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 August 31, 2009
[ ] 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
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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: 15,235,050 shares outstanding
as of September 30, 2009.
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2009
(Amounts expressed in US Dollars)
(Unaudited)
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2009
(Amounts expressed in US Dollars)
(Unaudited)
TABLE OF CONTENTS
Page No
Interim Balance Sheets as at August 31, 2009 and November 30, 2008 1
Interim Statement of Operations for the nine months and three
months ended August 31, 2009 and August 31, 2008 and the period
from Inception (March 1, 2005) to August 31, 2009 2
Interim Statement of Cash Flows for the nine months ended
August 31, 2009 and August 31, 2008 3
Interim Statements of changes in Stockholders' Equity (Deficiency)
for the nine months ended August 31, 2009 and for the period from
inception (March 1, 2005) to November 30, 2008 4
Condensed Notes to Interim Financial Statements 5-11
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Balance Sheets
As at August 31, 2009 and November 30, 2008
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
Aug 31, Nov 30,
2009 2008
(unaudited) (audited)
ASSETS $ $
CURRENT
Cash and cash equivalents 321,056 2,167,699
Prepaid expenses and other 30,880 45,984
------------ ------------
Total Current Assets 351,936 2,213,683
Plant and Equipment, net (Note 4) 31,901 25,450
------------ ------------
TOTAL ASSETS 383,837 2,239,133
------------ ------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 437,976 219,081
------------ ------------
Total Current Liabilities 437,976 219,081
------------ ------------
Going Concern (note 2)
Related Party Transactions (note 7)
Commitments (note 8)
STOCKHOLDERS' EQUITY (DEFICIENCY)
Capital Stock (Note 5) 15,235 14,447
Additional Paid-In Capital 13,463,251 13,084,826
Deficit Accumulated During the Development Stage (13,532,625) (11,079,221)
------------ ------------
Total Stockholders' Equity (Deficiency) (54,139) 2,020,052
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) 383,837 2,239,133
------------ ------------
See condensed notes to the interim financial statements.
1
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statements of Operations
For the Nine Months and Three Months Ended August 31, 2009 and August 31, 2008
and the Period from inception (March 1, 2005) to August 31, 2009 (Amounts
expressed in US Dollars) (Unaudited- Prepared by Management)
For the For the For the For the
nine months nine months three months three months
Cumulative ended ended ended ended
Since Aug 31, Aug 31, Aug 31, Aug 31,
inception 2009 2008 2009 2008
$ $ $ $ $
---------- ----------- ----------- ------------ ------------
OPERATING EXPENSES:
Research and Product
Development Cost 6,243,164 1,728,121 2,073,935 575,445 782,861
Amortization 17,701 6,452 6,228 2,310 2,285
General and administration
(note 6) 7,539,595 721,885 1,649,457 274,114 127,767
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 13,800,460 2,456,458 3,729,620 851,869 912,913
------------ ------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (13,800,460) (2,456,458) (3,729,620) (851,869) (912,913)
Other Income-Interest 267,835 3,054 59,671 - 17,469
------------ ------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (13,532,625) (2,453,404) (3,669,949) (851,869) (895,444)
Income taxes - - - - -
------------ ------------ ------------ ------------ ------------
NET LOSS (13,532,625) (2,453,404) (3,669,949) (851,869) (895,444)
------------ ------------ ------------ ------------ ------------
Loss per share - basic
and diluted (0.17) (0.26) (0.06) (0.06)
------------ ------------ ------------ ------------ ------------
Weighted average common
shares outstanding 14,484,437 14,330,050 14,558,398 14,330,050
------------ ------------ ------------ ------------ ------------
See condensed notes to the interim financial statements.
2
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Interim Statement of Cash Flows
For the Nine Months Ended August 31, 2009 and August 31, 2008 and the Period
from Inception (March 1, 2005) to August 31, 2009 (Amounts expressed in US
Dollars) (Unaudited-Prepared by Management)
For the For the
Cumulative nine months nine months
since inception ended ended
(March 1, 2005) Aug 31, 2009 Aug 31, 2008
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (13,532,625) (2,453,404) (3,669,949)
Items not requiring an outlay of cash:
Issue of shares for professional services 154,000 - -
Stock based compensation (included in
general and administration expenses) 4,905,419 177,990 1,231,056
Compensation expense for warrants
(Included in general and administration expenses) 361,317 4,223 -
Loss on cancellation of common stock 34,400 - -
Amortization 17,701 6,452 6,228
Changes in non-cash working capital:
Prepaid expenses and other (30,880) 15,104 12,062
Accounts payable and accrued liabilities 437,976 218,895 118,277
------------- ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (7,652,692) (2,030,740) (2,302,326)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Plant and Equipment (49,602) (12,903) (8,363)
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (49,602) (12,903) (8,363)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common shares 7,966,650 197,000 -
Cancellation of common stock (50,000) - -
Exercise of stock options 106,700 - -
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,023,350 197,000 -
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS FOR THE PERIOD 321,056 (1,846,643) (2,310,689)
Cash and cash equivalents, beginning of period - 2,167,699 5,293,176
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 321,056 321,056 2,982,487
============= ============= =============
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
From Inception (March 1, 2005) to August 31, 2009.
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
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 (audited) 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 (audited) 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 ended
November 30, 2007 - - - (4,827,937) (4,827,937)
------------ ------------ ------------ ------------ ------------
Balance as of
November 30, 2007(audited) 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 period - - - (4,401,786) (4,401,786)
------------ ------------ ------------ ------------ ------------
Balance as of
November 30, 2008(audited) 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 period - - - (2,453,404) (2,453,404)
------------ ------------ ------------ ------------ ------------
Balance as of
August 31, 2009 (unaudited) 15,235,050 15,235 13,463,251 (13,532,625) (54,139)
------------ ------------ ------------ ------------ ------------
See condensed notes to the interim financial statements.
4
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
August 31, 2009
(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, 2008. 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 August 31, 2009 and November 30, 2008, the
results of its operations for the nine- and three-month periods ended
August 31, 2009 and August 31, 2008, and its cash flows for the
nine-month periods ended August 31, 2009 and August 31, 2008. 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 nine-month period ended August 31, 2009
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 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.
5
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
August 31, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
2. NATURE OF OPERATIONS AND GOING CONCERN-Cont'd
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 three month period ended August 31, 2009, the Company was able to
raise $197,000 through issue of common shares and warrants.
The Company has incurred a loss of $ 2,453,404 during the nine month
period ended August 31, 2009 primarily due to its research and
development activities. At August 31, 2009, the Company had an
accumulated deficit during the development stage of $13,532,625 which
includes a non- cash stock based compensation expense of $4,905,419 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
acquired or 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
Furniture and Fixtures 30% declining balance method
6
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
August 31, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
4. PLANT AND EQUIPMENT, NET-Cont'd
Aug 31, 2009 Nov 30, 2008
--------------------- ---------------------
Accumulated Accumulated
Cost Amortization Cost Amortization
$ $ $ $
---------------------------------------------
Computer equipment 35,212 12,081 22,958 8,102
Furniture and fixtures 14,391 5,621 13,741 3,147
------- ------- ------- -------
49,603 17,702 36,699 11,249
------- ------- ------- -------
Net carrying amount $31,901 $25,450
------- -------
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.
b) Issued
15,235,050 Common shares
c) Changes to Issued Share Capital
Year ended November 30, 2008
The Company received $11,700 and issued 117,000 common shares from the
exercise of stock options by a director of the Company.
7
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
August 31, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
5. CAPITAL STOCK-Cont'd
Nine month period ended August 31, 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
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.
On December 17, 2008, the Company approved the reduction of the exercise
price of 2,940,000 outstanding options which had earlier been issued at
prices ranging from $1.00 to $3.60 to a new option price of $0.50 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 $114,688. This reduction in
exercise price relates to a total of 1,150,000 options in total issued
to the Company's three directors; 300,000 options in total issued to the
Company's officer and the balance total of 1,490,000 unexercised options
issued in the past to various consultants.
On June 17, 2009, the Company approved the reduction of the exercise
price of 2,700,000 outstanding options which had on December 17, 2008
been reduced to an option price of $0.50 per share, 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 $63,302.
This reduction in exercise price relates to a total of 1,150,000 options
in total issued to the Company's three directors; 300,000 options in
total issued to the Company's officer and the balance total of 1,250,000
unexercised options issued in the past to various consultants.
For the nine month period ended August 31, 2009 the Company has
recognized in its financial statements additional 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
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
August 31, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
6. STOCK BASED COMPENSATION-Cont'd
December 17, 2008:
------------------
Risk free rate 2.95%
Expected dividends 0%
Forfeiture rate 0%
Exercise price $0.50
Increase in fair value due to reduction in exercise
price of options $0.03-$0.09
Market price of Company's common stock on date of
reduction in exercise price $0.32
Stock-based compensation cost expensed $114,688
Unexpended stock-based compensation deferred over to
next period $Nil
June 17, 2009:
-------------
Risk free rate 2.95%
Expected dividends 0%
Forfeiture rate 0%
Exercise price $0.25
Increase in fair value due to reduction in exercise
price of options $0.02-$0.03
Market price of Company's common stock on date of
reduction in exercise price $0.25
Stock-based compensation cost expensed $63,302
Unexpended stock-based compensation deferred over to
next period $Nil
As of August 31, 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 $4,500
for providing office space during the nine month period ended August
31, 2009.
b) The directors were compensated from January 1, 2009 as per their
consulting agreements with the Company. One director was paid $80,000
as consulting fee and $12,000 as automobile allowance; one director
was paid $50,000 as consulting fee and $8,000 as automobile allowance;
one director was paid $25,000 as consulting fee and $8,000 as
automobile allowance.
c) On December 17, 2008 the board of directors approved the reduction in
the exercise price of the following options under its Non-Qualified
Stock Option Plan:
9
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
August 31, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
7. RELATED PARTY TRANSACTIONS-Cont'd
1. Reduction in the exercise price of the options already issued to
three directors to acquire 1,150,000 common shares from exercise
price of $1.20 to a new exercise price of $0.50 per share.
2. Reduction in the exercise price of the options already issued to
an officer to acquire 125,000 common shares from exercise price
of $1.25 to a new exercise price of $0.50 per share and reduction
in the exercise price to acquire 175,000 common shares from $1.20
to a new exercise price of $0.50 per share.
Stock based compensation cost relating to the reduction in the exercise
price of the options issued to directors and officers, as above,
amounting to $46,660 has been expensed to general and administration
expense.
d) On June 17, 2009 the board of directors approved the reduction in the
exercise price of the following options under its Non-Qualified Stock
Option Plan:
1. Reduction in the exercise price of the options already issued to
three directors to acquire 1,150,000 common shares from reduced
exercise price of $0.50 to a new exercise price of $0.25 per
share.
2. Reduction in the exercise price of the options already issued to
an officer to acquire 125,000 common shares from reduced exercise
price of $0.50 to a new exercise price of $0.25 per share and
further reduction in the exercise price to acquire 175,000 common
shares from $0.50 to a new exercise price of $0.25 per share.
Stock based compensation cost relating to the reduction in the exercise
price of the options issued to directors and officers, as above,
amounting to $34,322 has been expensed to general and administration
expense.
e) On June 17, 2009, the Company further approved the reduction of the
exercise price of 317,000 outstanding warrants which had earlier been
issued to directors for services at $0.50 per share to a new exercise
price of $0.25 per share, with all other terms of the original issue
remaining the same. The Company expensed this additional non-cash
compensation expense relating to this modification for $ 4,223.
10
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Financial Statements
August 31, 2009
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)
8. COMMITMENTS
On February 4, 2009 the Company's directors approved consulting
agreements with three of the Company's officers. The consulting
agreements, which are effective retroactive to January 1, 2009, provide
that the officers will consult with the Company in the areas of
corporate operations and product development. The terms of the
consulting agreements are shown below. The consulting agreements
terminate on December 31, 2009.
Monthly
Monthly Automobile
Name of Officer Consulting Fee Allowance
--------------- -------------- ----------
Sheldon Kales $10,000 $1,500
Boaz Dor $ 6,250 $1,000
Greg Sullivan $ 3,125 $1,000
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Securities Devices International, Inc. was incorporated on March 1, 2005
and for the period from inception to August 31, 2009 has not yet 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, 2008, and the nine months ended August
31, 2009, substantially all of SDI's cash expenses were related to the
development of its LEKTROX technology.
During the nine months ended August31, 2009:
o General and administrative expenses decreased primarily due to a
decline in stock based compensation. General and administrative
expenses included charges of $177,990, which did not require the use
of cash, associated with lowering the exercise price of certain
options granted to SDI's officers, directors and consultants.
o Research and Product Development expenses were lower by $345,814 as
compared to the same period ended August 31, 2008 since the
development of the Company's products was nearing completion.
During the period from inception (March 1, 2005) through August 31, 2009
SDI's operations used $(7,652,692) in cash. During this period SDI:
o purchased $49,602 of equipment;
o raised $7,966,650 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.
As of August 31, 2009 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 August 31, 2010 will be:
Development and Preproduction costs $ 900,000
General and Administrative Expenses 350,000
------------
Total $ 1,250,000
============
12
SDI expects that it will need to raise approximately $1,000,000 in
additional capital prior to December 31, 2009.
Other than the foregoing, SDI did not have any material future contractual
obligations or off balance sheet arrangements as of August 31, 2009.
SDI does not have any commitments or arrangements from any persons to
provide SDI with any additional capital it may need.
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 August 31, 2009, 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,
the 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 August 31, 2009, that
materially affected, or are reasonably likely to materially affect, its internal
control over financial reporting.
PART II
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.
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: October 14, 2009
By: /s/ Sheldon Kales
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Sheldon Kales, President and Principal
Executive Officer
Date: October 14, 2009
By: /s/ Rakesh Malhotra
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Rakesh Malhotra, Principal Financial
and Accounting Officer