments     Shares       Fair Value  
  Convertible Secured Debentures December 7, 2016     8,044,853     $  426,016  
  Convertible Notes October 22, 2018     8,500,000       531,285  
        16,544,853     $  957,301  

The following table summarizes the effects on gain (loss) associated with changes in the fair values of derivative financial instruments by type of financing for the nine months ended August 31, 2019 and 2018:

        Nine Months       Nine Months  
        Ended       Ended  
        August 31, 2019       August 31, 2018  
  Financings giving rise to derivative financial instruments and the income effects:                  
  Convertible Secured Debentures December 7, 2016   $  425,020     $                 (245,852 )
  Convertible Notes October 22, 2018   $  317,086       -  
      $  742,106     $                (245,852 )

22


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

9.

CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS-Cont’d

   

Fair Value Considerations

   

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:


  Level 1 valuations:

Quoted prices in active markets for identical assets and liabilities.

Level 2 valuations:

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model- derived valuations whose inputs or significant value drivers are observable.

     
  Level 3 valuations:

Significant inputs to valuation model are unobservable.

The Company follows the provisions of ASC 820 with respect to the financial instruments. As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The derivative financial instruments which are required to be measured at fair value on a recurring basis under of ASC 815 as of August 31, 2019 and November 30, 2018 are all measured at estimated fair value using Level 2 and 3 inputs.

The embedded derivative was fair valued using the income valuation technique using the Lattice valuation model. The following table sets forth the inputs for each significant assumption:

  Convertible secured debentures, December 7, 2016     August 31, 2019     November 30,  
              2018  
                 
  Derivative financial instruments   $  -   $  426,016  
  Conversion price   $  -   $  0.135  
  Volatility     -     91%  
  Remaining term (years)     -     0.52  
  Risk free rate     -     2.52%  

  Convertible notes, October 22, 2018     August 31, 2019     November 30,  
              2018  
                 
  Derivative financial instruments   $  214,200   $  531,285  
  Conversion price   $  0.15   $  0.15  
  Volatility     65%     79%  
  Remaining term (years)     0.62     1.38  
  Risk free rate     1.76%     2.70%  

23


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

10.

INVENTORY

   

Inventory as of August 31, 2019 consists of raw materials for Byrna for $401,742 (November 30, 2018: $Nil) finished goods of Byrna for $160,833 (November 30, 2018: $Nil), finished goods of Blunt Impact Projectiles 40mm for $67,121 (November 30, 2018: $90,329) and inventory procured from other suppliers for $37,216 (November 30, 2018: $38,792). The Company values its inventory on a first-in, first-out basis. Inventory is valued at the lower of cost or net realizable value.

   
11.

SEGMENT DISCLOSURES

   

The Company is organized on three geographic areas in the U.S.A., South Africa (“SA”) and Canada respectively. The U.S.A., South Africa and Canada operations are the Company’s operating segments and reportable segments, and each of those segments are led by the Company’s CEO. Performance is assessed and resources are allocated by the CEO, whom we have determined to be the Company’s Chief Operating Decision Maker (CODM). Management evaluates the segments based primarily upon revenue and assets. The tables below present segment sales and assets for the nine months ended August 31, 2019 and August 31, 2018:

   

Nine months ended August 31, 2019


      SDI USA     SDI SA     SDI Canada     Total  
  Sales $  278,676     266,417   $  36,202   $  581,295  

Nine months ended August 31, 2018

      SDI USA     SDI SA     SDI Canada     Total  
  Sales $  188,304     -   $  115,472   $  303,776  

      2019     2018  
  Sales $  581,295   $  303,776  
  Elimination of intersegment revenue   (157,318 )   (83,661 )
               
  Consolidated sales $  423,977     220,115  

As at August 31, 2019

      SDI USA     SDI SA     SDI Canada     Total  
  Assets $  3,374,139     687,882   $  50,415   $  4,112,436  

As at November 30, 2018

      SDI USA     SDI SA     SDI Canada     Total  
  Assets $  2,629,315     -   $  27,770   $  2,657,085  

24


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

12.

PATENT RIGHTS

 

 

Seven patent applications, six non-provisional, have been filed by the Company with the U.S. Patent Office. The Patents have been granted on the six non-provisional patents. The Company also owns the trademark for ‘BIP’ and has filed to register the “Byrna” trademark and the Byrna logo.

 

 

Non-Provisional (Granted U.S. Patents):

 

 

(a) Less-lethal Projectile: This issued patent relates to the Company’s distinctive collapsible ammunition head technology that absorbs kinetic energy of the projectile upon impact. The Corporation’s collapsible head is used in both the BIP and the Wireless Electric Projectile (“WEP”).

 

 

(b) Electronic Circuitry for Incapacitating a Living Target: This issued patent relates to the electronic circuitry incapacitation system which forms part of the WEP. The patent describes an electronic circuit which provides an electrical incapacitation current to a living target.

 

 

(c) Less-lethal Wireless Stun Projectile System for Immobilizing a Target by Neuro-Muscular Disruption: This issued patent describes the process by which the WEP operates with its attachment system to halt a target through a neuro-muscular-disruption system.

 

 

(d) Autonomous Operation of a Less-lethal Projectile: This patent describes a motion sensing system within the WEP. The sensor will monitor movement of the target and enable the electrical output until the target is subdued. The electrical pulse is programmed for an exact timeframe to specifications of the user.

 

 

(e) Projectile: This invention relates to a non-lethal projectile to be fired using a paintball gun, and more particularly, but not exclusively, to an aerodynamic non-lethal projectile which is used for marking, inhibiting or administering medicinal or other chemical substances to live targets.

 

 

(f) Payload Carrying Arrangement for a Non-Lethal Projectile: This patent relates to the process of carrying liquid and powder payloads in the head of the BIP munitions that upon impact release from the head and are dispersed upon the target.

25


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

12.

PATENT RIGHTS-Cont’d

   

On April 13, 2018, the Company entered into a purchase and sale agreement with André Buys, pursuant to which the Company agreed to purchase from Mr. Buys a portfolio of registered patent rights, provisional patent rights, and other intellectual property relating to air and/or gas fired long guns or pistols, including pump action launchers and munitions used with such pistols and long guns, including self-stabilizing shaped or “finned” rounds (the “Portfolio”). As consideration for the portfolio, the Company paid Buys $100,000, and incurred $10,000 in legal costs to transfer these patent rights. This consideration of $110,000 has been capitalized. The Company also agreed to pay Buys either $500,000 in cash or $750,000 worth of Company stock within two years (the “Second Payment”) at Buys’ discretion. In the event that the Company fails to make the Second Payment, the Portfolio would revert to Buys, but the Company would retain perpetual, irrevocable, exclusive and non-exclusive licenses to use technology with respect to the Portfolio and any technology developed within two years of April 13, 2018. As the substance of the purchase and sale agreement has been determined to be an option agreement, the Company has not recorded any amount related to the Second Payment. These patent rights have a maximum life of 20 years, expiring on various dates beginning in November 2033 to 2038, and are amortized straight-line commencing June 2018 over a period of 15 years being the estimated useful life, as determined by management. The Company amortized $5,499 during the nine months ended August 31, 2019 (August 31, 2018: $1,833). As the agreement included an option for full acquisition of the rights, conditional upon certain future events taking place, the Company has recorded the minimum rights to a licence arrangement as patent rights. As at August 31, 2019, the amount recorded as patent rights refer to the perpetual, irrevocable, exclusive and non-exclusive license to use technology with respect to the portfolio.

   
13.

PREPAID EXPENSES AND OTHER RECEIVABLES

   

Prepaid expenses and other receivables as of August 31, 2019, include the prepayment of $583,333 (November 30, 2018: $750,000) by the issuance of common shares to FinTekk AP LLC, being the issuance relating to the marketing campaign for the launch of the Company’s new ByrnaTM HD product to occur in the last half of fiscal 2019.

   
14.

DEFERRED COSTS

   

The Company has capitalized $55,862 of legal costs incurred for a future financing (see note 15).

26


SECURITY DEVICES INTERNATIONAL, INC.
Notes to Condensed Interim Consolidated Financial Statements
For the Periods Ended August 31, 2019 and 2018
(Amounts expressed in US Dollars) (Unaudited)

15.

SUBSEQUENT EVENTS

     
a)

The Company entered into a Securities Purchase Agreement (the "Agreement") with several investors (the "Purchasers") and Northeast Industrial Partners, LLC as collateral agent for the Purchasers to sell up to $3,000,000 of units, with each $1,000 of units consisting of (i) a $1,000 convertible promissory note (collectively the "Notes"), convertible into the Company's common stock at a conversion price of $0.15 per share, and (ii) four thousand warrants (the "Warrants") each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. On September 16, 2019, the Company closed on the sale of an additional $818,000 of the Units.

     

The outstanding principal amount of the Notes accrues interest at a rate of 10% per annum, provided that, in the event of default on the Notes, the interest rate will be 15% during the period of default. The maturity date of the Notes is June 30, 2021, which date is subject to optional extension by each Purchaser if a change of control of the Company is announced prior to such date. Interest on the Notes is payable in arrears on the last day of each January and July while the Notes are outstanding. The Company has the option to redeem the Notes by paying the Purchasers the optional redemption price as described in the Notes. Each Note is convertible into common stock, at the option of the Purchaser. Upon such optional conversion, the outstanding principal amount of the Note converts into shares of common stock at a conversion price of $0.15 per share, subject to adjustment upon issuance of other securities as set forth in the Notes. The Notes contain restrictive covenants which, among other things, restrict the Company’s ability to incur additional indebtedness, grant security interests on its assets, or make distributions on or repurchase its common stock. The Notes are secured, pursuant to the Agreement, with a security interest in substantially all of the Company’s assets.

     
b)

On September 23, 2019, 156,000 warrants were exercised for proceeds of $20,280.

27


Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by such words as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements do not guarantee future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A of this Form 10-Q under the heading “Risk Factors,” which are incorporated herein by reference. The following discussion should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended November 30, 2018 (the “2018 Form 10-K”) filed with the U.S. Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q. All information presented herein is based on the Company’s fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in November and the associated quarters, months and periods of those fiscal years. Each of the terms the “Company” and “SDI” as used herein refers collectively to Security Devices International Inc. and its wholly owned subsidiaries, unless otherwise stated. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Available Information

Information on the Company is available free of charge on the Company’s websites at ir.securitydii.com and by clicking “Investors” at www.byrna.com. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Company periodically provides other information for investors at ir.securitydii.com and through the Investors link at www.byrna.com. This includes press releases and other information about financial performance, information on corporate governance, and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.

Overview and Highlights

The Company is a defense technology firm specializing in the development, production, procurement and sale of innovative non-lethal technologies and products to the consumer, military, law enforcement and private security end markets. The Company's main product lines are its 40MM less-lethal projectiles and the Byrna™ line of personal security devices, the Company's first products designed to be used by civilians as well as private security professionals. The Company also sells accessories and third-party products compatible with its Byrna line of personal security devices, and projectiles to be used with the launchers. The Company sells its products in the United States, Canada, and South Africa. In the United States and in Canada, the Company sells products through its online stores and through historic dealer relationships. In South Africa, the Company sells the Byrna™ HD and related products directly and through an authorized manufacturer’s distributor.

Business Strategy

Less-lethal weapons include a wide variety of products designed to disorient, disarm, disable and deter would-be assailants, rioters, and other malfeasants. It is the Company’s belief that the United States, along with many other parts of the world is experiencing a significant spike in the demand for less-lethal products and that the less-lethal market will be one of the faster growing market segments over the next decade. The less lethal market has been projected to approach 12 billion dollars per year by 2023 (Statistics MRC. Non-Lethal Weapons – Global Market Outlook (2017-2023).

28


The Company’s business strategy is twofold: (1) to fulfill the growing demand for less-lethal products in the law enforcement, correctional services, military and security services markets, and (2) to provide civilians – including homeowners, campers, boaters, retirees, and others whose work or daily activities may put them at risk of being a victim – with easy access to an effective, non-lethal way to protect themselves and their loved ones from threats to their person or property.

Less-lethal Munitions

In the law enforcement, correctional services, and private security markets, the Company sells less-lethal munitions designed for 40mm rifled launchers. These less-lethal munitions include impact rounds designed to stop an individual without causing permanent injury or death and "payload" rounds carrying a variety of payload packages such as tear gas, pepper spray, DNA marking liquids, mal-odorants and other marking products designed to identify instigators in riot situations. The Company's flagship product in this market is its 40mm blunt impact projectile ("BIP"), which uses patented collapsible gel head technology. The Company believes its product is by far the best 40mm kinetic energy impact round currently on the market. The Company sells its 40mm munitions through distributors in the US and Canada and maintains an online store for sales to government agencies. The Company also has entered into a licensing agreement with Safariland to market the SDI patented 40mm piston driven collapsible head projectile mated to a Safariland and aluminum casing. The parties are still in the testing phase for the resulting product; however, testing to date has not been successful. If the SDI patented 40mm piston driven collapsible head projectile mated to a Safariland casing passes the testing regime, the Company would expect Safariland to market this product under the Def-Tec brand. The Company also has entered into an Agreement with Airtronics to supply the BIP® as the standard round to be sold with Airtronic's "Sonis" brand less lethal launcher. Airtronics focuses on military sales around the world. The Company is working on the development of new munitions for the law enforcement market.

The Byrna HD

Earlier this year the Company launched the Byrna HD, the first product in its highly anticipated Byrna™ line of handheld personal security devices intended to fill a perceived need in both the civilian and professional markets. The Byrna HD, which utilizes several of the Company's proprietary patents and has over 60 custom designed parts, is designed specifically for the consumer (home defense) and private security markets. The Byrna HD is compact, ergonomic, attractive, and easy to use. It uses proprietary CO2 cartridges to accurately fire .68 caliber impact and chemical irritant projectiles. The Byrna HD provides a non-lethal alternative to a firearm that is extremely effective at deterring, disabling, and temporarily incapacitating an intruder or would be assailant at safe stand-off distances up to 60 feet. Its small size (similar to popular lethal handguns on the market today), ease of obtaining and accessible price point should be appealing to individuals who want protection, but don’t want to apply for a gun license, don't want the risk of having a lethal weapon in their home, or want to avoid the potential liability that may follow the use of a lethal weapon. It also appeals to gun enthusiasts who appreciate a precision piece of equipment and want something in their collection that is both effective and non-lethal.

The Byrna HD comes with multiple easily reloadable magazines that can hold five .68 caliber highly effective payload rounds designed to burn an assailant's eyes and respiratory system upon contact. The Byrna also comes with inert and impact rounds that can be used for training. Accurate up to 60 feet, the Byrna™ HD is fitted with a picatinny rail that allows owners to mount either a laser sight or flashlight making it easy for novices to fire it accurately. The Byrna HD provides homeowners, women, retirees, and others whose work or daily activities may put them at risk of being a victim with easy access to an effective, non-lethal way to protect themselves and their loved ones from threats to their person or property. It also is ideal for boaters, truckers, RV owners, campers and gun enthusiasts around the world.

In February of 2019, the Company launched its online store for the Byrna HD and held its official product launch, in conjunction with Daytona Speedweek, where the Company was an associate sponsor of a race car driven by Cody Ware. Visitors to our display booth had the opportunity to see and hold Byrna prototypes, take pictures with the #52 Byrna Ford, meet Cody Ware, win Byrna logo apparel, and place pre-orders. Management was very encouraged by the conversion rate at Daytona Speedweek, selling the Byrna HD or a product bundle to approximately one out of every six people that visited the Company's booth. Deliveries of the Byrna HD began in late March when the Company began shipping to Dave Sheer Guns in South Africa. At the end of May the Company began shipments to customers in the U.S.

29


Q3 Developments

Nearly 1,000 Byrna HD launchers have now been shipped (approximately 85% in the quarter ended August 31, 2019), and retail customers have begun to post reviews on our website. Reviews have been extremely positive, and the Company is receiving orders of additional cartridges and projectiles from existing customers as well as new orders from returning customers of accessories and additional launchers. In response to inquiries from residents of California, where the Byrna HD could not be sold, the Company has begun work on a launcher for that market.

On July 15, 2019, Sootch00, a well-known gun reviewer with over 850,000 YouTube subscribers, posted a review of the Byrna HD on his YouTube channel. The video demonstrates the incapacitating effects of the Byrna Black chemical irritant round. Sales spurred following the posting of the Sootch00 video, supporting management's belief that the Byrna appeals to gun owners as well as those who would never own a firearm. The Company sells two types of chemical irritant projectiles for the Byrna, one of which was formulated specifically to comply with certain states' regulations where PAVA is prohibited. Management believes both are more effective than traditional pepper projectiles in use by law enforcement and prison guards, because they were formulated to immediately incapacitate an attacker rather than to disperse crowds or control riots.

The Company's primary focus through July was to get the Byrna HD into serial production, fulfill backorders, and build its inventory of Byrnas available for delivery. In July, production was moved to Roboro Industries Pty LTD ("Roboro"). Although changing the final assembly supplier mid-quarter was somewhat disruptive and production during the quarter was somewhat constrained by insufficient inventory of certain components and minor design changes to reduce testing failures, the change has resulted in a better production rate with a more reliable supply chain process and substantially lower rejection rate of completed launchers than before. SDI projects that production will exceed 3,000 units in the fourth quarter.

Q3 Capital Raise

The Company raised USD $2,282,500 during the quarter in a non-brokered private placement of $1,000 units of secured convertible notes and warrants (the “Units”) pursuant to Regulation D under the U.S. Securities Act of 1933 (the “Securities Act”) that closed a first tranche on July 22, 2019 and a second tranche in September. See Subsequent Events below. The net proceeds from the sale of the Units will be used for general corporate purposes and working capital.

Subsequent Events

On September 16, 2019 the Company closed the second tranche of the private placement commenced in July, raising an additional $818,000, and bringing the total amount raised in this offering to $3,100,500. Management expects the funds raised through September 16 will be sufficient for working capital needs for the upcoming 9 months as the Company builds sales and brand awareness.

On September 18, 2019, in conjunction with announcing the closing of a record quarter and the capital raise discussed above, the Company announced that it has entered into a binding agreement with Roboro (which will be operating under the name “Byrna Africa”) to serve as its authorized manufacturer’s distributor (“AMD”) in South Africa. In conjunction with its negotiation of the AMD agreement, management terminated negotiations of an anticipated exclusive dealership with Dave Sheer Guns (“DSG”) and cancelled the balance of an outstanding DSG purchase order at lower pricing than the AMD agreement provides. Management believes the new agreement with Roboro will result in a stronger sales effort for the ByrnaHD in South Africa and higher profit margins in the region. Following the cancellation of the purchase order DSG took delivery of an additional shipment of 100 launchers at the higher wholesaler price and continues to offer the Byrna HD for sale in its retail stores and to private security.

On September 21, 2019, SDI was the primary sponsor of the Rick Ware Racing #52 Byrna Ford Mustang, in the Federated Auto Parts 400 NASCAR Monster Energy Cup series at the Richmond Raceway in Richmond, VA where triple crown winner J.J. Yeley drove and made two appearances, with other Rick Ware drivers, at the Byrna display booth in the midway. Several hundred race fans checked out the Byrna booth and entered raffle drawings for J.J. Yeley signed memorabilia and a free Byrna HD kit.

30


Q3 Highlights

For the quarter ended August 31, 2019 ("Q3 2019"), SDI produced 1,675 launchers, up from 204 launchers produced at the end of the prior quarter. Management expects production rates will continue to increase as the new manufacturer gains experience with SDI products, new quality control and inventory procedures are implemented, and minor design changes are completed.

Sales for the third quarter of 2019 totaled $307,101, up from $105,769 in the second quarter of 2019 and compared to total sales of $53,257 in the third quarter of 2018. Over ninety percent of Q3 2019 sales came from sales of the Byrna HD and accessories, with the balance attributed to SDI’s line of 40mm Blunt Impact Projectiles. Of the $277,623 in Byrna sales, 81% were for the launcher and 19% came from sales of accessories and projectiles. SDI expects the percentage of sales derived from accessories and projectiles to increase as its customer base grows.

Net loss for Q3 2019 was $1,086,843 compared with a net loss in in the prior quarter of $718,731 and a net loss in the comparable quarter of the prior fiscal year of $118,651. The largest items accounting for the increase in net loss over this period was differences in the respective quarters in total interest expense plus accretion plus changes in fair value of derivative liabilities. These three items (interest, accretion and changes in fair value of derivative liabilities) totaled $380,690 in Q3 2019, up from $39,901 in Q2 2019. In comparison, these items contributed $244,264 towards net income in Q3 2018. These items thus account for a $624,954 increase of expenses impacting net loss for Q3 2019 compared with the same quarter in 2018.

Gross profit for Q3 2019 was $59,422 (19.3%), which included inventory charges as SDI transitioned from a prior contract manufacturing firm to SDI’s current supplier which has proven to produce reliable product. Excluding the Q3 2019 inventory charges, gross profit was $94,622 (30.8% margin) compared with Q2 2019 gross profit of 30,485 (28.8% margin) and Q3 2018 gross profit of $23,955 (45.0% margin). Selling, general and administration expenses totaled $755,545 in Q3 2019 compared with $728,893 in Q2 2019 and $385,556 for Q3 2018. Increases in cost of sales as well as selling, general and administrative expenses in 2019 reflect the Company’s investment in operations and professional staff, research and development, and initial marketing and advertising campaigns to increase and improve production and establish SDI’s brand and position in the non-lethal market.

During this period inventory rose to $666,912 and accounts payable plus accrued liabilities to $862,400. These changes were due largely to investment in manufacturing operations and ramp up of production. During the nine months ending August 31, 2019 the Company has invested $207,677 in equipment for use in the manufacture of the Byrna HDand related products. The Company’s capital raise during the quarter offset a portion of these expenses and brought the cash balance to $1,881,377.

Going Concern

The Company has incurred a cumulative loss of $35,941,684 from its inception in 2005 through August 31, 2019. The Company has funded operations through the issuance of capital stock, warrants, convertible debentures and convertible notes. The Company has started to generate revenue from the sale of the Byrna HD and associated products. However, it still expects to incur significant losses before becoming profitable. The Company’s future success is dependent upon its ability to raise sufficient capital or generate adequate revenue, to cover its ongoing operating expenses, and also to continue to develop and be able to profitably market its products. There can be no assurance that such financing will be available at all or on favorable terms. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty; such adjustments could be material.

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Significant Quarterly Information

The following represents selected information of the Company for the most recently completed financial quarter ended August 31, 2019.

    Three-     Three-  
    month     month  
    period     period  
    August 31,     August 31,  
    2019     2018  
    (unaudited)     (unaudited)  
  $     $  
             
Net loss for the three- month period   (1,086,843 )   (118,651 )
             
Basic and diluted loss per share   (0.010 )   (0.001 )
Total assets   4,112,436     2,657,085  
             
Total liabilities   4,292,553     2,500,048  
Cash dividends per share   -     -  

Results of Operations

Financial highlights (unaudited) for the period ending August 31, 2019 with comparatives are as follows:

Operating Results   For the three     For the three  
    months     months  
    ended     ended  
    August 31,     August 31,  
    2019     2018  
             
Sales $  307,101   $  53,257  
Cost of sales $  (247,679 ) $  (29,302 )
Gross profit $  59,422   $  23,955  
Operating expenses $  (765,575 ) $  (386,870 )
Other expenses -interest $  (109,572 ) $  (32,946 )
Accretion $  (367,457 ) $  (29,991 )
Change in fair value of derivative liabilities $  96,339     307,201  
Net loss for period $  (1,086,843 ) $  (118,651 )
             
Loss per share   ($0.010 )   ($0.001 )

Operating Results   For the nine     For the nine  
    months     months  
    ended     ended  
    August 31,     August 31,  
    2019     2018  
             
Sales $  423,977   $  220,115  
Cost of sales $  (328,512 ) $  (148,515 )
Gross profit $  95,465   $  71,600  
Operating expenses $  (2,597,402 ) $  (1,087,897 )
Other expenses -interest $  (256,998 ) $  (100,125 )
Accretion $  (672,517 ) $  (88,102 )
Change in fair value of derivative liabilities $  742,106   $  245,852  
Net Loss for Period $  (2,689,346 ) $  (958,672 )
             
Loss per Share   ($0.026 )   ($0.010 )

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The Company’s selected information for the quarter ended August 31, 2019 (unaudited) and November 30, 2018 (audited) are as follows:

    August 31, 2018     November 30, 2018  
Total current assets   3,509,711     2,231,669  
Total assets   4,112,436     2,657,085  
Total current liabilities   3,014,877     2,332,971  
Total liabilities   4,292,553     2,500,048  
Stockholders’ (deficiency) equity   (180,117 )   157,037  

Net loss for the three months ended August 31, 2019 was $1,086,843 ($0.010 per share) as compared to net loss of $118,651 ($0.001 per share) for the three-month period ended August 31, 2018.

During the quarter ended August 31, 2019, the Company expensed selling, general and administration expenses for $755,545 as compared to $385,556 for the three-month period ended August 31, 2018, thereby reflecting increase in costs primarily in research and development, payroll and consulting. Also refer to Quarter Highlights as detailed above.

Cash Flows

Net cash used in operations for the nine months ended August 31, 2019, was $2,244,482 as compared to $1,057,996 used for the nine months ended August 31, 2018. For major components of this change, refer to Q3 Highlights as detailed above.

The Company incurred a net loss of $2,689,346 for the nine months ended August 31, 2019, as compared to a net loss of $958,672 for the prior period ended August 31, 2018. For major components of this change, refer to Q3 Highlights as detailed above.

In addition, the Company’s closing inventory increased by $559,197 for the nine months ended August 31, 2019 as compared to an increase of $2,435 in 2018. This increase in inventory represents the investment in inventory required for production and sale of Byrna HD devices in the subsequent period.

Net cash flow from investing activities was an outflow of $207,677 during the nine-month period ended August 31, 2019 as compared to $388,349 for the nine-month period ended August 31, 2018. The Company acquired property and equipment for $185,560 and deposited $22,117 for equipment during the nine-month period ended August 31, 2019. The Company acquired patents for $110,000, property and equipment for $98,349 and deposited $180,000 for equipment during the nine-month comparative period ended August 31, 2018.

Net Cash flow from financing activities was a net inflow of $3,214,335 during the nine-month period ended August 31, 2019 as compared to net outflow of $40,357 for the nine-month period ended August 31, 2018. The increase in financing activities in 2019 was the result of cash raised from issuance of convertible notes for $4,250,265 and repayment of $1,035,930 of secured convertible debentures due for repayment during the period.

There was an overall increase in cash of $698,990 during the nine-month period ended August 31, 2019 as compared to a decrease in cash of $1,491,142 during the nine-month period ended August 31, 2018.

Liquidity and Capital Resources

As at August 31, 2019, cash and cash equivalent was $1,881,377, as compared to $1,182,387 at November 30, 2018. Through August 31, 2019 the Company raised $2,080,265 through the sale of convertible notes (see note 9). Proceeds have been used to extinguish previously issued secured convertible debentures as well as to retain cash on hand to fund operations. As the Company prepares to grow and build stocking inventories, credit terms with suppliers have been negotiated to help fund investment in inventories and working capital.

At August 31, 2019, the Company had a working capital of $494,834. The major components are cash and cash equivalent $1,881,377; prepaid expenses and other receivables $793,420; inventory for $666,912; accounts receivable for $112,140; deferred costs for $55,862; derivative liabilities for $214,200; convertible notes for $1,924,957; deferred revenue for $13,320 and accounts payable and accrued liabilities of $862,400.

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At November 30, 2018, the Company had a working capital deficit of $101,302. The major components are cash and cash equivalent $1,182,387; prepaid expenses and other receivables $901,247; accounts receivable for $18,914; inventory for $129,121; derivative liabilities for $957,301, secured convertible notes for $978,361 and accounts payable and accrued liabilities of $397,309.

Management has in the third quarter raised capital to help satisfy future debt obligations. This capital is essential to fund future operations, additional capital will likely be required in order to fund future operations.

Related party transactions

The following transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by related parties.

Nine months ended August 31, 2019

As of August 31, 2019, there are no amounts receivable from related parties.

The Company expensed $66,667 for services provided by Jensen as CEO through March 31, 2019, which includes an obligation of the Company to issue shares for $20,000.

The Company expensed $50,000 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which the CFO has an ownership interest.

The Company expensed $43,200, which includes $25,200 for the issuance of 180,000 common shares for services, pursuant to a consulting contract, for services provided by Thrasher, a former director of the Company.

The Company expensed $90,000 for services provided by Buys, CTO of the Company, and an additional $8,333 for royalties. The Company expensed $12,681 for the value of that portion of 1,500,000 options granted to Buys that vested during this period. As at August 31, 2019, the Company owes Buys $16,333.

The Company expensed $136,374 for services provided by Ganz, President of the Company and, effective April 1, 2019, CEO of the Company, which includes $46,667 for issuance of 333,333 common shares and $52,500 for issuance of convertible notes.

The Company expensed $119,385 for services provided for Wager, CLO of the Company, which includes $35,000 for issuance of 250,000 common shares and $42,500 for issuance of convertible notes.

The Company expensed $16,200 for office rent including services to a corporation owned and controlled by Ganz, President and, effective April 1, 2019 CEO of the Company. As of August 31, 2019, the Company has a payable due to that corporation of $8,120.

Current directors and officers of the Company participated in the April 22, 2019, May 20, 2019 and July 22, 2019 financing for 316 units for total proceeds of $315,588, of which $70,000 was issued for services rendered.

Amounts owing to related parties are unsecured, non-interest bearing and due on demand.

Nine months ended August 31, 2018

As of August 31, 2018, there were no amounts receivable from related parties.

As of August 31, 2018, the Company had a payable of $103,906 to related parties to be settled by issuance of stock.

The Company expensed $150,000 for services provided by Jensen, COO and President of the Company through July 13, 2018 and, CEO of the Company effective July 13, 2018.

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The Company expensed $34,875 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which Malhotra has an ownership interest, in accordance with his consulting contract.

The Company expensed $116,575 which includes $18,000 for issuance of proportionate shares per his contract, for services provided by Dean Thrasher as CEO of the Company through July 13,2018 and as Executive Chairman of the Company effective July 13, 2018, which was paid to a corporation in which the CEO has an ownership interest, in accordance with the consulting contract (See also note 7). The Company also expensed $39,046 for the value of that portion of the 1,150,000 options granted to Thrasher that vested during this period.

The Company issued 507,550 common shares to NEIP at a price of $0.12 per share to satisfy the payment of $62,500 for services rendered due in December 2017.

On April 13, 2018, the Company employed Mr. André Buys (“Buys”) as the CTO with compensation of $10,000 per month over a three-year period and granted Buys options to acquire a total of 1,500,000 common shares. The Company expensed $46,667 paid to Buys, and expensed $6,341 for the value of that portion of his 1,500,000 options that vested during this period. See Note 7(a).

Effective June 1, 2018 the Company entered into a consulting agreement (the “Consulting Agreement”) with Bryan Ganz pursuant to which Mr. Ganz served as President of the Company. By the terms of the Consulting Agreement, Mr. Ganz was to be paid annually $200,000 in the Company’s common shares for his services, subject to stock exchange approval. The common shares were to be issued quarterly, ending March 31, 2019. For the Company’s fiscal third and fourth quarters Ganz was to be paid 500,000 common shares for each quarter. The Company accrued expenses of $72,573 as the cost of shares issued to Ganz for services.

Effective December 1, 2017, the Company leased office premises at Wakefield, Massachusetts, USA for rent of $700 per month from a corporation owned and controlled by a director of the Company. The Company expensed $6,300 as office rent for the nine-months ended August 31, 2018. As of August 31, 2018, the Company had a payable for $3,940 for the rent.

Off-balance sheet arrangements

The Company has no significant off-balance sheet arrangements at this time.

Subsequent events

  a)

The Company entered into a Securities Purchase Agreement (the "Agreement") with several investors (the "Purchasers") and Northeast Industrial Partners, LLC as collateral agent for the Purchasers to sell up to $3,000,000 of units, with each $1,000 of units consisting of (i) a $1,000 convertible promissory note (collectively the "Notes"), convertible into the Company's common stock at a conversion price of $0.15 per share, and (ii) four thousand warrants (the "Warrants") each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. On September 16, 2019, the Company closed on the sale of an additional $818,000 of the Units.

     
 

The outstanding principal amount of the Notes accrues interest at a rate of 10% per annum, provided that, in the event of default on the Notes, the interest rate will be 15% during the period of default. The maturity date of the Notes is June 30, 2021, which date is subject to optional extension by each Purchaser if a change of control of the Company is announced prior to such date. Interest on the Notes is payable in arrears on the last day of each January and July while the Notes are outstanding. The Company has the option to redeem the Notes by paying the Purchasers the optional redemption price as described in the Notes. Each Note is convertible into common stock, at the option of the Purchaser. Upon such optional conversion, the outstanding principal amount of the Note converts into shares of common stock at a conversion price of $0.15 per share, subject to adjustment upon issuance of other securities as set forth in the Notes. The Notes contain restrictive covenants which, among other things, restrict the Company’s ability to incur additional indebtedness, grant security interests on its assets, or make distributions on or repurchase its common stock. The Notes are secured, pursuant to the Agreement, with a security interest in substantially all of the Company’s assets.

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  b)

On September 23, 2019, 156,000 warrants were exercised for proceeds of $20,280.

Outstanding share data

As of October 13, 2019, the Company had 104,177,837 issued and outstanding shares of common stock.

Dividends

The Company has not, since the date of its inception, declared or paid any dividends on its Common Shares and does not currently intend to pay dividends. Earnings, if any, will be retained to finance further growth and development of the business of the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable

Item 4. Controls and Procedures.

            (a) SDI maintains a system of controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (“1934 Act”), is recorded, processed, summarized and reported, within time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by SDI in the reports that it files or submits under the 1934 Act, is accumulated and communicated to SDI’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of August 31, 2019, SDI’s Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the design and operation of SDI’s disclosure controls and procedures. Based on that evaluation, SDI’s Principal Executive Officer and Principal Financial Officer concluded that SDI’s disclosure controls and procedures were not effective due to the following significant deficiency:

Inherent in any small business is the pervasive problem involving segregation of duties. Since SDI has a small accounting department, segregation of duties cannot be completely accomplished at this stage in its corporate lifecycle.

In order to correct the foregoing significant deficiency, the Company has taken and is taking the following remediation measures that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:

  • The Company has had several directors with business experience who have spent time with the business.
  • The Company has established an audit committee of its board of directors. The audit committee will provide oversight of the Company's accounting and financial reporting. Transactions that are complex are being referred to an outside consultant.
  • The Company is implementing SAP, a new accounting integrated software to facilitate centralized collection of financial data.

Accordingly, SDI’s management has added compensating controls to reduce and minimize the risk of a material misstatement in SDI’s annual and condensed interim consolidated financial statements.

            (b) Changes in Internal Controls. There were no changes in SDI’s internal control over financial reporting during the quarter ended August 31, 2019 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Part 11. Other Information

Item 1. Legal Proceedings

None

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Item 1A. Risk Factors

Additional Financing

The Company does not have adequate revenue to fund all of its operational needs and may require additional financing to continue its operations if it is unable to generate substantial revenue growth. There can be no assurance that such financing will be available at all or on favorable terms. Failure to generate substantial revenue growth may result in the Company looking to obtain such additional financing could result in delay or indefinite postponement of the Company’s deployment of its products, resulting in the possible dilution. Any such financing will dilute the ownership interest of the Company’s shareholders at the time of the financing and may dilute the value of their shareholdings.

General Venture Company Risks

The common shares must be considered highly speculative due to the nature of the Company’s business, the early stage of its deployment, its current financial position and ongoing requirements for capital. An investment in the common shares should only be considered by those persons who can afford a total loss of investment and is not suited to those investors who may need to dispose of their investment in a timely fashion. Investors should consult with their own professional advisors to assess the legal, financial and other aspects of an investment in common shares.

Uncertainty of Revenue Growth

There can be no assurance that the Company can generate substantial revenue growth, or that any revenue growth that is achieved can be sustained. Revenue growth that the Company has achieved or may achieve may not be indicative of future operating results. The Byrna HD is a brand new Gen 1 product and its adoption by the market remains unknown. Among other things, production delays, excessive costs, performance failures, or negative publicity could stall or prevent its success in the market and generation of revenue. Anticipated licensing alliances for the Company’s collapsible head projectile may fail if testing of the mated Safariland product is not successful. In addition, the Company may increase further its operating expenses in order to fund increase its sales and marketing efforts and increase its administrative resources in anticipation of future growth. To the extent that increases in such expenses precede or are not subsequently followed by increased revenues, the Company’s business, operating results and financial condition will be materially adversely affected.

Dependence on Management and Key Personnel

The Company is dependent on certain members of its management. The loss of the services of one or more of them could adversely affect the Company. The Company’s ability to maintain its competitive position is dependent upon its ability to attract and retain highly qualified managerial, specialized technical, manufacturing, sales and marketing personnel. There can be no assurance that the Company will be able to continue to recruit and retain such personnel. The inability of the Company to recruit and retain such personnel would adversely affect the Company’s operations and product development.

Dependence on Key Suppliers, Sufficient Quantities of Components, and Commercially Reasonable Terms

Future operating results depend upon the Company's ability to obtain components in sufficient quantities on commercially reasonable terms. The Company may be able to purchase certain key components of its products from a limited number of suppliers, subjecting it to supply and pricing risks. Failure of a supplier's business or consolidation within the industry could further limit the Company's ability to purchase key components in sufficient quantities on commercially reasonable terms. Failure of suppliers to provide sufficient quantities of components on favorable terms, meet quality standards, or deliver components on a timely basis could delay or stop production and result in possible lost sales.

Dependence on Third Parties for Product Manufacturing, Logistics and other Services

The Company also relies on third parties, including businesses located outside of the U.S., to source and inspect components, assure adequate and quality parts inventory, to assemble, kit and ship its products, to provide warranty repair services, and to market and sell the Byrna HD in certain territories. These arrangements lessen the Company's direct control over production, distribution, and some customer service functions. Loss of any of these relationships or failure of any of these third parties to perform as expected would adversely affect the Company's operations, sales, revenue, margins, and reputation.

Risk of Quality Problems

The Company sells complex products including products that are new to the market and do not have a long performance history. These products may contain certain design and manufacturing defects including defects in materials and components that the Company purchases from third parties. There can be no assurance the Company will be able to detect and fix all defects in the products it sells. Accordingly, the Company's products may experience quality and service problems from time to time that could result in decreased sales and operating margin and harm to the Company's reputation.

Product Liability

The Company may be subject to proceedings or claims that may arise in the ordinary conduct of the business, which could include product and service warranty claims, which could be substantial. If its products fail to perform as warranted and the Company fails to quickly resolve product quality or performance issues in a timely manner, sales may be lost and it may be forced to pay damages. Any failure to meet customer requirements could materially affect its business, results of operations and financial condition. The occurrence of product defects and the inability to correct errors could result in the delay or loss of market acceptance of its products, material warranty expense, diversion of technological and other resources from its product development efforts, and the loss of credibility with customers, manufacturer’s representatives, distributors, value added resellers, systems integrators, original equipment manufacturers and end-users, any of which could have a material adverse effect on the Company’s business, operating results and financial conditions.

The Company currently has general liability insurance that includes product liability coverage. There is no assurance this insurance policy will cover all potential claims which may have a material adverse effect on the business or financial condition of the Company. A product recall could have a material adverse effect on the business or financial condition of the Company.

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Strategic Alliances

The Company relies upon, and expects to rely upon, strategic alliances with original equipment manufacturers and others for the manufacturing, licensing, and distribution of its products. There can be no assurance that such strategic alliances can be achieved, will be extended or renewed, or will achieve their goals.

Marketing and Distribution Capabilities

In order to commercialize its technology, the Company must either acquire or develop an internal marketing and sales force with technical expertise and with supporting distribution capabilities or arrange for third parties to perform these services. In order to market certain of its products, the Company must either acquire or develop a sales and distribution infrastructure. In order to maximize sales of other products, the Company may determine that it needs to either acquire or develop a sales and distribution infrastructure. The acquisition or development of a sales and distribution infrastructure would require substantial resources, which may divert the attention of its management and key personnel and defer its product development and deployment efforts. To the extent that the Company enters into marketing and sales arrangements with other companies, its revenues will depend on the efforts of others. These efforts may not be successful. If the Company fails to develop substantial sales, marketing and distribution channels, or to enter into arrangements with third parties for those purposes, it will experience delays in product sales and incur increased costs.

Rapid Technological Development

The markets for the Company’s products and services are characterized by rapidly changing technology and evolving industry standards, which could result in product obsolescence or short product life cycles. Accordingly, the Company’s success is dependent upon its ability to anticipate technological changes in the industries it serves and to successfully identify, obtain, develop and market new products that satisfy evolving industry requirements. There can be no assurance that the Company will successfully develop new products or enhance and improve its existing products or that any new products and enhanced and improved existing products will achieve market acceptance. Further, there can be no assurance that competitors will not market products that have perceived advantages over the Company’s products or which render the products currently sold by the Company obsolete or less marketable. Regardless of the Industry as a whole, the less lethal sector moves somewhat slower in the adaptation and integration of new products.

The Company must commit significant resources to developing new products before knowing whether its investments will result in products the market will accept. To remain competitive, the Company may be required to invest significantly greater resources then currently anticipated in research and development and product enhancement efforts and result in increased operating expenses.

Competition

The Company’s industry is highly competitive and composed of many domestic and foreign companies. The Company has experienced and expects to continue to experience, substantial competition from numerous competitors whom it expects to continue to improve their products and technologies. Competitors may announce and introduce new products, services or enhancements that better meet the needs of end-users or changing industry standards, or achieve greater market acceptance due to pricing, sales channels or other factors. Competitors may be able to respond more quickly than the Company to changes in end-user requirements and devote greater resources to the enhancement, promotion and sale of their products.

Regulation

The Company is subject to numerous federal, provincial, state and local environmental, health and safety legislation and measures relating to the manufacture of ammunition. There can be no assurance that the Company will not experience difficulties with its efforts to comply with applicable regulations as they change in the future or that its continued compliance efforts (or failure to comply with applicable requirements) will not have a material adverse effect on the Company’s results of operations, business, prospects and financial condition. The Company’s continued compliance with present and changing future laws could restrict the Company’s ability to modify or expand its facilities or continue production and could require the Company to acquire costly equipment or to incur other significant expense.

38


Intellectual Property

The Company’s ability to compete effectively will depend, in part, on its ability to maintain the proprietary nature of its technology and manufacturing processes. Although the Company considers certain of its product designs as well as manufacturing processes involving certain of its products to be proprietary, patents or copyrights do not protect all design and manufacturing processes. The Company has adopted procedures to protect its intellectual property and maintain secrecy of its confidential business information and trade secrets. However, there can be no assurance that such procedures will afford complete protection of such intellectual property, confidential business information and trade secrets. There can be no assurance that the Company’s competitors will not independently develop technologies that are substantially equivalent or superior to the Company’s technology.

To protect the Company’s intellectual property, it may become involved in litigation, which could result in substantial expenses, divert the attention of its management, cause significant delays and materially disrupt the conduct of its business.

Infringement of Intellectual Property Rights

While the Company believes that its products and other intellectual property do not infringe upon the proprietary rights of third parties, its commercial success depends, in part, upon the Company not infringing intellectual property rights of others. A number of the Company’s competitors and other third parties have been issued or may have filed patent applications or may obtain additional patents and proprietary rights for technologies similar to those utilized by the Company. Some of these patents may grant very broad protection to the owners of the patents. The Company has not undertaken a review to determine whether any existing third- party patents or the issuance of any third- party patents would require the Company to alter its technology, obtain licenses or cease certain activities. The Company may become subject to claims by third parties that its technology infringes their intellectual property rights due to the growth of products in its target markets, the overlap in functionality of those products and the prevalence of products. The Company may become subject to these claims either directly or through indemnities against these claims that it provides to end-users, manufacturer’s representatives, distributors, value added resellers, system integrators and original equipment manufacturers.

Litigation may be necessary to determine the scope, enforceability and validity of third- party proprietary rights or to establish the Company’s proprietary rights. Some of its competitors have, or are affiliated with companies having, substantially greater resources than the Company and these competitors may be able to sustain the costs of complex intellectual property litigation to a greater degree and for a longer period of time than the Company. Regardless of their merit, any such claims could be time consuming to evaluate and defend, result in costly litigation, cause product shipment delays or stoppages, divert management’s attention and focus away from the business, subject the Company to significant liabilities and equitable remedies, including injunctions, require the Company to enter into costly royalty or licensing agreements and require the Company to modify or stop using infringing technology.

The Company may be prohibited from developing or commercializing certain technologies and products unless it obtains a license from a third party. There can be no assurance that it will be able to obtain any such license on commercially favorable terms or at all. If it does not obtain such a license, it could be required to cease the sale of certain of its products.

Health and Safety

Health and safety issues related to its products may arise that could lead to litigation or other action against the Company, to regulation of certain of its product components, or to negative publicity. The Company may be required to modify its technology and may not be able to do so. It may also be required to pay damages that may reduce its profitability and adversely affect its financial condition. Even if these concerns prove to be baseless, the resulting negative publicity could affect the Company’s ability to market certain of its products and, in turn, could harm its business and results from operations.

39


Stress in the Global Financial System

Recent events have demonstrated that businesses and industries throughout the world are very tightly connected to each other. Thus, events seemingly unrelated to the Company, or to its industry, may adversely affect its finances or operations in ways that are hard to predict or defend against. For example, credit contraction in financial markets may hurt the Company’s ability to access credit when it is needed or rapid changes in foreign exchange rates may adversely affect financial results. Finally, a reduction in credit, combined with reduced economic activity, may adversely affect businesses and industries that collectively constitute a significant portion of the Company’s customer base. As a result, these customers may need to reduce their purchases of the Company’s products, or there may be greater difficulty in receiving payment for the products that these customers purchase from the Company. Any of these events, or any other events caused by turmoil in world financial markets, may have a material adverse effect on the business, operating results, and financial condition.

Insurance and Uninsured Risks

The Company’s business is subject to a number of risks and hazards including industrial accidents, loss of parts or finished goods in inventory or shipment, labor disputes and changes in the regulatory environment. Such occurrences could delay or halt production, result in damage to equipment, personal injury or death, monetary losses and possible legal liability. Although the Company maintains liability insurance in amounts which it considers adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or the Company may elect not to insure against such liabilities due to high premium costs or other reasons, in which event the Company could incur significant costs that could have a materially adverse effect upon its financial position. The Company does not currently carry freight, inventory or auto insurance among other things, which could result in uninsured losses in those areas.

Conflicts of Interest

Certain directors and officers of the Company are or may become associated with other companies in the same or related industries which may give rise to conflicts of interest. Directors who have a material interest in any person who is a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract. In addition, the directors and the officers are required to act honestly and in good faith with a view to the best interests of the Company. The directors and certain officers of the Company have either other full-time employment or other business, or time restrictions placed on them and accordingly, the Company will not be the only business enterprise of these directors and officers. Accounting for the Company's wholly owned subsidiary, Byrna South Africa Pty Ltd, is handled by a firm whose principal is related to the Company's CTO.

Dividend Policy

The Company has not paid dividends in the past and has no plans to pay dividends for the foreseeable future. The future dividend policy of the Company will be determined by its directors.

Lack of Active Market

There can be no assurance that an active market for the common shares will continue and any increased demand to buy or sell the common shares can create volatility in price and volume.

Market Price of Common Shares

There can be no assurance that an active market for the common shares will be sustained. Securities of small and midcap companies have experienced substantial volatility in the past, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include global economic developments and market perceptions of the attractiveness of certain industries. The price per common share is also likely to be affected by change in the Company’s financial condition or results of operations as reflected in its quarterly filings. Other factors unrelated to the performance of the Company that may have an effect on the price of common shares include the following: the extent of analytical coverage available to subscribers concerning the business of the Company may be limited if investment banks with research capabilities do not follow the Company’s securities; lessening in trading volume and general market interest in the Company’s securities may affect a subscriber’s ability to trade significant numbers of common shares, the size of the Company’s public float may limit the ability of some institutions to invest in the Company’s securities; a substantial decline in the price of the common shares that persists for a significant period of time could cause the Company’s securities to be delisted from the exchange, further reducing market liquidity. If an active market for the common shares does not continue, the liquidity of a subscriber’s investment may be limited, and the price of the common shares may decline. If such a market does not develop, subscribers may lose their entire investment in the common shares.

40


Political Regulatory Risks

Any changes in government policy may result in changes to laws affecting the sale of the Company’s products. This may affect the Company’s ability to ship product in the future. The possibility that future governments may adopt substantially different policies, may also affect the Company’s operations. Local governments in all countries the Company deals with issue end user certificates to purchase or receive live ammunition from the Company. It is the decision of these countries in the Middle East, the United States, Canada, Europe, and the Baltics whether or not they will take possession or purchase such munitions.

Except as required by law, SDI disclaims any intention and assumes no obligation to update or revise any forward-looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward-looking statements or otherwise.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2019, the Company made a share issuance to Jensen pursuant to his employment agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of $20,000, due January 15, 2019.

In January 2019, the Company made a share issuance to Ganz pursuant to a consulting agreement. The Company issued 500,000 common shares at a price of $0.1482 for a total consideration of $74,100, due December 15, 2018.

In January 2019, the Company made a share issuance to a corporation owned and controlled by Thrasher, executive chairman of the Company, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.1482 for total consideration of $26,676 due January 15, 2018.

In January 2019, the Company made a share issuance to the Chief Legal Officer (“CLO”) pursuant to a consulting agreement. The Company issued 166,666 common shares at a price of $0.1482 for a total consideration of $24,700, due January 15, 2019.

In January 2019, the Company made a share issuance to a consultant pursuant to a consulting agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of $19,998 due January 15, 2019.These shares were cancelled in June 2019, and the Company subsequently paid the consultant $19,998 in cash.

On April 1, 2019 the Company made a share issuance to Ganz, pursuant to his consulting agreement dated June 1, 2018. The Company issued 333,333 common shares at a price of $0.14 per share to satisfy payment for $46,665.

On April 1, 2019 the Company made a share issuance to Wager for her services pursuant to board resolution. The Company issued 250,000 common shares at a price of $0.14 per share to satisfy payment for $35,000.

On April 1, 2019 the Company made a share issuance to a corporation owned and controlled by Thrasher, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.14 for a total consideration of $25,200.

On May 22, 2019, the Company made a share issuance to a consultant for services pursuant to the consulting agreement. The Company issued 300,000 common shares at a price of $0.14 per share for a total consideration of $42,000

41


Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

Exhibits  
   
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Bryan Ganz.
   
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Rakesh Malhotra.
   
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Bryan Ganz and Rakesh Malhotra.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SECURITY DEVICES INTERNATIONAL, INC.

Date: October 13, 2019

  By: /s/ Bryan Ganz
  Bryan Ganz, Principal Executive
  Officer

Date: October 13, 2019

  By: /s/ Rakesh Malhotra
  Rakesh Malhotra, Principal
  financial and Accounting Officer

42


EX-31.1 2 exhibit31-1.htm EXHIBIT 31.1 Security Devices International Inc.: Exhibit 31.1 - Filed by newsfilecorp.com
 

Exhibit 31.1

CERTIFICATIONS

I, Bryan Ganz, certify that;

1. I have reviewed this quarterly report on Form 10-Q of Security Devices International, Inc.;

2. Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

            a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

            b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

            c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

            d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

            a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

            b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

October 13, 2019

 

/s/ Bryan Ganz

 

Bryan Ganz,

 

Principal Executive Officer



EX-31.2 3 exhibit31-2.htm EXHIBIT 31.2 Security Devices International Inc.: Exhibit 31.2 - Filed by newsfilecorp.com
 

Exhibit 31.2

CERTIFICATIONS

I, Rakesh Malhotra, certify that;

1. I have reviewed this quarterly report on Form 10-Q of Security Devices International, Inc.;

2. Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

            a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

            b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

            c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

            d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

            a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

            b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

October 13, 2019

/s/ Rakesh Malhotra

 

Rakesh Malhotra,

 

Principal Financial Officer



EX-32 4 exhibit32.htm EXHIBIT 32 Security Devices International Inc.: Exhibit 32 - Filed by newsfilecorp.com
 

Exhibit 32

In connection with the quarterly report of Security Devices International, Inc., (the "Company") on Form 10-Q for the quarter ended August 31, 2019, as filed with the Securities and Exchange Commission (the "Report") Bryan Ganz, the Principal Executive Officer of the Company and Rakesh Malhotra, the Principal Financial Officer of the Company, certify pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the company.


October 13, 2019

/s/ Bryan Ganz

 

Bryan Ganz, Principal Executive Officer

   
   
   

October 13, 2019

/s/ Rakesh Malhotra

 

Rakesh Malhotra, Principal Financial Officer



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In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company at August 31, 2019 and November 30, 2018, the results of its operations for the nine and three month periods ended August 31, 2019 and August 31, 2018, and its cash flows for the nine month periods ended August 31, 2019 and August 31, 2018. The results of operations for the nine and three-month periods ended August 31, 2019 are not necessarily indicative of results to be expected for the full year.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">The Company was incorporated under the laws of the state of Delaware on March 1, 2005. On February 3, 2014, the Company incorporated a wholly owned subsidiary in Canada, Security Devices International Canada Corp. On March 1, 2018, the Company acquired all the shares of a company in South Africa, Byrna South Africa (Pty) Ltd. The condensed unaudited interim consolidated financial statements for the period ended August 31, 2019 include the accounts of Security Devices International, Inc., and its subsidiaries Security Devices International Canada Corp. and Byrna South Africa (Pty) Ltd. 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style="text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:right;width:10%;white-space:nowrap;background-color:#ffffff"><p style="text-align:center"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Cost</span></span></p></td><td style="text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:center;width:10%;white-space:nowrap;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Amortization</span></span></td><td style="text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:right;width:10%;white-space:nowrap;background-color:#ffffff"><p style="text-align:center"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Cost</span></span></p></td><td style="text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="text-align:center;width:10%;white-space:nowrap;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Amortization</span></span></td><td style="text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap;background-color:#ffffff"><p style="text-align:center"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></p></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap;background-color:#ffffff"><p style="text-align:center"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></p></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap;background-color:#ffffff"><p style="text-align:center"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></p></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap;background-color:#ffffff"><p style="text-align:center"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></p></td><td style="text-align:left;width:2%;white-space:nowrap;background-color:#ffffff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Computer equipment and software</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">81,893</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">51,469</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">77,382</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">46,837</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Furniture and fixtures</span></span></td><td style="text-align:left;width:1%;background-color:#ffffff"> </td><td style="text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">22,722</span></span></td><td style="text-align:left;width:2%;background-color:#ffffff"> </td><td style="text-align:left;width:1%;background-color:#ffffff"> </td><td style="text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">20,519</span></span></td><td style="text-align:left;width:2%;background-color:#ffffff"> </td><td style="text-align:left;width:1%;background-color:#ffffff"> </td><td style="text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">20,998</span></span></td><td style="text-align:left;width:2%;background-color:#ffffff"> </td><td style="text-align:left;width:1%;background-color:#ffffff"> </td><td style="text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">18,763</span></span></td><td style="text-align:left;width:2%;background-color:#ffffff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Leasehold improvements</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">26,471</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">26,471</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">26,471</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">26,471</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Moulds</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">470,922</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">229,440</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">291,599</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#ffffff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#ffffff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">210,961</span></span></td><td style="text-align:left;width:2%;background-color:#ffffff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">602,008</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">327,899</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">416,450</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">303,032</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr><td style="width:5%"> </td><td style="background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Net carrying amount</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">274,109</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">113,418</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr><td style="width:5%"> </td><td style="background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td><td style="width:1%;background-color:#ffffff"> </td><td style="width:10%;background-color:#ffffff"> </td><td style="width:2%;background-color:#ffffff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Depreciation expense for nine- month period</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 24,869</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(<span lang="EN-CA"><span style="line-height:107%">August 31, 2019</span></span>)</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 12,138</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(<span lang="EN-CA"><span style="line-height:107%">August31, 2018</span></span>)</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> 81893 77382 22722 20998 26471 26471 470922 291599 602008 416450 51469 46837 20519 18763 26471 26471 229440 210961 327899 303032 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">4.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">CAPITAL STOCK</span></span></p></td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%"> </td><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">a)</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Authorized</span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:10%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">300,000,000* Common shares, $0.001 par value</span></span></p><p style="MARGIN-LEFT:10%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">And</span></span></p><p style="MARGIN-LEFT:10%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">5,000,000 Preferred shares, $0.001 par value</span></span></p><p style="MARGIN-LEFT:10%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">* On October 6, 2017, the Company filed with the Secretary of the State of Delaware a certificate of amendment (the “Amendment”) to the Company’s certificate of incorporation. The Amendment increased the number of authorized shares of the Company’s common stock, par value $0.001, from 100,000,000 to 200,000,000 common shares.</span></span></p><p style="MARGIN-LEFT:10%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">* On March 21, 2019, the Company filed with the Secretary of the State of Delaware a certificate of amendment (the “Amendment”) to the Company’s certificate of incorporation. The Amendment increased the number of authorized shares of the Company’s common stock, par value $0.001, from 200,000,000 to 300,000,000 common shares.</span></span></p><p style="MARGIN-LEFT:10%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company’s Articles of Incorporation authorize its Board of Directors to issue up to 5,000,000 shares of preferred stock having par value of $0.001. The provisions in the Articles of Incorporation relating to the preferred stock allow the directors to issue preferred stock with multiple votes per share and dividend rights, which would have priority over any dividends paid with respect to the holders of SDI’s common stock.</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%"> </td><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">b)</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Issued</span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:10%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">104,021,837 common shares (November 30, 2018: 101,976,900 common shares)</span></span></p> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%"> </td><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">c)</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Changes to Issued Share Capital</span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><u><span lang="EN-CA">Nine months ended August 31, 2019</span></u></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In January 2019, the Company made a share issuance to Paul Jensen (“Jensen”) pursuant to his employment agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of $20,000, due January 15, 2019.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In January 2019, the Company made a share issuance to Bryan Ganz (“Ganz”) pursuant to a consulting agreement. The Company issued 500,000 common shares at a price of $0.1482 for a total consideration of $74,100, due December 15, 2018.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In January 2019, the Company made a share issuance to a corporation owned and controlled by Dean Thrasher (“Thrasher”), executive chairman of the Company, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.1482 for a total consideration of $26,676 due January 15, 2019.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In January 2019, the Company made a share issuance to Lisa Wager (“Wager”), the Chief Legal Officer (“CLO”), pursuant to a consulting agreement. The Company issued 166,666 common shares at a price of $0.1482 for a total consideration of $24,700, due January 15, 2019.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">In January 2019, the Company made a share issuance to </span><span style="line-height:107%">a consultant in South Africa, </span><span style="line-height:107%">pursuant to a consulting agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of</span></span> $19,998 due January 15, 2019<span style="line-height:normal"><span lang="EN-CA">. These shares were cancelled in June 2019, and the Company subsequently paid the consultant $19,998 in cash.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On April 1, 2019, the Company made a share issuance to Ganz, pursuant to a consulting agreement. The Company issued 333,333 common shares at a price of $0.14 per share to satisfy payment for $46,665, due April 15, 2019.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On April 1, 2019, the Company made a share issuance to <span lang="EN-CA"><span style="line-height:107%">Wager for services, pursuant to board resolution</span></span>. The Company issued 250,000 common shares at a price of $0.14 per share to satisfy payment for $35,000, due April 15, 2019.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On April 1, 2019, the Company made a share issuance to a corporation owned and controlled by Thrasher, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.14 for a total consideration of $25,200, due April 15, 2019.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On May 22, 2019, the Company made a share issuance to a consultant pursuant to a consulting agreement for services. The Company issued 300,000 common shares at a price of $0.14 per share for a total consideration of $42,000.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Year ended November 30, 2018</u></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In March 2018, the Company made a share issuance to Northeast Industrial Partners (“NEIP”) pursuant to a consulting agreement. SDI issued 507,550 common shares at a price of $0.1231 per share to satisfy the payment of $62,500 due in December 2017.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In March 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 339,370 common shares at a price of $0.1473 per share to satisfy the payment of $50,000, due January 15, 2018.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In May 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 334,154 common shares at a price of $0.1496 per share to satisfy the payment of $50,000, due April 15, 2018.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In July 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 298,880 common shares at a price of $0.1673 per share to satisfy the payment of $50,000, due July 15, 2018.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In November 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 136,146 common shares at a price of $0.1469 per share to satisfy the payment of $20,000, due October 15, 2018.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In November 2018, the Company made a share issuance to Ganz pursuant to a consulting agreement. SDI issued 500,000 common shares at a price of $0.1451 per share for a total consideration of $72,573 to satisfy the payment for services for the fiscal third quarter.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In November 2018, the Company made a share issuance to a corporation owned by Thrasher under the consulting agreement. SDI issued 180,000 common shares at a price of $0.1533 per share for a total consideration of $27,600 due September 15, 2018.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In November 2018, the Company made a share issuance of 6,666,666 common shares to FinTekk AP, LLC (“FinTekk”) at a price of $0.15 per share. The shares are issued pursuant to a debt settlement agreement, to retire certain debt owing by the Company to FinTekk, in connection with a sponsorship agreement (the “Sponsorship Agreement”). The Sponsorship Agreement details a marketing campaign for the launch of the Company’s new Byrna<sup>TM </sup>HD product over the 2018 and 2019 fiscal years. The Company recognized $750,000 as a prepaid expense as at November 30, 2018 (See note 13).</span></span></p> 134938 500000 180000 166666 134938 333333 250000 180000 300000 507550 339370 334154 298880 136146 500000 180000 6666666 180000 333333 250000 507550 200000 0.1482 0.1482 0.1482 0.1482 0.1482 0.14 0.14 0.14 0.14 0.1231 0.1473 0.1496 0.1673 0.1469 0.1451 0.1533 0.15 0.12 20000 19998 46665 35000 62500 50000 50000 50000 20000 72573 74100 26676 24700 25200 42000 27600 750000 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">5.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">STOCK BASED COMPENSATION AND WARRANTS</span></span></span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Effective May 31, 2013, the Company adopted an incentive stock option plan (the “2013 Stock Option Plan”) which replaced the prior stock option and stock bonus plans, as ratified by the Company’s shareholders at the Company’s 2015 annual meeting of shareholders. A maximum of 9,379,857 common shares were reserved for issuance under the 2013 Stock Option Plan.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Board approved a revised stock option plan (the “Revised Stock Option Plan”) and received stockholder approval at the annual meeting held on December 19, 2017, that increased the number of shares reserved for issuance under the stock option plan from 9,379,857 to 18,993,274.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The material terms of the Revised Stock Option Plan are as follows:</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(a) While the shares are listed on the Exchange (as defined in the Revised Stock Option Plan), options may be granted to employees, senior officers, directors and consultants of the Company or a subsidiary of the Company and to corporations wholly owned by such an employee, senior officer, director or consultant.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(b) The maximum number of common shares which can be issued under the Revised Stock Option Plan is<span lang="EN-CA"><span style="line-height:107%"> 18,993,274,</span></span> provided that, so long as the Company is listed on the Exchange, this maximum will be reduced to 20% of the issued and outstanding common shares on December 19, 2017.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(c) <span lang="EN-CA"><span style="line-height:107%">The term of any option granted under the Revised Stock Option Plan will be fixed by the board of directors at the time such option is granted, provided that options will not be permitted to exceed a term of ten years.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(d) <span lang="EN-CA"><span style="line-height:107%">The exercise price of any options granted under the Revised Stock Option Plan will be determined by the board of directors, in its sole discretion, but shall not be less than the closing price of the shares on the stock exchange on the day preceding the day on which the directors grant such options.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(e) <span lang="EN-CA"><span style="line-height:107%">While the shares are listed on the Exchange, options will be non-assignable and non-transferable.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(f) <span lang="EN-CA"><span style="line-height:107%">So long as the shares are listed on the Exchange, options on no more than 2% of the issued shares may be granted to any</span></span> one <span style="line-height:normal"><span lang="EN-CA">consultant, or in aggregate to all persons performing investor relations activities, in any 12- month period.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(g) <span lang="EN-CA"><span style="line-height:107%">If the option holder ceases to be someone eligible to receive a grant of options under the Revised Stock Option Plan, then that holder’s existing options shall expire on the earlier of (i) the expiry date fixed at the time of the option grant, and (ii) ninety days after the date that the option holder ceases to be eligible to receive a grant of options under the Revised Stock Option Plan.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Year ended November 30, 2018</u></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Warrants</u></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On October 22, 2018, the Company entered into a securities purchase agreement with several accredited investors to sell $1,275,000 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before the five year anniversary of the issuance. The Company issued 5,100,000 warrants. The relative grant date fair value of these warrants was estimated at $524,089 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">3.05%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">159%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">5 years</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of warrants</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.14</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Stock Options</u></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On March 27, 2017, the board of directors granted options to Dean Thrasher to acquire a total of 1,150,000 common shares. These options were issued at an exercise price of CAD $0.13 ($0.10) per share and vest thirty-three and one-third (33 1/3) percent every six months commencing January 1, 2017, with an expiry term of five years. The Company expensed stock-based compensation expense of $39,046 regarding the vesting of options during the year ended November 30, 2018, leaving a balance of $nilas unvested stock- based compensation expense.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On April 13, 2018, the board of directors granted 1,500,000 options for shares of the Company’s common stock to the Chief Technology officer (“CTO”), Buys, with exercise price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company’s stock price must close above the trigger price for 20 days in order for the option to be vested. The options shall have a seven-year life from grant date and Buys must remain employed by the Company for three years for the options to vest. The grant date fair value of the options used for the purpose of estimating the stock compensation is estimated using the Binomial Lattice option pricing model with the following assumptions:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.77%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">190%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">7 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of options</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed during the year</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 10,568</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Unvested stock-based compensation expense</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 40,159</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On October 22, 2018, the board of directors granted 400,000 options to directors and 250,000 options to a consultant for a total of 650,000 options. These options were issued at an exercise price of CAD $0.19 ($0.14) per share and vest immediately with an expiry term of five years. The fair value of each option used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.00%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">133%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">5 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of options</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.14</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed during the year</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 79,185</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Unvested stock-based compensation expense</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">        Nil</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">As of November 30, 2018, there was $40,159 of unrecognized expense related to non-vested stock-based compensation arrangements granted.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u><span lang="EN-CA"><span style="line-height:107%">Nine months ended August 31, 2019</span></span></u></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Warrants</u></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On December 3, 2018, the Company issued 750,000 warrants each to two consultants (the “incentive warrants”) to purchase common shares of the Company at a strike price equal to the average trading price of the Company on the OTC QB during the 20 business days proceeding such approval. 50% of the incentive warrants vested upon issuance and the balance will vest on December 31, 2019. The incentive warrants shall have a three-year life. These warrants were issued pursuant to the contracts executed with these two consultants. The grant date fair value of each warrant used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.00%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">149%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">3 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of warrants</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.16</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 164,230</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="padding:0in 0in 0in 0in" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Unvested stock-based compensation expense </span></span></span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 29,860</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> <p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On April 22, 2019 and May 20, 2019, the Company entered into a securities purchase agreement with several accredited investors to sell a total of $2,080,265 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest secured convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for<span lang="EN-CA"><span style="line-height:107%"> one </span></span>share of common stock at an exercise price of $0.25 per share on or before October 22, 2023. The Company issued<span lang="EN-CA"><span style="line-height:107%"> 8,321,058 </span></span>warrants. The relative grant date fair value of these warrants was estimated at $888,444 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.21—2.39%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">155—156%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">4.5 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of warrants</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On July 22, 2019, the Company entered into a securities purchase agreement with several investors to sell a total of $2,282,500 of units at a price of $1,000 per unit, consisting of (i) $1,000<span lang="EN-CA"><span style="line-height:107%"> 10% interest secured convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. The Company issued 9,130,000 warrants. The relative grant date fair value of these warrants was estimated at $1,038,081 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:</span></span></span></span></p><table cellpadding="5" class="Table" style="width:100.0%;border-collapse:collapse;border:undefined" width="100%"><tbody><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Risk free rate </span></span></span></span></td><td style="background:rgb(230, 239, 255);padding:0in;width:11px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">1.8% </span></span></span></span></td><td style="background:#e6efff;width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected forfeiture rate</span></span></span></span></td><td style="padding:0in;width:11px" valign="top"> </td><td style="padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">0%</span></span></span></span></td><td style="width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected dividends </span></span></span></span></td><td style="background:rgb(230, 239, 255);padding:0in;width:11px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">0% </span></span></span></span></td><td style="background:#e6efff;width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected volatility </span></span></span></span></td><td style="padding:0in;width:11px" valign="top"> </td><td style="padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">154% </span></span></span></span></td><td style="width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected life </span></span></span></span></td><td style="background:rgb(230, 239, 255);padding:0in;width:11px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">4.5 years </span></span></span></span></td><td style="background:#e6efff;width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Market price of the Company’s common stock on date of grant of warrants</span></span></span></span></td><td style="padding:0in;width:11px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">$</span></span></span></span></td><td style="padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">0.16</span></span></span></span></td><td style="width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Stock Options</u></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On April 13, 2018, the board of directors granted 1,500,000 options for shares of the Company’s common stock to Buys, with an exercise price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company expensed stock-based compensation of $12,681 <span lang="EN-CA"><span style="line-height:107%">during the nine-month period ended August 31, 2019.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On May 21, 2019, the Company granted 120,000 options to an employee. These options were issued at an exercise price of CAD $0.19 ($0.14) per share and vested immediately with an expiry term of five years. The grant date fair value of each option used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">2.00% </span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">133% </span></span></span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">5 years </span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of options</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.14</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 14,621</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Unvested stock-based compensation expense</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Nil</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">As of August 31, 2019, there was </span></span>$57,337 <span lang="EN-CA"><span style="line-height:107%">of unrecognized expense related to non-vested stock-based compensation arrangements granted.</span></span></span></span></p> 1275000 2080265 2282500 1000 1000 1000 0.25 0.15 0.24 0.31 0.135 0.15 0.15 0.135 0.15 0.15 0.15 1 1 1 1 1 524089 1038081 888444 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">3.05%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">159%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">5 years</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of warrants</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.14</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.21—2.39%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">155—156%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">4.5 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of warrants</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> <table cellpadding="5" class="Table" style="width:100.0%;border-collapse:collapse;border:undefined" width="100%"><tbody><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Risk free rate </span></span></span></span></td><td style="background:rgb(230, 239, 255);padding:0in;width:11px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">1.8% </span></span></span></span></td><td style="background:#e6efff;width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected forfeiture rate</span></span></span></span></td><td style="padding:0in;width:11px" valign="top"> </td><td style="padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">0%</span></span></span></span></td><td style="width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected dividends </span></span></span></span></td><td style="background:rgb(230, 239, 255);padding:0in;width:11px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">0% </span></span></span></span></td><td style="background:#e6efff;width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected volatility </span></span></span></span></td><td style="padding:0in;width:11px" valign="top"> </td><td style="padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">154% </span></span></span></span></td><td style="width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Expected life </span></span></span></span></td><td style="background:rgb(230, 239, 255);padding:0in;width:11px" valign="top"> </td><td style="background:rgb(230, 239, 255);padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">4.5 years </span></span></span></span></td><td style="background:#e6efff;width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr><tr><td style="padding:0in;width:73px" valign="top"> </td><td style="padding:0in;width:1053px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Market price of the Company’s common stock on date of grant of warrants</span></span></span></span></td><td style="padding:0in;width:11px" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">$</span></span></span></span></td><td style="padding:0in;width:157px;text-align:right" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">0.16</span></span></span></span></td><td style="width:1.98%;padding:0in 0in 0in 0in;width:1%" valign="top"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">2.00% </span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">133% </span></span></span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">5 years </span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of options</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.14</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 14,621</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Unvested stock-based compensation expense</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Nil</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> 0.0305 0.0277 0.0200 0.0200 0.0221 0.0221 0.0239 0.0239 0.018 0.0200 0 0 0 0 0 0 0 0 1.59 1.90 1.33 1.49 1.55 1.55 1.56 1.56 1.54 1.33 P5Y P7Y P5Y P3Y P4Y6M P4Y6M P4Y6M P5Y 0.14 0.16 0.15 0.15 0.16 1150000 1500000 400000 250000 650000 1500000 120000 1500000 1150000 1500000 500000 0.13 0.10 0.16 0.19 0.19 0.14 0.14 0.19 0.14 39046 40159 40159 29860 57337 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.77%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">190%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">7 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of options</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed during the year</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 10,568</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Unvested stock-based compensation expense</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 40,159</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.00%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">133%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">5 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of options</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.14</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed during the year</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 79,185</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Unvested stock-based compensation expense</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">        Nil</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.00%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected dividends</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected forfeiture rate</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected volatility</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">149%</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Expected life</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">3 years</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Market price of the Company’s common stock on date of grant of warrants</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.16</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Stock-based compensation cost expensed</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 164,230</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="padding:0in 0in 0in 0in" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">Unvested stock-based compensation expense </span></span></span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 29,860</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> 0 0 0 0 0 0 0 0.15 0.14 0.14 10568 79185 164230 12681 14621 750000 8321058 9130000 5100000 10 0.30 0.50 1.00 0.30 0.50 1.00 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">6.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">RELATED PARTY TRANSACTIONS</span></span></p></td></tr></tbody></table><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The following transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by related parties.</span></span></p><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Nine months ended </u><u>August 31, 2019</u><br/><br/>The Company expensed $66,667 for services provided by Jensen as CEO through March 31, 2019, which includes an obligation of the Company to issue shares for $20,000.<br/><br/>The Company expensed $50,000 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which the CFO has an ownership interest.<br/><br/>The Company expensed $43,200, which includes $25,200 for the issuance of 180,000 common shares for services, pursuant to a consulting contract, for services provided by Thrasher, a former director of the Company.<br/><br/>The Company expensed $90,000 for services provided by Andre Buys (“Buys”), CTO of the Company, and an additional $8,333 for royalties. The Company expensed $12,681 for the value of that portion of his 1,500,000 options that vested during this period. As at August 31, 2019, the Company owes Buys $16,333.<br/><br/>The Company expensed $136,374 for services provided by Ganz, President of the Company and, effective April 1, 2019, CEO of the Company, which includes $46,667 for issuance of 333,333 common shares and $52,500 for issuance of convertible notes.<br/><br/>The Company expensed $119,385 for services provided for Wager, CLO of the Company, which includes $35,000 for issuance of 250,000 common shares and $42,500 for issuance of convertible notes.<br/><br/>The Company expensed $16,200 for office rent including services to a corporation owned and controlled by Ganz, President and, effective April 1, 2019 CEO of the Company. As of August 31, 2019, the Company has a payable due to that corporation of $8,120.<br/><br/>Current directors and officers of the Company participated in the April 22, 2019, May 20, 2019 and July 22, 2019 financing for 316 units for total proceeds of $315,588, of which $70,000 was issued for services rendered.<br/><br/>Amounts owing to related parties are unsecured, non-interest bearing and due on demand.</span></span></p><p style="text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u>Nine months ended August 31, 2018</u><br/><br/>As of August 31, 2018, there were no amounts receivable from related parties.<br/><br/>As of August 31, 2018, the Company had a payable of $103,906 to related parties to be settled by issuance of stock.<br/><br/>The Company expensed $150,000 for services provided by Jensen, COO and President of the Company through July 13, 2018 and, CEO of the Company effective July 13, 2018.<br/><br/>The Company expensed $34,875 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which Malhotra has an ownership interest, in accordance with his consulting contract.<br/><br/>The Company expensed $116,575 which includes $18,000 for issuance of proportionate shares per his contract, for services provided by Dean Thrasher as CEO of the Company through July 13,2018 and as Executive Chairman of the Company effective July 13, 2018, which was paid to a corporation in which the CEO has an ownership interest, in accordance with the consulting contract (see also note 7). The Company also expensed $39,046 for the value of that portion of his 1,150,000 options that vested during this period.</span></span></p><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company issued 507,550 common shares to NEIP at a price of $0.12 per share to satisfy the payment of $62,500 for services rendered due in December 2017.<br/><br/>On April 13, 2018, the Company employed Buys as the CTO with compensation of $10,000 per month over a three-year period and granted Buys options to acquire a total of 1,500,000 common shares. The Company expensed $46,667 paid to Buys, and expensed $6,341 for the value of that portion of his 1,500,000 options that vested during this period. See Note 7(a).</span></span><br/><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Effective June 1, 2018 the Company entered into a consulting agreement (the “Consulting Agreement”) with Bryan Ganz pursuant to which Mr. Ganz served as President of the Company. By the terms of the Consulting Agreement, Mr. Ganz was to be paid annually $200,000 in the Company’s common shares for his services and subject to stock exchange approval. For the Company’s fiscal third and fourth quarters Ganz was to be paid 500,000 common shares for each quarter, ending March 31, 2019. The Company accrued expenses of $72,573 as the cost of shares issued to Ganz for services.<br/><br/>Effective December 1, 2017, the Company leased office premises at Wakefield, Massachusetts, USA for rent of $700 per month from a corporation owned and controlled by a director of the Company. The Company expensed $6,300 as office rent for the nine-months ended August 31, 2018. As of August 31, 2018, the Company had a payable for $3,940 for the rent.</span></span></p> 66667 50000 25200 119385 150000 18000 62500 20000 46667 35000 43200 90000 136374 34875 116575 46667 8333 12681 39046 16333 103906 72573 52500 42500 16200 6300 8120 316 315588 70000 10000 6341 700 700 2472 968 14750 3940 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">7.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">COMMITMENTS</span></span></p></td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%"> </td><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">a)</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Consulting agreements</span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">On April 13, 2018, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with André Buys, (“Buys”) a resident of South Africa, pursuant to which the Company purchased from Buys a portfolio of registered patent rights and other intellectual property relating to air and/or gas fired long guns or pistols, including pump action launchers and munitions used with such pistols and long guns, including self-stabilizing shaped or “finned” rounds (the “Portfolio”). As consideration for the Portfolio, the Company (i) paid Buys $100,000, (ii) agreed to pay Buys either $500,000 in cash or $750,000 worth of Company stock within two years (the “Second Payment”) at Buys’ discretion and (iii) agreed to pay Buys certain royalty payments for sales of products by the Company using technology covered by the Portfolio. In addition, the Company employed Buys as the CTO and for services issued 1,500,000 options for shares of the Company’s common stock to Buys with a strike price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company’s stock price must close above the trigger price for 20 days in order for the option to be triggered. The options shall have a seven year life from grant date and Buys must remain employed by the Company for three years in order for the options to vest. Until the earlier of, the second anniversary or the date the Second Payment is made, the royalty will be 10% of the Net Sales Price (“NSP”). The royalty will then be reduced to 4% till the sixth anniversary, 3% till the eighth anniversary, and 2% till the last expiration date of any of the intellectual property in the Portfolio. Until the royalty exceeds $25,000 per year, the Company is committed to a minimum payment of $25,000 per year effective on the earlier of one year from closing or upon Buys relocation to Boston. In the event that the Company fails to make the Second Payment, the Portfolio would revert to Buys, but the Company would retain perpetual, irrevocable, exclusive and non-exclusive licenses to use technology with respect to the Portfolio and any technology developed within two years of April 13, 2018. As the substance of the purchase and sale agreement has been determined to be an option agreement, the Company has not recorded any amount related to the Second Payment. The Company agrees that it will not terminate Buys except for cause prior to April 2021. As a result, the minimal commitment relating to the employment contract is $320,000 payable over a period of 32 months.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Effective November 1, 2018, the Company entered into consulting agreements (the “Consulting Agreements”) with two consultants. The consultants will each be paid $7,500 per month commencing November 1, 2018 and to be increased to $10,000 per month subsequent to the month the Company begins shipping the Byrna HD product to customers. The term of the contracts with the consultants continue until December 31, 2019.</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">b)</span></span></td><td style="text-align:left;width:90%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Lease commitments</span></span></td></tr><tr><td style="width:5%"> </td><td> </td><td style="width:90%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1.</span></span></td><td style="text-align:left;width:90%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company has commitments for leasing office premises in Wakefield, Massachusetts, USA to June 27, 2019, at a monthly rent of $700 (see note 6).</span></span></td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.</span></span></td><td style="text-align:left;width:90%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company has commitments for leasing warehouse space in Fort Wayne, Indiana, USA to February 28, 2020, at a monthly rent of $2,472.</span></span></td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">3.</span></span></td><td style="text-align:left;width:90%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company has commitments for leasing office premises in Pretoria East, South Africa to December 19, 2020, at a monthly rent of $968 (Rand 14,750).</span></span></td></tr></tbody></table> 100000 100000 500000 500000 750000 750000 1500000 0.16 P7Y P3Y 0.10 0.04 0.03 0.02 25000 25000 320000 P32M 7500 10000 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">EXCLUSIVE SUPPLY AND PURCHASE AGREEMENTS</span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">The Company entered a Development, Supply and Manufacturing Agreement with the BIP manufacturer on August 1, 2017. This agreement provides the Company to order and purchase only from the BIP manufacturer certain BIP assemblies and components for use by the Company to produce less-lethal and training projectiles as described in the agreement in North America. The agreement is for a term of four years with an automatic extension for additional one - year terms if neither party has given written notice of termination at least sixty (60) days prior to the end of the then- current term.</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">The Company entered a License and Supply Agreement with Safariland, LLC on May 1, 2017. This agreement provides the Company to license and sell only to Safariland, LLC for certain BIP standard payloads for integration with and production of certain less-lethal impact munitions in North America. This agreement is for a term of four years with an automatic extension for an additional one - year term if neither party has given written notice of termination at least ninety (90) days prior to the end of the then-current term</span></span></span></span></p> P4Y P4Y P1Y P1Y <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">9.</span></span></td><td><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS</span></span></td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%"> </td><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><strong><i>a)</i></strong></span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><strong><i>Secured Convertible Debentures $Nil(November 30, 2018: $978,361)</i></strong></span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The CAD $1,363,000 ($1,015,026) of Series B Secured Convertible Debentures (Subordinate Secured Debentures) were issued pursuant to the Trust Indenture agreement dated December 7, 2016 (the “Indenture”) in exchange for the Unsecured Debentures in equal principal amount and an additional CAD $36,000 ($26,640) of Series B Secured Convertible Debentures were issued pursuant to the Indenture in payment of accrued interest. These debentures mature on June 6, 2019 and bear interest at 12% per annum, payable semi-annually. The debentures are secured by all the assets of the Company. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of the Company’s common stock at a conversion price of $0.24 (CAD $0.31) per share subject to anti-dilution protection with a minimum conversion price of $0.135 and for capital reorganization events. The debentures also embody certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company has concluded that the embedded conversion option is not indexed to its stock because it did not pass all eight conditions of equity classification provided in ASC 815. The embedded conversion option is subject to classification in the financial statements in liabilities at fair value both at inception and subsequently.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company has evaluated the terms and conditions of the debentures under the guidance of ASC 815. All three criteria under ASC 815-15-25-1 are met, therefore, the conversion feature requires classification and measurement as derivative financial instruments. Accordingly, the evaluation resulted in the conclusion that this derivative financial instrument requires bifurcation and liability classification, at fair value. Current standards contemplate that the classification of financial instruments requires evaluation at each report date.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The following table reflects the allocation of the purchase on December 7, 2016:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Secured convertible debentures</span></span></td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Face Value</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(CAD $1,399,000)</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 1,041,835</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Proceeds</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1,041,835</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Embedded derivative</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(285,612</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Carrying value</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 756,223</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> <p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The carrying value of these debentures at November 30, 2018 was CAD $1,301,359 ($978,361). Effective May 31, 2019, the Company repaid these debentures for CAD $1,399,000 ($1,035,930) plus accrued interest.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Discounts (premiums) on the convertible debentures arise from (i) the allocation of basis to other instruments issued in the transaction, (ii) fees paid directly to the creditor and (iii) initial recognition at fair value, which is lower than face value. Discounts (premiums) are amortized through charges (credits) to interest expense over the term of the debt agreement. Amortization of debt discounts (premiums) amounted to CAD $98,924 ($73,201) during the nine months ended August 31, 2019 and CAD$112,064($88,102) during the prior nine months ended August 31, 2018. During the nine months ended August 31, 2019, the Company recorded interest expense for $67,007 (August 31, 2018: $99,090).</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><strong><em>b)          </em></strong><strong><i>Convertible Notes -</i></strong><strong><em> $3,202,633, (November 30, 2018: $167,077)</em></strong></span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1. On October 22, 2018, the Company entered into a Securities Purchase Agreement with several accredited investors to sell $1,275,000 of units, with each $1,000 of unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due April 15, 2020, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before the five year anniversary of the issuance. The notes are secured secondary by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. As a result of the repayment of the November 2016 Subordinate Secured Debentures on May 31, 2019, these convertible notes entered senior security position. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share subject to anti-dilution protection. The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the embedded conversion option is not indexed to the Company’s stock because it did not pass all eight conditions of equity classification provided in ASC 815. Therefore, the embedded conversion option is subject to classification in the financial statements in liabilities at fair value both at inception and subsequently.</span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company evaluated the terms and conditions of the Notes under the guidance of ASC 815. All three criteria under ASC 815-15-25-1 are met, therefore, the conversion feature requires classification and measurement as derivative financial instruments. Accordingly, the evaluation resulted in the conclusion that this derivative financial instrument requires bifurcation and liability classification, at fair value. Current standards contemplate that the classification of financial instruments requires evaluation at each report date.</span></span></p> <p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The following table reflects the allocation of the purchase on October 22, 2018:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Proceeds</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 1,275,000</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr><td style="text-align:left;width:48px"> </td><td style="text-align:left;width:948px"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible notes</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> (131,547</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr><td style="width:5%"> </td><td style="text-align:left;width:948px"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Derivative liability-convertible promissory notes</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> (619,364</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr><td style="width:5%"> </td><td style="text-align:left;width:948px"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:48px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Additional paid in capital (equity warrants)</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> (524,089</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr></tbody></table><p style="text-align:justify"> </p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">In conjunction with the October 22, 2018 note placement, the Company issued 5,100,000 warrants. The relative fair value of these warrants was estimated at $524,089 using the Binomial Lattice option pricing model and reflected in additional paid-in capital. Discounts (premiums) on the convertible notes arise from (i) the allocation of basis to other instruments issued in the transaction, (ii) fees paid directly to the creditor and (iii) initial recognition at fair value, which is lower than face value. Discounts (premiums) are amortized through charges (credits) to interest expense over the term of the debt agreement. Amortization of debt discounts (premiums) amounted to $322,897 during the nine months ended August 31, 2019 (August 31, 2018: $Nil)resulting in the carrying value of convertible notes at $489,974 as at August 31, 2019 (November 30, 2018: $167,077). During the nine months ended August 31, 2019, the Company recorded interest expense for $93,115 (August 31, 2018:$Nil).</span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2. On April 22, 2019 and May 20, 2019, the Company entered into a securities purchase agreement with several accredited investors to sell a total of $2,080,265 of units, with each $1,000 unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due April 15, 2020, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before October 22, 2023. The notes are secured secondary by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share. The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the Notes meet the definition of conventional convertible debt provided in ASC 815 and the embedded conversion option is not subject to bifurcation and classification in the financial statements in liabilities at fair value. In connection with the issuance of the Notes, the Company issued the holders warrants to purchase the common stock. The warrant is exercisable until October 23, 2023 for 8,321,058 of shares at a purchase price of $0.25 per share. The Company concluded that the warrants are indexed to the stock and, accordingly, the analysis resulted in the conclusion that these warrants achieved equity classification in the financial statements. As a result of the repayment of the November 2016 Subordinate Secured Debentures on May 31, 2019, these convertible notes entered senior security position.</span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company accounted for this transaction as a financing transaction, wherein the net proceeds received were allocated to the financial instruments issued which resulted in a discount. The warrants were valued at $888,444 and the balance of the convertible debt for $1,191,821. The discount is being charged to interest and is being accreted over the term of the note using the effective interest method. During the nine-month period ended August 31, 2019 (August 31, 2018: $Nil)the Company recorded $243,162 in interest from the accretion of the discount. In addition, the Company recorded interest expense for $71,862 for the nine-month period ended August 31, 2019 (August 31, 2018: $Nil).Prior to making the accounting allocation, the Company evaluated for proper classification under ASC 480 Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 Derivatives and Hedging (“ASC 815”). This debt agreement did not contain any embedded terms or features that require classification as derivatives. The Company was required to consider whether the hybrid contract embodied a beneficial conversion feature (“BCF”). The calculation of the effective conversion amount did not result in a BCF because the effective conversion price was equal to the Company’s stock price on the date of issuance.</span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the Notes meet the definition of conventional convertible debt provided in ASC 815 and the embedded conversion option is not subject to bifurcation and classification in the financial statements in liabilities at fair value. In connection with the issuance of the Notes, the Company issued the holders warrants to purchase the Company’s common stock. The warrants are exercisable until January 22, 2024 for 9,130,000 of shares at a purchase price of $0.25 per share. The Company concluded that the warrants are indexed to the stock and, accordingly, the analysis resulted in the conclusion that these warrants achieved equity classification in the financial statements.</span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company accounted for this transaction as a financing transaction, wherein the net proceeds received were allocated to the financial instruments issued which resulted in a discount. The warrants were valued at $1,038,081 and the balance of the convertible debt for $1,244,419. The discount is being charged to interest and is being accreted over the term of the note using the effective interest method. During the nine-month period ended August 31, 2019 (August 31, 2018: $Nil) the Company recorded $33,257 in interest from the accretion of the discount. In addition, the Company recorded interest expense for $25,014 for the nine-month period ended August 31, 2019 (August 31, 2018:$Nil). Prior to making the accounting allocation, the Company evaluated for proper classification under ASC 480 Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 Derivatives and Hedging (“ASC 815”). This debt agreement did not contain any embedded terms or features that require classification as derivatives. The Company was required to consider whether the hybrid contract embodied a beneficial conversion feature (“BCF”). The calculation of the effective conversion amount did not result in a BCF because the effective conversion price was equal to the Company’s stock price on the date of issuance.</span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">3. On July 22, 2019, the Company entered into a securities purchase agreement with several investors to sell a total of $2,282,500 of units, with each $1,000 of unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due June 30, 2021, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. The notes are secured <i>pari passu </i>with the October 2018 and April/May 2019 notes, by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. However, the principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share.</span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><strong>Derivative Liabilities</strong></span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The carrying values of the embedded derivative liabilities is reflected on the balance sheet, with changes in the carrying value being recorded as a change in fair value of derivative liabilities on the statement of operations.<br/><br/>The components of the embedded derivative as of August 31, 2019 are:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:768px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Indexed</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"> </td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:54px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:768px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Financings giving rise to derivative financial instruments</span></span></td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Shares</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Fair Value</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:768px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Notes October 22, 2018</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,500,000</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">214,200</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:54px"> </td><td style="text-align:left;width:768px"> </td><td style="text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,500,000</span></span></td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">214,200</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The components of the embedded derivative as of November 30, 2018 are:</span></span></p><table border="0" cellpadding="5" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:761px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Indexed</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"> </td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:54px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:761px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Financings giving rise to derivative financial instruments</span></span></td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Shares</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Fair Value</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:761px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Secured Debentures December 7, 2016</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,044,853</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">426,016</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:761px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Notes October 22, 2018</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,500,000</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">531,285</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:54px"> </td><td style="text-align:left;width:761px"> </td><td style="text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">16,544,853</span></span></td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">957,301</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> <p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The following table summarizes the effects on gain (loss) associated with changes in the fair values of derivative financial instruments by type of financing for the nine months ended August 31, 2019 and 2018:</span></span></p> <div class="integix-block-tag"><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:766px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Nine Months</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Nine Months</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:766px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Ended</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Ended</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:766px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2019</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2018</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:54px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:766px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Financings giving rise to derivative financial instruments and the income effects:</span></span></td><td style="text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%"> </td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:766px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Secured Debentures December 7, 2016</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 425,020</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(245,852)</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:54px"> </td><td style="text-align:left;width:766px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Notes October 22, 2018</span></span></td><td style="text-align:right;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 317,086</span></span></td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:766px"> </td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 742,106</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(245,852)</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table></div><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><strong><i>Fair Value Considerations </i></strong></span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;width:118px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><i>Level 1 valuations</i>:</span></span></td><td style="text-align:left;width:118px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Quoted prices in active markets for identical assets and liabilities.</span></span></td></tr><tr><td style="width:5%"> </td><td style="width:118px"> </td><td style="width:635px"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;width:118px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><i>Level 2 valuations</i>:</span></span></td><td style="text-align:left;width:635px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model- derived valuations whose inputs or significant value drivers are observable.</span></span></td></tr><tr><td style="width:5%"> </td><td style="width:118px"> </td><td style="width:635px"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;width:118px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><i>Level 3 valuations</i>:</span></span></td><td style="text-align:left;width:635px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Significant inputs to valuation model are unobservable.</span></span></td></tr></tbody></table><p style="margin-left:40pt;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The Company follows the provisions of ASC 820 with respect to the financial instruments. As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The derivative financial instruments which are required to be measured at fair value on a recurring basis under of ASC 815 as of August 31, 2019 and November 30, 2018 are all measured at estimated fair value using Level 2 and 3 inputs.</span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The embedded derivative was fair valued using the income valuation technique using the Lattice valuation model. The following table sets forth the inputs for each significant assumption:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:58px"> </td><td style="text-align:left;white-space:nowrap;width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible secured debentures, December 7, 2016</span></span></td><td style="text-align:right;width:1%;white-space:nowrap"> </td><td style="text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2019</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">November 30,</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:58px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:764px"> </td><td style="text-align:right;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2018</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr><td style="width:58px"> </td><td style="width:764px"> </td><td style="text-align:right;width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td><td style="width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td></tr><tr valign="top"><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:58px"> </td><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Derivative financial instruments</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> -</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 426,016</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:58px"> </td><td style="text-align:left;width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Conversion price</span></span></td><td style="text-align:right;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> -</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.135</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:58px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Volatility</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">91%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:58px"> </td><td style="text-align:left;width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Remaining term (years)</span></span></td><td style="text-align:right;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0.52</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:58px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.52%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;width:57px"> </td><td style="text-align:left;width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible notes, October 22, 2018</span></span></td><td style="text-align:right;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2019</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">November 30,</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:57px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:765px"> </td><td style="text-align:right;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2018</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr><td style="width:57px"> </td><td style="width:765px"> </td><td style="text-align:right;width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td><td style="width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td></tr><tr valign="top"><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:57px"> </td><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Derivative financial instruments</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 214,200</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 531,285</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:57px"> </td><td style="text-align:left;width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Conversion price</span></span></td><td style="text-align:right;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:57px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Volatility</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">65%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">79%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:57px"> </td><td style="text-align:left;width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Remaining term (years)</span></span></td><td style="text-align:right;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0.62</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1.38</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:57px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1.76%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.70%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> 978361 36000 26640 1301359 131547 1191821 1244419 0.12 0.10 <p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The following table reflects the allocation of the purchase on December 7, 2016:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Secured convertible debentures</span></span></td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Face Value</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(CAD $1,399,000)</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 1,041,835</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Proceeds</span></span></td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1,041,835</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Embedded derivative</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(285,612</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Carrying value</span></span></td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 756,223</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> <p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The following table reflects the allocation of the purchase on October 22, 2018:</span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Proceeds</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 1,275,000</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr><td style="text-align:left;width:48px"> </td><td style="text-align:left;width:948px"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible notes</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> (131,547</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr><td style="width:5%"> </td><td style="text-align:left;width:948px"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Derivative liability-convertible promissory notes</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> (619,364</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr><td style="width:5%"> </td><td style="text-align:left;width:948px"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:48px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:948px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Additional paid in capital (equity warrants)</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> (524,089</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr></tbody></table> 1041835 285612 756223 98924 73201 112064 88102 322897 67007 99090 93115 3202633 167077 4000 4000 619364 524089 243162 33257 71862 25014 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:768px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Indexed</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"> </td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:54px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:768px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Financings giving rise to derivative financial instruments</span></span></td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Shares</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Fair Value</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:768px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Notes October 22, 2018</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,500,000</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">214,200</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:54px"> </td><td style="text-align:left;width:768px"> </td><td style="text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,500,000</span></span></td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">214,200</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">The components of the embedded derivative as of November 30, 2018 are:</span></span></p><table border="0" cellpadding="5" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:761px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Indexed</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"> </td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:54px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:761px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Financings giving rise to derivative financial instruments</span></span></td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Shares</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Fair Value</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:761px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Secured Debentures December 7, 2016</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,044,853</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">426,016</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:761px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Notes October 22, 2018</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">8,500,000</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">531,285</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:54px"> </td><td style="text-align:left;width:761px"> </td><td style="text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">16,544,853</span></span></td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">957,301</span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table> 8500000 214200 8500000 214200 8044853 426016 8500000 531285 16544853 957301 <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:766px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Nine Months</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Nine Months</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:766px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Ended</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Ended</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="text-align:left;white-space:nowrap;width:54px"> </td><td style="text-align:left;white-space:nowrap;width:766px"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2019</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:left;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2018</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:54px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:766px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Financings giving rise to derivative financial instruments and the income effects:</span></span></td><td style="text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%"> </td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%"> </td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:766px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Secured Debentures December 7, 2016</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 425,020</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(245,852)</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:54px"> </td><td style="text-align:left;width:766px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible Notes October 22, 2018</span></span></td><td style="text-align:right;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 317,086</span></span></td><td style="text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:54px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:766px"> </td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 742,106</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">(245,852)</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;white-space:nowrap;width:58px"> </td><td style="text-align:left;white-space:nowrap;width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible secured debentures, December 7, 2016</span></span></td><td style="text-align:right;width:1%;white-space:nowrap"> </td><td style="text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2019</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td><td style="text-align:left;width:1%;white-space:nowrap"> </td><td style="text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">November 30,</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:58px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;white-space:nowrap;width:764px"> </td><td style="text-align:right;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:right;width:12%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2018</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr><td style="width:58px"> </td><td style="width:764px"> </td><td style="text-align:right;width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td><td style="width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td></tr><tr valign="top"><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:58px"> </td><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Derivative financial instruments</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> -</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 426,016</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:58px"> </td><td style="text-align:left;width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Conversion price</span></span></td><td style="text-align:right;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> -</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.135</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:58px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Volatility</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">91%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:58px"> </td><td style="text-align:left;width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Remaining term (years)</span></span></td><td style="text-align:right;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0.52</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:58px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:764px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">—</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.52%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="text-align:left;width:57px"> </td><td style="text-align:left;width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Convertible notes, October 22, 2018</span></span></td><td style="text-align:right;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">August 31, 2019</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">November 30,</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:57px"> </td><td style="border-bottom:2px solid rgb(0, 0, 0);text-align:left;width:765px"> </td><td style="text-align:right;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:12%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 2px solid;text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2018</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr><td style="width:57px"> </td><td style="width:765px"> </td><td style="text-align:right;width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td><td style="width:1%"> </td><td style="width:12%"> </td><td style="width:2%"> </td></tr><tr valign="top"><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:57px"> </td><td style="border-bottom:1px solid rgb(0, 0, 0);text-align:left;background-color:rgb(230, 239, 255);width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Derivative financial instruments</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 214,200</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 531,285</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:57px"> </td><td style="text-align:left;width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Conversion price</span></span></td><td style="text-align:right;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 0.15</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:57px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Volatility</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">65%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">79%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="text-align:left;width:57px"> </td><td style="text-align:left;width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Remaining term (years)</span></span></td><td style="text-align:right;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">0.62</span></span></td><td style="text-align:left;width:2%"> </td><td style="text-align:left;width:1%"> </td><td style="text-align:right;width:12%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1.38</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="text-align:left;background-color:rgb(230, 239, 255);width:57px"> </td><td style="text-align:left;background-color:rgb(230, 239, 255);width:765px"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Risk free rate</span></span></td><td style="text-align:right;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">1.76%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"> </td><td style="text-align:right;width:12%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2.70%</span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> 0.91 0.0252 0.65 0.79 0.0176 0.0270 P0Y6M7D P0Y7M13D P1Y4M17D <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">10.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">INVENTORY</span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Inventory as of <span lang="EN-CA"><span style="line-height:107%">August 31, 2019 consists of raw materials for Byrna for</span></span> $401,742 (November 30, 2018:$Nil) finished goods of Byrna for $160,833 (November 30, 2018: $Nil), finished goods of Blunt Impact Projectiles 40mm for $67,121 (November 30, 2018: $90,329) and inventory procured from other suppliers for $37,216 (November 30, 2018: $38,792). The Company values its inventory on a first-in, first-out basis. Inventory is valued at the lower of cost or net realizable value.</span></span></p> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">11.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SEGMENT DISCLOSURES</span></span></p></td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">The Company is organized on three geographic areas in the U.S.A., South Africa (“SA”) and Canada respectively. The U.S.A., South Africa and Canada operations are the Company’s operating segments and reportable segments, and each of those segments are led by the Company’s CEO. Performance is assessed and resources are allocated by the CEO, whom we have determined to be the Company’s Chief Operating Decision Maker (CODM). Management evaluates the segments based primarily upon revenue and assets. The tables below present segment sales and assets for the nine months ended August31, 2019 and August 31, 2018:</span></span></span></span></p><p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u><span lang="EN-CA"><span style="line-height:107%">Nine months ended August 31, 2019</span></span></u></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Sales</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">278,676</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">266,417</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">36,202</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">581,295</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table><p style="margin-left:5%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><u><span lang="EN-CA">Nine months ended August 31, 2018</span></u></span></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Sales</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">188,304</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">115,472</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">303,776</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2019</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2018</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Sales</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">581,295</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">303,776</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Elimination of intersegment revenue</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">(157,318</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">(83,661</span></span></span></span></td><td style="text-align:left;width:2%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr><td style="width:5%"> </td><td style="background-color:#e6efff"> </td><td style="width:1%;background-color:#e6efff"> </td><td style="width:10%;background-color:#e6efff"> </td><td style="width:2%;background-color:#e6efff"> </td><td style="width:1%;background-color:#e6efff"> </td><td style="width:10%;background-color:#e6efff"> </td><td style="width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Consolidated sales</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">423,977</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">220,115</span></span></span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span style="line-height:normal"><u><span lang="EN-CA">As at August 31, 2019</span></u></span></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Assets</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">3,374,139</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">687,882</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">50,415</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">4,112,436</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><u><span lang="EN-CA">As at November 30, 2018</span></u></span></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Assets</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 2,629,315</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 27,770</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">2,657,085</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <p style="MARGIN-LEFT:5%;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><u><span lang="EN-CA"><span style="line-height:107%">Nine months ended August 31, 2019</span></span></u></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Sales</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">278,676</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">266,417</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">36,202</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">581,295</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table><p style="margin-left:5%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><u><span lang="EN-CA">Nine months ended August 31, 2018</span></u></span></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%;white-space:nowrap"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%;white-space:nowrap"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%;white-space:nowrap"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Sales</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">188,304</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">115,472</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">303,776</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2019</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">2018</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Sales</span></span></td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">581,295</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td><td style="text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">303,776</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Elimination of intersegment revenue</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">(157,318</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">(83,661</span></span></span></span></td><td style="text-align:left;width:2%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">)</span></span></td></tr><tr><td style="width:5%"> </td><td style="background-color:#e6efff"> </td><td style="width:1%;background-color:#e6efff"> </td><td style="width:10%;background-color:#e6efff"> </td><td style="width:2%;background-color:#e6efff"> </td><td style="width:1%;background-color:#e6efff"> </td><td style="width:10%;background-color:#e6efff"> </td><td style="width:2%;background-color:#e6efff"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Consolidated sales</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">423,977</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">220,115</span></span></span></span></td><td style="text-align:left;width:2%"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span style="line-height:normal"><u><span lang="EN-CA">As at August 31, 2019</span></u></span></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Assets</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">3,374,139</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">687,882</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">50,415</span></span></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">4,112,436</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table><p style="MARGIN-LEFT:5%;text-align:justify"><br/><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><u><span lang="EN-CA">As at November 30, 2018</span></u></span></span></span></p><table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr valign="top"><td style="width:5%"> </td><td style="text-align:left"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI USA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI SA</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">SDI Canada</span></span></td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:2%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:left;width:1%"> </td><td style="BORDER-BOTTOM:#000000 1px solid;text-align:right;width:10%"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Total</span></span></td><td style="text-align:left;width:2%"> </td></tr><tr valign="top"><td style="width:5%"> </td><td style="text-align:left;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Assets</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 2,629,315</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"></span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> 27,770</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:2%;background-color:#e6efff"> </td><td style="BORDER-BOTTOM:#000000 3px double;text-align:left;width:1%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">$</span></span></td><td style="BORDER-BOTTOM:#000000 3px double;text-align:right;width:10%;background-color:#e6efff"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"> <span lang="EN-CA"><span style="line-height:107%">2,657,085</span></span></span></span></td><td style="text-align:left;width:2%;background-color:#e6efff"> </td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">12.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">PATENT RIGHTS</span></span></p></td></tr></tbody></table><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">Seven patent applications, six non-provisional, have been filed by the Company with the U.S. Patent Office. The Patents have been granted on the six non-provisional patents. The Company also owns the trademark for ‘BIP’and has filed to register the “Byrna” trademark and the Byrna logo.</span></span></span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">(a) Less-lethal Projectile: This issued patent relates to the Company’s distinctive collapsible ammunition head technology that absorbs kinetic energy of the projectile upon impact. The Corporation’s collapsible head is used in both the BIP and the Wireless Electric Projectile (“WEP”).</span></span><br/><br/><span style="line-height:normal"><span lang="EN-CA">(b) Electronic Circuitry for Incapacitating a Living Target: This issued patent relates to the electronic circuitry incapacitation system which forms part of the WEP. The patent describes an electronic circuit which provides an electrical incapacitation current to a living target.</span></span><br/><br/><span style="line-height:normal"><span lang="EN-CA">(c) Less-lethal Wireless Stun Projectile System for Immobilizing a Target by Neuro-Muscular Disruption: This issued patent describes the process by which the WEP operates with its attachment system to halt a target through a neuro-muscular-disruption system. </span></span><br/><br/><span style="line-height:normal"><span lang="EN-CA">(d) Autonomous Operation of a Less-lethal Projectile: This patent describes a motion sensing system within the WEP. The sensor will monitor movement of the target and enable the electrical output until the target is subdued. The electrical pulse is programmed for an exact timeframe to specifications of the user. </span></span><br/><br/><span lang="EN-CA"><span style="line-height:107%">(e) Projectile: This invention relates to a non-lethal projectile to be fired using a paintball gun, and more particularly, but not exclusively, to an aerodynamic non-lethal projectile which is used for marking, inhibiting or administering medicinal or other chemical substances to live targets.</span></span></span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">(f) Payload Carrying Arrangement for a Non-Lethal Projectile: This patent relates to the process of carrying liquid and powder payloads in the head of the BIP munitions that upon impact release from the head and are dispersed upon the target.</span></span></span></span></p><p style="margin-left:40pt;text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:normal"><span lang="EN-CA">On April 13, 2018, the Company entered into a purchase and sale agreement with André Buys, pursuant to which the Company agreed to purchase from Mr. Buys a portfolio of registered patent rights, provisional patent rights, and other intellectual property relating to air and/or gas fired long guns or pistols, including pump action launchers and munitions used with such pistols and long guns, including self-stabilizing shaped or “finned” rounds (the “Portfolio”). As consideration for the portfolio, the Company paid Buys $100,000, and incurred $10,000 in legal costs to transfer these patent rights. This consideration of $110,000 has been capitalized. The Company also agreed to pay Buys either $500,000 in cash or $750,000 worth of Company stock within two years (the “Second Payment”) at Buys’ discretion. In the event that the Company fails to make the Second Payment, the Portfolio would revert to Buys, but the Company would retain perpetual, irrevocable, exclusive and non-exclusive licenses to use technology with respect to the Portfolio and any technology developed within two years of April 13, 2018. As the substance of the purchase and sale agreement has been determined to be an option agreement, the Company has not recorded any amount related to the Second Payment. These patent rights have a maximum life of 20 years, expiring on various dates beginning in November 2033 to 2038, and are amortized straight-line commencing June 2018 over a period of 15 years being the estimated useful life, as determined by management. The Company amortized $5,499 during the nine months ended August 31, 2019 (August 31, 2018: $1,833). As the agreement included an option for full acquisition of the rights, conditional upon certain future events taking place, the Company has recorded the minimum rights to a licence arrangement as patent rights. As at August 31, 2019, the amount recorded as patent rights refer to the perpetual, irrevocable, exclusive and non-exclusive license to use technology with respect to the portfolio.</span></span></span></span></p> 10000 P2Y P20Y P15Y <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">13.</span></span></td><td><p style="text-align:justify"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">PREPAID EXPENSES AND OTHER RECEIVABLES</span></span></p></td></tr><tr><td style="width:5%" valign="top"> </td><td> </td></tr><tr><td style="width:5%" valign="top"> </td><td><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">Prepaid expenses and other receivables as of August 31, 2019, include the prepayment of $583,333 (November 30, 2018: $750,000) by the issuance of common shares to FinTekk AP LLC, being the issuance relating to the marketing campaign for the launch of the Company’s new ByrnaTM HD product to occur in the last half of fiscal 2019.</span></span></td></tr></tbody></table> 583333 750000 <table border="0" cellpadding="5" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">14.</span></span></td><td><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">DEFERRED COSTS</span></span></span></span></td></tr><tr><td style="width:5%" valign="top"> </td><td><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span><span><span lang="EN-CA"><span style="line-height:107%">The Company has capitalized $55,862 of legal costs incurred for a future financing (see note 15).</span></span></span></span></span></span></td></tr></tbody></table> <table border="0" cellpadding="0" cellspacing="0" style="BORDER-COLOR:black;FONT-SIZE:10pt;BORDER-COLLAPSE:collapse" width="100%"><tbody><tr><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">15.</span></span></td><td colspan="2"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%">SUBSEQUENT EVENTS</span></span></span></span></td></tr><tr><td style="width:5%"> </td><td style="width:5%"> </td><td> </td></tr><tr><td style="width:5%"> </td><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">a)</span></span></td><td><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%"><span style="color:black">The Company entered into a Securities Purchase Agreement (the "Agreement") with several investors (the "Purchasers") and Northeast Industrial Partners, LLC as collateral agent for the Purchasers to sell up to $3,000,000 of units, with each $1,000 of units consisting of (i) a $1,000 convertible promissory note (collectively the "Notes"), convertible into the Company's common stock at a conversion price of $0.15 per share, and (ii) four thousand warrants (the "Warrants") each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. On September 16, 2019, the Company closed on the sale of an additional $818,000 of the Units. </span></span></span></span></span></td></tr><tr><td style="width:5%"> </td><td style="width:5%"> </td><td> </td></tr><tr><td style="width:5%"> </td><td style="width:5%"> </td><td><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span style="line-height:107%"><span lang="EN-CA"><span style="line-height:107%"><span style="color:black">The outstanding principal amount of the Notes accrues interest at a rate of 10% per annum, provided that, in the event of default on the Notes, the interest rate will be 15% during the period of default. The maturity date of the Notes is June 30, 2021, which date is subject to optional extension by each Purchaser if a change of control of the Company is announced prior to such date. Interest on the Notes is payable in arrears on the last day of each January and July while the Notes are outstanding. The Company has the option to redeem the Notes by paying the Purchasers the optional redemption price as described in the Notes. Each Note is convertible into common stock, at the option of the Purchaser. Upon such optional conversion, the outstanding principal amount of the Note converts into shares of common stock at a conversion price of $0.15 per share, subject to adjustment upon issuance of other securities as set forth in the Notes. The Notes contain restrictive covenants which, among other things, restrict the Company’s ability to incur additional indebtedness, grant security interests on its assets, or make distributions on or repurchase its common stock.The Notes are secured, pursuant to the Agreement, with a security interest in substantially all of the Company’s assets.</span></span></span></span></span></span></td></tr><tr><td style="width:5%"> </td><td style="width:5%"> </td><td> </td></tr><tr><td style="width:5%"> </td><td style="width:5%" valign="top"><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif">b)</span></span></td><td><span style="font-size:10pt"><span style="font-family:Times New Roman,Times,serif"><span lang="EN-CA"><span style="line-height:107%"><span style="color:black">On September 23, 2019, 156,000 warrants were exercised for proceeds of $20,280.</span></span></span></span></span></td></tr></tbody></table> 3000000 1000 1000 0.15 20280 818000 156000 EX-101.SCH 6 sdev-20190831.xsd XBRL SCHEMA FILE 0001 - 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9 Months Ended
Dec. 07, 2016
Aug. 31, 2019
Proceeds   $ 4,250,265
Secured Debentures December 7, 2016 [Member]    
Secured convertible debentures $ 1,041,835  
Proceeds 1,041,835  
Embedded derivative (285,612)  
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Condensed Interim Consolidated Balance Sheets (Parenthetical) - $ / shares
Aug. 31, 2019
Nov. 30, 2018
Preferred Stock, Par Value Per Share (in dollars per share) $ 0.001 $ 0.001
Preferred Stock, Shares Authorized 5,000,000 5,000,000
Preferred Stock, Shares Issued
Preferred Stock, Shares Outstanding
Common Stock, Par Value Per Share (in dollars per share) $ 0.001 $ 0.001
Common Stock, Shares Authorized 300,000,000 300,000,000
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Common Stock, Shares, Outstanding 104,021,837 101,976,900
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9 Months Ended 12 Months Ended
Aug. 31, 2019
USD ($)
$ / shares
Nov. 30, 2018
USD ($)
$ / shares
Dec. 07, 2016
$ / shares
Dec. 07, 2016
$ / shares
Derivative financial instruments $ 214,200 $ 957,301    
Secured Debentures December 7, 2016 [Member]        
Derivative financial instruments   $ 426,016    
Conversion price | (per share)   $ 0.135 $ 0.31 $ 0.24
Remaining term (years)   6 months 7 days    
Secured Convertible Debentures October 22, 2018 [Member]        
Derivative financial instruments $ 214,200 $ 531,285    
Conversion price | $ / shares $ 0.15 $ 0.15    
Remaining term (years) 7 months 13 days 1 year 4 months 17 days    
Volatility [Member] | Secured Debentures December 7, 2016 [Member]        
Risk free rate   0.91    
Volatility [Member] | Secured Convertible Debentures October 22, 2018 [Member]        
Risk free rate 0.65 0.79    
Risk free rate [Member] | Secured Debentures December 7, 2016 [Member]        
Risk free rate   0.0252    
Risk free rate [Member] | Secured Convertible Debentures October 22, 2018 [Member]        
Risk free rate 0.0176 0.0270    
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BASIS OF PRESENTATION
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
BASIS OF PRESENTATION [Text Block]
1.BASIS OF PRESENTATION

The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (GAAP); however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods.

The unaudited condensed interim consolidated financial statements should be read in conjunction with the financial statements and notes thereto together with management’s discussion and analysis of financial condition and results of operations contained in Security Devices International Inc.’s (“SDI” or the “Company”) annual report on Form 10-K for the year ended November 30, 2018. In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company at August 31, 2019 and November 30, 2018, the results of its operations for the nine and three month periods ended August 31, 2019 and August 31, 2018, and its cash flows for the nine month periods ended August 31, 2019 and August 31, 2018. The results of operations for the nine and three-month periods ended August 31, 2019 are not necessarily indicative of results to be expected for the full year.

The Company was incorporated under the laws of the state of Delaware on March 1, 2005. On February 3, 2014, the Company incorporated a wholly owned subsidiary in Canada, Security Devices International Canada Corp. On March 1, 2018, the Company acquired all the shares of a company in South Africa, Byrna South Africa (Pty) Ltd. The condensed unaudited interim consolidated financial statements for the period ended August 31, 2019 include the accounts of Security Devices International, Inc., and its subsidiaries Security Devices International Canada Corp. and Byrna South Africa (Pty) Ltd. All material inter-company accounts and transactions have been eliminated.

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NATURE OF OPERATIONS AND GOING CONCERN (Narrative) (Details) - USD ($)
Aug. 31, 2019
Nov. 30, 2018
Deficiency $ (35,941,684) $ (33,252,338)
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PROPERTY AND EQUIPMENT (Tables)
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
Schedule of Depreciation Rate, Plant and Equipment [Table Text Block]
 Computer Equipment and Software30%declining balance method
 Furniture and Fixtures30%declining balance method
 Leasehold Improvements straight line over period of lease
 Moulds20%straight line over 5 years
Schedule of Property, Plant and Equipment [Table Text Block]
   August 31, 2019   November 30, 2018 
      Accumulated     Accumulated 
   

Cost

  Amortization  

Cost

  Amortization 
   

$

  

$

  

$

  

$

 
 Computer equipment and software 81,893  51,469  77,382  46,837 
 Furniture and fixtures 22,722  20,519  20,998  18,763 
 Leasehold improvements 26,471  26,471  26,471  26,471 
 Moulds 470,922  229,440  291,599  210,961 
   602,008  327,899  416,450  303,032 
              
 Net carrying amount   $274,109    $113,418 
              
 Depreciation expense for nine- month period$ 24,869  (August 31, 2019) $ 12,138  (August31, 2018) 
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EXCLUSIVE SUPPLY AND PURCHASE AGREEMENTS
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
EXCLUSIVE SUPPLY AND PURCHASE AGREEMENTS [Text Block]
8.

EXCLUSIVE SUPPLY AND PURCHASE AGREEMENTS

The Company entered a Development, Supply and Manufacturing Agreement with the BIP manufacturer on August 1, 2017. This agreement provides the Company to order and purchase only from the BIP manufacturer certain BIP assemblies and components for use by the Company to produce less-lethal and training projectiles as described in the agreement in North America. The agreement is for a term of four years with an automatic extension for additional one - year terms if neither party has given written notice of termination at least sixty (60) days prior to the end of the then- current term.

The Company entered a License and Supply Agreement with Safariland, LLC on May 1, 2017. This agreement provides the Company to license and sell only to Safariland, LLC for certain BIP standard payloads for integration with and production of certain less-lethal impact munitions in North America. This agreement is for a term of four years with an automatic extension for an additional one - year term if neither party has given written notice of termination at least ninety (90) days prior to the end of the then-current term

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CAPITAL STOCK
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
CAPITAL STOCK [Text Block]
4.

CAPITAL STOCK

 
 a)

Authorized

300,000,000* Common shares, $0.001 par value

And

5,000,000 Preferred shares, $0.001 par value

* On October 6, 2017, the Company filed with the Secretary of the State of Delaware a certificate of amendment (the “Amendment”) to the Company’s certificate of incorporation. The Amendment increased the number of authorized shares of the Company’s common stock, par value $0.001, from 100,000,000 to 200,000,000 common shares.

* On March 21, 2019, the Company filed with the Secretary of the State of Delaware a certificate of amendment (the “Amendment”) to the Company’s certificate of incorporation. The Amendment increased the number of authorized shares of the Company’s common stock, par value $0.001, from 200,000,000 to 300,000,000 common shares.

The Company’s Articles of Incorporation authorize its Board of Directors to issue up to 5,000,000 shares of preferred stock having par value of $0.001. The provisions in the Articles of Incorporation relating to the preferred stock allow the directors to issue preferred stock with multiple votes per share and dividend rights, which would have priority over any dividends paid with respect to the holders of SDI’s common stock.

 b)

Issued

104,021,837 common shares (November 30, 2018: 101,976,900 common shares)

 
 c)

Changes to Issued Share Capital

Nine months ended August 31, 2019

In January 2019, the Company made a share issuance to Paul Jensen (“Jensen”) pursuant to his employment agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of $20,000, due January 15, 2019.

In January 2019, the Company made a share issuance to Bryan Ganz (“Ganz”) pursuant to a consulting agreement. The Company issued 500,000 common shares at a price of $0.1482 for a total consideration of $74,100, due December 15, 2018.

In January 2019, the Company made a share issuance to a corporation owned and controlled by Dean Thrasher (“Thrasher”), executive chairman of the Company, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.1482 for a total consideration of $26,676 due January 15, 2019.

In January 2019, the Company made a share issuance to Lisa Wager (“Wager”), the Chief Legal Officer (“CLO”), pursuant to a consulting agreement. The Company issued 166,666 common shares at a price of $0.1482 for a total consideration of $24,700, due January 15, 2019.

In January 2019, the Company made a share issuance to a consultant in South Africa, pursuant to a consulting agreement. The Company issued 134,938 common shares at a price of $0.1482 per share to satisfy the payment of $19,998 due January 15, 2019. These shares were cancelled in June 2019, and the Company subsequently paid the consultant $19,998 in cash.

On April 1, 2019, the Company made a share issuance to Ganz, pursuant to a consulting agreement. The Company issued 333,333 common shares at a price of $0.14 per share to satisfy payment for $46,665, due April 15, 2019.

On April 1, 2019, the Company made a share issuance to Wager for services, pursuant to board resolution. The Company issued 250,000 common shares at a price of $0.14 per share to satisfy payment for $35,000, due April 15, 2019.

On April 1, 2019, the Company made a share issuance to a corporation owned and controlled by Thrasher, pursuant to a consulting agreement. The Company issued 180,000 common shares at a price of $0.14 for a total consideration of $25,200, due April 15, 2019.

On May 22, 2019, the Company made a share issuance to a consultant pursuant to a consulting agreement for services. The Company issued 300,000 common shares at a price of $0.14 per share for a total consideration of $42,000.

Year ended November 30, 2018

In March 2018, the Company made a share issuance to Northeast Industrial Partners (“NEIP”) pursuant to a consulting agreement. SDI issued 507,550 common shares at a price of $0.1231 per share to satisfy the payment of $62,500 due in December 2017.

In March 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 339,370 common shares at a price of $0.1473 per share to satisfy the payment of $50,000, due January 15, 2018.

In May 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 334,154 common shares at a price of $0.1496 per share to satisfy the payment of $50,000, due April 15, 2018.

In July 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 298,880 common shares at a price of $0.1673 per share to satisfy the payment of $50,000, due July 15, 2018.

In November 2018, the Company made a share issuance to Jensen pursuant to his employment agreement. SDI issued 136,146 common shares at a price of $0.1469 per share to satisfy the payment of $20,000, due October 15, 2018.

In November 2018, the Company made a share issuance to Ganz pursuant to a consulting agreement. SDI issued 500,000 common shares at a price of $0.1451 per share for a total consideration of $72,573 to satisfy the payment for services for the fiscal third quarter.

In November 2018, the Company made a share issuance to a corporation owned by Thrasher under the consulting agreement. SDI issued 180,000 common shares at a price of $0.1533 per share for a total consideration of $27,600 due September 15, 2018.

In November 2018, the Company made a share issuance of 6,666,666 common shares to FinTekk AP, LLC (“FinTekk”) at a price of $0.15 per share. The shares are issued pursuant to a debt settlement agreement, to retire certain debt owing by the Company to FinTekk, in connection with a sponsorship agreement (the “Sponsorship Agreement”). The Sponsorship Agreement details a marketing campaign for the launch of the Company’s new ByrnaTM HD product over the 2018 and 2019 fiscal years. The Company recognized $750,000 as a prepaid expense as at November 30, 2018 (See note 13).

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PATENT RIGHTS
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
PATENT RIGHTS [Text Block]
12.

PATENT RIGHTS

Seven patent applications, six non-provisional, have been filed by the Company with the U.S. Patent Office. The Patents have been granted on the six non-provisional patents. The Company also owns the trademark for ‘BIP’and has filed to register the “Byrna” trademark and the Byrna logo.

(a) Less-lethal Projectile: This issued patent relates to the Company’s distinctive collapsible ammunition head technology that absorbs kinetic energy of the projectile upon impact. The Corporation’s collapsible head is used in both the BIP and the Wireless Electric Projectile (“WEP”).

(b) Electronic Circuitry for Incapacitating a Living Target: This issued patent relates to the electronic circuitry incapacitation system which forms part of the WEP. The patent describes an electronic circuit which provides an electrical incapacitation current to a living target.

(c) Less-lethal Wireless Stun Projectile System for Immobilizing a Target by Neuro-Muscular Disruption: This issued patent describes the process by which the WEP operates with its attachment system to halt a target through a neuro-muscular-disruption system.

(d) Autonomous Operation of a Less-lethal Projectile: This patent describes a motion sensing system within the WEP. The sensor will monitor movement of the target and enable the electrical output until the target is subdued. The electrical pulse is programmed for an exact timeframe to specifications of the user.

(e) Projectile: This invention relates to a non-lethal projectile to be fired using a paintball gun, and more particularly, but not exclusively, to an aerodynamic non-lethal projectile which is used for marking, inhibiting or administering medicinal or other chemical substances to live targets.

(f) Payload Carrying Arrangement for a Non-Lethal Projectile: This patent relates to the process of carrying liquid and powder payloads in the head of the BIP munitions that upon impact release from the head and are dispersed upon the target.

On April 13, 2018, the Company entered into a purchase and sale agreement with André Buys, pursuant to which the Company agreed to purchase from Mr. Buys a portfolio of registered patent rights, provisional patent rights, and other intellectual property relating to air and/or gas fired long guns or pistols, including pump action launchers and munitions used with such pistols and long guns, including self-stabilizing shaped or “finned” rounds (the “Portfolio”). As consideration for the portfolio, the Company paid Buys $100,000, and incurred $10,000 in legal costs to transfer these patent rights. This consideration of $110,000 has been capitalized. The Company also agreed to pay Buys either $500,000 in cash or $750,000 worth of Company stock within two years (the “Second Payment”) at Buys’ discretion. In the event that the Company fails to make the Second Payment, the Portfolio would revert to Buys, but the Company would retain perpetual, irrevocable, exclusive and non-exclusive licenses to use technology with respect to the Portfolio and any technology developed within two years of April 13, 2018. As the substance of the purchase and sale agreement has been determined to be an option agreement, the Company has not recorded any amount related to the Second Payment. These patent rights have a maximum life of 20 years, expiring on various dates beginning in November 2033 to 2038, and are amortized straight-line commencing June 2018 over a period of 15 years being the estimated useful life, as determined by management. The Company amortized $5,499 during the nine months ended August 31, 2019 (August 31, 2018: $1,833). As the agreement included an option for full acquisition of the rights, conditional upon certain future events taking place, the Company has recorded the minimum rights to a licence arrangement as patent rights. As at August 31, 2019, the amount recorded as patent rights refer to the perpetual, irrevocable, exclusive and non-exclusive license to use technology with respect to the portfolio.

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CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS (Narrative) (Details)
1 Months Ended 3 Months Ended 9 Months Ended
Dec. 03, 2018
shares
Dec. 07, 2016
CAD ($)
$ / shares
Dec. 07, 2016
USD ($)
Jul. 22, 2019
USD ($)
$ / shares
shares
Apr. 22, 2019
USD ($)
$ / shares
shares
Oct. 22, 2018
USD ($)
$ / shares
shares
Aug. 31, 2019
USD ($)
Aug. 31, 2018
USD ($)
Aug. 31, 2019
CAD ($)
Aug. 31, 2019
USD ($)
Aug. 31, 2018
CAD ($)
Aug. 31, 2018
USD ($)
May 20, 2019
shares
Nov. 30, 2018
CAD ($)
Nov. 30, 2018
USD ($)
$ / shares
Dec. 07, 2016
USD ($)
$ / shares
Proceeds from Convertible Debt                   $ 4,250,265            
Repayments of Convertible Debt                   1,035,930            
Convertible notes, net of amortization of debt discounts (premiums)             $ 1,277,676     1,277,676         $ 167,077  
Foreign exchange translation adjustment for the year             (52,089) $ (4,922)   (80,208)   $ (7,175)        
Number of warrant issued | shares 750,000                              
Securities purchase agreement [Member] | Accredited investors [Member] | Warrant [Member]                                
Interest Expense, Debt                   93,115          
Convertible Debt         $ 1,191,821                      
Debt Instrument, Convertible, Conversion Price | $ / shares         $ 0.15 $ 0.15                    
Convertible notes             3,202,633 $ 167,077   3,202,633   167,077        
Convertible notes, net of amortization of debt discounts (premiums)             489,974     489,974         167,077  
Amortization of debt discounts (premiums)                   322,897          
Warrants and Rights Outstanding         $ 2,080,265 $ 1,275,000                    
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares         $ 1,000 $ 1,000                    
Warrants outstanding | shares           4,000                    
Number of securities called by each warrant | shares         1 1             1      
Number of warrant issued | shares         8,321,058 5,100,000                    
Class of warrant or right grant date fair value         $ 888,444 $ 524,089                    
Interest from accretion of the discount                   243,162          
Interest Expense                   71,862          
Securities Purchase Agreement Two [Member] | Accredited investors [Member] | Warrant [Member]                                
Convertible Debt       $ 1,244,419                        
Debt Instrument, Convertible, Conversion Price | $ / shares       $ 0.15                        
Warrants and Rights Outstanding       $ 2,282,500                        
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares       $ 1,000                        
Number of securities called by each warrant | shares       1                        
Number of warrant issued | shares       9,130,000                        
Class of warrant or right grant date fair value       $ 1,038,081                        
Interest from accretion of the discount             33,257                
Interest Expense             25,014                
Series B Convertible Secured Debentures December 7, 2016 [Member]                                
Proceeds from Convertible Debt     $ 1,041,835                          
Repayments of Convertible Debt                 $ 1,399,000 1,035,930            
Interest Expense, Debt                   67,007   99,090        
Convertible Debt                       $ 1,301,359 $ 978,361  
Debt Instrument, Convertible, Conversion Price | (per share)   $ 0.31                         $ 0.135 $ 0.24
Amortization of debt discounts (premiums)                 $ 98,924 $ 73,201 $ 112,064 $ 88,102        
Series B Convertible Secured Debentures December 7, 2016 [Member] | Trust Indenture Agreement [Member]                                
Proceeds from Convertible Debt   $ 1,363,000 $ 1,015,026                          
Series B Convertible Secured Debentures December 7, 2016 [Member] | Minimum [Member]                                
Debt Instrument, Convertible, Conversion Price | $ / shares                               $ 0.135
Series B Secured Convertible Debentures Issued Pursuant To Indenture In Payment Of Accrued Interest [Member]                                
Debt Instrument, Interest Rate, Stated Percentage   12.00%                           12.00%
Convertible Debt   $ 36,000                           $ 26,640
XML 22 R37.htm IDEA: XBRL DOCUMENT v3.19.3
DEFERRED COSTS (Narrative) (Details)
Aug. 31, 2019
USD ($)
Deferred Costs [Abstract]  
Deferred cost $ 55,862
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PREPAID EXPENSES AND OTHER RECEIVABLES
9 Months Ended
Aug. 31, 2019
Prepaid Expense and Other Assets, Current [Abstract]  
PREPAID EXPENSES AND OTHER RECEIVABLES [Text Block]
13.

PREPAID EXPENSES AND OTHER RECEIVABLES

  
 Prepaid expenses and other receivables as of August 31, 2019, include the prepayment of $583,333 (November 30, 2018: $750,000) by the issuance of common shares to FinTekk AP LLC, being the issuance relating to the marketing campaign for the launch of the Company’s new ByrnaTM HD product to occur in the last half of fiscal 2019.

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CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS [Text Block]
9.CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS
 
 a)

Secured Convertible Debentures $Nil(November 30, 2018: $978,361)

The CAD $1,363,000 ($1,015,026) of Series B Secured Convertible Debentures (Subordinate Secured Debentures) were issued pursuant to the Trust Indenture agreement dated December 7, 2016 (the “Indenture”) in exchange for the Unsecured Debentures in equal principal amount and an additional CAD $36,000 ($26,640) of Series B Secured Convertible Debentures were issued pursuant to the Indenture in payment of accrued interest. These debentures mature on June 6, 2019 and bear interest at 12% per annum, payable semi-annually. The debentures are secured by all the assets of the Company. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of the Company’s common stock at a conversion price of $0.24 (CAD $0.31) per share subject to anti-dilution protection with a minimum conversion price of $0.135 and for capital reorganization events. The debentures also embody certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company has concluded that the embedded conversion option is not indexed to its stock because it did not pass all eight conditions of equity classification provided in ASC 815. The embedded conversion option is subject to classification in the financial statements in liabilities at fair value both at inception and subsequently.

The Company has evaluated the terms and conditions of the debentures under the guidance of ASC 815. All three criteria under ASC 815-15-25-1 are met, therefore, the conversion feature requires classification and measurement as derivative financial instruments. Accordingly, the evaluation resulted in the conclusion that this derivative financial instrument requires bifurcation and liability classification, at fair value. Current standards contemplate that the classification of financial instruments requires evaluation at each report date.

The following table reflects the allocation of the purchase on December 7, 2016:

 Secured convertible debentures Face Value 
 (CAD $1,399,000)$ 1,041,835 
 Proceeds 1,041,835 
 Embedded derivative (285,612)
 Carrying value$ 756,223 
 

The carrying value of these debentures at November 30, 2018 was CAD $1,301,359 ($978,361). Effective May 31, 2019, the Company repaid these debentures for CAD $1,399,000 ($1,035,930) plus accrued interest.

Discounts (premiums) on the convertible debentures arise from (i) the allocation of basis to other instruments issued in the transaction, (ii) fees paid directly to the creditor and (iii) initial recognition at fair value, which is lower than face value. Discounts (premiums) are amortized through charges (credits) to interest expense over the term of the debt agreement. Amortization of debt discounts (premiums) amounted to CAD $98,924 ($73,201) during the nine months ended August 31, 2019 and CAD$112,064($88,102) during the prior nine months ended August 31, 2018. During the nine months ended August 31, 2019, the Company recorded interest expense for $67,007 (August 31, 2018: $99,090).

b)          Convertible Notes - $3,202,633, (November 30, 2018: $167,077)

1. On October 22, 2018, the Company entered into a Securities Purchase Agreement with several accredited investors to sell $1,275,000 of units, with each $1,000 of unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due April 15, 2020, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before the five year anniversary of the issuance. The notes are secured secondary by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. As a result of the repayment of the November 2016 Subordinate Secured Debentures on May 31, 2019, these convertible notes entered senior security position. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share subject to anti-dilution protection. The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the embedded conversion option is not indexed to the Company’s stock because it did not pass all eight conditions of equity classification provided in ASC 815. Therefore, the embedded conversion option is subject to classification in the financial statements in liabilities at fair value both at inception and subsequently.

The Company evaluated the terms and conditions of the Notes under the guidance of ASC 815. All three criteria under ASC 815-15-25-1 are met, therefore, the conversion feature requires classification and measurement as derivative financial instruments. Accordingly, the evaluation resulted in the conclusion that this derivative financial instrument requires bifurcation and liability classification, at fair value. Current standards contemplate that the classification of financial instruments requires evaluation at each report date.

 

The following table reflects the allocation of the purchase on October 22, 2018:

 Proceeds$ 1,275,000 
     
 Convertible notes$ (131,547)
     
 Derivative liability-convertible promissory notes$ (619,364)
     
 Additional paid in capital (equity warrants)$ (524,089)

 

In conjunction with the October 22, 2018 note placement, the Company issued 5,100,000 warrants. The relative fair value of these warrants was estimated at $524,089 using the Binomial Lattice option pricing model and reflected in additional paid-in capital. Discounts (premiums) on the convertible notes arise from (i) the allocation of basis to other instruments issued in the transaction, (ii) fees paid directly to the creditor and (iii) initial recognition at fair value, which is lower than face value. Discounts (premiums) are amortized through charges (credits) to interest expense over the term of the debt agreement. Amortization of debt discounts (premiums) amounted to $322,897 during the nine months ended August 31, 2019 (August 31, 2018: $Nil)resulting in the carrying value of convertible notes at $489,974 as at August 31, 2019 (November 30, 2018: $167,077). During the nine months ended August 31, 2019, the Company recorded interest expense for $93,115 (August 31, 2018:$Nil).

2. On April 22, 2019 and May 20, 2019, the Company entered into a securities purchase agreement with several accredited investors to sell a total of $2,080,265 of units, with each $1,000 unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due April 15, 2020, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before October 22, 2023. The notes are secured secondary by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. The principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share. The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the Notes meet the definition of conventional convertible debt provided in ASC 815 and the embedded conversion option is not subject to bifurcation and classification in the financial statements in liabilities at fair value. In connection with the issuance of the Notes, the Company issued the holders warrants to purchase the common stock. The warrant is exercisable until October 23, 2023 for 8,321,058 of shares at a purchase price of $0.25 per share. The Company concluded that the warrants are indexed to the stock and, accordingly, the analysis resulted in the conclusion that these warrants achieved equity classification in the financial statements. As a result of the repayment of the November 2016 Subordinate Secured Debentures on May 31, 2019, these convertible notes entered senior security position.

The Company accounted for this transaction as a financing transaction, wherein the net proceeds received were allocated to the financial instruments issued which resulted in a discount. The warrants were valued at $888,444 and the balance of the convertible debt for $1,191,821. The discount is being charged to interest and is being accreted over the term of the note using the effective interest method. During the nine-month period ended August 31, 2019 (August 31, 2018: $Nil)the Company recorded $243,162 in interest from the accretion of the discount. In addition, the Company recorded interest expense for $71,862 for the nine-month period ended August 31, 2019 (August 31, 2018: $Nil).Prior to making the accounting allocation, the Company evaluated for proper classification under ASC 480 Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 Derivatives and Hedging (“ASC 815”). This debt agreement did not contain any embedded terms or features that require classification as derivatives. The Company was required to consider whether the hybrid contract embodied a beneficial conversion feature (“BCF”). The calculation of the effective conversion amount did not result in a BCF because the effective conversion price was equal to the Company’s stock price on the date of issuance.

The note embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company concluded that the Notes meet the definition of conventional convertible debt provided in ASC 815 and the embedded conversion option is not subject to bifurcation and classification in the financial statements in liabilities at fair value. In connection with the issuance of the Notes, the Company issued the holders warrants to purchase the Company’s common stock. The warrants are exercisable until January 22, 2024 for 9,130,000 of shares at a purchase price of $0.25 per share. The Company concluded that the warrants are indexed to the stock and, accordingly, the analysis resulted in the conclusion that these warrants achieved equity classification in the financial statements.

The Company accounted for this transaction as a financing transaction, wherein the net proceeds received were allocated to the financial instruments issued which resulted in a discount. The warrants were valued at $1,038,081 and the balance of the convertible debt for $1,244,419. The discount is being charged to interest and is being accreted over the term of the note using the effective interest method. During the nine-month period ended August 31, 2019 (August 31, 2018: $Nil) the Company recorded $33,257 in interest from the accretion of the discount. In addition, the Company recorded interest expense for $25,014 for the nine-month period ended August 31, 2019 (August 31, 2018:$Nil). Prior to making the accounting allocation, the Company evaluated for proper classification under ASC 480 Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 Derivatives and Hedging (“ASC 815”). This debt agreement did not contain any embedded terms or features that require classification as derivatives. The Company was required to consider whether the hybrid contract embodied a beneficial conversion feature (“BCF”). The calculation of the effective conversion amount did not result in a BCF because the effective conversion price was equal to the Company’s stock price on the date of issuance.

3. On July 22, 2019, the Company entered into a securities purchase agreement with several investors to sell a total of $2,282,500 of units, with each $1,000 of unit consisting of (i) a $1,000 10% interest convertible promissory note (collectively the “Notes”) due June 30, 2021, convertible into the Company’s common stock at a conversion price of $0.15 per share, and (ii) four thousand (4,000) warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. The notes are secured pari passu with the October 2018 and April/May 2019 notes, by all of the Company assets and accrue interest at 10% per annum, payable in cash at maturity. However, the principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of common stock at a conversion price of $0.15 per share.

Derivative Liabilities

The carrying values of the embedded derivative liabilities is reflected on the balance sheet, with changes in the carrying value being recorded as a change in fair value of derivative liabilities on the statement of operations.

The components of the embedded derivative as of August 31, 2019 are:

   Indexed    
 Financings giving rise to derivative financial instruments Shares  Fair Value 
 Convertible Notes October 22, 2018 8,500,000 $214,200 
   8,500,000 $214,200 

The components of the embedded derivative as of November 30, 2018 are:

   Indexed    
 Financings giving rise to derivative financial instruments Shares  Fair Value 
 Convertible Secured Debentures December 7, 2016 8,044,853 $426,016 
 Convertible Notes October 22, 2018 8,500,000  531,285 
   16,544,853 $957,301 
 

The following table summarizes the effects on gain (loss) associated with changes in the fair values of derivative financial instruments by type of financing for the nine months ended August 31, 2019 and 2018:

 
   Nine Months  Nine Months 
   Ended  Ended 
   August 31, 2019  August 31, 2018 
 Financings giving rise to derivative financial instruments and the income effects:      
 Convertible Secured Debentures December 7, 2016$ 425,020 $(245,852) 
 Convertible Notes October 22, 2018$ 317,086   
  $ 742,106 $(245,852) 

Fair Value Considerations

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:

 Level 1 valuations:Quoted prices in active markets for identical assets and liabilities.
   
 Level 2 valuations:Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model- derived valuations whose inputs or significant value drivers are observable.
   
 Level 3 valuations:Significant inputs to valuation model are unobservable.


The Company follows the provisions of ASC 820 with respect to the financial instruments. As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The derivative financial instruments which are required to be measured at fair value on a recurring basis under of ASC 815 as of August 31, 2019 and November 30, 2018 are all measured at estimated fair value using Level 2 and 3 inputs.

The embedded derivative was fair valued using the income valuation technique using the Lattice valuation model. The following table sets forth the inputs for each significant assumption:

 Convertible secured debentures, December 7, 2016 August 31, 2019  November 30, 
      2018 
        
 Derivative financial instruments$ - $ 426,016 
 Conversion price$ - $ 0.135 
 Volatility   91% 
 Remaining term (years)   0.52 
 Risk free rate   2.52% 
 
 Convertible notes, October 22, 2018 August 31, 2019  November 30, 
      2018 
        
 Derivative financial instruments$ 214,200 $ 531,285 
 Conversion price$ 0.15 $ 0.15 
 Volatility 65%  79% 
 Remaining term (years) 0.62  1.38 
 Risk free rate 1.76%  2.70% 
XML 27 R11.htm IDEA: XBRL DOCUMENT v3.19.3
STOCK BASED COMPENSATION AND WARRANTS
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
STOCK BASED COMPENSATION AND WARRANTS [Text Block]
5.

STOCK BASED COMPENSATION AND WARRANTS

Effective May 31, 2013, the Company adopted an incentive stock option plan (the “2013 Stock Option Plan”) which replaced the prior stock option and stock bonus plans, as ratified by the Company’s shareholders at the Company’s 2015 annual meeting of shareholders. A maximum of 9,379,857 common shares were reserved for issuance under the 2013 Stock Option Plan.

The Board approved a revised stock option plan (the “Revised Stock Option Plan”) and received stockholder approval at the annual meeting held on December 19, 2017, that increased the number of shares reserved for issuance under the stock option plan from 9,379,857 to 18,993,274.

The material terms of the Revised Stock Option Plan are as follows:

(a) While the shares are listed on the Exchange (as defined in the Revised Stock Option Plan), options may be granted to employees, senior officers, directors and consultants of the Company or a subsidiary of the Company and to corporations wholly owned by such an employee, senior officer, director or consultant.

(b) The maximum number of common shares which can be issued under the Revised Stock Option Plan is 18,993,274, provided that, so long as the Company is listed on the Exchange, this maximum will be reduced to 20% of the issued and outstanding common shares on December 19, 2017.

(c) The term of any option granted under the Revised Stock Option Plan will be fixed by the board of directors at the time such option is granted, provided that options will not be permitted to exceed a term of ten years.

(d) The exercise price of any options granted under the Revised Stock Option Plan will be determined by the board of directors, in its sole discretion, but shall not be less than the closing price of the shares on the stock exchange on the day preceding the day on which the directors grant such options.

(e) While the shares are listed on the Exchange, options will be non-assignable and non-transferable.

(f) So long as the shares are listed on the Exchange, options on no more than 2% of the issued shares may be granted to any one consultant, or in aggregate to all persons performing investor relations activities, in any 12- month period.

(g) If the option holder ceases to be someone eligible to receive a grant of options under the Revised Stock Option Plan, then that holder’s existing options shall expire on the earlier of (i) the expiry date fixed at the time of the option grant, and (ii) ninety days after the date that the option holder ceases to be eligible to receive a grant of options under the Revised Stock Option Plan.

Year ended November 30, 2018

Warrants

On October 22, 2018, the Company entered into a securities purchase agreement with several accredited investors to sell $1,275,000 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before the five year anniversary of the issuance. The Company issued 5,100,000 warrants. The relative grant date fair value of these warrants was estimated at $524,089 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:

 Risk free rate 3.05% 
 Expected dividends 0% 
 Expected volatility 159% 
 Expected life 5 years 
 Market price of the Company’s common stock on date of grant of warrants$ 0.14 

Stock Options

On March 27, 2017, the board of directors granted options to Dean Thrasher to acquire a total of 1,150,000 common shares. These options were issued at an exercise price of CAD $0.13 ($0.10) per share and vest thirty-three and one-third (33 1/3) percent every six months commencing January 1, 2017, with an expiry term of five years. The Company expensed stock-based compensation expense of $39,046 regarding the vesting of options during the year ended November 30, 2018, leaving a balance of $nilas unvested stock- based compensation expense.

On April 13, 2018, the board of directors granted 1,500,000 options for shares of the Company’s common stock to the Chief Technology officer (“CTO”), Buys, with exercise price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company’s stock price must close above the trigger price for 20 days in order for the option to be vested. The options shall have a seven-year life from grant date and Buys must remain employed by the Company for three years for the options to vest. The grant date fair value of the options used for the purpose of estimating the stock compensation is estimated using the Binomial Lattice option pricing model with the following assumptions:

 Risk free rate 2.77% 
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 190% 
 Expected life 7 years 
 Market price of the Company’s common stock on date of grant of options$ 0.15 
 Stock-based compensation cost expensed during the year$ 10,568 
 Unvested stock-based compensation expense$ 40,159 


On October 22, 2018, the board of directors granted 400,000 options to directors and 250,000 options to a consultant for a total of 650,000 options. These options were issued at an exercise price of CAD $0.19 ($0.14) per share and vest immediately with an expiry term of five years. The fair value of each option used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:

 Risk free rate 2.00% 
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 133% 
 Expected life 5 years 
 Market price of the Company’s common stock on date of grant of options$ 0.14 
 Stock-based compensation cost expensed during the year$ 79,185 
 Unvested stock-based compensation expense$        Nil 

As of November 30, 2018, there was $40,159 of unrecognized expense related to non-vested stock-based compensation arrangements granted.

Nine months ended August 31, 2019

Warrants

On December 3, 2018, the Company issued 750,000 warrants each to two consultants (the “incentive warrants”) to purchase common shares of the Company at a strike price equal to the average trading price of the Company on the OTC QB during the 20 business days proceeding such approval. 50% of the incentive warrants vested upon issuance and the balance will vest on December 31, 2019. The incentive warrants shall have a three-year life. These warrants were issued pursuant to the contracts executed with these two consultants. The grant date fair value of each warrant used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:

 Risk free rate 2.00% 
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 149% 
 Expected life 3 years 
 Market price of the Company’s common stock on date of grant of warrants$ 0.16 
 Stock-based compensation cost expensed$ 164,230 
 Unvested stock-based compensation expense $ 29,860 
 

On April 22, 2019 and May 20, 2019, the Company entered into a securities purchase agreement with several accredited investors to sell a total of $2,080,265 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest secured convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before October 22, 2023. The Company issued 8,321,058 warrants. The relative grant date fair value of these warrants was estimated at $888,444 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:

 Risk free rate 2.21—2.39% 
 Expected forfeiture rate 0% 
 Expected dividends 0% 
 Expected volatility 155—156% 
 Expected life 4.5 years 
 Market price of the Company’s common stock on date of grant of warrants$ 0.15 


On July 22, 2019, the Company entered into a securities purchase agreement with several investors to sell a total of $2,282,500 of units at a price of $1,000 per unit, consisting of (i) $1,000 10% interest secured convertible promissory note, convertible into the Company’s common stock at a conversion price of $0.15 per share and (ii) four thousand warrants each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. The Company issued 9,130,000 warrants. The relative grant date fair value of these warrants was estimated at $1,038,081 using the Binomial lattice option pricing model and reflected in additional paid-in capital, with the following assumptions:

 Risk free rate  1.8%  
 Expected forfeiture rate 0% 
 Expected dividends  0%  
 Expected volatility  154%  
 Expected life  4.5 years  
 Market price of the Company’s common stock on date of grant of warrants$0.16 


Stock Options

On April 13, 2018, the board of directors granted 1,500,000 options for shares of the Company’s common stock to Buys, with an exercise price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company expensed stock-based compensation of $12,681 during the nine-month period ended August 31, 2019.

On May 21, 2019, the Company granted 120,000 options to an employee. These options were issued at an exercise price of CAD $0.19 ($0.14) per share and vested immediately with an expiry term of five years. The grant date fair value of each option used for the purpose of estimating the stock compensation is estimated using the Black-Scholes option pricing model with the following assumptions:

 Risk free rate 2.00%  
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 133%  
 Expected life 5 years  
 Market price of the Company’s common stock on date of grant of options$ 0.14 
 Stock-based compensation cost expensed$ 14,621 
 Unvested stock-based compensation expense$Nil 

As of August 31, 2019, there was $57,337 of unrecognized expense related to non-vested stock-based compensation arrangements granted.

XML 28 R32.htm IDEA: XBRL DOCUMENT v3.19.3
EXCLUSIVE SUPPLY AND PURCHASE AGREEMENTS (Narrative) (Details)
9 Months Ended
Aug. 31, 2019
BIP manufacturer [Member]  
Term of agreement 4 years
Additional term of agreement 1 year
Safariland, LLC [Member]  
Term of agreement 4 years
Additional term of agreement 1 year
XML 29 R36.htm IDEA: XBRL DOCUMENT v3.19.3
PREPAID EXPENSES AND OTHER RECEIVABLES (Narrative) (Details) - USD ($)
Aug. 31, 2019
Nov. 30, 2018
Prepaid Expense and Other Assets, Current [Abstract]    
Prepayment of prepaid expenses and other receivables $ 583,333 $ 750,000
XML 30 Show.js IDEA: XBRL DOCUMENT // Edgar(tm) Renderer was created by staff of the U.S. Securities and Exchange Commission. Data and content created by government employees within the scope of their employment are not subject to domestic copyright protection. 17 U.S.C. 105. var Show={};Show.LastAR=null,Show.showAR=function(a,r,w){if(Show.LastAR)Show.hideAR();var e=a;while(e&&e.nodeName!='TABLE')e=e.nextSibling;if(!e||e.nodeName!='TABLE'){var ref=((window)?w.document:document).getElementById(r);if(ref){e=ref.cloneNode(!0); e.removeAttribute('id');a.parentNode.appendChild(e)}} if(e)e.style.display='block';Show.LastAR=e};Show.hideAR=function(){Show.LastAR.style.display='none'};Show.toggleNext=function(a){var e=a;while(e.nodeName!='DIV')e=e.nextSibling;if(!e.style){}else if(!e.style.display){}else{var d,p_;if(e.style.display=='none'){d='block';p='-'}else{d='none';p='+'} e.style.display=d;if(a.textContent){a.textContent=p+a.textContent.substring(1)}else{a.innerText=p+a.innerText.substring(1)}}} XML 31 R42.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) - USD ($)
1 Months Ended 9 Months Ended
Apr. 13, 2018
May 21, 2019
Oct. 22, 2018
Aug. 31, 2019
Nov. 30, 2018
Mar. 27, 2017
Stock-based compensation cost expensed during the year       $ 12,681    
Unvested stock-based compensation expense         $ 40,159  
Share-based Payment Arrangement, Option [Member]            
Risk free rate 2.77% 2.00% 2.00%      
Expected dividends 0.00% 0.00% 0.00%      
Expected forfeiture rate 0.00% 0.00% 0.00%      
Expected volatility 190.00% 133.00% 133.00%      
Expected life 7 years 5 years 5 years      
Market price of the Company's common stock on date of grant of options $ 0.15 $ 0.14 $ 0.14      
Stock-based compensation cost expensed during the year $ 10,568 $ 14,621 $ 79,185      
Unvested stock-based compensation expense $ 40,159 $ 57,337 $ 39,046
XML 32 R2.htm IDEA: XBRL DOCUMENT v3.19.3
Condensed Interim Consolidated Balance Sheets - USD ($)
Aug. 31, 2019
Nov. 30, 2018
CURRENT ASSETS    
Cash and cash equivalents $ 1,881,377 $ 1,182,387
Accounts receivable 112,140 18,914
Inventory 666,912 129,121
Deferred cost 55,862  
Prepaid expenses and other receivables 793,420 901,247
Total Current Assets 3,509,711 2,231,669
Patent rights 100,835 106,334
Deposit for equipment 227,781 205,664
Property and equipment 274,109 113,418
TOTAL ASSETS 4,112,436 2,657,085
CURRENT LIABILITIES    
Accounts payable and accrued liabilities 862,400 397,309
Deferred revenue 13,320  
Secured convertible debentures   978,361
Convertible notes 1,924,957  
Derivative liabilities 214,200 957,301
Total Current Liabilities 3,014,877 2,332,971
Long term convertible notes 1,277,676 167,077
Total Liabilities 4,292,553 2,500,048
Capital stock    
Preferred stock, $0.001 par value, 5,000,000 shares authorized, Nil issued and outstanding (November 30, 2018 - nil).
Common stock, $0.001 par value 300,000,000 shares authorized, 104,021,837 issued and outstanding (November 30, 2018: 101,976,900) 104,022 101,977
Additional paid-in capital 35,752,050 33,341,695
Shares to be issued 20,000  
Accumulated deficit (35,941,684) (33,252,338)
Accumulated other comprehensive loss (114,505) (34,297)
Total Stockholders' (Deficiency) Equity (180,117) 157,037
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY $ 4,112,436 $ 2,657,085
XML 33 R46.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Derivative Intruments, Amounts reflected in Income (Details) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2019
Aug. 31, 2018
Change in fair value of derivative liability $ 96,339 $ 307,201 $ 742,106 $ 245,852
Secured Debentures December 7, 2016 [Member]        
Change in fair value of derivative liability     425,020 $ 245,852
Secured Convertible Debentures October 22, 2018 [Member]        
Change in fair value of derivative liability     $ 317,086  
XML 34 R6.htm IDEA: XBRL DOCUMENT v3.19.3
Condensed Interim Consolidated Statement of Changes in Stockholders' (Deficiency) Equity - USD ($)
Common Shares [Member]
Additional Paid-In Capital [Member]
Shares To Be Issued [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive loss [Member]
Total
Beginning Balance at Nov. 30, 2017 $ 93,014 $ 31,365,097   $ (31,098,864) $ (32,624) $ 326,623
Beginning Balance (Shares) at Nov. 30, 2017 93,014,134          
Stock based compensation   45,387       45,387
Issue of common shares for services $ 1,480 211,020       212,500
Issue of common shares for services (Shares) 1,479,954          
Net loss for the period       (958,672)   (958,672)
Foreign currency translation         (7,175) (7,175)
Ending Balance at Aug. 31, 2018 $ 94,494 31,621,504   (32,057,536) (39,799) (381,337)
Ending Balance (Shares) at Aug. 31, 2018 94,494,088          
Beginning Balance at Nov. 30, 2018 $ 101,977 33,341,695   (33,252,338) (34,297) 157,037
Beginning Balance (Shares) at Nov. 30, 2018 101,976,900          
Stock based compensation   191,532       191,532
Issue of common shares for services $ 2,180 312,159       314,339
Issue of common shares for services (Shares) 2,179,875          
Cancellation of shares $ (135) (19,861)       (19,996)
Cancellation of shares (shares) (134,938)          
Shares to be issued     $ 20,000     20,000
Issuance of warrants   1,926,525       1,926,525
Net loss for the period       (2,689,346)   (2,689,346)
Foreign currency translation         (80,208) (80,208)
Ending Balance at Aug. 31, 2019 $ 104,022 $ 35,752,050 $ 20,000 $ (35,941,684) $ (114,505) $ (180,117)
Ending Balance (Shares) at Aug. 31, 2019 104,021,837          
XML 35 R27.htm IDEA: XBRL DOCUMENT v3.19.3
PROPERTY AND EQUIPMENT (Narrative) (Details) - USD ($)
Aug. 31, 2019
Nov. 30, 2018
Deposit for equipment $ 227,781 $ 205,664
XML 36 R23.htm IDEA: XBRL DOCUMENT v3.19.3
STOCK BASED COMPENSATION AND WARRANTS (Tables)
9 Months Ended
Aug. 31, 2019
Stock Options Granted, April 13, 2018 [Member] | Employee Stock Option [Member]  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
 Risk free rate 2.77% 
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 190% 
 Expected life 7 years 
 Market price of the Company’s common stock on date of grant of options$ 0.15 
 Stock-based compensation cost expensed during the year$ 10,568 
 Unvested stock-based compensation expense$ 40,159 
Stock Options Granted, October 22, 2018 [Member] | Employee Stock Option [Member]  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
 Risk free rate 2.00% 
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 133% 
 Expected life 5 years 
 Market price of the Company’s common stock on date of grant of options$ 0.14 
 Stock-based compensation cost expensed during the year$ 79,185 
 Unvested stock-based compensation expense$        Nil 
Stock Options Granted, On May 21, 2019 | Employee Stock Option [Member]  
Schedule of Share-based Payment Award, Warrants, Valuation Assumptions [Table Text Block]
 Risk free rate 2.00%  
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 133%  
 Expected life 5 years  
 Market price of the Company’s common stock on date of grant of options$ 0.14 
 Stock-based compensation cost expensed$ 14,621 
 Unvested stock-based compensation expense$Nil 
Warrants Granted, October 22, 2018 [Member] | Warrant [Member]  
Schedule of Share-based Payment Award, Warrants, Valuation Assumptions [Table Text Block]
 Risk free rate 3.05% 
 Expected dividends 0% 
 Expected volatility 159% 
 Expected life 5 years 
 Market price of the Company’s common stock on date of grant of warrants$ 0.14 
Warrants Granted, December 3, 2018 [Member] | Warrant [Member]  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
 Risk free rate 2.00% 
 Expected dividends 0% 
 Expected forfeiture rate 0% 
 Expected volatility 149% 
 Expected life 3 years 
 Market price of the Company’s common stock on date of grant of warrants$ 0.16 
 Stock-based compensation cost expensed$ 164,230 
 Unvested stock-based compensation expense $ 29,860 
Warrants Granted, April 22, 2019 and May 20, 2019 [Member] | Warrant [Member]  
Schedule of Share-based Payment Award, Warrants, Valuation Assumptions [Table Text Block]
 Risk free rate 2.21—2.39% 
 Expected forfeiture rate 0% 
 Expected dividends 0% 
 Expected volatility 155—156% 
 Expected life 4.5 years 
 Market price of the Company’s common stock on date of grant of warrants$ 0.15 
Warrants Granted, July 22, 2019 [Member] | Warrant [Member]  
Schedule of Share-based Payment Award, Warrants, Valuation Assumptions [Table Text Block]
 Risk free rate  1.8%  
 Expected forfeiture rate 0% 
 Expected dividends  0%  
 Expected volatility  154%  
 Expected life  4.5 years  
 Market price of the Company’s common stock on date of grant of warrants$0.16 
XML 37 R38.htm IDEA: XBRL DOCUMENT v3.19.3
SUBSEQUENT EVENTS (Narrative) (Details) - Subsequent Event [Member] - USD ($)
1 Months Ended
Sep. 23, 2019
Sep. 16, 2019
Number Of Warrants Exercised 156,000  
Proceeds from Warrant Exercises $ 20,280  
Securities purchase agreement [Member] | Northeast Industrial Partners, LLC [Member] | Unsecured Debt [Member]    
Proceeds from issuance or sale of units   $ 3,000,000
Issuance of sale of units   1,000
Unsecured convertible promissory note   $ 1,000
Debt Instrument, Convertible, Conversion Price   $ 0.15
Warrants outstanding   4,000
Number of securities called by each warrant   1
Exercise price of warrants   $ 0.25
Additional proceeds from issuance or sale of units   $ 818,000
Debt Instrument, Interest Rate, Stated Percentage   10.00%
Interest rate during the period of default   15.00%
XML 38 R30.htm IDEA: XBRL DOCUMENT v3.19.3
RELATED PARTY TRANSACTIONS (Narrative) (Details) - USD ($)
1 Months Ended 9 Months Ended
Jun. 01, 2018
Apr. 13, 2018
Dec. 31, 2017
Aug. 31, 2019
Aug. 31, 2018
Allocated share-based compensation expense       $ 12,681  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures   1,500,000      
Due to related parties         $ 103,906
Rent Expenses For Services     $ 700    
Office rent         6,300
Rent payable         3,940
Paul Jensen [Member]          
Stock issued during period, value, issued for services       66,667 150,000
Amount of accrual issued for proportionate shares       20,000  
Dean Thrasher [Member]          
Related party transaction, amounts of transaction       $ 43,200 116,575
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested         $ 39,046
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures         1,150,000
Stock issued during period, shares, issued for services       180,000  
Stock issued during period, value, issued for services       $ 25,200 $ 18,000
Northeast Industrial Partners, LLC [Member]          
Stock issued during period, shares, issued for services         507,550
Shares issued, price per share         $ 0.12
Stock issued during period, value, issued for services         $ 62,500
Andre Buys [Member]          
Employee benefits and share-based compensation   $ 10,000      
Related party transaction, amounts of transaction   $ 46,667   90,000  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested       $ 12,681  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures   1,500,000   1,500,000  
Stock-based compensation expense, vesting of options   $ 6,341      
Due to related parties       $ 16,333  
Royalties payment       8,333  
Bryan Ganz [Member]          
Related party transaction, amounts of transaction       $ 136,374  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures 500,000        
Stock issued during period, shares, issued for services 200,000     333,333  
Due to related parties $ 72,573        
Amount of accrual issued for proportionate shares       $ 46,667  
Office rent       16,200  
Rent payable       8,120  
Issuance of convertible debentures       52,500  
Malhotra [Member]          
Related party transaction, amounts of transaction         $ 34,875
Stock issued during period, value, issued for services       $ 50,000  
Wager [Member]          
Stock issued during period, shares, issued for services       250,000  
Stock issued during period, value, issued for services       $ 119,385  
Amount of accrual issued for proportionate shares       35,000  
Issuance of convertible debentures       $ 42,500  
Directors And Officers [Member]          
Number of units issued in April 22, 2019, May 20, 2019 and July 22, 2019 financing       316  
Total proceeds from units issued in April 22, 2019, May 20, 2019 and July 22, 2019 financing       $ 315,588  
Proceeds from units issued for services       $ 70,000  
XML 39 R34.htm IDEA: XBRL DOCUMENT v3.19.3
INVENTORY (Narrative) (Details) - USD ($)
Aug. 31, 2019
Nov. 30, 2018
Inventory $ 666,912 $ 129,121
Raw materials for Byrna [Member]    
Inventory 401,742
Finished goods of Byrna [Member]    
Inventory 160,833  
Finished goods of 40mm Blunt Impact Projectiles [Member]    
Inventory 67,121 90,329
Inventory procured from other suppliers [Member]    
Inventory $ 37,216 $ 38,792
XML 40 R17.htm IDEA: XBRL DOCUMENT v3.19.3
SEGMENT DISCLOSURES
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
SEGMENT DISCLOSURES [Text Block]
11.

SEGMENT DISCLOSURES

The Company is organized on three geographic areas in the U.S.A., South Africa (“SA”) and Canada respectively. The U.S.A., South Africa and Canada operations are the Company’s operating segments and reportable segments, and each of those segments are led by the Company’s CEO. Performance is assessed and resources are allocated by the CEO, whom we have determined to be the Company’s Chief Operating Decision Maker (CODM). Management evaluates the segments based primarily upon revenue and assets. The tables below present segment sales and assets for the nine months ended August31, 2019 and August 31, 2018:

Nine months ended August 31, 2019

   SDI USA  SDI SA  SDI Canada  Total 
 Sales$278,676  266,417 $ 36,202 $ 581,295 

Nine months ended August 31, 2018

   SDI USA  SDI SA  SDI Canada  Total 
 Sales$ 188,304   $ 115,472 $ 303,776 
 
   2019  2018 
 Sales$ 581,295 $ 303,776 
 Elimination of intersegment revenue (157,318) (83,661)
        
 Consolidated sales$ 423,977  220,115 


 As at August 31, 2019

   SDI USA  SDI SA  SDI Canada  Total 
 Assets$ 3,374,139  687,882 $ 50,415 $ 4,112,436 


As at November 30, 2018

   SDI USA  SDI SA  SDI Canada  Total 
 Assets$ 2,629,315   $ 27,770 $ 2,657,085 
XML 41 R13.htm IDEA: XBRL DOCUMENT v3.19.3
COMMITMENTS
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
COMMITMENTS [Text Block]
7.

COMMITMENTS

 
 a)

Consulting agreements

On April 13, 2018, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with André Buys, (“Buys”) a resident of South Africa, pursuant to which the Company purchased from Buys a portfolio of registered patent rights and other intellectual property relating to air and/or gas fired long guns or pistols, including pump action launchers and munitions used with such pistols and long guns, including self-stabilizing shaped or “finned” rounds (the “Portfolio”). As consideration for the Portfolio, the Company (i) paid Buys $100,000, (ii) agreed to pay Buys either $500,000 in cash or $750,000 worth of Company stock within two years (the “Second Payment”) at Buys’ discretion and (iii) agreed to pay Buys certain royalty payments for sales of products by the Company using technology covered by the Portfolio. In addition, the Company employed Buys as the CTO and for services issued 1,500,000 options for shares of the Company’s common stock to Buys with a strike price of $0.16 and a trigger price of $0.30, $0.50 and $1.00 for each batch of 500,000 options, respectively. The Company’s stock price must close above the trigger price for 20 days in order for the option to be triggered. The options shall have a seven year life from grant date and Buys must remain employed by the Company for three years in order for the options to vest. Until the earlier of, the second anniversary or the date the Second Payment is made, the royalty will be 10% of the Net Sales Price (“NSP”). The royalty will then be reduced to 4% till the sixth anniversary, 3% till the eighth anniversary, and 2% till the last expiration date of any of the intellectual property in the Portfolio. Until the royalty exceeds $25,000 per year, the Company is committed to a minimum payment of $25,000 per year effective on the earlier of one year from closing or upon Buys relocation to Boston. In the event that the Company fails to make the Second Payment, the Portfolio would revert to Buys, but the Company would retain perpetual, irrevocable, exclusive and non-exclusive licenses to use technology with respect to the Portfolio and any technology developed within two years of April 13, 2018. As the substance of the purchase and sale agreement has been determined to be an option agreement, the Company has not recorded any amount related to the Second Payment. The Company agrees that it will not terminate Buys except for cause prior to April 2021. As a result, the minimal commitment relating to the employment contract is $320,000 payable over a period of 32 months.

Effective November 1, 2018, the Company entered into consulting agreements (the “Consulting Agreements”) with two consultants. The consultants will each be paid $7,500 per month commencing November 1, 2018 and to be increased to $10,000 per month subsequent to the month the Company begins shipping the Byrna HD product to customers. The term of the contracts with the consultants continue until December 31, 2019.

 b)Lease commitments
   
 1.The Company has commitments for leasing office premises in Wakefield, Massachusetts, USA to June 27, 2019, at a monthly rent of $700 (see note 6).
 2.The Company has commitments for leasing warehouse space in Fort Wayne, Indiana, USA to February 28, 2020, at a monthly rent of $2,472.
 3.The Company has commitments for leasing office premises in Pretoria East, South Africa to December 19, 2020, at a monthly rent of $968 (Rand 14,750).
XML 42 R48.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Segment Reporting Information, by Segment (Details) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2019
Aug. 31, 2018
Nov. 30, 2018
Segment Reporting Information [Line Items]          
Sales $ 307,101 $ 53,257 $ 423,977 $ 220,115  
Assets 4,112,436   4,112,436   $ 2,657,085
Operating Segments [Member] | SDI USA [Member]          
Segment Reporting Information [Line Items]          
Assets 3,374,139   3,374,139   2,629,315
Operating Segments [Member] | SDI SA [Member]          
Segment Reporting Information [Line Items]          
Assets 687,882   687,882  
Operating Segments [Member] | SDI Canada [Member]          
Segment Reporting Information [Line Items]          
Assets $ 50,415   50,415   $ 27,770
Intersegment Eliminations [Member]          
Segment Reporting Information [Line Items]          
Sales     (157,318) (83,661)  
Sales [Member] | Operating Segments [Member]          
Segment Reporting Information [Line Items]          
Sales     581,295 303,776  
Sales [Member] | Operating Segments [Member] | SDI USA [Member]          
Segment Reporting Information [Line Items]          
Sales     278,676 188,304  
Sales [Member] | Operating Segments [Member] | SDI SA [Member]          
Segment Reporting Information [Line Items]          
Sales     266,417  
Sales [Member] | Operating Segments [Member] | SDI Canada [Member]          
Segment Reporting Information [Line Items]          
Sales     $ 36,202 $ 115,472  
XML 43 R8.htm IDEA: XBRL DOCUMENT v3.19.3
NATURE OF OPERATIONS AND GOING CONCERN
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
NATURE OF OPERATIONS AND GOING CONCERN [Text Block]
2.

NATURE OF OPERATIONS AND GOING CONCERN

The Company is a less-lethal defense technology company, specializing in innovative next generation solutions for security situations that do not require the use of lethal force. SDI has implemented manufacturing partnerships to assist in the deployment of their patented and patent pending family of 40mm and .68 caliber products. These products consist of the current manufacture of Blunt Impact Projectile 40mm (BIP) line of products, a line of 12 gauge less-lethal products, and a .68 caliber handheld personal security device called the Byrna.

These condensed unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.

The Company’s activities are subject to risk and uncertainties including:

The Company has not earned adequate revenue and has used cash in its operations. Therefore, the Company will need additional financing to continue its operations if it is unable to generate substantial revenue growth.

The Company has incurred a cumulative loss of $35,941,684 from inception to August 31, 2019. The Company has funded operations through the issuance of capital stock, warrants, convertible debentures and convertible notes. The Company has started to generate revenue from operations. However, it still expects to incur significant losses before becoming profitable. The Company’s future success is dependent upon its ability to raise sufficient capital or generate adequate revenue, to cover its ongoing operating expenses, and also to continue to develop and be able to profitably market its products. There can be no assurance that such revenue will be generated or financing will be available at all or on favorable terms. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty; such adjustments could be material.

XML 44 R40.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Property, Plant and Equipment (Details) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2019
Aug. 31, 2018
Nov. 30, 2018
Property, Plant and Equipment, Gross $ 602,008   $ 602,008   $ 416,450
Accumulated Depreciation 327,899   327,899   303,032
Property and equipment 274,109   274,109   113,418
Depreciation expense 7,848 $ 5,379 24,869 $ 12,138  
Computer Equipment and Software [Member]          
Property, Plant and Equipment, Gross 81,893   81,893   77,382
Accumulated Depreciation 51,469   51,469   46,837
Furniture and Fixtures [Member]          
Property, Plant and Equipment, Gross 22,722   22,722   20,998
Accumulated Depreciation 20,519   20,519   18,763
Leasehold Improvements [Member]          
Property, Plant and Equipment, Gross 26,471   26,471   26,471
Accumulated Depreciation 26,471   26,471   26,471
Moulds [Member]          
Property, Plant and Equipment, Gross 470,922   470,922   291,599
Accumulated Depreciation $ 229,440   $ 229,440   $ 210,961
XML 45 R4.htm IDEA: XBRL DOCUMENT v3.19.3
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2019
Aug. 31, 2018
SALES $ 307,101 $ 53,257 $ 423,977 $ 220,115
COST OF SALES (247,679) (29,302) (328,512) (148,515)
GROSS PROFIT 59,422 23,955 95,465 71,600
EXPENSES:        
Depreciation 7,848 5,379 24,869 12,138
Amortization of patent rights 1,833 1,833 5,499 1,833
Foreign currency translation (gain) loss 349 (5,898) (15,372) (17,498)
Selling, general and administration 755,545 385,556 2,582,406 1,091,424
TOTAL OPERATING EXPENSES 765,575 386,870 2,597,402 1,087,897
LOSS FROM OPERATIONS (706,153) (362,915) (2,501,937) (1,016,297)
Accretion (367,457) (29,991) (672,517) (88,102)
Change in fair value of derivative liabilities 96,339 307,201 742,106 245,852
Other expense- Interest (109,572) (32,946) (256,998) (100,125)
LOSS BEFORE INCOME TAXES (1,086,843) (118,651) (2,689,346) (958,672)
Income taxes 0 0 0 0
NET LOSS (1,086,843) (118,651) (2,689,346) (958,672)
Foreign exchange translation adjustment for the period (52,089) (4,922) (80,208) (7,175)
COMPREHENSIVE LOSS $ (1,138,932) $ (123,573) $ (2,769,554) $ (965,847)
Loss per share - basic and diluted $ (0.01) $ (0.001) $ (0.026) $ (0.01)
Weighted average number of common shares outstanding 104,071,705 94,357,643 103,386,825 93,559,755
XML 46 R44.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Convertible Debentures, allocation of the purchase (Details) - USD ($)
1 Months Ended 9 Months Ended
Oct. 22, 2018
Aug. 31, 2019
Proceeds   $ 4,250,265
Secured Convertible Debentures October 22, 2018 [Member]    
Proceeds $ 1,275,000  
Convertible notes (131,547)  
Derivative liability-convertible promissory notes 619,364  
Additional paid in capital (equity warrants) $ 524,089  
XML 47 R25.htm IDEA: XBRL DOCUMENT v3.19.3
SEGMENT DISCLOSURES (Tables)
9 Months Ended
Aug. 31, 2019
Schedule of Segment Reporting Information, by Segment [Table Text Block]

Nine months ended August 31, 2019

   SDI USA  SDI SA  SDI Canada  Total 
 Sales$278,676  266,417 $ 36,202 $ 581,295 

Nine months ended August 31, 2018

   SDI USA  SDI SA  SDI Canada  Total 
 Sales$ 188,304   $ 115,472 $ 303,776 
 
   2019  2018 
 Sales$ 581,295 $ 303,776 
 Elimination of intersegment revenue (157,318) (83,661)
        
 Consolidated sales$ 423,977  220,115 


 As at August 31, 2019

   SDI USA  SDI SA  SDI Canada  Total 
 Assets$ 3,374,139  687,882 $ 50,415 $ 4,112,436 


As at November 30, 2018

   SDI USA  SDI SA  SDI Canada  Total 
 Assets$ 2,629,315   $ 27,770 $ 2,657,085 
XML 48 R21.htm IDEA: XBRL DOCUMENT v3.19.3
SUBSEQUENT EVENTS
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
SUBSEQUENT EVENTS [Text Block]
15.SUBSEQUENT EVENTS
   
 a)The Company entered into a Securities Purchase Agreement (the "Agreement") with several investors (the "Purchasers") and Northeast Industrial Partners, LLC as collateral agent for the Purchasers to sell up to $3,000,000 of units, with each $1,000 of units consisting of (i) a $1,000 convertible promissory note (collectively the "Notes"), convertible into the Company's common stock at a conversion price of $0.15 per share, and (ii) four thousand warrants (the "Warrants") each exercisable for one share of common stock at an exercise price of $0.25 per share on or before January 22, 2024. On September 16, 2019, the Company closed on the sale of an additional $818,000 of the Units.
   
  The outstanding principal amount of the Notes accrues interest at a rate of 10% per annum, provided that, in the event of default on the Notes, the interest rate will be 15% during the period of default. The maturity date of the Notes is June 30, 2021, which date is subject to optional extension by each Purchaser if a change of control of the Company is announced prior to such date. Interest on the Notes is payable in arrears on the last day of each January and July while the Notes are outstanding. The Company has the option to redeem the Notes by paying the Purchasers the optional redemption price as described in the Notes. Each Note is convertible into common stock, at the option of the Purchaser. Upon such optional conversion, the outstanding principal amount of the Note converts into shares of common stock at a conversion price of $0.15 per share, subject to adjustment upon issuance of other securities as set forth in the Notes. The Notes contain restrictive covenants which, among other things, restrict the Company’s ability to incur additional indebtedness, grant security interests on its assets, or make distributions on or repurchase its common stock.The Notes are secured, pursuant to the Agreement, with a security interest in substantially all of the Company’s assets.
   
 b)On September 23, 2019, 156,000 warrants were exercised for proceeds of $20,280.
XML 49 R29.htm IDEA: XBRL DOCUMENT v3.19.3
STOCK BASED COMPENSATION AND WARRANTS (Narrative) (Details)
1 Months Ended 9 Months Ended
Dec. 03, 2018
USD ($)
shares
Apr. 13, 2018
USD ($)
trigger_price
$ / shares
shares
Jul. 22, 2019
USD ($)
$ / shares
shares
May 21, 2019
USD ($)
$ / shares
$ / shares
May 21, 2019
USD ($)
$ / shares
shares
May 20, 2019
shares
Apr. 22, 2019
USD ($)
$ / shares
shares
Oct. 22, 2018
USD ($)
$ / shares
$ / shares
shares
Oct. 22, 2018
USD ($)
$ / shares
shares
Mar. 27, 2017
USD ($)
$ / shares
shares
Mar. 27, 2017
USD ($)
$ / shares
shares
Aug. 31, 2019
USD ($)
shares
Mar. 21, 2019
shares
Nov. 30, 2018
USD ($)
shares
Dec. 19, 2017
shares
Oct. 06, 2017
shares
Oct. 05, 2017
shares
May 31, 2013
shares
Common Stock, Shares Authorized                       300,000,000 300,000,000 300,000,000   200,000,000 100,000,000  
Warrants Issued During Period, Value | $                       $ 1,926,525            
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures   1,500,000                                
Stock-based compensation cost expensed during the year | $                       12,681            
Unvested stock-based compensation expense | $                           $ 40,159        
Number of warrant issued 750,000                                  
Warrant [Member]                                    
Stock-based compensation cost expensed during the year | $ $ 164,230                                  
Unvested stock-based compensation expense | $ $ 29,860                                  
Expected life 3 years   4 years 6 months     4 years 6 months 4 years 6 months   5 years                  
Share-based Payment Arrangement, Option [Member]                                    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures                 650,000 1,150,000 1,150,000              
Options granted during the year, weighted average exercise price | (per share)                   $ 0.13 $ 0.10              
Stock-based compensation cost expensed during the year | $   $ 10,568     $ 14,621       $ 79,185                  
Unvested stock-based compensation expense | $   $ 40,159       $ 39,046 $ 39,046 $ 57,337          
Expected life   7 years     5 years       5 years                  
Market price of the Company's common stock on date of grant of options | $ / shares   $ 0.15   $ 0.14 $ 0.14     $ 0.14 $ 0.14                  
Share-based Payment Arrangement, Option [Member] | Chief Technology Officer [Member]                                    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures   1,500,000                                
Options granted during the year, weighted average exercise price | $ / shares   $ 0.16                                
Share-based Payment Arrangement, Option [Member] | Directors [Member]                                    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures                 400,000                  
Options granted during the year, weighted average exercise price | (per share)               $ 0.19 $ 0.14                  
Share-based Payment Arrangement, Option [Member] | Consultant [Member]                                    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures                 250,000                  
Options granted during the year, weighted average exercise price | (per share)               $ 0.19 $ 0.14                  
Share-based Payment Arrangement, Option [Member] | Employee [Member]                                    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures         120,000                          
Options granted during the year, weighted average exercise price | (per share)       $ 0.19 $ 0.14                          
Securities purchase agreement [Member] | Accredited investors [Member] | Warrant [Member]                                    
Number of warrants outstanding | $             $ 2,080,265 $ 1,275,000 $ 1,275,000                  
Price per unit of warrants outstanding | $ / shares             $ 1,000 $ 1,000 $ 1,000                  
Conversion price | $ / shares             $ 0.15 $ 0.15 $ 0.15                  
Warrants outstanding               4,000 4,000                  
Number of securities called by each warrant           1 1 1 1                  
Number of warrant issued             8,321,058   5,100,000                  
Class of warrant or right grant date fair value | $             $ 888,444 $ 524,089 $ 524,089                  
Securities Purchase Agreement Two [Member] | Accredited investors [Member] | Warrant [Member]                                    
Number of warrants outstanding | $     $ 2,282,500                              
Price per unit of warrants outstanding | $ / shares     $ 1,000                              
Debt conversion interest rate     1000.00%                              
Conversion price | $ / shares     $ 0.15                              
Number of securities called by each warrant     1                              
Number of warrant issued     9,130,000                              
Class of warrant or right grant date fair value | $     $ 1,038,081                              
2013 Stock Option Plan [Member]                                    
Common Stock, Shares Authorized                                   9,379,857
Revised Stock Option Plan [Member]                                    
Common Stock, Shares Authorized                             18,993,274      
Batch of 500,000 options 1 [Member] | Chief Technology Officer [Member]                                    
Stock option, trigger price | trigger_price   0.30                                
Batch of 500,000 options 2 [Member] | Chief Technology Officer [Member]                                    
Stock option, trigger price | trigger_price   0.50                                
Batch of 500,000 options 3 [Member] | Chief Technology Officer [Member]                                    
Stock option, trigger price | trigger_price   1.00                                
XML 50 R1.htm IDEA: XBRL DOCUMENT v3.19.3
Document and Entity Information - shares
9 Months Ended
Aug. 31, 2019
Oct. 13, 2019
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Aug. 31, 2019  
Entity Registrant Name Security Devices International Inc.  
Entity Central Index Key 0001354866  
Current Fiscal Year End Date --11-30  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   104,177,837
Entity Current Reporting Status Yes  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Ex Transition Period false  
Entity Interactive Data Current Yes  
Entity File Number 333-132456  
Entity Tax Identification Number 71-1050654  
Entity Address, Address Line One 107 Audubon Road, Bldg 2, Suite 201  
Entity Address, City or Town Wakefield  
Entity Address, State or Province MA  
Entity Address, Postal Zip Code 01880  
City Area Code 978  
Local Phone Number 868-5011  
Document Quarterly Report true  
Document Transition Report false  
Entity Incorporation, State or Country Code DE  
Entity Shell Company false  
CANADIAN NATIONAL STOCK EXCHANGE [Member]    
Trading Symbol SDZ.CN  
Title of 12(b) Security Common Stock, par value $0.001 per share  
OTHER OTC [Member]    
Trading Symbol SDEV  
Title of 12(b) Security Common Stock, par value $0.001 per share  
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Share-based Payment Award, Warrants, Valuation Assumptions (Details) - USD ($)
1 Months Ended 9 Months Ended
Dec. 03, 2018
Jul. 22, 2019
May 20, 2019
Apr. 22, 2019
Oct. 22, 2018
Aug. 31, 2019
Nov. 30, 2018
Allocated share-based compensation expense           $ 12,681  
Unvested stock-based compensation expense             $ 40,159
Warrant [Member]              
Risk free rate 2.00% 1.80%     3.05%    
Expected dividends 0.00% 0.00% 0.00% 0.00% 0.00%    
Expected forfeiture rate 0.00% 0.00% 0.00% 0.00%      
Expected volatility 149.00% 154.00%     159.00%    
Expected life 3 years 4 years 6 months 4 years 6 months 4 years 6 months 5 years    
Market price of the Company's common stock on date of grant of warrants $ 0.16 $ 0.16 $ 0.15 $ 0.15 $ 0.14    
Allocated share-based compensation expense 164,230            
Unvested stock-based compensation expense $ 29,860            
Warrant [Member] | Minimum [Member]              
Risk free rate     2.21% 2.21%      
Expected volatility     155.00% 155.00%      
Warrant [Member] | Maximum [Member]              
Risk free rate     2.39% 2.39%      
Expected volatility     156.00% 156.00%      
XML 52 R5.htm IDEA: XBRL DOCUMENT v3.19.3
Condensed Interim Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Aug. 31, 2019
Aug. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss for the period $ (2,689,346) $ (958,672)
Items not involving cash:    
Stock-based compensation expense (included in selling, general and administration expenses) 191,532 45,387
Accretion 672,517 88,102
Foreign currency translation gain (15,372) (17,498)
Change in fair value of derivative liabilities (742,106) (245,852)
Issue of common shares for services 314,339 212,500
Cancellation of shares for services (19,998)  
Shares to be issued for services 20,000  
Issue of convertible debentures for services 112,500  
Depreciation 24,869 12,138
Amortization of patent rights 5,499 1,833
Changes in non-cash working capital:    
Accounts receivable (97,072) 1,252
Prepaid expenses and other receivables 103,670 (98,296)
Deferred revenue 13,320  
Deferred costs (55,862)  
Inventory (559,197) (2,435)
Accounts payable and accrued liabilities 476,225 (96,455)
NET CASH USED IN OPERATING ACTIVITIES (2,244,482) (1,057,996)
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of patents   (110,000)
Deposit for equipment (22,117) (180,000)
Purchase of property and equipment (185,560) (98,349)
NET CASH USED IN INVESTING ACTIVITIES (207,677) (388,349)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from convertible debentures 4,250,265  
Repayment of secured convertible debentures (1,035,930)  
Repayment of unsecured convertible debentures   (40,357)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 3,214,335 (40,357)
Effects of foreign currency exchange rate changes (63,186) (4,440)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE PERIOD 698,990 (1,491,142)
Cash and cash equivalents, beginning of period 1,182,387 1,965,043
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,881,377 473,901
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:    
INCOME TAXES PAID 0 0
INTEREST PAID $ 67,007 $ 67,179
XML 53 R45.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Derivative Liabilities at Fair Value (Details) - USD ($)
Aug. 31, 2019
Nov. 30, 2018
Indexed Shares [Member]    
Embedded derivatives, liability $ 8,500,000 $ 16,544,853
Fair Value [Member]    
Embedded derivatives, liability 214,200 957,301
Secured Debentures December 7, 2016 [Member] | Indexed Shares [Member]    
Embedded derivatives, liability   8,044,853
Secured Debentures December 7, 2016 [Member] | Fair Value [Member]    
Embedded derivatives, liability   426,016
Secured Convertible Debentures October 22, 2018 [Member] | Indexed Shares [Member]    
Embedded derivatives, liability 8,500,000 8,500,000
Secured Convertible Debentures October 22, 2018 [Member] | Fair Value [Member]    
Embedded derivatives, liability $ 214,200 $ 531,285
XML 54 R9.htm IDEA: XBRL DOCUMENT v3.19.3
PROPERTY AND EQUIPMENT
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
PROPERTY AND EQUIPMENT [Text Block]
3.

PROPERTY AND EQUIPMENT

   

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is provided commencing in the month following acquisition using the following annual rate and method:

  Computer Equipment and Software 30% declining balance method
  Furniture and Fixtures 30% declining balance method
  Leasehold Improvements   straight line over period of lease
  Moulds 20% straight line over 5 years

      August 31, 2019     November 30, 2018  
            Accumulated           Accumulated  
      Cost     Amortization     Cost     Amortization  
      $     $     $     $  
  Computer equipment and software   81,893     51,469     77,382     46,837  
  Furniture and fixtures   22,722     20,519     20,998     18,763  
  Leasehold improvements   26,471     26,471     26,471     26,471  
  Moulds   470,922     229,440     291,599     210,961  
      602,008     327,899     416,450     303,032  
                           
  Net carrying amount       $ 274,109         $ 113,418  
                           
  Depreciation expense for nine- month period $  24,869     (August 31, 2019 ) $  12,138     (August 31, 2018 )

As of August 31, 2019, the Company has deposits of $227,781 (November 30, 2018 - $205,664) with vendors primarily for supply of moulds and equipment. As of August 31, 2019, the vendors had not completed the supply of these moulds and equipment.

XML 55 R28.htm IDEA: XBRL DOCUMENT v3.19.3
CAPITAL STOCK (Narrative) (Details) - USD ($)
1 Months Ended 12 Months Ended
May 22, 2019
Apr. 30, 2019
Jan. 31, 2019
Jul. 31, 2018
May 31, 2018
Mar. 31, 2018
Nov. 30, 2018
Aug. 31, 2019
Mar. 21, 2019
Oct. 06, 2017
Oct. 05, 2017
Common Stock, Shares Authorized             300,000,000 300,000,000 300,000,000 200,000,000 100,000,000
Common Stock, Par or Stated Value Per Share             $ 0.001 $ 0.001 $ 0.001 $ 0.001  
Preferred Stock, Shares Authorized             5,000,000 5,000,000      
Preferred Stock, Par or Stated Value Per Share             $ 0.001 $ 0.001      
Common Stock, Shares, Issued             101,976,900 104,021,837      
Northeast Industrial Partners LLP [Member] | Consulting Agreement [Member]                      
Number of common stock share issued           507,550          
Shares Issued, Price Per Share           $ 0.1231          
Payments of Stock Issuance Costs           $ 62,500          
Fintekk Ap, Llc [Member] | Debt Settlement Agreement [Member]                      
Number of common stock share issued             6,666,666        
Shares Issued, Price Per Share             $ 0.15        
Prepaid expense             $ 750,000        
Chief Legal Officer [Member] | Consulting Agreement [Member]                      
Number of common stock share issued     166,666                
Shares Issued, Price Per Share     $ 0.1482                
Payments for consultant services     $ 24,700                
Paul Jensen [Member] | Employment Agreement [Member]                      
Number of common stock share issued     134,938 298,880 334,154 339,370 136,146        
Shares Issued, Price Per Share     $ 0.1482 $ 0.1673 $ 0.1496 $ 0.1473 $ 0.1469        
Payments of Stock Issuance Costs     $ 20,000 $ 50,000 $ 50,000 $ 50,000 $ 20,000        
Bryan Ganz [Member] | Consulting Agreement [Member]                      
Number of common stock share issued   333,333 500,000       500,000        
Shares Issued, Price Per Share   $ 0.14 $ 0.1482       $ 0.1451        
Payments of Stock Issuance Costs   $ 46,665         $ 72,573        
Payments for consultant services     $ 74,100                
Dean Thrasher [Member] | Consulting Agreement [Member]                      
Number of common stock share issued   180,000 180,000       180,000        
Shares Issued, Price Per Share   $ 0.14 $ 0.1482       $ 0.1533        
Payments for consultant services   $ 25,200 $ 26,676       $ 27,600        
Wager [Member]                      
Number of common stock share issued   250,000                  
Shares Issued, Price Per Share   $ 0.14                  
Payments of Stock Issuance Costs   $ 35,000                  
Consultant [Member] | Consulting Agreement [Member]                      
Number of common stock share issued 300,000                    
Shares Issued, Price Per Share $ 0.14                    
Payments for consultant services $ 42,000                    
Andre J Buys Sr [Member] | Consulting Agreement [Member]                      
Number of common stock share issued     134,938                
Shares Issued, Price Per Share     $ 0.1482                
Payments of Stock Issuance Costs     $ 19,998                
XML 56 R24.htm IDEA: XBRL DOCUMENT v3.19.3
CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND DEFERRED FINANCING COSTS (Tables)
9 Months Ended
Aug. 31, 2019
Schedule of Derivative Liabilities at Fair Value [Table Text Block]
   Indexed    
 Financings giving rise to derivative financial instruments Shares  Fair Value 
 Convertible Notes October 22, 2018 8,500,000 $214,200 
   8,500,000 $214,200 

The components of the embedded derivative as of November 30, 2018 are:

   Indexed    
 Financings giving rise to derivative financial instruments Shares  Fair Value 
 Convertible Secured Debentures December 7, 2016 8,044,853 $426,016 
 Convertible Notes October 22, 2018 8,500,000  531,285 
   16,544,853 $957,301 
Schedule of Derivative Instruments, Amounts reflected in Income [Table Text Block]
   Nine Months  Nine Months 
   Ended  Ended 
   August 31, 2019  August 31, 2018 
 Financings giving rise to derivative financial instruments and the income effects:      
 Convertible Secured Debentures December 7, 2016$ 425,020 $(245,852) 
 Convertible Notes October 22, 2018$ 317,086   
  $ 742,106 $(245,852) 
Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Method Used [Table Text Block]
 Convertible secured debentures, December 7, 2016 August 31, 2019  November 30, 
      2018 
        
 Derivative financial instruments$ - $ 426,016 
 Conversion price$ - $ 0.135 
 Volatility   91% 
 Remaining term (years)   0.52 
 Risk free rate   2.52% 
 
 Convertible notes, October 22, 2018 August 31, 2019  November 30, 
      2018 
        
 Derivative financial instruments$ 214,200 $ 531,285 
 Conversion price$ 0.15 $ 0.15 
 Volatility 65%  79% 
 Remaining term (years) 0.62  1.38 
 Risk free rate 1.76%  2.70% 
Series B Convertible Secured Debentures December 7, 2016 [Member]  
Schedule of Secured Convertible Debentures, Allocation of the Purchase [Table Text Block]

The following table reflects the allocation of the purchase on December 7, 2016:

 Secured convertible debentures Face Value 
 (CAD $1,399,000)$ 1,041,835 
 Proceeds 1,041,835 
 Embedded derivative (285,612)
 Carrying value$ 756,223 
Secured Convertible Debentures October 22, 2018 [Member]  
Schedule of Secured Convertible Debentures, Allocation of the Purchase [Table Text Block]

The following table reflects the allocation of the purchase on October 22, 2018:

 Proceeds$ 1,275,000 
     
 Convertible notes$ (131,547)
     
 Derivative liability-convertible promissory notes$ (619,364)
     
 Additional paid in capital (equity warrants)$ (524,089)
XML 57 R20.htm IDEA: XBRL DOCUMENT v3.19.3
DEFERRED COSTS
9 Months Ended
Aug. 31, 2019
Deferred Costs [Abstract]  
DEFERRED COSTS
14.DEFERRED COSTS
 The Company has capitalized $55,862 of legal costs incurred for a future financing (see note 15).
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COMMITMENTS (Narrative) (Details)
1 Months Ended 9 Months Ended
Apr. 13, 2018
USD ($)
trigger_price
$ / shares
shares
Dec. 31, 2017
USD ($)
Aug. 31, 2019
USD ($)
Aug. 31, 2019
ZAR (R)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures | shares 1,500,000      
Rental expenses for services   $ 700    
Massachusetts [Member]        
Rental expenses for services     $ 700  
Indiana [Member]        
Rental expenses for services     2,472  
South Africa [Member]        
Rental expenses for services     968 R 14,750
Consulting Agreements [Member]        
Payment For Consultants     7,500  
Amount of increased in payment for consultants     $ 10,000  
Purchase and Sale Agreement (the Agreement) with Andre Buys [Member]        
Number of stock options | shares 1,500,000      
Stock option price per share | $ / shares $ 0.16      
First installment of consideration payment $ 100,000      
Second installment of consideration payment in cash 500,000      
Deferred compensation arrangement with individual share award granted amount $ 750,000      
Terms of stock option grant date 7 years      
Stock option terms of remain employee 3 years      
Percentage of intellectual property of portfolio 2.00%      
Amount of royalty exceeds $ 25,000      
Minimum payment of royalty 25,000      
Minimal commitment relating to employment contract $ 320,000      
Terms of minimal commitment relating to employment contract 32 months      
Purchase and Sale Agreement (the Agreement) with Andre Buys [Member] | Second Anniversary [Member]        
Percentage of royalty 10.00%      
Purchase and Sale Agreement (the Agreement) with Andre Buys [Member] | Sixth Anniversary [Member]        
Percentage of royalty 4.00%      
Purchase and Sale Agreement (the Agreement) with Andre Buys [Member] | Eighth Anniversary [Member]        
Percentage of royalty 3.00%      
Batch of 500,000 options 1 [Member] | Purchase and Sale Agreement (the Agreement) with Andre Buys [Member]        
Stock option, trigger price | trigger_price 0.30      
Batch of 500,000 options 2 [Member] | Purchase and Sale Agreement (the Agreement) with Andre Buys [Member]        
Stock option, trigger price | trigger_price 0.50      
Batch of 500,000 options 3 [Member] | Purchase and Sale Agreement (the Agreement) with Andre Buys [Member]        
Stock option, trigger price | trigger_price 1.00      
XML 61 R35.htm IDEA: XBRL DOCUMENT v3.19.3
PATENTS (Narrative) (Details) - USD ($)
3 Months Ended 9 Months Ended
Apr. 13, 2018
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2019
Aug. 31, 2018
Purchase of patents         $ 110,000
Amortization of patents   $ 1,833 $ 1,833 $ 5,499 $ 1,833
Purchase and Sale Agreement with Andre Buys [Member]          
Purchase of patents $ 110,000        
Amount for consideration portfolio 100,000        
Legal costs to transfer of patent rights $ 10,000        
Term for second payment       2 years  
Purchase and Sale Agreement with Andre Buys [Member] | Maximum [Member]          
Useful life of patents 20 years        
Agreed to pay amount for discretion $ 750,000        
Purchase and Sale Agreement with Andre Buys [Member] | Minimum [Member]          
Useful life of patents 15 years        
Agreed to pay amount for discretion $ 500,000        
XML 62 R39.htm IDEA: XBRL DOCUMENT v3.19.3
Schedule of Depreciation Rate, Plant and Equipment (Details)
9 Months Ended
Aug. 31, 2019
Computer Equipment and Software [Member]  
Depreciation method declining balance method
Property Plant And Equipment Depreciation Rate 30.00%
Furniture and Fixtures [Member]  
Depreciation method declining balance method
Property Plant And Equipment Depreciation Rate 30.00%
Moulds [Member]  
Depreciation method straight line
Property, Plant and Equipment, Useful Life 5 years
Property Plant And Equipment Depreciation Rate 20.00%
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INVENTORY
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
INVENTORY [Text Block]
10.

INVENTORY

Inventory as of August 31, 2019 consists of raw materials for Byrna for $401,742 (November 30, 2018:$Nil) finished goods of Byrna for $160,833 (November 30, 2018: $Nil), finished goods of Blunt Impact Projectiles 40mm for $67,121 (November 30, 2018: $90,329) and inventory procured from other suppliers for $37,216 (November 30, 2018: $38,792). The Company values its inventory on a first-in, first-out basis. Inventory is valued at the lower of cost or net realizable value.

XML 64 R12.htm IDEA: XBRL DOCUMENT v3.19.3
RELATED PARTY TRANSACTIONS
9 Months Ended
Aug. 31, 2019
Notes to Financial Statements [Abstract]  
RELATED PARTY TRANSACTIONS [Text Block]
6.

RELATED PARTY TRANSACTIONS

The following transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by related parties.

Nine months ended August 31, 2019

The Company expensed $66,667 for services provided by Jensen as CEO through March 31, 2019, which includes an obligation of the Company to issue shares for $20,000.

The Company expensed $50,000 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which the CFO has an ownership interest.

The Company expensed $43,200, which includes $25,200 for the issuance of 180,000 common shares for services, pursuant to a consulting contract, for services provided by Thrasher, a former director of the Company.

The Company expensed $90,000 for services provided by Andre Buys (“Buys”), CTO of the Company, and an additional $8,333 for royalties. The Company expensed $12,681 for the value of that portion of his 1,500,000 options that vested during this period. As at August 31, 2019, the Company owes Buys $16,333.

The Company expensed $136,374 for services provided by Ganz, President of the Company and, effective April 1, 2019, CEO of the Company, which includes $46,667 for issuance of 333,333 common shares and $52,500 for issuance of convertible notes.

The Company expensed $119,385 for services provided for Wager, CLO of the Company, which includes $35,000 for issuance of 250,000 common shares and $42,500 for issuance of convertible notes.

The Company expensed $16,200 for office rent including services to a corporation owned and controlled by Ganz, President and, effective April 1, 2019 CEO of the Company. As of August 31, 2019, the Company has a payable due to that corporation of $8,120.

Current directors and officers of the Company participated in the April 22, 2019, May 20, 2019 and July 22, 2019 financing for 316 units for total proceeds of $315,588, of which $70,000 was issued for services rendered.

Amounts owing to related parties are unsecured, non-interest bearing and due on demand.


Nine months ended August 31, 2018

As of August 31, 2018, there were no amounts receivable from related parties.

As of August 31, 2018, the Company had a payable of $103,906 to related parties to be settled by issuance of stock.

The Company expensed $150,000 for services provided by Jensen, COO and President of the Company through July 13, 2018 and, CEO of the Company effective July 13, 2018.

The Company expensed $34,875 for services provided by Malhotra, CFO of the Company, which was paid to a corporation in which Malhotra has an ownership interest, in accordance with his consulting contract.

The Company expensed $116,575 which includes $18,000 for issuance of proportionate shares per his contract, for services provided by Dean Thrasher as CEO of the Company through July 13,2018 and as Executive Chairman of the Company effective July 13, 2018, which was paid to a corporation in which the CEO has an ownership interest, in accordance with the consulting contract (see also note 7). The Company also expensed $39,046 for the value of that portion of his 1,150,000 options that vested during this period.

The Company issued 507,550 common shares to NEIP at a price of $0.12 per share to satisfy the payment of $62,500 for services rendered due in December 2017.

On April 13, 2018, the Company employed Buys as the CTO with compensation of $10,000 per month over a three-year period and granted Buys options to acquire a total of 1,500,000 common shares. The Company expensed $46,667 paid to Buys, and expensed $6,341 for the value of that portion of his 1,500,000 options that vested during this period. See Note 7(a).


Effective June 1, 2018 the Company entered into a consulting agreement (the “Consulting Agreement”) with Bryan Ganz pursuant to which Mr. Ganz served as President of the Company. By the terms of the Consulting Agreement, Mr. Ganz was to be paid annually $200,000 in the Company’s common shares for his services and subject to stock exchange approval. For the Company’s fiscal third and fourth quarters Ganz was to be paid 500,000 common shares for each quarter, ending March 31, 2019. The Company accrued expenses of $72,573 as the cost of shares issued to Ganz for services.

Effective December 1, 2017, the Company leased office premises at Wakefield, Massachusetts, USA for rent of $700 per month from a corporation owned and controlled by a director of the Company. The Company expensed $6,300 as office rent for the nine-months ended August 31, 2018. As of August 31, 2018, the Company had a payable for $3,940 for the rent.