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 February 28, 2010
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____ to _______
Commission File Number: None
Security Devices International, Inc.
------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware Applied For
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2171 Avenue Rd., Suite 103
Toronto, Ontario Canada M5M 4B4
------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (416) 787-1871
N/A
----------------------------------------------------------------------
Former name, former address, and former fiscal year, if changed
since last report
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 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]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 16,745,050 shares outstanding
as of April 12, 2010.
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
INTERIM FINANCIAL STATEMENTS
FEBRUARY 28, 2010
(Amounts expressed in US Dollars)
(Unaudited)
TABLE OF CONTENTS
Page No
Interim Balance Sheets as at February 28, 2010 and November 30, 2009 1
Interim Statement of Operations for the three months ended
February 28, 2010 and February 28, 2009 2
Interim Statement of Cash Flows for the three months ended
February 28, 2010 and February 28, 2009 3
Interim Statements of changes in Stockholders' Deficit for the three
months ended February 28, 2010 and for the period from inception
(March 1, 2005) to November 30, 2009 4
Condensed Notes to Interim Financial Statements 5-11
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Balance Sheets
As at February 28, 2010 and November 30, 2009
(Amounts expressed in US Dollars)
February 28, November 30,
2010 2009
(unaudited) (audited)
ASSETS $ $
CURRENT
Cash 51,573 55,431
Prepaid expenses and other 27,528 31,172
----------- -----------
Total Current Assets 79,101 86,603
Plant and Equipment, net (Note 4) 27,680 29,924
----------- -----------
TOTAL ASSETS 106,781 116,527
----------- -----------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 777,530 691,729
----------- -----------
Total Current Liabilities 777,530 691,729
----------- -----------
Going Concern (note 2)
Related Party Transactions (note 7)
Commitments (note 8)
STOCKHOLDERS' DEFICIT
Capital Stock (Note 5)
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, Nil issued and outstanding (2009 - nil)
Common stock, $0.001 par value 50,000,000 shares
authorized, 16,745,050 issued and outstanding
(2009 -15,235,050) 16,745 15,235
Additional Paid-In Capital 13,912,734 13,463,251
Deficit Accumulated During the Development Stage (14,600,228) (14,053,688)
----------- -----------
Total Stockholders' Deficit (670,749) (575,202)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT 106,781 116,527
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, 2010 and February 28, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
For the For the
Cumulative quarter quarter
since inception ended ended
(March 1, 2005) February 28, February 28,
2010 2009
$ $ $
OPERATING EXPENSES:
Research and Product
Development Cost 6,817,486 271,213 536,393
Amortization 22,841 2,244 1,978
General and Administration 8,032,495 273,083 273,261
------------ ------------ ------------
TOTAL OPERATING EXPENSES 14,872,822 546,540 811,632
------------ ------------ ------------
LOSS FROM OPERATIONS (14,872,822) (546,540) (811,632)
Other Income-Interest 272,594 - 3,054
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (14,600,228) (546,540) (808,578)
Income taxes - - -
------------ ------------ ------------
NET LOSS (14,600,228) (546,540) (808,578)
------------ ------------ ------------
Loss per share - basic and diluted (0.03) (0.06)
------------ ------------
Weighted average common shares
outstanding 16,174,606 14,447,050
------------ ------------
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, 2010 and February 28, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
For the For the
Cumulative quarter quarter
since inception ended ended
(March 1, 2005) February 28, February 28,
2010 2009
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (14,600,228) (546,540) (808,578)
Items not requiring an outlay
of cash:
Issue of shares for professional
services 154,000 - -
Stock based compensation (included
in general and administration
expenses) 4,998,912 93,493 114,688
Compensation expense for warrants
issued
(Included in general and
administration expenses) 361,317 - -
Loss on cancellation of common stock 34,400 - -
Amortization 22,841 2,244 1,978
Changes in non-cash working capital:
Prepaid expenses and other (27,528) 3,644 10,905
Accounts payable and accrued liabilities 777,530 85,801 37,099
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (8,278,756) (361,358) (643,908)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Plant and Equipment (50,521) - (3,442)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (50,521) - (3,442)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of
common shares 8,324,150 357,500 -
Cancellation of common stock (50,000) - -
Exercise of stock options 106,700 - -
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 8,380,850 357,500 -
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
FOR THE PERIOD 51,573 (3,858) (647,350)
Cash, beginning of period - 55,431 2,167,699
------------ ------------ ------------
CASH, END OF PERIOD 51,573 51,573 1,520,349
============ ============ ============
INCOME TAXES PAID - - -
============ ============ ============
INTEREST 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, 2010 and for Period from Inception (March 1,
2005) to November 30, 2009.
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
Number of Common Additional Deficit
Common Shares Paid-in Accumulated During
Shares amount Capital Development Stage 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 for cash 1,170,670 1,171 1,169,499 1,170,670
Issuance of common shares for cash
and services 50,000 50 154,950 155,000
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)
Stock based compensation 2,446,433 2,446,433
Issue of warrants 357,094 357,094
Net loss for the year - - - (4,827,937) (4,827,937)
------------ ----------- ------------ ------------ ------------
Balance as of November 30, 2007 14,330,050 14,330 11,842,187 (6,677,435) 5,179,082
Exercise of stock options 117,000 117 11,583 11,700
Stock based compensation - - 1,231,056 - 1,231,056
Net loss for the year - - - (4,401,786) (4,401,786)
------------ ----------- ------------ ------------ ------------
Balance as of November 30, 2008 14,447,050 14,447 13,084,826 (11,079,221) 2,020,052
Issuance of common shares for cash 788,000 788 196,212 197,000
Stock based compensation - - 177,990 - 177,990
Compensation expense for warrants 4,223 4,223
Net loss for the year - - - (2,974,467) (2,974,467)
------------ ----------- ------------ ------------ ------------
Balance as of November 30, 2009 15,235,050 15,235 13,463,251 (14,053,688) (575,202)
Issuance of common shares for cash 1,510,000 1,510 355,990 357,500
Stock based compensation 93,493 93,493
Net loss for the period (546,540) (546,540)
------------ ----------- ------------ ------------ ------------
Balance as of February 28, 2010 16,745,050 16,745 13,912,734 (14,600,228) (670,749)
------------ ----------- ------------ ------------ ------------
See condensed notes to the interim financial statements
4
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
February 28, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed 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 U.S. generally accepted accounting principles (GAAP); however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods.
The condensed 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 the Company's annual report on Form 10-K for the year ended
November 30, 2009. In the opinion of management, the accompanying condensed
financial statements reflect all adjustments of a normal recurring nature
considered necessary to fairly state the financial position of the Company
at February 28, 2010 and November 30, 2009, the results of its operations
for the three-month periods ended February 28, 2010 and February 28, 2009,
and its cash flows for the three-month periods ended February 28, 2010 and
February 28, 2009. In addition, some of the Company's statements in this
quarterly report on Form 10-Q may be considered forward-looking and involve
risks and uncertainties that could significantly impact expected results.
The results of operations for the three-month period ended February 28,
2010 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.
2. NATURE OF OPERATIONS AND GOING CONCERN
The Company has completed the development of a fully operational 40MM long
range LEKTROX, a unique line of wireless electric ammunition for use in
military, homeland security, law enforcement, and professional and home
security scenarios and the Company is now planning for a production line.
LEKTROX has been specially designed for use with standard issue riot guns
and M203 grenade launchers. 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
5
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
February 28, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
2. NATURE OF OPERATIONS-Cont'd
stun guns which had a range of an arm's length. 2nd generations were the
wired electric charge solutions. 3rd generations are the wireless electric
bullets.
The Company's financial statements are presented on a going concern basis,
which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has no source for
operating revenue and expects to incur expenses before establishing
operating revenue. The Company has a need for additional working capital to
fund its operating expenses and for the economic production of LEKTROX,
which is
currently being evaluated by the US Military. The Company's future success
is dependent upon its continued ability to raise sufficient capital to fund
operating expenses and the economic production of LEKTROX. This raises
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from this uncertainty. In order to finance the continued
development, the Company is working towards to raising of appropriate
capital in the near future. During the year ended November 30, 2009, the
Company was able to raise $197,000 through issue of common shares and
warrants. The Company further raised an additional $357,500 net through the
issue of common shares during the quarter ended February 28, 2010.
The Company has incurred a loss of $546,540 during the three month period
ended February 28, 2010 primarily due to its research and development
activities. At February 28, 2010, the Company had an accumulated deficit
during the development stage of $14,600,228 which includes a non- cash
stock based compensation expense of $4,998,912 and compensation expense for
warrants for $361,317.
3. RESEARCH AND PRODUCT DEVELOPMENT
Research and Product Development costs, including acquired research and
product development costs, are charged against income in the period
incurred.
6
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
February 28, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
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
Furniture and Fixtures 30% declining balance method
February 28, 2010 November 30, 2009
------------------------------- ------------------------
Accumulated Accumulated
Cost Amortization Cost Amortization
$ $ $ $
--------------------------------------------------------------
Computer equipment 35,211 15,696 35,211 14,113
Furniture and fixtures 15,310 7,145 15,310 6,484
-------- -------- -------- --------
50,521 22,841 50,521 20,597
-------- -------- -------- --------
Net carrying amount $27,680 $29,924
-------- --------
5. CAPITAL STOCK
a) Authorized
50,000,000 Common shares, $0.001 par value
And
5,000,000 Preferred shares, $0.001 par value
The Company's Articles of Incorporation authorize its Board of Directors to
issue up to 5,000,000 shares of preferred stock. 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.
7
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
February 28, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
b) Issued
16,745,050 Common shares
c) Changes to Issued Share Capital
Year ended November 30, 2009
----------------------------
On August 19, 2009 the Company sold 788,000 units to a group of private
investors. Each unit consisted of one share of common stock and one
warrant. Each warrant allows the holder to purchase one share of the
Company's common stock at a price of $0.50 per share at any time prior to
June 15, 2010. The shares were sold at a price of $0.25 per unit. The
shares of common stock are, and any shares issuable upon the exercise of
warrants will be, restricted securities, as that term is defined in Rule
144 of the Securities and Exchange Commission. The Company relied upon the
exemption provided by Section 4(2) of the Securities Act of 1933 in
connection
Three month period ended February 28, 2010
------------------------------------------
On January 4, 2010 the Company completed the placement for 1,510,000 common
shares to private investors. The shares were sold at a price of $0.25 per
common share for a total consideration of $377,500. The Company paid
$20,000 as finder's fees. The shares of common stock are restricted
securities, as that term is defined in Rule 144 of the Securities and
Exchange Commission. The Company relied upon the exemption provided by
Section 4(2) of the Securities Act of 1933 in this connection.
6. STOCK BASED COMPENSATION
On December 4, 2009, the Company approved the reduction of the exercise
price of 300,000 outstanding options which had earlier been issued at a
price of $0.50 to a new option price of $0.25 per share, with all other
terms of the original grant remaining the same. The Company expensed this
additional non-cash stock based compensation expense relating to this
modification for $6,534. The fair value of each option used for the purpose
of estimating the stock compensation is calculated using the Black-Scholes
option pricing model with the following weighted average assumptions:
8
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
February 28, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
6. STOCK BASED COMPENSATION-cont'd
Risk free rate 2.61%
Expected dividends 0%
Forfeiture rate 0%
Volatility 173.24%
Exercise price $0.25
Increase in fair value due to reduction in exercise
price of options $0.02
Market price of Company's common stock on date of
reduction in exercise price $0.25
Stock-based compensation cost expensed $6,534
On December 4, 2009, the Company approved the extension of the
expiration of 2,900,000 outstanding options from their initial expiry
date ranging from November 2011 to April 2013 to a new expiration date
of June 30, 2014 with all other terms of the original grant remaining
the same. The Company expensed this additional non-cash stock based
compensation expense relating to this modification for $106,036. The
fair value of each option used for the purpose of estimating the stock
compensation is calculated using the Black-Scholes option pricing
model with the following weighted average assumptions:
Risk free rate 2.61%
Expected dividends 0%
Forfeiture rate 0%
Volatility 173.24%
Stock-based compensation cost expensed $63,282
On January 4, 2010, the board of directors granted options to a
director to acquire 100,000 common shares at an exercise price of
$0.25 per share. All of these options vested immediately and have an
expiry of five years. The Company expensed stock based compensation
cost of $23,677. The fair value of each option used for the purpose of
estimating the stock compensation is calculated using the
Black-Scholes option pricing model with the following weighted average
assumptions:
Risk free rate 2.61%
Expected dividends 0%
Forfeiture rate 0%
Volatility 170.69%
9
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
February 28, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
6. STOCK BASED COMPENSATION-Cont'd
Market price of Company's common stock on date
of grant of options $0.25
Stock-based compensation cost expensed $23,677
As of February 28, 2009 there was $Nil of unrecognized expense related to
non-vested stock-based compensation arrangements granted.
7. RELATED PARTY TRANSACTIONS
a) A Company Director has charged the Company a total amount of $1,500
for providing office space during the quarter ended February 29, 2009.
b) The directors were compensated from December 1, 2009 as per their
consulting agreements with the Company. One director was paid $21,500
as consulting fee and $3,000 as automobile allowance; one director was
paid $17,750 as consulting fee and $2,000 as automobile allowance; one
director was paid $16,500 as consulting fee and $2,000 as automobile
allowance.
c) On December 4, 2009 the board of directors approved extension of the
expiration of outstanding options from their initial expiry date to a
new expiration date of June 30, 2014 with all other terms of the
original grant remaining the same.
1. Extension of the expiration of 1,150,000 outstanding options
already issued to three directors from their initial expiry date
to a new expiration date of June 30, 2014
2. Extension of the expiration of 300,000 outstanding options
already issued to an officer from their initial expiry date to a
new expiration date of June 30, 2014.
Stock based compensation cost relating to the extension in the expiry date
of the outstanding options issued to three directors and an officer, as
above, amounting to $30,213 has been expensed to general and administration
expense.
d) On January 4, 2010, the board of directors granted options to a
director to acquire 100,000 common shares at an exercise price of
$0.25 per share. All of these options vested immediately and have an
expiry of five years. The Company expensed stock based compensation
cost of $23,677.
10
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
February 28, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
8. COMMITMENTS
a) On January 1, 2010, the Company's directors renewed consulting
agreements with three of the Company's officers on the following
terms:
Monthly
Consulting Fees for Expiration of
February through Car Consulting
Name December 2010 Allowance Agreement
---- ----------------- -------------- ----------
Sheldon Kales $6,500 -- 12-31-2010
Boaz Dor $6,500 -- 12-31-2010
Gregory Sullivan $6,500 -- 12-31-2010
b) On November 30, 2009, the Company entered into a Memorandum of
Understanding ("MOU") with its research and development service
contractor ("the contractor"). This MOU covers various alternatives to
the Company to settle the liability to the contractor in the amount of
$658,932 as at November 30, 2009. Should the Company become insolvent,
or be unable to continue operations, or be unable to pay the
contractor pursuant to the MOU, then it will grant the contractor an
exclusive, perpetual, irrevocable, worldwide, assignable, sub
licensable, license to further develop and to market the Company's
electric bullet and BIP technology. The Company will negotiate a
royalty with the contractor in the event of granting such rights to
the contractor.
11
Management's Discussion and Analysis of Financial Condition and Results of
Operation
SDI was incorporated on March 1, 2005 and for the period from inception to
February 28, 2010 has not generated any revenue.
During the three months ended February 28, 2010:
o Research and Product Development expenses were lower since the
development of the Company's products was nearing completion.
o General and administrative expenses were comparable with prior period.
During the period from inception (March 1, 2005) through February 28, 2010
SDI's operations used $8,278,756 in cash. During this period SDI:
o purchased $50,521 of equipment;
o raised $8,274,150 (net) from the sale of shares of its common stock;
and
o raised $106,700 from three of its officers and directors upon the
exercise of options to purchase 1,067,000 shares of common stock.
In August 2009 SDI sold, in a private offering, 788,000 Units at a price of
$0.25 per Unit. Each Unit consisted of one share of SDI's common stock and one
warrant. Each warrant allows the Holder to purchase one additional share of
SDI's common stock at a price of $0.50 per share at any time on or before June
15, 2010.
On January 4, 2010 the Company completed the placement for 1,510,000 common
shares to private investors. The shares were sold at a price of $0.25 per common
share for a total consideration of $377,500.
As of February 28, 2010 SDI had developed a fully operational Long Range
LEKTROX (40MM) and was planning a production line.
SDI anticipates that its capital requirements for the twelve-month period
ending February 28, 2011 will be:
Development and Preproduction costs $1,500,000
General and Administrative Expenses 375,000
-----------
Total $1,875,000
===========
Other than the foregoing, SDI did not have any material future contractual
obligations or off balance sheet arrangements as of February 28, 2010.
SDI does not have any commitments or arrangements from any persons to
provide SDI with any additional capital it may need. Without additional capital
SDI will not be able to fund its anticipated capital requirements outlined
above.
12
PART II
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In January 2010 SDI sold, in a private offering, 1,510,000 shares of its
common stock at a price of $0.25 per share. The Company paid $20,000 as finder's
fees in connection with the sale of these shares.
SDI relied upon the exemption provided by Section 4(2) of the Securities
Act of 1933 with respect to the sale of these securities. The investors in this
offering were provided with full information regarding SDI. There was no general
solicitation in connection with this private offering. The investors in this
offering acquired SDI's securities for their own accounts. The certificates
representing the shares of common stock issued to the investors bear restricted
legends providing that the shares cannot be sold except pursuant to an effective
registration statement or an exemption from registration.
Item 4 and 4T. 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 February 28, 2010, 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 effective.
(b) Changes in Internal Controls. There were no changes in SDI's internal
control over financial reporting during the quarter ended February 28, 2010,
that materially affected, or are reasonably likely to materially affect, its
internal control over financial reporting.
Item 6. Exhibits
Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for
Sheldon Kales.
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
Sheldon Kales and Rakesh Malhotra.
13
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: April 13, 2010
By: /s/ Sheldon Kales
-----------------------------------
Sheldon Kales, President and Principal
Executive Officer
Date: April 13, 2010
By: /s/ Rakesh Malhotra
-----------------------------------
Rakesh Malhotra, Principal Financial and
Accounting Officer
14