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, 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 July 10, 2007, the Company had 14,330,050 issued and outstanding shares of common stock. 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) 1,992,709 861,961 14,468 830,355 6,724 Legal & accounting 391,007 293,461 26,117 61,880 7,837 Consulting and Professional 225,426 142,522 8,750 119,166 8,750 ------------ ------------ ----------- ------------ ---------- 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 (0.141) (0.018) (0.098) (0.003) 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. 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 past and on-going consulting services as per EITF issue 96-18. This amount of $80,000 has been expensed to consulting services and credited to additional paid in capital. 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 2007, 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. 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: Options Options granted granted 2007 2007 Risk free rate 4.25% 3.50% Volatility factor 106.04% 122.84% Expected dividends nil nil Expected life 5 years 5 years Range of exercise prices $2.75-3.60 $1.50 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. 10 SECURITY DEVICES INTERNATIONAL, INC. (A Development Stage Enterprise) Condensed Notes to Interim Financial Statements May 31, 2007 (Amounts expressed in US Dollars) (Unaudited) 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. 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. 11 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 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 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 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 3 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 July 12, 2007. SECURITY DEVICES INTERNATIONAL INC. By /s/ Sheldon Kales ------------------------------------ Sheldon Kales, President and Chief Executive Officer By /s/ Rakesh Malhotra ------------------------------------ Rakesh Malhotra, Principal Financial Officer