SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A
(Mark One)

    (X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the Fiscal Year Ended November 30, 2006
                                       OR
( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

Commission File No.   None

                       SECURITY DEVICES INTERNATIONAL INC.
                       -----------------------------------
                 (Name of Small Business Issuer in its charter)

                Delaware                                     Applied For
         ------------------------                      ------------------------
         (State of incorporation)                           (IRS Employer
                                                          Identification No.)
      120 Adelaide Street West
      Suite 2500
      Toronto, Ontario Canada                                   M5H 1T1
   --------------------------------------              ------------------------
   (Address of Principal Executive Office)                     Zip Code

Registrant's telephone number, including Area Code: (416) 787-1871 Securities
registered pursuant to Section 12(b) of the Act: None Securities registered
pursuant to Section 12(g) of the Act:

                                      None
                               ------------------
                                (Title of Class)

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act. [ ]

Check whether the Registrant (1) has 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
                           -------------                  -------------

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act):
                                        Yes             No  __X__
                                            -----             -


<PAGE>

The Company's revenues during the year ended November 30, 2006 were  $  -0- .
                                                                     --------

The aggregate market value of the voting stock held by non-affiliates of the
Company (9,046,550 shares) on February 15, 2007 was approximately $28,044,000.

Documents incorporated by reference:      None

As of September 10, 2007, the Company had 14,330,050 issued and outstanding
shares of common stock.

   CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

      This report includes "forward-looking statements". All statements other
than statements of historical facts included in this report, regarding the
Company's financial position, business strategy, plans and objectives, are
forward-looking statements. Although the Company believes that the expectations
reflected in the forward-looking statements and the assumptions upon which such
forward-looking statements are based are reasonable, it can give no assurance
that such expectations and assumptions will prove to have been correct.


   REASONS FOR AMENDED REPORT

     This  report  has  been  amended  so that  certain  parts of Item 6 and the
Company's  financial  statements  correspond  with  the  Company's  registration
statement  on Form SB-2  (File  No.  333-143301)  to  reflect  certain  enhanced
disclosures in the notes to the financial  statements.  There were no changes in
the amounts reported in the Company's audited financial  statements  included in
the 10KSB report previously filed on February 28, 2007 (File No. 333-132456).


                                       2

<PAGE>

ITEM 1.  BUSINESS

     Security Devices  International  Inc. was incorporated in Delaware on March
1, 2005.

     SDI 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 applications.

     SDI's LEKTROX system was developed by Elad  Engineering,  Israel,  assisted
by:

     o    Dr.  Nathan   Blaunstein,   Professor  of   Electrical   and  Computer
          Engineering  at  Ben-Gurion   University,   specializing  in  Wireless
          Cellular Communication, radio physics, and electronics;

     o    Dr. Yoav Paz, a heart and chest  surgery  specialist  at the  Hadassah
          Medical  Center,   Jerusalem,   member  of  the  European  Society  of
          Cardiology; and

     o    Emanuel  Mendes,  an electrical  engineer at the forefront of Israel's
          R&D for almost 50 years.

      SDI's strategic collaboration with Elad resulted in the patent pending
LEKTROX system. Featuring the unique extended range Wireless Electro-Muscular
Disruption Technology, (or "W-EMDT"), SDI's first products, the LEKTROX 37/38mm
and 40mm round ammunition will be ready for the market in 2007 with a 12-guage
version to be introduced later.

      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 generation were the wired electric charge solutions. 3rd generation are the
wireless electric bullets. Currently, there is still no 3rd generation wireless
electric bullet on the market.

      LEKTROX is being specifically developed to achieve the highest operational
success at the greatest distance of those known to be currently in development.
Causing instant target incapacitation up to distances of 60 yards, the LEKTOX
will give maximum field superiority to military personnel, law enforcement
officers and other security operatives in situations that do not call for the
use of lethal ammunition.

      The LEKTROX Electric Bullet is totally safe in storage, transportation,
handling and loading. Locked in safe mode until its internal electric and
mechanical systems are activated by contact with the target, LEKTROX eliminates
any possibility of the round's accidental charging.

                                       3

<PAGE>

      Exploiting proven fin technologies, the LEKTROX Electric Bullet maintains
excellent stability for the highest possible accuracy. In addition LEKTROX
achieves distances way beyond those reached by previous generation, wired
electric ammunition systems.

      In addition to achieving a greater range, the LEKTROX delivers new levels
of effectiveness and safety through the use of

     o    Unique mechanisms that reduce the projectile's kinetic energy
     o    W-EMDT that instantly incapacitates the target without causing serious
          injury or lethality.

      To reduce kinetic energy levels, the bullet's head is composed of a
collapsible material that enlarges the contact surface and absorbs part of the
impact. Additional energy is transferred to other absorption mechanisms that use
the energy to release the Multiple Mini-Harpoon mechanism and activate the
built-in electrical system.

      When released, the mini-harpoons fix the bullet irremovably to the
target's clothing or body. At the same time, the bullet's electrical system
releases a W-EMDT charge that imitates the electro-neural impulses used by the
human body. Sending out a control signal to the muscles, this high voltage low
current pulse safely overrides the target's nervous system inducing a harmless
muscle spasm that causes them to fall to the ground helpless.

      Operating at lower than critical cardio-fibrillation levels, the LEKTROX
W-EMDT electric output has been designed in line with stringent medical
equipment standards that protect patients from permanent injury. Enabling full
recovery with no clinical after effects, LEKTROX helps decreases liability for
wrongful injury or death.

      When introduced, the Short Range LEKTROX will have a safe firing range of
2-10 yards and will be fired from a proprietary system powered by a pressurized
air cartridge. Simple to operate, this laser-aiming system will be point and
fire exactly as they would with a standard pistol trigger. The round will fire
with low recoil enabling a quick firing of a second or third round if necessary.

      The cost of manufacturing a LEKTROX electrical round is estimated to be
between $10 and $12. An electric round is estimated to sell at a retail price
between $60 and $75. In comparison, rubber, smoke or stun rounds typically sell
for $20 to $28. A cartridge for the TASER(R) sells for approximately $60.

      The cost to manufacture a launcher for the Short Range LEKTROX is
estimated to be $150. SDI estimates that the short range launcher will sell at a
retail price of approximately $875 per unit. In comparison, the X26c Citizen
Defense System (PISTOL) sells for approximately $1,000.

      SDI anticipates that most of its revenues will be generated from initial
and repeat sales of electrical rounds.


                                       4
<PAGE>

      As of September 10, 2007 SDI has completed the following steps in the
development of the LEKTROX:

     o    Design and  testing  of  ballistic  rounds.  o  Production  of various
          ballistic rounds.
     o    Design of `electrical arms' to adhere to clothing or skin.
     o    Design of safety/armed mechanism.
     o    Production of mechanical systems.
     o    Design of electrical system.
     o    Production of electrical system.
     o    Integration and assembly of mechanical and electrical  sub-systems for
          electrical rounds.

Key steps to be completed include:

     o    Testing of different ballistic rounds.
     o    Production of completed rounds.
     o    Powder loading testing.
     o    Testing of complete electrical rounds.
     o    Adjustment of electrical rounds based on test results.
     o    Testing with military and law enforcement organizations.
     o    Completion of fully operational Long Range LEKTROX for production.
     o    Clinical testing on animals and humans.

      See Item 6 of this report for information regarding the cost and timing of
the remaining steps in the development of the LEKTROX.

      The electrical aspects of the LEKTROX are being developed by Emanuel
Mendez and assisted by D.P. Electronic Systems, Ltd., a company controlled by
Alexander Blaunshtein. Alexander Blaunshtein is a principal shareholder of SDI
and is the son of Natan Blaunstein, who is one of SDI's directors. During the
period from its inception (March 1, 2005) through January 31, 2007 SDI paid
$106,100 to D.P. Electronic Systems.

      The mechanical development of the LEKTROX is being completed by Elad
Engineering Ltd., an Israeli company which has designed weapons for the Israeli
Military. During the period from its inception (March 1, 2005) to January 31,
2007 SDI paid $509,200 to Elad Engineering for research and development.

      SDI does not have written agreements with Elad Engineering or D.P.
Electronic Systems for work relating to the development of the LEKTROX.

      Once operational prototypes are completed, SDI plans to joint venture or
license the LEKTROX to larger companies which have the financial capability,
expertise and relationships for manufacturing, distribution, marketing, sales
and training. As of September 10, 2007 SDI has not entered into any joint
venture or licensing agreements.

                                       5
<PAGE>

Competition

      The primary competitive factors in the market for non-lethal weapons are a
weapon's cost, effectiveness, and ease of use.

   In the military market a wide variety of weapon systems are used. Conducted
energy devices, such as the LEKTROX, have gained increased acceptance during the
last two years as a result of the increased role of military personnel in Iraq
and Afghanistan. Conducted energy weapons have gained limited acceptance in the
private citizen market for non-lethal weapons.

      SDI's primary competitors will be Taser International, Inc. and Stinger
Systems, Inc. The LEKTROX will also compete indirectly with a variety of other
non-lethal alternatives, including pepper spray and impact weapons sold by
companies such as Armor Holdings, Inc. and Jaycor, Inc.

      SDI believes that its competitive advantage will be the ability of the
LEKTROX to effectively incapacitate offenders from a distance as far as 75
meters without a trail of wires leading back to the launcher. Stun Gun operators
must be in direct physical contact with combatants while the TASER(R) has a
range of less than seven meters. In contrast, the LEKTROX will be designed to
have a range which is over four times farther that TASER(R), providing a
significant safety advantage for enforcement officers and security personnel.

Patents

     Two patent applications, one for the electrical mechanism and the other for
the  mechanical  mechanism of the LEKTROX,  have been filed by SDI with the U.S.
Patent Office.

SDI does not hold any foreign patents.

      SDI's patents may not protect its proprietary technology. In addition,
other companies may develop products similar to the LEKTROX or avoid patents
held by SDI. Disputes may arise between SDI and others as to the scope and
validity of its patents. Any defense of its patents could prove costly and time
consuming and SDI may not be in a position, or may not consider it advisable, to
carry on such a defense. In addition, others may acquire or independently
develop the same or similar unpatented proprietary technology used by SDI.

Government Regulation

      Under current regulations the LEKTROX will be considered a crime control
product by the United States Department of Commerce and the export of the
LEKTROX will be regulated under export administration regulations. As a result,
export licenses from the Department of Commerce will be required for all
shipments to foreign countries other than Canada. In addition, the Department of
Commerce has regulations which may restrict the export of technology used in the
LEKTROX.


                                       6
<PAGE>

      The LEKTROX will be controlled, restricted or its use prohibited by
several state and local governments. In many cases, the law enforcement and
corrections market is subject to different regulations than the private citizen
market. Many states have regulations restricting the sale of stun guns and
hand-held shock devices, such as the LEKTROX, to private citizens or security
personnel.

      Foreign regulations pertaining to non-lethal weapons are numerous and
often unclear and a number of countries prohibit devices similar to the LEKTROX.

General

      As of September 10, 2007 SDI did not have any full-time employees.

      SDI's offices are located at 120 Adelaide Street West, Suite 2500,
Toronto, Ontario, Canada M5H 1T1. SDI's leases this space on a month-to-month
basis at a rate of $1,000 per month. SDI's offices are expected to be adequate
to meet SDI's foreseeable future needs.

      SDI's website is www.lektrox.com.

ITEM 2.  DESCRIPTION OF PROPERTY
         -----------------------

      See Item 1.

ITEM 3.  LEGAL PROCEEDINGS.
         ------------------

      SDI is not involved in any legal proceedings and SDI does not know of any
legal proceedings which are threatened or contemplated.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
         ----------------------------------------------------

      Not Applicable

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
        -----------------------------------------------------------------------
        OTHER SHAREHOLDER MATTERS.
        --------------------------

      On August 28, 2006 SDI's common stock was listed on the OTC Bulletin Board
under the symbol "SDEV". The following shows the high and low closing prices for
SDI's common stock for the months indicated:

      Month                       High        Low

      September 2006             $0.80       $0.15
      October 2006               $0.77       $0.65
      November 2006              $2.25       $0.60
      December 2006              $2.02       $1.75
      January 2007               $3.65       $1.75


                                       7
<PAGE>

      As of September 10, 2007, SDI had approximately 200 shareholders and
14,330,050 outstanding shares of common stock.

      Holders of common stock are entitled to receive dividends as may be
declared by the Board of Directors. SDI's Board of Directors is not restricted
from paying any dividends but is not obligated to declare a dividend. No
dividends have ever been declared and it is not anticipated that dividends will
ever be paid.

       SDI'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 SDI's 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. The issuance of preferred stock with these rights may make the
removal of management difficult even if the removal would be considered
beneficial to shareholders generally, and will have the effect of limiting
shareholder participation in certain transactions such as mergers or tender
offers if these transactions are not favored by SDI's management.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
        OPERATION

      SDI was incorporated on March 1, 2005 and as of February 15, 2007 has not
yet generated any revenue.

      During the year ended November 30, 2006 capital became 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 November 30, 2006
SDI's operations used $(625,999) in cash. During this period:

     o    SDI borrowed $4,227 (net) from its officers and directors,

     o    raised  $425,105 from the sale of 1,839,880  shares of common stock to
          private investors,

     o    raised  $400,000  from the public sale of  2,000,000  shares of common
          stock at a price of $0.20 per share, and

     o    raised $1,165,500 from subscriptions for common stock, and

     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 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 scenarios.


                                       8
<PAGE>

      SDI's plan of operation during the twelve-month period ending August 31,
2008 is as follows:

                                                      Projected      Estimated
Activity                                           Completion Date      Cost
--------                                           ---------------  -----------

Completion of fully operational Long Range LEKTROX
   prototype (37-38MM) up to production file:            9/07

Completion of fully operational Long Range LEKTROX
   prototype (40MM) up to production file:               9/07

Completion of mechanical aspects of Long Range
   LEKTROX prototype (12 GUAGE)                          2/08

Completion of tooling for Long Range LEXTROX             2/08

                        Total for above:                            $1,460,000

      SDI plans to develop a Short Range version of the LEKTROX after the
development to the Long Range LEKTROX has been completed. However, since the
development of the Long Range LEKTROX is not yet complete, SDI does not know the
time or cost involved in developing a Short Range LEKTROX.

         SDI anticipates that its capital requirements for the twelve-month
period ending August 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 anticipate that it will need to hire any employees prior to
December 31, 2007. SDI does not expect that it will need to raise additional
capital during the twelve months ending August 31, 2008. SDI believes that its
cash on hand at August 31, 2007 will satisfy its working capital needs for the
next eighteen months.

      SDI does not have any commitments or arrangements from any persons to
provide SDI with any additional capital it may need.

ITEM 7.     FINANCIAL STATEMENTS
            --------------------

See the financial statements attached to this report.


                                       9
<PAGE>

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
            ---------------------------------------------

      Not applicable


ITEM 8A.    CONTROLS AND PROCEDURES
            -----------------------

Sheldon Kales, the Company's Chief Executive Officer 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.


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
         ------------------------------------------------------------

    Name                     Age    Position
    ----                     ---    --------

    Sheldon Kales             50    Chief Executive Officer and a Director
    Boaz Dor                  52    Secretary and a Director
    Rakesh Malhotra           50    Chief Financial Officer
    Gregory Sullivan          40    Director

      The directors of SDI serve until the first annual meeting of its
shareholders and until their successors have been duly elected and qualified.
The officers serve at the discretion of SDI's directors.

Sheldon  Kales has been an officer and  director of SDI since March 2005.  Since
February  2004 Mr.  Kales has been  working on the  development  of the LEKTROX.
Between  January 2000 and February  2004 Mr. Kales was the  President of Yangtze
Telecom,  a company which provides messaging and related services for cell phone
users in China.  Mr. Kales  founded,  and between 1985 and 2001,  operated Argus
Investigation Services.

Boaz Dor has been a director  of SDI since  April 2005 and its  Secretary  since
March 15, 2006. Mr. Dor served in the Israeli  Defense Forces from 1972 to 1975.
Recruited  by  the  Israeli  Secret  Services,  Mr.  Dor  was  assigned  to  the
International   Security   Division  for  Aviation   Security  for  the  Israeli
Government, eventually assuming the position of Head of Security for the Embassy
of Israel and El Al Israel Airlines in Cairo,  Egypt,  and later, as Vice-Consul
and Head of Security for the Israeli Consulate in Toronto and Western Canada and
El Al Israel Airlines.  In 1989, Mr. Dor resigned from the public sector to open
a security  consulting  firm. In 1991, he was  appointed  executive  director of
security for the Seabeco Group of Companies where Mr. Dor oversaw  international
operations in Switzerland, Belgium, Russia, New York and Toronto. Since 2000 Mr.


                                       10
<PAGE>

Dor has owned and  operated  Ozone  Water  Systems  Inc.,  a water  purification
company.

Rakesh  Malhotra has been SDI's Chief  Financial  Officer since January 7, 2007.
Mr. Malhotra is a United States Certified Public Accountant (CPA) and a Canadian
Chartered  Accountant  (CA).  Mr.  Malhotra  graduated with Bachelor of Commerce
(Honors) from the  University of Delhi (India) and worked for A.F Ferguson & Co.
(Indian correspondent for KPMG) and obtained his CA designation in India. Having
practiced  as a  Chartered  Accountant  for over ten  years  in New  Delhi,  Mr.
Malhotra  moved  to  the  Middle  East  and  worked  for  five  years  with  the
International  Bahwan Group in a senior finance position.  Between 2000 and 2001
Mr.  Malhotra worked as a Chartered  Accountant  with a medium sized  accounting
firm in Toronto and then worked for five years as the Vice  President of Finance
for a private  group of companies in Toronto.  Since 2005 Mr.  Malhotra has been
the Chief Financial  Officer for Yukon Gold Corporation Inc. and a consultant to
a number of public companies.

Gregory Sullivan has been a director of SDI since April 2005. Mr. Sullivan has
been a law enforcement officer for the past 20 years. During his law enforcement
career, Mr. Sullivan has trained with federal, state and municipal agencies in
the United States, Canada and the Caribbean and has gained extensive experience
in the use of lethal and non-lethal weapons. Mr. Sullivan has also trained
personnel employed by both public and private agencies in the use of force and
firearms. Mr. Sullivan served four years with the military reserves in Canada.

      None of SDI's directors are independent as that term is defined in section
121(A) of the listing standards of the American Stock Exchange.

      SDI does not have a compensation committee or an audit committee. Rakesh
Malhotra is SDI's financial expert. However, since he is an officer of SDI Mr.
Malhotra is not independent as that term is defined in section 121(A) of the
listing standards of the American Stock Exchange.

      SDI has not adopted a Code of Ethics applicable to its principal
executive, financial, and accounting officers and persons performing similar
functions. SDI does not believe a Code of Ethics is needed at this time since
SDI has only four officers.

ITEM 10.  EXECUTIVE COMPENSATION
          ----------------------

      The following table shows the compensation during the period from March 1,
2005 (the inception of the Company) to November 30, 2005, and for the year ended
November 30, 2006, paid or accrued, to Sheldon Kales, the Principal Executive
Officer of SDI. None of the executive officers of SDI received compensation in
excess of $100,000 during this period.



                                       11
<PAGE>

                                                              All
                                                             Other
                                                             Annual
                                           Stock     Option  Compen-
Name and Principal  Fiscal  Salary  Bonus  Awards    Awards  sation
     Position        Year    (1)     (2)    (3)       (4)      (5)      Total
------------------  -----   ------  -----  ------    ------  --------   -----

Sheldon Kales,       2006      --      --      --  $342,500        --  $342,500
 President           2005      --      -- $25,000        --        --  $ 25,000

(1)  The dollar value of base salary (cash and non-cash) received.
(2)  The dollar value of bonus (cash and non-cash) received.
(3)  During the periods  covered by the table,  the value of SDI's shares issued
     as compensation for services to the persons listed in the table.
(4)  The value of all stock options  granted  during the periods  covered by the
     table calculated as being the difference  between the market price of SDI's
     common stock and the option price on the date of grant.
(5)  All other  compensation  received that SDI could not properly report in any
     other column of the table.

     SDI does not have an employment agreement with any of its officers.

     The  following  shows the amounts  which SDI expects to pay to its officers
during the twelve month  period  ending  December  31, 2007,  and the time these
persons plan to devote to SDI's business.

                                   Proposed        Time to be Devoted to the
         Name                    Compensation           Business of SDI
         ----                    ------------      -------------------------

         Sheldon Kales                   *                    100%
         Boaz Dor                        *                     50%
         Rakesh Malhotra           $18,000                     10%
         Gregory Sullivan                *                     10%

*    These officers/directors have agreed to serve without cash compensation
     until SDI has accumulated gross revenues of $500,000. In lieu of cash
     compensation, these persons have received shares of SDI's common stock as
     well as options.

      Once accumulated revenue reaches $500,000, SDI's directors may compensate
its officers depending upon a variety of factors, including past sales volume
and the anticipated results of its future operations. However, there are no
sales, net income, or other thresholds which are required for SDI's directors to
increase the compensation paid to SDI's officers. SDI may issue shares of its
common stock to its officers in payment of compensation owed to its officers.


                                       12
<PAGE>

Long-Term Incentive Plans. SDI does not provide its officers or employees with
pension, stock appreciation rights, long-term incentive or other plans and has
no intention of implementing any of these plans for the foreseeable future.

Employee Pension, Profit Sharing or other Retirement Plans. SDI does not have a
defined benefit, pension plan, profit sharing or other retirement plan, although
it may adopt one or more of such plans in the future.

Compensation of Directors During Year Ended November 30, 2006

      Name                 Paid in Cash    Stock Awards (1) Option Awards (2)
      ----                 ------------    ---------------- -----------------

      Boaz Dor                  --              --              $120,156
      Gregory Sullivan          --              --              $120,156


(1)  The fair value of stock issued for services computed in accordance with FAS
     123R on the date of grant.
(2)  The fair value of options granted computed in accordance with FAS 123R on
     the date of grant.

Stock Option and Bonus Plans
----------------------------

      SDI has adopted stock option and stock bonus plans. A summary description
of these plans follows. In some cases these Plans are collectively referred to
as the "Plans".

      Incentive Stock Option Plan. SDI's Incentive Stock Option Plan authorizes
the issuance of shares of SDI's Common Stock to persons that exercise options
granted pursuant to the Plan. Only SDI employees may be granted options pursuant
to the Incentive Stock Option Plan. The option exercise price is determined by
SDI's directors but cannot be less than the market price of SDI's common stock
on the date the option is granted.

      Non-Qualified Stock Option Plan. SDI's Non-Qualified Stock Option Plan
authorizes the issuance of shares of SDI's Common Stock to persons that exercise
options granted pursuant to the Plans. SDI's employees, directors, officers,
consultants and advisors are eligible to be granted options pursuant to the
Plans, provided however that bona fide services must be rendered by such
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.

      Stock Bonus Plan. SDI's Stock Bonus Plan allows for the issuance of shares
of common stock to it's employees, directors, officers, consultants and
advisors. However bona fide services must be rendered by the consultants or
advisors and such services must not be in connection with the offer or sale of
securities in a capital-raising transaction.

      Summary. The following lists, as of February 20, 2007, the options granted
pursuant to the Plans. Each option represents the right to purchase one share of
SDI's common stock.


                                       13
<PAGE>

<TABLE>
<S>                                 <C>             <C>         <C>             <C>

                                    Total         Shares
                                    Shares     Reserved for    Shares        Remaining
                                   Reserved     Outstanding   Issued as   Options/Shares
Name of Plan                      Under Plans     Options    Stock Bonus    Under Plans
------------                      -----------  ------------  -----------  --------------

Incentive Stock Option Plan        1,000,000           --          N/A        1,000,000
Non-Qualified Stock Option Plan    2,250,000      825,000          N/A        1,425,000
Stock Bonus Plan                     150,000          N/A           --          150,000

</TABLE>

      The following lists the unexercised options which were outstanding as of
February 20, 2007 and held by the SDI's officers and directors. All of the
options listed below were granted pursuant to SDI's Non-Qualified Stock Option
Plan.

                             Shares underlying
                       unexercised options which are:
                       -----------------------------  Exercise    Expiration
    Name               Exercisable     Unexercisable    Price        Date
    ----

    Sheldon Kales       100,000            --         $0.25       10/29/11
    Boaz Dor            100,000            --         $0.25       10/29/11
    Rakesh Malhotra     125,000            --         $1.50       01/17/12
    Gregory Sullivan    100,000            --         $0.25       10/29/11

(1) These options will expire on the first to occur of the following: (i) the
    expiration date of the option, (ii) the date the option holder is removed
    from office for cause, or (iii) the date the option holder resigns as an
    officer of the Company.

      For the purpose of these options "Cause" means any action by the Option
Holder or any inaction by the Option Holder which constitutes:

     (i)  fraud, embezzlement, misappropriation, dishonesty or breach of trust;

     (ii) a willful  or knowing  failure  or  refusal  by the  Option  Holder to
          perform any or all of his material duties and  responsibilities  as an
          officer of SDI, other than as the result of the Option  Holder's death
          or Disability; or

    (iii) gross  negligence by the Option Holder in the  performance  of any or
          all of his material duties and  responsibilities as an officer of SDI,
          other than as a result of the Option Holder's death or Disability;

      For purposes of these options "Disability" means any mental or physical
illness, condition, disability or incapacity which prevents the Option Holder
from reasonably discharging his duties and responsibilities as an officer of SDI
for a minimum of twenty hours per week.

      The following table shows the weighted average exercise price of the
outstanding options granted pursuant to SDI's stock option plans as of November
30, 2006, SDI's most recent fiscal year end. SDI's stock option plans have not
been approved by its shareholders.


                                       14
<PAGE>

<TABLE>
<S>                              <C>             <C>                   <C>

                                                              Number of Securities
                                Number                         Remaining Available
                            of Securities                      For Future Issuance
                             to be Issued  Weighted-Average       Under Equity
                            Upon Exercise  Exercise Price of   Compensation Plans,
                            of Outstanding  of Outstanding     Excluding Securities
Plan category                 Options (a)      Options        Reflected in Column (a)
-------------               -------------- -----------------  -----------------------

Incentive Stock Option Plan            --             --              1,000,000
Non-Qualified Stock Option Plan   700,000           $0.46             1,550,000

</TABLE>


ITEM  11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table shows the ownership of SDI's common stock as of August
31, 2007 by each  shareholder  known by SDI to be the  beneficial  owner of more
than 5% of SDI's outstanding shares, each director and executive officer and all
directors and executive officers as a group. Except as otherwise indicated, each
shareholder has sole voting and investment power with respect to the shares they
beneficially own.

                                     Number
     Name                          of Shares (1)           Percent of Class
     ----                          -------------           ----------------

     Sheldon Kales                   2,992,000                      21%

     Boaz Dor                        1,257,500                     8.9%

     Rakesh Malhotra                        --                       --

     Gregory Sullivan                  405,000                     2.8%

     Dror Shachar (2)                1,200,000                     8.4%

     All Officers and Directors      4,654,500                    32.6%
        as a group (four persons)

(1)  Does not reflect shares issuable upon the exercise of options.
(2)  Dror  Shachar  holds  these  shares  for the  benefit of his  father,  Mark
     Shachar.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The following lists all shares of SDI's common stock which have been issued
since its incorporation:


                                       15
<PAGE>

                                                              Consideration
   Shareholder                 Date of Sale    Shares Issued  Paid for Shares

   Sheldon Kales                  3-03-05        2,300,000    Services rendered,
                                                              valued at $23,000
   Sheldon Kales                  3-04-05          200,000    Services rendered,
                                                              valued at $2,000
   Boaz Dor                       3-03-05          900,000    Services rendered,
                                                              valued at $9,000
   Gregory Sullivan               3-03-05           40,000    Services rendered,
                                                              valued at $400
   Gregory Sullivan               3-04-05          200,000    Services rendered,
                                                              valued at $2,000
   Alexander Blaunshtein (1)      3-03-05        1,560,000    Services rendered,
                                                              valued at $15,600
   Consultant                     3-03-05        1,200,000    Services rendered,
                                                              valued at $12,000
   Consultants                    3-04-05          125,000    Services rendered,
                                                              valued $1,250
   Private Investors              4-15-05          397,880    $     99,470
   Private Investors              12-31-05         486,000    $     48,600
   Private Investors              1-31-06          470,000    $     47,000
   Private Investors              3-08-06          286,000    $     50,050
   Consultant                     3-08-06           50,000    Services rendered,
                                                              valued at $8,750
   Public Investors              5-06/7-06       2,000,000    $   400,000
   Sheldon Kales                    11-06          550,000    $     55,000 (2)
   Boaz Dor                         11-06          200,000    $     20,000 (2)
   Gregory Sullivan                 11-06          200,000    $     20,000 (2)
   Private Investors                12-06        2,536,170    $  2,536,170
   Private Investors             4-07/5-07       2,139,000    $  4,812,750

(1)  Alexander Blaunshtein is the son of Natan Blaunstein,  a former director of
     SDI.
(2)  Shares were issued upon the exercise of stock options.

      Sheldon Kales, Natan Blaunstein, Boaz Dor and Gregory Sullivan are the
promoters and parents of SDI.

      The services relating to the shares issued in March 2005 were provided for
the development of the LEKTROX and were valued at $0.01 per share. The 50,000
shares issued in March 2006 to a consultant were issued as compensation for
introducing investors to SDI and were valued at $0.175 per share which is the
price, per share, received by SDI for the shares sold for cash in March 2006.

      The electrical aspects of the LEKTROX are being developed by Emanuel
Mendez and assisted by D.P. Electronic Systems, Ltd., a company controlled by
Alexander Blaunsthein. Alexander Blaunstein is a principal shareholder of SDI

                                       16
<PAGE>

and is the son of Natan Blaunstein, a former director of SDI. During the period
from its inception (March 1, 2005) through February 15, 2007 SDI paid $106,100
to D.P. Electronic Systems. SDI is of the opinion that its arrangement with D.P.
Electronic Systems is at least as favorable as that which SDI could have
obtained from any unrelated third party.

ITEM 13.  EXHIBITS
          --------

Exhibit
Number   Description of Exhibit
-------- ----------------------

  3.1    Articles of Incorporation        (Incorporated by reference to the same
                                          exhibit filed with the Company's
                                          registration statement on Form SB-2
                                          (File No. 333-12456).

  3.2    Bylaws                           (Incorporated by reference to the same
                                          exhibit filed with the Company's
                                          registration statement on Form SB-2
                                          (File No. 333-132456).

   31    Rule 13a-14(a) Certifications         *

   32    Section 1350 Certifications           *

* Filed with this report.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
          --------------------------------------

      Schwartz Levitsky Feldman, LLP ("Schwartz Levitsky") audited SDI's
financial statements for the year ended November 30, 2006.

      The following table shows the aggregate fees billed and billable to SDI
during the years ended November 30, 2006 and 2005 by Schwartz Levitsky.

                                           2006           2005
                                           ----           ----

Audit Fees                              $16,800        $10,800
Audit-Related Fees                     $  1,000      $     700
Financial Information Systems                --             --
Design and Implementation Fees               --             --
Tax Fees                                     --             --
All Other Fees                               --             --

      Audit fees represent amounts billed for professional services rendered for
the audit of SDI's annual financial statements. Audit-Related fees represent

                                       17
<PAGE>

amounts billed for the services related to the filing of SDI's registration
statements on Form SB-2 and Form S-8. Before Schwartz Levitsky was engaged by
Security Devices to render audit services, the engagement was approved by
Security Device's Directors.


                                       18

<PAGE>



                      SECURITY DEVICES INTERNATIONAL, INC.
                        (A Development Stage Enterprise)

                              FINANCIAL STATEMENTS

                    PERIODS ENDED NOVEMBER 30, 2006 AND 2005
      Together with Report of Independent Registered Public Accounting Firm
                        (Amounts expressed in US Dollars)



<PAGE>

                      SECURITY DEVICES INTERNATIONAL, INC.
                        (A Development Stage Enterprise)

                              FINANCIAL STATEMENTS
                    PERIODS ENDED NOVEMBER 30, 2006 AND 2005
                        (Amounts expressed in US Dollars)


                                TABLE OF CONTENTS
                                                                        Page No

     Report of Independent Registered Public Accounting Firm                  1

     Balance Sheets as at November 30, 2006 and November 30, 2005             2

     Statement of Operations for the year ended November 30, 2006
     and nine months (since inception) ended November 30, 2005                3

     Statement of Cash Flows for the year ended November 30, 2006 and
     nine months (since inception) ended November 30, 2005                    4

     Statement of Stockholders' Equity for the year ended November
     30, 2006 and for the nine months (since inception) ended
     November 30, 2005                                                        5

     Notes to Financial Statements                                         6-22



<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


     To the Board of Directors and Stockholders of
     Security Devices International, Inc.
     (A Development Stage Enterprise)


     We have audited the accompanying balance sheets of Security Devices
     International, Inc. (incorporated in Delaware, United States of America) as
     at November 30, 2006 and 2005 and the related statements of operations,
     cash flows and stockholders' deficiency for the year ended November 30,
     2006, the nine month period from inception to November 30, 2005 and the
     period from inception to November 30, 2006. These financial statements are
     the responsibility of the Company's management. Our responsibility is to
     express an opinion on these financial statements based on our audit.

     We conducted our audits in accordance with the standards of the Public
     Company Accounting Oversight Board (United States). Those standards require
     that we plan and perform the audits to obtain reasonable assurance about
     whether the financial statements are free of material misstatement. An
     audit includes examining, on a test basis, evidence supporting the amounts
     and disclosures in the financial statements. An audit also includes
     assessing the accounting principles used and significant estimates made by
     management, as well as evaluating the overall financial statement
     presentation. We believe that our audits provide a reasonable basis for our
     opinion.

     In our opinion, the financial statements referred to above present fairly,
     in all material respects, the financial position of Security Devices
     International, Inc. as of November 30, 2006 and 2005, and the results of
     its operations and its cash flows for the year ended November 30, 2006, the
     nine month period from inception to November 30, 2005 and the period from
     inception to November 30, 2006 in accordance with generally accepted
     accounting principles in the United States of America.


                                      "SCHWARTZ LEVITSKY FELDMAN LLP"


     Toronto, Ontario, Canada                         Chartered Accountants
     February 20, 2007                          Licensed Public Accountants




<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Balance Sheets
As at November 30, 2006 and 2005
(Amounts expressed in US Dollars)


                                                              2006       2005
                                ASSETS                          $           $

CURRENT
   Cash and cash equivalents                                1,463,833      126
   Prepaid expenses and other (Note 8)                          4,452        -
                                                           ----------- ---------

Total Current Assets                                        1,468,285      126
                                                           ----------- ---------

TOTAL ASSETS                                                1,468,285      126
                                                           ----------- ---------
                                   LIABILITIES


CURRENT LIABILITIES
   Accounts payable and accrued liabilities (Note 4)          104,011   16,076
   Loans from Directors/Shareholders (Note 7)                   4,227    8,029
                                                           ----------- ---------
Total Current Liabilities                                     108,238   24,105

                        STOCKHOLDERS' EQUITY (DEFICIENCY)


Capital Stock (Note 5)                                         11,365    6,923
Additional Paid-In Capital                                  3,198,180  157,797
Deficit Accumulated During the Development Stage           (1,849,498)(188,699)
                                                           ----------- ---------

Total Stockholders' Equity  (Deficiency)                    1,360,047  (23,979)
                                                           ----------- ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  1,468,285      126
                                                           ----------- ---------


         The accompanying notes are an integral part of these financial
statements.

                                       2

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statements of Operations
Year Ended November 30, 2006 and the Period from Inception (March 1, 2005) to
November 30, 2005 (Amounts expressed in US Dollars)

                                           Cumulative
                                         since inception     2006         2005
                                                $              $            $

  EXPENSES:

  Research and Product Development Cost       538,300        458,300     80,000

  General and administration (Note 6)       1,311,198      1,202,499    108,699
                                          ------------   -----------  ----------

  TOTAL OPERATING EXPENSES                  1,849,498      1,660,799    188,699
                                          ------------   -----------  ----------

  LOSS BEFORE INCOME TAXES                 (1,849,498)    (1,660,799)  (188,699)

  Income taxes (Note 9)                             -              -          -
                                          ------------   -----------  ----------

  NET LOSS                                 (1,849,498)    (1,660,799)  (188,699)
                                          ------------   -----------  ----------

  Loss per share - basic and diluted                           (0.19)     (0.03)
                                                         -----------  ----------

  Weighted average common shares outstanding               8,623,258  6,808,409
                                                         -----------  ----------


          The accompanying notes are an integral part of these financial
statements.

                                       3


<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
Year Ended November 30, 2006 and Period from Inception (March 1, 2005) to
November 30, 2005
(Amounts expressed in US Dollars)

                                           Cumulative
                                         since inception     2006         2005
                                                $              $            $


CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss for the period                   (1,849,498)   (1,660,799)   (188,699)
  Items not requiring an outlay of cash:
    Issue of shares for professional services  74,000         8,750      65,250
    Stock based compensation (included in
    General and Administration Expenses)    1,049,940     1,049,940           -
    Changes in non-cash working capital:
    Accounts payable and accrued liabilities  104,011        87,935      16,076
    Prepaid expenses and other                 (4,452)       (4,452)          -
                                         ------------- ------------- -----------

   NET CASH USED IN OPERATING ACTIVITIES     (625,999)     (518,626)   (107,373)
                                         ------------- ------------- -----------

   CASH FLOWS FROM FINANCING ACTIVITIES
    Loans from directors/shareholders           4,227        (3,802)      8,029
    Proceeds from issuance of common shares   825,105       725,635      99,470
    Exercise of stock options                  95,000        95,000           -
    Stock subscriptions received            1,165,500     1,165,500           -
                                         ------------- ------------- -----------

  NET CASH PROVIDED BY FINANCING
   ACTIVITIES                               2,089,832     1,982,333     107,499
                                         ------------- ------------- -----------

   NET INCREASE IN CASH AND CASH
      EQUIVALENTS FOR THE PERIOD            1,463,833     1,463,707         126
   Cash and cash equivalents, beginning
    of period                                       -           126           -
                                         ------------- ------------- -----------

   CASH AND CASH EQUIVALENTS, END OF        1,463,833     1,463,833         126
     PERIOD                              ============= ============= ===========

   INCOME TAXES PAID                                -             -           -
                                         ============= ============= ===========

   INTEREST PAID                                    -             -           -
                                         ============= ============= ===========


         The accompanying notes are an integral part of these financial
statements.

                                       4

<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
Year ended November 30, 2006 and for Period from Inception (March 1, 2005) to
November 30, 2005.
(Amounts expressed in US Dollars)

<TABLE>

<S>                              <C>        <C>         <C>           <C>         <C>

                               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
                            -----------  ---------  ----------  -----------  -----------

</TABLE>

         The accompanying notes are an integral part of these financial
statements.

                                       5

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)


1. BASIS OF PRESENTATION

        The financial statements include the accounts of Security Devices
        International Inc. (the "Company"). The Company was incorporated under
        the laws of the state of Delaware on March 1, 2005. The first period of
        the financial statements commenced March 1, 2005 and ended November 30,
        2005.

     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
        $ 1,660,799 during the year ended November 30, 2006. At November 30,
        2006, the Company had an accumulated deficit during the development
        stage of $1,849,498 which includes a non- cash stock based compensation
        cost of $1,049,940. 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). Subsequent to the year end the company raised an additional
        $1,170,670 through issue of common stock. The company has a working
        capital and shareholders equity of $1,360,047 as at November 30, 2006
        and Management's plan is to continue raising additional funds through
        future equity or debt financing until it achieves profitable operations


                                       6

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        a) Use of Estimates

           These financial statements have been prepared in accordance with
           generally accepted accounting principles in the United States of
           America. Because a precise determination of assets and liabilities,
           and correspondingly revenues and expenses, depends on future events,
           the preparation of financial statements for any period necessarily
           involves the use of estimates and assumption an example being
           assumptions in valuation of stock options. Actual amounts may differ
           from these estimates. These financial statements have, in
           management's opinion, been properly prepared within reasonable limits
           of materiality and within the framework of the accounting policies
           summarized below.

        b) Income Taxes

           The Company accounts for income taxes under the provisions of SFAS
           No. 109, which requires recognition of deferred tax assets and
           liabilities for the expected future tax consequences of events that
           have been included in the financial statements or tax returns.
           Deferred income taxes are provided using the liability method. Under
           the liability method, deferred income taxes are recognized for all
           significant temporary differences between the tax and financial
           statement bases of assets and liabilities.

           Current income tax expense (recovery) is the amount of income taxes
           expected to be payable (recoverable) for the current period. A
           deferred tax asset and/or liability is computed for both the expected
           future impact of differences between the financial statement and tax
           bases of assets and liabilities and for the expected future tax
           benefit to be derived from tax losses. Valuation allowances are
           established when necessary to reduce deferred tax asset to the amount
           expected to be "more likely than not" realized in future tax returns.
           Tax law and rate changes are reflected in income in the period such
           changes are enacted. Due to valuation allowance for deferred tax
           assets, there are no deferred tax benefits or expenses for the years
           ended November 30, 2006 and 2005.

        c) Revenue Recognition

           The Company's revenue recognition policies are expected to follow
           common practice in the manufacturing industry.


                                       7

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        d) Loss per Share

           The Company has adopted FAS No. 128, "Earnings per Share", which
           requires disclosure on the financial statements of "basic" and
           "diluted" loss per share. Basic loss per share is computed by
           dividing net loss by the weighted average number of common shares
           outstanding for the year. Diluted loss per share is computed by
           dividing net loss by the weighted average number of common shares
           outstanding plus common stock equivalents (if dilutive) related to
           stock options and warrants for each year. There were no common
           equivalent shares outstanding at November 30, 2006 and 2005 that have
           been included in dilutive loss per share calculation as the effects
           would have been anti-dilutive. At November 30, 2006, there were
           700,000 options and no warrants outstanding. At November 30, 2005,
           there were no options or warrants outstanding.

        e) Fair Values

           The carrying amount of the Company's cash, accounts payable and
           accrued liabilities approximates fair values because of the short
           term maturity of these instruments.

        f) 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.

        g) Stock-Based Compensation

           In December 2004, the Financial Accounting Standards Board (FASB)
           issued Statement of Financial Accounting Standards No. 123 (Revised
           2004), "Share-Based Payment" (SFAS 123 (R)). SFAS 123 (R) requires
           companies to recognize compensation cost for employee and
           non-employee services received in exchange for an award of equity
           instruments based on the grant-date fair value of the award. The
           Company adopted the provisions of SFAS 123 (R) on December 1, 2005
           using the "modified prospective" application method of adoption which
           requires the Company to record compensation cost related to unvested
           stock awards as of November 30, 2005 by recognizing the unamortized
           grant date fair value of these awards over the remaining service
           periods of those awards with no change in historical reported
           earnings. The adoption of this standard did not affect the financial
           statements for the period ended November 30, 2005, since up to that
           date, no stock options had been issued to employees nor
           non-employees. All awards granted to employees and non-employees
           after November 30, 2005 are valued at fair value in accordance with
           the provisions of SFAS 123 (R) by using the Black-Scholes option
           pricing model and recognized on a straight line basis over the
           service periods of each award.


                                       8

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)


     3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

          The Company accounts for equity instruments issued in exchange for the
          receipt of goods or services  from other than  employees in accordance
          with SFAS No. 123 and the  conclusions  reached by the Emerging Issues
          Task  Force  ("EITF")  in Issue  No.  96-18,  "Accounting  for  Equity
          Instruments  That Are Issued to Other Than  Employees for Acquiring or
          in Conjunction with Selling Goods or Services".  Costs are measured at
          the estimated fair market value of the  consideration  received or the
          estimated fair value of the equity  instruments  issued,  whichever is
          more reliably  measurable.  The value of equity instruments issued for
          consideration  other  than  employee  services  is  determined  on the
          earlier of a performance  commitment or completion of  performance  by
          the provider of goods or services as defined by EITF No. 96-18.

           As of November 30, 2006 there was $Nil of unrecognized expense
           related to non-vested stock-based compensation arrangements granted.
           The total stock-based compensation expense relating to employees and
           non employees for the year ended November 30, 2006 and 2005 was
           $1,049,940 and $Nil respectively as no options were granted during
           the year ended November 30, 2005.

        h) Foreign Currency

           The Company maintains its books, records and banking transactions in
           U.S. dollars which is its functional and reporting currency. As such,
           no translation adjustment is created.

        i) Comprehensive Income
           The Company has adopted SFAS No. 130, "Reporting Comprehensive
           Income." This statement establishes standards for reporting
           comprehensive income and its components in a financial statement.
           Comprehensive income as defined includes all changes in equity (net
           assets) during a period from non-owner sources. Examples of items to
           be included in comprehensive income, which are excluded from net
           income, include foreign currency translation adjustments and
           unrealized gains and losses on available-for-sale securities.
           Comprehensive income (loss) is not presented in the Company's
           financial statements since there is no difference between net loss
           and comprehensive loss in any period presented.

                                       9

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        j) Impairment of Long-lived Assets

           In accordance with Statement of Financial Accounting Standards
           ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
           Long-Lived Assets", long-lived assets to be held and used are
           analyzed for impairment whenever events or changes in circumstances
           indicate that the related carrying amounts may not be recoverable.
           The Company evaluates at each balance sheet date whether events and
           circumstances have occurred that indicate possible impairment. If
           there are indications of impairment, the Company uses future
           undiscounted cash flows of the related asset or asset grouping over
           the remaining life in measuring whether the assets are recoverable.
           In the event such cash flows are not expected to be sufficient
           to recover the recorded asset values, the assets are written down to
           their estimated fair value. Long-lived assets to be disposed of are
           reported at the lower of carrying amount or fair value of asset less
           cost to sell.

        k) Asset Retirement Obligation

           The Company accounts for asset retirement obligations in accordance
           with Financial Accounting Standards Board ("FASB") Statement No. 143,
           "Accounting for Asset Retirement Obligations" ("Statement 143"),
           which requires that the fair value of an asset retirement obligation
           be recorded as a liability in the period in which a company incurs
           the obligation.

        l) Concentration of Credit Risk

           SFAS No. 105, "Disclosure of Information About Financial Instruments
           with Off-Balance Sheet Risk and Financial Instruments with
           Concentration of Credit Risk", requires disclosure of any significant
           off-balance sheet risk and credit risk concentration. The Company
           does not have significant off-balance sheet risk or credit
           concentration.

       m)  Cash and Cash Equivalents

           Cash consists of cash and cash equivalents, which are short-term,
           highly liquid investments with original terms to maturity of 90 days
           or less.
                                       10

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)


     3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

       n)  Intellectual Property with Respect to Pending Patent Applications

           Two patent applications, one for the electrical mechanism and the
           other for the mechanical mechanism of the LEKTROX, have been filed by
           the Company with the U.S. Patent Office. Expenditures for patent
           applications as a result of research activity are not capitalized due
           to the uncertain value of the benefits that may accrue.

       o)  Recent Accounting Pronouncements

           In May 2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes
           and Error Corrections", which replaces APB Opinion No. 20,
           "Accounting  Changes", and SFAS No. 3, "Reporting  Accounting Changes
           in Interim Financial Statements - An Amendment  of APB  Opinion
           No. 28".  SFAS No. 154  provides guidance on the accounting for and
           reporting of changes in accounting principles and error
           corrections. SFAS No. 154 requires retrospective application to prior
           period financial statements of voluntary changes in accounting
           principles and changes required by new accounting standards when the
           standard does not include specific transition provisions, unless it
           is impracticable to do so. SFAS No. 154 also requires certain
           disclosures for restatements due to correction of an error. SFAS
           No. 154 is effective for accounting changes and corrections of errors
           made in fiscal years beginning after December 15, 2005, and are
           required to be adopted by the Company as of December 1, 2006. The
           impact that the adoption of SFAS No. 154 will have on the Company's
           results of operations and financial condition will depend on the
           nature of future accounting changes adopted by the Company and the
           nature of transitional guidance provided in future accounting
           pronouncements.

        In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
        Hybrid Financial Instruments - an amendment of FASB Statements No. 133
        and 140". This Statement permits fair value of re-measurement for any
        hybrid financial instrument that contains an embedded derivative that
        otherwise would require bifurcation; clarifies which interest-only
        strips and principal-only strips are not subject to the requirements of
        SFAS No. 133, "Accounting for Derivative Instruments and Hedging
        Activities"; establishes a requirement to evaluate interests in
        securitized financial assets to identify interests that are freestanding
        derivatives or that are hybrid financial instruments that contain an
        embedded derivative requiring bifurcation; clarifies that concentrations
        of credit risk in the form of subordination are not embedded
        derivatives; and amended SFAS No. 140, "Accounting for Transfers and
        Servicing of Financial Assets and Extinguishments of Liabilities", to
        eliminate the prohibition on a qualifying special-purpose entity from
        holding a derivative financial instrument that pertains to a beneficial

                                       11

<PAGE>
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)


   3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        interest other than another derivative financial instrument. SFAS No.
        155 is effective for all financial instruments acquired, issued, or
        subject to a re-measurement (new basis) event occurring after the
        beginning of an entity's first fiscal year that begins after September
        15, 2006. The Company is currently reviewing the effect, if any, the
        proposed guidance will have on its financial position and operations.

        In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
        of Financial Assets", which amends SFAS No. 140, "Accounting for
        Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities". In a significant change to current guidance, SFAS No. 156
        permits an entity to choose either of the following subsequent
        measurement methods for each class of separately recognized servicing
        assets and servicing liabilities: (1) Amortization Method or (2) Fair
        Value Measurement Method. SFAS No. 156 is effective as of the beginning
        of an entity's first fiscal year that begins after September 15, 2006.
        The Company is currently reviewing the effect, if any, the proposed
        guidance will have on its financial position and operations.

        In July 2006, the FASB issued Interpretation No. 48, "Accounting for
        Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting
        for uncertainty in income taxes recognized in an enterprises' financial
        statements in accordance with SFAS No. 109, "Accounting for Income
        Taxes". FIN 48 prescribes a recognition threshold and measurement
        attributable for the financial statement recognition and measurement of
        a tax position taken or expected to be taken in a tax return. FIN 48
        also provides guidance on derecognizing, classification, interest and
        penalties, accounting in interim periods, disclosures and transitions.
        FIN 48 is effective for fiscal years beginning after December 15, 2006.
        The Company is currently reviewing the effect, if any, FIN 48 will have
        on its financial position and operations.

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures"
        ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a
        framework for measuring fair value in generally accepted accounting
        principles ("GAAP"), expands disclosures about fair value measurements,
        and applies under other accounting pronouncements that require or permit
        fair value measurements. SFAS No. 157 does not require any new fair
        value measurements, however the FASB anticipates that for some entities,
        the application of SFAS No. 157 will change current practice. SFAS No.
        157 is effective for financial statements issued for fiscal years
        beginning after November 15, 2007, which for the Company would be its
        fiscal year beginning November 1, 2008. The implementation of SFAS No.

                                       12

<PAGE>
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

   3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        157 is not expected to have a material impact on the Company's results
        of operations and financial condition.

        In September 2006, the Financial Accounting Standards Board ("FASB")
        issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension
        and Other Postretirement Plans - an amendment of FASB Statements No. 87,
        88, 106, and 132(R)". This statement requires employers to recognize the
        overfunded or underfunded status of a defined benefit postretirement
        plan (other than a multi-employer plan) as an asset
        or liability in its statement of financial position and to recognize
        changes in that funded status in the year in which the changes occur
        through comprehensive income of a business entity or changes in
        unrestricted net assets of a not-for-profit organization. This statement
        also requires an employer to measure the funded status of a plan as of
        the date of its year-end statement of financial position, with limited
        exceptions. The provisions of SFAS No. 158 are effective for employers
        with publicly traded equity securities as of the end of the fiscal year
        ending after December 15, 2006. The adoption of this statement is not
        expected to have a material effect on the Company's future reported
        financial position or results of operations.

        In September 2006, the Securities and Exchange Commission ("SEC")
        issued Staff Accounting Bulletin No. 108 (Topic 1N), "Quantifying
        Misstatements in Current Year Financial Statements" ("SAB No. 108"). SAB
        No. 108 addresses how the effect of prior year uncorrected misstatements
        should be considered when quantifying misstatements in current year
        financial statements. SAB No. 108 requires SEC registrants (i) to
        quantify misstatements using a combined approach which considers both
        the balance sheet and income statement approaches; (ii) to evaluate
        whether either approach results in quantifying an error that is material
        in light of relevant quantitative and qualitative factors; and (iii) to
        adjust their financial statements if the new combined approach results
        in a conclusion that an error is material. SAB No. 108 addresses the
        mechanics of correcting misstatements that include effects from prior
        years. It indicates that the current year correction of a material error
        that includes prior year effects may result in the need to correct prior
        year financial statements even if the misstatement in the prior year or
        years is considered immaterial. Any prior year financial statements
        found to be materially misstated in years subsequent to the issuance of
        SAB No. 108 would be restated in accordance with SFAS No. 154,
        "Accounting Changes and Error Corrections." Because the combined
        approach represents a change in practice, the SEC staff will not require
        registrants that followed an acceptable approach in the past to restate
        prior years' historical financial statements. Rather, these registrants
        can report the cumulative effect of adopting the new approach as an

                                       13

<PAGE>
SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)


   3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        adjustment to the current year's beginning balance of retained earnings.
        If the new approach is adopted in a quarter other than the first
        quarter, financial statements for prior interim periods within the year
        of adoption may need to be restated. SAB No. 108 is effective for fiscal
        years ending after November 15, 2006, which for the
        Company is November 30, 2006. The implementation of SAB No. 108 is not
        expected to have a material impact on the Company's results of
        operations and financial condition.

     4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                       2006           2005
                                                       ----           ----
           Accounts payable and accrued liabilities
           are comprised of the following:

               Trade payables                      $     7,689   $    5,210
               Accrued liabilities                      96,322       10,866
                                                   -----------    ---------
                                                     $ 104,011    $  16,076
                                                     =========    =========

        Accrued liabilities relate primarily to research and development and
        legal and accounting costs.

     5. CAPITAL STOCK

        a) Authorized

            50,000,000 Common shares, $0.001 par value

          And

            5,000,000 Preferred shares, $0.001 par value

        SDI'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

           11,364,880 Common shares (2005: 6,922,880 Common shares)


                                       14
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     5. CAPITAL STOCK (cont'd)

        c) Changes to Issued Share Capital

        November 30, 2005

          i)   On  March  3,  2005,  the  Company  authorized  the  issuance  of
               4,800,000  common shares to promoters  for services  rendered for
               total  consideration  of $48,000 and  1,200,000  common shares to
               consultants for services  rendered for a total  consideration  of
               $12,000.  These shares were measured and recorded at the exchange
               amount.

          ii)  On March 4, 2005, the Company  authorized the issuance of 400,000
               common  shares  to  promoters  for  services  rendered  for total
               consideration  of $4,000 and 125,000 common shares to consultants
               for services rendered for a total consideration of $1,250.  These
               shares were measured and recorded at the exchange amount.

          iii) On April 15, 2004 the Company  authorized the issuance of 397,880
               Common shares for cash for a total consideration of $99,470.

        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.

        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.

                                       15

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     5. CAPITAL STOCK (cont'd)

         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.

        d) Purchase Warrants

           During the current year or prior year, no warrants were issued.

     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.

        Effective October 30, 2006 the Company adopted the following stock
        option and stock bonus plans.

        Incentive Stock Option Plan. The Company's Incentive Stock Option Plan
        authorizes the issuance of shares of its Common Stock to persons that
        exercise options granted pursuant to the Plan. Only employees may be
        granted options pursuant to the Incentive Stock Option Plan. The option
        exercise price is determined by its directors but cannot be less than
        the market price of its common stock on the date the option is granted.
        The Company has reserved 1,000,000 common shares under this plan. No
        options have been issued under this plan as at November 30, 2006.

        Non-Qualified Stock Option Plan. SDI's Non-Qualified Stock Option Plan
        authorizes the issuance of shares of its Common Stock to persons that
        exercise options granted pursuant to the Plans. SDI's employees,
        directors, officers, consultants and advisors are eligible to be granted
        options pursuant to the Plans, provided however that bona fide services
        must be rendered by such consultants or advisors and such services must
        not be in connection with the offer or sale of securities in a
        capital-raising transaction. The Company has reserved 2,250,000 common
        shares under this plan.


                                       16
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     6. STOCK BASED COMPENSATION (cont'd)

        Stock Bonus Plan. SDI's Stock Bonus Plan allows for the issuance of
        shares of common stock to its employees, directors, officers,
        consultants and advisors. However bona fide services must be rendered by
        the consultants or advisors and such services must not be in connection
        with the offer or sale of securities in a capital-raising transaction.
        The Company has reserved 150,000 common shares under this plan. No
        options have been issued under this plan as at November 30, 2006.

        On October 31, 2006 the board of directors granted the following options
        under its Non-Qualified Stock Option Plan:

          1.   Options to one director to acquire  650,000  common  shares.  The
               exercise price for 550,000 options was set at $0.10 per share and
               balance 100,000 options were set at $0.25 per share.

          2.   Options to one director to acquire  300,000  common  shares.  The
               exercise price for 200,000 options was set at $0.10 per share and
               balance 100,000 options were set at $0.25 per share.

          3.   Options to one director to acquire  300,000  common  shares.  The
               exercise price for 200,000 options was set at $0.10 per share and
               balance 100,000 options were set at $0.25 per share.

          4.   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 $0.50 per share.

        All of the above options vest immediately and have an expiry date of
        October 29, 2011.

        On November 14, 2006 the board of directors granted the following
        options under its Non-Qualified Stock Option Plan:

        Options to one consultant to acquire 100,000 common shares. The exercise
        price for 100,000 options was set at $1.00 per share. These options vest
        immediately and expire on November 14, 2011.

                                       17

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     6. STOCK BASED COMPENSATION (cont'd)

          The fair value of each grant was estimated at the grant date using the
          Black-Scholes  option-pricing  model. The Black-Scholes option pricing
          model  requires  the use of certain  assumptions,  including  expected
          terms, expected volatility,  expected dividends and risk-free interest
          rate to calculate the fair value of stock-based  payment  awards.  The
          assumptions  used in calculating the fair value of stock option awards
          involve  inherent  uncertainties  and the  application  of  management
          judgment.  As the Company is  relatively  new and had limited data for
          historic  volatility,  the  estimated  volatility  was  determined  by
          comparing  the  volatility  of similar  Companies  within the industry
          sector.  The expected term calculation is based upon the expected term
          the option is to be held,  which is the full term of the  option.  The
          risk-free  interest  rate is based  upon the  U.S.  Treasury  yield in
          effect at the time of grant for an instrument  with a maturity that is
          commensurate with the expected term of the stock options. The dividend
          yield  of zero is  based  on the fact  that we have  never  paid  cash
          dividends on our common stock and we have no present  intention to pay
          cash  dividends.  The  expected  forfeiture  rate  of 0% is  based  on
          immediate vesting of stock options.

        For the year ended November 30, 2006, 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
                                                    October 31,    November 14,
                                                       2006            2006

           Risk free rate                              3.50%           3.50%
           Volatility factor                            100%            100%
           Expected dividends                             0%              0%
           Forteiture rate                                0%              0%
           Expected life                            5 years         5 years
           Range of exercise prices              $0.10-0.50           $1.00

           Market price of Company's common
             stock on date of grant                   $0.65           $1.90
           Total number of options granted        1,550,000         100,000
           Grant date fair value of options           $0.58           $1.58

           Stock-based compensation cost
              expensed for year ended
              November 30, 2006                    $892,214        $157,726
           Unexpended stock-based compensation
              deferred over to next year                nil             nil

                                       18

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     6. STOCK BASED COMPENSATION (cont'd)

           The following table summarizes the options outstanding under its
           Non-Qualified Stock Option Plan as at Nov 30:

                                         Option price        Number of shares
                  Expiry date              per share        2006         2005
                  -----------            ------------       ----         ----

                  October 29, 2011         $0.25           300,000          -
                  October 29, 2011         $0.50           300,000          -
                  November 14, 2011        $1.00           100,000          -
                                                         ----------   ---------
                                                           700,000          -
                                                         ----------   ---------
                  Weighted average exercise
                      price at end of year                   $0.46          -
                                                         ----------   ---------

                                                      Number of shares
                                                   2006               2005
                                                   ----               ----

            Outstanding, beginning of year               -                -
            Granted                              1,650,000                -
            Expired                                      -                -
            Exercised                             (950,000)               -
            Cancelled                                    -                -
            Outstanding, end of year               700,000                -
                                               -----------  ---------------
            Exercisable, end of year               700,000                -
                                               -----------  ---------------

            At November 30, 2006, the weighted average contractual term of the
            total outstanding, and the total exercisable options under the
            Non-Qualified Stock Option Plan were as follows:

                                                         Weighted-Average
                                                      Remaining Contractual Term

            Total outstanding options                         4.9 years
            Total exercisable options                         4.9 years

                                       19

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     7. RELATED PARTY TRANSACTIONS

           During the years ended November 30, 2006 and 2005, no director was
           paid any compensation in cash. All out of pocket expenses of
           directors/promoters were expensed. During the year ended November 30,
           2006, (Prior year `Nil') the Directors were issued Stock Options
           (Refer to note 6).

        a) Options to one director to acquire 650,000 common shares. The
           exercise price for 550,000 options was set at $0.10 per share and
           balance 100,000 options were set at $0.25 per share. The Company
           recognized stock based compensation expense of $386,302. The director
           exercised the options to acquire 550,000 common shares at $0.10 per
           share.

        b) Options to one director to acquire 300,000 common shares. The
           exercise price for 200,000 options was set at $0.10 per share and
           balance 100,000 options were set at $0.25 per share. The Company
           recognized stock based compensation expense of $176,028. The director
           exercised the option to acquire 200,000 common shares at $0.10 per
           share.

        c) Options to one director to acquire 300,000 common shares. The
           exercise price for 200,000 options was set at $0.10 per share and
           balance 100,000 options were set at $0.25 per share. The Company
           recognized stock based compensation expense of $176,028. The director
           exercised the option to acquire 200,000 common shares at $0.10 per
           share.

        During the year ended November 30, 2005, the directors were
        issued3,640,000shares in lieu of services rendered, which were measured
        and recorded at the exchange amount.

        The Directors also made advances to the Company to meet the operating
        expenses. These advances of $4,227 (2005 $8,029) are unsecured and bear
        interest at 4% p.a. Further, a Company Director has charged the Company
        a total amount of $2,250 (2005: $2,250) for providing office space
        during the year.

        A company controlled by a 13.7% (as of November 30, 2006) shareholder,
        who is also the son of a director was paid $106,100 from inception to
        January 31, 2007 ($90,100 to November 30, 2006) for research and
        development (see note 10(c))

     8. PREPAID EXPENSES AND OTHER

        Includes prepayments made to a consulting group for providing real-time
        market data, news and innovative tools (2005: $ nil).

                                       20

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

     9. INCOME TAXES

        The Company has certain non-capital losses of approximately $799,558
        (2005: $188,699) available, which can be applied against future taxable
        income and which expires in 2025 and 2026. These losses have not been
        assessed by the tax authorities.

        Reconciliation of statutory tax rate to the effective income tax rate is
        as follows:

        Federal statutory income tax rate                          (34.0) %
        State income taxes, net of tax benefit                      (3.5) %
                                                                   --------
        Deferred tax asset valuation allowance                     (37.5) %
                                                                   --------
        Effective rate                                              (0.0) %

        Deferred tax asset components as of November 30, 2006 and 2005 are as
follows:

                                                            2006      2005
           Operating losses available to offset future
               income-taxes                              $799,558    $188,699
                                                         --------    --------

           Expected Income tax recovery at statutory
               rate of 37.5%                            ($299,834)   ($70,762)
           Valuation Allowance                           $299,834     $70,762
                                                         --------     -------
           Net deferred tax assets                              -           -
                                                         --------     -------

        As the company is in the development stage, it has provided a 100 per
        cent valuation allowance on the net deferred tax asset as of November
        30, 2006 and 2005.

    10. SUBSEQUENT EVENTS

        a) Unregistered Sales of Equity Securities.

           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.

           The Company paid a commission of $20,015 in connection with the sale
           of these shares. The Company received cash of $ 1,365,500 during the
           year ended November 30, 2006 and the balance of $1,170,670 was
           received subsequent to the year end. The Company relied upon the
           exemption provided by Section 4(2) of the Securities Act of 1933 for
           the sale of these shares.

                                       21

<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2006 and 2005
(Amounts expressed in US Dollars)

    10. SUBSEQUENT EVENTS-Cont'd

        b) Effective January 7, 2007 the company appointed a CFO and granted
           stock options to acquire 125,000 common shares. The exercise price
           for the options was set at $1.50 per share. These options vest
           immediately and expire on November 14, 2011. The stock -based
           compensation cost of $204,986 will be expensed in the next quarter
           ending February 28, 2007.

           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:

               Risk free rate                        3.50%
               Volatility factor                   122.84%
               Expected dividends                     nil

        c) The Company has 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 2006, 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 director in return has released the
           Company from a prior obligation to pay royalty from the sale of any
           product developed using this technology. The Company has expensed
           this payment of $22,000 as Research and Product Development cost
           during 2006 and will expense the balance $16,000 to Research and
           Product Development during the first quarter of 2007. In addition,
           the director was paid $62,000 on February 6th 2007 upon signing the
           amended agreement. The Company will expense this payment of $62,000
           to Research and Product Development in the first quarter of 2007.
           Should the development of a working industrial prototype of the ES
           technology be completed to the satisfaction of the Company on or
           before March 10, 2007, then the son of the director can retain
           ownership of the 1,560,000 shares issued during March 2005 and valued
           at $15,600 for services rendered ("subject shares") which represent
           13.7% of the common shares of the Company as of November 30, 2006.
           Should the development of a working industrial prototype of the ES
           technology not be completed to the satisfaction of the Company on or
           before March 10, 2007, then the subject shares will be cancelled by
           the Company and the director will be paid $50,000 on March 10, 2007.
           The Company took possession of the subject shares certificate upon
           execution of the agreement. In the event of cancellation of these
           shares, the Company will account for this transaction under the
           constructive retirement method. The cancelled shares will revert to
           authorized but unissued status. The stock and additional
           paid-in-capital amounts will be reduced with a total of $15,600 and a
           debit of $34,400 to retained earnings, being the excess of the
           purchase cost over the original issuance.


                                       22
<PAGE>


                                   SIGNATURES

      In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 12th day of September 2007.

                                  SECURITY DEVICES INTERNATIONAL INC.


                                  By  /s/ Sheldon Kales
                                      -----------------------------------------
                                      Sheldon Kales, President and Chief
                                      Executive Officer


                                  By  /s/ Rakesh Malhotra
                                      -----------------------------------------
                                      Rakesh Malhotra, Principal Financial and
                                      Accounting Officer

      Pursuant to the requirements of the Securities Act of l934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

                                     Title                    Date

/s/ Sheldon Kales
------------------------
Sheldon Kales                       Director             September 12, 2007


/s/ Boaz Dor
------------------------
Boaz Dor                            Director             September 12, 2007

/s/ Gregory Sullivan
------------------------
Gregory Sullivan                    Director             September 12, 2007