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 May 31, 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 June 20, 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
MAY 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
INTERIM FINANCIAL STATEMENTS
MAY 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
TABLE OF CONTENTS
Page No
Interim Balance Sheets as of May 31, 2006 and November 30, 2005 1
Interim Statement of Operations for the six months and three months
ended May 31, 2006 and May 31, 2005. 2
Interim Statement of Cash Flows for the six months
ended May 31, 2006 and May 31, 2005. 3
Interim Statement of Changes in Stockholders' Deficiency for the
six months ended May 31, 2006 and nine months
(since inception) ended November 30, 2005. 4
Condensed Notes to Interim Financial Statements 5-7
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Balance Sheets As at May 31, 2006 and November 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)
ASSETS
May 31, November 30,
2006 2005
---------- ------------
CURRENT ASSETS
Cash 109,870 126
---------- ------------
109,870 126
LIABILITIES
May 31, November 30,
2006 2005
---------- ------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities 6,400 16,076
Loans from Directors/Shareholders (note 5) 12,559 8,029
---------- ------------
18,959 24,105
---------- ------------
STOCKHOLDERS' DEFICIENCY
CAPITAL STOCK (note 4) 8,215 6,923
STOCK SUBSCRIPTION (note 6) 500
ADDITIONAL PAID-IN CAPITAL 410,405 157,797
DEFICIT, ACCUMULATED DURING THE
DEVELOPMENT STAGE (328,209) (188,699)
---------- ------------
90,911 (23,979)
---------- ------------
109,870 126
========== ============
See condensed notes to the financial statements
1
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Statement of Operations
For the six months and three months ended May 31, 2006 and May 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)
For the For the For the
six months six months three months For the
Cumulative ended ended ended three months
since May 31, May 31, May 31, ended
inception 2006 2005 2006 May 31, 2005
---------- ---------- ---------- ------------ -------------
$ $ $ $ $
RESEARCH AND PRODUCT
DEVELOPMENT COST 170,175 90,175 33,000 -- 33,000
OTHER OPERATING EXPENSES
General and administration 35,943 14,468 4,060 6,724 4,060
Legal and accounting 48,091 26,117 689 7,837 689
Consulting and professional 74,000 8,750 65,250 8,750 65,250
---------- ---------- ---------- ------------ -------------
TOTAL EXPENSES 328,209 139,510 102,999 23,311 102,999
---------- ---------- ---------- ------------ -------------
LOSS BEFORE INCOME TAXES (328,209) (139,510) (102,999) (23,311) (102,999)
Income taxes -- -- -- -- --
---------- ---------- ---------- ------------ -------------
NET LOSS (328,209) (139,510) (102,999) (23,311) (102,999)
---------- ---------- ---------- ------------ -------------
Loss per share - basic
and diluted (0.018) (0.016) (0.003) (0.016)
---------- ---------- ------------ -------------
Weighted average common shares
outstanding 7,798,166 6,580,710 8,189,315 6,580,710
---------- ---------- ------------ -------------
See condensed notes to the financial statements
2
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Statement of Cash Flows
For the six months ended May 31, 2006 and May 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)
For the For the
six months six months
Cumulative ended ended
since May 31, May 31,
inception 2006 2005
---------- ---------- ----------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (328,209) (139,510) (102,999)
Items not requiring an outlay of cash:
Issue of shares for professional services 74,000 8,750 65,250
Increase/(Decrease) in accounts payable
and accrued liabilities 6,400 (9,676) (4,311)
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (247,809) (140,436) (42,060)
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES -- -- --
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in loans from directors/shareholders 12,559 4,530 150
Proceeds from issuance of common shares 245,120 145,650 89,470
Stock subscriptions received 100,000 100,000 --
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 357,679 250,180 89,620
---------- ---------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS FOR THE PERIOD 109,870 109,744 47,560
Cash and cash equivalents, beginning
of period -- 126 --
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD 109,870 109,870 47,560
========== ========== ==========
INCOME TAXES PAID -- --
========== ==========
INTEREST PAID -- --
========== ==========
See condensed notes to the financial statements
3
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Statement of Changes in Stockholders' Deficiency
For the six months ended May 31, 2006 and nine months (since inception)
Ended November 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)
Number of Common Additional Common
Common Shares Paid-in Stock Deficit
Shares amount Capital Subscribed 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)
--------- ------ --------- ---------- ----------- -----------
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
Stock Subscriptions 99,500 500 100,000
Net loss for the period -- -- -- -- (139,510) (139,510)
--------- ------ --------- ---------- ----------- -----------
Balance as of May 31, 2006 8,214,880 8,215 410,405 500 (328,209) 90,911
--------- ------ --------- ---------- ----------- -----------
See condensed notes to the financial statements
4
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 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 audited financial statements for the nine-month period
ended November 30, 2005.
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. As such, the
results for the prior comparative period for six months and three months
ended May 31, 2005 are the same.
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.
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.
5
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
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.
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.
b) Purchase Warrants
During the current quarter no warrants were issued.
5. RELATED PARTY TRANSACTIONS
During the six month period ended May 31, 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
$12,559 as on May 31, 2006 are unsecured and bear interest at 4%
p.a. Further, a Company Director has charged the Company a total
amount of $1,500 for providing office space for the six 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
6
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
May 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
6. COMMON STOCK SUBSCRIPTION
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. These shares were offered by the Company through
its officers on a "best efforts" basis. The Company plans to close
the offering on June 30, 2006, however, it may at its discretion end
the offering sooner or extend the offering to September 30, 2006.
All funds raised are being directly received by the Company.
The Company estimates the expenses for the offering at $45,000 and
intends to use the net proceeds from the sale of the shares it is
offering, for research and development and general and
administrative expenses.
7. INCOME TAXES
The Company did not record any recovery for income taxes for the
period ended May 31, 2006 as the net loss carry forwards are fully
offset by a valuation allowance.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATIONS
Security Devices was incorporated on March 1, 2005 and as of June 20, 2006
had not generated any revenue.
During the period from inception (March 1, 2005) through May 31, 2006
Security Devices' operations used $247,809 in cash. During this period, Security
Devices borrowed $12,559 from its officers and directors, raised $245,120 from
the sale of its common stock in private transactions and raised $100,000 from
the public sale of its shares.
Security Devices' plan of operation during the twelve months ending May
31, 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 May 31, 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 $0.20 per share. As of June 20, 2006 Security
Devices had sold 500,000 shares 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
8
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 the end of the period covered by this report, and in his opinion the
Company's disclosure controls and procedures are effective to ensure that
material information relating to the Company, 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.
9
PART II
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-----------------------------------------------------------
During the six months ended May 31, 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 May 31, 2006.
10
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 June 28, 2006.
SECURITY DEVICES INTERNATIONAL INC.
By /s/ Sheldon Kales
--------------------------------------
Sheldon Kales, President and Principal
Accounting Officer
11