SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(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, 2010
   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                                71-1050654
  ---------------------------------      ------------------------------------
 (State or other jurisdiction of         (I.R.S. Employer Identification No.)
  incorporation or organization)

      1101 Pennsylvania Ave., NW, 6th Floor
         Washington, DC 20004
  ---------------------------------------------
   (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

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ]

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

Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [  ]                   Accelerated filer  [ ]

Non-accelerated filer  [  ]                     Smaller reporting company  [X]
(Do not check if a smaller reporting company)

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

The aggregate market value of the voting stock held by non-affiliates of the
Company on May 31, 2010 was approximately $3,678,000.

As of February 28, 2011, the Company had 25,878,050 issued and outstanding
shares of common stock.

Documents incorporated by reference:      None
<PAGE>

ITEM 1.  BUSINESS

     Security Devices  International  Inc. ("SDI" or the "Company") is a defense
technology company specializing in the development of innovative next generation
solutions for security  situations  that do not require the use of lethal force,
or ammunition.  SDI is currently developing manufacturing partnerships to assist
in the  deployment of their patent  pending  family of products.  These products
consist of; the Blunt Impact Projectile 40mm (BIP40),  and the Wireless Electric
Projectile 40mm (WEP40).

     The BIP40 is a direct impact  less-than-lethal  ammunition round. Developed
to respond to the increasing demand for security solutions in circumstances that
do not  require  lethal  force  to  control.  Patented  technologies  allow  for
operational  effectiveness  at  distances  of up to 262 feet (80m),  while still
enhancing target safety if engaged from close range.

     The  BIP40  operates  with  smokeless  powder  as  a  propellant,  ensuring
consistent velocity and accuracy at long distances.  The head of the round has a
collapsible nose which absorbs the kinetic energy upon impact. The Company holds
a global patent for the collapsible nose.

     Designed to supersede  previous blunt impact solutions such as foam, baton,
sponge and rubber  bullets,  the BIP40's  technology  enables the  projectile to
engage the target with higher  kinetic energy while meeting  official,  military
standard requirements.

     The  WEP40  is an  industry  leading  electric  ammunition  round  that was
developed to answer the growing need for an effective,  extended  range electric
incapacitation  solution  for  situations  that do not require the use of lethal
force to control.  Incorporating  SDI's  patent-pending  technologies allows for
this ammunition round to deliver operational success at distances up to 160 feet
(50m).

     The Market sectors for these products  include;  the military,  army, navy,
air force,  peacekeeping,  homeland security, and law enforcement professionals.
The WEP40 when deployed emits a Wireless Electro-Muscular  Disruption Technology
that  incapacitates  the  targeted  individual.  The  BIP40 is a  non-electrical
ammunition  round  that will stop an  individual  with  targeted  accuracy.  The
Company's  products were designed for a standard 40mm ammunition casing, for use
with standard issue weapons such as riot guns and M203 grenade launchers.

     As of  February  28,  2011 SDI has  completed  the  following  steps in the
development of the BIP40 and the WEP40:

            o  Design and testing of the BIP40 version 1.0 is complete

            o  Design and testing of the WEP40 version 1.0 is complete


     During the year  ending  November  30,  2011 SDI plans to have  operational
BIP40 ammunition rounds.

                                       2
<PAGE>

     SDI anticipates that its capital  requirements for the twelve-month  period
ending November 30, 2011 will be:

          Production costs                                  $120,000
          General and Administrative Expenses                576,000
                                                             -------
               Total                                        $696,000
                                                            ========


Competition

     The Company's  industry is highly competitive and composed of many domestic
and foreign  companies.  The Corporation has experienced and expects to continue
to experience, substantial competition from numerous competitors whom it expects
to continue to improve their products and technologies. Competitors may announce
and introduce new products,  services or enhancements that better meet the needs
of  end-users  or  changing  industry  standards,   or  achieve  greater  market
acceptance due to pricing,  sales channels or other factors.  Competitors may be
able  to  respond   more  quickly  than  the  Company  to  changes  in  end-user
requirements and devote greater resources to the enhancement, promotion and sale
of their products.

Patents

     Four patent applications,  one for the electrical mechanism and three other
for the mechanical mechanism of the WEP40 and BIP40, have been filed by SDI with
the U.S. Patent Office and other patent offices worldwide.

     SDI has also filed several foreign patents applications.

     SDI's  patents may not protect its  proprietary  technology.  In  addition,
other  companies  may develop  products  similar to the BIP40 and WEP40 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 SDI  family of  products  (the  "Family of
Products")  will be considered a military or crime control product by the United
States  Department  of Commerce and the export of the Family of Products 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 these products.

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

                                       3
<PAGE>

     The Company's Family of Products 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 WEP40, to private citizens or
security personnel.

General

     As of February 28, 2011 SDI did not have any full-time employees.

     SDI's  offices  are  located  at 1101  Pennsylvania  Ave.,  NW,  6th  Floor
Washington,  DC 20004, and 338 Church Street Oakville,  Ontario L6J 1P1 Canada..
SDI's rents its Ontario office at a cost of $1,700 per month pursuant to a lease
which  expires  on  September  30,  2012.  The  annual  commitments,   excluding
proportionate realty and maintenance costs and taxes are as follows:

Year ended November 30, 2011   $ 20,400
Year ended November 30, 2012   $ 17,000

The USA office does not have a lease term and runs month by month. SDI believes
its offices are adequate to meet its foreseeable future needs.

     SDI's website is www.lektrox.com.

ITEM 2.  DESCRIPTION OF PROPERTY

     See Item 1 of this report.

                                       4
<PAGE>


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.


     SDI's  common  stock is 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 periods indicated:

      Three Months Ended              High       Low
      ------------------              ----       ---
      February 2009                  $0.81      $0.31
      May 2009                       $0.60      $0.33
      August 2009                    $0.91      $0.15
      November 2009                  $0.42      $0.19

      February 2010                  $0.34      $0.20
      May 2010                       $0.34      $0.17
      August 2010                    $0.92      $0.18
      November 2010                  $0.41      $0.25

     As of February 28, 2010 SDI had  approximately  250  shareholders of record
and 25,878,050 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.

                                       5
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

     Not applicable.

ITEM 7.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND PLAN
         OF OPERATION

     SDI is a defence  technology  company  specializing  in the  development of
innovative next generation solutions for security situations that do not require
the use of lethal force. SDI is currently developing manufacturing  partnerships
to assist in the deployment of their patent  pending  family of products.  These
products consist of; the Blunt Impact Projectile 40mm (BIP40),  and the Wireless
Electric Projectile 40mm (WEP40).

The BIP40 is a direct impact  less-than-lethal  ammunition  round.  Developed to
respond to the increasing demand for security solutions in circumstances that do
not require lethal force to control. Patented technologies allow for operational
effectiveness at distances of up to 262 feet (80m), while still enhancing target
safety if engaged from close range.

The BIP40 operates with smokeless  powder as a propellant,  ensuring  consistent
velocity and accuracy at long distances. The head of the round has a collapsible
nose which  absorbs the kinetic  energy upon impact.  The Company holds a global
patent for the collapsible nose.

Designed to supersede  previous  blunt  impact  solutions  such as foam,  baton,
sponge and rubber  bullets,  the BIP40's  technology  enables the  projectile to
engage the target with higher  kinetic energy while meeting  official,  military
standard requirements.

The WEP40 is an industry leading electric ammunition round that was developed to
answer the growing need for an effective, extended range electric incapacitation
solution for situations  that do not require the use of lethal force to control.
Incorporating SDI's patent-pending technologies allows for this ammunition round
to deliver operational success at distances up to 160 feet (50m).

The Market sectors for these products  include;  the military,  army,  navy, air
force, peacekeeping,  homeland security, and law enforcement professionals.  The
WEP40  when  deployed  emits  a  Wireless  Electro   Neuro-Muscular   Disruption
Technology  that  incapacitates  the  targeted   individual.   The  BIP40  is  a
non-electrical  ammunition  round  that will stop an  individual  with  targeted
accuracy.  The Company's  products were designed for a standard 40mm  ammunition
casing,  for use with standard  issue weapons such as riot guns and M203 grenade
launchers.

SDI has  terminated  their  agreement  with Elad  Engineering  of Israel,  dated
November  30,  2009 and is in the midst of  negotiating  a new  arrangement  for
future services with this company.

SDI continues to speak to large defence technology companies, and are looking to
manufacture their BIP40 in the United States in calendar 2011.

                                       6
<PAGE>

Commencing  June 2010,  new management was put in place to administer the day to
day  operations  of SDI  with an aim to build  the  company  to a point  that an
effective  partnership with a large defense technology company could be executed
and to reduce the monthly expenses of the company and provide responsible fiscal
over sight to the company.

Two new directors were  appointed to the board of directors;  Mr. Harry Walters,
with an extensive  history  working with the United  States  Government  and the
Pentagon,  brings  excellent  insight into the United States Military to further
SDI's forward momentum with the United States Dept. of defense,  and Mr. Patrick
Bryan who brings an extensive background in business as well as Military service
and managing a modern weapons  company that dealt with United States  Government
agencies, both Military and civilian.

The Company  appointed  members of the board to serve on the audit  committee to
oversee financial statements once completed.

The Company appointed a Chief operating Officer to assist the President with the
day to day operations of the company.

The  Company  contracted  Level 4 Capital  Corp.  to assist  with the  financial
strategy  of SDI  during  this  fiscal  2010 and to work with the  Company  with
restructurings, contract negotiations, and operational issues.

The Company joined the  Association of the United States Army and attended their
annual conference in October 2010 in Washington, D.C. At the conference, SDI was
shown  interest  from two  large  defense  technology  companies,  and is now in
advanced  stage  discussions  with them to form a proposed joint venture with at
least one of them.

The Company  opened a US office in  Washington  DC to  accommodate  the large US
military presence.


SDI was  incorporated  on March 1, 2005 and for the  period  from  inception  to
November 30, 2010 has not generated any revenue.

     During the year ended November 30, 2010:

        o   Research and product development expenses were substantially lower
            since the development of the Company's products was nearing
            completion.

        o   General and administrative expenses increased primarily due to the
            following reasons:

            Effective June 1, 2010, the Company entered into a `Consulting and
            Professional Services agreement' with Level 4 Capital Corp. for a
            term of five months. The consultant is to provide various
            managerial, legal and investor relation services. The total fees for
            the services agreed are $360,000. The consultant agreed and the
            Company issued 1,800,000 common shares of the Company at $0.20 per

                                       7
<PAGE>

            share in lieu of fees. The Company expensed $360,000 to general and
            administrative expense during the year ended November 30, 2010.

            Effective July 1, 2010, the Company obtained the services of a
            consultant providing consulting, corporate strategy and Investor
            relations for a term of three months at CAD $10,000 per month. The
            consultant agreed and the Company issued 150,000 common shares of
            the Company at $0.20 per share in lieu of fees. The Company expensed
            $30,000 to general and administrative expense during the year ended
            November 30, 2010.

            The Company expensed stock based compensation expense (included in
            general and administrative expenses) for issue and modification of
            options and warrants for $289,670 during the year ended November 30,
            2010 as compared to $182,213 for the prior year. Stock based
            compensation expense does not require the use of cash, associated
            with the issue or modification of the exercise price of certain
            options granted to SDI's officers, directors and consultants.

     During the period from inception  (March 1, 2005) through November 30, 2010
SDI's operations used $9,420,549 in cash. During this period SDI:

        o  purchased $58,773 of equipment;
        o raised $9,629,150 from the sale of shares of its common stock; and
        o raised $117,500 from its officers and directors upon the exercise of
          options to purchase 1,175,000 shares of common stock.

        Changes to Issued Share Capital

        Year ended November 30, 2009

       On August 19, 2009 the Company sold 788,000 units to a group of private
       investors. Each unit consisted of one share of common stock and one
       warrant. Each warrant allows the holder to purchase one share of the
       Company's common stock at a price of $0.50 per share at any time prior to
       June 15, 2010. The shares were sold at a price of $0.25 per unit. The
       shares of common stock are, and any shares issuable upon the exercise of
       warrants will be, restricted securities, as that term is defined in Rule
       144 of the Securities and Exchange Commission. The Company relied upon
       the exemption provided by Section 4(2) of the Securities Act of 1933 in
       connection

       Year ended November 30, 2010

       On January 4, 2010 the Company completed the placement for 1,510,000
       common shares to private investors. The shares were sold at a price of
       $0.25 per common share for a total consideration of $377,500. The Company
       paid $20,000 as finder's fees. The shares of common stock are restricted
       securities, as that term is defined in Rule 144 of the Securities and
       Exchange Commission. The Company relied upon the exemption provided by
       Section 4(2) of the Securities Act of 1933 in this connection.

       In May, 2010, the Company received $10,800 being the exercise of options
       to acquire 108,000 common shares at an exercise price of $0.10 per common
       share. The Company issued 108,000 common shares during the quarter ended
       August 31, 2010.

                                       8
<PAGE>

      On June 1, 2010 the Company sold 1,000,000 shares of common stock to a
      private investor at a price of $0.20 per share. The shares of common stock
      are restricted securities, as that term is defined in Rule 144 of the
      Securities and Exchange Commission. The Company relied upon the exemption
      provided by Section 4(2) of the Securities Act of 1933 in connection with
      the sale of these securities.

      In June 9, 2010 the Company sold 650,000 shares of common stock to two
      private investors at a price of $0.20 per share. The Company relied upon
      the exemption provided by Section 4(2) of the Securities Act of 1933 in
      connection with the sale of these shares. The shares sold are restricted
      securities, as that term is defined in Rule 144 of the Securities and
      Exchange Commission.

      On August 31, 2010 the Company sold 700,000 shares of common stock to a
      private investor at a price of $0.20 per share. The shares of common stock
      are restricted securities, as that term is defined in Rule 144 of the
      Securities and Exchange Commission. The Company relied upon the exemption
      provided by Section 4(2) of the Securities Act of 1933 in connection with
      the sale of these securities.

      On September 22, 2010 the Company sold 2,250,000 shares of common stock to
      private investors at a price of $0.20 per share. The shares of common
      stock are restricted securities, as that term is defined in Rule 144 of
      the Securities and Exchange Commission. The Company relied upon the
      exemption provided by Section 4(2) of the Securities Act of 1933 in
      connection with the sale of these securities.

      On October 18, 2010 the Company sold 1,925,000 shares of common stock to
      private investors at a price of $0.20 per share. The shares of common
      stock are restricted securities, as that term is defined in Rule 144 of
      the Securities and Exchange Commission. The Company relied upon the
      exemption provided by Section 4(2) of the Securities Act of 1933 in
      connection with the sale of these securities.

      On October 18, 2010 the Company issued 2,500,000 shares of common stock
      for services which includes 550,000 common shares issued to directors for
      settlement of debt and cancellation of options and 1,800,000 common shares
      for services provided by an outside Company which is owned by an officer
      of this Company.

      SDI relied upon the exemption provided by Section 4(2) of the Securities
      Act of 1933 with respect to the sale of the securities listed above. The
      investors in these offerings were provided with full information regarding
      SDI. There was no general solicitation in connection with these private
      offerings. The investors in these offerings acquired SDI's securities for
      their own account. The certificates representing the shares of common
      stock issued to the investors in these offerings bear restricted legends
      providing that the shares cannot be sold except pursuant to an effective
      registration statement or an exemption from registration.

      SDI anticipates that its capital requirements for the twelve-month period
      ending November 30, 2011 will be:

                                       9
<PAGE>

      Development and Production costs              $120,000
      General and Administrative Expenses            576,000
                                                     -------
            Total                                   $696,000
                                                    ========

     Other than the foregoing,  SDI did not have any material future contractual
obligations or off balance sheet arrangements as of November 30, 2010.

     SDI does not have any  commitments  or  arrangements  from any  persons  to
provide SDI with any additional  capital it may need. Without additional capital
SDI will  not be able to fund  its  anticipated  capital  requirements  outlined
above.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     Not applicable.

ITEM 8     FINANCIAL STATEMENTS

     See the financial statements included with this report.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

     Not applicable.

ITEM 9A. and 9A(T).  CONTROLS AND PROCEDURES

     a) SDI  maintains a system of controls  and  procedures  designed to ensure
that  information  required to be disclosed in reports filed or submitted  under
the  Securities  Exchange Act of 1934,  as amended  ("1934  Act"),  is recorded,
processed,  summarized and reported,  within time periods specified in the SEC's
rules and forms and to ensure that  information  required to be disclosed by SDI
in the reports that it files or submits under the 1934 Act, is  accumulated  and
communicated to SDI's management,  including its Principal Executive Officer and
Principal  Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.  As of November 30, 2010, SDI's Principal Executive Officer
and Principal  Financial  Officer  evaluated the effectiveness of the design and
operation of SDI's disclosure controls and procedures. Based on that evaluation,
the Principal  Executive Officer and Principal  Financial Officer concluded that
SDI's disclosure controls and procedures were effective.

Management's Report on Internal Control Over Financial Reporting

     SDI's management is responsible for  establishing and maintaining  adequate
internal  control  over  financial  reporting  and  for  the  assessment  of the
effectiveness  of internal control over financial  reporting.  As defined by the
Securities and Exchange Commission, internal control over financial reporting is
a process  designed by, or under the  supervision of SDI's  principal  executive
officer  and  principal  financial  officer  and  implemented  by SDI's Board of
Directors,  management  and other  personnel,  to provide  reasonable  assurance
regarding the  reliability of financial  reporting and the  preparation of SDI's
financial  statements  in accordance  with U.S.  generally  accepted  accounting
principles.

                                       10
<PAGE>

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     SDI's management  evaluated the  effectiveness of its internal control over
financial  reporting  as of November 30, 2010 based on criteria  established  in
Internal  Control - Integrated  Framework  issued by the Committee of Sponsoring
Organizations of the Treadway  Commission,  or the COSO Framework.  Management's
assessment  included an evaluation of the design of SDI's internal  control over
financial  reporting  and  testing  of the  operational  effectiveness  of those
controls.

     Inherent  in  any  small  business  is  the  pervasive   problem  involving
segregation of duties. Since SDI has a small accounting department,  segregation
of duties  cannot be  completely  accomplished  at this  stage in its  corporate
lifecycle.  Accordingly,  SDI's  management has added  compensating  controls to
reduce and  minimize  the risk of a material  misstatement  in SDI's  annual and
interim financial statements.

     Based on this evaluation,  SDI's  management  concluded that SDI's internal
control over financial reporting was effective as of November 30, 2010.

     There was no change in SDI's internal control over financial reporting that
occurred  during the year ended November 30, 2010 that has materially  affected,
or is  reasonably  likely to  materially  affect,  SDI's  internal  control over
financial reporting.

ITEM 9B.   OTHER INFORMATION

     Not applicable.

                                       11
<PAGE>

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL  PERSONS

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

    Gregory Sullivan          44    President, Principal Executive Officer and a
                                    Director
    Dean Thrasher             47    Chief Operating Officer
    Boaz Dor                  56    Secretary and a Director
    Rakesh Malhotra           54    Principal Financial and Accounting Officer
    Harry Walters             56    Director
    Patrick Bryan             46    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.

Gregory  Sullivan  has been a director of SDI since April 2005.  On May 30, 2010
Mr. Sullivan was appointed SDI's President and Principal Executive Officer.  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.

Dean Thrasher has been the COO of SDI since November 1, 2010. Mr.  Thrasher is a
senior  executive  with  more  than  twenty  five  years  of  start-up  business
management   skills,   mergers  &  acquisitions,   product   launches,   product
development, and funding experience in the technology, wholesale, manufacturing,
distribution,  retail and franchise sectors, as well as extensive  international
business and public market experience.  Dean has run and managed several private
companies as well as a TSX-Venture listed public company. His previously tenures
include Chair of both private and public companies, as well as holding a seat on
the Board of Directors of these entities.

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

                                       12
<PAGE>

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) degree from the University of Delhi (India) and worked for A.F Ferguson
& Co. (the Indian correspondent for KPMG) and obtained his CA designation in
India. Having practiced as an 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. During 2000 and 2001,
Mr. Malhotra worked as a chartered accountant with a mid-sized accounting firm
in Toronto performing audits of public companies. Since 2005 Mr. Malhotra has
been a consultant to a number of public companies. Mr. Malhotra has more than 20
years experience in accounting and financing.

Harry  Walters  has been a director of SDI since June 8, 2011.  Since 2000,  Mr.
Walter's  has been a  principal  in the  Lafayette  Equity  Fund,  a $12 million
Washington,   DC-based   venture  capital  fund  investing  in  emerging  growth
technology  companies.  Since 2000,  Mr.  Walters  has also been an  independent
consultant  to the financial  industry.  Mr.  Walters,  a graduate of the United
States Military Academy at West Point,  served as the  Administrator of Veterans
Affairs, reporting to President Ronald Reagan, from 1983 to 1986.

Patrick  Bryan has been a director of SDI since June 8, 2011.  Since  2009,  Mr.
Bryan has been an independent  consultant in the international trade area. Prior
to that time, Mr. Bryan was the Chief Executive Officer (2004-2008), and later a
consultant  (2009),  to Land Warfare Resources  Corporation,  a firm holding the
technology for a new type of military assault rifle.

     Harry Walters and Patrick Bryan are  independent as that term is defined in
Section 803 of the NYSE AMEX Company Guide.

     SDI  does not  have a  compensation  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 803 of the NYSE AMEX Company Guide.

     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.

     SDI  believes  its  directors  are  qualified  to act as such  due to their
experience  in the law  enforcement  or  weapons  industries  and their  general
business backgrounds.

     Sheldon Kales resigned as an officer and director of SDI on May 30, 2010.

                                       13
<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION

     The following table shows the compensation for the two years ended November
30,  2010  earned  by SDI's  Principal  Executive  Officers.  None of the  other
directors or officers of SDI received  compensation in excess of $100,000 during
these years.
<TABLE>
<S>                   <C>    <C>      <C>      <C>     <C>       <C>         <C>

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

Gregory Sullivan,    2010     --      --       --   $144,311     $77,000    $221,311
 President since
 May 30, 2010

Sheldon Kales,      2010      --      --       --   $ 13,097     $45,500     $58,597
 President prior to 2009      --      --       --   $ 40,293    $126,500    $166,793
 May 30, 2010
</TABLE>

(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
(3) The fair value of stock issued for services computed in accordance with ASC
    718 on the date of grant.
(4) The fair value of options and warrants granted computed in accordance with
    ASC 718 on the date of grant, adjusted for the fair value relating to
    lowering the exercise price of options granted.
(5) Amount represents consulting fees paid during the year.

     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 year period ending November 30, 2011, and the time these persons plan
to devote to SDI's business.

                                Proposed           Time to be devoted to the
      Name                    Compensation             business of SDI
      ----                    ------------             ---------------
      Gregory Sullivan          $75,000                      90%
      Dean Thrasher             $96,000                      70%
      Boaz Dor                  $36,000                      50%
      Rakesh Malhotra           $30,000                      10%

     There are no sales, net income,  or other thresholds which are required for
SDI's directors to increase the compensation  which in the future may be paid to
SDI's  officers.  SDI may also issue  shares of its  common  stock or options to
compensate its officers and directors for services provided to SDI.

                                       14
<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, 2010

                                                            Awards of Options
Name                Paid in Cash (1)    Stock Awards (2)     or Warrants (3)
----                ----------------    ----------------    -----------------

Boaz Dor              $64,250 (4)             --                   $5,820
Gregory Sullivan      $50,500 (5)             --                 $144,311
Harry Walter                -                 --                  $24,941
Patrick Bryan               -                 --                  $24,941

(1)  Represents consulting fees paid during the year
(2)  The fair value of stock issued for services computed in accordance with ASC
     718 on the date of grant.
(3)  The fair value of options or warrants granted computed in accordance with
     ASC 718 on the date of grant.
(4)  Does not include compensation for $14,000 settled by issue of shares
(5)  Does not include compensation of $26,500 settled by issue of shares

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.

                                       15
<PAGE>

     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 28, 2011, the options granted
pursuant to the Plans. Each option represents the right to purchase one share of
SDI's common stock.

<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     5,000,000   1,450,000        N/A        2,375,000
Stock Bonus Plan                      150,000         N/A         --          150,000
</TABLE>

     The  following  tables show all  options  granted  and  exercised  by SDI's
current  officers and directors since the inception of SDI and through  February
28, 2011, and the options held by the officers and directors named below. All of
the options  listed below were  granted  pursuant to SDI's  Non-Qualified  Stock
Option Plan.

                                       16
<PAGE>
<TABLE>
<S>                  <C>      <C>         <C>     <C>          <C>       <C>

                              Options Granted/Exercised
                              -------------------------
                                                            Shares
                  Grant     Options   Exercise Expiration Acquired on    Value
Name               Date   Granted (#)   Price    Date     Exercise (1) Realized (2)
----              ------  ----------- -------- ---------- ------------ ------------

Gregory Sullivan 10/29/05  200,000       $0.10  10/29/11     200,000   $100,000
Boaz Dor         10/29/05  200,000       $0.10  10/29/11     200,000   $100,000
Rakesh Malhotra   1/07/07  125,000       $0.25  06/30/14
Boaz Dor         01/24/08  117,000       $0.10  01/24/13     117,000   $ 25,740
Harry Walters     6/15/10   50,000       $0.20  6/15/15
Patrick Bryan     6/15/10   50,000       $0.20  6/15/15
Harry Walters     9/30/10   50,000       $0.20  9/30/15
Patrick Bryan     9/30/10   50,000       $0.20  9/30/15
</TABLE>

(1)  The number of shares received upon exercise of options.

(2)  With respect to options exercised, the dollar value of the difference
     between the option exercise price and the market value of the option shares
     purchased on the date of the exercise of the options.

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

    Rakesh Malhotra     125,000            --         $0.25 (2)    6-30-14 (3)
    Harry Walters        50,000            --         $0.20        6-15-15
    Patrick Bryan        50,000            --         $0.20        6-15-15
    Harry Walters        50,000            --         $0.20        9-30-15
    Patrick Bryan        50,000            --         $0.20        9-30-15

     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.

(2)  On June 17, 2009, SDI's directors approved the reduction of the exercise
     price of these options to $0.25 per share.

(3)  On December 4, 2009 SDI's directors extended the expiration date of these
     options to June 30, 2014.

     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

                                       17
<PAGE>

      (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, 2010,  SDI's most recent fiscal year end.  SDI's stock option plans have not
been approved by its shareholders.

                                                            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                     1,450,000          $0.27             2,375,000

Warrants

     In addition to the options described above, SDI has granted warrants to its
officers and directors upon the terms shown below.

                                       Shares Issuable
                           Grant       Upon Exercise    Exercise   Expiration
    Name                    Date         of Options      Price        Date
    ----                    ----        -----------      -----        ----

    Gregory Sullivan     10-05-07          50,000        $0.25(1)   10-05-14
    Boaz Dor              9-06-07          17,000        $0.25(1)    5-31-17
    Gregory Sullivan     10-01-10         397,000        $0.20(2)    9-30-15
    Boaz Dor             10-01-10          50,000        $0.20(3)    9-30-15
    Rakesh Malhotra      10-01-10         175,000        $0.20(4)    9-30-15

   (1)On June 17, 2009, SDI's directors approved the reduction of the exercise
   price of these warrants to $0.25 per share.

   (2) On October 1, 2010, the Board cancelled 725,000 options issued to the
   director having an exercise price of $0.25 per share and expiring on various
   dates ranging from October 29, 2011 to January 4, 2015 and issued warrants to
   acquire 397,000 common shares exercisable at $0.20 per share with an expiry
   term of five years and 500,000 common shares in lieu thereof.

                                       18
<PAGE>

   (3) On October 1, 2010, the Board cancelled 400,000 options issued to
   thedirector having an exercise price of $0.25 per share and expiring on
   various dates ranging from October 29, 2011 to June 30, 2014 and issued
   warrants to acquire 50,000 common shares exercisable at $0.20 per share with
   an expiry term of five years and 50,000 common shares in lieu thereof.

   (4)On October 1, 2010, the Board cancelled 175,000 options issued to the
   officer having an exercise price of $0.25 per share and expiring on June 30,
   2014 and issued warrants to acquire 175,000 common shares exercisable at
   $0.20 per share with an expiry term of five years.


ITEM 12.  SECURITY  OWNERSHIP  OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT
          AND RELATED STOCKHOLDERS MATTERS

     The  following  table  shows  the  ownership  of SDI's  common  stock as of
February 28, 2011 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
     ----                          -------------        ----------------
     Gregory Sullivan                900,000                3.5%

     Boaz Dor                      1,070,000                4.1%

     Sheldon Kales                 2,540,910                9.8%

     All Officers and Directors    1,970,000                7.6%
      as a group (six persons)

(1)Does not reflect shares issuable upon the exercise of options.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Schwartz  Levitsky  Feldman,   LLP  ("Schwartz   Levitsky")  audited  SDI's
financial statements for the years ended November 30, 2010 and 2009.

                                       19
<PAGE>

     The  following  table shows the  aggregate  fees billed and billable to SDI
during these years by Schwartz Levitsky.

                                           2010           2009
                                           ----           ----

Audit Fees                              $20,000        $16,200
Audit-Related Fees                      $10,500       $  8,320
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
amounts  billed for the services  related to the reviews of SDI's 10-Q  reports.
Before  Schwartz  Levitsky  was  engaged by  Security  Devices  to render  audit
services, the engagement was approved by Security Device's Directors.

ITEM 15.  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).

 10.1    Agreement with Level 4 Capital Corp.  (Incorporated by reference to the
                                               same exhibit filed with the
                                               Company's report on Form 10-Q for
                                               the three months ended August 31,
                                               2010.

   31    Rule 13a-14(a) Certifications         *

   32    Section 1350 Certifications           *

* Filed with this report.


                                       20
<PAGE>
 SECURITY DEVICES INTERNATIONAL, INC.
                        (A Development Stage Enterprise)

                              FINANCIAL STATEMENTS

                     YEARS ENDED NOVEMBER 30, 2010 AND 2009

      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

                     YEARS ENDED NOVEMBER 30, 2010 AND 2009
                        (Amounts expressed in US Dollars)


                                TABLE OF CONTENTS

                                                                        Page No

     Report of Independent Registered Public Accounting Firm                 1

     Balance Sheets as at November 30, 2010 and November 30, 2009            2

     Statements  of  Operations  and  Comprehensive  loss for the
     years ended November 30, 2010 and  November 30, 2009 and the
     period from  inception  (March 1, 2005) to November 30, 2010            3

     Statements of Cash Flows for the years ended November 30, 2010
     and November 30, 2009 and the period from inception (March 1, 2005)
     to November 30, 2010                                                    4

     Statements of Stockholders' Deficit for the years ended November 30,
     2010 and November 30, 2009 and the period from inception
     (March 1,  2005) to November 30, 2010                                   5

     Notes to Financial Statements                                        6-31
<PAGE>

Schwartz Levitsky Feldman llp
CHARTERED ACCOUNTANTS
LICENCED PUBLIC ACCOUNTANTS
TORONTO, MONTREAL

             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.  (the  "Company")  as at November 30, 2010 and 2009 and the
related  statements  of  operations  and  comprehensive  loss,  cash  flows  and
stockholders' equity (deficiency) for the years ended November 30, 2010 and 2009
and the period  from  inception  (March 1, 2005) to  November  30,  2010.  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 audits.

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 the Company as of November 30,
2010 and 2009,  and the  results  of its  operations  and its cash flows for the
years ended November 30, 2010 and 2009 and the period from  inception  (March 1,
2005) to November 30, 2010 in  accordance  with  generally  accepted  accounting
principles in the United States of America.

The company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal  control over  financial  reporting as a basis for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness of the company's  internal  controls
over financial reporting. Accordingly, we express no such opinion.

The  accompanying  financial  statements  have been  prepared  assuming that the
company  will  continue  as a  going  concern.  As  discussed  in  note 2 to the
financial statements, the company has not commenced operations and has no source
of  operating  revenue  and  expects  to  incur   significant   expenses  before
establishing  operating revenue.  The Company's future success is dependent upon
its ability to raise  sufficient  capital,  not only to maintain  its  operating
expenses,  but also to continue to develop and be able to profitably  market its
product.  That raises substantial doubt about its ability to continue as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.

                                            "SCHWARTZ LEVITSKY FELDMAN LLP"

Toronto, Ontario, Canada                              Chartered Accountants
March 14, 2011                                  Licensed Public Accountants
                                       1
<PAGE>

<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Balance Sheets
As at November 30, 2010 and 2009
(Amounts expressed in US Dollars)

                                                             2010       2009
                                ASSETS                        $           $

CURRENT
   Cash                                                   247,328       55,431
   Prepaid expenses and other                              38,419       31,172
                                                      -------------------------

Total Current Assets                                      285,747       86,603
Plant and Equipment, net (Note 9)                          29,200       29,924
                                                      -------------------------

TOTAL ASSETS                                              314,947      116,527

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

                                   LIABILITIES


CURRENT LIABILITIES
Accounts payable and accrued liabilities (Note 4)         787,641      691,729
                                                      -------------------------
Total Current Liabilities                                 787,641      691,729
                                                      -------------------------
Going Concern (Note 2)

Related Party Transactions (Note 8)

Commitments (Note 11)

Subsequent Events (Note 13)

                              STOCKHOLDERS' DEFICIT

Capital Stock (Note 5)
Preferred stock, $0.001 par value, 5,000,000
  shares authorized, Nil issued and outstanding
  (2008 - nil)
Common stock, $0.001 par value 50,000,000 shares
  authorized, 25,878,050 issued and outstanding
  (2009 -15,235,050)                                       25,878       15,235
Additional Paid-In Capital                             15,876,078   13,463,251
Deficit Accumulated During the Development Stage      (16,374,650) (14,053,688)
                                                      -------------------------

Total Stockholders' Deficit                              (472,694)    (575,202)
                                                      -------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT               314,947      116,527
                                                      -------------------------


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

                                       2
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statements of Operations and Comprehensive loss
Years Ended November 30, 2010 and 2009 and the Period from Inception (March 1,
2005) to November 30, 2010 (Amounts expressed in US Dollars)

                                        Cumulative
                                     since inception     2010          2009
                                     ---------------     ----          ----
                                           $              $              $
EXPENSES:

  Research and Product Development      7,492,975        946,702    2,031,230
  Amortization                             29,573          8,976        9,348
  General and administration            9,124,696      1,365,284      941,702
                                       ----------    -----------    ---------

TOTAL OPERATING EXPENSES               16,647,244      2,320,962    2,982,280
                                      -----------    ----------- ------------

LOSS FROM OPERATIONS                  (16,647,244)    (2,320,962)  (2,982,280)

  Other Income                            272,594              -        7,813
                                      -----------    ----------- ------------
LOSS BEFORE INCOME TAXES              (16,374,650)    (2,320,962)  (2,974,467)

   Income taxes (Note 10)                       -              -            -
                                      -----------    ----------- ------------

NET LOSS AND COMPREHENSIVE LOSS       (16,374,650)    (2,320,962)  (2,974,467)
                                      -----------    ----------- ------------

  Loss per share - basic and
    diluted                                                (0.12)       (0.20)
                                                     ----------- ------------

  Weighted average common shares
    outstanding                                       18,612,924   14,671,576
                                                     ----------- ------------


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

                                       3
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
Years Ended November 30, 2010 and 2009 and the Period from Inception (March 1,
2005) to November 30, 2010 (Amounts expressed in US Dollars)

                                               Cumulative
                                             Since inception      2010    2009
                                             ---------------      ----    ----
                                                  $            $          $
CASH FLOWS FROM OPERATING ACTIVITIES

   Net loss for the period                   (16,374,650)(2,320,962)(2,974,467)
     Items not requiring an outlay of
       cash:
      Issue of shares for services               584,500    430,500          -
      Stock based compensation for
        options and warrants
        (included in general and
        administration expenses)               5,556,406    289,670    182,213
      Loss on cancellation of common stock        34,400          -          -
      Amortization                                29,573      8,976      9,348
      Changes in non-cash working capital:
      Prepaid expenses and other                 (38,419)    (7,247)    14,812
      Accounts payable and accrued
        liabilities                              787,641     95,912    472,648
                                             ----------- ---------- ----------

NET CASH USED IN OPERATING ACTIVITIES         (9,420,549)(1,503,151)(2,295,446)
                                             ----------- ---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES

      Acquisition of Plant and Equipment         (58,773)    (8,252)   (13,822)
                                             ----------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES            (58,773)    (8,252)   (13,822)
                                             ----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
      Stock subscriptions received                30,000     30,000
      Net Proceeds from issuance of
        common shares                          9,629,150  1,662,500    197,000
      Cancellation of common stock               (50,000)         -          -
      Exercise of stock options                  117,500     10,800          -
                                             ----------- ---------- ----------

NET CASH PROVIDED BY FINANCING ACTIVITIES      9,726,650  1,703,300    197,000
                                             ----------- ---------- ----------

 NET INCREASE (DECREASE) IN CASH
   FOR THE YEAR                                  247,328    191,897 (2,112,268)
      Cash, beginning of Year                          -     55,431  2,167,699
                                             ----------- ---------- ----------
CASH, END OF YEAR                                247,328    247,328     55,431
                                             =========== ========== ==========

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 Changes in Stockholders' Deficit
For the years ended November 30, 2010 and 2009 and the period from inception
(March 1, 2005) to November 30, 2010.
(Amounts expressed in US Dollars)

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

                                       Number of        Common      Additional      Deficit
                                        Common          Shares       Paid-in   Accumulated During
                                        Shares          amount       Capital    Development Stage     Total
                                        ------          ------       -------    -----------------     -----
                                          $                $            $               $               $
Balance as of March 1, 2005                   -              -             -               -                -
Issuance of Common shares
for professional services             6,525,000          6,525        58,725               -           65,250
Issuance of common shares for cash      397,880            398        99,072                           99,470
Net loss for the period                       -              -             -        (188,699)        (188,699)
                                    ------------       --------    ----------     -----------      -----------
Balance as of November 30, 2005       6,922,880          6,923       157,797        (188,699)         (23,979)
                                    ------------       --------    ----------     -----------      -----------

Issuance of common shares for cash      956,000            956        94,644               -            95,600

Issuance of common shares for cash      286,000            286        49,764               -            50,050
Issuance of common shares  to
  consultant for services                50,000             50         8,700               -             8,750
Issuance of common shares for cash    2,000,000          2,000       398,000               -           400,000
Exercise of stock options               950,000            950        94,050               -            95,000
Issuance of common shares for cash
  (net of agent commission)             200,000            200       179,785               -           179,985
Stock subscriptions received                                       1,165,500               -         1,165,500
Stock based compensation                      -              -     1,049,940               -         1,049,940
Net loss for the year                        --              -            --      (1,660,799)       (1,660,799)
                                    ------------       --------    ----------     -----------      -----------
Balance as of November 30, 2006      11,364,880         11,365     3,198,180      (1,849,498)        1,360,047

Issuance of common shares for stock
Subscriptions received in prior
  year                                1,165,500          1,165        (1,165)              -                 -
Issuance of common shares for cash    1,170,670          1,171     1,169,499                         1,170,670
Issuance of common shares for cash
  and services                           50,000             50       154,950                           155,000
Issuance of common shares for cash
(net of expenses)                     2,139,000          2,139     4,531,236                         4,533,375
Cancellation of stock                (1,560,000)        (1,560)      (14,040)                          (15,600)
Stock based compensation                                           2,446,433                         2,446,433
Issue of warrants                                                    357,094                           357,094
Net loss for the year                         -              -             -      (4,827,937)       (4,827,937)
                                    ------------       --------    ----------     -----------      -----------
Balance as of November 30, 2007      14,330,050         14,330    11,842,187      (6,677,435)        5,179,082

Exercise of stock options               117,000            117        11,583                            11,700
Stock based compensation                      -              -     1,231,056               -         1,231,056
Net loss for the year                         -              -             -      (4,401,786)       (4,401,786)
                                    ------------       --------    ----------     -----------      -----------
Balance as of November 30, 2008      14,447,050         14,447    13,084,826     (11,079,221)        2,020,052

Issuance of common shares for cash      788,000            788       196,212                           197,000
Stock based compensation                      -              -       177,990               -           177,990
Compensation expense for warrants                                      4,223                             4,223
Net loss for the year                         -              -             -      (2,974,467)       (2,974,467)
                                    ------------       --------    ----------     -----------      -----------
Balance as of November 30, 2009      15,235,050         15,235    13,463,251     (14,053,688)         (575,202)

Issuance of common shares for cash    8,143,000          8,143     1,665,157                         1,673,300
Issuance of common shares
  for services and debt               2,500,000          2,500       428,000                           430,500
Stock subscriptions received                                          30,000                            30,000
Stock based compensation                                             289,670                           289,670
Net loss for the year                                                             (2,320,962)       (2,320,962)
                                    ------------       --------    ----------     -----------      -----------
Balance as of November 30, 2010      25,878,050         25,878    15,876,078     (16,374,650)         (472,694)
</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, 2010 and 2009
(Amounts expressed in US Dollars)

1. BASIS OF PRESENTATION

        The financial statements which include the accounts of Security Devices
        International Inc. (the "Company" or "SDI") were prepared in accordance
        with US GAAP. The Company was incorporated under the laws of the state
        of Delaware on March 1, 2005.

2. NATURE OF OPERATIONS AND GOING CONCERN

        The Company is a defence technology corporation specializing in the
        development of innovative next generation solutions for security
        situations that do not require the use of lethal force, or ammunition.
        SDI is currently developing manufacturing partnerships to assist in the
        deployment of their patent pending family of products. These products
        consist of; the Blunt Impact Projectile 40mm (BIP40), and the Wireless
        Electric Projectile 40mm (WEP40).

        These financial statements have been prepared in accordance with
        generally accepted accounting principles applicable to a going concern,
        which assumes that the Company will be able to meet its obligations and
        continue its operations for its next fiscal year. At November 30, 2010,
        the Company has not yet achieved profitable operations, had a working
        capital deficiency of $501,894 and has accumulated losses of $16,374,650
        since inception and expects to incur further losses in the development
        of its business, all of which limits the Company's ability to continue
        as a going concern. The Company has a need for additional working
        capital to launch its blunt impact and electric 40mm round products,
        meet its ongoing levels of corporate overhead and discharge its
        liabilities as they come due.
        In order to finance the continued development, the Company is working
        towards raising of appropriate capital in the near future. During the
        year ended November 30, 2009, the Company raised $197,000 through issue
        of common shares and warrants. The Company further raised an additional
        $1,673,300 net through the issue of 8,143,000 common shares and also
        received $30,000 subscription for shares pending allotment during the
        year ended November 30, 2010

        While the Company has been successful in securing financings in the
        past, there is no assurance that it will be able to do so in the future.
        Accordingly, these financial statements do not give effect to
        adjustments, if any, that would be necessary should the Company be
        unable to continue as a going concern

        The Company has incurred a loss of $ 2,320,962 during the year ended
        November 30, 2010 primarily due to its research and development
        activities and non-cash stock based compensation expense for $289,670.
        At November 30, 2010, the Company had an accumulated deficit during the
        development stage of $16,374,650 which includes a non- cash stock based
        compensation expense of $5,556,406 for issue of options and warrants.

                                       6
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(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. As the 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. Actual amounts may differ from these
            estimates. Significant estimates include accruals, valuation
            allowance for deferred tax assets, estimates for calculation of
            stock based compensation and estimating the useful life of its plant
            and equipment.

        b) Income Taxes
            The Company accounts for income taxes under FASB Codification Topic
            740-10-25 ("ASC 740-10-25"). Under ASC 740-10-25, deferred tax
            assets and liabilities are recognized for the future tax
            consequences attributable to differences between the financial
            statement carrying amounts of existing assets and liabilities and
            their respective tax bases. Deferred tax assets and liabilities are
            measured using enacted tax rates expected to apply to taxable income
            in the years in which those temporary differences are expected to be
            recovered or settled. Under ASC 740-10-25, the effect on deferred
            tax assets and liabilities of a change in tax rates is recognized in
            income in the period that includes the enactment date. The Company
            provides a valuation allowance for deferred tax assets for which it
            does not consider realization of such assets likely. The Company did
            not incur any material impact to its financial condition or results
            of operations due to the financial statement recognition and
            measurement of a tax position taken or expected to be taken in a tax
            return. The Company is subject to U.S federal jurisdiction income
            tax examinations for the tax years 2006 through 2009. In addition,
            the Company is subject to state and local income tax examinations
            for the tax years 2006 through 2009.

        c) Revenue Recognition

            The Company's revenue recognition policies are expected to follow
            common practice in the manufacturing industry. The Company will
            record revenue when it is realized, or realizable and earned. The
            Company considers revenue to be realized, or realizable and earned,
            when the following revenue recognition requirements will be met:
            persuasive evidence of an arrangement exists; the products or
            services have been accepted by the customer via delivery or
            installation acceptance; the sales price is fixed or determinable;
            and collectability is probable. For product sales, the Company
            determines that the earnings process is complete when title, risk of
            loss and the right to use equipment has transferred to the customer.

                                       7
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Cont'd

       d) Earnings (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, 2010 and 2009 that have been included in dilutive loss
           per share calculation as the effects would have been anti-dilutive.
           At November 30, 2010, there were 1,450,000 options and 1,289,000
           warrants outstanding, which were convertible into equal number of
           common shares of the Company. At November 30, 2009, there were
           3,768,000 options and 1,105,000 warrants outstanding, which were
           convertible into equal number of common shares of the Company.


       e) Fair Values

           The Company carries cash and accounts payable and accrued liabilities
           at historical costs since their respective estimated fair values
           approximate carrying values due to their current nature.

       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

           All awards granted to employees and non-employees after November 30,
           2005 are valued at fair value by using the Black-Scholes option
           pricing model and recognized on a straight line basis over the
           service periods of each award. The Company accounts for equity
           instruments issued in exchange for the receipt of goods or services
           from other than employees using 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 of
           November 30, 2010 there was $nil of unrecognized expense related to
           non-vested stock-based compensation arrangements granted. The total
           stock-based compensation expense relating to all employees and non
           employees for the years ended November 30, 2010 and 2009 was $289,670
           and $182,213 respectively

                                       8
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Cont'd

       h) Foreign Currency

           The   Company   maintains   its  books,   records   and   banking
           transactions  in  U.S.   dollars  which  is  its  functional  and
           reporting currency.

       i) Comprehensive loss
           Comprehensive loss includes all changes in equity (net assets) during
           a period from non-owner sources. Examples of items to be included in
           comprehensive loss, which are excluded from net loss, include foreign
           currency translation adjustments and unrealized gains and losses on
           available-for-sale securities.

       j) Financial Instruments

           The Company's financial instruments consist of cash and accounts
           payable and accrued liabilities.

           The Company follows ASC 820-10, "Fair Value Measurements and
           Disclosures" (ASC 820-10), which among other things, defines fair
           value, establishes a consistent framework for measuring fair value
           and expands disclosure for each major asset and liability category
           measured at fair value on either a recurring or nonrecurring basis.
           Fair value is an exit price, representing the amount that would be
           received to sell an asset or paid to transfer a liability in an
           orderly transaction between market participants. As such, fair value
           is a market-based measurement that should be determined based on
           assumptions that market participants would use in pricing an asset or
           liability. As a basis for considering such assumptions, a three-tier
           fair value hierarchy has been established, which prioritizes the
           inputs used in measuring fair value as follows:

           o Level 1--Inputs are unadjusted, quoted prices in active markets for
           identical assets or liabilities at the measurement date.

           Assets that are generally included in this category are cash and cash
           equivalents comprised of money market funds, restricted cash and
           short-term investments.

           o Level 2--Inputs (other than quoted prices included in Level 1) are
           either directly or indirectly observable for the asset or liability
           through correlation with market data at the measurement date and for
           the duration of the instrument's anticipated life.

           o Level 3--Inputs reflect management's best estimate of what market
           participants would use in pricing the asset or liability at the
           measurement date. Consideration is given to the risk inherent in the
           valuation technique and the risk inherent in the inputs to the model.

                                       9
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Cont'd

       j) Financial Instruments-Cont'd

           Assets and liabilities measured at fair value as of November 30, 2010
           and 2009 are classified below based on the three fair value hierarchy
           tiers described above:


                        Carrying Value    Fair Value

November 30, 2010:
Cash                        $247,328      $247,328
Accounts payable and
  accrued liabilities       $787,641      $787,641



                        Carrying Value    Fair Value
November 30, 2009:
Cash                         $55,431       $ 55,431
Accounts payable and
accrued liabilities         $691,729       $691,729


Cash has been measured using Level 1 of the Fair Value Hierarchy.

       k) Impairment 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.


       l) Concentration of Credit Risk

           The Company does not have significant off-balance sheet risk or
           credit concentration.

                                       10
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Cont'd


       m) Intellectual Property with Respect to Pending Patent Applications

           Four patent applications, one for the electrical mechanism and the
           other three for the mechanical mechanism of the WEP40, 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.

       n) Plant and Equipment

           Plant and equipment are recorded at cost less accumulated
           depreciation. Depreciation is provided commencing in the month
           following acquisition using the following annual rate and method:


     Computer equipment          30%        declining balance method
     Furniture and fixtures      30%        declining balance method
     Leasehold Improvements                 straight  line over  period of lease

                                       11
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Cont'd


       o) Recent Accounting Pronouncements

           In June 2009, the FASB issued Topic 105, which became the source of
           authoritative GAAP recognized by the FASB to be applied by
           nongovernmental entities. Rules and interpretive releases of the SEC
           under authority of federal securities laws are also sources of
           authoritative GAAP for SEC registrants. On the effective date of this
           Topic, the Codification will supersede all then-existing non-SEC
           accounting and reporting standards. All other non-SEC accounting
           literature not included in the Codification will become
           non-authoritative. This Topic identifies the sources of accounting
           principles and the framework for selecting the principles used in
           preparing the financial statements of nongovernmental entities that
           are presented in conformity with GAAP and arranged these sources of
           GAAP in a hierarchy for users to apply accordingly. This Topic is
           effective for financial statements issued for interim and annual
           periods ending after September 15, 2009. The adoption of this topic
           did not have a material impact on the Company's disclosure of the
           financial statements.

           In January 2010, the FASB issued an amendment to ASC 820, Fair Value
           Measurements and Disclosure, to require reporting entities to
           separately disclose the amounts and business rationale for
           significant transfers in and out of Level 1 and Level 2 fair value
           measurements and separately present information regarding purchase,
           sale, issuance, and settlement of Level 3 fair value measures on a
           gross basis. This standard, for which the Company is currently
           assessing the impact, is effective for interim and annual reporting
           periods beginning after December 15, 2009 with the exception of
           disclosures regarding the purchase, sale, issuance, and settlement
           of Level 3 fair value measures which are effective for fiscal years
           beginning after December 15, 2010. The adoption of this standard is
           not expected to have a significant impact on the Company's financial
           statements. In February 2010, the FASB issued ASU No. 2010-09
           "Subsequent Events (ASC Topic 855) "Amendments to Certain Recognition
           and Disclosure Requirements" ("ASU No. 2010-09"). ASU No. 2010-09
           requires an entity that is an SEC filer to evaluate subsequent events
           through the date that the financial statements are issued and
           removes the requirement for an SEC filer to disclose a date, in both
           issued and revised financial statements, through which the filer had
           evaluated subsequent events. The adoption of this standard did not
           have an impact on the Company's financial statements.

                                       12
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Cont'd

       o) Recent Accounting Pronouncements Cont'd


           In September 2009, FASB amended ASC 605, as summarized in ASU
           2009-13, Revenue Recognition: Multiple-Deliverable Revenue
           Arrangements. As summarized in ASU 2009-13, ASC Topic 605 has been
           amended: (1) to provide updated guidance on whether multiple
           deliverables exist, how the deliverables in an arrangement should be
           separated, and the consideration allocated; (2) to require an entity
           to allocate revenue in an arrangement using estimated selling prices
           of deliverables if a vendor does not have VSOE or third-party
           evidence of selling price; and (3) to eliminate the use of the
           residual method and require an entity to allocate revenue using
           the relative selling price method. The accounting changes in ASU
           2009-13 are both effective for fiscal years beginning on or after
           June 15, 2010, with early adoption permitted. Adoption may either
           be on a prospective basis or by retrospective application. The
           Company is currently evaluating the potential impact that the
           adoption of this statement will have on its financial position and
           results from operations and will adopt the provision of this
           statement in fiscal 2011.


           In February 2010, the FASB Accounting Standards Update 2010-10 (ASU
           2010-10), "Consolidation (Topic 810): Amendments for Certain
           Investment Funds." The amendments in this Update are effective as of
           the beginning of a reporting entity's first annual period that begins
           after November 15, 2009 and for interim periods within that first
           reporting period. Early application is not permitted. The Company's
           adoption of provisions of ASU 2010-10 did not have a material effect
           on the financial position, results of operations or cash flows.

                                       13
<PAGE>


 SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)


4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
                                                          2010        2009
                                                          ----        ----
           Accounts payable and accrued liabilities
           are comprised of the following:

               Trade payables                          $ 735,634    $ 658,932
               Accrued liabilities                        52,007       32,797
                                                       ---------    ---------
                                                       $ 787,641    $ 691,729
                                                       ---------    ---------

        Accrued  liabilities relate primarily to audit, legal and accounting
        expenses

5. CAPITAL STOCK

       a) Authorized
            50,000,000 Common shares, $0.001 par value
          And
            5,000,000 Preferred shares, $0.001 par value

           The Company's Articles of Incorporation authorize its Board of
           Directors to issue up to 5,000,000 shares of preferred stock. The
           provisions in the Articles of Incorporation relating to the preferred
           stock allow the directors to issue preferred stock with multiple
           votes per share and dividend rights which would have priority over
           any dividends paid with respect to the holders of SDI's common stock.

       b) Issued

           25,878,050 Common shares (2009: 15,235,050 Common shares)

                                       14
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

5. CAPITAL STOCK-Cont'd

       c) Changes to Issued Share Capital

           Year ended November 30, 2009

       On August 19, 2009 the Company sold 788,000 units to a group of private
       investors. Each unit consisted of one share of common stock and one
       warrant. Each warrant allows the holder to purchase one share of the
       Company's common stock at a price of $0.50 per share at any time prior to
       June 15, 2010. The shares were sold at a price of $0.25 per unit. The
       shares of common stock are, and any shares issuable upon the exercise of
       warrants will be, restricted securities, as that term is defined in Rule
       144 of the Securities and Exchange Commission. The Company relied upon
       the exemption provided by Section 4(2) of the Securities Act of 1933 in
       connection

       Year ended November 30, 2010

       On January 4, 2010 the Company completed the placement for 1,510,000
       common shares to private investors. The shares were sold at a price of
       $0.25 per common share for a total consideration of $377,500. The Company
       paid $20,000 as finder's fees. The shares of common stock are restricted
       securities, as that term is defined in Rule 144 of the Securities and
       Exchange Commission. The Company relied upon the exemption provided by
       Section 4(2) of the Securities Act of 1933 in this connection.

       In May, 2010, the Company received $10,800 being the exercise of options
       to acquire 108,000 common shares at an exercise price of $0.10 per common
       share. The Company issued 108,000 common shares during the quarter ended
       August 31, 2010.

      On June 1, 2010 the Company sold 1,000,000 shares of common stock to a
      private investor at a price of $0.20 per share. The shares of common stock
      are restricted securities, as that term is defined in Rule 144 of the
      Securities and Exchange Commission. The Company relied upon the exemption
      provided by Section 4(2) of the Securities Act of 1933 in connection with
      the sale of these securities.

      In June 9, 2010 the Company sold 650,000 shares of common stock to two
      private investors at a price of $0.20 per share. The Company relied upon
      the exemption provided by Section 4(2) of the Securities Act of 1933 in
      connection with the sale of these shares. The shares sold are restricted
      securities, as that term is defined in Rule 144 of the Securities and
      Exchange Commission.

      On August 31, 2010 the Company sold 700,000 shares of common stock to a
      private investor at a price of $0.20 per share. The shares of common stock
      are restricted securities, as that term is defined in Rule 144 of the
      Securities and Exchange Commission. The Company relied upon the exemption
      provided by Section 4(2) of the Securities Act of 1933 in connection with
      the sale of these securities.


                                       15
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

5. CAPITAL STOCK-Cont'd

      On September 22, 2010 the Company sold 2,250,000 shares of common stock to
      private investors at a price of $0.20 per share. The shares of common
      stock are restricted securities, as that term is defined in Rule 144 of
      the Securities and Exchange Commission. The Company relied upon the
      exemption provided by Section 4(2) of the Securities Act of 1933 in
      connection with the sale of these securities.

      On October 18, 2010 the Company sold 1,925,000 shares of common stock to
      private investors at a price of $0.20 per share. The shares of common
      stock are restricted securities, as that term is defined in Rule 144 of
      the Securities and Exchange Commission. The Company relied upon the
      exemption provided by Section 4(2) of the Securities Act of 1933 in
      connection with the sale of these securities.

      On October 18, 2010 the Company issued 2,500,000 shares of common stock
      for services which includes 550,000 common shares issued to directors for
      settlement of debt and cancellation of options and 1,800,000 common shares
      for services provided by an outside Company which is owned by an officer
      of this Company.


6. STOCK BASED COMPENSATION

        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, 2010.

         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. By a resolution of the Board of
         Directors, the Company amended this plan to increase the number of
         common shares available under this plan from 2,250,000 to 4,500,000
         effective October 10, 2007. The Company further amended its
         Non-Qualified Stock Option Plan to increase the number of Common Shares
         available under this plan to 5,000,000 and filed an S-8 registration
         statement on April 10, 2008.

                                       16
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(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,
         2010.

        Year ended November 30, 2009

        On December 17, 2008, the Company approved the reduction of the exercise
        price of 2,940,000 outstanding options which had earlier been issued at
        prices ranging from $1.00 to $3.60 to a new option price of $0.50 per
        share, with all other terms of the original grant remaining the same.
        The Company expensed this additional non-cash stock based compensation
        expense relating to this modification for $114,688. This reduction in
        exercise price relates to a total of 1,150,000 options in total issued
        to the Company's three directors; 300,000 options in total issued to the
        Company's officer and the balance total of 1,490,000 unexercised options
        issued in the past to various consultants.

        On June 17, 2009, the Company approved the reduction of the exercise
        price of 2,700,000 outstanding options which had on December 17, 2008
        been reduced to an option price of $0.50 per share, to a new option
        price of $0.25 per share, with all other terms of the original grant
        remaining the same. The Company expensed this additional non-cash stock
        based compensation expense relating to this modification for $63,302.
        This reduction in exercise price relates to a total of 1,150,000 options
        in total issued to the Company's three directors; 300,000 options in
        total issued to the Company's officer and the balance total of 1,250,000
        unexercised options issued in the past to various consultants.

        For the year ended November 30, 2009 the Company has recognized in its
        financial statements additional stock-based compensation costs as per
        the following details. The fair value of each option used for the
        purpose of estimating the stock compensation is calculated using the
        Black-Scholes option pricing model with the following weighted average
        assumptions:

December 17, 2008:

        Risk free rate                                                2.95%
        Expected dividends                                               0%
        Forfeiture rate                                                  0%
        Exercise price                                                $0.50
        Volatility                                                  137.12%
        Increase in fair value due to reduction in exercise
          price of options                                      $0.03-$0.09
        Market price of Company's common stock on date of
          reduction in exercise price                                 $0.32
        Stock-based compensation cost expensed                     $114,688
        Unexpended stock-based compensation deferred over to
          next period                                                  $Nil


                                       17
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

6. STOCK BASED COMPENSATION-Cont'd

        June 17, 2009:

        Risk free rate                                                2.95%
        Expected dividends                                               0%
        Forfeiture rate                                                  0%
        Exercise price                                                $0.25
        Volatility                                                  125.79%
        Increase in fair value due to reduction in exercise
          price of options                                      $0.02-$0.03
        Market price of Company's common stock on date of
          reduction in exercise price                                 $0.25
        Stock-based compensation cost expensed                      $63,302
        Unexpended stock-based compensation deferred over to
          next period                                                  $Nil
        As of November 30, 2009 there was $Nil of unrecognized
          expense related to non-vested stock-based
          compensation arrangements granted.

        Year ended November 30, 2010

       On December 4, 2009, the Company approved the reduction of the exercise
       price of 300,000 outstanding options which had earlier been issued at a
       price of $0.50 to a new option price of $0.25 per share, with all other
       terms of the original grant remaining the same. The Company expensed this
       additional non-cash stock based compensation expense relating to this
       modification for $6,534. The fair value of each option used for the
       purpose of estimating the stock compensation is calculated using the
       Black-Scholes option pricing model with the following weighted average
       assumptions:

          Risk free rate                                              2.61%
          Expected dividends                                             0%
          Forfeiture rate                                                0%
          Volatility                                                173.24%
          Exercise price                                              $0.25
          Increase in fair value due to reduction in exercise
            price of options                                          $0.02
          Market price of Company's common stock on date of
            reduction in exercise price                               $0.25
          Stock-based compensation cost expensed                     $6,534

       On December 4, 2009, the Company approved the extension of the expiration
       of 2,900,000 outstanding options from their initial expiry date ranging
       from November 2011 to April 2013 to a new expiration date of June 30,
       2014 with all other terms of the original grant remaining the same. The
       Company expensed this additional non-cash stock based compensation
       expense relating to this modification for $63,282. The fair value of each
       option used for the purpose of estimating the stock compensation is
       calculated using the Black-Scholes option pricing model with the
       following weighted average assumptions:

                                       18
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

6. STOCK BASED COMPENSATION-Cont'd

            Risk free rate                                            2.61%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              173.24%
            Stock-based compensation cost expensed                  $63,282

       On January 4, 2010, the board of directors granted options to a director
       to acquire 100,000 common shares at an exercise price of $0.25 per share.
       All of these options vested immediately and have an expiry of five years.
       The Company expensed stock based compensation cost of $23,677. The fair
       value of each option used for the purpose of estimating the stock
       compensation is calculated using the Black-Scholes option pricing model
       with the following weighted average assumptions:

            Risk free rate                                            2.61%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              170.69%
            Market price of Company's common stock on date
              of grant of options                                     $0.25
            Stock-based compensation cost expensed                  $23,677

       On May 20, 2010, the Company approved the extension of the expiration of
       50,000 outstanding options from their initial expiry date from May 21,
       2010 to a new expiration date of June 30, 2014 and a reduction in the
       exercise price of the options from $0.50 to $0.25 with all other terms of
       the original grant remaining the same. The Company expensed this
       additional non-cash stock based compensation expense relating to this
       modification for $13,326. The fair value of each option used for the
       purpose of estimating the stock compensation is calculated using the
       Black-Scholes option pricing model with the following weighted average
       assumptions:

            Risk free rate                                            2.61%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              166.16%
            Stock-based compensation cost expensed                  $13,326

                                       19
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

6. STOCK BASED COMPENSATION-Cont'd

       On June 15, 2010, the board of directors granted options to a director to
       acquire 350,000 common shares, two directors to acquire 50,000 common
       shares each and to a consultant to acquire 35,000 common shares. All
       these 485,000 options were issued at an exercise price of $0.20 per share
       and vest immediately with an expiry term of five years. The Company
       expensed stock based compensation cost of $119,368. The fair value of
       each option used for the purpose of estimating the stock compensation is
       calculated using the Black-Scholes option pricing model with the
       following weighted average assumptions:

            Risk free rate                                            2.61%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              164.99%
            Market price of Company's common stock on date
              of grant of options                                     $0.26
            Stock-based compensation cost expensed                 $119,368

       On September 30, 2010, the board of directors granted options to two
       directors to acquire 50,000 common shares each. All these 100,000 options
       were issued at an exercise price of $0.20 per share and vest immediately
       with an expiry term of five years. The Company expensed stock based
       compensation cost of $25,271. The fair value of each option used for the
       purpose of estimating the stock compensation is calculated using the
       Black-Scholes option pricing model with the following weighted average
       assumptions:

            Risk free rate                                            2.61%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              189.45%
            Market price of Company's common stock on date
              of grant of options                                     $0.26
            Stock-based compensation cost expensed                  $25,271


       On October 1, 2010, the Board cancelled 725,000 options issued to a
       director having an exercise price of $0.25 per share and expiring on
       various dates ranging from October 29, 2011 to January 4, 2015 and issued
       warrants to acquire 397,000 common shares exercisable at $0.20 per share
       with an expiry term of five years and 500,000 common shares in lieu
       thereof. All outstanding payables to the said director for services
       provided were adjusted against the said issuance of common shares. The
       Company expensed this additional non-cash stock based compensation
       expense relating to this modification for $31,097. The fair value of each
       option used for the purpose of estimating the stock compensation is
       calculated using the Black-Scholes option pricing model with the
       following weighted average assumptions:

                                       20
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

6. STOCK BASED COMPENSATION-Cont'd

            Risk free rate                                            3.25%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              189.42%
            Stock-based compensation cost expensed                  $31,097

       On October 1, 2010, the Board cancelled 400,000 options issued to a
       director having an exercise price of $0.25 per share and expiring on
       various dates ranging from October 29, 2011 to June 30, 2014 and issued
       warrants to acquire 50,000 common shares exercisable at $0.20 per share
       with an expiry term of five years and 50,000 common shares in lieu
       thereof. All outstanding payables to the said director for services
       provided were adjusted against the said issuance of common shares. The
       Company concluded that there was no additional non-cash stock based
       compensation expense relating to this modification. The fair value of
       each option used for the purpose of estimating the stock compensation is
       calculated using the Black-Scholes option pricing model with the
       following weighted average assumptions:

            Risk free rate                                            3.25%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              189.42%
            Stock-based compensation cost expensed                     $Nil

       On October 1, 2010, the Board cancelled 175,000 options issued to an
       officer having an exercise price of $0.25 per share and expiring on June
       30, 2014 and issued warrants to acquire 175,000 common shares exercisable
       at $0.20 per share with an expiry term of five years. The Company
       expensed this additional non-cash stock based compensation expense
       relating to this modification for $1,607. The fair value of each option
       used for the purpose of estimating the stock compensation is calculated
       using the Black-Scholes option pricing model with the following weighted
       average assumptions:

            Risk free rate                                            3.25%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              189.42%
            Stock-based compensation cost expensed                   $1,607

                                       21
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

6. STOCK BASED COMPENSATION-Cont'd


       On October 1, 2010, the Board cancelled 300,000 options each for a total
       of 600,000 options issued to two consultants having an exercise price of
       $0.25 per share and expiring on June 30, 2014 and issued warrants to each
       to acquire 300,000 common shares exercisable at $0.20 per share for a
       total of 600,000 warrants with an expiry term of five years. The Company
       expensed this additional non-cash stock based compensation expense
       relating to this modification for $5,508. The fair value of each option
       used for the purpose of estimating the stock compensation is calculated
       using the Black-Scholes option pricing model with the following weighted
       average assumptions:

            Risk free rate                                            3.25%
            Expected dividends                                           0%
            Forfeiture rate                                              0%
            Volatility                                              189.42%
            Stock-based compensation cost expensed                   $5,508

      As of November 30, 2010 there was $Nil of unrecognized expense related to
      non-vested stock-based compensation arrangements granted.

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

                                                      Number of shares
                                                 -------------------------
                                                 2010                 2009
                                                 ----                 ----

            Outstanding, beginning of year       3,768,000        3,768,000
            Granted                                685,000                -
            Expired                               (220,000)               -
            Exercised                             (108,000)               -
            Forfeited                             (775,000)
            Cancelled                           (1,900,000)               -
                                                -----------      ----------
            Outstanding, end of year             1,450,000        3,768,000
                                                -----------      -----------
             Exercisable, end of year            1,450,000        3,768,000
                                                -----------      -----------

                                       22
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

6. STOCK BASED COMPENSATION-Cont'd

                                           Option price     Number of shares
                  Expiry date               per share            2010
                  -----------               ---------            ----
                  January 29, 2012            $0.50             40,000
                  April 11, 2013              $0.50            150,000
                  June 30, 2014               $0.25          1,025,000
                  June 15, 2015               $0.20            100,000
                  September 30, 2015          $0.20            135,000
                  -------------------------------------------------------
                  TOTAL                                      1,450,000
                                                             ---------

                  Weighted average exercise price:
                  Options outstanding at end of year             $0.27
                  Options granted during the year                $0.21
                  Options exercised during the year              $0.10
                  Options cancelled during the year              $0.24

                                         Option price     Number of shares
                  Expiry date               per share            2009
                  -----------               ---------            ----
                  January 31, 2010            $1.20            120,000
                  May 21, 2010                $0.50             50,000
                  October 29, 2011            $0.25            300,000
                  October 29, 2011            $0.50            300,000
                  November 14, 2011           $0.25            100,000
                  January 7, 2012             $0.25            125,000
                  January 29, 2012            $0.50             40,000
                  April 23, 2012$0.25                          300,000
                  October 12, 2012            $0.25          1,575,000

                  January 24, 2013            $0.10            108,000
                  April 11, 2013              $0.50            150,000
                  April 11, 2013              $0.25            600,000
                  -------------------------------------------------------
                  TOTAL                                      3,768,000
                                                             ---------
                  Weighted average exercise price:
                  Options outstanding at end of year             $0.29

                                       23
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

6. STOCK BASED COMPENSATION-Cont'd

        The weighted average remaining contractual term of the total
        outstanding, and the total exercisable options under the Non-Qualified
        Stock Option Plan were as follows:

                                                         2010     2009
                                                       -----------------

                                                        (Years)  (Years)
      Total outstanding options                           3.6      2.7
      Total exercisable options                           3.6      2.7

     7. STOCK PURCHASE WARRANTS

        Year ended November 30, 2009

        On August 19, 2009 the Company sold 788,000 units to a group of private
        investors. Each unit consisted of one share of common stock and one
        warrant. Each warrant allows the holder to purchase one share of the
        Company's common stock at a price of $0.50 per share at any time prior
        to June 15, 2010.

        Year ended November 30, 2010

        On October 1, 2010, the Board cancelled 725,000 options issued to a
        director having an exercise price of $0.25 per share and expiring on
        various dates ranging from October 29, 2011 to January 4, 2015 and
        issued warrants to acquire 397,000 common shares exercisable at $0.20
        per share with an expiry term of five years and 500,000 common shares in
        lieu thereof.

        On October 1, 2010, the Board cancelled 400,000 options issued to a
        director having an exercise price of $0.25 per share and expiring on
        various dates ranging from October 29, 2011 to June 30, 2014 and issued
        warrants to acquire 50,000 common shares exercisable at $0.20 per share
        with an expiry term of five years and 50,000 common shares in lieu
        thereof.

        On October 1, 2010, the Board cancelled 175,000 options issued to an
        officer having an exercise price of $0.25 per share and expiring on June
        30, 2014 and issued warrants to acquire 175,000 common shares
        exercisable at $0.20 per share with an expiry term of five years.

        On October 1, 2010, the Board cancelled 300,000 options each for a total
        of 600,000 options issued to two consultants having an exercise price of
        $0.25 per share and expiring on June 30, 2014 and issued warrants to
        each to acquire 300,000 common shares exercisable at $0.20 per share for
        a total of 600,000 warrants with an expiry term of five years.

                                       24
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

7. STOCK PURCHASE WARRANTS-Cont'd


                                        Number of
                                        Warrants         Exercise       Expiry
                                         Granted          Prices         Date
                                                              $
                 Outstanding at
          November 30, 2007 and
         average exercise price           423,950          1.08
           Granted in year 2008                 -             -
                      Exercised                 -             -
                      Forfeited                 -             -
                      Cancelled                 -             -
                                                -             -
                                --------------------------------
                 Outstanding at           423,950          1.08
          November 30, 2008 and
         average exercise price

           Granted in year 2009           788,000          0.50        6/15/2010
                      Exercised                 -             -
              Forfeited/Expired         (106,950)        (2.81)
                      Cancelled                 -             -
                                --------------------------------
                 Outstanding at         1,105,000          0.50
          November 30, 2009 and
         average exercise price

           Granted in year 2010         1,222,000          0.20        10/1/2015
                      Exercised                 -             -

              Forfeited/Expired        (1,038,000)       (0.50)
                      Cancelled                 -             -
                                --------------------------------
                                        1,289,000          0.22
Outstanding at November 30,
2010 and average exercise price
Exercisable at November 30, 2010                       1,289,000          0.22
Exercisable at November 30, 2009        1,105,000          0.50



        The weighted average remaining contractual term of the total
        outstanding, and the total exercisable warrants were as follows:


                                                         2010     2009
                                                       -----------------

                                                        (Years)  (Years)
      Total outstanding warrants                          4.9      1.8
      Total exercisable warrants                          4.9      1.8

                                       25
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

8. RELATED PARTY TRANSACTIONS

        The following transactions are in the normal course of operations and
        are measured at the exchange amount, which is the amount of
        consideration established and agreed to by the related parties.

        Year ended November 30, 2009:

        a)  A Company Director has charged the Company a total amount of $6,000
            for providing office space during the year ended November 30, 2009.

        b)  The directors were compensated from January 1, 2009 as per their
            consulting agreements with the Company. One director was paid
            $110,000 as consulting fee and $16,500 as automobile allowance; one
            director was paid $68,750 as consulting fee and $11,000 as
            automobile allowance; one director was paid $40,000 as consulting
            fee and $11,000 as automobile allowance.

        c)  On December 17, 2008 the board of directors approved the
            reduction in the exercise price of the following options under
            its Non-Qualified Stock Option Plan:


          1.   Reduction in the exercise price of the options already issued to
               three directors to acquire 1,150,000 common shares from exercise
               price of $1.20 to a new exercise price of $0.50 per share.

          2.   Reduction in the exercise price of the options already issued to
               an officer to acquire 125,000 common shares from exercise price
               of $1.25 to a new exercise price of $0.50 per share and reduction
               in the exercise price to acquire 175,000 common shares from $1.20
               to a new exercise price of $0.50 per share.

           Stock based compensation cost relating to the reduction in the
           exercise price of the options issued to directors and officers, as
           above, amounting to $46,660 has been expensed to general and
           administration expense.


        d)  On June 17, 2009 the board of directors approved the reduction in
            the exercise price of the following options under its
            Non-Qualified Stock Option Plan:

           1.  Reduction in the exercise price of the options already issued to
               three directors to acquire 1,150,000 common shares from reduced
               exercise price of $0.50 to a new exercise price of $0.25 per
               share.

           2.  Reduction in the exercise price of the options already issued to
               an officer to acquire 125,000 common shares from reduced exercise
               price of $0.50 to a new exercise price

                                       26
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

8. RELATED PARTY TRANSACTIONS-Cont'd

        of $0.25 per share and further reduction in the exercise price to
        acquire 175,000 common shares from $0.50 to a new exercise price of
        $0.25 per share.

        Stock based compensation cost relating to the reduction in the exercise
        price of the options issued to directors and officers, as above,
        amounting to $34,322 has been expensed to general and administration
        expense.

        e) On June 17, 2009, the Company further approved the reduction of the
           exercise price of 317,000 outstanding warrants which had earlier been
           issued to directors at $0.50 per share to a new exercise price of
           $0.25 per share, with all other terms of the original issue remaining
           the same. The Company expensed this additional non-cash compensation
           expense relating to this modification for $ 4,223.

        f) The Company expensed $ 21,300 being cost for services rendered by the
           CFO for the year ended November 30, 2009.


      Year ended November 30, 2010:

      a) A Company Director has charged the Company a total of $1,500 for
         providing office space. The said director resigned during the year
         2010.

      b) The directors were compensated as per their consulting agreements with
         the Company. The Company expensed a total of $192,250 as Management fee
         (including $41,000 paid to a director who resigned during the year) and
         expensed a total of $7,000 as automobile allowance (including $3,000
         paid to a director who resigned during the year)

      c) On December 4, 2009 the board of directors approved extension of the
         expiration of outstanding options from their initial expiry date to a
         new expiration date of June 30, 2014 with all other terms of the
         original grant remaining the same.

           1. Extension of the expiration of 1,150,000 outstanding options
              already issued to three directors from their initial expiry date
              to a new expiration date of June 30, 2014;

           3.  Extension of the expiration of 300,000 outstanding options
               already issued to an officer from their initial expiry date to a
               new expiration date of June 30, 2014.

       Stock based compensation cost relating to the extension in the expiry
       date of the outstanding options issued to three directors and an officer,
       as above, amounting to $30,213 has been expensed to general and
       administration expense.

                                       27
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

8. RELATED PARTY TRANSACTIONS-Cont'd


       d)  On January 4, 2010, the board of directors granted options to a
           director to acquire 100,000 common shares at an exercise price of
           $0.25 per share. All of these options vested immediately and have an
           expiry of five years. The Company expensed stock based compensation
           cost of $23,677.

       e)  On June 15, 2010, the board of directors granted options to a
           director to acquire 350,000 common shares and to two directors to
           acquire 50,000 common shares each. All these 450,000 options were
           issued at an exercise price of $0.20 per share and vest immediately
           with an expiry term of five years. The Company expensed stock based
           compensation cost of $110,754 for these 450,000 options.

       f)  On September 30, 2010, the board of directors granted options to two
           directors to acquire 50,000 common shares each. All these 100,000
           options were issued at an exercise price of $0.20 per share and vest
           immediately with an expiry term of five years. The Company expensed
           stock based compensation cost of $25,271.

       g)  On October 1, 2010, the Board cancelled 725,000 options issued to a
           director having an exercise price of $0.25 per share and expiring on
           various dates ranging from October 29, 2011 to January 4, 2015 and
           issued warrants to acquire 397,000 common shares exercisable at $0.20
           per share with an expiry term of five years and 500,000 common shares
           in lieu thereof. All outstanding payables to the said director for
           services provided were adjusted against the said issuance of common
           shares. The Company expensed this additional non-cash stock based
           compensation expense relating to this modification for $31,097.

       h)  On October 1, 2010, the Board cancelled 400,000 options issued to a
           director having an exercise price of $0.25 per share and expiring on
           various dates ranging from October 29, 2011 to June 30, 2014 and
           issued warrants to acquire 50,000 common shares exercisable at $0.20
           per share with an expiry term of five years and 50,000 common shares
           in lieu thereof. All outstanding payables to the said director for
           services provided were adjusted against the said issuance of common
           shares. The Company concluded that there was no additional non-cash
           stock based compensation expense relating to this modification.

       i)  On October 1, 2010, the Board cancelled 175,000 options issued to an
           officer having an exercise price of $0.25 per share and expiring on
           June 30, 2014 and issued warrants to acquire 175,000 common shares
           exercisable at $0.20 per share with an expiry term of five years. The
           Company expensed this additional non-cash stock based compensation
           expense relating to this modification for $1,607.

       j)  The Company expensed $29,725 for services provided by the CFO of the
           Company and $8,000 for services provided by COO of the Company.

                                       28
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

8. RELATED PARTY TRANSACTIONS-Cont'd

     k) Effective June 1, 2010, the Company entered into a `Consulting and
        Professional Services agreement' with Level 4 Capital Corp. for a term
        of five months. The consultant is to provide various managerial, legal
        and investor relation services. The total fees for the services agreed
        was $360,000. The consultant agreed and the Company issued 1,800,000
        common shares of the Company at $0.20 per share in lieu of fees. The
        Company expensed $360,000 to general and administrative expense during
        the year ended November 30, 2010. Subsequent to the completion of the
        contract, the consultant became the Chief Operating officer of the
        Company.

   9. PLANT AND EQUIPMENT

           Plant and equipment are recorded at cost less accumulated
           depreciation.

                                     Nov 30, 2010           Nov 30, 2009
                                           Accumulated             Accumulated
                                  Cost    Amortization    Cost    Amortization
                                    $          $           $            $

        Computer equipment       35,211      20,442      35,211      14,113
        Furniture and fixtures   15,310       9,131      15,310       6,484
        Leasehold Improvements    8,252           -           -           -
        -----------------------------------------------------------------------
                                 58,773      29,573      50,521      20,597
                                 ------      ------      ------      ------

        Net carrying amount            $29,200                 $29,924
                                       -------                 -------

         Amortization expense           $8,976                  $9,348
                                        ------                  ------


10. INCOME TAXES

        The Company has certain non-capital losses of approximately $10,528,821
        (2009: $8,501,446) available, which can be applied against future
        taxable income and which expire as follows:

        2025     $   188,494
        2026     $   609,991
        2027     $ 1,731,495
        2028     $ 3,174,989
                          -
        2029     $ 2,792,560
        2030     $ 2,031,292
                 -----------
                 $10,528,821

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

        Federal statutory income tax rate                         35.0%
        Deferred tax asset valuation allowance                  (35.0)%
                                                                -------
        Effective rate                                           (0.0)%
                                                               ========

                                       29
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

10. INCOME TAXES-Cont'd

        Deferred tax asset components as of November 30, 2010 and 2009 are as
        follows:

                                                         2010        2009
                                                         ----        ----
           Operating losses available to offset
             future income-taxes                      $10,528,821  $8,501,446
                                                      -----------  ----------

           Expected Income tax recovery at
               statutory rate of 35%
               (2009: 35.0%)                          ($3,685,087)($2,975,506)
           Valuation Allowance                         $3,685,087  $2,975,506
                                                      -----------  ----------
           Net deferred tax assets                              -           -
                                                      -----------  ----------


        As the company is in the development stage and has not yet earned any
        revenue, it has provided a 100 per cent valuation allowance on the net
        deferred tax asset as of November 30, 2010 and 2009.


11. COMMITMENTS

     a) On January 1, 2010, the Company's directors renewed consulting
        agreements with the Company on the following terms:

                                        Monthly
                                   Consulting Fees from        Expiration of
                                     February through            Consulting
         Name                         December 2010               Agreement
         ----                      --------------------        --------------

         Boaz Dor                        $6,500                  12-31-2010
         Gregory Sullivan                $6,500                  12-31-2010


     b) On November 30, 2009, the Company entered into a Memorandum of
        Understanding ("MOU") with its research and development service
        contractor ("the contractor"). This MOU covers various alternatives to
        the Company to settle the liability to the contractor in the amount of
        $658,932 as at November 30, 2009. Should the Company become insolvent,
        or is unable to continue operations, or is unable to pay the contractor
        pursuant to the MOU, then it will grant the contractor an exclusive,
        irrevocable, worldwide, assignable, sub licensable, perpetual license to
        further develop and to market the Company's electric bullet (WEP40) and
        blunt impact (BIP40) technology. The Company will negotiate a royalty in
        the event of granting such rights to the contractor. The Company
        subsequent to the year end terminated their MOU with the contractor and
        is in the midst of negotiating with the contractor for future services.

                                       30
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2010 and 2009
(Amounts expressed in US Dollars)

11. COMMITMENTS-Cont'd

     c) Effective June 1, 2010, the Company entered into a `Consulting and
        Professional Services agreement' with Level 4 Capital Corp. for a term
        of five months. The consultant is to provide various managerial, legal
        and investor relation services. The total fees for the services agreed
        are $360,000. The consultant agreed and the Company issued 1,800,000
        common shares of the Company at $0.20 per share in lieu of fees. The
        Company expensed $360,000 to general and administrative expense during
        the year ended November 30, 2010.

     d) Effective July 1, 2010, the Company obtained the services of a
        consultant providing consulting, corporate strategy and Investor
        relations for a term of three months at CAD $10,000 per month. The
        consultant agreed and the Company issued 150,000 common shares of the
        Company at $0.20 per share in lieu of fees. The Company expensed $30,000
        to general and administrative expense during the year ended November 30,
        2010.

     e) The Company has commitments for leasing office premises in Oakville,
        Ontario, Canada to September 30, 2012. The annual commitments, excluding
        proportionate realty and maintenance costs and taxes are as follows:

        Year ended November 30, 2011   $ 20,400
                                       --------
        Year ended November 30, 2012   $ 17,000

     f) The Company signed a consulting agreement with an officer of the
        Company for a period of six months commencing November 1, 2010. The
        officer will be paid $8,000 plus applicable taxes.

12. SEGMENT DISCLOSURES

     The Company, after reviewing its reporting systems, has determined that it
     has one reportable segment and geographic segment. The Company's operations
     are all related to the research and product development for its wireless
     electric ammunition, as well as its blunt impact projectile. All assets of
     the business are located in Canada.

13. SUBSEQUENT EVENTS

     The Company signed a consulting agreement with a director of the Company
     for a period of one year commencing January 1, 2011. The director will be
     paid consulting fees of $3,000 per month.

     Subsequent to the year end the Company received subscriptions for 650,000
     common shares at $0.20 per share and received proceeds of $130,000.

     The Company terminated their current MOU with their research and
     development contractor and is now in the midst of negotiating with the
     contractor for future services (refer to Commitment note 11(b))

                                       31
<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 14th day of March 2011.

                                            SECURITY DEVICES INTERNATIONAL INC.


March 14, 2011                             By /s/ Greg Sullivan
                                              ----------------------------------
                                              Gregory Sullivan, President and
                                              Principal Executive Officer


March 14, 2011                             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/ Gregory Sullivan
----------------------
Gregory Sullivan                    Director             March 14, 2011


/s/ Boaz Dor
----------------------
Boaz Dor                            Director             March 14, 2011



----------------------
Harry Walters                       Director


/s/Patrick Bryan
----------------------
Patrick Bryan                       Director             March 14, 2011

<PAGE>


                      SECURITY DEVICES INTERNATIONAL, INC.

                           ANNUAL REPORT ON FORM 10-K


                                    EXHIBITS
<PAGE>