<SEC-DOCUMENT>0001062993-13-003508.txt : 20130719
<SEC-HEADER>0001062993-13-003508.hdr.sgml : 20130719
<ACCEPTANCE-DATETIME>20130719093723
ACCESSION NUMBER:		0001062993-13-003508
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20130719
DATE AS OF CHANGE:		20130719

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Security Devices International Inc.
		CENTRAL INDEX KEY:			0001354866
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1130

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-187138
		FILM NUMBER:		13976021

	BUSINESS ADDRESS:	
		STREET 1:		1101 PENNSYLVANIA AVE NW
		STREET 2:		6TH FLOOR
		CITY:			WASHINGTON
		STATE:			DC
		ZIP:			20004
		BUSINESS PHONE:		647-388-1117

	MAIL ADDRESS:	
		STREET 1:		338 CHURCH STREET
		CITY:			OAKVILLE
		STATE:			A6
		ZIP:			L6J 1P1
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>form424b3.htm
<DESCRIPTION>FORM 424B3
<TEXT>


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   <TITLE>Security Devices International Inc.: Form 424(b)(3) - Filed by newsfilecorp.com</TITLE>
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<P align=right><B>This filing is made pursuant </B><BR><B>to Rule 424(b)(3)
under the </B><BR><B>Securities Act of 1933, as amended, in
</B><BR><B>connection with registration </B><BR><B>No. 333-187138 </B><BR></P>
<P align=justify><B>PROSPECTUS SUPPLEMENT NO. 1 </B></P>
<P align=center><B>SECURITY DEVICES INTERNATIONAL INC.</B> <BR>Up to 8,625,000
COMMON SHARES <BR></P>
<P align=justify>This Prospectus Supplement No. 1 supplements and amends our
Prospectus filed with the United States Securities and Exchange Commission (the
&#147;SEC&#148;) on June 27, 2013 (the &#147;Prospectus&#148;). This Prospectus Supplement No. 1
includes our attached Quarterly Report on Form 10-Q for the quarter ended May
31, 2013, as filed with the SEC on July 15, 2013.<B> </B></P>
<P align=justify>This Prospectus Supplement No. 1 should be read in conjunction
with the Prospectus. Any statement contained in the Prospectus shall be deemed
to be modified or superseded to the extent that information in this Prospectus
Supplement No. 1 modifies or supersedes such statement. Any statement that is
modified or superseded shall not be deemed to constitute a part of the
Prospectus except as modified or superseded by this Prospectus Supplement No.
1.</P>
<P align=justify><B>Investing in our common stock involves certain risks. You
should review carefully the risks described under &#147;Risk Factors&#148; beginning on
page 10 of the Prospectus and under similar headings in any amendments or
supplements to the Prospectus. </B></P>
<P align=justify><B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if the Prospectus or this Prospectus Supplement No. 1 is truthful or
complete. Any representation to the contrary is a criminal offense. </B></P>
<P align=center>The date of this Prospectus Supplement No. 1 is July 19,
2013.</P>
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<P align=center><B><FONT size=5>UNITED STATES </FONT></B><BR><B><FONT
size=5>SECURITIES AND EXCHANGE COMMISSION </FONT></B><BR>Washington, D.C. 20549
</P>
<P align=center><B><FONT size=5>FORM 10-Q </FONT></B></P>
<P align=center>(Mark One)</P>
<P align=center>[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934</P>
<P align=center>For the quarterly period ended <B><U>May 31, 2013 </U></B></P>
<P align=center>[&nbsp; &nbsp;] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934<B> </B></P>
<P align=center>For the transition period from _______ to _______</P>
<P align=center>Commission File Number:<B> </B><B><U>333-132456</U></B><B>
</B></P>
<P align=center><B><U><FONT size=5>SECURITY DEVICES INTERNATIONAL,
INC.</FONT></U></B><B> </B><BR>(Exact Name of Registrant as Specified in its
Charter)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=center><B><U>Delaware </U></B></TD>
    <TD align=center width="50%"><B><U>71-1050654 </U></B></TD></TR>
  <TR vAlign=top>
    <TD align=center>(State or other jurisdiction of </TD>
    <TD align=center width="50%">(I.R.S. Employer </TD></TR>
  <TR vAlign=top>
    <TD align=center>incorporation or organization) </TD>
    <TD align=center width="50%">Identification No.) </TD></TR></TABLE>
<P align=center><B>1101 Pennsylvania Ave., NW, 6th Floor
</B><BR><B><U>Washington, DC 20004</U> </B><BR>(Address of Principal
Executive Offices) (Zip Code)</P>
<P align=center>Registrant's telephone number including area code:
<B><U>202-538-1677</U> </B></P>
<P align=center><B><U>N/A</U> </B><BR>Former name, former address, and
former fiscal year, if changed since last report</P>
<P align=justify>Indicate by check mark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.<BR>Yes [X]&nbsp;&nbsp;&nbsp;&nbsp; No
[&nbsp;&nbsp; ]</P>
<P align=justify>Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (&#167;232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).<BR>Yes [X]&nbsp;&nbsp;&nbsp;&nbsp; No [&nbsp; &nbsp;]</P>
<P align=justify>Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of &#147;large accelerated filer&#148;, &#147;accelerated
filer&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the Exchange Act.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>Larger accelerated filer [&nbsp;&nbsp; ] </TD>
    <TD align=left width="50%">Accelerated
      filer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;[&nbsp;&nbsp; ] </TD></TR>
  <TR vAlign=top>
    <TD align=left>Non-accelerated filer&nbsp;&nbsp;&nbsp; [&nbsp; &nbsp;] </TD>
    <TD align=left width="50%">Smaller reporting company [X]
</TD></TR></TABLE>
<P align=justify>Indicate by check mark whether registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).<BR>Yes [&nbsp;&nbsp;
]&nbsp;&nbsp;&nbsp;&nbsp; No [X]</P>
<P align=justify>As of July 15, 2013, the Company had 33,273,913 issued and
outstanding shares of common stock </P>
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<P align=justify>&nbsp;</P>
<P align=center><B>SECURITY DEVICES INTERNATIONAL, INC. <BR>(A Development Stage
Enterprise) </B></P>
<P align=center><B>INTERIM FINANCIAL STATEMENTS </B></P>
<P align=center><B>MAY 31, 2013 </B></P>
<P align=center><B>(Amounts expressed in US Dollars) </B></P>
<P align=center><B>(Unaudited) </B></P>
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<P align=center><B>SECURITY DEVICES INTERNATIONAL, INC. <BR>(A Development Stage
Enterprise) </B></P>
<P align=center><B>INTERIM FINANCIAL STATEMENTS </B></P>
<P align=center><B>MAY 31, 2013 </B></P>
<P align=center><B>(Amounts expressed in US Dollars) <BR>(Unaudited) </B></P>
<P align=center><B>TABLE OF CONTENTS</B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=right width="10%" ><B>Page No</B> </TD></TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=right width="10%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_4">Interim
      Balance Sheets as at May 31, 2013 and November 30, 2012 </A></TD>
    <TD align=right width="10%" bgColor=#eeeeee ><A
      href="#page_4">1
      </A></TD></TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=right width="10%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_5">Interim
      Statements of Operations and Comprehensive loss for the six months and
      three months ended May 31, 2013 and May 31, 2012 and the period from
      inception (March 1, 2005) to May 31, 2013 </A></TD>
    <TD align=right width="10%" bgColor=#eeeeee ><A
      href="#page_5">2
      </A></TD></TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=right width="10%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_6">Interim
      Statements of Cash Flows for the six months ended May 31, 2013 and May 31,
      2012 and the period from inception (March 1, 2005) to May 31, 2013 </A></TD>
    <TD align=right width="10%" bgColor=#eeeeee ><A
      href="#page_6">3
      </A></TD></TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=right width="10%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_7">Interim Statements of Changes in Stockholders&#146; Deficit for
    the six months ended May 31, 2013 and the period from inception (March 1,
    2005) to May 31, 2013</A></TD>
    <TD align=right width="10%" bgColor=#eeeeee ><A
      href="#page_7">4
      </A></TD></TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=right width="10%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_8">Condensed
      Notes to Interim Financial Statements </A></TD>
    <TD align=right width="10%" bgColor=#eeeeee ><A
      href="#page_8">5-15
      </A></TD></TR></TABLE><BR>
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<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC.</B> <BR><B>(A
Development Stage Enterprise) </B><BR><B>Interim Balance Sheets </B><BR><B>As at
May 31, 2013 and November 30, 2012</B> <BR><B>(Amounts expressed in US Dollars)
</B><BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">May 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">November 30, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2013 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2012 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(unaudited) </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(audited) </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center></TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD align=center
      bgColor=#e6efff>&nbsp;<STRONG>ASSETS</STRONG> </TD>
    <TD vAlign=bottom align=center width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=center width="12%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=center width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=center width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=center width="12%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>CURRENT </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cash </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">79,214 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">232,471 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Deferred costs (Note 11) </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>93,730 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>32,500 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Prepaid expenses and other receivables </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">6,127 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">7,200 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Total Current Assets </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">179,071 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">272,171 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Plant and Equipment (Note 4) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>173,086 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>145,048 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>TOTAL ASSETS </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">352,157 </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">417,219 </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD align=left  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center><B>LIABILITIES</B> </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>CURRENT LIABILITIES </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Accounts payable and accrued liabilities </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">341,455 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">150,368 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Loan from related party (Note 13) </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>96,700 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Loans from non-related parties (Note 12) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">531,850 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Total Current Liabilities </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>970,005 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>150,368 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Convertible Debentures (Note 10) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">700,661 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">1,192,639 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Total Liabilities </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>1,670,666 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>1,343,007 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Going Concern (Note 2) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Related Party Transactions (Note 8) </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Commitments (Note 9) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center><B>STOCKHOLDERS' DEFICIT</B> </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Capital Stock (Note 5) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Preferred stock, $0.001 par value,
      5,000,000 shares authorized, Nil <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      issued and outstanding (2012 - nil) <BR>Common stock, $0.001 par value,
      100,000,000 shares authorized, <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      33,273,913 issued and outstanding (2012 -31,472,433) </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>33,274 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>31,472 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Additional Paid-In Capital </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">18,976,773 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">18,338,886 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Deficit Accumulated During the Development
      Stage </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(20,328,556</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(19,296,146</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Total Stockholders' Deficit </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(1,318,509</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(925,788</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
    </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>352,157 </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>417,219 </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="2%"  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center>See condensed notes to the interim financial statements. </P>
<P align=center>1</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_5></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC.</B> <BR><B>(A
Development Stage Enterprise) </B><BR><B>Interim Statements of Operations and
Comprehensive loss </B><BR><B>For the Six months and Three Months Ended May 31,
2013 and May 31, 2012 and the Period from Inception </B><BR><B>(March 1, 2005)
to May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited) </B><BR></P>
<DIV>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">For the </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">For the </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">For the </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">For the </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">six months </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">six months </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">three months </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">three months </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">Cumulative </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">ended </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">ended </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">ended </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">ended </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">Since </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">May 31, </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">May 31, </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">May 31, </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">May 31, </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">inception </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">2013 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">2012 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">2013 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">2012 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="9%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">$</TD>
    <TD align=right width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>OPERATING EXPENSES: </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Research and product </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Development cost (recovery) (note 12 (b)) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">7,473,781 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">- </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(215,143</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">- </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">- </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Amortization </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>78,125 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>17,181 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>4,686 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>8,967 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>2,402 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>General and administration </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">12,734,145 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">927,908 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">721,920 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">502,909 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">300,731 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>TOTAL OPERATING EXPENSES </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">20,286,051 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">945,089 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">511,463 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">511,876 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">303,133 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>LOSS FROM OPERATIONS </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(20,286,051</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(945,089</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(511,463</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(511,876</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(303,133</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Other expense- Interest
    </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(315,099</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(87,321</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(89,177</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(50,886</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="9%">(45,076</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Other
      Income-Interest </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>272,594 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>LOSS BEFORE INCOME TAXES </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>(20,328,556</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>(1,032,410</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>(600,640</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>(562,762</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="9%" bgColor=#e6efff>(348,209</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Income taxes </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>NET LOSS </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(20,328,556</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(1,032,410</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(600,640</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(562,762</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(348,209</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Loss per share &#150; basic and diluted </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(0.03</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(0.02</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(0.02</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(0.01</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Weighted average common shares outstanding
    </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="9%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>32,818,594 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>26,828,050 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>33,273,913 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>26,828,050 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR></TABLE></DIV>
<P align=center>See condensed notes to the interim financial statements. </P>
<P align=center>2 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_6></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC.</B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Interim Statements of Cash Flows
</B><BR><B>For the Six Months Ended May 31, 2013 and May 31, 2012 and the Period
from Inception (March 1, 2005) to </B><BR><B>May 31, 2013 </B><BR><B>(Amounts
expressed in US Dollars) </B><BR><B>(Unaudited) </B><BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">For the </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">For the </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">six months </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">six months </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Cumulative </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">ended </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">ended </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">since inception </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">May 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">May 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(March 1, 2005</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2013 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2012 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp; </TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff><B>CASH FLOWS FROM OPERATING
      ACTIVITIES</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp; Net loss for the period </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(20,328,556</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(1,032,410</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(600,640</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
  </TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Items not requiring an outlay of cash: </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issue of shares for services </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>584,500 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value of options and warrants (included in general and administration expenses) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">6,585,016 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">99,245 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">213,440 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recovery of accounts payable </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(215,143</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(215,143</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
  </TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss on cancellation of common stock </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">34,400 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of plant and equipment </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>78,125 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>17,181 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>4,686 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of debt discount </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">49,961 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">8,022 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">15,451 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of deferred financing cost
    </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>35,160 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>10,916 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in non-cash working capital: </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other receivables
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(6,127</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>1,073 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(30,760</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
  </TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred costs </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">(93,730</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">(61,230</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable and accrued liabilities*
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>653,541 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>231,531 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(205,646</TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><U>)</U> </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>NET CASH USED IN OPERATING ACTIVITIES </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(12,622,853</TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><U>)</U> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(736,588</TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><U>)</U> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>(807,696</TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><U>)</U> </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD>
    <TD vAlign=bottom width="1%" >&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp; </TD>
    <TD vAlign=bottom width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff><B>CASH FLOWS FROM INVESTING
      ACTIVITIES</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquisition of Plant and Equipment </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">(251,211</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">(45,219</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">(5,079</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>NET CASH USED IN INVESTING ACTIVITIES </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">(251,211</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">(45,219</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">(5,079</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD><B>CASH FLOWS FROM FINANCING ACTIVITIES</B> </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net proceeds from issuance of common
      shares </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>10,468,900 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from convertible debentures </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">1,788,328 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">880,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cancellation of common stock </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>(50,000</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loan from related party </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">96,700 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">96,700 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loan from non-related parties </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>531,850 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>531,850 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exercise of stock options </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">117,500 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>NET CASH PROVIDED BY FINANCING ACTIVITIES </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">12,953,278 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">628,550 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%">880,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>NET INCREASE (DECREASE) IN CASH FOR THE PERIOD </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">79,214 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">(153,257</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="12%">67,225 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash, beginning of period </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>232,471 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="12%" bgColor=#e6efff>114,835 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>CASH, END OF PERIOD </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">79,214 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">79,214 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">182,060 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>SUPPLEMENTAL DISCLOSURE OF CASH FLOWS: </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="12%">&nbsp; </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>INCOME TAXES PAID </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>INTEREST PAID </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="12%">- </TD>
    <TD vAlign=bottom align=left width="2%"
>&nbsp;</TD></TR></TABLE>
<P align=justify>*Excludes the conversion of accrued interest for $40,444 into
common shares during the six month period ended May 31, 2013 </P>
<P align=center>See condensed notes to the interim financial statements.</P>
<P align=center>3 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_7></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC.</B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Interim Statement of Changes in
Stockholders&#146; Deficit </B><BR><B>For the period from inception (March 1, 2005)
to May 31, 2013. </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Number of </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Common </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Additional </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Deficit </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Common </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Shares </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Paid-in </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">Accumulated During </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%">Shares </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%">amount </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%">Capital </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%">Development Stage </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%">Total </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=center width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="11%"></TD>
    <TD vAlign=bottom align=center width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="11%"></TD>
    <TD vAlign=bottom align=center width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="11%"></TD>
    <TD vAlign=bottom align=center width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=center width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Balance as of March 1, 2005
    </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of Common shares for professional
      services </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">6,525,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">6,525 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">58,725 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">65,250 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issuance of common shares for
      cash </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>397,880 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>398 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>99,072 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>99,470 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Net loss for the period </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(188,699</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(188,699</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff ><B>Balance as of November 30,
      2005</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="11%" bgColor=#e6efff><B>6,922,880</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="11%" bgColor=#e6efff><B>6,923</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="11%" bgColor=#e6efff><B>157,797</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="11%" bgColor=#e6efff><B>(188,699</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom align=right
    width="11%" bgColor=#e6efff><B>(23,979</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares for cash </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">956,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">956 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">94,644 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">95,600 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issuance of common shares for
      cash </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>286,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>286 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>49,764 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>50,050 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares to consultant for
      services </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">50,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">50 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">8,700 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">8,750 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issuance of common shares for
      cash </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>2,000,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>2,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>398,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>400,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Exercise of stock options </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">950,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">950 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">94,050 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">95,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issuance of common shares for
      cash (net of agent commission) </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>200,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>200 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>179,785 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>179,985 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Stock subscriptions received </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,165,500 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,165,500 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Stock based compensation </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,049,940 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,049,940 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Net loss for the year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">-- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">-- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(1,660,799</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(1,660,799</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff ><B>Balance as of November 30,
      2006</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>11,364,880</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>11,365</B>
</TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>3,198,180</B>
    </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
    bgColor=#e6efff><B>(1,849,498</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>1,360,047</B>
    </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares for stock </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Subscriptions received in
      prior year </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,165,500 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,165 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>(1,165</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares for cash </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,170,670 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,171 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,169,499 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,170,670 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issuance of common shares for
      cash and services </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>50,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>50 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>154,950 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff></TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>155,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares for cash (net of
      expenses) </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,139,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,139 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">4,531,236 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">4,533,375 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Cancellation of stock </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>(1,560,000</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>(1,560</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>(14,040</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>(15,600</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
  </TD></TR>
  <TR vAlign=top>
    <TD align=left >Stock based compensation </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,446,433 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,446,433 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issue of warrants </TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>357,094 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>357,094 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Net loss for the year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(4,827,937</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(4,827,937</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff ><B>Balance as of November 30,
      2007</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>14,330,050</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>14,330</B>
</TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>11,842,187</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
    bgColor=#e6efff><B>(6,677,435</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>5,179,082</B>
    </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Exercise of stock options </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">117,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">117 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">11,583 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">11,700 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Stock based compensation </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,231,056 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,231,056 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Net loss for the year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">- </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(4,401,786</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(4,401,786</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff ><B>Balance as of November 30,
      2008</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>14,447,050</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>14,447</B>
</TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>13,084,826</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>(11,079,221</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>2,020,052</B>
    </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares for cash </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">788,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">788 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">196,212 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">197,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Stock based compensation </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>177,990 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>177,990 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Compensation expense for warrants </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">4,223 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">4,223 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Net loss for the year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>- </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>(2,974,467</TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><U>)</U> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>(2,974,467</TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><U>)</U> </TD></TR>
  <TR vAlign=top>
    <TD align=left ><B>Balance as of November 30, 2009</B> </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>15,235,050</B> </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>15,235</B> </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>13,463,251</B> </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>(14,053,688</B></TD>
    <TD vAlign=bottom align=left width="2%" ><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>(575,202</B></TD>
    <TD vAlign=bottom align=left width="2%" ><B>)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issuance of common shares for
      cash </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>8,143,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>8,143 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,665,157 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>1,673,300 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares for services </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,500,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,500 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">428,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">430,500 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Stock subscriptions received
    </TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>30,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>30,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Stock based compensation </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">289,670 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">289,670 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Net loss for the year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>(2,320,962</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%" bgColor=#e6efff>(2,320,962</TD>
    <TD vAlign=bottom align=left width="2%"  bgColor=#e6efff>)
  </TD></TR>
  <TR vAlign=top>
    <TD align=left ><B>Balance as of November 30, 2010</B> </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>25,878,050</B> </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>25,878</B> </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>15,876,078</B> </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>(16,374,650</B></TD>
    <TD vAlign=bottom align=left width="2%" ><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"><B>(472,694</B></TD>
    <TD vAlign=bottom align=left width="2%" ><B>)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Issuance of common shares for
      cash </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>800,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>800 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>159,200 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>160,000 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Common shares issued for stock subscriptions
      received in prior year </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">150,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">150 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">(150</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Beneficial conversion feature
      on Convertible debt </TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff></TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff></TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>29,300 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff></TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>29,300 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Net loss for the year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(901,558</TD>
    <TD vAlign=bottom align=left width="2%" ><U>)</U> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(901,558</TD>
    <TD vAlign=bottom align=left width="2%" ><U>)</U> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff ><B>Balance as of November 30,
      2011</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>26,828,050</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>26,828</B>
</TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>16,064,428</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>(17,276,208</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
    bgColor=#e6efff><B>(1,184,952</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left >Beneficial conversion features on convertible
      debt </TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">50,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">50,000 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Conversion of convertible
      debt to common shares </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>2,478,549 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>2,479 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>647,508 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff></TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>649,987 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Issuance of common shares for cash </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,165,834 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">2,165 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">647,585 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">649,750 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Stock based compensation </TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>929,365 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>929,365 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Net loss for the year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(2,019,938</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(2,019,938</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff ><B>Balance as of November 30,
      2012</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>31,472,433</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>31,472</B>
</TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>18,338,886</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>(19,296,146</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
    bgColor=#e6efff><B>(925,788</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left >Conversion of convertible debt to common
      shares </TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,801,480 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">1,802 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">538,642 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"></TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%" >&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%">540,444 </TD>
    <TD vAlign=bottom align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Stock based compensation </TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>99,245 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff>99,245 </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Net loss for the period </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(1,032,410</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=left
    width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right
    width="11%">(1,032,410</TD>
    <TD vAlign=bottom align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff ><B>Balance as of May 31,
      2013</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>33,273,913</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%" bgColor=#e6efff><B>33,274</B>
</TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>18,976,773</B> </TD>
    <TD vAlign=bottom align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
      bgColor=#e6efff><B>(20,328,556</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD>
    <TD vAlign=bottom align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD vAlign=bottom align=right width="11%"
    bgColor=#e6efff><B>(1,318,509</B></TD>
    <TD vAlign=bottom align=left width="2%"
      bgColor=#e6efff><B>)</B> </TD></TR></TABLE>
<P align=center>See condensed notes to the interim financial statements. </P>
<P align=center>4</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_8></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B><BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">1. </TD>
    <TD>
      <P align=justify>BASIS OF PRESENTATION</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The accompanying unaudited condensed financial statements
      have been prepared in accordance with the instructions to Form 10-Q and
      therefore do not include all information and footnotes necessary for a
      fair presentation of financial position, results of operations and cash
      flows in conformity with U.S. generally accepted accounting principles
      (GAAP); however, such information reflects all adjustments (consisting
      solely of normal recurring adjustments), which are, in the opinion of
      management, necessary for a fair statement of the results for the interim
      periods.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The interim unaudited financial statements should be read
      in conjunction with the financial statements and Notes thereto together
      with management&#146;s discussion and analysis of financial condition and
      results of operations contained in the Company&#146;s annual report on Form
      10-K for the year ended November 30, 2012. In the opinion of management,
      the accompanying condensed financial statements reflect all adjustments of
      a normal recurring nature considered necessary to fairly state the
      financial position of the Company at May 31, 2013, the results of its
      operations for the six -and three-month periods ended May 31, 2013 and May
      31, 2012, and its cash flows for the six -month periods ended May 31, 2013
      and May 31, 2012. In addition, some of the Company&#146;s statements in this
      quarterly report on Form 10-Q may be considered forward-looking and
      involve risks and uncertainties that could significantly impact expected
      results. The results of operations for the six -month period ended May 31,
      2013 are not necessarily indicative of results to be expected for the full
      year.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company was incorporated under the laws of the state
      of Delaware on March 1, 2005.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>2.</B> </TD>
    <TD>
      <P align=justify>NATURE OF OPERATIONS AND GOING CONCERN</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company is a non-lethal defense technology company,
      specializing in the development of innovative next generation solutions
      for security situations that do not require the use of lethal force. SDI
      has implemented manufacturing partnerships to assist in the deployment of
      their patented and patent pending family of products. These products
      consist of: the Blunt Impact Projectile 40mm (BIP) line of products and
      the Wireless Electric Projectile 40mm (WEP).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>These unaudited interim financial statements have been
      prepared in accordance with generally accepted accounting principles
      applicable to a going concern, which assumes that the Company will be able
      to meet its obligations and continue its operations for its next fiscal
      year. At May 31, 2013, the Company has no source of operating cash flows,
      has not achieved profitable operations, and has accumulated losses of
      $20,328,556 since inception and expects to incur further losses in the
      development of its business. These factors cast substantial doubt about
      the Company&#146;s ability to continue as a going concern. The Company has a
      need for additional working capital to launch its blunt impact and
      electric 40mm round products, meet its ongoing levels of corporate
      overhead, and discharge its liabilities as they come
due.</P></TD></TR></TABLE>
<P align=center>5</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_9></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">2. </TD>
    <TD>
      <P align=justify>NATURE OF OPERATIONS AND GOING CONCERN-Cont&#146;d</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>In order to finance the continued development, the
      Company is working towards the raising of appropriate capital in the near
      future. In addition to raising funds in the prior years, the Company
      raised $160,000 through the issuance of 800,000 common shares during the
      year ended November 30, 2011. The Company further raised an additional
      $878,328 by issue of Convertible Debentures during the year ended November
      30, 2011 and $910,000 during the year ended November 30, 2012. In
      addition, the Company raised $649,750 by issuance of 2,165,834 common
      shares during the year ended November 30, 2012. The Company has filed a
      final prospectus in Canada (Ontario, Alberta and British Columbia) to
      raise additional funds in accordance with the terms of the
    prospectus.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>While the Company has been successful in securing
      financings in the past, there is no assurance that it will be able to do
      so in the future. Accordingly, these financial statements do not give
      effect to adjustments, if any, that would be necessary should the Company
      be unable to continue as a going concern.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>At May 31, 2013, the Company had an accumulated deficit
      during the development stage of $20,328,556 which includes a non- cash
      stock based compensation expense of $6,585,016 for issue of options and
      warrants.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">3. </TD>
    <TD>
      <P align=justify>RESEARCH AND PRODUCT DEVELOPMENT</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Research and Product Development costs, including
      acquired research and product development costs, are charged against
      income in the period incurred.</P></TD></TR></TABLE>
<P align=center>6 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_10></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC.</B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">4. </TD>
    <TD>
      <P align=justify>PLANT AND EQUIPMENT</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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:</P></TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 height="57">

  <TR vAlign=top>
    <TD width="5%" height="15"  ></TD>
    <TD align=left bgColor=#e6efff height="15">Computer equipment </TD>
    <TD align=left bgColor=#e6efff height="15" >30% </TD>
    <TD align=left bgColor=#e6efff height="15" >declining balance
      method </TD></TR>
  <TR vAlign=top>
    <TD width="5%" height="15" ></TD>
    <TD align=left height="15">Furniture and Fixtures </TD>
    <TD align=left height="15" >30% </TD>
    <TD align=left height="15" >declining balance method </TD></TR>
  <TR vAlign=top>
    <TD width="5%" height="15" ></TD>
    <TD align=left bgColor=#e6efff height="15">Leasehold Improvements </TD>
    <TD align=left bgColor=#e6efff height="15" >20% </TD>
    <TD align=left bgColor=#e6efff height="15" >straight line over period of
    lease </TD></TR>
  <TR vAlign=top>
    <TD width="5%" height="12" ></TD>
    <TD align=left height="12">Moulds </TD>
    <TD align=left height="12" colspan="2" >Straight line over 5 years </TD>
    </TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD colspan="4" align=center>May 31, 2013 </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD colspan="4" align=center>November 30, 2012 </TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Accumulated </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Accumulated </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Cost </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Amortization </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Cost </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Amortization </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="12%">$</TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="12%">$</TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="12%">$</TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="12%">$</TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Computer equipment </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">37,573 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">29,916 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">37,573 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">28,565 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Furniture and fixtures </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>18,027 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>13,144 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>18,027 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>12,282 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Leasehold Improvements </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">23,721 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">8,510 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">8,252 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">8,252 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Moulds </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>171,890 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>26,555 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>142,140 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>11,845 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">251,211 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">78,125 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">205,992 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">60,944 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Net carrying amount </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%"></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">&nbsp;173,086 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%"></TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">145,048 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Amortization expense </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%"></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">17,181 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%"></TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">20,585 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(6 months</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(12 months</TD>
<TD align=left width="2%"  bgColor=#e6efff>)</TD></TR></TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">5. </TD>
    <TD>
      <P align=justify>CAPITAL STOCK</P></TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">a) </TD>
    <TD>
      <P align=justify>Authorized</P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%"
align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
100,000,000* Common shares, $0.001 par value </P>
<P style="MARGIN-LEFT: 10%"
align=justify>And&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,000,000
Preferred shares, $0.001 par value</P>
<P style="MARGIN-LEFT: 10%" align=justify>*On March 20, 2013 the Company filed
with the Secretary of the State of Delaware a certificate of amendment (the
&#147;Amendment&#148;) to the Company&#146;s certificate of incorporation. The Amendment
increased the number of authorized shares of the Company&#146;s common stock, par
value $0.001, from 50,000,000 to 100,000,000 common shares. </P>
<P style="MARGIN-LEFT: 10%" align=justify>The Company&#146;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&#146;s common stock. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">b) </TD>
    <TD>
      <P align=justify>Issued</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>33,273,913 Common shares</P></TD></TR></TABLE>
<P align=center>7</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_11></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">5. </TD>
    <TD>
      <P align=justify>CAPITAL STOCK-Cont&#146;d</P></TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">c) </TD>
    <TD>
      <P align=justify>Changes to Issued Share Capital</P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%" align=justify><U>Year ended November 30,
2012</U></P>
<P style="MARGIN-LEFT: 10%" align=justify>During the three month period ended
August 31, 2012, the Company issued 1,484,169 common shares for conversion of
convertible debentures having face value of $411,828 (Convertible debenture 2)
and accrued interest of $33,423. The total debt for $445,251 was converted into
1,484,169 common shares at $0.30 per share.</P>
<P style="MARGIN-LEFT: 10%" align=justify>During the three month period ended
August 31, 2012, the Company issued 1,333,333 shares of common stock to private
investors at a price of $0.30 per share for a total consideration of $400,000.
The shares of common stock are restricted securities, as that term is defined in
Rule 144 of the Securities and Exchange Commission. The Company relied upon the
exemption provided by Section 4(2) of the Securities Act of 1933 in connection
with the sale of these securities. </P>
<P style="MARGIN-LEFT: 10%" align=justify>During the three month period ended
November 30, 2012, the Company issued 994,380 common shares for conversion of
convertible debentures having a face value of $146,500 (Convertible debenture 1)
and accrued interest of $23,076. The total debt for $169,576 was converted into
994,380 common shares.</P>
<P style="MARGIN-LEFT: 10%" align=justify>During the three month period ended
November 30, 2012, the Company issued 832,501 shares of common stock to private
investors at a price of $0.30 per share for a total consideration of $249,750.
The shares of common stock are restricted securities, as that term is defined in
Rule 144 of the Securities and Exchange Commission. The Company relied upon the
exemption provided by Section 4(2) of the Securities Act of 1933 in connection
with the sale of these securities. </P>
<P style="MARGIN-LEFT: 10%" align=justify><U>Six- months ended May 31,
2013</U></P>
<P style="MARGIN-LEFT: 10%" align=justify>During the six month period ended May
31, 2013 the Company issued 1,801,480 common shares for conversion of
convertible debentures having face value of $500,000 and accrued interest of
$40,444. The total debt for $540,444 was converted into 1,801,480 common shares
at $0.30 per share.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">6. </TD>
    <TD>
      <P align=justify>STOCK BASED COMPENSATION</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Effective October 30, 2006 the Company adopted the
      following stock option and stock bonus plans.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><U>Incentive Stock Option Plan</U>. The Company&#146;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
      May 31, 2013.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><U>Non-Qualified Stock Option Plan</U>. SDI&#146;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&#146;s employees, directors, officers, consultants and advisors are
      eligible to be granted options pursuant to the Plans, provided however
      that bona fide services must be rendered by such consultants or advisors
      and such services must not be in connection with the offer or sale of
      securities in a capital-raising transaction. By a resolution of the Board
      of Directors, the Company amended this plan to increase the number of
      common shares available under this plan from 2,250,000 to 4,500,000
      effective October 10, 2007. The Company further amended its Non-Qualified
      Stock Option Plan to increase the number of Common Shares available under
      this plan to 5,000,000 and filed an S-8 registration statement on April
      10, 2008.</P></TD></TR></TABLE>
<P align=center>8</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_12></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">6. </TD>
    <TD>
      <P align=justify>STOCK BASED COMPENSATION-Cont&#146;d</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><U>Stock Bonus Plan</U>. SDI&#146;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 May 31,
    2013.</P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify><U>Year ended November 30, 2012</U>
</P>
<P style="MARGIN-LEFT: 5%" align=justify>On January 4, 2012, the board of
directors granted options to three directors to acquire a total of 775,000
common shares, one officer to acquire 20,000 common shares and two consultants
to acquire a total of 110,000 common shares. The 905,000 options were issued at
an exercise price of $0.13 per share and vest immediately with an expiry term of
four years. The fair value of each option used for the purpose of estimating the
stock compensation is calculated using the Black-Scholes option pricing model
with the following weighted average assumptions:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2.00% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">206.87% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date of grant of options </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.13 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Stock-based compensation cost </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;113,292 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On September 19, 2012 the board of
directors approved the cancellation of all the 905,000 options issued on January
4, 2012, as detailed above and to be exchanged into 905,000 warrants on terms
identical to the terms of the existing stock options in the Company. The
cancellation of 905,000 options and issuance of 905,000 warrants in lieu thereof
was effective October 8, 2012.</P>
<P style="MARGIN-LEFT: 5%" align=justify>On March 9, 2012, all of the issued and
outstanding stock options for common shares in the Company&#146;s capital stock
previously issued to Elad, Ilan Shalev and Haim Danon (being principals of Elad)
were exchanged into warrants on terms identical to the terms of the existing
stock options in the Company. The Company thus cancelled 850,000 options having
an exercise price of $0.25 per common share and expiring on June 30, 2014 and
issued 850,000 warrants at exercise price of $0.25 per common share and expiring
June 30, 2014.</P>
<P style="MARGIN-LEFT: 5%" align=justify>On October 3, 2012, the board of
directors granted options to two consultants to acquire 100,000 common shares
each for a total of 200,000 common shares. The 200,000 options were issued at an
exercise price of $0.42 per share and vest immediately with an expiry term of
three years. The fair value of each option used for the purpose of estimating
the stock compensation is calculated using the Black-Scholes option pricing
model with the following weighted average assumptions:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.50% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">199.60% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date of grant of options </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.42 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Stock-based compensation cost </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;77,096 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On October 26, 2012, the board of
directors granted options to one director to acquire a total of 1,000,000 common
shares and to another director to acquire 100,000 common shares for a total of
1,100,000 options. These 1,100,000 options were issued at an exercise price of
$0.45 per share and vest immediately with an expiry term of four years. The fair
value of each option used for the purpose of estimating the stock compensation
is calculated using the Black-Scholes option pricing model with the following
weighted average assumptions:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.65% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">217.15% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date of grant of options </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.50 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Stock-based compensation cost </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;534,905 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>As of November 30, 2012 there was $Nil
of unrecognized expense related to non-vested stock-based compensation
arrangements granted. </P>
<P style="MARGIN-LEFT: 5%" align=justify><U>Six months ended May 31, 2013</U>
</P>
<P style="MARGIN-LEFT: 5%" align=justify>The Company did not issue any options
during the six month period ended May 31, 2013 </P>
<P style="MARGIN-LEFT: 5%" align=justify>As of May 31, 2013 there was $Nil of
unrecognized expense related to non-vested stock-based compensation arrangements
granted.</P>
<P align=center>9</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_13></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">7. </TD>
    <TD>
      <P align=justify>STOCK PURCHASE WARRANTS</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><U>Year ended November 30, 2012</U></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On January 4, 2012, the board of directors issued
      warrants to a Company in which the Chief Operating officer has an interest
      in, to acquire a total of 800,000 common shares. These warrants were
      issued at an exercise price of $0.13 per share with an expiry term of four
      years. The Company expensed stock based compensation cost of $100,148. The
      fair value of each warrant used for the purpose of estimating the
      compensation expense is calculated using the Black-Scholes option pricing
      model with the following weighted average
assumptions:</P></TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2.00% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">206.87% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date of grant of options </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.13 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Compensation expense </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;100,148 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On March 9, 2012, all of the issued and
outstanding stock options for common shares in the Company&#146;s capital stock
previously issued to Elad, Ilan Shalev and Haim Danon (being principals of Elad)
were exchanged into warrants on terms identical to the terms of the existing
stock options in the Company. The Company thus cancelled 850,000 options having
an exercise price of $0.25 per common share and expiring on June 30, 2014 and
issued 850,000 warrants at exercise price of $0.25 per common share and expiring
June 30, 2014 (see note 6) </P>
<P style="MARGIN-LEFT: 5%" align=justify>On August 9, 2012, the board of
directors issued warrants to a Company owned and controlled by a director, to
acquire a total of 400,000 common shares. These warrants were issued at an
exercise price of $0.20 per share with an expiry term of four years. The Company
expensed stock based compensation cost of $75,013. The fair value of each
warrant used for the purpose of estimating the compensation expense is
calculated using the Black-Scholes option pricing model with the following
weighted average assumptions:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>3.63% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">183.31% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date of grant of options </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.20 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Compensation expense </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;75,013 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On October 3, 2012, the board of
directors issued warrants to a consultant, to acquire a total of 75,000 common
shares. These warrants were issued at an exercise price of $0.42 per share with
an expiry term of three years. The Company expensed stock based compensation
cost of $28,911. The fair value of each warrant used for the purpose of
estimating the compensation expense is calculated using the Black-Scholes option
pricing model with the following weighted average assumptions:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.5% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">199.60% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date of grant of options </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.42 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Compensation expense </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;28,911 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On September 19, 2012 the board of
directors approved the cancellation of 905,000 options issued on January 4,
2012, to be exchanged into 905,000 warrants on terms identical to the terms of
the existing stock options in the Company. The cancellation of 905,000 options
and issuance of 905,000 warrants in lieu thereof was effective October 8, 2012
(see note 6). </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_14></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<P style="MARGIN-LEFT: 5%" align=justify><U>Six months ended May 31, 2013</U>
</P>
<P style="MARGIN-LEFT: 5%" align=justify>On January 30, 2013, the board of
directors granted 100,000 warrants as an incentive to a lender who provided a
working capital loan of $193,400 (CAD $200,000). These warrants were issued at
an exercise price of $0.50 per share and vest immediately with an expiry term of
two years. The fair value of incentive warrants used for the purpose of
estimating the stock compensation is calculated using the Black-Scholes option
pricing model with the following weighted average assumptions: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.35% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">187.87% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>of grant of options </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.47 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Compensation expense </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;38,183 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On March 14, the board of directors
granted 50,000 warrants as an incentive to a director who provided a working
capital loan of $96,700 (CAD $100,000). These warrants were issued at an
exercise price of $0.50 per share and vest immediately with an expiry term of
two years. The fair value of incentive warrants used for the purpose of
estimating the stock compensation is calculated using the Black-Scholes option
pricing model with the following weighted average assumptions: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.35% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">182.13% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>of grant of options </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.40 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Compensation expense </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;15,637 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On April 12, 2013, the board of
directors granted 100,000 warrants as an incentive to a lender who provided a
working capital loan of $193,400 (CAD $200,000).. These warrants were issued at
an exercise price of $0.50 per share and vest immediately with an expiry term of
two years. The fair value of incentive warrants used for the purpose of
estimating the stock compensation is calculated using the Black-Scholes option
pricing model with the following weighted average assumptions: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.35% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">168.05% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>of grant of options </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.35 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Compensation expense </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;25,351 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On May 14, 2013, the board of directors
granted 75,000 warrants as an incentive to a lender who provided a working
capital loan of $145,050 (CAD$150,000). These warrants were issued at an
exercise price of $0.50 per share and vest immediately with an expiry term of
two years. The fair value of incentive warrants used for the purpose of
estimating the stock compensation is calculated using the Black-Scholes option
pricing model with the following weighted average assumptions: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="15%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.35% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Expected dividends </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Forfeiture rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>Volatility </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">181.17% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Market price of Company&#146;s common stock on
      date </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left>of grant of options </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.35 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="15%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Compensation expense </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;20,074 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center>10</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_15></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">8. </TD>
    <TD>
      <P align=justify>RELATED PARTY TRANSACTIONS</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><U>Six months ended May 31, 2013</U></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The directors were compensated as per their consulting
      agreements with the Company. The Company expensed a total of $147,600 as
      management fees to its three directors and expensed a total of $3,600 as
      automobile allowance.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company expensed $24,250 for services provided by the
      CFO of the Company and $120,000 for services provided by a corporation in
      which the Chief Operating Officer has an interest.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company reimbursed $87,019 to directors and officers
      for travel and entertainment expenses incurred for the Company.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On March 4, the board of directors granted 100,000
      warrants as an incentive to a director who provided a working capital loan
      of $96,700 (CAD $100,000). These warrants were issued at an exercise price
      of $0.50 per share and vest immediately with an expiry term of two years.
      The Company expensed $15,637 as compensation expense.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><U>Six months ended May 31, 2012</U></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The directors were compensated as per their consulting
      agreements with the Company. The Company expensed a total of $126,000 as
      Management fees for payment to its three directors and expensed a total of
      $3,000 as automobile allowance.</P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>On January 4, 2012, the board of
directors granted options to three directors to acquire a total of 775,000
common shares and one officer to acquire 20,000 common shares. All these 795,000
options were issued at an exercise price of $0.13 per share and vest immediately
with an expiry term of four years. The Company expensed stock based compensation
cost of $99,522 for these options.</P>
<P style="MARGIN-LEFT: 5%" align=justify>The Company expensed $10,950 for
services provided by the CFO of the Company and $101,600 for services provided
by a corporation in which the Chief Operating Officer has an interest.</P>
<P style="MARGIN-LEFT: 5%" align=justify>The Company reimbursed $84,731 to
directors and officers for travel and entertainment expenses incurred for the
Company.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">9. </TD>
    <TD colSpan=2>
      <P align=justify>COMMITMENTS</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">a) </TD>
    <TD>
      <P align=justify>Consulting agreements:</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The directors of the Company executed consulting
      agreements with the Company on the following terms:</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Effective January 1, 2013, SDI executed an agreement with
      a director to pay compensation for $5,000 per month. The agreement expires
      June 30, 2013. Either party may terminate the consulting agreement by
      giving 30 days written notice.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Effective January 1, 2013, SDI executed an agreement with
      a Company in which a director has an interest in, for a period of two
      years to pay compensation of $8,500 per month with a 5% increase on the
      first anniversary date for services rendered. Either party may terminate
      the consulting agreement by giving 30 days written notice.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Agreement with the Chief Executive Officer to pay
      compensation of $12,000 per month, with an annual 5% increase and a car
      allowance of $600 per month. The agreement expires December 31, 2016. The
      monthly remuneration will increase with accomplishment of milestones. The
      agreement may be terminated with mutual consent or by the Chief Executive
      Officer giving three weeks notice.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Effective October 4, 2012, SDI executed an agreement with
      a Company in which the Chief Operating Officer has an interest in, for a
      period of two years which expires September 30, 2014 for services
      rendered. The total consulting fees are estimated at $480,000 for the two
      year period. The Company expensed $60,000 during the three month period
      ended February 28, 2013. The Company may also accept common shares at
      $0.45 per common share in lieu of cash. As of May 31, 2013, the Company
      has not exercised its right to accept this compensation in
  shares.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>SDI entered into an agreement (the &#147;Teaming Agreement&#148;)
      dated November 30, 2011 with Chemring Ordnance, Inc. (&#147;Chemring&#148;) pursuant
      to which both agreed to establish a co-operative and supportive team to
      develop the best marketing, management and technical approach for the
      worldwide manufacture and sale of 40mm less that blunt trauma ammunition.
      The Teaming Agreement provides for SDI and Chemring to create a team for
      the purpose of preparing competitive, cost effective proposals in response
      to requests for proposals and obtaining and performing any contracts that
      result therefrom.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Pursuant to the Teaming Agreement, if a contract is
      awarded, each of SDI and Chemring will perform the work to be done by it
      as specified in the Teaming Agreement and will share the revenue as set
      out in the Teaming Agreement. Either party who initiated the proposal that
      led to the contract will be the prime contact for that customer. Upon a
      contract being awarded to either SDI or Chemring, it will subcontract with
      the other for the other&#146;s share of the work. In accordance with the
      Teaming Agreement, the BIP ammunition sold will have Chemring&#146;s branding
      unless otherwise agreed by the parties.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Teaming Agreement will terminate on December 20,
      2016. The Teaming Agreement may also expire if a time period of two years
      from the effective date of the agreement passes without a bona fide arms
      length contract being executed and delivered with respect to BIP
      ammunition. It will also terminate if either party is in material breach
      of the Agreement or a subcontract that hasn&#146;t been resolved, if any
      required governmental licenses or approvals or permits are revoked, in the
      event of a debarment or suspension of a party at the option of the other
      party, and by the mutual written agreement of the parties.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Company entered into a Development, Supply and
      Manufacturing Agreement with the BIP Manufacturer on July 25, 2012. This
      Agreement provides the Company to order and purchase only from the BIP
      Manufacturer certain 40MM assemblies and components for use by the Company
      to produce less-lethal and training projectiles as described in the
      Agreement. The Agreement is for a term of five years with an automatic
      extension for an additional year if neither party has given written notice
      of termination prior to the end of the five year period.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Effective January 1, 2013, SDI executed an agreement with
      a non-related consultant to pay compensation of $7,000 per month. The
      consultant is to assist with sales initiatives, demos and participate in
      trade shows. The agreement is for a period of one year. Either party may
      terminate the consulting agreement by giving 30 days written
  notice.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Effective January 1, 2013, SDI executed an agreement with
      another non-related consultant to pay compensation of $7,000 per month.
      The consultant is to assist with sales initiatives, demos and participate
      in trade shows. The agreement is for a period of one year. Either party
      may terminate the consulting agreement by giving 30 days written
      notice.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">b) </TD>
    <TD>
      <P align=justify>The Company has commitments for leasing office premises
      in Oakville, Ontario, Canada to April 30, 2018 at a monthly rent of
      Canadian $6,399 per month.</P></TD></TR></TABLE>
<P align=center>11</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_16></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">10. </TD>
    <TD>
      <P align=justify>CONVERTIBLE DEBENTURES AND DEFERRED FINANCING
  COSTS</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The carrying values of the Company&#146;s convertible
      debentures consist of the following as of May 31,
2013:</P></TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Carrying </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">Value </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>$320,000 face value convertible debenture
      due June 30, 2014 (Convertible Debenture 2) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>320,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>$170,000 face value convertible debenture due January 16,
      2015 (Convertible Debenture 4) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">170,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>$240,000 face value convertible debenture
      due January 16, 2015 (Convertible Debenture 5) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>210,661 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Total </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;700,661 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify><I>$320,000 Face Value Convertible
Debenture</I> </P>
<P style="MARGIN-LEFT: 5%" align=justify>During the year ended November 30, 2011
the Company issued $731,828 face value Convertible Debentures, due June 30, 2014
(&#147;Convertible Debentures 2&#148;), to various investors (&#147;Investors&#148;) for net
proceeds of $731,828. The Debenture accrues interest at 8% per annum. The
principal is payable at maturity whereas the interest is payable annually in
arrears on each anniversary of the issuance date. The principal may be converted
in multiples of $1,000 into common stock at the option of the Investor at any
time during the term to maturity. The conversion prices are (i) $0.30 on or
before the first anniversary of the debenture; (ii) $0.35 on or before the
second anniversary of the debenture; and (iii) $0.40 after the second
anniversary of the issuance of the debenture and maturity. The conversion prices
are subject to adjustment solely for capital reorganization events.</P>
<P style="MARGIN-LEFT: 5%" align=justify>During the quarter ended August 31,
2012, $411,828 face value Convertible Debentures along with accrued interest for
$33,423 were converted into 1,484,169 common shares at $0.30 per share, leaving
a balance of $320,000 face value Convertible Debentures (&#147;Convertible Debentures
2&#148;).</P>
<P style="MARGIN-LEFT: 5%" align=justify>The debenture provides down-round
protection to the Investor in the event the Company issues rights, options or
warrants to all or substantially all the holders of the Common Shares pursuant
to which those holders are entitled to subscribe for, purchase or otherwise
acquire Common Shares or Convertible Securities within a period of 45 days from
the date of issue (the &#147;Rights Period&#148;) at a price, or at a conversion price, of
less than 90% of the Current Market Price at the record date for such
distribution (any such issuance being a &#147;Rights Offering&#148; and Common Shares that
may be acquired in exercise of the Rights Offering, or upon conversion of the
Convertible Securities offered by the Rights Offering, being the &#147;Offered
Shares&#148;). The debenture also embodies certain traditional default provisions
that are linked to credit or interest risks, such as bankruptcy proceedings,
liquidation events and corporate existence. In the event of a reorganization,
consolidation, merger, or a sale of all or substantially all of the assets, the
Company has the option to redeem the debenture at (i) $1,250 per $1,000 of
Principal Sum, if occurring on or before the first anniversary of issuance; (ii)
$1,125 per $1,000 of Principal Sum if occurring after the first anniversary and
prior to the second anniversary of issuance; and (iii) $1,050 per $1,000 of
Principal Sum if occurring after the second anniversary of issuance and prior to
the end of the term. </P>
<P align=center>12</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_17></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">10. </TD>
    <TD>
      <P align=justify>CONVERTIBLE DEBENTURES AND DEFERRED FINANCING
      COSTS-Cont&#146;d</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><I>$170,000 Face Value Convertible
Debenture</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>During the nine month period ended August 31, 2012 the
      Company issued $670,000 face value Convertible debentures, due January 16,
      2012 (&#147;Convertible Debentures 4&#148;), to various investors (&#147;Investors&#148;) for
      net proceeds of $670,000. The Debenture accrues interest at 8% per annum.
      The principal is payable at maturity whereas the interest is payable
      annually in arrears on each anniversary of the issuance date. The
      principal may be converted in multiples of $1,000 into common stock at the
      option of the Investor at any time during the term to maturity. The
      conversion prices are (i) $0.30 on or before the first anniversary of the
      debenture; (ii) $0.35 on or before the second anniversary of the
      debenture; and (iii) $0.40 after the second anniversary of the issuance of
      the debenture and maturity. The conversion prices are subject to
      adjustment solely for capital reorganization events.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>During the quarter ended February 28, 2013, $500,000 face
      value Convertible debentures along with accrued interest for $40,444 were
      converted into 1,801,480 common shares at $0.30 per share, leaving a
      balance of $170,000 face value Convertible debentures (&#147;Convertible
      Debentures 4&#148;).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The debenture provides down-round protection to the
      Investor in the event the Company issues rights, options or warrants to
      all or substantially all the holders of the Common Shares pursuant to
      which those holders are entitled to subscribe for, purchase or otherwise
      acquire Common Shares or Convertible Securities within a period of 45 days
      from the date of issue (the &#147;Rights Period&#148;) at a price, or at a
      conversion price, of less than 90% of the Current Market Price at the
      record date for such distribution (any such issuance being a &#147;Rights
      Offering&#148; and Common Shares that may be acquired in exercise of the Rights
      Offering, or upon conversion of the Convertible Securities offered by the
      Rights Offering, being the &#147;Offered Shares&#148;). The debenture also embodies
      certain traditional default provisions that are linked to credit or
      interest risks, such as bankruptcy proceedings, liquidation events and
      corporate existence. In the event of a reorganization, consolidation,
      merger, or a sale of all or substantially all of the assets, the Company
      has the option to redeem the debenture at (i) $1,250 per $1,000 of
      Principal Sum, if occurring on or before the first anniversary of
      issuance; (ii) $1,125 per $1,000 of Principal Sum if occurring after the
      first anniversary and prior to the second anniversary of issuance; and
      (iii) $1,050 per $1,000 of Principal Sum if occurring after the second
      anniversary of issuance and prior to the end of the term.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><I>$240,000 Face Value Convertible
Debenture</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>During the quarter ended February 29, 2012 the Company
      issued $240,000 face value Convertible debentures, due January 16, 2012
      (&#147;Convertible Debentures 5&#148;), to various investors (&#147;Investors&#148;) for net
      proceeds of $240,000. The Debenture accrues interest at 8% per annum. The
      principal is payable at maturity whereas the interest is payable annually
      in arrears on each anniversary of the issuance date. The principal may be
      converted in multiples of $1,000 into common stock at the option of the
      Investor at any time during the term to maturity. The conversion prices
      are (i) $0.30 on or before the first anniversary of the debenture; (ii)
      $0.35 on or before the second anniversary of the debenture; and (iii)
      $0.40 after the second anniversary of the issuance of the debenture and
      maturity. The conversion prices are subject to adjustment solely for
      capital reorganization events.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The debenture provides down-round protection to the
      Investor in the event the Company issues rights, options or warrants to
      all or substantially all the holders of the Common Shares pursuant to
      which those holders are entitled to subscribe for, purchase or otherwise
      acquire Common Shares or Convertible Securities within a period of 45 days
      from the date of issue (the &#147;Rights Period&#148;) at a price, or at a
      conversion price, of less than 90% of the Current Market Price at the
      record date for such distribution (any such issuance being a &#147;Rights
      Offering&#148; and Common Shares that may be acquired in exercise of the Rights
      Offering, or upon conversion of the Convertible Securities offered by the
      Rights Offering, being the &#147;Offered Shares&#148;).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The debenture also embodies certain traditional default
      provisions that are linked to credit or interest risks, such as bankruptcy
      proceedings, liquidation events and corporate existence. In the event of a
      reorganization, consolidation, merger, or a sale of all or substantially
      all of the assets, the Company has the option to redeem the debenture at
      (i) $1,250 per $1,000 of Principal Sum, if occurring on or before the
      first anniversary of issuance; (ii) $1,125 per $1,000 of Principal Sum if
      occurring after the first anniversary and prior to the second anniversary
      of issuance; and (iii) $1,050 per $1,000 of Principal Sum if occurring
      after the second anniversary of issuance and prior to the end of the
      term.</P></TD></TR></TABLE>
<P align=center>13</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_18></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited)</B> <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">10. </TD>
    <TD>
      <P align=justify>CONVERTIBLE DEBENTURES AND DEFERRED FINANCING
      COSTS-Cont&#146;d</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify><B>Accounting for the Financings:</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company has evaluated the terms and conditions of the
      convertible debentures under the guidance of ASC 815, Derivatives and
      Hedging. The conversion features meet the definition of conventional
      convertible for purposes of applying the conventional convertible
      exemption. The definition of conventional convertible contemplates a
      limitation on the number of shares issuable under the arrangement. In the
      case of Convertible Debentures 2, 4 and 5 the instrument is convertible
      into a fixed number of shares. Although this instrument contains a
      down-round protection feature, it was determined to be insignificant and
      did not preclude characterization as conventional convertible. Since the
      Convertible Debentures achieved the conventional convertible exemption,
      the Company was required to consider whether the hybrid contracts embody a
      beneficial conversion feature. In the case of Convertible Debenture5, the
      calculation of the effective conversion amount resulted in a beneficial
      conversion feature. However, in the case of Convertible Debentures 2 and 4
      the calculation of the effective conversion amount did not result in a
      beneficial conversion feature. At inception, the Company recorded a
      beneficial conversion feature for Convertible Debenture 5 as a component
      of stockholders&#146; equity.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The optional redemption feature embedded in Convertible
      Debentures 2, 4 and 5 were not considered clearly and closely related to
      the host debt instrument. The Company analyzed the down-round protection
      feature, which expires 45 days from the inception date of the financing.
      The Company determined that there were no contemplated financings during
      this time period that would trigger the down-round protection feature.
      Given the feature&#146;s short-term nature and the unlikelihood of a triggering
      event occurring, the down-round protection feature was deemed immaterial
      at inception and thus does not require bifurcation and liability
      classification.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The purchase price allocation for Convertible Debenture 5
      resulted in a debt discount of $50,000 respectively. The discount on the
      debenture is being amortized through periodic charges to interest expense
      over the term of the debenture using the effective interest
  method.</P></TD></TR></TABLE>
<P align=center>14</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_19></A>
<P align=justify><B>SECURITY DEVICES INTERNATIONAL, INC. </B><BR><B>(A
Development Stage Enterprise) </B><BR><B>Notes to Financial Statements
</B><BR><B>May 31, 2013 </B><BR><B>(Amounts expressed in US Dollars)
</B><BR><B>(Unaudited) </B><BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">11. </TD>
    <TD>
      <P align=justify>DEFERRED COSTS</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The balance represents the corporate legal and finance
      fees and retainer given to an agent to commence due diligence and
      processing of public offering. These costs have been deferred and upon
      completion of this transaction a charge will be made to share
    capital.</P></TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">12. </TD>
    <TD>
      <P align=justify>LOANS FROM NON- RELATED PARTIES</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On January 30, 2013, the Company obtained an unsecured
      loan of $193,400 (CAD $200,000) for general working capital purposes
      (&#147;Working Capital Loan&#148;). The Working Capital Loan, together with interest
      at 6% per annum, accrued and calculated daily, plus $12,000 will be repaid
      on the earlier of July 30, 2013 and demand. The Company has accrued
      interest of $15,781 for the six month period ended May 31, 2013. The
      Company also granted 100,000 warrants to the lender as bonus consideration
      for the loan. These warrants were issued at an exercise price of $0.50 per
      share and vest immediately with an expiry term of two years.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On April 12, 2013, the Company obtained an unsecured loan
      of $193,400 (CAD $200,000) for general working capital purposes (&#147;Working
      Capital Loan&#148;). The Working Capital Loan, together with interest at 6% per
      annum, accrued and calculated daily, plus $12,000 will be repaid on the
      earlier of July 30, 2013 and demand. The Company has accrued interest of
      $13,644 for the six month period ended May 31, 2013. The Company also
      granted 100,000 warrants to the lender as bonus consideration for the
      loan. These warrants were issued at an exercise price of $0.50 per share
      and vest immediately with an expiry term of two years.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On May 14, 2013, the Company obtained an unsecured loan
      of $145,050 (CAD $150,000) for general working capital purposes (&#147;Working
      Capital Loan&#148;). The Working Capital Loan, together with interest at 6% per
      annum, accrued and calculated daily, plus $9,000 will be repaid on the
      earlier of July 30, 2013 and demand. The Company has accrued interest of
      $9,444 for the six month period ended May 31, 2013. The Company also
      granted 75,000 warrants to the lender as bonus consideration for the loan.
      These warrants were issued at an exercise price of $0.50 per share and
      vest immediately with an expiry term of two
years.</P></TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>13. </TD>
    <TD align=left width="95%" >LOAN FROM RELATED PARTY</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=left width="95%" >
      <P align=justify>On March 14, 2013, the Company obtained an unsecured loan
      of $96,700 (CAD$100,000) for general working capital purposes (&#147;Working
      Capital Loan&#148;) from a director. The Working Capital Loan , together with
      interest at 6% per annum, accrued and calculated daily, plus $6,000 will
      be repaid on the earlier of July 30, 2013 and demand. The Company has
      accrued interest of $7,298 for the six month period ended May 31, 2013.
      The Company also granted 50,000 warrants to the lender as bonus
      consideration for the loan. These warrants were issued at an exercise
      price of $0.50 per share and vest immediately with an expiry term of two
      years. </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >&nbsp;    </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>14. </TD>
    <TD align=left width="95%" >
      <P align=justify>SUBSEQUENT EVENTS </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >&nbsp;    </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=left width="95%" >
      <P align=justify>a) On July 3, 2013 the Company obtained receipt from the
      Ontario Securities Commission for a Long Form Prospectus filed on July 2, 2013 (the prospectus). The prospectus has been filed under
      Multilateral Instrument 11-102 Passport System in British Columbia and
      Alberta. </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >&nbsp;    </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=left width="95%" >
      <P align=justify>b) On June 12, 2013, the Company entered into an
      Agreement with a former director and CEO of the Company. In accordance
      with the terms of an Agreement, the Company agreed to pay a fee of CAD
      $80,000 pursuant to which the former director and CEO agreed to deposit in
      escrow 2,300,000 Common Shares of the Company owned by him as required by
      the policies of the TSXV with respect to seed share resale restrictions
      and as a condition precedent to the TSXV issuing its final acceptance for
      listing of the Common Shares on the TSXV. The Company will make payment
      within 2 business days following closing of the Initial Public Offering
      (&#147;IPO&#148;) in Canada. </P></TD></TR></TABLE>
<P align=center>15</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_20></A>
<P align=justify><B>ITEM
2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><B><U>MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL</U></B> <B><U>CONDITION</U></B><B> </B><B><U>AND PLAN OF
OPERATION</U></B><B> </B></P>
<P align=justify><B>FOR THE SIX-MONTH AND THREE-MONTH PERIODS ENDED MAY 31, 2013
</B></P>
<P align=justify>The following discussion and analysis of the financial
condition and results of Security Devices International, Inc. (also referred to
as "we", "us", "our", "SDI", or the "Company"), should be read in conjunction
with the Company's financial statements (and related notes) as at November 30,
2012 </P>
<P align=justify><I>The following discussion contains forward-looking
statements, which are subject to risks and uncertainties and other factors that
may cause SDI&#146;s results to differ materially from expectations. When reviewing
the Company's forward-looking statements, investors and others should carefully
consider the foregoing factors and other uncertainties and potential events.
These include risk relating to market fluctuations, performance, , strength of
the North American and other world economies and foreign exchange fluctuations.
These forward-looking statements speak only as of the date hereof. Unless
otherwise required by applicable securities laws, the Company disclaims any
intention or obligation to update these forward-looking statements. The Company
does have an ongoing obligation to disclose material information as it becomes
available. The discussion also includes cautionary statements about these
matters. You should read the cautionary statements made below as being
applicable to all forward-looking statements wherever they appear in this
document.</I></P>
<P align=justify><B><U>Business</U></B> </P>
<P align=justify><B>History </B></P>
<P align=justify>Security Devices International Inc. was incorporated on March
1, 2005. The Company began as a research and development company focused on the
development of 40mm less-lethal ammunition. 40mm refers to the diameter of the
bullet (sometimes also referred to as a round or a projectile) and bullets of
this size are required for standard issue military riot guns. 40mm bullets are
also the emerging standard among riot guns used by police forces, although many
police forces are currently using 37mm riot guns. </P>
<P align=justify>The Company began with development of a wireless electric
projectile (a &#147;WEP&#148;), named the Lektrox. The Company hired Elad Engineering Ltd.
(&#147;Elad&#148;) a ballistics engineering firm located in Tel Aviv, Israel, to
collaborate in the development of the WEP. The WEP uses mini-harpoons to fix the
bullet to the target's clothing or body. The bullet contains an electrical
system that releases a 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 overrides the target's nervous system inducing a muscle spasm
that causes the target to fall to the ground helpless. </P>
<P align=justify>Commencing in December 2008, the Joint Non-Lethal Weapons
Directorate (&#147;JNLWD&#148;) of the US Department of Defense, an organization
responsible for the development and coordination of non-lethal weapons
activities within the United States, tested the WEP through its evaluation
facility at Penn State University. The testing evaluated the effectiveness and
safety of the electrical output compared to the Government&#146;s standard total body
effects model. Testing was completed in November 2009 and a report was prepared
by Penn State University and submitted to the JNLWD in January 2010. An
executive summary was released to the Company indicating a positive outcome.
Research and development continued on the WEP until mid-2010. </P>
<P align=justify>To reduce kinetic energy levels, the head of the WEP contains a
cushioning mechanism composed of a collapsible material that enlarges the
contact surface and absorbs part of the impact. In June 2010, the Company began
development of a 40mm blunt impact projectile (the &#147;BIP&#148;) which used the
cushioning mechanism of the WEP but did not contain the electrical mechanism of
the WEP. The BIP used the pain of impact to obtain compliance from the target.
</P>
<P align=justify>In the fall of 2010 the Company underwent a change in the board
of directors and management. Two new directors were appointed and the board of
directors appointed a Chief Operating Officer. The Company contracted with Level
4 Capital Corp. to assist with restructuring of the Company, contract
negotiations and operational issues.</P>
<P align=justify>Early in 2011 the Company decided to focus its attention on the
BIP and to discontinue further development work on the WEP. The Company
concluded that the cost and time required to complete development and testing of
the BIP were significantly less than that required to complete development and
testing of the WEP. The BIP is also less expensive to produce than the WEP, and
can be sold for a lower price. The Company plans to use revenue received from
BIP sales to complete the development and production line for the WEP. </P>
<P align=justify>Initially, the Company&#146;s products were designed, tested and
assembled in Israel. In 2011, the Company moved its engineering, intellectual
property and production facilities from Tel Aviv, Israel to the operator (the
&#147;BIP Manufacturer&#148;) of an injection molding facility outside of Boston,
Massachusetts. The BIP Manufacturer has a history of manufacturing 40mm
components for the military sector, and provides molding services to the
medical, aerospace, petrochemical, commercial, electronics, and defense
industries.</P>
<P align=justify>The Company attended several military tradeshows through 2011
and signed a teaming agreement with Chemring Ordnance Inc. (&#147;Chemring&#148;), of
Perry, Florida in December 2011. The agreement gives Chemring the non-exclusive
right to market and sell the BIP worldwide for a five- year term. Chemring is
responsible for its costs of marketing the BIPs and BIPs sold through this
arrangement will bear the Chemring brand. The Company has retained the right to
market the BIP directly to military, law enforcement and government agencies
outside of Chemring&#146;s sales channels.</P>
<P align=center>16 </P>
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<P align=justify>Research and development for the BIP was completed in the
summer of 2012.</P>
<P align=justify>In October 2012, the Company obtained an ammunition
certification from Chemring which meant that the BIP satisfied the standards set
by Chemring for products which it would distribute. </P>
<P align=justify>In November 2012, the Company obtained a United States
Department of Transportation number (DOT#) required in order for the Company to
ship BIP rounds. </P>
<P align=justify>In June 2012, the Company contracted CRT Less Lethal Inc.
(&#147;CRT&#148;) to test the BIP. CRT is a Seattle- based company founded in 2003 with
expertise in the analysis, evaluation and human effects testing of less-lethal
munitions. The testing protocol included accuracy, precision, consistency,
muzzle and target energy, impact energy density and effective range of the BIP.
Human volunteers were used during the test firing, revealing full effects to the
lower body from the blunt trauma of the BIP. Extensive wound profiling from the
tests were finalized in a detailed report from CRT. Based on data obtained from
the three-stage evaluation, the BIP passed the CRT testing protocol for
accuracy, consistency, relative safety and effectiveness. </P>
<P align=justify>In July 2012, the Company signed a five-year development,
supply and manufacturing agreement with the BIP Manufacturer. An engineering
team is available to the Company through the BIP Manufacturer for development of
all of the core components of the BIP and any product changes that are
necessary. </P>
<P align=justify>During 2012, the Company attended several law enforcement
tradeshows and conducted live fire demonstrations with government agencies in
Canada, and the US. Live fire demonstrations allow the Company to demonstrate
the short and long distance firing capabilities, accuracy and relative safety of
the BIP.</P>
<P align=justify>The Company has begun the development of five new less-lethal
ammunition rounds. These new rounds will be a modified version of the BIP, four
of which will carry a payload (a marking liquid, a marking powder, pepper spray
and a pungent odor) and the fifth of which is a lower cost practice round. SDI
expects to complete development of these five new ammunition rounds by the
fourth quarter of calendar 2013. The Company has now moved into the testing
phase with the payload rounds. </P>
<P align=justify><B>Products</B> </P>
<P align=justify>SDI&#146;s business is the development, manufacture and sale of
less-lethal ammunition. This ammunition is used by the military and police
forces for crowd control. </P>
<P align=justify>The Company has two products: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">a) </TD>
    <TD>
      <P align=justify>The Company has developed the BIP, a blunt impact
      projectile which uses pain to control a target. The Company is developing
      five versions of the standard BIP, four of which contain a payload and one
      of which is a cheaper cost practice round. A payload is an internal
      capsule inside the BIP, which holds a liquid or powder
substance.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">b) </TD>
    <TD>
      <P align=justify>The Company has undertaken substantial work to develop
      the WEP, a wireless electric projective which releases an electrical pulse
      that induces a muscle spasm and causes the target to fall to the ground
      helpless.</P></TD></TR></TABLE>
<P align=justify><B>Less-Lethal Sector</B> </P>
<P align=justify>Both military and law enforcement agencies are seeking
alternatives to traditional lethal ammunition. From a military standpoint, the
involvement of armed forces in populated areas has created a need for
less-lethal ammunition. Police forces also require non-lethal ammunition for
riot control and critical incident de-escalation, motivated in part by a desire
to avoid expensive litigation. </P>
<P align=center>17 </P>
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<A name=page_22></A>
<P align=justify>Chemical irritants (such as tear gas) have been sporadically
used by military and have been adopted by police forces around the world for use
in riot control.</P>
<P align=justify>Throughout the 1970&#146;s and 1980&#146;s the military and police forces
began to use kinetic energy impact projectiles. These projectiles included wood,
rubber and bean-bag material as ammunition. Many of these projectiles are still
being used by military and police forces around the world. There has been very
little technology progression within this space over the last half a century.
</P>
<P align=justify>The rubber bullet was developed by the Ministry of Defense for
the British Army in Northern Ireland at the request of army officers who wanted
a weapon for use in civil disturbances with a range beyond a stone-throwing
distance. In management&#146;s opinion, rubber bullets are inaccurate and have
unpredictable ricochets. In addition, management believes that they have caused
numerous severe injuries and several deaths. </P>
<P align=justify>The nature of a military&#146;s role has changed significantly to
the extent that the military becomes actively engaged in the policing of
civilian populations. This is where the military in effect, intersects with
local police forces to support and uphold national and regional law. Today,
military units are involved in on-going conflicts that bring them into direct
contact with civilian populations in Iraq, Afghanistan and various countries in
the Middle East. Soldiers who are deployed in humanitarian roles are often
subject to rules of engagement which disallow the use of deadly force unless
soldiers encounter a lethal threat. The military requires less-lethal deterrent
ammunition for use in crowd and riot control, perimeter security and pilfering
situations. In management&#146;s opinion, less-lethal ammunition means a greater
opportunity to preserve life. </P>
<P align=justify>Police and military forces require easily applied options for
riot control without the consequences of lethal force. In addition to the
litigation, administrative and financial resources required to defend the use of
lethal force, there is a moral consideration as well. Police and military forces
must balance the risk of injury or death to their own personnel against the risk
of injury to civilians, including bystanders. Riot control involves difficult
and challenging decision that often must be made within seconds.</P>
<P align=justify>Both police and military personnel are demanding access to
options that fall somewhere between physically charging into a crowd with batons
and firing munitions designed to kill targets. If these personnel are equipped
and trained with less-lethal munitions, they are better equipped to diffuse a
riot and regain control. By providing soldiers and police with a midlevel force
response, appropriate to the level of threat, the chance of an escalation can be
reduced. In addition, if this less-lethal response can be employed at a standoff
distance, the troops or officers can maintain a buffer zone between themselves
and the crowd. The capability to target a specific individual, as opposed to
spraying an entire crowd, reduces the risk of injury to innocent bystanders and
political backlash.</P>
<P align=justify>Conflicts in Iraq and Afghanistan, events such as the August
2011 UK riots, and the June 2012 Quebec student street violence have led
governments, police and defense decision-makers to seek cost effective
less-lethal weapons. These decision-makers understand that social media will
limit the use of lethal weapons and a new generation of less-lethal weapons is
required. </P>
<P align=center>18</P>
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<P align=justify><B><U>Going Concern</U></B><B> </B></P>
<P align=justify>These unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles applicable to a
going concern, which assumes that the Company will be able to meet its
obligations and continue its operations for its next fiscal year. At May 31,
2013, the Company has no source of operating cash flows, has not achieved
profitable operations, and has accumulated losses of $20,328,556 since inception
and expects to incur further losses in the development of its business. These
factors cast substantial doubt about the Company&#146;s ability to continue as a
going concern. The Company has a need for additional working capital to launch
its blunt impact and electric 40mm round products, meet its ongoing levels of
corporate overhead, and discharge its liabilities as they come due. </P>
<P align=justify>In order to finance the continued development, the Company is
working towards the raising of appropriate capital in the near future. In
addition to raising funds in the prior years, the Company raised $160,000
through the issuance of 800,000 common shares during the year ended November 30,
2011. The Company further raised an additional $878,328 by issue of Convertible
Debentures during the year ended November 30, 2011 and $910,000 during the year
ended November 30, 2012. In addition, the Company raised $649,750 by issuance of
2,165,834 common shares during the year ended November 30, 2012. The Company has
filed a final prospectus in Canada (Ontario, Alberta and British Columbia) to
raise additional funds in accordance with the terms of the prospectus </P>
<P align=justify>While the Company has been successful in securing financings in
the past, there is no assurance that it will be able to do so in the future.
These financial statements do not give effect to adjustments, if any, that would
be necessary should the Company be unable to continue as a going concern.</P>
<P align=justify>At May 31, 2013, the Company had an accumulated deficit during
the development stage of $20,328,556 which includes a non-cash stock based
compensation expense of $6,585,016 for issue of options and warrants. </P>
<P align=justify><B><U>Significant Quarterly Information</U></B></P>
<P align=justify>The following represents selected information of the Company
for the most recently completed financial quarter ended May 31, 2013 </P>
<DIV align=center>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="80%" border=0>

  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">Three- month period </TD>
    <TD align=left width="3%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">Three- month period </TD>
    <TD align=left width="3%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">May 31, 2013 </TD>
    <TD align=left width="3%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">May 31 , 2012 </TD>
    <TD align=left width="3%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">(unaudited) </TD>
    <TD align=left width="3%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">(unaudited) </TD>
    <TD align=left width="3%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="16%">$</TD>
    <TD align=right width="3%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="16%">$</TD>
    <TD align=right width="3%" >&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="16%">&nbsp; </TD>
    <TD width="3%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="16%">&nbsp; </TD>
    <TD width="3%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Net loss for the three month
      period </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="16%" bgColor=#e6efff>562,762 </TD>
    <TD align=left width="3%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="16%" bgColor=#e6efff>348,209 </TD>
    <TD align=left width="3%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Basic and diluted loss per share </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">0.02 </TD>
    <TD align=left width="3%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">0.01 </TD>
    <TD align=left width="3%"
>&nbsp;</TD></TR></TABLE></DIV><BR>
<DIV align=center>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="80%" border=0>

  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">As at </TD>
    <TD align=left width="3%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">As at </TD>
    <TD align=left width="3%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%"><U>May 31, 2013</U> </TD>
    <TD align=left width="3%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%"><U>November 30, 2012</U> </TD>
    <TD align=left width="3%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Total assets </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="16%" bgColor=#e6efff>352,157 </TD>
    <TD align=left width="3%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="16%" bgColor=#e6efff>417,219 </TD>
    <TD align=left width="3%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="16%">&nbsp; </TD>
    <TD width="3%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="16%">&nbsp; </TD>
    <TD width="3%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Total liabilities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="16%" bgColor=#e6efff>1,670,666 </TD>
    <TD align=left width="3%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="16%" bgColor=#e6efff>1,343,007 </TD>
    <TD align=left width="3%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Cash dividends per share </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">- </TD>
    <TD align=left width="3%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="16%">- </TD>
    <TD align=left width="3%" >&nbsp;</TD></TR></TABLE></DIV>
<P align=center>19 </P>
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<A name=page_24></A>
<P align=justify><B><U>Results of Operations</U></B><B> </B></P>
<P align=justify>SDI was incorporated on March 1, 2005 and for the period from
inception to May 31, 2013 has not generated any revenue.</P>
<P align=justify>Financial highlights (unaudited) for the three month and six
month period ending May 31, 2013 with comparatives are as follows: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-TOP: #000000 1px solid" align=left
      >Operating Results </TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=right width="22%">For the
      three months ended May 31, </TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=right width="22%">For the
      three months ended May 31 , </TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      >&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="22%">2013
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="22%">2012
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Operating Expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="22%" bgColor=#e6efff>511,876 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="22%" bgColor=#e6efff>303,133 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Other expenses - </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="22%">50,886 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="22%">45,076 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Interest </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left >Net
      Loss for Period </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="22%">562,762 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="22%">348,209 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff >&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      >(Loss) per Share </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="22%">($0.02</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="22%">($0.01</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-TOP: #000000 1px solid" align=left
      >Operating Results </TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=right width="22%">For the
      six months ended May 31, </TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=right width="22%">For the
      six months ended May 31 , </TD>
    <TD style="BORDER-TOP: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      >&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="22%">2013
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="22%">2012
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Operating Expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="22%" bgColor=#e6efff>945,089 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="22%" bgColor=#e6efff>511,463 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Other expenses - </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="22%">87,321 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="22%">89,177 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Interest </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left >Net
      Loss for Period </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="22%">1,032,410 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="22%">600,640 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff >&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="22%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      >(Loss) per Share </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="22%">($0.03</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="22%">($0.02</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR></TABLE>
<P align=justify>The Company&#146;s selected information for the six month period
ended May 31, 2013 (unaudited) and November 30, 2012 (audited) are as follows:
</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
    align=left >&nbsp; </TD>
    <TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
    align=left width="1%" >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
    align=right width="22%">May 31, 2013 </TD>
    <TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
    align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
    align=left width="1%" >&nbsp;</TD>
    <TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
    align=right width="22%">November 30, 2012 </TD>
    <TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
    align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="22%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Total current assets </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="22%" bgColor=#e6efff>179,071 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="22%" bgColor=#e6efff>272,171 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Total assets </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="22%">352,157 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="22%">417,219 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Total current liabilities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="22%" bgColor=#e6efff>970,005 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="22%" bgColor=#e6efff>150,368 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Convertible debentures </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="22%">700,661 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="22%">1,192,639 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Total liabilities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="22%" bgColor=#e6efff>1,670,666 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="22%" bgColor=#e6efff>1,343,007 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Stockholders&#146; deficiency </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="22%">(1,318,509</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="22%">(925,788</TD>
    <TD align=left width="2%" >) </TD></TR></TABLE><BR>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_25></A>
<P align=justify>Net loss for the six months ended May 31, 2013 was $1,032,410
($0.03per share) as compared to $600,640 ($0.02per share) for the six month
period ended May 31 , 2012. The major variance in net loss for the six months in
2013 as compared with 2012 is attributable to the following: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">(i) </TD>
    <TD>
      <P align=justify>Increase in legal and consulting expenses in 2013 as
      compared to 2012</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%">(ii) </TD>
    <TD>
      <P align=justify>Stock based compensation expense $99,245 in 2013 as
      compared to $213,440 in 2012</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%">(iii) </TD>
    <TD>
      <P align=justify>Credit (recovery) of $nil in 2013 as compared to $215,143
      in 2012 for research and product development</P></TD></TR></TABLE>
<P align=justify><U>The major components of change for (i) relate to</U>: </P>
<P align=justify>(a) Effective January 1, 2013, SDI executed an agreement with a
consultant to pay compensation of $7,000 per month. The consultant is to assist
with sales initiatives, demos and participate in trade shows. The agreement is
for a period of one year. The Company expensed $35,000 during the six month
period ended May 31, 2013 and $nil during the six month period ended May 31,
2012.</P>
<P align=justify>(b) Effective January 1, 2013, SDI executed an agreement with
another consultant to pay compensation of $7,000 per month. The consultant is to
assist with sales initiatives, demos and participate in trade shows. The
agreement is for a period of one year. The Company expensed $35,000 during the
six month period ended May 31, 2013 and $nil during the six month period ended
May 31, 2012.</P>
<P align=justify>(c) The Company filed a prospectus in Canada and an S-1
registration statement in the USA to raise funds as per the prospectus. The
Company has incurred additional legal and other general and administrative
expenses in 2013 as compared to $nil in 2012. </P>
<P align=justify><U>The major components of change for (ii) relate to</U>: </P>
<P align=justify>a) During the six month period ended May 31, 2013, the board of
directors granted 325,000 warrants to various lenders (includes 50,000 warrants
to a director) who provided a working capital loan of $628,550 (CAD $650,000).
These warrants were issued at an exercise price of $0.50 per share and vest
immediately with an expiry term of two years. The fair value of the warrants
issued for the purpose of estimating the stock compensation was calculated using
the Black-Scholes option pricing model at $99,245. </P>
<P align=justify>b) During the six month period ended May 31, 2012, the board of
directors granted options to three directors to acquire a total of 775,000
common shares, one officer to acquire 20,000 common shares and two consultants
to acquire a total of 110,000 common shares. The 905,000 options were issued at
an exercise price of $0.13 per share and vest immediately with an expiry term of
four years. The fair value of the options issued for the purpose of estimating
the stock compensation was calculated using the Black-Scholes option pricing
model at $113,292. </P>
<P align=justify>c) During the six month period ended May 31, 2012, the board of
directors issued warrants to a Company in which the Chief Operating officer has
an interest in, to acquire a total of 800,000 common shares. These warrants were
issued at an exercise price of $0.13 per share with an expiry term of four
years. The fair value of the options issued for the purpose of estimating the
stock compensation was calculated using the Black-Scholes option pricing model
at $100,148. </P>
<P align=justify><U>The major components of change for (iii) relate to</U>: </P>
<P align=justify>On November 30, 2009, the Company entered into a Memorandum of
Understanding (&#147;MOU&#148;) with its former research and development services
contractor Elad Engineering Ltd. (&#147;Elad&#146;) to settle their liability. On March
13, 2012, the Company entered into a definitive agreement with Elad to settle
the accounts payable. Elad had previously performed services for the development
of a less-than-lethal-electric-projectile and blunt impact projectile. At the
date of the settlement agreement, the Company owed Elad $315,143.The Company and
Elad agreed to irrevocably waive and release each other from any claim, demand
or action in connection with services provided, upon payment of $100,000 by the
Company to Elad no later than March 20, 2012. The $100,000 payment was made on
March 20, 2012. The Company recorded the reduction of the payable in the amount
of $215,143 during the period ended May 31, 2012 as recovery of research and
development product development cost. This was measured as the difference
between the amount payable to Elad and the settlement amount. </P>
<P align=center>20</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_26></A>
<P align=justify><B><U>Cash Flows</U></B><B> </B></P>
<P align=justify>Net cash used in operations for the six months ended May 31,
2013, was $736,588 as compared to $807,696 used for the six months ended May 31,
2012. The major components of change relate to: </P>
<P align=justify>1) Items not affecting cash: </P>
<P align=justify><U>Stock based compensation of $99,245 in 2013, as compared to
$213,440 in 2012.</U></P>
<P align=justify>a) During the six month period ended May 31, 2013, the board of
directors granted 325,000 warrants to various lenders (includes 50,000 warrants
to a director) who provided a working capital loan of $628,550 (CAD $650,000).
These warrants were issued at an exercise price of $0.50 per share and vest
immediately with an expiry term of two years. The fair value of the warrants
issued for the purpose of estimating the stock compensation was calculated using
the Black-Scholes option pricing model at $99,245. </P>
<P align=justify>b) During the six month period ended May 31, 2012, the board of
directors granted options to three directors to acquire a total of 775,000
common shares, one officer to acquire 20,000 common shares and two consultants
to acquire a total of 110,000 common shares. The 905,000 options were issued at
an exercise price of $0.13 per share and vest immediately with an expiry term of
four years. The fair value of the options issued for the purpose of estimating
the stock compensation was calculated using the Black-Scholes option pricing
model at $113,292. </P>
<P align=justify>c) During the six month period ended May 31, 2012, the board of
directors issued warrants to a Company in which the Chief Operating officer has
an interest in, to acquire a total of 800,000 common shares. These warrants were
issued at an exercise price of $0.13 per share with an expiry term of four
years. The fair value of the options issued for the purpose of estimating the
stock compensation was calculated using the Black-Scholes option pricing model
at $100,148. </P>
<P align=justify><U>Recovery of accounts payable for nil in 2013 as compared to
$(215,143) in 2012</U> </P>
<P align=justify>On November 30, 2009, the Company entered into a Memorandum of
Understanding (&#147;MOU&#148;) with its former research and development services
contractor Elad Engineering Ltd. (&#147;Elad&#146;) to settle their liability. On March
13, 2012, the Company entered into a definitive agreement with Elad to settle
the accounts payable. Elad had previously performed services for the development
of a less-than-lethal-electric-projectile and blunt impact projectile. At the
date of the settlement agreement, the Company owed Elad $315,143.The Company and
Elad agreed to irrevocably waive and release each other from any claim, demand
or action in connection with services provided, upon payment of $100,000 by the
Company to Elad no later than March 20, 2012. The $100,000 payment was made on
March 20, 2012. The Company recorded the reduction of the payable in the amount
of $215,143 during the period ended February 29, 2012 as recovery of research
and development product development cost. This was measured as the difference
between the amount payable to Elad and the settlement amount. </P>
<P align=justify>2) Changes in non- cash balances relating to operations: </P>
<P align=justify>The Company&#146;s deferred costs increased by $61,230 in 2013 as
compared to $nil in 2012. This increase represents the corporate legal and
finance fees and retainer given to an agent to commence due diligence and
processing of the public offering. This cost has been deferred and upon
completion of this transaction a charge was made to share capital. </P>
<P align=justify>Net cash flow from investing activities was $45,219 during the
six month period ended May 31, 2013 as compared to $ 5,079 for the same period
for prior year.</P>
<P align=justify>Net Cash flow from financing activities was an inflow of
$531,850 being a loan from a non-related party and $96,700 being a loan from
related party during the six months period ended May 31, 2013 ( $nil in May 31,
2012). The Company obtained unsecured loans for $531,850 (CAD $550,000) for
general working capital purposes (&#147;Working Capital Loans&#148;). The Working Capital
Loan proceeds will be used for general working capital purposes and the Working
Capital Loans, together with interest at 6% per annum, accrued and calculated
daily, plus $39,000 will be repaid on the earlier of July 30, 2013 and demand.
During the period ended May 31, 2012, the Company raised $880,000 by issue of
Convertible Debentures</P>
<P align=justify>There was an overall decrease in cash of $153,257 in 2013 as
compared to an increase of $67,225 during 2012. </P>
<P align=center>21</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_27></A>
<P align=justify><B><U>Liquidity and Capital Resources</U></B><B> </B></P>
<P align=justify>As at May 31, 2013, cash was $79,214, as compared to $232,471
at November 30, 2012. This decrease is mainly attributable to the combination of
factors mentioned above under heading &#147;Cash Flows&#148;. </P>
<P align=justify>At May 31, 2013, the Company had a working capital deficit of
$790,934. The major components are as follows; cash $79,214; prepaid expenses
and other receivables $6,127; deferred costs for $93,730; accounts payable and
accrued liabilities of $341,455; loan from non- related parties for $531,850 and
loan from related party for $96,700. The Company filed a prospectus in Canada to
raise gross proceeds of CDN$3,000,000 with net proceeds of CDN$2,730,000. After
meeting all of its obligations for sales and marketing, operations, general and
administration, repayment of Bridge Loans and other expenses, the Company
believes it will have a surplus of unallocated working capital to fund ongoing
operations in excess of $250,000. </P>
<P align=justify>At November 30, 2012, the Company had a working capital of
$121,803. The major components are as follows; cash $232,471; prepaid expenses
and other receivables $7,200; deferred costs for $32,500 and accounts payable
and accrued liabilities of $150,368</P>
<P align=justify>During the period from inception (March 1, 2005) through May
31, 2013, SDI&#146;s operations used $12,622,853 in cash. During this period SDI
purchased $251,211 of equipment and raised $12,953,278 from financing
activities. There are no assurances that the Company can continue to raise
equity financing to fund its operations. SDI does not have any commitments or
arrangements from any persons to provide SDI with any additional capital it may
need. </P>
<P align=center>22</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_28></A>
<P align=justify><B>Off-balance sheet arrangements </B></P>
<P align=justify>The Company has no significant off-balance sheet arrangements
at this time. </P>
<P align=justify><B><U>Transactions with related parties</U></B></P>
<P align=justify><U>Six months ended May 31, 2013</U> </P>
<P align=justify>The directors were compensated as per their consulting
agreements with the Company. The Company expensed a total of $147,600 as
management fees to its three directors and expensed a total of $3,600 as
automobile allowance. </P>
<P align=justify>The Company expensed $24,250 for services provided by the CFO
of the Company and $120,000 for services provided by a corporation in which the
Chief Operating Officer has an interest. </P>
<P align=justify>The Company reimbursed $87,019 to directors and officers for
travel and entertainment expenses incurred for the Company. </P>
<P align=justify>On March 4, the board of directors granted 100,000 warrants as
an incentive to a director who provided a working capital loan of $96,700 (CAD
$100,000 ). These warrants were issued at an exercise price of $0.50 per share
and vest immediately with an expiry term of two years. The Company expensed
$15,637 as compensation expense. </P>
<P align=justify><U>Six months ended May 31, 2012</U> </P>
<P align=justify>The directors were compensated as per their consulting
agreements with the Company. The Company expensed a total of $126,000 as
Management fees for payment to its three directors and expensed a total of
$3,000 as automobile allowance. </P>
<P align=justify>On January 4, 2012, the board of directors granted options to
three directors to acquire a total of 775,000 common shares and one officer to
acquire 20,000 common shares. All these 795,000 options were issued at an
exercise price of $0.13 per share and vest immediately with an expiry term of
four years. The Company expensed stock based compensation cost of $99,522 for
these options.</P>
<P align=justify>The Company expensed $10,950 for services provided by the CFO
of the Company and $101,600 for services provided by a corporation in which the
Chief Operating Officer has an interest.</P>
<P align=justify>The Company reimbursed $84,731 to directors and officers for
travel and entertainment expenses incurred for the Company.</P>
<P align=center>23</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_29></A>
<P align=justify><B><U>Commitments</U></B><B> </B></P>
<P align=justify>a) Consulting agreements:</P>
<P align=justify>The directors of the Company executed consulting agreements
with the Company on the following terms: </P>
<P align=justify>Effective January 1, 2013, SDI executed an agreement with a
director to pay compensation for $5,000 per month. The agreement expires June
30, 2013. Either party may terminate the consulting agreement by giving 30 days
written notice. </P>
<P align=justify>Effective January 1, 2013, SDI executed an agreement with a
Company in which a director has an interest in, for a period of two years to pay
compensation of $8,500 per month with a 5% increase on the first anniversary
date for services rendered. Either party may terminate the consulting agreement
by giving 30 days written notice. </P>
<P align=justify>Agreement with the Chief Executive Officer to pay compensation
of $12,000 per month, with an annual 5% increase and a car allowance of $600 per
month. The agreement expires December 31, 2016. The monthly remuneration will
increase with accomplishment of milestones. The agreement may be terminated with
mutual consent or by the Chief Executive Officer giving three weeks notice.</P>
<P align=justify>Effective October 4, 2012, SDI executed an agreement with a
Company in which the Chief Operating Officer has an interest in, for a period of
two years which expires September 30, 2014 for services rendered. The total
consulting fees are estimated at $480,000 for the two year period. The Company
expensed $60,000 during the three month period ended February 28, 2013. The
Company may also accept common shares at $0.45 per common share in lieu of cash.
As of May 31, 2013, the Company has not exercised its right to accept this
compensation in shares.</P>
<P align=justify>SDI entered into an agreement (the &#147;Teaming Agreement&#148;) dated
November 30, 2011 with Chemring Ordnance, Inc. (&#147;Chemring&#148;) pursuant to which
both agreed to establish a co-operative and supportive team to develop the best
marketing, management and technical approach for the worldwide manufacture and
sale of 40mm less that blunt trauma ammunition. The Teaming Agreement provides
for SDI and Chemring to create a team for the purpose of preparing competitive,
cost effective proposals in response to requests for proposals and obtaining and
performing any contracts that result therefrom. </P>
<P align=justify>Pursuant to the Teaming Agreement, if a contract is awarded,
each of SDI and Chemring will perform the work to be done by it as specified in
the Teaming Agreement and will share the revenue as set out in the Teaming
Agreement. Either party who initiated the proposal that led to the contract will
be the prime contact for that customer. Upon a contract being awarded to either
SDI or Chemring, it will subcontract with the other for the other&#146;s share of the
work. In accordance with the Teaming Agreement, the BIP ammunition sold will
have Chemring&#146;s branding unless otherwise agreed by the parties. </P>
<P align=justify>The Teaming Agreement will terminate on December 20, 2016. The
Teaming Agreement may also expire if a time period of two years from the
effective date of the agreement passes without a bona fide arms length contract
being executed and delivered with respect to BIP ammunition. It will also
terminate if either party is in material breach of the Agreement or a
subcontract that hasn&#146;t been resolved, if any required governmental licenses or
approvals or permits are revoked, in the event of a debarment or suspension of a
party at the option of the other party, and by the mutual written agreement of
the parties. </P>
<P align=justify>The Company entered into a Development, Supply and
Manufacturing Agreement with the BIP Manufacturer on July 25, 2012. This
Agreement provides the Company to order and purchase only from the BIP
Manufacturer certain 40MM assemblies and components for use by the Company to
produce less-lethal and training projectiles as described in the Agreement. The
Agreement is for a term of five years with an automatic extension for an
additional year if neither party has given written notice of termination prior
to the end of the five year period. </P>
<P align=justify>Effective January 1, 2013, SDI executed an agreement with a
non-related consultant to pay compensation of $7,000 per month. The consultant
is to assist with sales initiatives, demos and participate in trade shows. The
agreement is for a period of one year. Either party may terminate the consulting
agreement by giving 30 days written notice. </P>
<P align=justify>Effective January 1, 2013, SDI executed an agreement with
another non-related consultant to pay compensation of $7,000 per month. The
consultant is to assist with sales initiatives, demos and participate in trade
shows. The agreement is for a period of one year. Either party may terminate the
consulting agreement by giving 30 days written notice. </P>
<P align=justify>b) The Company has commitments for leasing office premises in
Oakville, Ontario, Canada to April 30, 2018 at a monthly rent of Canadian $6,399
per month. </P>
<P align=justify><B>Revenue Recognition </B></P>
<P align=justify>The Company&#146;s revenue recognition policies are expected to
follow common practice in the manufacturing industry. The Company will record
revenue when it is realized, or realizable and earned. The Company considers
revenue to be realized, or realizable and earned, when the following revenue
recognition requirements will be met: persuasive evidence of an arrangement
exists; the products or services have been accepted by the customer via delivery
or installation acceptance; the sales price is fixed or determinable; and
collectability is probable. For product sales, the Company determines that the
earnings process is complete when title, risk of loss and the right to use
equipment has transferred to the customer.</P>
<P align=justify><B>Outstanding share data </B></P>
<P align=justify>As of July 15, 2013, the Company had 33,273,913 issued and
outstanding shares of common stock </P>
<P align=center>24</P>
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<P align=justify><B><U>Risk Factors</U></B><B> </B></P>
<P align=justify><B><I>We may not successfully commercialize any of our products
or earn a profit</I></B><B>. </B></P>
<P align=justify>We have incurred losses since incorporation. As of May 31,
2013, we have an accumulated total deficit of $20,328,556. To date, we have
experienced negative cash flow from development of our products. We currently
have not generated any revenue from operations and expect to incur substantial
net losses for the foreseeable future to further develop and commercialize our
products. We cannot predict the extent of these future net losses, or when we
may attain profitability, if at all. If we are unable to generate significant
revenue from our products or attain profitability, we will not be able to
sustain operations.</P>
<P align=justify>Because of the numerous risks and uncertainties associated with
developing and commercializing our products, we are unable to predict the extent
of any future losses or when we will become profitable, if ever. We may never
become profitable and you may never receive a return on an investment in our
common stock. An investor in our common stock must carefully consider the
substantial challenges, risks and uncertainties inherent in a developmental
stage company. The Common Shares must be considered highly speculative due to
the nature of the Company&#146;s business, the early stage of its deployment, its
current financial position and ongoing requirements for capital. An investment
in the Common Shares should only be considered by those persons who can afford a
total loss of investment, and is not suited to those investors who may need to
dispose of their investment in a timely fashion. We may never successfully
commercialize our products, and our business may fail. Investors should consult
with their own professional advisors to assess the legal, financial and other
aspects of an investment in Common Shares. </P>
<P align=justify><B><I>We need substantial additional capital to grow and fund
our present and planned business and business strategy.</I></B></P>
<P align=justify>We anticipate expending substantial funds to carry out the
development, introduction and manufacture of additional products. We have no
source of operating cash flow to fund all of its operational needs and will
require additional financing to continue its operations. As such, our current
and planned operations contemplate funding in the future through one or more
public or private equity financings, by taking on debt financing, or from other
sources. There can be no assurance that such financing will be available on
favorable terms or at all. If such funds are unavailable or are only available
at a prohibitive cost, we may have to significantly curtail its product
development program or seek funds through financing alternatives that may
require us to sell its rights to certain products or certain marketing
territories. Failure to meet funding milestones may have a significant adverse
effect on our growth and we may have to curtail our business strategy. Failure
to obtain such additional financing could result in delay or indefinite
postponement of the deployment of our products. If we receive less funding than
planned, we will have to revise our business model and reduce proposed plans.
Without significant funding, we will not be able to execute on our business
operations and may be forced to cease operations. At this time, there can be no
assurance we will be able to obtain the funding we need and even if we obtain
such funding that it will be on terms and conditions favorable to us and our
existing shareholders. Without funding we will not be able to proceed with
planned operations or meet existing obligations.</P>
<P align=justify><B><I>We did not have a meeting of our shareholders from
inception until March 15, 2013.</I></B></P>
<P align=justify>We did not have an annual general meeting of the shareholders
since it was formed on March 1, 2005. Our Bylaws and the General Corporation Law
of the State of Delaware requires us to have an annual general meeting of
shareholders to elect directors. Pursuant to the laws of the State of Delaware,
the failure to hold an annual meeting of stockholders does not automatically
invalidate all corporate actions. However, it is unclear if all such actions
would be deemed valid if challenged in a court of law. We had an annual general
meeting of our shareholders on March 15, 2013. </P>
<P align=center>25</P>
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<P align=justify><B><I>There is substantial doubt as to our ability to continue
as a going concern. </I></B></P>
<P align=justify>Due to our recurring losses from operations, there is
substantial doubt about our ability to continue as a going concern, meaning that
we may not be able to continue in operation for the foreseeable future or be
able to realize assets and discharge liabilities in the ordinary course of
operations. Our audited financial statements for the year ended November 30,
2012 were prepared assuming that we will continue as a going concern. However,
the report of our independent registered public accounting firm stated there was
substantial doubt about our ability to continue as a going concern. Such an
opinion could materially limit our ability to raise additional funds through the
issuance of new debt or equity securities or otherwise. There is no assurance
that sufficient financing will be available when needed to allow us to continue
as a going concern. The perception that we may not be able to continue as a
going concern may cause others to choose not to deal with us due to concerns
about our ability to meet our contractual obligations. </P>
<P align=justify><B><I>There can be no assurance that we can generate
substantial revenue growth, or that any revenue growth that is achieved can be
sustained.</I></B> </P>
<P align=justify>Revenue growth that we have achieved or may achieve may not be
indicative of future operating results. In addition, we may increase further its
operating expenses in order to fund higher levels of research and development,
increase its sales and marketing efforts and increase its administrative
resources in anticipation of future growth. To the extent that increases in such
expenses precede or are not subsequently followed by increased revenues, the
Company&#146;s business, operating results and financial condition will be materially
adversely affected.</P>
<P align=justify><B><I>We are dependent on certain members of our management.
</I></B></P>
<P align=justify>The loss of the services of one or more of them could adversely
affect us. Our ability to maintain its competitive position is dependent upon
its ability to attract and retain highly qualified managerial, specialized
technical, manufacturing, sales and marketing personnel. There can be no
assurance that we will be able to continue to recruit and retain such personnel.
Our inability to recruit and retain such personnel would adversely affect our
operations and product development.</P>
<P align=justify><B><I>We are dependent on key suppliers</I></B><B> </B></P>
<P align=justify>We purchase certain key components of its products from a
limited number of key suppliers. Failure of a supplier to provide sufficient
quantities on favorable terms or on a timely basis could result in possible lost
sales. </P>
<P align=justify><B><I>We may be subject to product or warranty claims that
could have a material adverse effect on our business, operating results and
financial condition. </I></B></P>
<P align=justify>We may be subject to proceedings or claims that may arise in
the ordinary conduct of the business, which could include product and service
warranty claims, which could be substantial. If our products fail to perform as
warranted and we fail to quickly resolve product quality or performance issues
in a timely manner, sales may be lost and we may be forced to pay damages. Any
failure to meet customer requirements could materially affect our business,
results of operations and financial condition. The occurrence of product defects
and the inability to correct errors could result in the delay or loss of market
acceptance of our products, material warranty expense, diversion of
technological and other resources from our product development efforts, and the
loss of credibility with customers, manufacturer&#146;s representatives,
distributors, value added resellers, systems integrators, original equipment
manufacturers and end-users, any of which could have a material adverse effect
on our business, operating results and financial condition.</P>
<P align=justify>We currently have general liability insurance, which includes
product liability coverage. There is no assurance this insurance policy will
cover all potential claims which may have a material adverse effect on the
business or financial condition of the Company. A product recall could have a
material adverse effect on our business or financial condition. </P>
<P align=center>26 </P>
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<P align=justify><B><I>We rely upon, and expect to rely upon, strategic
alliances with original equipment manufacturers for the manufacturing and
distribution of its products.</I></B> </P>
<P align=justify>There can be no assurance that such strategic alliances can be
achieved or that the Company will be able to maintain existing strategic
alliances or that we will achieve our goals.</P>
<P align=justify><B><I>In order to commercialize its technology, we must either
acquire or develop an internal marketing and sales force with technical
expertise and supporting distribution capabilities or arrange for third parties
to perform these services.</I></B> </P>
<P align=justify>In order to market any of our products, we must either acquire
or develop a sales and distribution infrastructure. The acquisition or
development of a sales and distribution infrastructure would require substantial
resources, which may divert the attention of our management and key personnel,
and defer our product development and deployment efforts. To the extent that we
into marketing and sales arrangements with other companies, our revenues will
depend on the efforts of others. These efforts may not be successful. If we fail
to develop substantial sales, marketing and distribution channels, or to enter
into arrangements with third parties for those purposes, we will experience
delays in product sales and incur increased costs, which may affect our
business, operating results and financial condition.</P>
<P align=justify><B><I>The markets for our products and services are
characterized by rapidly changing technology and evolving industry standards,
which could result in product obsolescence or short product life cycles.</I></B>
</P>
<P align=justify>Accordingly, our success is dependent upon its ability to
anticipate technological changes in the industries it serves and to successfully
identify, obtain, develop and market new products that satisfy evolving industry
requirements. </P>
<P align=justify>There can be no assurance that we will successfully develop new
products or enhance and improve its existing products or that any new products
and enhanced and improved existing products will achieve market acceptance.
Further, there can be no assurance that competitors will not market products
that have perceived advantages over the our products or which render the
products currently sold by us obsolete or less marketable.</P>
<P align=justify>We must commit significant resources to developing new products
before knowing whether its investments will result in products the market will
accept. To remain competitive, we may be required to invest significantly
greater resources then currently anticipated in research and development and
product enhancement efforts, and result in increased operating expenses. There
can be no assurance that we will have adequate capital to meet these
demands.</P>
<P align=justify><B><I>Our industry is highly competitive and composed of many
domestic and foreign companies.</I></B> </P>
<P align=justify>We have experienced and expect to continue to experience,
substantial competition from numerous competitors with greater resources and
whom we expect to continue to improve their products and technologies.
Competitors may announce and introduce new products, services or enhancements
that better meet the needs of end-users or changing industry standards, or
achieve greater market acceptance due to pricing, sales channels or other
factors. Competitors may be able to respond more quickly than we can to changes
in end-user requirements and devote greater resources to the enhancement,
promotion and sale of their products.</P>
<P align=justify><B><I>We are materially dependent on acceptance of our products
by the law enforcement, both domestic and international, and federal markets. If
law enforcement agencies choose not to purchase our products, our revenues will
be adversely affected.</I></B> </P>
<P align=justify>A substantial number of law enforcement and corrections
agencies may not purchase our products. Law enforcement and corrections agencies
may be influenced by claims or perceptions that WEPs and BIPs (each as
hereinafter defined), such as our products, are unsafe or may be used in an
abusive manner. Sales of our products to these agencies may also be delayed or
limited by these claims or perceptions. </P>
<P align=justify><B><I>Most of our end-user customers are subject to budgetary
and political constraints, particularly in the currently challenging economic
environment, that may delay or prevent sales.</I></B> </P>
<P align=justify>Most of our end-user customers are government agencies. These
agencies often do not set their own budgets and therefore, have limited control
over the amount of money they can spend. In addition, these agencies experience
political pressure that may dictate the manner in which they spend money. As a
result, even if an agency wants to acquire our products, it may be unable to
purchase them due to budgetary or political constraints. Currently, many
governmental agencies are continuing to experience severe budgetary constraints.
There can be no assurance that the economic and budgeting issues will not worsen
and adversely impact sales of our products. Some government agency orders may
also be canceled or substantially delayed due to budgetary, political or other
scheduling delays which frequently occur in connection with the acquisition of
products by such agencies and such cancellations may accelerate or be more
severe than we have experienced historically as a result of the current economic
environment. </P>
<P align=justify><B><I>We may face personal injury, wrongful death and other
liability claims that harm our reputation and adversely affect our sales and
financial condition.</I></B> </P>
<P align=justify>Our products can be used in aggressive confrontations that may
result in serious, permanent bodily injury or death to those involved. Our
products may be associated with these injuries. A person injured in a
confrontation or otherwise in connection with the use of our products may bring
legal action against us to recover damages on the basis of theories including
personal injury, wrongful death, negligent design, defective product or
inadequate warning. We are currently subject to a number of such lawsuits. We
may also be subject to lawsuits involving allegations of misuse of our products.
If successful, personal injury, misuse and other claims could have a material
adverse effect on our operating results and financial condition and could result
in negative publicity about our products. Although we carry product liability
insurance, we do incur significant legal expenses within our self-insured
retention in defending these lawsuits and significant litigation could also
result in a diversion of management&#146;s attention and resources, negative
publicity and a potential award of monetary damages in excess of our insurance
coverage. The outcome of any litigation is inherently uncertain and there can be
no assurance that our existing or any future litigation will not have a material
adverse effect on our revenues, our financial condition or financial results.
</P>
<P align=center>27 </P>
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<P align=justify><B><I>We face risks associated with rapid technological change
and new competing products.</I></B> </P>
<P align=justify>The technology associated with law enforcement devices is
receiving significant attention and is rapidly evolving. While we have patent
protection in key areas of our technology, it is possible that new technology
may result in competing products that operate outside our patents and could
present significant competition for our products. </P>
<P align=justify><B><I>We are subject to numerous and health and safety laws and
regulations, which may require us to make substantial expenditures. </I></B></P>
<P align=justify>We are subject to numerous federal, state, local and foreign
health and safety legislation and measures relating to the manufacture of
ammunition. There can be no assurance that we will not experience difficulties
with our efforts to comply with applicable regulations as they change in the
future or that our continued compliance efforts (or failure to comply with
applicable requirements) will not have a material adverse effect on our results
of operations, business, prospects and financial condition. Our continued
compliance with present and changing future laws could restrict our ability to
modify or expand our facilities or continue production and could require us to
acquire costly equipment or to incur other significant expense.</P>
<P align=justify>Health and safety and violations related to our products may
arise that could lead to litigation or other action against us or to regulation
of certain of our product components. We may also incur substantial penalties,
civil and criminal sanctions, permit revocations and facility shutdowns. We may
be required to modify our technology and may not be able to do so. We may also
be required to pay damages that may reduce our profitability and adversely
affect our financial condition. Additionally, future and health and safety laws
and regulations or reinterpretation of current laws and regulations may require
us to make substantial expenditures. Even if these concerns prove to be
baseless, the resulting negative publicity could affect our ability to market
our products. In turn, our costs to comply with, or any liabilities under, these
laws and regulations could have a material adverse effect on our business,
financial condition, cash flows and results of operations.</P>
<P align=justify><B><I>We may be unable to adequately protect or enforce our
patents and proprietary rights. </I></B></P>
<P align=justify>Our future success depends, in part, on our ability to protect
our intellectual property and maintain the proprietary nature of our technology
through a combination of patents, licenses and other intellectual property
arrangements, without infringing the proprietary rights of third parties.
Although we consider certain of our product designs as well as manufacturing
processes involving certain of its products to be proprietary, patents or
copyrights do not protect all design and manufacturing processes. We have
adopted procedures to protect its intellectual property and maintain secrecy of
its confidential business information and trade secrets. However, there can be
no assurance that such procedures will afford complete protection of such
intellectual property, confidential business information and trade secrets.
There can be no assurance that our competitors will not independently develop
technologies that are substantially equivalent or superior to our
technology.</P>
<P align=justify>We currently have 3 patents relating to our business and 1
patent pending. We cannot assure you that these pending patents will be issued
or that any of our patents will be held valid if challenged, that any pending
patent applications will issue, or that other parties will not claim rights in
or ownership of our patents and other proprietary rights. Moreover, patents
issued to us may be circumvented or fail to provide adequate protection. Our
competitors might independently develop or patent technologies that are
substantially equivalent or superior to our technologies. Since patent
applications in the United States are not publicly disclosed until the patent is
issued, applications may have been filed by others which, if issued as patents,
could cover our products. We cannot be certain that others will not assert
patent infringement claims or claims of misappropriation against us based on
current or pending U.S. and/or foreign patents or trade secrets or that such
claims will not be successful.</P>
<P align=justify>We also rely on trade secrets to develop and maintain our
competitive position. Although we protect our proprietary technology in part by
confidentiality agreements with our employees, consultants and corporate
partners, we cannot assure you that these agreements will not be breached, that
we will have adequate remedies for any breach or that our trade secrets will not
otherwise become known or be discovered independently by our competitors. The
failure to protect our intellectual property rights effectively or to avoid
infringing the intellectual property rights of others could seriously harm our
business, financial condition and results of operations and ability to achieve
sufficient cash flow to service our indebtedness.</P>
<P align=justify><B><I>Our commercial success depends, in part, upon us not
infringing intellectual property rights of others</I></B>.</P>
<P align=justify>While we believe that our products and other intellectual
property do not infringe upon the proprietary rights of third parties, our
commercial success depends, in part, upon us not infringing intellectual
property rights of others. A number of our competitors and other third parties
have been issued or may have filed patent applications or may obtain additional
patents and proprietary rights for technologies similar to those utilized by us.
Some of these patents may grant very broad protection to the owners of the
patents. We have not undertaken a review to determine whether any existing third
party patents or the issuance of any third party patents would require us to
alter its technology, obtain licenses or cease certain activities. We may become
subject to claims by third parties that its technology infringes their
intellectual property rights due to the growth of products in its target
markets, the overlap in functionality of those products and the prevalence of
products. We may become subject to these claims either directly or through
indemnities against these claims that it provides to end-users, manufacturer&#146;s
representatives, distributors, value added resellers, system integrators and
original equipment manufacturers.</P>
<P align=justify>Litigation may be necessary to determine the scope,
enforceability and validity of third party proprietary rights or to establish
our proprietary rights. Some of our competitors have, or are affiliated with
companies having, substantially greater resources than us and these competitors
may be able to sustain the costs of complex intellectual property litigation to
a greater degree and for a longer period of time than us. </P>
<P align=justify>In addition, defending our company against these types of
claims, regardless of their merits, could require us to incur substantial costs,
divert the attention of key personnel and management, cause significant delays
and materially disrupt the conduct of our business. Parties making these types
of claims may be able to obtain injunctive or other equitable relief which could
effectively block our ability to provide our services and could result in an
award of substantial damages. In the event of a successful claim of
infringement, we may need or be required to obtain one or more licenses from, as
well as grant one or more licenses to, others. We cannot assure you that we
could obtain necessary licenses from others at a reasonable cost or at all.</P>
<P align=justify>Regardless of their merit, any such claims could be time
consuming to evaluate and defend, result in costly litigation, cause product
shipment delays or stoppages, divert key personnel and management&#146;s attention
and focus away from the business, subject us to significant liabilities and
equitable remedies, including injunctions, require us to enter into costly
royalty or licensing agreements and require us to modify or stop using
infringing technology Parties making these types of claims may be able to
effectively block our ability to manufacture our products and could result in an
award of substantial damages. In the event of a successful claim of
infringement, we may be prohibited from developing or commercializing certain
technologies and products unless it obtains a license from a third party or we
may need or be required to grant one or more licenses to, others. There can be
no assurance that we will be able to obtain any such license on commercially
favorable terms or at all. If we do not obtain such a license, we could be
required to cease the sale of certain products.</P>
<P align=center>28</P>
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<P align=justify><B><I>We are subject to currency and foreign exchange
fluctuations</I></B> </P>
<P align=justify>Fluctuations in the exchange rate between the United States
dollar and the Canadian dollar may have a material effect on the our results of
operations. To date, we have not engaged in exchange rate-hedging activities. To
the extent that we may seek to implement hedging techniques in the future with
respect to its foreign currency transactions, there can be no assurance that we
will be successful in such hedging activities.</P>
<P align=justify><B><I>Stress in the global financial system may adversely
affect our finances and operations in ways that may be hard to predict or to
defend against. </I></B></P>
<P align=justify>Recent events have demonstrated that businesses and industries
throughout the world are very tightly connected to each other. Thus, events
seemingly unrelated to us, or to its industry, may adversely affect its finances
or operations in ways that are hard to predict or defend against. For example,
credit contraction in financial markets may hurt our ability to access credit
when it is needed or rapid changes in foreign exchange rates may adversely
affect financial results. Finally, a reduction in credit, combined with reduced
economic activity, may adversely affect businesses and industries that
collectively constitute a significant portion of our customer base. As a result,
these customers may need to reduce their purchases of our products, or there may
be greater difficulty in receiving payment for the products that these customers
purchase from us. Any of these events, or any other events caused by turmoil in
world financial markets, may have a material adverse effect on our business,
operating results, and financial condition. </P>
<P align=justify><B><I>Our business is subject to a number of risks and hazards
including industrial accidents, labor disputes, changes in the regulatory
environment.</I></B> </P>
<P align=justify>Such occurrences could result in damage to equipment, personal
injury or death, monetary losses and possible legal liability. Although we
maintain liability insurance in amounts which it considers adequate, the nature
of these risks is such that liabilities might exceed policy limits, the
liabilities and hazards might not be insurable, or we may elect not to insure
against such liabilities due to high premium costs or other reasons, in which
event we could incur significant costs that could have a materially adverse
effect upon its financial position.</P>
<P align=justify><B><I>Certain of our directors and officers are or may become
associated with other companies in the same or related industries which may give
rise to conflicts of interest.</I></B> </P>
<P align=justify>Directors who have a material interest in any person who is a
party to a material contract or a proposed material contract with us are
required, subject to certain exceptions, to disclose that interest and generally
abstain from voting on any resolution to approve the contract. In addition, the
directors and the officers are required to act honestly and in good faith with a
view to our best interest Our directors and officers have either other full-time
employment or other business or time restrictions placed on them and
accordingly, we will not be the only business enterprise of these directors and
officers. </P>
<P align=justify><B><I>We do not expect to pay dividends. </I></B></P>
<P align=justify>We have not paid dividends in the past and we do not expect to
declare or pay any dividends on our common stock in the foreseeable future. The
declaration and payment in the future of any cash or stock dividends on the
common stock will be at the discretion of our board of directors and will depend
upon a variety of factors, including our ability to service our outstanding
indebtedness, if any, and to pay dividends on securities ranking senior to the
common stock, our future earnings, if any, capital requirements, financial
condition and such other factors as our board of directors may consider to be
relevant from time to time. Our earnings, if any, are expected to be retained
for use in expanding our business.</P>
<P align=justify><B><I>Our common stock is subject to volatility. </I></B></P>
<P align=justify>There can be no assurance that the market price for our common
stock will remain at its current level and a decrease in the market price could
result in substantial losses for investors. The market price of our common stock
may be significantly affected by one or more of the following factors:</P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <P>announcements or press releases relating to the industry or to our own
  business or prospects; </P>
  <LI>
  <P>regulatory, legislative or other developments affecting us or the industry
  generally; </P>
  <LI>
  <P>sales by holders of restricted securities pursuant to effective
  registration statements or exemptions from registration; </P>
  <LI>
  <P>actual or anticipated fluctuations in our quarterly financial and operating
  results; </P>
  <LI>
  <P>our failure to meet the expectations of the investment community and
  changes in investment community recommendations or estimates of our future
  operating results; </P>
  <LI>
  <P>strategic moves by our competitors, such as product announcements or
  acquisitions; </P>
  <LI>
  <P>litigation; </P>
  <LI>
  <P>general market conditions; </P>
  <LI>
  <P>other domestic and international macroeconomic factors unrelated to our
  performance; and </P>
  <LI>
  <P>additions or departures of key personnel. </P></LI></UL>
<P align=justify><B><I>There is a very limited trading market for our shares and
no active trading market may develop or be sustained.</I></B><B> </B></P>
<P align=justify>Prior to the closing of the Offering, there has been a limited
public market for the shares on the OTCBB in the United States. Trading prices
and volumes on the OTC Bulletin Board are thin and erratic. The price paid for
each Common Share under the Offering was determined by negotiation between us
and the Canadian Agent; this price may bear no relation to the price at which
our Common Shares will trade in the public market subsequent to the Offering. We
can not predict at what price our Common Shares will trade and there can be no
assurance that an active trading market in our Common Shares will develop or be
sustained.</P>
<P align=justify>Our common stock trades on the OTCBB in the United States. As a
result, there are additional risks associated with our common stock and you may
be unable to liquidate your investment in our common stock quickly. The trading
market for our shares is not always liquid. The market price of our shares has
ranged from a high of $0.99 and a low of $0.10 during the twelve-month period
ended May 31, 2013. The volume of shares traded at any one time can be limited,
and, as a result, there may not be a liquid trading market for our shares.</P>
<P align=center>29</P>
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<P align=justify><B><I>There can be no assurance that an active market for our
Common Shares will be sustained.</I></B> </P>
<P align=justify>Securities of small and mid cap companies have experienced
substantial volatility in the past, often based on factors unrelated to the
financial performance or prospects of the companies involved. These factors
include global economic developments and market perceptions of the
attractiveness of certain industries. The price per Common Share is also likely
to be affected by change in our financial condition or results of operations as
reflected in its quarterly filings. Other factors unrelated to our performance
that may have an effect on the price of our Common Shares include the following:
the extent of analytical coverage available to investors concerning our business
may be limited if investment banks with research capabilities do not follow our
securities; lessening in trading volume and general market interest in our
securities may affect a subscriber&#146;s ability to trade significant numbers of
Common Shares, the size of our public float may limit the ability of some
institutions to invest in our securities; a substantial decline in the price of
our Common Shares that persists for a significant period of time could cause our
securities to be delisted from an exchange, further reducing market liquidity.
If an active market for our Common Shares does not continue, the liquidity of a
subscriber&#146;s investment may be limited and the price of our Common Shares may
decline. If such a market does not develop, investors may lose their entire
investment in our Common Shares.</P>
<P align=justify><B><I>Any changes in government policy may result in changes to
laws affecting the sale of our products.</I></B> </P>
<P align=justify>This may affect our ability to ship product in the future. The
possibility that future governments may adopt substantially different policies,
may also affect our operations. Local governments in all countries we deal with
issue end user certificates to purchase or receive live ammunition from us. A
change in policy may lead to a decision of these countries as to whether or not
they will take possession or purchase such munitions. This may have a material
adverse effect on our business, operating results, and financial condition.</P>
<P align=justify><B><I>Our common stock is classified as a &#147;penny stock&#148; under
SEC Rules and Regulations, which means broker-dealers may experience difficulty
in completing customer transactions and trading activity in our securities may
be adversely affected. </I></B></P>
<P align=justify>The United States Securities and Exchange Commission (the
&#147;SEC&#148;) has adopted Rule 15g-9 which generally defines "penny stock" to be any
equity security that has a market price (as defined) less than USD$5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our shares are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and "accredited investors". The term
"accredited investor" refers generally to institutions with assets in excess of
USD$5,000,000 or individuals with a net worth in excess of USD$1,000,000 or
annual income exceeding USD$200,000 or USD$300,000 jointly with their spouse.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document in a form prepared by the SEC, which provides information
about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our shares. We believe
that the penny stock rules may discourage investor interest in and limit the
marketability of our shares.</P>
<P align=justify><B><I>Due to the substantial instability in our common stock
price, you may not be able to sell your shares at a profit or at all, and as a
result, any investment in our shares could be totally lost. </I></B></P>
<P align=justify>The public market for our common stock is very limited. As with
the market for many other small companies, any market price for our shares is
likely to continue to be very volatile. Our common stock has very limited volume
and as a &#147;penny stock,&#148; many brokers will not trade in our stock limiting our
stocks&#146; liquidity. As such it may be difficult for you to sell shares of our
common stock.</P>
<P align=justify><B><I>A decline in the price of our common stock could affect
our ability to raise further working capital and adversely impact our
operations.</I></B></P>
<P align=justify>A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital. Because our operations have been primarily
financed through the sale of equity securities, a decline in the price of our
common stock could be especially detrimental to our liquidity and our continued
operations. Any reduction in our ability to raise equity capital in the future
would force us to default on our debt obligations and forfeit our property
interests or to reallocate funds from other planned uses. Either of these would
have a significant negative effect on our business plans and operations,
including our ability to acquire new property interests or fund our obligations
for development of our current property interests. If our stock price declines,
we may not be able to raise additional capital or generate funds from operations
sufficient to meet our obligations.</P>
<P align=justify><B><U>Legal proceedings</U></B><B> </B></P>
<P align=justify>There are no legal proceedings involving the Company or its
assets which management of the Company believes to be material to the Company,
nor are any such proceedings known by the Company to be contemplated. </P>
<P align=justify><B>Item 4.&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;Controls and
Procedures.</B> </P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) SDI maintains a system of
controls and procedures designed to ensure that information required to be
disclosed in reports filed or submitted under the Securities Exchange Act of
1934, as amended (&#147;1934 Act&#148;), is recorded, processed, summarized and reported,
within time periods specified in the SEC&#146;s rules and forms and to ensure that
information required to be disclosed by SDI in the reports that it files or
submits under the 1934 Act, is accumulated and communicated to SDI&#146;s management,
including its Principal Executive Officer and Principal Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. As of May
31, 2013, SDI&#146;s Principal Executive Officer and Principal Financial Officer
evaluated the effectiveness of the design and operation of SDI&#146;s disclosure
controls and procedures. Based on that evaluation, SDI&#146;s Principal Executive
Officer and Principal Financial Officer concluded that SDI&#146;s disclosure controls
and procedures were effective.</P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <I>Changes in Internal
Controls</I>. There were no changes in SDI&#146;s internal control over financial
reporting during the quarter ended May 31, 2013 that materially affected, or are
reasonably likely to materially affect, its internal control over financial
reporting.</P>
<P align=center>30</P>
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<P align=center><B>PART II </B></P>
<P align=justify><B>Item 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unregistered Sales of Equity Securities and Use of Proceeds</B> </P>
<P align=justify>The Company did not issue any capital during the period ended
May 31, 2013. </P>
<P align=justify>&nbsp;</P>
<P align=justify><B>Item 6.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits</B>
</P>
<P align=justify><B>Exhibits</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>31.1 </TD>
    <TD align=left width="90%" bgColor=#eeeeee>Certification pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002 for Gregory Sullivan. </TD>
  </TR>
  <TR>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="90%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>31.2 </TD>
    <TD align=left width="90%" bgColor=#eeeeee>Certification pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002 for Rakesh Malhotra. </TD></TR>
  <TR>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="90%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>32 </TD>
    <TD align=left width="90%" bgColor=#eeeeee>Certification pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002 for Gregory Sullivan and
      Rakesh Malhotra. </TD></TR></TABLE>
<P align=center>SIGNATURES</P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.</P>
<P align=center>SECURITY DEVICES INTERNATIONAL, INC.</P>
<P align=justify>Date: July 15, 2013</P>
<P style="MARGIN-LEFT: 40%" align=justify>By: /s/ Gregory
Sullivan<BR>-----------------------------------<BR>Gregory Sullivan,
President<BR>and Principal Executive<BR>Officer<BR></P>
<P align=justify>Date: July 15, 2013</P>
<P style="MARGIN-LEFT: 40%" align=justify>By: /s/ Rakesh
Malhotra<BR>-----------------------------------<BR>Rakesh Malhotra,
Principal<BR>Financial and Accounting<BR>Officer<BR></P>
<P align=center>31</P>
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