7.           STOCK-BASED COMPENSATION

2017 Plan

In 2017, the Company adopted the Security Devices International Inc. 2017 Stock Option Plan (the "2017 Plan") for the issuance of stock options and other stock-based awards, authorizing 9,379,857 shares of the Company's common stock to be issued. On December 19, 2017, the 2017 Plan was amended to increase the number of shares reserved for issuance from 9,379,857 to 18,993,274.

At the time that the 2017 Plan was adopted, the Company was trading on the Toronto Stock Exchange ("TSX"). On October 15, 2018, the Company ceased trading on the TSX and was listed on the Canadian Stock Exchange ("CSE"). As part of this change, the Company amended the 2017 Plan to allow for the exercise of options under the 2017 Plan to be traded on the CSE. Accordingly, on October 13, 2019, the Board approved the first amendment to the 2017 Plan (the "First Amendment"). The First Amendment amends the 2017 Plan for specific rules and definitions that must be adhered to on the CSE. All other provisions of the 2017 Plan remain. The First Amendment is subject to approval by the majority of the Company's shareholders which may be obtained by consent or by vote at a general or special meeting of the shareholders.

During the years ended November 30, 2019 and 2018, the Company granted options to purchase 120,000 shares and 1,900,000 shares, respectively, of common stock to employees and directors. The Company recorded stock-based compensation expense for options granted to employees and directors of $31,530 and $98,343 during the years ended November 30, 2019 and 2018, respectively.

During the years ended November 30, 2019 and 2018, the Company granted options to purchase no shares and 250,000 shares, respectively, of common stock to non-employees. The Company recorded stock-based compensation expense for options granted to non-employees of $Nil and $30,456 during the years ended November 30, 2019 and 2018, respectively.

Stock Option Valuation

The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and non-employees for the years ended November 30, 2019 and 2018 were as follows:

Year ended November 30, 2019

Employee Options (Black-Scholes option pricing model)

Year ended November 30, 2018

Employee Options (Binomial Lattice option pricing model)

Director and Non-Employee Options (Black-Scholes option pricing model)

The following table summarizes option activity under the 2017 Plan during the years ended November 30, 2019 and 2018:

2019:

The aggregate intrinsic value of options outstanding and exercisable at November 30, 2019 is $19,600.

The aggregate intrinsic value of options outstanding and exercisable at November 30, 2018 is $88,500.

The share options outstanding at the end of the year had a weighted-average remaining contractual life as follows:

Incentive Warrants

During the year ended November 30, 2019, the Company issued 750,000 warrants each to two consultants (the "Incentive Warrants") to purchase common shares. The Incentive Warrants were issued outside of the 2017 Plan. Stock-based compensation expense for the year ended November 30, 2019 was $186,624, before a tax benefit of $50,986 which has been fully reserved in the valuation allowance. The Company did not issue Incentive Warrants in 2018. As of November 30, 2019, non-vested stock-based compensation expense associated with the Incentive Warrants was $7,465.

Incentive Warrant Valuation

The assumptions that the Company used to determine the grant-date fair value of Incentive Warrants granted to two consultants for the year ended November 30, 2019 were as follows:

Year ended November 30, 2019

Incentive Warrants (Black-Scholes option pricing model)

Stock-Based Compensation Expense

Total stock-based compensation expenses of $218,154 and $128,799 for the years ended November 30, 2019 and 2018, respectively, were recorded in SG&A expenses.

As of November 30, 2019, there was $30,715 of unrecognized expense related to non-vested stock-based compensation arrangements granted. The weighted-average period over which total compensation cost related to non-vested awards not yet recognized is expected to be recognized is 1.4 years.