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 May 31, 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)
464 Old Orchard Grove
Toronto, Ontario
Canada M5M 2G4
---------------------------------------------
(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 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 10QSB report previously
filed on July 13, 2007 (File No. 333-132456).
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
INTERIM FINANCIAL STATEMENTS
MAY 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
INTERIM FINANCIAL STATEMENTS
MAY 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
TABLE OF CONTENTS
Page No
Interim Balance Sheets as at May 31, 2007 and November 30, 2006 1
Interim Statement of Operations for the six months and three months
ended May 31, 2007 and May 31, 2006. 2
Interim Statement of Cash Flows for the six months
ended May 31, 2007 and May 31, 2006. 3
Interim Statements of changes in Stockholders' Equity for the six
months ended May 31, 2007 and for the period from inception
(March 1, 2005) to November 30, 2006 4
Condensed Notes to Interim Financial Statements 5-9
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Balance Sheets
As at May 31, 2007 and November 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)
May 31, November 30,
2007 2006
$ $
ASSETS
CURRENT
Cash and cash equivalents 6,268,201 1,463,833
Prepaid expenses and other (Note 9) 122,625 4,452
------------- ------------
Total Current Assets 6,390,826 1,468,285
Plant and Equipment, net (Note 4) 7,620 -
------------- ------------
TOTAL ASSETS 6,398,446 1,468,285
------------- ------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 156,649 104,011
Loans from Directors/Shareholders (Note 7) 1,635 4,227
------------- ------------
Total Current Liabilities 158,284 108,238
------------- ------------
STOCKHOLDERS' EQUITY
Capital Stock (Note 5) 14,330 11,365
Additional Paid-In Capital 9,943,944 3,198,180
Deficit Accumulated During the Development Stage (3,718,112) (1,849,498)
------------- ------------
Total Stockholders' Equity 6,240,162 1,360,047
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 6,398,446 1,468,285
------------- ------------
See condensed notes to the interim financial statements.
1
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Statements of Operations
For the six months and three months ended May 31, 2007 and May 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
For the For the For the For the
Cumulative six months six months three months three months
since ended ended ended ended
Inception May 31, May 31, May 31, May 31,
2007 2006 2007 2006
$ $ $ $
OPERATING EXPENSES:
Research and Product Development Cost 1,170,877 632,577 90,175 321,991 -
Amortization 759 759 - 629 -
General and administration (note 6) 2,609,142 1,297,944 49,335 1,011,401 23,311
------------ ------------ ----------- ------------ ----------
TOTAL OPERATING EXPENSES 3,780,778 1,931,280 139,510 1,334,021 23,311
------------ ------------ ----------- ------------ ----------
LOSS FROM OPERATIONS (3,780,778) (1,931,280) (139,510) (1,334,021) (23,311)
Other Income-Interest 62,666 62,666 - 41,644 -
------------ ------------ ----------- ------------ ----------
LOSS BEFORE INCOME TAXES (3,718,112) (1,868,614) (139,510) (1,292,377) (23,311)
Income taxes - - - - -
------------ ------------ ----------- ------------ ----------
NET LOSS (3,718,112) (1,868,614) (139,510) (1,292,377) (23,311)
------------ ------------ ----------- ------------ ----------
Loss per share - basic and diluted (0.14) (0.02) (0.10) (0.00)
Weighted average common shares outstanding 13,297,757 7,798,166 13,182,555 8,189,315
------------ ----------- ------------ ----------
See condensed notes to the interim financial statements.
2
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Statements of Cash Flow
For the six months ended May 31, 2007 and May 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
For the For the
Cumulative six months six months
since ended ended
Inception May 31, 2007 May 31, 2006
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (3,718,112) (1,868,614) (139,510)
Items not requiring an outlay of cash:
Issue of shares for professional services 154,000 80,000 8,750
Stock based compensation 1,955,224 905,284 -
Amortization 759 759 -
Loss on cancellation of stock 34,400 34,400 -
Changes in non-cash working capital:
Accounts payable and accrued liabilities 156,649 52,638 (9,676)
Prepaid expenses and other (122,625) (118,173) -
------------- ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (1,539,705) (913,706) (140,436)
------------- ------------- -------------
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/ (Repayments) from
directors/shareholders 1,635 (2,592) 4,530
Net Proceeds from issuance of
common shares 7,769,650 5,779,045 145,650
Cancellation of stock (50,000) (50,000) -
Stock subscriptions received - - 100,000
Exercise of stock options 95,000 - -
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,816,285 5,726,453 250,180
------------- ------------- -------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS FOR THE PERIOD 6,268,201 4,804,368 109,744
Cash and cash equivalents,
beginning of period - 1,463,833 126
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 6,268,201 6,268,201 109,870
============= ============= =============
INCOME TAXES PAID - - -
============= ============= =============
INTEREST PAID - - -
============= ============= =============
The accompanying condensed notes are an integral part of these
interim financial statements.
3
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise) Interim Statement of Changes in Stockholders'
Equity For the six months ended May 31, 2007 and May 31, 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 6,923 157,797 (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 or cash 1,170,670 1,171 1,169,499 1,170,670
Stock based compensation 204,986 204,986
Issuance of common shares
for cash and services 50,000 50 154,950 155,000
Stock based compensation 700,298 700,298
Issuance of common
shares for cash (net of
expenses) 2,139,000 2,139 4,531,236 4,533,375
Cancellation of stock (1,560,000) (1,560) (14,040) (15,600)
Net loss for the six month
period ended May 31, 2007 - - - (1,868,614) (1,868,614)
------------ --------- --------- ---------- -----------
Balance as of May 31, 2007 14,330,050 14,330 9,943,944 (3,718,112) 6,240,162
------------ --------- --------- ---------- -----------
The accompanying condensed notes are an integral part of these interim financial
statements.
4
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 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
$ 1,868,614 during the six month period ended May 31, 2007. At May 31,
2007, the Company had an accumulated deficit during the development
stage of $3,718,112 which includes a non- cash stock based compensation
cost of $1,955,224. 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
$1,170,670 through issue of
5
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
2. NATURE OF OPERATIONS (cont'd)
common stock. During the quarter ended May 31, 2007, the Company raised
an additional $4,608,375 (net of expenses of $279,375) through the issue
of Common stock. The company has a working capital of $ 6,232,542 and
shareholders' equity of $6,240,162 as at May 31, 2007. Management's plan
is to continue raising additional funds through future equity or debt
financing until it achieves profitable operations.
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
May 31, 2007 November 30,2006
Accumulated Accumulated
Cost Depreciation Cost Depreciation
$ $ $ $
-------------------------------------------------
Computer equipment 8,379 759 - -
------- --------- ------ ------
8,379 759 - -
------- --------- ------ ------
Net carrying amount $7,620 $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.
6
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
5. ISSUANCE OF CAPITAL STOCK (cont'd)
Year ended November 30, 2006 (cont'd)
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.
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.
Six months ended May 31, 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.
7
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
5. ISSUANCE OF CAPITAL STOCK (cont'd)
Six months ended May 31, 2007 (cont'd)
--------------------------------------
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.
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 was 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.
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 the first quarter of
2007. 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 the first quarter of
2007. The director in return had 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.
8
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
5. ISSUANCE OF CAPITAL STOCK (cont'd)
Six months ended May 31, 2007 (cont'd)
--------------------------------------
On April 25, 2007 the Company sold 1,998,500 shares of its common stock
to a group of private investors. As part of this same financing the
Company sold an additional 140,500 shares to private investors on May 4,
2007. The shares were sold at a price of $2.25 per share and are
restricted securities as that term is defined in Rule 144 of the
Securities and Exchange Commission. In connection with the sale of these
2,139,000 shares, the Company paid a commission of $240,638 to the sales
agent for the offering and incurred legal and other expenditure of
$38,737.
The sales agent also received warrants which allows them to purchase
106,950 shares of the Company's Common stock at a price of $2.81 per
share. The warrants expire in 2009.
The Company has agreed to file a registration statement with the
Securities and Exchange Commission registering the resale of the shares
sold to the investors, as well as the shares issuable upon the exercise
of the warrants issued to the sales agent, and have it declared
effective by September 21, 2007.
If the registration statement is not filed and declared effective by
this date, the Company will issue to the investors, as a group, 85,560
common shares plus16,043 additional common shares for each month the
registration statement remains unfilled or not effective.
The Company relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933 for the sale of these securities.
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 17, 2012.
The stock based compensation cost of $204,986 has been expensed to legal
and accounting.
9
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
6. STOCK BASED COMPENSATION (cont'd)
Effective April 23, 2007, the board of directors granted the following
options under its Non-Qualified Stock Option Plan:
1. Options to two consultants to acquire 150,000 common share each
for a total of 300,000 shares. The exercise price for 300,000
options was set at $2.75 per share. These options vest
immediately and expire on April 23, 2012. Stock based
compensation cost of $622,074 has been expensed to general and
administration expense.
2. Options to two consultants to acquire 20,000 common share each
for a total of 40,000 shares. The exercise price for 40,000
options was set at $3.60 per share. These options vest
immediately and expire on January 29, 2012. Stock based
compensation cost of $78,224 has been expensed to general and
administration expense.
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 the 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.
For the six month period ended May 31, 2007, the Company has recognized
in the financial statements, stock-based compensation costs as per the
following details. 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:
10
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
6. STOCK BASED COMPENSATION (cont'd)
Options Options
granted granted
April 23, 2007 January 7, 2007
-------------- ---------------
Risk free rate 4.25% 3.50%
Volatility factor 106.04% 122.84%
Expected dividends nil nil
Forfeiture rate 0% 0%
Expected life 5 years 5 years
Range of exercise prices $2.75-3.60 $1.50
Market price of Company's common
stock on date of grant $2.65 $1.90
Grant date fair value of options $2.06 $1.64
Total number of options granted 340,000 125,000
Stock-based compensation cost
expensed for six month period
ended May 31, 2007 $700,298 $204,986
Unexpended stock-based compensation
deferred over to next period nil nil
7. RELATED PARTY TRANSACTIONS
a) During the six month period ended May 31, 2007, all out of pocket
expenses of directors/promoters were expensed. The Directors
maintain a current account with the Company to meet the operating
expenses. As of May 31, 2007, there was a payable of $1,635 to the
directors. This balance is unsecured and bears interest at 4% p.a.
8. COMMITMENTS
In March 2007, the Company entered into an Investor Relation Service
Agreement for a period of twelve months commencing the first of April
2007. The consultant will represent the Company in European countries
for disseminating investor relation information and creating awareness
in the European financial community. The Company agreed to pay the
consultant a total of $205,000 for the services to be provided over the
twelve month period and payment of $100,000 in advance. The Company
expensed $34,167 during this quarter and an amount of $65,833 is
included in prepaid expenses and other.
In May 2007, the company entered into a consulting agreement with a
consultant who will provide financial public relation services through
its sub-contractors and shall monitor, supervise and maintain
communications with the subcontractors. The agreement was a period of
three months requiring the Company to pay the total fee of $36,000 in
advance. The Company expensed $12,000 during this quarter and an amount
of $24,000 is included in prepaid expenses and others.
11
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2007
(Amounts expressed in US Dollars)
(Unaudited)
6. COMMITMENTS (cont'd)
In May 2007 the Company entered into a consulting agreement with a
consultant for business development and active marketing of the
Company's technology and products. The initial time frame of the
agreement is from May to November 2007, with a planned extension, at the
mutual agreement of both parties. Compensation to the consultant for the
services is $5,000 monthly in advance.
9. PREPAID EXPENSES AND OTHER
In addition to prepayments for Investor relation services for $ 65,833
and consulting services for $24,000 (note 8) prepaid expenses also
includes prepayments made for directors' and officers insurance for
$28,000.
10. SUBSEQUENT EVENTS
On July 11, 2007 the Company authorized the issuance of warrants to two
directors. These warrants allow one director to purchase 250,000 shares
at a price of $0.50 per share and the other director to purchase 50,000
shares at price of $0.50 per share. The warrants expire May 31, 2017.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATIONS
Security Devices was incorporated on March 1, 2005 and as of May 31, 2007
had not generated any revenue. 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
situations.
During the year ended November 30, 2006 substantially all of SDI's cash
expenses were related to the development of its LEKTROX technology.
During the six months ended May 31, 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 May 31, 2007
SDI's operations used $1,539,705 in cash. During this period SDI:
o purchased $8,379 of equipment,
o borrowed $1,635 (net) from its officers and directors,
o raised $7,769,650 from the sale of shares of its common stock,
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 May 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
On April 25, 2007 the Company sold 1,998,500 shares of its common stock to
a group of private investors. As part of this same financing the Company sold an
additional 140,500 shares to private investors on May 4, 2007. The shares were
sold at a price of $2.25 per share and are restricted securities as that term is
defined in Rule 144 of the Securities and Exchange Commission.
In connection with the sale of these 2,139,000 shares the Company paid a
commission of $240,638 to Salman Partners Inc. the sales agent for the offering.
Salman Partners also received warrants which allows Salman Partners to purchase
106,950 shares of the Company's common stock at a price of $2.81 per share. The
warrants expire in 2009.
The Company relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933 for the sale of these securities.
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 12,
2007.
SECURITY DEVICES INTERNATIONAL INC.
By /s/ Sheldon Kales
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Sheldon Kales, President and Chief
Executive Officer
By /s/ Rakesh Malhotra
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Rakesh Malhotra, Principal
Financial and Accounting Officer