UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 28, 2006 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 [ ] NO [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes X No ______ ------------ As of April 15, 2006, the Company had 8,214,880 issued and outstanding shares of common stock. SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) INTERIM FINANCIAL STATEMENTS FEBRUARY 28, 2006 (Amounts expressed in US Dollars) (Unaudited) SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) INTERIM FINANCIAL STATEMENTS FEBRUARY 28, 2006 (Amounts expressed in US Dollars) (Unaudited) TABLE OF CONTENTS Page No Interim Balance Sheets as of February 28, 2006 and November 30, 2005 1-2 Interim Statement of Operations for the three months ended February 28, 2006 3 Interim Statement of Cash Flows for the three months ended February 28, 2006 4 Interim Statement of Changes in Stockholders' Deficiency for the three months ended February 28, 2006 and nine months (since inception) ended November 30, 2005. 5 Condensed Notes to Interim Financial Statements 6-8 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Balance Sheets As at February 28, 2006 and November 30, 2005 (Amounts expressed in US Dollars) (Unaudited) ASSETS February 28, November 30, 2006 2005 $ $ CURRENT ASSETS Cash 66,203 126 _________ _________ 66,203 126 ========= ========= See condensed notes to the financial statements. 1 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Balance Sheets As at February 28, 2006 and November 30, 2005 (Amounts expressed in US Dollars) (Unaudited) LIABILITIES February 28, November 30, 2006 2005 $ $ CURRENT LIABILITIES Accounts payable and accrued liabilities 98,543 16,076 Loans from Directors/Shareholders (note 5) 12,238 8,029 --------- --------- 110,781 24,105 --------- --------- STOCKHOLDERS' DEFICIENCY CAPITAL STOCK (note 4) 7,879 6,923 ADDITIONAL PAID-IN CAPITAL 252,441 157,797 DEFICIT, ACCUMULATED DURING THE DEVELOPMENT STAGE (304,898) (188,699) --------- --------- (44,578) (23,979) --------- --------- 66,203 126 --------- --------- See condensed notes to the financial statements 2 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Statement of Operations For the three months ended February 28, 2006 (Amounts expressed in US Dollars) (Unaudited) For the quarter Cumulative ended since February 28, inception 2006 $ $ RESEARCH AND PRODUCT DEVELOPMENT COST 170,175 90,175 OTHER OPERATING EXPENSES General and administration 29,219 7,744 Legal and accounting 40,254 18,280 Consulting and professional 65,250 - ------------- --------- TOTAL EXPENSES 304,898 116,199 ------------- --------- LOSS BEFORE INCOME TAXES (304,898) (116,199) Income taxes - - ------------- --------- NET LOSS (304,898) (116,199) ------------- --------- Loss per share - basic and diluted (0.02) ----------- Weighted average common shares outstanding 7,398,324 ----------- See condensed notes to the financial statements 3 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Statement of Cash Flows For the three months ended February 28, 2006 (Amounts expressed in US Dollars) (Unaudited) For the quarter Cumulative ended since February 28, inception 2006 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period (304,898) (116,199) Items not requiring an outlay of cash: Issue of shares for professional services 65,250 - Increase in accounts payable and accrued liabilities 98,543 82,467 ------------- --------- NET CASH USED IN OPERATING ACTIVITIES (141,105) (33,732) ------------- --------- CASH FLOWS FROM INVESTING ACTIVITIES - - ------------- --------- NET CASH USED IN INVESTING ACTIVITIES - - ------------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in loans from directors/ shareholders 12,238 4,209 Proceeds from issuance of common shares 195,070 95,600 ------------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 207,308 99,809 ------------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD 66,203 66,077 Cash and cash equivalents, beginning of period - 126 ------------- --------- CASH AND CASH EQUIVALENTS, END OF 66,203 66,203 PERIOD ============= ========= INCOME TAXES PAID - ========= INTEREST PAID - ========= See condensed notes to the financial statements 4 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Interim Financial Statement of Changes in Stockholders' Deficiency For the three months ended February 28, 2006 and nine months (since inception) Ended November 30, 2005 (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 Net loss for the quarter (116,199) (116,199) ------------ ---------- -------- ---------- --------- Balance as of February 28, 2006 7,878,880 7,879 252,441 (304,898) (44,578) ------------ ---------- -------- ---------- --------- See condensed notes to the financial statements 5 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2006 (Amounts expressed in US Dollars) (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited interim 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, 2006. Interim financial statements should be read in conjunction with the Company's annual audited financial statements. The financial statements include the accounts of Security Devices International Inc. (the "Company"). The Company was incorporated on March 1, 2005. The first period for financial statements of the Company commenced March 1, 2005 and ended November 30, 2005. For this interim quarter for three months ended February 28, 2006, there are hence no comparative prior quarter financial statements. 2. NATURE OF OPERATIONS AND GOING CONCERN The Company was incorporated under the laws of the state of Delaware on March 1, 2005. The company plans to develop and market a wireless, non-lethal weapon for use in law enforcement, defense and personal security. The company's product in the making is similar to the widely used Stun Gun, except that it can effectively incapacitate offenders from a distance as far as 30 meters without a trail of wires leading back to the launcher. The company has not commenced operations. It has no source for operating revenue and expects to incur significant expenses before establishing operating revenue. The Company's future success is dependent upon its ability to raise sufficient capital, not only to maintain its operating expenses, but to continue to develop and be able to profitably market its product. There is no guarantee that such capital will be available on acceptable terms, if at all. 6 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2006 (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. ISSUANCE OF COMMON SHARES a) Changes to Issued Share Capital 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. b) Purchase Warrants During the current quarter no warrants were issued. 5. RELATED PARTY TRANSACTIONS During the quarter ended February 28, 2006 no director was paid any compensation in cash. All out of pocket expenses of directors/promoters were expensed. The Directors made advances to the Company to meet the operating expenses. These advances of $12,238 as on February 28, 2006 are unsecured and bear interest at 4% p.a. Further, a Company Director has charged the Company a total amount of $750 for providing office space for the three month period. The Company's officers and directors have agreed to serve without compensation until commercial sales begin. The Company has agreed to pay a director a royalty equal to 3.5% of the Company's sales. 7 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements February 28, 2006 (Amounts expressed in US Dollars) (Unaudited) 6. INCOME TAXES The Company did not record any recovery for income taxes for the quarter ended February 28, 2006 as the net loss carry forwards are fully offset by a valuation allowance. 7. SUBSEQUENT EVENTS a) Private placement offering On March 8, 2006 the Company closed a private placement offering of its common stock. It issued 286,000 common shares for cash received at $0.17 per share. The company also on March 8, 2006 issued 50,000 shares for services rendered as finder's fee. The net proceeds of this offering will be used primarily to meet with the legal, audit and patent costs. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS Security Devices was incorporated on March 1, 2005 and as of April 15, 2006 had not generated any revenue. During the period from inception (March 1, 2005) through February 28, 2006 Security Devices' operations used $(141,105) in cash. During this period, Security Devices borrowed $12,238 from its officers and directors and raised $195,070 from the sale of its common stock in private transactions. In March 2006 Security Devices sold 286,000 shares of common stock in a private transaction for $50,050 in cash and issued 50,000 shares of common stock to an unrelated third party for services rendered. Security Devices' plan of operation during the twelve months ending February 28, 2007 is as follows: Projected Estimated Activity Completion Date Cost - -------- --------------- ----------- Completion of fully operational Long Range WERS prototype (rifle fired) for production 10/06 $177,000 Completion of fully operational Long Range WERS prototype (shotgun fired) for production 2/07 30,000 Design production system for Long Range WERS 2/07 536,000 --------- $743,000 Security Devices plans to develop a Short Range version of the WERS after the development to the Long Range WERS has been completed. However since the development of the Long Range WERS is not complete, Security Devices does not know the time or cost involved in developing the Short Range WERS. Security Devices anticipates that its capital requirements for the twelve months ending February 28, 2007 will be: Research and Development $743,000 General and administrative expenses 70,000 Offering Expenses 30,000 --------- Total $843,000 Security Devices' future plans will be dependent upon the amount of capital Security Devices is able to raise. By means of a registration statement on Form SB-2 Security Devices is offering for public sale up to 2,000,000 shares of its common stock at a price of $0.50 per share. As of April 15, 2006 Security Devices had not sold any of the shares which it is offering by means of the registration statement. Security Devices will attempt to raise the capital which it requires through the private or public sale of its equity securities or borrowings from third parties. Security Devices does not have any commitments or arrangements from any person to provide Security Devices with any capital. If additional financing is not available when needed, Security Devices may continue to operate in its present mode or Security Devices may need to reduce its level of operations. If Security Devices continues to operate in its present mode, it will require approximately $125,000 of funding during the next twelve months. Controls and Procedures - ----------------------- Sheldon Kales, the Company's Chief Executive and Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of a date prior to the filing date of this report, and in his opinion the Company's disclosure controls and procedures are effective to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to him by others within those entities, particularly during the period in which this report is being prepared, so as to allow timely decisions regarding required disclosure. There have been no changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls. As a result, no corrective actions with regard to significant deficiencies or material weakness in the Company's internal controls were required. PART II ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ----------------------------------------------------------- During the three months ended February 28, 2006 the Company: 1. Sold 1,212,000 shares of its common stock to a group of foreign investors for $140,400 in cash. 2. Issued 50,000 shares of its common stock to an unrelated third party for services rendered, and 3. Sold 30,000 shares of its common stock to one U.S. investor for $5,250 in cash. These shares referred to in 1 and 2 above were all issued to non-U.S. persons who reside outside of the United States. The negotiations and agreements relating to the issuance of these shares were made by the Company's officers (who were non-U.S. persons) from Canada or Israel. The shares are restricted from resale in the public markets for a period of one year from the date of their issuance. As of the date of this report there was no market for the Company's securities in the United States and none of the securities have been transferred since their issuance. The Company relied upon the exemption provided by Rule 901 of the Securities and Exchange Commission with respect to the sale of these shares. The Company relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 with respect to the sale of the shares referred to in 3 above. 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 The Company did not file any reports on Form 8-K during the three months ended February 28, 2006. 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 April 19, 2006. SECURITY DEVICES INTERNATIONAL INC. By /s/ Sheldon Kales ------------------------------------ Sheldon Kales, President and Principal Accounting Officer