UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB/A [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 28, 2007 or [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Commission file No. 0-33259 SECURITY DEVICES INTERNATIONAL INC. ----------------------------------- (Exact name of registrant as specified in its charter) Delaware Applied For (State of incorporation) (I.R.S. Employer Identification Number) 120 Adelaide Street West Suite 2500 Toronto, Ontario Canada M5H 1T1 ------------------------------------------------- (Address of Principal Executive Office) Zip Code (647) 388-1117 ---------------------------------------- (Registrant's telephone number, including area code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No __X____ ------------ - As of September 10, 2007, the Company had 14,330,050 issued and outstanding shares of common stock. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This report includes "forward-looking statements". All statements other than statements of historical facts included in this report, regarding the Company's financial position, business strategy, plans and objectives, are forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements and the assumptions upon which such forward-looking statements are based are reasonable, it can give no assurance that such expectations and assumptions will prove to have been correct. REASONS FOR AMENDED REPORT This report has been amended so that certain parts of the Management's Discussion and Analysis section of this report and the Company's financial statements correspond with the Company's registration statement on Form SB-2 (File No. 333-143301) to reflect certain enhanced disclosures in the notes to the financial statements. There were no changes in the amounts reported in the Company's interim financial statements included in the 10-QSB report previously filed on April 16, 2007 (File No. 333-132456). SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) INTERIM FINANCIAL STATEMENTS FEBRUARY 28, 2007 (Amounts expressed in US Dollars) (Unaudited) SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) INTERIM FINANCIAL STATEMENTS FEBRUARY 28, 2007 (Amounts expressed in US Dollars) (Unaudited) TABLE OF CONTENTS Page No Interim Balance Sheets as at February 28, 2007 and November 30, 2006 1 Interim Statement of Operations for the three months ended February 28, 2007 and February 28, 2006 2 Interim Statement of Cash Flows for the three months ended February 28, 2007 and February 28, 2006 3 Interim Statements of changes in Stockholders' Equity for the three months ended February 28, 2007 and for the period from inception (March 1, 2005) to November 30, 2006 4 Condensed Notes to Interim Financial Statements 5-8 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Balance Sheets As at February 28, 2007 and November 30, 2006 (Amounts expressed in US Dollars) (Unaudited) February 28, November 30, 2007 2006 ASSETS $ $ CURRENT Cash and cash equivalents 2,279,701 1,463,833 Prepaid expenses and other (Note 8) 10,665 4,452 ------------ ------------ Total Current Assets 2,290,366 1,468,285 Plant and Equipment, net (Note 4) 8,249 - ------------ ------------ TOTAL ASSETS 2,298,615 1,468,285 ------------ ------------ LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities 134,208 104,011 Loans from Directors/Shareholders (Note 7) 4,941 4,227 ------------ ------------ Total Current Liabilities 139,149 108,238 ------------ ------------ STOCKHOLDERS' EQUITY Capital Stock (Note 5) 13,701 11,365 Additional Paid-In Capital 4,571,500 3,198,180 Deficit Accumulated During the Development Stage (2,425,735) (1,849,498) ------------ ------------ Total Stockholders' Equity 2,159,466 1,360,047 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,298,615 1,468,285 ============ ============ See condensed notes to the interim financial statements. 1 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Statements of Operations For the Three Months Ended February 28, 2007 and February 28, 2006 (Amounts expressed in US Dollars) (Unaudited) For the For the quarter quarter ended ended Cumulative February 28, February 28, since inception 2007 2006 $ $ $ REVENUES - - - ---------------- ------------ ------------ OPERATING EXPENSES: Research and Product Development Cost 848,886 310,586 90,175 Amortization 130 130 - General and Administration 1,597,741 286,543 26,024 ---------------- ------------ ------------ TOTAL OPERATING EXPENSES 2,446,757 597,259 116,199 ---------------- ------------ ------------ LOSS FROM OPERATIONS (2,446,757) (597,259) (116,199) Other Income-Interest 21,022 21,022 - ---------------- ------------ ------------ LOSS BEFORE INCOME TAXES (2,425,735) (576,237) (116,199) ---------------- ------------ ------------ Income taxes - - - ---------------- ------------ ------------ NET LOSS (2,425,735) (576,237) (116,199) ---------------- ------------ ------------ Loss per share - basic and diluted (0.04) (0.02) ------------ ------------ Weighted average common shares outstanding 13,415,518 7,398,324 ------------ ----------- See condensed notes to the interim financial statements. 2 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Statement of Cash Flows For the Three Months Ended February 28, 2007 and February 28, 2006 (Amounts expressed in US Dollars) (Unaudited) For the For the quarter quarter ended ended Cumulative February 28, February 28, since inception 2007 2006 $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period (2,425,735) (576,237) (116,199) Items not requiring an outlay of cash: Issue of shares for professional services 74,000 - - Stock based compensation 1,254,926 204,986 - Amortization 130 130 Changes in non-cash working capital: Accounts payable and accrued liabilities 134,208 30,197 82,467 Prepaid expenses and other (10,665) (6,213) - ---------------- ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (973,136) (347,137) (33,732) ---------------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of Plant and Equipment (8,379) (8,379) - ---------------- ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (8,379) (8,379) - ---------------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Loans from directors/shareholders 4,941 714 4,209 Proceeds from issuance of common shares 3,161,275 1,170,670 95,600 Exercise of stock options 95,000 - - ---------------- ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 3,261,216 1,171,384 99,809 ---------------- ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD 2,279,701 815,868 66,077 Cash and cash equivalents, beginning of period - 1,463,833 126 ---------------- ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD 2,279,701 2,279,701 66,203 INCOME TAXES PAID - - - ================ ============ ============ See condensed notes to the interim financial statements. 3 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Statement of Changes in Stockholders' Equity Three months ended February 28, 2007 and for Period from Inception (March 1, 2005) to November 30, 2006. (Amounts expressed in US Dollars) (Unaudited) Number of Common Additional Common Shares Paid-in Deficit Shares amount Capital accumulated Total $ $ $ $ $ Balance as of March 1, 2005 - - - - - Issuance of Common shares for professional services 6,525,000 6,525 58,725 - 65,250 Issuance of common shares for cash 397,880 398 99,072 99,470 Net loss for the period - - - (188,699) (188,699) ----------- -------- --------- ----------- ----------- Balance as of November 30, 2005 6,922,880 6,923 57,797 (188,699) (23,979) Issuance of common shares for cash 956,000 956 94,644 - 95,600 Issuance of common shares for cash 286,000 286 49,764 - 50,050 Issuance of common shares to consultant for services 50,000 50 8,700 - 8,750 Issuance of common shares for cash 2,000,000 2,000 398,000 - 400,000 Exercise of stock options 950,000 950 94,050 - 95,000 Issuance of common shares for cash (net of agent commission) 200,000 200 179,785 - 179,985 Stock subscriptions received 1,165,500 - 1,165,500 Stock based compensation - - 1,049,940 - 1,049,940 Net loss for the year - - - (1,660,799) (1,660,799) ----------- -------- --------- ----------- ----------- Balance as of November 30, 2006 11,364,880 11,365 3,198,180 (1,849,498) 1,360,047 Issuance of common shares for stock subscriptions received in prior year 1,165,500 1,165 (1,165) - - Issuance of common shares for cash 1,170,670 1,171 1,169,499 1,170,670 Stock based compensation 204,986 204,986 Net loss for the three month period ended February 28, 2007 - - - (576,237) (576,237) ----------- -------- --------- ----------- ----------- Balance as of February 28, 2007 13,701,050 13,701 4,571,500 (2,425,735) 2,159,466 ----------- -------- --------- ----------- -----------
The accompanying notes are an integral part of these financial statements. 4 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2007 (Amounts expressed in US Dollars) (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of all recurring accruals) considered necessary for fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the year ended November 30, 2007. Interim financial statements should be read in conjunction with the company's annual audited financial statements for the year ended November 30, 2006. The Company was incorporated under the laws of the state of Delaware on March 1, 2005. The interim financial statements include the accounts of Security Devices International Inc. (the "Company"). 2. NATURE OF OPERATIONS The Company is currently in the advanced stages of developing LEKTROX, a unique line of wireless electric ammunition for use in military, homeland security, law enforcement, and professional and home security scenarios. LEKTROX has been specially designed for use with standards issue riot guns, M203 grenade launchers and regular 12-guage shotguns. This will allow military, law enforcement agencies etc. to quickly deploy LEKTROX without the need for lengthy, complex training methods or significant functional adjustments to vehicles or personal equipment. Simplicity of use is also a key benefit for the home security market where most users have little or no specialized training. LEKTROX is a 3rd generation electric solution. First generation solutions were electric batons and hand-held stun guns which had a range of arm's length. 2nd generations were the wired electric charge solutions. 3rd generations are the wireless electric bullets. Currently, there is still no 3rd generation wireless electric bullet on the market. The Company is in the development stage and has not yet realized revenues from its planned operations. The Company has incurred a loss of $ 576,237 during the three month period ended February 28, 2007. At February 28, 2007, the Company had an accumulated deficit during the development stage of $2,425,735 which includes a non- cash stock based compensation cost of $1,254,926. The Company has funded operations through the issuance of capital stock. During the year ended November 30, 2006 the Company raised $1,982,333 primarily through issue of common stock. (See note 5). During the quarter ended February 28, 2007, the company raised an additional $1,170,670 through issue of common stock. The company has a working capital of $ 2,151,217 and shareholders' equity of $2,159,466 as at February 28, 2007. Management's plan is to continue raising additional funds through future equity or debt financing until it achieves profitable operations 5 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2007 (Amounts expressed in US Dollars) (Unaudited) 3. RESEARCH AND PRODUCT DEVELOPMENT Research and Product Development costs, other than capital expenditures but including acquired research and product development costs, are charged against income in the period incurred. 4. PLANT AND EQUIPMENT, NET Plant 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 30% declining balance method February 28, 2007 November 30,2006 Accumulated Accumulated Cost Depreciation Cost Depreciation $ $ $ $ ------------------------------------------------------------------------- Computer equipment 8,379 130 - - 8,379 130 - - ------- --- Net carrying amount $8,249 $Nil ------ ---- 5. ISSUANCE OF CAPITAL STOCK Year ended November 30, 2006 i) On December 31, 2005 the Company authorized the issuance of 486,000 common shares for cash for a total consideration of $48,600. ii) On January 31, 2006 the Company authorized the issuance of 470,000 common shares for cash for a total consideration of $ 47,000. iii) On March 8, 2006 the Company authorized the issuance of 286,000 common shares for cash @ $0.175 per share for a total consideration of $50,050. On the same day, the Company authorized the issuance of 50,000 shares to a consultant for the services rendered as finder's fees. These services were valued @$0.175 per common share and expensed as consulting fees in the amount of $8,750. 6 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2007 (Amounts expressed in US Dollars) (Unaudited) 5. ISSUANCE OF CAPITAL STOCK (Cont'd) iv) By means of a prospectus dated May 5, 2006 the Company offered to the public up to 2,000,000 shares of its common stock at a price of $0.20 per share. The Company closed the offering on July 31, 2006 after receiving consideration of $400,000 and issued 2,000,000 common shares in August, 2006. v) The company directors exercised 950,000 stock options to purchase 950,000 common shares for a total consideration of $95,000 on November 1, 2006. vi) On November 29, 2006 the company authorized the issuance of 200,000 common shares for cash @$1.00 per common share. A commission of $20,015 was paid to the agent and this amount is netted with additional paid in capital. The proceeds received were part of the Private offering effective November 20, 2006. vii) As at November 30, 2006 the company received stock subscription for $1,165,500. This was also part of the private offering effective November 20, 2006. The Company closed this private offering on December 12, 2006 when it had completed the sale of 2,536,170 shares of its common stock to a group of private investors. Three months ended February 28, 2007 On December 12, 2006 the Company completed the sale of 2,536,170 shares of its common stock to a group of private investors. The shares were sold in the private offering at a price of $1.00 per share and are restricted securities as that term is defined in Rule 144 of the Securities and Exchange Commission. The Company had already issued 200,000 common shares on November 29, 2006 and it issued the balance 2,336,170 shares on December 12, 2006. The Company relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 for the sale of these shares. 7 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2007 (Amounts expressed in US Dollars) (Unaudited) 6. STOCK BASED COMPENSATION Per SEC Staff Accounting Bulletin 107, Topic 14.F, "Classification of Compensation Expense Associated with Share-Based Payment Arrangements" stock based compensation expense is being presented in the same lines as cash compensation paid. As such, stock based compensation is no longer presented separately. Effective January 7, 2007 the company appointed a CFO and granted stock options to acquire 125,000 common shares under its Non-Qualified Stock Option Plan. The exercise price for the options was set at $1.50 per share. These options vest immediately and expire on January 7, 2012. The stock based compensation cost of $204,986 has been expensed in this quarter. The fair value of each grant was estimated at the grant date using the Black-Scholes option-pricing model. The Black-Scholes option pricing model requires the use of certain assumptions, including expected terms, expected volatility, expected dividends and risk-free interest rate to calculate the fair value of stock-based payment awards. The assumptions used in calculating the fair value of stock option awards involve inherent uncertainties and the application of management judgment. The estimated volatility used is the historic volatility. The expected term calculation is based upon the expected term the option is to be held, which is full term of the option. The risk-free interest rate is based upon the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that we have never paid cash dividends on our common stock and we have no present intention to pay cash dividends. The expected forfeiture rate of 0% is based on immediate vesting of stock options. The fair value of each option used for the purpose of estimating the stock compensation is based on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: Risk free rate 3.50% Volatility factor 122.84% Expected dividends 0% Forfeiture rate 0% Expected life 5 years Exercise price $1.50 Grant date fair value of options $1.64 8 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2007 (Amounts expressed in US Dollars) (Unaudited) 6. STOCK BASED COMPENSATION (Cont'd) Market price of Company's common stock on date of grant $1.90 Total number of options granted 125,000 Stock-based compensation cost expense $204,986 Unexpended stock-based compensation deferred over to next period nil As of February 28, 2007 there was $Nil of unrecognized expense related to non-vested stock-based compensation arrangements granted. 7. RELATED PARTY TRANSACTIONS a) During the three month period ended February 28, 2007, all out of pocket expenses of directors/promoters were expensed. The Directors also made advances to the Company to meet the operating expenses. These advances of $4,941 as at February 28, 2007 are unsecured and bear interest at 4% p.a. b) A company controlled by a 13.7% (as of November 30, 2006) shareholder, who is also the son of a director was paid $168,100 from inception to February 28, 2007 ($78,000 for the three months ended February 28, 2007) for research and development (see note 9 (b)) 8. PREPAID EXPENSES AND OTHER Includes prepayments made for directors' and officers insurance for $10,665. 9. SUBSEQUENT EVENTS a) The Company had entered into an amended agreement in February 2007, with a director regarding development of its "Electrical Shocker" ("ES") technology. Pursuant to the original agreement executed in November 2006, the director was paid a total of $38,000 which included $22,000 during the last quarter of 2006 and an additional $16,000 in January 2007. The Company has expensed this payment of $22,000 as Research and Product Development cost during 2006 and also expensed the balance $16,000 to Research and Product Development cost in this quarter. In addition, the director was paid $62,000 in February, 2007 upon signing the amended agreement. The Company expensed this payment of $62,000 to Research and Product Development in this quarter . The director in return had 9 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2007 (Amounts expressed in US Dollars) (Unaudited) 9. SUBSEQUENT EVENTS (Cont'd) released the Company from a prior obligation to pay royalty from the sale of any product developed using this technology. In the absence of acceptance of the ES technology by the Company, the Company cancelled 1,560,000 shares and the director was paid $50,000 on March 12, 2007 in accordance with the amended agreement. The Company accounted for this transaction under the constructive retirement method in the second quarter of 2007. The cancelled shares reverted to authorized but unissued status. The stock and additional paid-in-capital amounts were reduced with a total of $15,600 and a debit of $34,400 to retained earnings, being the excess of purchase cost over the original issuance. b) On March 12, 2007, the Company authorized the issuance of 50,000 common shares at $1.50 per share for a total cash consideration of $75,000 to a consultant who rendered investor relation services to the Company during the quarter ended May 31, 2007. The market price of the total stock on the date of issuance was $155,000. The difference of $80,000 between the market price of the total stock ($155,000) and the issued price ($75,000) represents the estimated fair value of the consultant's services. The par value of the shares in the amount of $50 will be credited to share capital and the balance of $154,950 credited to additional paid-in capital and shown as issuance of common shares for cash and services in interim statement of changes in stockholder's equity. c) The Company has signed a letter of intent with a third party Agent on a best effort basis for a private placement offering of Common Shares in the amount of US$5million. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS SDI was incorporated on March 1, 2005. SDI is a defense technology company which is developing LEKTROX, a unique line of wireless electric ammunition for use in military, homeland security, law enforcement, and professional and home security scenarios. SDI plans to develop a Short Range version of the LEKTROX after the development to the Long Range LEKTROX has been completed. However, since the development of the Long Range LEKTROX is not yet complete, SDI does not know the time or cost involved in developing a Short Range LEKTROX. As of August 31, 2007 SDI had not generated any revenue. During the three months ended February 28, 2007 more capital was available to SDI and as a result SDI was able to spend more on research and product development. During the period from inception (March 1, 2005) through February 28, 2007 SDI's operations used $(973,131) in cash. During this period: o SDI borrowed $4,941 (net) from its officers and directors, o raised $2,761,275 from the sale of 4,176,050 shares of common stock to private investors, o raised $400,000 from the public sale of 2,000,000 shares of common stock at a price of $0.20 per share, and o raised $95,000 from three of its officers and directors upon the exercise of options to purchase 950,000 shares of common stock. SDI did not have any material future contractual obligations or off-balance sheet arrangements as of August 31, 2007. SDI anticipates that its capital requirements for the twelve-month period ending May 31, 2008 will be: Research and Development $1,460,000 General and administrative expenses 100,000 Patent filings 30,000 ------------- Total $1,590,000 ============= SDI does not anticipate that it will need to hire any employees prior to December 31, 2007. SDI does not expect that it will need to raise additional capital during the twelve months ending May 31, 2008. SDI believes that its cash on hand at May 31, 2007 will satisfy its working capital needs for the next eighteen months. SDI does not have any commitments or arrangements from any persons to provide SDI with any additional capital it may need. Controls and Procedures Sheldon Kales, the Company's Chief Executive Officer and Rakesh Malhotra, the Company's Principal Financial Officer, have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report, and in their opinion the Company's disclosure controls and procedures are effective. There were no changes in the Company's internal controls over financial reporting that occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting. PART II ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the three months ended February 28, 2007 the Company sold 2,336,170 shares of its common stock to a group of private investors at a price of $1.00 per share. The Company relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 with respect to the sale of these shares. ITEM 5. OTHER INFORMATION In March 2007 the Company purchased 1,560,000 shares of its common stock from Alexander Blaunshtein for $50,000. These shares were returned to treasury and cancelled. Alexander Blaunshtein is the son of Dr. Natan Blaunstein, who is a director of the Company. ITEM 6. EXHIBITS The following exhibits are filed with this report: Number Description ------ ----------- 31 Rule 13a-14(a)/15d-14(a) certifications 32 Section 1350 certifications SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized on September 13, 2007. SECURITY DEVICES INTERNATIONAL INC. By /s/ Sheldon Kales ------------------------------------ Sheldon Kales, President and Chief Executive Officer By /s/ Rakseh Malhotra ------------------------------------ Rakesh Malhotra, Principal Financial and Accounting Officer