SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(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, 2007

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

Commission File No. None

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

                Delaware                              Applied For
         ------------------------                  ------------------------
         (State of incorporation)                      (IRS Employer
                                                     Identification No.)
          2171 Avenue Rd.
            Suite 103
     Toronto, Ontario Canada                                M5M 4B4
    --------------------------------                   ---------------
 (Address of Principal Executive Office)                  Zip Code

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

                                     None
                                (Title of Class)

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

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. (Check One):

      Large accelerated filer [  ]     Accelerated filer [  ]

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

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



                                       1
<PAGE>

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X] Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act):
                                            Yes ____      No  __X__

The Company's revenues during the year ended November 30, 2007 were $   -0-   .
                                                                     ---------

The aggregate market value of the voting stock held by non-affiliates of the
Company (9,900,550 shares) on February 25, 2008 was approximately $13,860,000.

Documents incorporated by reference:      None

As of February 25, 2008, the Company had 14,330,050 issued and outstanding
shares of common stock.

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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


                                       2
<PAGE>
ITEM 1.  BUSINESS

      SDI is currently in the advanced stages of developing LEKTROX, a unique
line of wireless electric ammunition for use in military, homeland security, law
enforcement, and professional and home security situations.

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

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

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

      SDI's strategic collaboration with Elad resulted in the patent pending
LEKTROX system. Featuring the unique extended range Wireless Electro-Muscular
Disruption Technology, (or "W-EMDT"), SDI's first products, the LEKTROX 37/38mm
and 40mm round ammunition will be ready for the market in 3rd quarter 2008 with
a 12-guage version to be introduced later.

      LEKTROX has been specially designed for use with standards issue riot
guns, M203 grenade launchers. This will allow military, law enforcement agencies
etc. to quickly deploy LEKTROX without the need for lengthy, complex training
methods or significant functional adjustments to vehicles or personal equipment.
Simplicity of use is also a key benefit for the home security market where most
users have little or no specialized training.

      LEKTROX is a 3rd generation electric solution. First generation solutions
were electric batons and hand-held stun guns which had a range of arm's length.
2nd generation were the wired electric charge solutions. 3rd generation are the
wireless electric bullets. Currently, there is still no 3rd generation wireless
electric bullet on the market.

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

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

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

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

                                       3
<PAGE>

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

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

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

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

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

      The cost of manufacturing a LEKTROX electrical round is estimated to be
between $20 and $30. SDI anticipates that its electric round will sell at a
retail price of approximately $100 per round. In comparison, rubber, smoke or
stun rounds typically sell for $20 to $28. A cartridge for the TASER(R) sells
for approximately $60.

      As of February 25, 2008 SDI has completed the following steps in the
development of the LEKTROX:

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


                                       4
<PAGE>

o    Integration  and assembly of  mechanical  and  electrical  sub-systems  for
     electrical rounds.
o    Testing of different ballistic rounds
o    Powder loading
     testing o Testing of complete  electrical rounds
o    Adjustment of electrical rounds based on test results
o    Two clinical studies in European Clinics.

                 Additional steps to be completed include:

o    Production of completed rounds.
o    Testing with military and law enforcement organization of fully operational
     Long Range LEKTROX for production.

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

      The mechanical development of the LEKTROX is being completed by Elad
Engineering Ltd., an Israeli company which has designed weapons for the Israeli
Military.

      During the period from its inception (March 1, 2005) to November 30, 2007
SDI paid $1,882,495 for research and development.

      SDI does not have written agreements with Elad Engineering for work
relating to the development of the LEKTROX.

       As of February 25, 2008 SDI has not entered into any joint venture or
licensing agreements.

   SDI currently plans to manufacture market and sell all products on its own
behalf.

Competition

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

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

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


                                       5
<PAGE>

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

Patents

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

      SDI does not hold any foreign patents.

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

Government Regulation

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

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

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

      The LEXTROX 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 LEXTROX, to private citizens or security
personnel.


                                       6
<PAGE>

General

      As of February 25, 2008 SDI did not have any full-time employees.

      SDI's offices are located at 2171 Avenue Rd., Suite 103, Toronto, Ontario,
Canada M5M 4B4. SDI's rental costs on this space for the three years ending
November 30, 2010, excluding SDI's share of operating and common area expenses,
are $11,705 (2008), $12,138 (2009) and $12,138 (2010). SDI's offices are
expected to be adequate to meet SDI's foreseeable future needs.

      SDI's website is www.lektrox.com.

ITEM 2.  DESCRIPTION OF PROPERTY

      See Item 1 of this report.

ITEM 3.  LEGAL PROCEEDINGS.

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

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

      Not Applicable

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

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

      Three Months Ended              High       Low

      November 2006                  $2.65      $0.15
      February 2007                  $3.80      $1.75
      May 2007                       $3.25      $2.65
      August 2007                    $3.20      $2.00
      November 2007                  $1.95      $1.20

      As of February 25, 2008 SDI had approximately 200 shareholders and
14,330,050 outstanding shares of common stock.



                                       7
<PAGE>

      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 50,000,000 shares of preferred stock. The provisions in the Articles of
Incorporation relating to the preferred stock allow SDI's directors to issue
preferred stock with multiple votes per share and dividend rights which would
have priority over any dividends paid with respect to the holders of SDI's
common stock. The issuance of preferred stock with these rights may make the
removal of management difficult even if the removal would be considered
beneficial to shareholders generally, and will have the effect of limiting
shareholder participation in certain transactions such as mergers or tender
offers if these transactions are not favored by SDI's management.

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

      SDI was incorporated on March 1, 2005 and as of February 25, 2008 has not
yet generated any revenue. SDI is a defense technology company which is
developing LEKTROX, a unique line of wireless electric ammunition for use in
military, homeland security, law enforcement, and professional and home security
situations.

      During the year ended November 30, 2006 substantial all of SDI's cash
expenses were related to the development of its LEKTROX technology.

      During the year ended November 30, 2007:

o    general and administrative  expenses  increased  primarily as the result of
     expenses  (which  did not  require  the use of  cash)  associated  with the
     issuance of options and warrants.

o    more  capital  was  available  to SDI and as a result SDI was able to spend
     more on research and product development;

      During the period from inception (March 1, 2005) through November 30, 2007
SDI's operations used ($2,494,917) in cash. During this period SDI:

o    purchased $26,557 of equipment,

o    raised $7,719,650 from the sale of shares of its common stock,

o    raised  $95,000 from three of its officers and directors  upon the exercise
     of options to purchase 950,000 shares of common stock.

      SDI did not have any material future contractual obligations or off
balance sheet arrangements as of November 30, 2007.

                                       8
<PAGE>

      SDI's plan of operation during the twelve-month-period ending February 28,
2009 is as follows:
                                                            Projected
Activity                                                 Completion Date

Completion of fully operational Long Range LEKTROX        3rd quarter 2008
prototype (37-38MM) up to production file:

Completion of fully operational Long Range LEKTROX
prototype (40MM) up to production file:                   3rd quarter 2008

Completion of mechanical aspects of Long Range
LEKTROX prototype (12 GUAGE)                                    2009

Completion of tooling and moulds for 37MM
and 40MM LEKTROX                                          3rd quarter 2008

      SDI anticipates that its capital requirements for the twelve-month period
ending February 28, 2009 will be:

      Research and Development               2,100,000
      General and administrative expenses      250,000

           Total                             2,350,000

      SDI does not anticipate that it will need to hire any employees prior to
September 30, 2008. SDI does not expect that it will need to raise additional
capital during the twelve months ending February 28, 2009 SDI believes that its
cash on hand will satisfy its working capital needs until sale of its products
have commenced.

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

ITEM 7.     FINANCIAL STATEMENTS

See the financial statements attached to this report.

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

      Not applicable

ITEM 8A.    CONTROLS AND PROCEDURES

     Sheldon Kales,  the Company's Chief Executive  Officer and Rakesh Malhotra,
the Company's Principal  Financial Officer,  have evaluated the effectiveness of
the Company's  disclosure  controls and procedures (as defined in Rule 13a-15(e)
of the  Securities  Exchange Act of 1934) as of the end of the period covered by


                                       9
<PAGE>

this  report,  and in  their  opinion  the  Company's  disclosure  controls  and
procedures  are  effective.  There  were no changes  in the  Company's  internal
controls over financial  reporting that occurred  during the fiscal quarter that
have materially  affected,  or are reasonably likely to materially  affect,  the
Company's internal controls over financial reporting.

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

    Name                     Age    Position

    Sheldon Kales             51    Chief Executive Officer and a Director
    Boaz Dor                  53    Secretary and a Director
    Rakesh Malhotra           51    Chief Financial Officer
    Gregory Sullivan          41    Director

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

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

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

Rakesh  Malhotra has been SDI's Chief  Financial  Officer since January 7, 2007.
Mr. Malhotra is a United States Certified Public Accountant (CPA) and a Canadian
Chartered  Accountant  (CA).  Mr.  Malhotra  graduated with Bachelor of Commerce
(Honors) 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


                                       10
<PAGE>

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.

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

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

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

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

ITEM 10.  EXECUTIVE COMPENSATION

      The following table shows the compensation for the years ended November
30, 2007 and 2006 paid or accrued, to Sheldon Kales, the Principal Executive
Officer of SDI. None of the executive officers of SDI received compensation in
excess of $100,000 during this period.

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

Sheldon Kales,      2007      --      --      --    $886,948    --    $886,948
 President          2006      --      --      --    $386,302    --    $386,302

(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
      FAS 123R on the date of grant.
(4)   The fair value of options and warrants granted computed in accordance with
      FAS 123R on the date of grant.
(5)   All other compensation received that SDI could not properly report in any
      other column of the table. SDI does not have an employment agreement with
      any of its officers.

                                       11
<PAGE>

      The following shows the amounts which SDI expects to pay in cash to its
officers during the twelve month period ending November 30, 2008, and the time
these persons plan to devote to SDI's business.
                                Proposed                Time to be Devoted
      Name                    Compensation             to the Business of SDI

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

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

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

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, 2007

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

      Boaz Dor                  --              --                $304,987
      Gregory Sullivan          --              --                $213,867


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

                                       12
<PAGE>

Stock Option and Bonus Plans

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

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

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

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

      Summary. The following lists, as of February 25, 2008, the options granted
pursuant to the Plans. Each option represents the right to purchase one share of
SDI's common stock.

                               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                       4,500,000   2,225,000        N/A        1,325,000
Stock Bonus Plan               150,000         N/A         --          150,000

      The following tables show all options granted and exercised by SDI's
officers and directors since the inception of SDI and through February 25, 2008,
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.

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

Sheldon Kales   10/29/05  550,000       $0.10 10/29/11     550,000   $275,000
Sheldon Kales   10/29/05  100,000       $0.25 10/29/11


                                       13
<PAGE>

Boaz Dor        10/29/05  200,000       $0.10 10/29/11     200,000   $100,000
Boaz Dor        10/29/05  100,000       $0.25 10/29/11
Gregory Sullivan10/29/05  200,000       $0.10 10/29/11     200,000   $100,000
Gregory Sullivan10/29/05  100,000       $0.25 10/29/11
Rakesh Malhotra  1/07/07  125,000       $1.50 01/07/12
Sheldon Kales   10/12/07  675,000       $1.20 10/12/12
Boaz Dor        10/12/07  300,000       $1.20 10/12/12
Rakesh Malhotra 10/12/07  175,000       $1.20 10/12/12
Gregory Sullivan10/12/07  175,000       $1.20 10/12/12
Sheldon Kales    1/24/08  108,000       $0.10 01/24/13
Boaz Dor         1/24/08  117,000       $0.10 01/24/13

(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

    Sheldon Kales       100,000            --            $0.25      10-29-11
    Boaz Dor            100,000            --            $0.25      10-29-11
    Gregory Sullivan    100,000            --            $0.25      10-29-11
    Rakesh Malhotra     125,000            --            $1.50       1-17-12
    Sheldon Kales       675,000            --            $1.20      10-12-12
    Rakesh Malhotra     175,000            --            $1.20      10-12-12
    Gregory Sullivan    175,000            --            $1.20      10-12-12
    Sheldon Kales       108,000            --            $0.10       1-24-13
    Boaz Dor            117,000            --            $0.10       1-24-13

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

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

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

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

                                       14
<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, 2007, 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                  --              --
Non-Qualified Stock
  Option Plan

Warrants

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

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

     Broker warrants     4-25-07         106,950         $2.81       4-25-09
    Boaz Dor             9-06-07          17,000         $0.50       5-31-17
    Sheldon Kales       10-05-07         250,000         $0.50      10-05-14
    Gregory Sullivan    10-05-07          50,000         $0.50      10-05-14

ITEM  11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  shows  the  ownership  of SDI's  common  stock as of
February 25, 2008 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.

                                       15
<PAGE>

                                     Number
     Name                          of Shares (1)        Percent of Class

     Sheldon Kales                   2,884,000               20.1%

     Boaz Dor                        1,140,500                8.0%

     Rakesh Malhotra                        --                  --

     Gregory Sullivan                  405,000                2.8%

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

     All Officers and Directors      4,429,500               30.9%
        as a group (four persons)

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

(2)  Dror  Shachar  holds  these  shares  for the  benefit of his  father,  Mark
     Shachar.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

                           Date      Shares           Consideration
Shareholder              of Sale     Issued         Paid for Shares

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


                                       16
<PAGE>

                           Date      Shares           Consideration
Shareholder              of Sale     Issued         Paid for Shares

Public Investors       5-06/7-06    2,000,000     $  400,000
Sheldon Kales              11-06      550,000     $   55,000 (2)
Boaz Dor                   11-06      200,000     $   20,000 (2)
Gregory Sullivan           11-06      200,000     $   20,000 (2)
Private Investors          12-06    2,536,170     $2,536,170
Consultant               3-12-07       50,000     Services rendered, valued at
                                                     $155,000
Private Investors      4-07/5-07    2,139,000     $4,812,750

(1)   Alexander Blaunshtein is the son of Natan Blaunstein, who was a former
      director of SDI. In March 2007 these shares were purchased by SDI for
      $50,000, cancelled, and returned to the status of authorized but unissued
      shares.
(2)   Shares were issued upon the exercise of stock options.

      With the exception of the shares issued upon the exercise of shares issued
upon the exercise of options, SDI relied upon the exemption provided by Section
4(2) of the Securities Act of 1933 in connection with the issuance of these
shares.

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

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

ITEM 13.  EXHIBITS

Exhibit
Number   Description of Exhibit

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

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

   31    Rule 13a-14(a) Certifications         *

   32    Section 1350 Certifications           *

* Filed with this report.


                                       17
<PAGE>

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Schwartz Levitsky Feldman, LLP ("Schwartz Levitsky") audited SDI's
financial statements for the years ended November 30, 2007 and 2006.

      The following table shows the aggregate fees billed and billable to SDI
during the years ended November 30, 2007 and 2006 by Schwartz Levitsky.

                                           2007           2006
                                           ----           ----

Audit Fees                              $17,000        $16,800
Audit-Related Fees                      $39,900       $  1,000
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 filing of SDI's registration
statements on Form SB-2 and Form S-8. Before Schwartz Levitsky was engaged by
Security Devices to render audit services, the engagement was approved by
Security Device's Directors.


                                       18
<PAGE>











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

                              FINANCIAL STATEMENTS

                     YEARS ENDED NOVEMBER 30, 2007 AND 2006

      Together with Report of Independent Registered Public Accounting Firm

                        (Amounts expressed in US Dollars)



<PAGE>

                                TABLE OF CONTENTS
                                                                       Page No

Report of Independent Registered Public Accounting Firm                     1

Balance Sheets as at November 30, 2007 and November 30, 2006                2

Statements of Operations and Comprehensive loss for the years
ended November 30, 2007 and  November  30,  2006 and the period
from  inception  (March 1, 2005) to November 30, 2007                       3

Statements of Cash Flows for the years ended  November 30, 2007
and November 30, 2006 and the period from inception (March 1, 2005)
to November 30, 2007                                                        4

Statements of Stockholders' Equity for the years ended  November 30,
2007 and November 30, 2006 and the period from inception (March 1, 2005)
to November 30, 2007                                                       5

Notes to Financial Statements                                            6-30



<PAGE>

Schwartz Levitsky Feldman llp
CHARTERED ACCOUNTANTS
TORONTO. MONTREAL
                                                            1167 Caledonia Road
                                                        Toronto, Ontario M6A 2X1
                                                               Tel: 416 785 5353
                                                               Fax: 416 785 5663


               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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


     We have audited the accompanying balance sheets of Security Devices
     International, Inc. (incorporated in Delaware, United States of America) as
     at November 30, 2007 and 2006 and the related statements of operations and
     comprehensive loss, cash flows and stockholders' equity for the years ended
     November 30, 2007 and 2006 and the period from inception to November 30,
     2007. 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 Security Devices
     International, Inc. as of November 30, 2007 and 2006, and the results of
     its operations and its cash flows for the years ended November 30, 2007 and
     2006 and the period from inception to November 30, 2007 in accordance with
     generally accepted accounting principles in the United States of America.


                                                "SCHWARTZ LEVITSKY FELDMAN LLP"


     Toronto, Ontario, Canada                         Chartered Accountants
     February 25, 2008                          Licensed Public Accountants



<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Balance Sheets
As at November 30, 2007 and 2006
(Amounts expressed in US Dollars)


                                                       2007           2006
                                ASSETS                   $              $

CURRENT
   Cash and cash equivalents                        5,293,176      1,463,833
   Prepaid expenses and other                          36,788          4,452
------------------------------------------------------------------------------

Total Current Assets                                5,329,964      1,468,285
Plant and Equipment, net (Note 9)                      23,960              -
------------------------------------------------------------------------------

TOTAL ASSETS                                        5,353,924      1,468,285
------------------------------------------------------------------------------

                                   LIABILITIES

CURRENT LIABILITIES
   Accounts payable and accrued
     liabilities (Note 4)                             174,842        104,011
   Loans from Directors/Shareholders (Note 8)               -          4,227
------------------------------------------------------------------------------

Total Current Liabilities                             174,842        108,238
------------------------------------------------------------------------------

Related Party Transactions (note 8)

Commitments and Contingencies (note 11)

                              STOCKHOLDERS' EQUITY


Capital Stock (Note 5)                                 14,330         11,365
Additional Paid-In Capital                         11,842,187      3,198,180
Deficit Accumulated During the Development Stage   (6,677,435)    (1,849,498)
-------------------------------------------------------------------------------

Total Stockholders' Equity                          5,179,082      1,360,047
-------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          5,353,924      1,468,285
===============================================================================

   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, 2007 and 2006 and the Period from Inception (March 1,
2005) to November 30, 2007 (Amounts expressed in US Dollars)

                                      Cumulative
                                    since inception       2007          2006
EXPENSES:                                    $              $             $

  Research and Product Development      1,882,495      1,344,195      458,300
  Amortization                              2,597          2,597            -
  General and administration            4,983,473      3,672,275    1,202,499
                                       ----------    -----------  -----------

TOTAL OPERATING EXPENSES                6,868,565      5,019,067    1,660,799
                                       ----------    ----------- ------------

LOSS FROM OPERATIONS                   (6,868,565)    (5,019,067)  (1,660,799)

  Other Income-Interest                   191,130        191,130            -
                                       ----------     ----------   ----------

LOSS BEFORE INCOME TAXES               (6,677,435)    (4,827,937)  (1,660,799)

   Income taxes (note 10)                       -              -            -
                                       ----------     ----------   ----------

NET LOSS AND COMPREHENSIVE LOSS        (6,677,435)    (4,827,937)  (1,660,799)
                                      -----------    -----------  -----------

  Loss per share - basic and diluted                       (0.35)      (0. 19)
                                                     -----------  -----------

  Weighted average common shares outstanding          13,815,317    8,623,258
                                                     -----------  -----------



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


                                       3
<PAGE>

SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
Years Ended November 30, 2007 and 2006 and the Period from Inception (March 1,
2005) to November 30, 2007 (Amounts expressed in US Dollars)

                                             Cumulative
                                           Since inception    2007       2006
                                           ---------------    ----       ----
                                                  $            $           $
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss for the period                     (6,677,435)  (4,827,937)(1,660,799)
  Items not requiring an outlay of cash:
   Issue of shares for professional services    154,000       80,000      8,750
   Stock based compensation (included in
     general and administration expenses)     3,496,373    2,446,433  1,049,940
   Compensation expense for warrants issued
    (included in general and administration
    expenses)                                   357,094      357,094         -
   Loss on cancellation of common stock          34,400       34,400         -
   Amortization                                   2,597        2,597         -
   Changes in non-cash working capital:
   Prepaid expenses and other                   (36,788)     (32,336)    (4,452)
   Accounts payable and accrued liabilities     174,842       70,831     87,935
                                                -------       ------     ------

   NET CASH USED IN OPERATING ACTIVITIES     (2,494,917)  (1,868,918)  (518,626)
                                              ---------    ---------   --------

   CASH FLOWS FROM INVESTING ACTIVITIES

        Acquisition of Plant and Equipment      (26,557)     (26,557)         -
                                              ---------    ---------   --------

   NET CASH USED IN INVESTING ACTIVITIES        (26,557)     (26,557)         -
                                              ---------    ---------   --------

   CASH FLOWS FROM FINANCING ACTIVITIES
    Loans/ (Repayments) from directors/
      shareholders                                    -       (4,227)    (3,802)
    Net Proceeds from issuance of common
      shares                                  7,769,650    5,779,045  1,891,135
    Cancellation of common stock                (50,000)     (50,000)         -
    Exercise of stock options                    95,000            -     95,000

   NET CASH PROVIDED BY FINANCING ACTIVITIES  7,814,650    5,724,818  1,982,333
                                              ---------    ---------   --------

   NET INCREASE IN CASH AND CASH
    EQUIVALENTS FOR THE PERIOD                5,293,176    3,829,343  1,463,707
    Cash and cash equivalents, beginning
     of period                                        -    1,463,833        126
                                              ---------    ---------  - --------
   CASH AND CASH EQUIVALENTS, END OF PERIOD   5,293,176    5,293,176  1,463,833
                                              =========    =========  =========

   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' Equity
For the years ended November 30, 2007 and 2006 and from the period from
inception (March 1, 2005) to November 30, 2007.
(Amounts expressed in US Dollars)
<TABLE>
<S>                              <C>         <C>         <C>          <C>         <C>

                              Number of    Common    Additional
                               Common      Shares     Paid-in       Deficit
                               Shares      amount     Capital      accumulated     Total
                              ---------   ---------  ----------    -----------    -------

Balance as of March 1, 2005           -   $      -    $       -     $       -    $       -
Issuance of Common shares
  for professional services   6,525,000      6,525       58,725             -       65,250
Issuance of common shares
  for cash                      397,880        398       99,072                     99,470
Net loss for the period               -          -            -      (188,699)    (188,699)
                             ----------   --------    ---------     ---------     ---------
Balance as of
November 30, 2005             6,922,880      6,923      157,797      (188,699)     (23,979)

Issuance of common shares
   for cash                     956,000        956       94,644             -       95,600
Issuance of common shares
   for cash                     286,000        286       49,764             -       50,050
Issuance of common shares
    to consultant for services   50,000         50        8,700             -        8,750
Issuance of common shares
   for cash                   2,000,000      2,000      398,000             -      400,000
Exercise of stock options       950,000        950       94,050             -       95,000
Issuance of common shares
  for cash (net of agent
  commission)                   200,000        200      179,785             -      179,985
Stock subscriptions received                          1,165,500             -    1,165,500
Stock based compensation              -          -    1,049,940             -    1,049,940
Net loss for the year                 -          -            -    (1,660,799)  (1,660,799)
                             ----------   --------    ---------     ---------    ---------
Balance as of
November 30, 2006            11,364,880     11,365    3,198,180    (1,849,498)   1,360,047

Issuance of common shares
  for stock subscriptions
  received in prior year      1,165,500      1,165       (1,165)            -            -

Issuance of common shares
  for cash                    1,170,670      1,171    1,169,499                  1,170,670
Issuance of common shares
  for cash and services          50,000         50      154,950                    155,000
Issuance of common shares
  for cash (net of expenses)  2,139,000      2,139    4,531,236                  4,533,375
Cancellation of stock        (1,560,000)    (1,560)     (14,040)                   (15,600)
Stock based compensation                              2,446,433                  2,446,433
Issue of warrants                                       357,094                    357,094
Net loss for the year ended
November 30, 2007                     -           -           -    (4,827,937)  (4,827,937)
                             ----------    --------   ---------     ---------    ---------

Balance as of November 30,
  2007                       14,330,050      14,330  11,842,187    (6,677,435)   5,179,082
                             ----------    --------   ---------     ---------    ---------
</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, 2007 and 2006
(Amounts expressed in US Dollars)

1. BASIS OF PRESENTATION

        The financial statements, which include the accounts of Security Devices
        International Inc. (the "Company"), were prepared in accordance with
        United States Generally Accepted Accounting Principles. The Company was
        incorporated under the laws of the state of Delaware on March 1, 2005.

     2. NATURE OF OPERATIONS

        The Company is currently in the advanced stages of developing LEKTROX, a
        unique line of wireless electric ammunition for use in military,
        homeland security, law enforcement, and professional and home security
        scenarios. LEKTROX has been specially designed for use with standard
        issue riot guns, M203 grenade launchers and regular 12-guage shotguns.
        This will allow military, law enforcement agencies etc. to quickly
        deploy LEKTROX without the need for lengthy, complex training methods or
        significant functional adjustments to vehicles or personal equipment.
        Simplicity of use is also a key benefit for the home security market
        where most users have little or no specialized training. LEKTROX is a
        3rd generation electric solution. First generation solutions were
        electric batons and hand-held stun guns which had a range of arm's
        length. 2nd generations were the wired electric charge solutions. 3rd
        generations are the wireless electric bullets. Currently, there is still
        no 3rd generation wireless electric bullet on the market.

        The Company is in the development stage and has not yet realized
        revenues from its planned operations. The Company has incurred a loss of
        $ 4,827,937 during the year ended November 30, 2007. At November 30,
        2007, the Company had an accumulated deficit during the development
        stage of $6,677,435 which includes a non- cash stock based compensation
        expense of $3,496,373 and non-cash compensation expense on issue of
        warrants for $357,094. The Company has funded operations through the
        issuance of capital stock. During the year ended November 30, 2006 the
        Company raised $1,982,333 substantially through issue of common stock.
        (See note 5). During the first quarter of 2007, the company raised
        $1,170,670 through issue of common stock. During the second quarter of
        2007, the Company raised an additional $4,688,375 (net of expenses of
        $279,375) through the issue of Common stock.

        The company has a working capital of $ 5,155,122 and stockholders'
        equity of $5,179,082 as at November 30, 2007. Management's plan is to
        continue raising additional funds through future equity or debt
        financing until it achieves profitable operations.


                                       6
<PAGE>


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 and estimates for calculation for stock based
            compensation.

        b) Income Taxes

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

           Current income tax expense (recovery) is the amount of income taxes
           expected to be payable (recoverable) for the current period. A
           deferred tax asset and/or liability is computed for both the expected
           future impact of differences between the financial statement and tax
           bases of assets and liabilities and for the expected future tax
           benefit to be derived from tax losses. Valuation allowances are
           established when necessary to reduce deferred tax asset to the amount
           expected to be "more likely than not" realized in future tax returns.
           Tax law and rate changes are reflected in income in the period such
           changes are enacted. Due to valuation allowance for deferred tax
           assets, no deferred tax benefits or expenses were recorded for the
           years ended November 30, 2007 and 2006.

        c) Revenue Recognition

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



                                       7
<PAGE>

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

        d) Loss per Share

           The Company has adopted FAS No. 128, "Earnings per Share", which
           requires disclosure on the financial statements of "basic" and
           "diluted" loss per share. Basic loss per share is computed by
           dividing net loss by the weighted average number of common shares
           outstanding for the year. Diluted loss per share is computed by
           dividing net loss by the weighted average number of common shares
           outstanding plus common stock equivalents (if dilutive) related to
           stock options and warrants for each year. There were no common
           equivalent shares outstanding at November 30, 2007 and 2006 that have
           been included in dilutive loss per share calculation as the effects
           would have been anti-dilutive. At November 30, 2007, there were
           2,890,000 options and 423,950 warrants outstanding, which were
           convertible into equal number of common shares of the Company. At
           November 30, 2006, there were 700,000 options outstanding convertible
           into equal number of common shares and no warrants outstanding.

e) Fair Values

           The Company's financial instruments as defined by SFAS No. 107,
           "Disclosures about Fair Value of Financial Instruments", includes
           cash, accounts payable and accrued liabilities. All instruments are
           accounted for on a historical cost basis, which, due to the short
           maturity of these financial instruments, approximates fair value.

f) Research and Product Development

           Research and Product Development costs, other than capital
           expenditures but including acquired research and product development
           costs, are charged against income in the period incurred.

        g) Stock-Based Compensation

           In December 2004, the Financial Accounting Standards Board (FASB)
           issued Statement of Financial Accounting Standards No. 123 (Revised
           2004), "Share-Based Payment" (SFAS 123 (R)). SFAS 123 (R) requires
           companies to recognize compensation cost for employee and
           non-employee services received in exchange for an award of equity
           instruments based on the grant-date fair value of the award. All
           awards granted to employees and non-employees are valued at fair
           value in accordance with the provisions of SFAS 123 (R) by using the
           Black-Scholes option pricing model and recognized on a straight-line
           basis over the service periods of each award.


                                       8
<PAGE>


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

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

h) Foreign Currency

          The Company maintains its books,  records and banking  transactions in
          U.S. dollars which is its functional and reporting  currency.  Foreign
          currency  transactions  are  translated at the  transaction  date into
          functional  currency by the use of the exchange rate in effect at that
          date.

        i) Comprehensive Income

           The Company has adopted SFAS No. 130, "Reporting Comprehensive
           Income." This statement establishes standards for reporting
           comprehensive income and its components in a financial statement.
           Comprehensive income as defined includes all changes in equity (net
           assets) during a period from non-owner sources. Examples of items to
           be included in comprehensive income, which are excluded from net
           income, include foreign currency translation adjustments and
           unrealized gains and losses on available-for-sale securities.

        j) Impairment of Long-lived Assets

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


                                       9
<PAGE>


SECURITY DEVICES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
November 30, 2007 and 2006
(Amounts expressed in US Dollars)

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

        k) Asset Retirement Obligation

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

        l) Concentration of Credit Risk

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

       m)  Cash and Cash Equivalents

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

       n)  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 LEKTROX, have been
           filed by the Company with the U.S. Patent Office. Expenditures for
           patent applications as a result of research activity are not
           capitalized due to the uncertain value of the benefits that may
           accrue.

          o)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



                                       10
<PAGE>


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

       p)  Recent Accounting Pronouncements

           In February 2006, the FASB issued SFAS No. 155, "Accounting for
           Certain Hybrid Financial Instruments - an amendment of FASB
           Statements No. 133 and 140". This Statement permits fair value of
           re-measurement for any hybrid financial instrument that contains an
           embedded derivative that otherwise would require bifurcation;
           clarifies which interest-only strips and principal-only strips are
           not subject to the requirements of SFAS No. 133, "Accounting for
           Derivative Instruments and Hedging Activities"; establishes a
           requirement to evaluate interests in securitized financial assets to
           identify interests that are freestanding derivatives or that are
           hybrid financial instruments that contain an embedded derivative
           requiring bifurcation; clarifies that concentrations of credit risk
           in the form of subordination are not embedded derivatives; and
           amended SFAS No. 140, "Accounting for Transfers and Servicing of
           Financial Assets and Extinguishments of Liabilities", to eliminate
           the prohibition on a qualifying special-purpose entity from holding a
           derivative financial instrument that pertains to a beneficial
           interest other than another derivative financial instrument. SFAS No.
           155 is effective for all financial instruments acquired, issued, or
           subject to a re-measurement (new basis) event occurring after the
           beginning of an entity's first fiscal year that begins after
           September 15, 2006. The Company believes that adoption of the
           standard will not have a material effect on its financial position or
           result of operation.

          In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
          of  Financial  Assets",  which  amends SFAS No. 140,  "Accounting  for
          Transfers and  Servicing of Financial  Assets and  Extinguishments  of
          Liabilities".  In a significant  change to current guidance,  SFAS No.
          156  permits an entity to choose  either of the  following  subsequent
          measurement methods for each class of separately  recognized servicing
          assets and servicing liabilities:  (1) Amortization Method or (2) Fair
          Value  Measurement  Method.  SFAS  No.  156  is  effective  as of  the
          beginning of an entity's first fiscal year that begins after September
          15, 2006. The Company  believes that adoption of the standard will not
          have a  material  effect  on  its  financial  position  or  result  of
          operation.

          In July 2006, the FASB issued  Interpretation  No. 48, "Accounting for
          Uncertainty  in  Income  Taxes"  ("FIN  48").  FIN  48  clarifies  the
          accounting  for   uncertainty   in  income  taxes   recognized  in  an
          enterprises'  financial  statements in  accordance  with SFAS No. 109,
          "Accounting  for  Income  Taxes".  FIN  48  prescribes  a  recognition
          threshold and  measurement  attributable  for the financial  statement
          recognition  and measurement of a tax position taken or expected to be
          taken in a tax return. FIN 48 also provides

                                       11
<PAGE>


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

        guidance on derecognizing, classification, interest and penalties,
        accounting in interim periods, disclosures and transitions. FIN 48 is
        effective for fiscal years beginning after December 15, 2006. The
        Company believes that adoption of the standard will not have a material
        effect on its financial position or result of operation.

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

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

        In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") - the fair
        value option for financial assets and liabilities including in amendment
        of SFAS 115.


                                       12
<PAGE>


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

        This Statement permits entities to choose to measure many financial
        instruments and certain other items at fair value. The objective is to
        improve financial reporting by providing entities with the opportunity
        to mitigate volatility in reported earnings caused by measuring related
        assets and liabilities differently without having to apply complex hedge
        accounting provisions. This Statement is expected to expand the use of
        fair value measurement objectives for accounting for financial
        instruments. This Statement is effective as of the beginning of an
        entity's first fiscal year that begins after November15, 2007, and
        interim periods within those fiscal years. Early adoption is permitted
        as of the beginning of a fiscal year that begins on or before November
        15, 2007, provided the entity also elects to apply the provisions of
        FASB Statement No. 157, Fair value measurements. The Company is
        currently evaluating the impact of SFAS No. 159 on its financial
        statements.

        In September 2006, the Securities and Exchange Commission ("SEC") issued
        Staff Accounting Bulletin No. 108 (Topic 1N), "Quantifying Misstatements
        in Current Year Financial Statements" ("SAB No. 108"). SAB No. 108
        addresses how the effect of prior year uncorrected misstatements should
        be considered when quantifying misstatements in current year financial
        statements. SAB No. 108 requires SEC registrants (i) to quantify
        misstatements using a combined approach which considers both the balance
        sheet and income statement approaches; (ii) to evaluate whether either
        approach results in quantifying an error that is material in light of
        relevant quantitative and qualitative factors; and (iii) to adjust their
        financial statements if the new combined approach results in a
        conclusion that an error is material. SAB No. 108 addresses the
        mechanics of correcting misstatements that include effects from prior
        years. It indicates that the current year correction of a material error
        that includes prior year effects may result in the need to correct prior
        year financial statements even if the misstatement in the prior year or
        years is considered immaterial. Any prior year financial statements
        found to be materially misstated in years subsequent to the issuance of
        SAB No. 108 would be restated in accordance with SFAS No. 154,
        "Accounting Changes and Error Corrections." Because the combined
        approach represents a change in practice, the SEC staff will not require
        registrants that followed an acceptable approach in the past to restate
        prior years' historical financial statements. Rather, these registrants
        can report the cumulative effect of adopting the new approach as an
        adjustment to the current year's beginning balance of retained earnings.
        If the new approach is adopted in a quarter other than the first
        quarter, financial statements for prior interim periods within the year
        of adoption may need to be restated. SAB No. 108 is effective for fiscal
        years ending after November 15, 2006. The implementation of SAB No. 108
        is not expected to have a material impact on the Company's results of
        operations and financial condition.

        In December 2007, the FASB issued SFAS No. 141(R), "Business
        Combinations". This Statement replaces SFAS No. 141, Business
        Combinations.


                                       13
<PAGE>

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

        This Statement retains the fundamental requirements in Statement 141
        that the acquisition method of accounting (which Statement 141 called
        the purchase method) be used for all business combinations and for an
        acquirer to be identified for each business combination. This Statement
        also establishes principles and requirements for how the acquirer: a)
        recognizes and measures in its financial statements the identifiable
        assets acquired, the liabilities assumed, and any non-controlling
        interest in the acquiree; b) recognizes and measures the goodwill
        acquired in the business combination or a gain from a bargain purchase
        and c) determines what information to disclose to enable users of the
        financial statements to evaluate the nature and financial effects of the
        business combination. SFAS No. 141(R) will apply prospectively to
        business combinations for which the acquisition date is on or after
        Company's fiscal year beginning December 1, 2009.

        In December 2007, the FASB issued SFAS No. 160, "Non-controlling
        Interests in Consolidated Financial Statements". This Statement amends
        ARB 51 to establish accounting and reporting standards for the
        non-controlling (minority) interest in a subsidiary and for the
        deconsolidation of a subsidiary. It clarifies that a non-controlling
        interest in a subsidiary is an ownership interest in the consolidated
        entity that should be reported as equity in the consolidated financial
        statements. The Company has not yet determined the impact, if any, that
        SFAS No. 160 will have on its consolidated financial statements. SFAS
        No. 160 is effective for the Company's fiscal year beginning December 1,
        2009

     4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                        2007           2006
                                                        -----          ----
        Accounts payable and accrued liabilities
        are comprised of the following:

               Trade payables                      $     17,973     $   7,689
               Accrued liabilities                      156,869        96,322
                                                   ------------     ---------
                                                     $ 174,842      $  104,011
                                                     =========      ==========

                                       14
<PAGE>

     5. CAPITAL STOCK

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

        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

           14,330,050 Common shares (2006: 11,364,880 Common shares)

        c) Changes to Issued Share Capital.

        Year ended November 30, 2006

          i) On December 31, 2005 the Company authorized the issuance of 486,000
             common shares for cash for a total consideration of $48,600.

         ii) On January 31, 2006 the Company authorized the issuance of 470,000
             common shares for cash for a total consideration of $ 47,000.

        iii) On March 8, 2006 the Company  authorized  the issuance of 286,000
             common   shares   for  cash  @  $0.175  per  share  for  a  total
             consideration of $50,050. On the same day, the Company authorized
             the issuance of 50,000  shares to a  consultant  for the services
             rendered as finder's fees. These services were valued @$0.175 per
             common  share and  expensed as  consulting  fees in the amount of
             $8,750.

         iv) By means of a prospectus dated May 5, 2006 the Company offered to
             the public up to 2,000,000  shares of its common stock at a price
             of $0.20 per share.  The Company  closed the offering on July 31,
             2006  after  receiving   consideration  of  $400,000  and  issued
             2,000,000 common shares in August, 2006.


                                       15
<PAGE>


     5. CAPITAL STOCK (cont'd)

          v)   The company directors exercised 950,000 stock options to purchase
               950,000  common  shares for a total  consideration  of $95,000 on
               November 1, 2006.

          vi)  On  November  29,  2006 the company  authorized  the  issuance of
               200,000  common  shares  for cash  @$1.00  per  common  share.  A
               commission  of $20,015  was paid to the agent and this  amount is
               netted with  additional  paid in capital.  The proceeds  received
               were part of the Private offering effective November 20, 2006.

          vii) As at November 30, 2006 the company  received stock  subscription
               for  $1,165,500.  This  was  also  part of the  private  offering
               effective  November  20,  2006.  The Company  closed this private
               offering on December 12, 2006 when it had  completed  the sale of
               2,536,170  shares  of its  common  stock  to a group  of  private
               investors.

        Year ended November 30, 2007

        On December 12, 2006 the Company completed the sale of 2,536,170 shares
        of its common stock to a group of private investors. The shares were
        sold in the private offering at a price of $1.00 per share and are
        restricted securities as that term is defined in Rule 144 of the
        Securities and Exchange Commission.

        The Company had already issued 200,000 common shares on November 29,
        2006 and it issued the balance 2,336,170 shares on December 12, 2006.
        The Company relied upon the exemption provided by Section 4(2) of the
        Securities Act of 1933 for the sale of these shares.

        On March 12, 2007, the Company authorized the issuance of 50,000 common
        shares at $1.50 per share for a total cash consideration of $75,000 to a
        consultant who rendered investor relation services to the Company during
        the quarter ended May 31, 2007.

        The market price of the total stock on the date of issuance was
        $155,000. The difference of $80,000 between the market price of the
        total stock ($155,000) and the issued price ($75,000) represents the
        estimated fair value of the consultant's services. The par value of the
        shares in the amount of $50 was credited to share capital and the
        balance of $154,950 credited to additional paid-in capital and shown as
        issuance of common shares for cash and services in the statement of
        changes in stockholder's equity.


                                       16
<PAGE>


     5. CAPITAL STOCK (cont'd)

        The Company had entered into an amended agreement in February 2007, with
        a director regarding development of its "Electrical Shocker" ("ES")
        technology. Pursuant to the original agreement executed in November
        2006, the director was paid a total of $38,000 which included $22,000
        during the last quarter of 2006 and an additional $16,000 in January
        2007. The Company has expensed this payment of $22,000 as Research and
        Product Development during 2006 and also expensed the balance $16,000 to
        Research and Product Development in the first quarter of 2007. In
        addition, the director was paid $62,000 in February, 2007 upon signing
        the amended agreement. The Company expensed this payment of $62,000 to
        Research and Product Development in the first quarter of 2007. The
        director in return had released the Company from a prior obligation to
        pay royalty from the sale of any product developed using this
        technology. In the absence of acceptance of the ES technology by the
        Company, the Company cancelled 1,560,000 shares and the director was
        paid $50,000 on March 12, 2007 in accordance with the amended agreement.
        The Company accounted for this transaction under the constructive
        retirement method in the second quarter of 2007. The cancelled shares
        reverted to authorized but unissued status. The stock and additional
        paid-in-capital amounts were reduced with a total of $15,600 and a debit
        of $34,400 to retained earnings, being the excess of purchase cost over
        the original issuance.

        On April 25, 2007 the Company sold 1,998,500 shares of its common stock
        to a group of private investors. As part of this same financing the
        Company sold an additional 140,500 shares to private investors on May 4,
        2007. The shares were sold at a price of $2.25 per share and are
        restricted securities as that term is defined in Rule 144 of the
        Securities and Exchange Commission. In connection with the sale of these
        2,139,000 shares, the Company paid a commission of $240,638 to the sales
        agent for the offering and incurred legal and other expenditure of
        $38,737.

        The sales agent also received 106,950 warrants which allow them to
        purchase 106,950 shares of the Company's Common stock at a price of
        $2.81 per share. The warrants expire in 2009.

        The Company agreed to file a registration statement with the Securities
        and Exchange Commission registering the resale of the shares sold to the
        investors, as well as the shares issuable upon the exercise of the
        warrants issued to the sales agent. The registration statement was
        declared effective on September 20, 2007.

        The Company relied upon the exemption provided by Section 4(2) of the
        Securities Act of 1933 for the sale of these securities.


                                       17
<PAGE>

     6. STOCK BASED COMPENSATION

        Per SEC Staff Accounting Bulletin 107, Topic 14.F, "Classification of
        Compensation Expense Associated with Share-Based Payment Arrangements"
        stock based compensation expense is being presented in the same lines as
        cash compensation paid.

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

        Incentive Stock Option Plan. The Company's Incentive Stock Option Plan
        authorizes the issuance of shares of its Common Stock to persons that
        exercise options granted pursuant to the Plan. Only employees may be
        granted options pursuant to the Incentive Stock Option Plan. The option
        exercise price is determined by its directors but cannot be less than
        the market price of its common stock on the date the option is granted.
        The Company has reserved 1,000,000 common shares under this plan. No
        options have been issued under this plan as at November 30, 2007.

        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.

        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, 2007.


                                       18
<PAGE>

     6. STOCK BASED COMPENSATION (cont'd)

        Year ended November 30, 2006

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

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

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

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

          4.   Options to two  consultants to acquire  150,000 common share each
               for a total of 300,000  shares.  The  exercise  price for 300,000
               options was set at $0.50 per share.

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

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

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

        For the year ended November 30, 2006, the Company has recognized in the
        financial statements, stock-based compensation costs as per the
        following details. The fair value of each option used for the purpose of
        estimating the stock compensation is based on the grant date using the
        Black-Scholes option pricing model with the following weighted average
        assumptions:


                                       19
<PAGE>


        6. STOCK BASED COMPENSATION (cont'd)


                                       October 31,   November 14,
                                          2006           2006          Total
                                       ----------    -----------       ------

          Risk  free rate                  3.50%            3.50%
          Volatility  factor                100%             100%
          Expected dividends                  0%               0%
          Stock-based compensation cost
            expensed for year ended
            November 30, 2006           $892,214         $157,726    $1,049,940
          Unexpended stock-based
            compensation deferred over
            to next year                    $nil             $nil          $nil

        As of November 30, 2006 there was $Nil of unrecognized expense related
        to non-vested stock-based compensation arrangements granted. The total
        stock-based compensation expense relating to employees and non employees
        for the year ended November 30, 2006 was $1,049,940.

        Year ended November 30, 2007

        Effective January 7, 2007 the company granted stock options to one
        officer to acquire 125,000 common shares under its Non-Qualified Stock
        Option Plan. The exercise price for the options was set at $1.50 per
        share. These options vest immediately and expire on January 17, 2012.
        The stock based compensation cost of $204,986 has been expensed to
        general and administration.

        Effective April 23, 2007, the board of directors granted the following
        options under its Non-Qualified Stock Option Plan:

          1.   Options to two  consultants to acquire  150,000 common share each
               for a total of 300,000  shares.  The  exercise  price for 300,000
               options  was  set  at  $2.75  per  share.   These   options  vest
               immediately   and  expire  on  April  23,   2012.   Stock   based
               compensation  cost of $622,074  has been  expensed to general and
               administration expense.

          2.   Options to two  consultants  to acquire  20,000 common share each
               for a total of 40,000  shares.  The  exercise  price  for  40,000
               options  was  set  at  $3.60  per  share.   These   options  vest
               immediately   and  expire  on  January  29,  2012.   Stock  based
               compensation  cost of $78,224  has been  expensed  to general and
               administration expense.


                                       20
<PAGE>


     6. STOCK BASED COMPENSATION (cont'd)

        Effective October 12, 2007 the board of directors granted the following
        options under its Non-Qualified Stock Option Plan:

          1.   Options to one director to acquire  675,000  common  shares.  The
               exercise price was set at $1.20 per share.

          2.   Options to one director to acquire  300,000  common  shares.  The
               exercise price was set at $1.20 per share.

          3.   Options to one director to acquire  175,000  common  shares.  The
               exercise price was set at $1.20 per share.

          4.   Options to one  officer to acquire  175,000  common  shares.  The
               exercise price was set at $1.20 per share.

          5.   Options to two  consultants to acquire 125,000 common shares each
               for a total of 250,000  options.  The  exercise  price was set at
               $1.20 per share.

        All of the above options vest immediately and have an expiry date of
        October 12, 2012. Stock based compensation cost of $1,436,275 has been
        expensed to general and administration expense.

        Effective October 25, 2007, the board of directors granted under its
        Non-Qualified Stock Option Plan, options to a consultant to acquire
        150,000 common shares. The exercise price was set at $1.20 per share.
        These options vest immediately and have an expiry date of January 31,
        2010. Stock based compensation cost of $104,874 has been expensed to
        general and administration expense.


                                       21
<PAGE>


     6. STOCK BASED COMPENSATION (cont'd)

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

        For the year ended November 30, 2007, the Company has recognized in the
        financial statements, stock-based compensation costs as per the
        following details. The fair value of each option used for the purpose of
        estimating the stock compensation is based on the grant date using the
        Black-Scholes option pricing model with the following weighted average
        assumptions:

Date of grant                 7-Jan     23-Apr      12-Oct    25-Oct
                               2007      2007        2007       2007     Total
                          ------------------------------------------------------

Risk free rate              3.50%        4.25%         5%         5%
Volatility factor         122.84%      106.04%     98.76%    102.37%
Expected dividends             0%           0%         0%         0%
Forfeiture rate                0%           0%         0%         0%
Expected life             5 years      5 years    5 years  2.3 years
Exercise price              $1.50   $2.75-3.60      $1.20      $1.20
Total  number of options
  granted                 125,000      340,000  1,575,000    150,000  2,190,000
Grant  date fair value of
  options                   $1.64        $1.96      $0.91      $0.70

Market price of             $1.90        $2.65      $1.20      $1.20
Company's common stock
  on date of grant          $1.90        $2.65      $1.20      $1.20
Stock-based  compensation
  cost expensed during the
  year ended November 30,
  2007                   $204,986     $700,298 $1,436,275   $104,874  2,446,433
Unexpended Stock-based
 compensation cost
 deferred over the
 vesting period              $nil         $nil       $nil       $nil      $nil


                                       22
<PAGE>


     6. STOCK BASED COMPENSATION (cont'd)

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

                                                     Number of shares
                                                   2007               2006
                                                   ----               ----

            Outstanding, beginning of year         700,000                -
            Granted                              2,190,000        1,650,000
            Expired                                      -                -
            Exercised                                    -         (950,000)
            Cancelled                                    -                -
            Outstanding, end of year             2,890,000          700,000
                                               -----------        ---------
             Exercisable, end of year            2,890,000          700,000
                                              ------------        ---------


                                         Option price         Number of shares
                  Expiry date             per share        2007         2006
                  -----------            ---------         ----         ----

                  January 31, 2010         $1.20           150,000           -
                  October 29, 2011         $0.25           300,000      300,000
                  October 29, 2011         $0.50           300,000      300,000
                  November 14, 2011        $1.00           100,000      100,000
                  January 7, 2012          $1.50           125,000            -
                  January 29, 2012         $3.60            40,000            -
                  April 23, 2012           $2.75           300,000            -
                  October 12, 2012         $1.20         1,575,000
                                                         ---------     ---------
                  TOTAL                                  2,890,000      700,000
                                                         ---------     --------

          Weighted average exercise
          price at end of year                               $1.22         0.46

        At November 30, 2007, the weighted average contractual term of the total
        outstanding, and the total exercisable options under the Non-Qualified
        Stock Option Plan were as follows:
                                                        Weighted-Average
                                                        Remaining Contractual
                                                             Term

      Total outstanding options                            4.4 years
      Total exercisable options                            4.4 years


                                       23
<PAGE>


     7. STOCK PURCHASE WARRANTS

      During the year ended November 30, 2007 the Company granted the following
      stock purchase warrants:

      Effective September 6, 2007, the Company issued 17,000 common share
      purchase warrants to a director. Each warrant is exercisable into one
      common share of the Company at the price of $0.50 until May 31, 2017.
      These warrants vest immediately (Refer to note 8-related party
      transactions)

      The fair value of the warrant was estimated on the grant date using the
      Black-Scholes option-pricing model. For the year ended November 30, 2007,
      the Company expensed $31,411 as compensation expense on issue of warrants.
      The fair value of the warrant was calculated using the following weighted
      average assumptions: Risk free rate of 5%, volatility factor 96.85%,
      expected dividends 0% and forfeiture rate 0%. The grant date fair value of
      each warrant was $ 1.85.

      Effective October 5, 2007, the Company issued 250,000 common share
      purchase warrants to one director and another 50,000 common share purchase
      warrants to another director. Each warrant is exercisable into one common
      share of the Company at the price of $0.50 until October 5, 2014. These
      warrants vest immediately. The fair value of the warrant was estimated on
      the grant date using the Black-Scholes option-pricing model. For the year
      ended November 30, 2007, the Company expensed $325,683 as compensation
      expense on issue of warrants. (Refer to note 8-related party transactions)
      The fair value of the warrant was calculated using the following weighted
      average assumptions:

      Risk free rate of 5%, volatility factor 100.56%, expected dividends 0% and
      forfeiture rate 0%. The grant date fair value of each warrant was $ 1.09.


                                       24
<PAGE>

     7. STOCK PURCHASE WARRANTS (cont'd)



                                    Number of
                                     Warrants       Exercise
                                     Granted         Prices       Expiry Date

    Outstanding at December 1,
    2005 and average exercise price        -              -

    Granted in year 2006                   -              -                -

                                      ------          ------        --------
    Outstanding at November
    30, 2006 and average
    exercise price                         -              -                -

    Granted in year 2007              17,000           0.50        5/31/2017
    Granted in year 2007             250,000           0.50        10/5/2014
    Granted in year 2007              50,000           0.50        10/5/2014
    Granted in year 2007             106,950           2.81        4/25/2009
    Exercised                              -              -
    Forfeited                              -              -
    Cancelled
                                      ------          ------        --------
    Outstanding at November          423,950           1.08
    30,2007 and average
    exercise price
                                     =======         ======
    Exercisable at November          423,950
      30, 2007

   At November 30, 2007, the weighted average contractual term of the total
   outstanding, and the total exercisable warrants were as follows:

Weighted-Average
                                                        Remaining Contractual
                                                               Term

      Total outstanding options                               5.7 years
      Total exercisable options                               5.7 years


                                       25
<PAGE>

     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.

        During the years ended November 30, 2007 and 2006, no director was paid
        any compensation in cash. All out of pocket expenses of
        directors/promoters were expensed. During the year ended November 30,
        2007 and November 30, 2006, the Directors were compensated for their
        services by issue of Stock Options (Refer to note 6).

         Year ended November 30, 2006

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

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

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

        Year ended November 30, 2007

        Effective January 7, 2007 the company granted stock options to one
        officer to acquire 125,000 common shares under its Non-Qualified Stock
        Option Plan. The exercise price for the options was set at $1.50 per
        share. These options vest immediately and expire on January 17, 2012.
        The stock based compensation cost of $204,986 has been expensed to
        general and administration.


                                       26
<PAGE>


     8. RELATED PARTY TRANSACTIONS (cont'd)

        Effective October 12, 2007 the board of directors granted the following
        options under its Non-Qualified Stock Option Plan:

          1.   Options to one director to acquire  675,000  common  shares.  The
               exercise price was set at $1.20 per share.

          2.   Options to one director to acquire  300,000  common  shares.  The
               exercise price was set at $1.20 per share.

          3.   Options to one director to acquire  175,000  common  shares.  The
               exercise price was set at $1.20 per share.

          4.   Options to one  officer to acquire  175,000  common  shares.  The
               exercise price was set at $1.20 per share.

          5.   Options to two  consultants to acquire 125,000 common shares each
               for a total of 250,000  options.  The  exercise  price was set at
               $1.20 per share.

        All of the above options vest immediately and have an expiry date of
        October 12, 2012. Stock based compensation cost of $1,436,275 has been
        expensed to general and administration expense.

        Effective September 6, 2007, the Company issued 17,000 common share
        purchase warrants to a director. Each warrant is exercisable into one
        common share of the Company at the price of $0.50 until May 31, 2017.
        These warrants vest immediately. The fair value of the warrant was
        estimated on the grant date using the Black-Scholes option-pricing
        model. For the year ended November 30, 2007, the Company expensed
        $31,411 as compensation expense on issue of warrants.

        Effective October 5, 2007, the Company issued 250,000 common share
        purchase warrants to one director and another 50,000 common share
        purchase warrants to another director. Each warrant is exercisable into
        one common share of the Company at the price of $0.50 until October 5,
        2014. These warrants vest immediately. The fair value of the warrant was
        estimated on the grant date using the Black-Scholes option-pricing
        model. For the year ended November 30, 2007, the Company expensed
        $325,683 as compensation expense on issue of warrants.

        The Directors also made advances to the Company to meet the operating
        expenses. These advances of $nil (2006 $4,227) are unsecured and bear
        interest at 4% p.a. Further, a Company Director has charged the Company
        a total amount of $1,500 (2006: $2,250) for providing office space
        during the year.


                                       27
<PAGE>

     8. RELATED PARTY TRANSACTIONS (cont'd)

        A company controlled by a 13.7% (as of November 30, 2006) shareholder,
        who is also the son of a director (since resigned) was paid $16,000
        during the year ended November 30, 2007 (2006: $90,100) for research and
        development.

   9. PLANT AND EQUIPMENT, NET

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

                Computer equipment          30%   declining balance method
                Furniture and Fixtures      30%   declining balance method

                                           Nov 30, 2007            Nov 30, 2006
                                           Accumulated              Accumulated
                                Cost      Amortization      Cost   Amortization
                                  $            $              $         $

     Computer equipment        18,387          2,597             -            -
     Furniture and fixtures     8,170              -             -            -
                               26,557          2,597             -            -
                               ------          -----           ---          ---

      Net carrying amount             $23,960                        $nil
                                      -------                        ----

     10. INCOME TAXES

        The Company has certain non-capital losses of approximately $2,823,968
        (2006: $799,558) available, which can be applied against future taxable
        income and which expire as follows:

            2025     $  188,699
            2026     $  610,859
            2027     $2,024,410
                     $2,823,968

        These losses have not been assessed by the tax authorities.

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

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

                                       28
<PAGE>

     10. INCOME TAXES-Cont'd

        Deferred tax asset components as of November 30, 2007 and 2006 are as
follows:

                                                          2007         2006
       Operating losses available to offset future
          income-taxes                                 $2,823,968     $799,558
                                                       ----------     --------

       Expected Income tax recovery at statutory
          rate of 37.5%                               ($1,058,988)   ($299,834)
       Valuation Allowance                             $1,058,988     $299,834
                                                       ----------     --------
       Net deferred tax assets                                  -            -
                                                       ----------     --------

        As the company is in the development stage, it has provided a 100 per
        cent valuation allowance on the net deferred tax asset as of November
        30, 2007 and 2006.

     11. COMMITMENTS

1.   The  company has  commitments  for  leasing  office  premises in Toronto to
     November 30, 2010. The annual commitments,  excluding  proportionate realty
     and maintenance costs and taxes are as follows:

        Year ended November 30,

            2008        $11,705
            2009        $12,138
            2010        $12,138
                        $35,981

2.   Effective  October  25,  2007 the Company  entered  into a contract  with a
     consultant  for a period  of one year  which can be  terminated  by 30 days
     written  notice to either  party.  The  consultant  is to provide  investor
     relation  services.   The  company  granted  150,000  options  to  purchase
     restricted  common  shares,  exercisable  at a price of $1.20 per share and
     expires on January 31, 2010. In addition,  the Company may grant options to
     purchase an additional  250,000 shares of the Company's common stock if the
     closing  price of the Company's  common stock  maintains at $3.00 per share
     for 30 calendar days prior to March 15, 2008. In addition,  the Company may
     grant an option to purchase an additional  100,000  shares of the Company's
     common stock if the closing price of the Company's  common stock  maintains
     at $4.00 per share during any consecutive  30-day calendar period beginning
     on March 15,  2008.  All  options are  exercisable  at a price of $1.20 per
     share and expire January 31, 2010.


                                       29
<PAGE>

 12. SUBSEQUENT EVENTS

        Effective January 24, 2008 the board of directors granted the following
        options under its Non-Qualified Stock Option Plan:

          1.   Options to one director to acquire  108,000  common  shares.  The
               exercise price was set at $0.10 per share.

          2.   Options to one director to acquire  117,000  common  shares.  The
               exercise price was set at $0.10 per share.

        All of the above options vest immediately and have an expiry date of
        January 24, 2013. Stock based compensation cost of $324,891 will be
        expensed to general and administration expense during the quarter ended
        January 31, 2008.


















                                       30
<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 26th day of February 2008.

                                     SECURITY DEVICES INTERNATIONAL INC.


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


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

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

                                     Title                    Date

/s/ Sheldon Kales
----------------------------
Sheldon Kales                       Director             February 26, 2008


/s/ Boaz Dor
--------------------------
Boaz Dor                            Director             February 26, 2008


/s/ Gregory Sullivan
---------------------------
Gregory Sullivan                    Director             February 26, 2008