UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION




WASHINGTON,
D.C. 20549






FORM
10-K


(Mark
One)




S
            
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For  the
      fiscal year ended June 30, 2008





£
            
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For
      the transition period
      from  __  to_______________________________








Commission
File Number: 333-118801


SMARTMETRIC,
      INC(Exact
      name of registrant as specified in its charter)





Nevada
            
            05-0543557(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer identification No.)1150 Kane Concourse, Suite 400, Bay Harbor
      Islands, FL
            
            33154(Address
      of principal executive offices)
            
            (Zip
      Code)





Registrant’s
telephone number, including area
code                                                                                                           (305)
495-7190











Securities
registered under Section 12(b) of the Exchange Act:




Title
      of each class
            
            Name
      of each exchange on which registeredN/A
            
            N/A




Securities
registered pursuant to section 12(g) of the Act






Common Stock, par value
$0.001 per share






(Title of
Class)




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





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





Note – Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under those
Sections.








1





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





Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.S





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




Large accelerated
      filer o
            Accelerated filer
      oNon-accelerated
      filer o     
      (Do not check if a smaller reporting company)
            Smaller reporting
      company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).




£
Yes                                SNo




State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.




Note – If a determination as
to whether a particular person or entity is an affiliate cannot be made without
involving unreasonable effort and expense, the aggregate market value of the
common stock held by non-affiliates may be calculated on the basis of
assumptions reasonable under the circumstances, provided that the assumptions
are set forth in this Form.




The
aggregate market value of the voting and non-voting common stock of the issuer
held by non-affiliates as of October 7, 2008 was approximately $2,976,968 based
upon the closing price of the common stock as quoted by Nasdaq OTC Bulletin
Board on such date.




APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:




Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.£Yes  £No




(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)






Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.




As of
October 7, 2008, there were 71,254,259  issued and outstanding shares
of the issuer’s common stock.






DOCUMENTS
INCORPORATED BY REFERENCE






List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g. Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.  The listed documents should be
clearly described for identification purposes (e.g. annual report to security
holders for fiscal years ended December 24, 1980).






2











TABLE OF
CONTENTS




PagePART
      IItem
      1.
            DESCRIPTION
      OF BUSINESS
            
            5Item
      1A
            RISK
      FACTORS
            
            9Item
      1B
            UNRESOLVED
      STAFF COMMENTS
            
            9Item
      2.
            DESCRIPTION
      OF PROPERTY
            
            9Item
      3.
            LEGAL
      PROCEEDINGS
            
            10Item
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            10PART
      IIItem
      5.
            MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS ISSUER PURCHASES OF EQUITY
      SECURITIES
            
            10Item
      6
            SELECT
      FINANCIAL DATA
            
            12Item
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            
            13Item
      7A
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            15Item
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
            
            15Item
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            
            15Item
      9A.
            CONTROLS
      AND PROCEDURES
            
            15Item
      9B.
            OTHER
      INFORMATION
            
            16PART
      IIIItem
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(b) OF THE EXCHANGE ACT
            
            17Item
      11.
            EXECUTIVE
      COMPENSATION
            
            18Item
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
            
            20Item
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
            
            21Item
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            
            21Item
      15.
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
            
            22SIGNATURES
            
            23






3




FORWARD
LOOKING STATEMENTS




In this
annual report, references to “SmartMetric, Inc.,” “Smartmetric,” “SMME,” “the
Company,” “we,” “us,” and “our” refer to SmartMetric, Inc.





This
Annual Report on Form 10-KSB contains forward-looking statements regarding our
business, financial condition, results of operations and prospects. Words such
as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,”
“estimates” and similar expressions or variations of such words are intended to
identify forward-looking statements, but are not deemed to represent an
all-inclusive means of identifying forward-looking statements as denoted in this
Annual Report on Form 10-KSB/A. Additionally, statements concerning future
matters are forward-looking statements.




Although
forward-looking statements in this Annual Report on Form 10-K reflect the good
faith judgment of our management, such statements can only be based on facts and
factors currently known by us. Consequently, forward-looking statements are
inherently subject to risks and uncertainties and actual results and outcomes
may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking statements. Factors that could cause or contribute to
such differences in results and outcomes include, without limitation, those
specifically addressed under the headings “Risks Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” You
are urged not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Annual Report on Form 10-K. We file reports
with the SEC. The SEC maintains a website (www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC, including us. You can also read and copy any
materials we file with the SEC at the SEC’s Public Reference Room at 100 F
Street, NE, Washington, DC 20549. You can obtain additional information about
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.




We
undertake no obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
Annual Report on Form 10-K, except as required by law. Readers are urged to
carefully review and consider the various disclosures made throughout the
entirety of this Annual Report, which are designed to advise interested parties
of the risks and factors that may affect our business, financial condition,
results of operations and prospects.







4









PART
I






Item
1.                      Business




Corporate
History and Overview





SmartMetric
was incorporated pursuant to the laws of the State of Nevada on December 18,
2002.





Smartmetric
is in the business of producing high-technology identity
cards.  SmartMetric's Chief Executive Officer, Colin Hendrick, has
created patented technology which is being used in the prototype of the
SmartMetric "Biometric Card," a credit card-sized device which utilizes a finger
print sensor to authenticate a person's identity. The embedded sensor takes the
image of the person's fingerprint and matches it with a fingerprint stored on
the card.





On
September 14, 2004, Mr. Hendrick received a United States patent with regard to
the use of the Biometric card. Mr. Hendrick transferred the patent, which was
then pending, to Applied Cryptography, Inc., a Nevada corporation, owned by Mr.
Hendrick, in June 2004. On August 1, 2004, Applied Cryptography, Inc. entered
into a license agreement with SmartMetric pursuant to which SmartMetric has the
right to use, manufacture and sell products utilizing the patented technology in
perpetuity. This patent was granted on September 14, 2004.





As of
June 30, 2008, SmartMetric had a total stockholders' deficiency of $112,288, and
cash of $266,417.  SmartMetric has no off-balance sheet arrangements
that are reasonably likely to have a material current or future effect on
SmartMetric's financial condition, results of operations or
liquidity.





The
SmartMetric Biometric Card





SmartMetric
has designed a biometric card utilizing patented technology licensed to the
company.  A prototype of this card was completed in February 2 The
company is in the process of finalizing its biometric card and expects to have a
final product by November 2008– While the product was expected to be finalized
during the Summer of 2008, engineers uncovered more research and development had
to be done on a second antenna, thus pushing back product
finalization.  The product, due to exposure in specialty trade
publications and numerous press releases, is receiving much interest in the
private sector, especially amongst banking entities.  Also, the
product has received interest from the governmental sector, including, but not
limited to the Department of Homeland Security and the Department of
Defense.





SmartMetric
believes that its biometric card will have several functions:





·
            The
      fingerprint sensor will facilitate instant authorization
      verification;





·
            In
      card biometric measurement storage will safeguard personal
      information;





·
            In
      card biometric storage will permit access, identity and transaction
      control verification;





·
            Instant
      identity verification will be secure since such information is contained
      in the card and not in centralized
database




The
biometric card has been designed to contain up to two on-card processors and up
to1 gigabyte of memory. SmartMetric believes this will enable the card to store
the full image of a fingerprint and a database capable of storing information
such as medical records, financial or banking records or human resource card.
SmartMetric believes its biometric card may be used as a credit card, building
access card or computer access card.





SmartMetric
believes that its biometric card, by way of containing information unique to the
individual user, will be useless in the hands of others. Unlike a picture-based
identification system, the SmartMetric biometric card has been designed to
operate exclusively with the registered user. And unlike biometric security
systems where the biometric information is stored at a central location, we
believe that confirmation of identify with the SmartMetric system may not be
interrupted during the verification process or while it is stored at the remote
location since the biometric information is embedded in the card, itself, in a
memory chip protected by encryption. The fingerprint sensor built into the card
has been designed to activate the card. Without a match with the encrypted
fingerprint already stored on the card, the biometric card will not
operate.





The
SmartMetric biometric card is a card that authorized persons will carry with
them and activate to obtain access. Such activation will take place by placing a
finger on a fingerprint sensor. The SmartMetric biometric cards are designed to
be read by both contact and contactless card acceptor devices. For contact card
acceptor devices, the device must touch a chip mounted on the surface of the
Biometric card. This contact allows the card to transmit data to the reading
device. For contactless acceptor devices, a radio frequency signal will be sent
from the card to a radio frequency signal receiver in the acceptor device. In
both types of acceptor devices, the activation signal is sent only when there
has been a positive match of fingerprint by fingerprint sensor. The card
acceptor devices are available from several different third parties and do not
require any licenses.






5





The
company expects that the memory and computational capacities of the biometric
card will be used to store a template of each user's fingerprint(s). The memory
capacity will store a template of a user's fingerprint(s). The computational
capacity will be used to process a digitized image from the fingerprint sensor
to confirm a match (or no match) with the fingerprint template. Additional
computational processes such as increased Cryptography will depend on the
requirements of specific customers.





SmartMetric
believes its biometric card may be used for a variety of security applications
such as airport employed access and identity, building access and identity,
computer network access, drivers licenses, passports and check cashing identity
verification.





Fingerprint
Sensor





The
fingerprint sensor used in the SmartMetric biometric card is known as the
"Metric 60" fingerprint sensor. The Metric 60 allows for fingerprints which are
either wet or dry to be recognized or authenticated. It is also pressure
sensitive. SmartMetric purchases the fingerprint sensor from an unrelated third
party, but has no signed agreement with such party. The fingerprint sensor is
available from other suppliers. SmartMetric has designed a method of integrating
the fingerprint sensor on the card, which is then connected to a microprocessor,
which is connected to a rechargeable power supply in the card and a memory chip
for storage, retrieval and matching of the fingerprint on the card.





The
SmartMetric biometric card has been designed to utilize a rechargeable, lithium
polymer battery. Because this battery is available in a variety of shapes and
sizes, SmartMetric can design its cards in similar variety of shapes. This
lithium polymer battery is owned and manufactured by a third party unaffiliated
with SmartMetric. This battery will be integrated into the card. SmartMetric has
located a supplier for this battery and has purchased battery’s that meet the
requirements and specifications of the Biometric Card.





While
SmartMetric has already purchased these batteries, other raw materials which are
part of the product have been purchased as well.  Examples include,
but are not limited to, microchips, memory chips and processor
chips.  The sources and availability of these materials are numerous
and readily available, and should not affect the ability of SmartMetric to meet
future demand.





The
SmartMetric card has been designed to meet the International Standard
Organization 7816 Flex requirements so that it will not break or crack when bent
or flexed. The prototype card has been designed to meet ISO requirements for
crush test, drop test and nail test. It has been designed to operate in a wide
range of temperatures.





The
Biometric card has been designed to offer the option of a built-in radio
frequency transmitter for contactless entry and identity
verification.





The
Security Technology Industry





Biometrics





Biometric
technologies identify users by electronically capturing a specific biological or
behavioral characteristic of that individual, such as a fingerprint or voice or
facial feature, and creating a unique digital identifier from that
characteristic. Because this process relies on largely unalterable human
characteristics, positive identification can be achieved independent of any
information possessed by the individual seeking authorization.





The
process of identity authentication typically requires that a person present for
comparison one or more of the following factors:





·
            Something
      known such as a password, PIN or mother's maiden
  name;





·
            Something
      carried such as a token, card, or key;
or





·
            Something
      physical such as fingerprint, voice pattern, signature motion, facial
      shape or other biological or behavioral
  characteristic.




Comparison
of biological and behavioral characteristics has historically been the most
reliable and accurate of the three factors, but has also been the most difficult
and costly to implement into a single product that can automatically verify the
identity of a user accessing a computer network or the Internet. However, recent
advances in biometric collection technologies (both biometric hardware products
and their associated processing software) have increased the speed and accuracy
and reduced the cost of implementing biometrics in commercial environments.
Management believes that individuals, Web site operators, government
organizations, and businesses will increasingly use this method of identity
authentication.








6





Biometrics
refers to the automatic identification of a person based on his/her
physiological or behavioral characteristics. This method of identification is
preferred over traditional methods involving passwords and personal
identification numbers ("PINs") for various reasons: (i) the person to be
identified is required to be physically present at the point of identification
to be identification; (ii) identification based on biometric techniques obviates
the need to remember a password or carry a token. By replacing PINs, biometric
techniques can potentially prevent unauthorized access to or fraudulent use of
cellular phones, Biometric cards, desktop PCs, workstations and computer
networks. It can be used during transactions conducted via telephone and
Internet (e-commerce and e-banking). In automobiles, biometrics could replace
keys-less entry devices.





PINs and
passwords may be forgotten, and token-based methods of identification, e.g.,
passports and driver's licenses, may be forged, stolen or lost. Various types of
biometric systems are being used for real-time identification, with the most
popular based on face recognition and fingerprint matching. Other biometric
systems utilize iris and retinal scanning, speech, facial thermograms and hand
geometry.





A
biometric system is essentially a pattern recognition system, which makes a
personal identification by determining the authenticity of a specific
physiological or behavioral characteristic possessed by the user. An important
issue in designing a practical system is to determine how an individual is
identified.





There are
two different ways to resolve a person's identity: verification and
identification. Verification (Am I whom I claim I am?) involves confirming or
denying a person's claimed identity. In identification, one has to establish a
person's identity (Who am I?).





The
SmartMetric biometric card has been designed as a credit-card sized plastic card
embedded with an integrated circuit chip and biometric fingerprint sensor. While
we have completed a prototype of this card, we are in the process of completing
the final product. The SmartMetric card has been designed to provide not only
memory capacity, but also computational capability along with secure
non-refutable identification of the user. We believe that the self-containment
of SmartMetric's card will make it substantially resistant to attack, as it will
not need to depend upon potentially vulnerable external resources. Because of
this characteristic, we expect that the SmartMetric biometric card may be used
in different applications which require strong security protection and
authentication.





The
physical structure of a card is specified by the International Standards
Organization ("ISO") 7810, 7816/1 and 7816/2. Generally, it is made up of three
elements. The plastic card is the most basic one and has the dimensions of
85.60mm x 53.98 x 0.80mm. A printed circuit and an integrated circuit chip are
embedded on the card.





The
SmartMetric card has been designed so that the printed circuit conforms to ISO
standard 7816/3 which provides five connection points for power and data. It
will be hermetically fixed in the recess provided for the card and will be
burned onto the circuit chip, filled with a conductive material and sealed with
contracts protruding. The printed circuit is a part of, and not distinct from,
the Biometric card. The printed circuit is intended to protect the circuit chip
from mechanical stress and static electricity. Communication with the chip will
be accomplished through contacts that overlay the printed circuit. The
integrated circuit chip defines the capability of a smart chip. Typically, an
integrated circuit chip consists of a microprocessor, read only memory (ROM),
non-static random access memory and electrically erasable programmable read only
memory which will retain its state when the power is removed. The current
circuit chip is made from silicon, which is not flexible and particularly easy
to break. In order to avoid breakage when the card is bent, the chip is
restricted to only a few millimeters in size.





Furthermore,
it is our intent that the physical interface which allows data exchange between
the integrated circuit chip and the card acceptor device will be limited to 9600
bits per second. The communication line is intended to be a bi-directional
serial transmission line, which conforms to ISO standard 7816/3. We intend that
all the data exchanges will be under the control of the central processing unit
in the integrated circuit chip. Card commands and input data will be sent to the
chip that responds with status words and output data upon the receipt of these
commands and data. Information will be sent in half duplex mode (transmission of
data is in one direction at a time). This protocol, together with the
restriction of the bit rate, is designed to prevent massive data attack on the
card.





In
general, the size, the thickness and bend requirements for the biometric card
were designed to protect the card from being spoiled physically. However, this
also limits the memory and processing resources that may be placed on the card.
In the past, industry participants have encountered particular difficulty in
attempting to integrate high memory chips and finger sensor technology that will
withstand both the size constraints and physical daily usage such as bending in
a user's wallet sitting in his back pocket. We believe our biometric card has
met and overcome the physical demands of the credit card to produce what is a
powerful on-card computer processor with state-of-the-art biometric technology.
However, we believe that additional engineering is necessary to reduce the size
to the circuitry of the card prototype. We expect that such re-engineering will
be complete by November 2008.





Sales
and Marketing





When
we have completed the prototype of our biometric card and received any required
regulatory approval, we plan to market and sell our product to banking interests
in the private sector and governmental agencies such as the Department of
Homeland Security and the Department of Defense.  As noted previously,
we have received interest in the product from the aforementioned.






7





We do not
currently have a marketing or sales force or a distribution arrangement in
place.  We will need to expend resources to develop our own marketing and
sales force or enter into third-party distribution arrangements.





Manufacturing





We expect
to outsource manufacturing of our Biometric cards once we have sales orders. We
do not intend to purchase any plants or significant
equipment.   Because SmartMetric does not own or rent a
manufacturing facility, we will enter into a contract with a manufacturing
facility to produce our Biometric cards.  Although we have engaged in
preliminary negotiations with two potential manufacturers, no contract has been
signed.





Intellectual
Property





We rely
on patents, licenses, trade secrets, trademarks, copyright registrations and
non-disclosure agreements to establish and protect our proprietary rights in our
technologies and products.





Patents





Applied
Cryptography, Inc., a company owned and controlled by Colin Hendrick, President
and CEO of SmartMetric, owns the patent for a Biometric card process. This
patent has been licensed to SmartMetric. The patent expires September 30,
2014.





The
patent asserts claims to the following processes:





·
            A
      system for managing digital rights of digital content over a
      network.





·
            A
      data card contains user information including digital rights information
      specific to a users, the data card having memory component for enabling
      information to be stored within the data
card.





·
            A
      data card reader is adapted to access the user information contained on
      the data card when the data card is in communication with a card reading
      device.





·
            A
      data processor in communication with the data card reader is adapted to be
      connected to the network.





·
            An
      application program resides on the memory component of the data card, the
      application program being configured to operate in conjunction with a
      universal language for creating and controlling digital rights, to manage
      user rights of the digital content available on the network based on the
      digital rights information specific to the user which is contained on the
      data card.





License
Agreements





On August
1, 2004, SmartMetric entered into a license agreement with Applied Cryptography,
Inc., a Nevada corporation which is owner of certain technology for which a
patent was issued from the United States. Pursuant to the license agreement,
SmartMetric has the right to make use of this technology for the purpose of
developing software and systems to be used by SmartMetric to provide certain
applications including any or all of the following: 1) secure transactions over
the Internet from home and office computers; 2) an automatic method for
connecting to remote computers; 3) a method of developing targeted advertising
to home and/or office computers; 4) identity verification and access control as
provided for in the patent. Colin Hendrick, President, Chief Executive Officer
and Chairman of the Board of Directors of SmartMetric, is the sole officer and
shareholder of Applied Cryptography, Inc.





Pursuant
to this license agreement, Applied Cryptography, Inc. will receive 2% of all
revenues generated by SmartMetric on products which utilize this patented
technology. The license fee will be paid on a quarterly basis based on revenues
received during that quarter. The license fee shall be due within 45 days of the
end of each quarter. In the event no revenues were generated through the use of
any of the licensed patents during a given quarter, no money shall be owed
Applied Cryptography, Inc. for such quarter. Late license fees shall accrue
interest at a rate of 2% per quarter. Applied Cryptography, Inc. may rescind the
license agreement and reclaim all rights and interest in the patents if certain
events, such as SmartMetric's filing for bankruptcy protection or
reorganization, occur.





This
license agreement will remain in effect for the life of the patent. SmartMetric
may utilize their patented technological applications anywhere in the world
without limitation.





Our
technology is also dependent upon unpatented trade secrets.  However, trade
secrets are difficult to protect.  In an effort to protect our trade
secrets, we have a policy of requiring our employees, consultants and advisors
to execute non-disclosure agreements.  These agreements provide that
confidential information developed or made known to an individual during the
course of their relationship with us must be kept confidential, and may not be
used, except in specified circumstances.  In addition, our employees are
parties to agreements that require them to assign to us all inventions and other
technology that they create while employed by us.






8





Research
and Development





Our
research and development program is focused on completing development of our
Biometric card.  We continue to refine existing technology and develop
further improvements to our product.  We are in the very final stages
of finalizing the product.  We expect research and development costs
to trend lower in fiscal year ending June 30, 2009, due to the product expected
to be ready for market in November 2008.  Almost all research and
development costs now center around an adjustment being made to a second antenna
in the card.





Competition





SmartMetric
is a company involved in identity management. This industry is dominated by
several large international corporations such as BioNetrix, Keyware, Genplus and
Precise Biometrics, all of which manufacture and/or distribute and market
identity management products. These companies and many others are more
established than SmartMetric, which will put it at a competitive disadvantage.
For example, Precise Biometrics, a company whose stock is listed on the
Stockholm stock exchange, sells products which utilize its patented biometric
fingerprint authentication technology which allows it to isolate the
characteristic features of a human fingerprint and to match such features with a
stored template to secure identity. However, Precise Biometrics is publicly
traded and better funded then SmartMetric, and thus better known. SmartMetric's
licensed patent allows for such data to be stored on a credit card sized device;
however, SmartMetric only has a prototype of its biometric card.





BioNetrix
offers a solution for systems security - user authentication and sign on. This
company was found in 1997.





SmartMetric
is a newcomer to this industry, with no proven track record and an untested
product. We are not as well known as our potential competitors, nor are we
certain our card will work as intended or that it will meet clients' needs. We
are at a competitive disadvantage when compared to those better known, better
funded and experienced identity management companies. SmartMetric will be
competing with these as well as smaller and mid-size identity management
manufactures, distributors, and developers.





Employees





As of the
date of this annual report, SmartMetric has four full time employees including
Colin Hendrick, SmartMetric’s CEO, and no part-time employees. None of these
employees belongs to any union.





Government
Regulation





There are
currently no governmental regulations which have any bearing on the raw
materials or the manufacturing of our product.




Item
1A. Risk Factors.




Not
Applicable.




Item
1B. Unresolved Staff Comments.




Not
Applicable.




Item
2.                      Properties.




Our
executive offices are located at 1150 Kane Concourse, Suite 400, Bay Harbor
Islands, Florida 33154.  We lease this office space under a lease
expiring June 30, 2008 and renewable to June 30, 2012.  Rent expense
for the years ended June 30, 2008 and 2007 were $54,872 and
$34,776 respectively.




We believe that our existing
facilities will be adequate for our current needs and that additional space will
be available as needed.  The material terms of our property leases are set
forth in the table below.




Location
            
            Use
            
            Square
      Feet
            
            Rent Payments
            
            Term
            
            Leased From1150
      Kane Concourse, Suite 400, Bay Harbor Islands, Florida
    33154
            
            
            Offices
            
            
            Approximately 1200
      square feet
            
            $
            4,815 per month
            
            
            1
      year
            
            
            June
      2008






9








Item
3.                      Legal
Proceedings.









We know
of no material, active, pending or threatened proceeding against us or our
subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or
defendant in any material proceeding or pending litigation.




Item
4.                      Submission
of Matters to a Vote of Security Holders.






None.






PART
II






Item
5.                      Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.






Market
Information




Our
common stock has been traded over-the-counter on the Over-the-Counter (“OTC”)
Bulletin Board and “Pink Sheets” since April 7, 2006 under the symbol SMME and
the market for the stock has been relatively inactive. The range of high and low
bid quotations for the quarters of the last two years ended June 30, 2008 is
listed below. The quotations are taken from the OTC Bulletin Board. They reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.




Calendar
      Quarter
            
            Low
      Bid
            
            High
      Bid2007
      First Quarter
            
            
            1.00
            
            0.512007
      Second Quarter
            
            
            1.01
            
            0.472007
      Third Quarter
            
            
            1.00
            
            0.202007
      Fourth Quarter
            
            
            0.55
            
            0.302008
      First Quarter
            
            
            0.51
            
            0.252008
      Second Quarter
            
            
            0.45
            
            0.122008
      Third Quarter
            
            
            0.38
            
            0.152008
      Fourth Quarter
            
            
            0.40
            
            0.08





As of
October 7, 2008, we had approximately 839 shareholders of record of our common
stock, including the shares held in street name by brokerage firms. The holders
of common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders.  Holders of the common
stock have no preemptive rights and no right to convert their common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock.





Dividends





Any
payment of dividends will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company. At the
present time, the Company's anticipated financial capital requirements are such
that it intends to follow a policy of retaining earnings in order to finance the
development of its business.





Securities
authorized for issuance under equity compensation plans





As of the
date of this report, we do not have any securities authorized for issuance under
any equity compensation plans and we do not have any equity compensation
plans.





Penny
Stock Regulations





Our
shares of common stock are subject to the "penny stock" rules of the Securities
Exchange Act of 1934 and various rules under this Act. In general terms, "penny
stock" is defined as any equity security that has a market price less than $5.00
per share, subject to certain exceptions. The rules provide that any equity
security is considered to be a penny stock unless that security is registered
and traded on a national securities exchange meeting specified criteria set by
the SEC, issued by a registered investment company, and excluded from the
definition on the basis of price (at least $5.00 per share), or based on the
issuer's net tangible assets or revenues. In the last case, the issuer's net
tangible assets must exceed $3,000,000 if in continuous operation for at least
three years or $5,000,000 if in operation for less than three years, or the
issuer's average revenues for each of the past three years must exceed
$6,000,000.






10







Trading
in shares of penny stock is subject to additional sales practice requirements
for broker-dealers who sell penny stocks to persons other than established
customers and accredited investors. Accredited investors, in general, include
individuals with assets in excess of $1,000,000 or annual income exceeding
$200,000 (or $300,000 together with their spouse), and certain institutional
investors. For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of the security and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, the rules
require the delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock. A broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered representative,
and current quotations for the security. Finally, monthly statements must be
sent disclosing recent price information for the penny stocks. These rules may
restrict the ability of broker-dealers to trade or maintain a market in our
common stock, to the extent it is penny stock, and may affect the ability of
shareholders to sell their shares.




Recent Sales of Unregistered Securities




The
following summarizes the securities that we sold during the fiscal year
ended June 30, 2008 without registering the securities under the Securities
Act:





In the
three months ended September 30, 2007, we sold a total of 903,813 Units at
prices ranging from $0.30 to $0.34 per Unit in private placement offerings
resulting in net proceeds of $297,633. Each Unit consists of one share of common
stock and one warrant exercisable for 12 months from the date of issue into one
share of common stock at $1.00 per share.





In
October 2007, the Company sold a total of 69,636 Units at a price of $.20 per
Unit in private placement offerings resulting in net proceeds of
$13,927.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





On
October 10, 2007, the Company issued a total of 23,636 Units at a price of $.20
per Unit to a consultant for services rendered.  Each Unit consists of
one share of common stock and one warrant exercisable for 12 months from the
date of issue into one share of common stock at $1.00 per share.





In
November 2007, the Company sold a total of 75,000 Units at a price of $.20 per
Unit in private placement offerings resulting in net proceeds of
$15,000.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





On
November 5, 2007, we issued an aggregate of 80,000 shares of common stock to two
directors of the Company, valued at $24,000.





On
December 12, 2007, the Company sold 60,000 Units at a price of $.20 per Unit in
a private placement offering resulting in net proceeds of
$12,000.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





On
January 14, 2008, the Company issued a total of 2,107,000 shares of its common
stock (valued at $421,400) to its attorney and two consultants for services
rendered.





In
January 2008, the Company sold a total of 342,500 Units at a price of $.20 per
Unit in private placement offerings resulting in net proceeds of
$68,500.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





In
February 2008, the Company sold a total of 368,300 Units at a price of $.20 per
Unit in private placement offerings resulting in net proceeds of
$73,660.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





On
February 26, 2008, the Company issued 140,000 shares of its common stock (valued
at $28,000) to its attorney for services rendered.





On March
3, 2008, the Company issued 9,090 shares of its common stock at a price of $.55
per share in a private placement offering resulting in net proceeds
of $4,999.50 .




On March
26, 2008, the Company sold 200,000 shares of its common stock at a price of $.10
per share resulting in net proceeds of $20,000.





In March
2008, the Company sold 483,686 shares of its common stock at a price of $.127
per share in private placement offerings resulting in net proceeds of $76,300.
In the same month, the Company also sold 125,000 Units at a price of $.20 per
Unit in private placement offerings resulting in net proceeds of $25,000. Each
Unit consists of one share of common stock and one warrant exercisable for 12
months from the date of issue into one share of common stock at $1.00 per
share.





In April
2008, the Company sold a total of 1,897,801 Units at a price of $.20 per Unit in
private placement offerings resulting in net proceeds of
$379,560.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.









11






Also in
April 2008, the Company sold 893,932 shares of its common stock at price ranging
from $.073 to $.30 per share in private placement offerings resulting in net
proceeds of $178,786.





In May
2008, the Company sold a total of 921,534 Units at a price of $.20 per Unit in
private placement offerings resulting in net proceeds of
$184,307.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





Also in
May 2008, the Company sold 354,605 shares of its common stock at prices ranging
from $0.21 to $0.23 per share in private placement offerings resulting in net
proceeds of $182,303.





In June
2008, the Company sold a total of 200,000 Units at a price of $.20 per Unit in
private placement offerings resulting in net proceeds of
$40,000.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





Also in
June 2008, the Company sold 254,536 shares of its common stock at prices ranging
from $0.21 to $0.23 per share in private placement offerings resulting in net
proceeds of $47,862.





On July
4, 2008, the Company sold 13,000 shares of its common stock at prices of $0.23
per share in private placement offerings resulting in net proceeds of
$2,990.





In July
2008, the Company sold a total of 206,666 Units at prices ranging from $0.15 and
$0.25 per Unit in private placement offerings resulting in net proceeds of
$23,960.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.





Unless
otherwise noted in this section, with respect to the sale of unregistered
securities referenced above, all transactions were exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"), and Regulation D or Regulation S promulgated under the 1933 Act. In each
instance, the purchaser had access to sufficient information regarding
SmartMetric so as to make an informed investment decision. More specifically, we
had a reasonable basis to believe that each purchaser was an "accredited
investor" as defined in Regulation D or Regulation S of the 1933 Act and
otherwise had the requisite sophistication to make an investment in
SmartMetric's securities.




Item
6.                      Selected
Financial Data.




The
following selected statement of operations data contains statement of operations
data and balance sheet data for the fiscal years ended June 30, 2008 and 2007.
The statement of operations data and balance sheet data were derived from the
audited financial statements. Such financial data should be read in conjunction
with the financial statements and the notes to the financial statements starting
on page F-1 and with the section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” below.





Statements of Operation Data:




Year ended June
      30,2008
            
            
            2007Net
      revenues
            
            $
            0
            
            
            $
            0Cost
      of sales
            
            
            0
            
            
            
            0Gross
      profit
            
            
            0
            
            
            
            0Operating
      expenses:Research
      and development
            
            
            85,167
            
            
            
            142,566General
      and administrative
            
            
            1,293,946
            
            
            
            895,016Operating
      income (loss)
            
            
            (1,379,113
            )
            
            
            (1,037,582
            )Other
      income
            
            
            0
            
            
            
            0Interest
      income
            
            
            0
            
            
            
            131Interest
      expenses
            
            
            (17,943
            )
            
            
            (12,738
            )Income
      (loss) before income taxes
            
            
            (1,397,056
            )
            
            
            (1,050,189
            )Income
      tax
            
            
            0
            
            
            
            0Net
      income (loss)
            
            
            (1,397,056
            )
            
            
            (1,050,189
            )






12









Balance Sheet Data:





As at June
      30
            
            
            As at June
      302008
            
            
            2007Cash
      and cash equivalents
            
            $
            266,417
            
            
            $
            5,534Working
      capital
            
            
            112,924
            
            
            
            269,488Total
      assets
            
            
            334,362
            
            
            
            86,374Total
      liabilities
            
            
            205,394
            
            
            
            333,974
            )Total
      shareholders’ equity (deficiency)
            
            
            (112,288
            )
            
            
            (488,856
            )




Item
7.                      Management’s
Discussion and Analysis of Financial Condition and Results of
Operations






The
following discussion of the financial condition and results of operation of the
Company for the fiscal years ended June 30, 2008 and 2007 should be read in
conjunction with the selected financial data, the financial statements and the
notes to those statements that are included elsewhere in this registration
statement. Our discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and
Business sections in this registration statement. We use terms such as
“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.




General





Incorporated
in 2002, SmartMetric and its founder and CEO, Colin Hendrick, have been engaged
in research and development of a biometric security solution which would
authenticate the identity of a person in a self-contained credit card-sized
device. SmartMetric’s biometric card has been designed to use an on-board finger
print sensor which is imbedded in the card along with an integrated circuit chip
which will provide one gigabyte of memory capacity. SmartMetric has recently
completed a prototype of its card but has not yet begun to manufacture the
biometric cards utilizing its licensed technology. The prototype is expected to
be completed by the end of November 2008 and is already being marketed in
various specialty trade publications and press releases. To date, SmartMetric
has had no sales revenues.




A
prototype of our biometric card was completed in February 2005 and we have been
adjusting and developing software for the card since that date.  The
finished product will be the prototype or model for our biometric cards, which
will be manufactured upon receipt of customer orders.   We are in
the process of revising some of the engineering of the prototype so as to
decrease the size of the circuitry contained in the card. We expect that the
revised prototype will be completed in November 2008.





We expect
to outsource manufacturing of our biometric cards once we have sales orders. We
do not intend to purchase any plants or significant
equipment.   Because SmartMetric does not own or rent a
manufacturing facility, we will enter into a contract with a manufacturing
facility to produce our biometric cards.  Although we have engaged in
preliminary negotiations with two potential manufacturers, no contract has been
signed.




We
currently have four full time employees, including Colin Hendrick, our President
and Chief Executive Officer. Once we have begun to generate sales, we intend to
hire additional employees.




SmartMetric
does not believe its business is seasonal in any way.




Results
of Operations




Comparison of the
Year Ended June 30, 2008 and 2007





Revenue and Net Income
(Loss)





For the
fiscal year ended June 30, 2008, there were $0 sales revenues and a net loss of
$1,397,056. For the year ended June 30, 2007, there were $0 sales revenues and a
net loss of $1,050,189. This increased loss of $346,867 or 33%
resulted primarily from an increase in general and administrative
expenses and an issuance of shares in consideration for
services.






13







General and Administrative
Expenses





General
and administrative expenses for the year ended June 30, 2008 were $1,123,946, an
increase of $398,930 or 55% compared to $725,016 for the comparable period in
2007. The increase was primarily attributable to a large number of shares being
issued in consideration of services rendered.





Research and Development
Expenses





Research
and development expenses for the year ended June 30, 2008 were $85,167, a
decrease of $57,399 or 40% compared to $142,566 for the comparable period in
2007. The decrease was primarily attributable to the revised prototype being in
its final stages, thus reducing the need for intensive research and
development





Interest
Expenses




There was
$17,943 interest expense for the year ended June 30, 2008 compared to $12,738
for the comparable period in 2007, an increase of $5,205 or 41%.  The
increase was primarily attributable to Internal Revenue Service interest
payments.





Income Tax
Expenses





Income
tax for the year ended June 30, 2008 was $0, unchanged from June 30,
2007.




Liquidity
and Capital Resources





Cash
and Cash Equivalent




Our cash
and cash equivalents were $5,534  at the beginning of the year ended
June 30, 2008 and increased to $266,417 by the end of such period, an increase
of $260,883 or 4714%.  The increase was primarily attributable to a
stepped-up pace of stock sales as the product grows closer to
completion.




Net
cash provided by operating activities





Net cash
provided by operating activities was $0 for the year ended June 30, 2008,
unchanged from June 30, 2007.





Net
cash used in investing activities




Net cash
used in investing activities was $0 for the year ended June 30, 2008, a decrease
of $10,253 from $10,253 for the comparable period in 2007. The decrease was
primarily attributable to no equipment purchases during the period.




Net
cash used in financing activities





Net cash
provided in financing activities was $1,300,224 for the year ended June 30,
2008, compared to $760,349 for the same period in 2007. The difference was
primarily attributable to stepped-up stock sales as the product grows closer to
completion.





Contractual
Obligations and Off-Balance Sheet Arrangements.





We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our financial position, results of operations, and cash flows.





The
following table (in thousands) summarizes our contractual obligations as of June
30, 2008, and the effect these obligations are expected to have on our liquidity
and cash flows in future periods.





Totals
            
            Less Than
              1 Year
            
            1
      to 3
              Years
            
            ThereafterCapital
      expenditures
            
            $
            [_0_]
            
            $
            [_0_]
            
            $
            [_0_]
            
            0
            —






14






Critical
accounting policies and estimates




The
financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Management makes these estimates using the best information
available at the time the estimates are made; however actual results could
differ materially from those estimates (See Note 2 in the Notes to Financial
Statements).




Intangible
assets





SmartMetric
did not purchase any intangible assets for the year ended June 30,
2008.




New
Financial Accounting Pronouncements






There
have been no new financial accounting pronouncements.




Item
7A.  Quantitative and Qualitative Disclosures About Market
Risk.





Not
Applicable.





Interest Rates





Our
exposure to market risk for changes in interest rates relates primarily to our
short-term investments; thus, fluctuations in interest rates would not have a
material impact on the fair value of these investments. At October 13, 2008, we
had approximately $19,000 in cash and cash equivalents. A hypothetical 5%
increase or decrease in either short term or long term interest rates would not
have a material impact on our earnings or loss, or the fair market value or cash
flows of these instruments.





Item
8.                      Financial
Statements and Supplementary Data.





Our
audited consolidated financial statements for the fiscal years ended June 30,
2008 and 2007, together with the report of the independent certified public
accounting firm thereon and the notes thereto, are presented beginning at page
F-1.




Item
9.                      Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.





None.





ITEM 9A (T) – CONTROLS AND
PROCEDURES





Evaluation
of Disclosure Controls and Procedures





SmartMetric
maintains a set of disclosure controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports filed under
the Securities Exchange Act, is recorded, processed, summarized and reported
within the time periods specified by the Securities and Exchange Commission’s
(“SEC”) rules and forms. Disclosure controls are also designed with the
objective of ensuring that this information is accumulated and communicated to
the Company's management, including the Company's chief executive officer and
chief financial officer, as appropriate, to allow timely decisions regarding
required disclosure.




Based
upon their evaluation as of the end of the period covered by this report,
SmartMetric’s chief executive officer and chief financial officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be included in the Company's periodic SEC filings is
recorded, processed, summarized, and reported within the time periods specified
in the SEC rules and forms.  As such, the Company is in compliance
with the SEC’s requirements as set forth in Item 308T of Regulation
S-K.





Management’s
Report on Internal Control over Financial Reporting





SmartMetric’s
management is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control system was
designed to provide reasonable assurance to our management and Board of
Directors regarding the preparation and fair presentation of published financial
statements.





SmartMetric’s
management assessed the effectiveness of our internal control over financial
reporting as of June 30, 2008. In making this assessment, it used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal
Control—Integrated Framework  Based on its assessment, the Company’s
management believes that, as of June 30, 2008, the Company’s internal control
over financial reporting is effective based on those criteria.






15





This
annual report does not include an attestation report of SmartMetric’s registered
accounting firm regarding internal control over financial reporting. The
management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the SEC.




Changes
in Internal Control over Financial Reporting





No
changes in the Company's internal control over financial reporting have come to
management's attention during the Company's last fiscal quarter that have
materially affected, or are likely to materially affect, the Company's internal
control over financial reporting.





Limitations
on Controls





Management
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all error and fraud. Any
control system, no matter how well designed and operated, is based upon certain
assumptions and can provide only reasonable, not absolute, assurance that its
objectives will be met. Further, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, within the Company have been
detected.





Item
9B. Other Information.





There
have been no material events that have occurred during the fiscal year ending
June 30, 2008 that were not previously disclosed.








16







PART
III





Item
10.                      
Directors, Executive Officers and Corporate Governance





The
following table sets forth certain information concerning our directors and
executive officers:








Name
            Age
            Position
      with the CompanyColin
      Hendrick
              9195
      Collins Ave #302
              Surfside,
      Fl. 33154
            52
            President,
      Chief Executive Officer and Chairman of the BoardJay
      M. Needelman, CPA
              c/o
      Smartmetric, Inc.
              1150
      Kane Concourse, Suite 400
              Bay
      Harbor Islands, FL 33154
            40
            Chief
      Financial Officer, DirectorElizabeth
      Ryba
              73
      Brown Road
              Scarsdale,
      New York 10583
            57
            DirectorPeter
      Sleep*
              3
      Bernadette Court
              East
      Doncaster, Victoria Australia
            51
            Vice
      President of Asia-Pacific Sales and former DirectorJoseph
      Katzman*
              790
      Montgomery Street Brooklyn, New York 11213
            56
            Former
      Director


*Peter
Sleep and Joseph Katzman resigned as directors of Smartmetric as of April 2008
and May 2008, respectively.





Biography





COLIN HENDRICK has been
President, Chief Executive Officer and Chairman of the Board of SmartMetric
since the Company’s inception in 2002. He has served as President and CEO of
Smart Micro Chip, Inc., an Australian corporation from 2000 to 2002. From 1999
to 2001, Mr. Hendrick was President and Chief Executive Officer of Smarticom
Inc. and Fast Econ, Inc., Australian corporations. From 1994 to 1998, Mr.
Hendrick served as executive officer of Applied Computing Science (Australia),
an Australian company involved in e-commerce systems, research and development.
Mr. Hendrick attended Dandenong College in Australia.





JAY M.  NEEDELMAN, CPA,has been the Chief Financial Officer for SmartMetric since July
2004.  Mr. Needelman has over 16 years of experience in public
accounting.  A 1991 graduate of Florida State University in
Tallahassee, Fl, Mr. Needelman began his career in public accounting in Miami,
Fl, in 1991.  After working for two different firms, Mr. Needelman
founded his own firm in late 1992.





ELIZABETH RYBA, has been a
director of SmartMetric since April 5, 2006. Ms. Ryba has over 15 years of
experience in the credit card industry. She was a promotion director at Hearst
Publishing from 2002 through 2005. Between 2001 and 2004, Ms. Ryba was a
consultant at Stratus Rewards Credit Cards where she launched a Visa Luxury
credit card where points were redeemable on private jets. Between 2000 and 2001,
Ms. Ryba worked as a Marketing Consultant for SpaFinder. In 1991 through 1999
Ms. Ryba worked at Master Card where she launched a SmartCard in Australia Ms.
Ryba received her M.S. in Marketing from the University of Illinois, and her
B.A. in English from the State University of New York at Stony Brook.





PETER SLEEP was Secretary and
a director of SmartMetric in January 2003. In April 2006, he was appointed Vice
President of Sales - Asia Pacific. In April 2008, Mr. Sleep resigned from his
position as director of Smartmetric. From November 1996 to January 2003,
Mr. Sleep was Vice President of Smart MicroChip, Inc., an Australian
corporation. Mr. Sleep attended Brunswick Technology School and Footscray
College, both located in Australia.








17





JOSEPH KATZMAN served as a
director of SmartMetric from January 2003 to May 2008. Since 1993, he has been
host and executive producer of A Cable To Jewish Life, a television talk show.
From 1991 to 2000, he was the New York office administrator of congregation
Yeshiva Tomchei Tmimim Lubavitch. Mr. Katzman is a graduate of KfarChabad and
the Rabinical College of Canada.





Family
Relationships





There are
no family relationships among officers or directors of SmartMetric.





Involvement
in Certain Legal Proceedings





Our
directors, executive officers and control person have not been involved in any
of the following events during the part five years:





1.
            any
      bankruptcy petition filed by or against any business of which such person
      was a general partner or executive officer either at the time of the
      bankruptcy or within two years prior to that
  time;





2.
            any
      conviction in a criminal proceeding or being subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offenses);





3.
            being
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or





4.
            being
      found by a court of competent jurisdiction (in a civil action), the
      Commission or the Commodity Futures Trading Commission to have violated a
      federal or state securities or commodities law, and the judgment has not
      been reversed, suspended, or
vacated.





Audit
Committee Financial Expert





SmartMetric’s
board of directors has determined that the company does not have an audit
committee financial expert serving on its audit committee.





Identification
of the Audit Committee





SmartMetric
does not currently have a separately - designated standing committee established
in accordance with Section 3(a) (58)(A) of the Exchange Act. The entire board of
directors is acting as SmartMetric’s audit committee.





Code
of Ethics





The
Company has adopted a Code of Ethics that applies to its Chief Executive Officer
and Chief Financial Officer.





Compliance
with Section 16(a) of the Securities Act of 1934





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
officers and directors and persons who own more than 10% of a registered class
of our equity securities to file with the Securities and Exchange Commission
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership of the our common stock and other
equity securities, on Form 3, 4 and 5 respectively. Executive officers,
directors and greater than 10% shareholders are required by the Securities and
Exchange Commission regulations to furnish our company with copies of all
Section 16(a) reports they file.





Based
solely on our review of the copies of such reports received by us, and on
written representations by our officers and directors regarding their compliance
with the applicable reporting requirements under Section 16(a) of the Exchange
Act, we believe that, with respect to the fiscal year ended June 30, 2008, our
officers and directors, and all of the persons known to us to own more than 10%
of our common stock, filed all required reports on a timely basis.




Item
11.                      
Executive Compensation.





The
following is a summary of the compensation we paid to our Chief Executive
Officer, Chief Financial Officer, and Vice President for Asia Pacific Sales for
the two years ended June 30, 2008 and 2007.








18





Name and
              Principal
              Position
            
            Fiscal
              Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-equity
              Incentive Plan
              Compensation
              ($)
            
            Change in
              Pension
              Value 
      and
              Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            
            All Other
              Compensation
              ($)
            
            Total
              ($)Colin
      Hendrick  (President, Chief Executive Officer, Chairman of the
      Board) (1)
            
            
            2008
            
            170,000
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-2007
            
            170,000
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-Jay
      Needelman (Chief Financial Officer) (2)
            
            
            2008
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            7,380
            
            
            -0-2007
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-Peter
      Sleep (Vice President, Asia Pacific Sales and former Director)
      (3)
            
            
            2008
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            131,000
            
            
            -0-2007
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            -0-
            
            
            -0-
            
            92,000
            
            
            -0-







(1)
            Colin
      Hendrick has been President, CEO and director of the Company since
      inception.  Mr. Hendrick receives an annual salary of
      $170,000.(2)
            Jay
      Needleman has been serving as CFO and director of the Company since July
      2004.(3)
            Peter
      Sleep was appointed Secretary and director of the Company in January
      2003.  In April 2008, Mr. Sleep resigned as
      director.  He remains Vice President of Sales – Asia Pacific, a
      position that he has held since April
2006.





Employment
Agreements





We have
no employment agreements with any of our executive officers, except for an
employment agreement entered into between the Company and Mr. Hendrick effective
July 1, 2004, which expired June 30, 2006. However, Mr. Hendrick continues to
serve as President and is paid on the basis of $170,000 annual
salary.





Compensation
Discussion and Analysis





We strive
to provide our named executive officers (as defined in Item 402 of Regulation
S-K) with a competitive base salary that is in line with their roles and
responsibilities when compared to peer companies of comparable size in similar locations.





We plan
to implement a more comprehensive compensation program, which takes into account
other elements of compensation, including, without limitation, short and long
term compensation, cash and non-cash, and other equity-based compensation such
as stock options. We expect that this compensation program will be comparable to
the programs of our peer companies and aimed to retain and attract talented
individuals.





We will
also consider forming a compensation committee to oversee the compensation of
our named executive officers. The majority of the members of the compensation
committee would be independent directors.





Compensation
of Directors





As of the
date of this registration statement, our directors have received no compensation
for their service on the board of directors, except Peter Sleep, our former
Director who also serves as Vice President of Asia-Pacific
Sales.   A compensation program for our independent directors, as
and when they are appointed, which we anticipate will include such elements as
an annual retainer, meeting attendance fees and stock options. The details of
that compensation program will be negotiated with each independent
director.  Please note that Mr. Sleep’s compensation was paid to him
as a Director.






19




Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.





The
following table sets forth certain information with respect to the beneficial
ownership of our voting securities by (i) any person or group owning more than
5% of any class of voting securities, (ii) each director, (iii) our chief
executive officer and president and (iv) all executive officers and directors as
a group as of October 7, 2008.





Amount
and Nature of Beneficial Ownership




Name and Address ofBeneficial Owner
            
            Director/Officer
            
            Number
      of Shares of Common Stock (1)
            
            
            
            Percentage
              of Class (1)Owner of More than 5% of
      ClassApplied
      Cryptography, Inc.
              9195
      Collins Avenue
              Surfside,
      Fl, 33154
            
            
            
            
            
            49,127,778
            
            
            (2)
            
            
            
            68.9%Directors
      and Executive OfficersColin
      Hendrick
              1150
      Kane Concourse, Suite 400,
              Bay
      Harbor Islands, FL
            
            
            Chief
      Executive Officer, Chairman of the Board of Directors
            
            
            49,127,778
            
            
            (2
            )
            
            
            68.9%Jay
      Needelman, CPA
              1150
      Kane Concourse, Suite 400,
              Bay
      Harbor Islands, FL
            
            
            Chief
      Financial Officer, Director
            
            
            0
            
            
            
            
            
            
            *%Elizabeth
      Ryba
              73
      Brown Road
              Scarsdale,
      New York 10583
            
            
            Director
            
            
            40,000
            
            
            
            
            
            
            *%Peter Sleep
              3
      Bernadette Court
              East
      Doncaster, Victoria
              Australia
            
            
            Vice
      President, Asia Pacific Sales and Former Director
            
            
            1,060,000
            
            
            (3
            )
            
            
            1.5%Joseph
      Katzman
              790
      Montgomery Street Brooklyn, New York 11213
            
            
            Former
      Director
            
            
            0
            
            
            (4)
            
            
            
            *%All
      directors and officers as a group (5 persons)
            
            
            
            
            
            50,227,778
            
            
            
            
            
            
            70.5%




(1)           In
determining beneficial ownership of our common stock as of a given date, the
number of shares shown includes shares of common stock which may be acquired on
exercise of warrants or options or conversion of convertible securities within
60 days of that date. In determining the percent of common stock owned by a
person or entity on October 7, 2008, (a) the numerator is the number of shares
of the class beneficially owned by such person or entity, including shares which
may be acquired within 60 days on exercise of warrants or options and conversion
of convertible securities, and (b) the denominator is the sum of (i) the total
shares of common stock outstanding on October 7, 2008 (71,254,259  ),
and (ii) the total number of shares that the beneficial owner may acquire upon
conversion of any preferred stock and on exercise of the warrants and options.
Unless otherwise stated, each beneficial owner has sole power to vote and
dispose of its shares.





(2)           
Applied Cryptography, Inc., a Nevada corporation, is owned and controlled by Mr.
Hendrick, our Chairman and Chief Executive Officer.






20








(3)           Includes
300,000 shares owned by Carolyn Dianne Sleep (Mr. Sleep’s wife) and 500,000
shares owned by TrinityTrust. Mr. Sleep is trustee of the Trinity
Trust.  Mr. Sleep serves as Vice President for Asia-Pacific Sales and
served as director of SmartMetric from January 2003 to April 2008.





(4)           
Mr. Katzman served as director of SmartMetric from January 2003 to May
2008.





* Under 1
percent of the issued and outstanding shares as of October 7, 2008.





Item
13.                      
Certain Relationships and Related Transactions, and Director
Independence.





There
have been no significant related party transactions meeting the requirements for
disclosure for the fiscal year ended June 30, 2008.





Procedures
for Approval of Related Party Transactions




Our board
of directors is charged with reviewing and approving all potential related party
transactions.  All such related party transactions must then be
reported under applicable SEC rules. We have not adopted other procedures for
review, or standards for approval, of such transactions, but instead review them
on a case-by-case basis.





Director
Independence





The
Company currently does not have a director that qualifies as an “independent”
director as that term is defined under the National Association of Securities
Dealers Automated Quotation system.  Our company, however, recognizes
the importance of good corporate governance and intends to appoint an audit
committee comprised entirely of independent directors, including at least one
financial expert, in the near future.





Item
14.                      
Principal Accounting Fees and Services





The
approximate annual accounting fees of SmartMetric, paid to Mr. Jay Needelman,
CPA, are $7,500.  The company does not anticipate any material change
in this amount going forward.





Audit
Fee





The
aggregate fees incurred by the Company’s independent registered public
accounting firms, for professional services rendered for the audit of our annual
financial statements for the year ended June 30, 2008, and for the reviews of
the financial statements included in our Quarterly Reports on Form 10-QSB during
this fiscal year were approximately $26,500.





Audit-Related
Fees





The
Company incurred approximately $0 in fees from its independent registered public
accounting firms for audit-related services during the year ended June 30,
2008.





Tax
Fees





The
Company incurred approximately $0 in fees from its independent registered public
accounting firms for tax compliance and tax consulting services for the year
ended June 30, 2008.





All
Other Fees





The
Company incurred approximately $0 in fees from its independent registered public
accounting firms for services rendered to the Company other than services
covered in the above referenced categories for the fiscal year ended
June 30, 2008.






21





Item
15.                      
Exhibits, Financial Statements Schedules





3.1
            Certificate
      of Incorporation of SmartMetric, Inc. (1)3.2
            By-laws
      of SmartMetric, Inc. (1)4.1
            Specimen
      Certificate of Common Stock. (1)10.1
            License
      Agreement between SmartMetric and Applied Cryptography, Inc. (3)10.2
            Employment
      Agreement - Colin Hendrick (2)10.3
            Agreement
      between SmartMetric and ISI (1)10.4
            Employment
      Agreement Extension (4)10.5
            Subscription
      Agreement (4)10.6
            Lease
      Agreement for Florida Office. (3)14.1
            Code
      of Ethics (1)21.1
            Subsidiaries
      of SmartMetric (2)31.1
            Certification
      of SmartMetric’s Chief Executive Office pursuant to Rule13a- 14(a) of the
      Securities Exchange Act of 193431.2
            Certification
      of SmartMetric’s Chief Financial Officer pursuant to Rule13a- 14(a) of the
      Securities Exchange Act of 193432.1
            Certification
      of SmartMetric’s Chief Executive Officer and Chief Financial Officer
      required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and
      Section 1350 of Chapter 63 of Title 18 the United States Code (18
      U.S.C.1350)





(1)
            Filed
      with original registration statement on September 3,
  2004.(2)
            Filed
      with Amendment No. 1 on February 3,
2005.





(3)
            Filed
      with Amendment No. 3 May 23, 2005.(4)
            Filed
      with Amendment No. 5 June 27, 2005.









22












SIGNATURES





Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Bay Harbor Islands, FL, on
the 14th day of
October, 2008.





SMARTMETRIC,
      INC.By:
            /s/
      Colin HendrickColin
      HendrickPresident,
      Chief Executive Officer and Chairman
              (principal executive
officer)





In
accordance with the requirements of the Securities and Exchange Act of 1934,
this registration statement has been signed below by the following persons on
behalf of the Company in the capacities and on the dates indicated.





/s/
      Colin Hendrick
            
            October
      14, 2008Colin
      HendrickPresident,
      Chief Executive Officer and Chairman/s/
      Jay Needelman
            
            October  14,
      2008Jay
      Needelman, CPAChief
      Financial Officer and Director(principal fianancial and accounting officer)





/s/
      Elizabeth Ryba
            
            October
      14, 2008Elizabeth
      RybaDirector







23






SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Index
to Financial Statements
 
 PageReport
      of Independent Registered Public Accounting Firm
                
                
                
                F-2Financial
      Statements:Consolidated
      Balance Sheets as of June 30, 2008 and 2007
                
                
                
                F-3Consolidated
      Statements of Operations for the years ended June 30, 2008 and 2007
      and for the period December 18, 2002 (inception) to June 30,
      2008
                
                
                
                F-4Consolidated
      Statements of Changes in Stockholders’ Equity for the period December 18,
      2002 (inception) to June 30, 2008
                
                
                
                F-5Consolidated
      Statements of Cash Flows for the years ended June 30, 2008 and 2007
      and for the period December 18, 2002 (inception) to June 30,
      2008
                
                
                
                F-8Notes
      to Consolidated Financial Statements
                
                
                
                F-9
 
  F-1






REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of
 SmartMetric,
Inc.
 
 I have
audited the accompanying consolidated balance sheets of SmartMetric, Inc. and
subsidiary (the “Company”), a development stage company, as of June 30, 2008
and  2007, and the related consolidated statements of operations,
changes in stockholders’ equity, and cash flows for the years then ended and for
the period December 18, 2002 (inception) to June 30, 2008. These consolidated
financial statements are the responsibility of the Company’s
management.  My responsibility is to express an opinion on these
consolidated financial statements based on my audits.
 
 I
conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  I believe
that my audits provide a reasonable basis for my opinion.
 
 In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of SmartMetric, Inc. and
subsidiary, a development stage company, as of June 30, 2008 and 2007, and the
results of their operations and cash flows for the years then ended and for the
period December 18, 2002 (inception) to June 30, 2008 in conformity with
accounting principles generally accepted in the United States.
 
 The
accompanying financial statements referred to above have been prepared assuming
that the Company will continue as a going concern.  As discussed in
Note 2 to the consolidated financial statements, the Company’s present financial
situation raises substantial doubt about its ability to continue as a going
concern.  Management’s plans in regard to this matter are also
described in Note 2.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 /s/ Michael T. Studer CPA
P.C.
 
 
 Freeport,
New York
 October
10, 2008
 
 
 
 F-2


SMARTMETRIC,
INC. AND SUBSIDIARY


(A
Development Stage Company)


Consolidated
Balance Sheets


June
      30,2008
              
              
              2007AssetsCurrent
      assets:Cash
              
              $
              266,417
              
              
              $
              5,534Prepaid
      expenses
              
              
              51,901
              
              
              
              58,952Total
      current assets
              
              
              318,318
              
              
              
              64,486Equipment,
      less accumulated depreciation of$9,315
      and $5,031, respectively
              
              
              6,669
              
              
              
              10,953Other
      assets:Patent
      costs, less accumulated amortizationof
      $5,625 and $4,125, respectively
              
              
              9,375
              
              
              
              10,875Organization
      costs - net
              
              
              -
              
              
              
              60Total
      assets
              
              $
              334,362
              
              
              $
              86,374Liabilities and
      Stockholders' EquityCurrent
      liabilities:Accounts
      payable and accrued expenses
              
              $
              67,886
              
              
              $
              141,905Payroll
      taxes, withholdings, and accruedinterest
      and penalties
              
              
              137,508
              
              
              
              192,069Total
      current liabilities
              
              
              205,394
              
              
              
              333,974Other
      liabilities
              
              
              -
              
              
              
              -Total
      liabilities
              
              
              205,394
              
              
              
              333,974Common
      stock subject to possible rescission (160,837 shares)
              
              
              241,256
              
              
              
              241,256Stockholders'
      equity :Preferred
      stock, $.01 par value; 5,000,000 sharesauthorized,
      0 shares issued and outstanding
              
              
              -
              
              
              
              -Class
      A common stock, $.001 par value; 50,000,000shares
      authorized, 0 shares issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, $.001 par value; 100,000,000 sharesauthorized,
      issued and outstanding 69,913,395 and60,956,761
      shares, respectively
              
              
              69,913
              
              
              
              60,957Additional
      paid-in capital
              
              
              3,784,482
              
              
              
              2,019,814Deficit
      accumulated during the development stage
              
              
              (3,966,683
              )
              
              
              (2,569,627
              )Total
      stockholders' equity (deficiency)
              
              
              (112,288
              )
              
              
              (488,856
              )Total
      liabilities and stockholders' equity
              
              $
              334,362
              
              
              $
              86,374






See notes
to consolidated financial statements.
   F-3
    SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Consolidated
Statements of Operations
 During
      theDevelopmentStageYear
      Ended
                
                
                Year
      Ended
                
                
                (December
      18, 2002June
      30,
                
                
                June
      30,
                
                
                to
      June 30,2008
                
                
                2007
                
                
                
                2008
                )Revenues
                
                $
                -
                
                
                $
                -
                
                
                $
                -Expenses:Officer's
      salary
                
                
                170,000
                
                
                
                170,000
                
                
                
                595,000Other
      general and administrative
                
                
                1,123,946
                
                
                
                725,016
                
                
                
                2,776,096Research
      and development
                
                
                85,167
                
                
                
                142,566
                
                
                
                563,163Total
      expenses
                
                
                1,379,113
                
                
                
                1,037,582
                
                
                
                3,934,259Loss
      from operations
                
                
                #########
                
                
                
                #########
                
                
                
                (3,934,259
                )Interest
      income
                
                
                -
                
                
                
                131
                
                
                
                657Interest
      expense
                
                
                (17,943
                )
                
                
                (12,738
                )
                
                
                (33,081
                )Net
      loss
                
                $
                #########
                
                
                $
                #########
                
                
                $
                (3,966,683
                )Net
      loss per share, basic and diluted
                
                $
                (0.02
                )
                
                $
                (0.02
                )Weighted
      average number of commonshares
      outstanding, basic and diluted
                
                
                #########
                
                
                
                #########
  See notes
to consolidated financial statements.
    F-4
  SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Consolidated
Statements of Changes in Stockholders' Equity
 DeficitAccumulated
                  
                  
                  TotalAdditional
                  
                  
                  During
      the
                  
                  
                  Stockholders'Class
      A Common Stock
                  
                  
                  Common
      Stock
                  
                  
                  Paid-In
                  
                  
                  Development
                  
                  
                  EquityShares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Stage
                  
                  
                  (Deficiency)Net
      loss for periodDecember
      18, 2002(date
      of inception)to
      June 30, 2003
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  (60
                  )
                  
                  $
                  (60
                  )Balances,
      June 30, 2003
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (60
                  )
                  
                  
                  (60
                  )Sale
      of Class Acommon
      stock  inOctober
      2003 at a priceof
      $.001 per share
                  
                  
                  50,000,000
                  
                  
                  
                  50,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,000Sale
      of common stockfrom
      October 2003to
      June 2004 at aprice
      of $.01 per share
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  8,560,257
                  
                  
                  
                  8,560
                  
                  
                  
                  77,042
                  
                  
                  
                  -
                  
                  
                  
                  85,602Net
      loss for year endedJune
      30, 2004
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (35,978
                  )
                  
                  
                  (35,978
                  )Balances,
      June 30, 2004
                  
                  
                  50,000,000
                  
                  
                  
                  50,000
                  
                  
                  
                  8,560,257
                  
                  
                  
                  8,560
                  
                  
                  
                  77,042
                  
                  
                  
                  (36,038
                  )
                  
                  
                  99,564Costs
      associated withsale
      of common stocksubject
      to possiblerescission
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (95,877
                  )
                  
                  
                  -
                  
                  
                  
                  (95,877
                  )Net
      loss for year endedJune
      30, 2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (258,355
                  )
                  
                  
                  (258,355
                  )Balances,
      June 30, 2005
                  
                  
                  50,000,000
                  
                  
                  
                  50,000
                  
                  
                  
                  8,560,257
                  
                  
                  
                  8,560
                  
                  
                  
                  (18,835
                  )
                  
                  
                  (294,393
                  )
                  
                  
                  (254,668
                  )Sale
      of common stockfrom
      August 2005 toFebruary
      2006 in publicoffering
      at $1.50 pershare,
      less offeringcosts
      of $138,471
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  743,648
                  
                  
                  
                  744
                  
                  
                  
                  976,257
                  
                  
                  
                  -
                  
                  
                  
                  977,001
  See notes
to consolidated financial statements.
  F-5
  SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Consolidated
Statements of Changes in Stockholders' Equity
 DeficitAccumulated
                  
                  
                  TotalAdditional
                  
                  
                  During
      the
                  
                  
                  Stockholders'Class
      A Common Stock
                  
                  
                  Common
      Stock
                  
                  
                  Paid-In
                  
                  
                  Development
                  
                  
                  EquityShares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Stage
                  
                  
                  (Deficiency)Conversion
      of Class Acommon
      stock tocommon
      stock byrelated
      parties inFebruary
      and May 2006
                  
                  
                  
                  (50,000,000
                  )
                  
                  
                  (50,000
                  )
                  
                  
                  50,000,000
                  
                  
                  
                  50,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Conversion
      of $60,000loans
      payable andaccrued interest
      tocommon
      stock inMarch
      2006
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  40,000
                  
                  
                  
                  40
                  
                  
                  
                  62,360
                  
                  
                  
                  -
                  
                  
                  
                  62,400Shares
      issued for services
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  20,000
                  
                  
                  
                  20
                  
                  
                  
                  19,980
                  
                  
                  
                  -
                  
                  
                  
                  20,000Sale
      of Units from May2006
      to June 2006 inprivate
      offering at $1.15per
      Unit less offeringcosts
      of $38
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  192,464
                  
                  
                  
                  192
                  
                  
                  
                  221,104
                  
                  
                  
                  -
                  
                  
                  
                  221,296Net
      loss for year endedJune
      30, 2006
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,225,045
                  )
                  
                  
                  (1,225,045
                  )Balances,
      June 30, 2006
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  59,556,369
                  
                  
                  
                  59,556
                  
                  
                  
                  1,260,866
                  
                  
                  
                  (1,519,438
                  )
                  
                  
                  (199,016
                  )Sale
      of Units inprivate
      placements
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,208,887
                  
                  
                  
                  1,209
                  
                  
                  
                  759,140
                  
                  
                  
                  -
                  
                  
                  
                  760,349Shares
      issued for servicesand
      adjustments
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  191,505
                  
                  
                  
                  192
                  
                  
                  
                  (192
                  )
                  
                  
                  -
                  
                  
                  
                  -Net
      loss for yearended
      June 30, 2007
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,050,189
                  )
                  
                  
                  (1,050,189
                  )Balances,
      June 30, 2007
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  60,956,761
                  
                  
                  
                  60,957
                  
                  
                  
                  2,019,814
                  
                  
                  
                  (2,569,627
                  )
                  
                  
                  (488,856
                  )
   See notes
to consolidated financial statements.
   F-6
   SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Consolidated
Statements of Changes in Stockholders' Equity
   DeficitAccumulated
                  
                  
                  TotalAdditional
                  
                  
                  During
      the
                  
                  
                  Stockholders'Class
      A Common Stock
                  
                  
                  Common
      Stock
                  
                  
                  Paid-In
                  
                  
                  Development
                  
                  
                  EquityShares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Stage
                  
                  
                  (Deficiency)Sale
      of Units inprivate
      placements
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,239,816
                  
                  
                  
                  5,239
                  
                  
                  
                  1,162,187
                  
                  
                  
                  -
                  
                  
                  
                  1,167,426Sale
      of shares inprivate
      placements
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,389,818
                  
                  
                  
                  1,390
                  
                  
                  
                  131,408
                  
                  
                  
                  -
                  
                  
                  
                  132,798Shares
      issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,327,000
                  
                  
                  
                  2,327
                  
                  
                  
                  471,073
                  
                  
                  
                  -
                  
                  
                  
                  473,400Net
      loss for yearended
      June 30, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,397,056
                  )
                  
                  
                  (1,397,056
                  )Balances,
      June 30, 2008
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  69,913,395
                  
                  
                  $
                  69,913
                  
                  
                  $
                  3,784,482
                  
                  
                  $
                  (3,966,683
                  )
                  
                  $
                  (112,288
                  )
    F-7
  SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Consolidated
Statements of Cash Flows
 CumulativeDuring
      theDevelopmentStageYear
      Ended
                    
                    
                    Year
      Ended
                    
                    
                    (December
      18, 2002June
      30,
                    
                    
                    June
      30,
                    
                    
                    to
      June 30,2008
                    
                    
                    2007
                    
                    
                    
                    2008)Cash
      flows from operating activities:Net
      loss
                    
                    $
                    (1,397,056
                    )
                    
                    $
                    (1,050,189
                    )
                    
                    $
                    (3,966,683
                    )Interest
      accrued on convertible notes payable
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,400Shares
      issued for services
                    
                    
                    473,400
                    
                    
                    
                    -
                    
                    
                    
                    493,400Depreciation
      of equipment
                    
                    
                    4,284
                    
                    
                    
                    4,402
                    
                    
                    
                    9,315Amortization
      of patent costs
                    
                    
                    1,500
                    
                    
                    
                    1,500
                    
                    
                    
                    5,625Changes
      in operating assets and liabilities:Prepaid
      expenses
                    
                    
                    7,051
                    
                    
                    
                    (26,503
                    )
                    
                    
                    (51,901
                    )Organization
      costs
                    
                    
                    60
                    
                    
                    
                    120
                    
                    
                    
                    -Accounts
      payable and accrued expenses
                    
                    
                    (74,019
                    )
                    
                    
                    101,423
                    
                    
                    
                    67,886Payroll
      taxes, withholdings, and accruedinterest
      and penalties
                    
                    
                    (54,561
                    )
                    
                    
                    161,442
                    
                    
                    
                    137,508Net
      cash used for operating activities
                    
                    
                    (1,039,341
                    )
                    
                    
                    (807,805
                    )
                    
                    
                    (3,302,450
                    )Cash
      flows from investing activities:Equipment
      purchased
                    
                    
                    -
                    
                    
                    
                    (10,253
                    )
                    
                    
                    (15,984
                    )Patent
      costs incurred
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (15,000
                    )Net
      cash used for investing activities
                    
                    
                    -
                    
                    
                    
                    (10,253
                    )
                    
                    
                    (30,984
                    )Cash
      flows from financing activities:Proceeds
      from notes payable
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    60,000Loans
      from related party
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    54,427Repayment
      of loans from related party
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (54,427
                    )Stock
      subscriptions collected from private placements, net
                    
                    
                    1,300,224
                    
                    
                    
                    760,349
                    
                    
                    
                    2,562,850Sale
      of common stock in public offering
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,115,472Public
      offering costs incurred
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (138,471
                    )Net
      cash provided by  financing activities
                    
                    
                    1,300,224
                    
                    
                    
                    760,349
                    
                    
                    
                    3,599,851Net
      increase (decrease) in cash
                    
                    
                    260,883
                    
                    
                    
                    (57,709
                    )
                    
                    
                    266,417Cash,
      beginning of period
                    
                    
                    5,534
                    
                    
                    
                    63,243
                    
                    
                    
                    -Cash,
      end of period
                    
                    $
                    266,417
                    
                    
                    $
                    5,534
                    
                    
                    $
                    266,417Supplemental
      disclosures of cash flow information:Interest
      paid
                    
                    $
                    15,436
                    
                    
                    $
                    12,738
                    
                    
                    $
                    28,174Income
      taxes paid
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -






See notes
to consolidated financial statements.






F-8






SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 NOTE
1 – ORGANIZATION
 
 SmartMetric,
Inc. (“SmartMetric”) was incorporated in the State of Nevada on December 18,
2002.  SmartMetric is developing a credit card size plastic card
embedded with an integrated circuit chip and biometric fingerprint sensor which
provides identification of the user (the “SmartMetric Smart Card”) to market to
government agencies, corporations, and organizations interested in
identification cards.
 
 NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of
presentation – The consolidated financial statements include the accounts of
SmartMetric and its inactive wholly owned subsidiary SmartMetric Australia Pty.
Ltd. (collectively, the “Company”).  The Company has been presented as
a “development stage enterprise” in accordance with Statement of Financial
Accounting Standards (“SFAS”) No.7, “Accounting and Reporting by Development
Stage Enterprises”.  Since inception, the Company’s activities have
been limited to organizational efforts, obtaining initial financing, and product
development.
 
 The
consolidated financial statements have been prepared on a “going concern” basis,
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business.  However, at June 30, 2008 and 2007,
the Company had a stockholders’ deficiency of $112,288 and $488,856,
respectively.  For the years ended June 30, 2008 and 2007, the Company
incurred net losses of $1,397,056 and $1,050,189, respectively.  These
factors create uncertainty as to the Company’s ability to continue as a going
concern.  As discussed in Note 6 to the consolidated financial
statements, the Company is raising capital through private placements of its
common stock to commence planned operations and achieve profitability. However,
there is no assurance that the Company will be successful in raising sufficient
capital to accomplish these objectives.  The financial statements do
not include any adjustments that might be necessary should the Company be unable
to continue as a going concern.
 
 Use of
estimates – The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ
from those estimates.
 
 Fair
value of financial instruments – The Company’s financial instruments consist of
cash, accounts payable and accrued expenses, and payroll taxes, withholdings,
and accrued interest and penalties, which approximate fair value because of
their short maturity.
  F-9
     SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 Equipment
– Equipment is stated at cost and depreciated using the straight line method
over the respective assets’ useful life.
 
 Patent
costs – Patent costs are amortized over the respective patent’s expected useful
economic life (ten years) using the straight line method.
 
 Income
taxes – Income taxes are accounted for under the assets and liability
method.  Current income taxes are provided in accordance with the laws
of the respective taxing authorities.  Deferred income taxes are
provided for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards.   Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.  Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is not more likely than not that some portion or all of the deferred tax
assets will be realized.
 
 Net loss
per common share – Basic net income (loss) per common share is computed on the
basis of the weighted average number of common shares outstanding during the
period.
 
 Diluted
net income (loss) per share is computed on the basis of the weighted average
number of common shares and dilutive securities (such as stock options,
warrants, and other convertible securities) outstanding.  Dilutive
securities having an anti-dilutive effect on diluted net income (loss) per share
are excluded from the calculation.
 
 Reclassifications
– Certain prior year balances have been reclassified to conform to current year
presentation.
 
 
 
 F-10
 
 
 SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 NOTE
3 – PATENT COSTS
 
 Patent
costs consist of:
  June
      30,2008
                
                
                2007Legal
      fees paid in connection with patent applicationsfor
      products covered under the Company'slicense
      agreement with ACI (see note 8)
                
                $
                15,000
                
                
                $
                15,000Less
      accumulated amortization
                
                
                (5,625
                )
                
                
                (4,125
                )Net
                
                $
                9,375
                
                
                $
                10,875
 Amortization
expense relating to the patent costs for the years ended June 30, 2008 and 2007
was $1,500 and $1,500, respectively.  Expected amortization expense
for each of the Company’s five succeeding fiscal years ending June 30, 2009,
2010, 2011, 2012, and 2013 is $1,500, $1,500, $1,500, $1,500, and $1,500,
respectively.
 
 NOTE
4 – PAYROLL TAXES, WITHHOLDINGS, AND ACCRUED INTEREST
AND PENALTIES
 
 As of
June 30, 2008, the Company had not filed payroll tax returns for the quarterly
periods ended September 30, 2007, December 31, 2007, March 31, 2008, and June
30, 2008 and had not paid any of the related withholdings or employer
taxes.  The liability consists of:
  June
      30,2008
              
              
              2007Social
      security and Federal income tax withheld
              
              $
              88,609
              
              
              $
              117,143Social
      security taxes
              
              
              17,314
              
              
              
              26,764Accrued
      interest
              
              
              3,033
              
              
              
              5,540Accrued
      penalties
              
              
              28,552
              
              
              
              42,622Total
              
              $
              137,508
              
              
              $
              192,069
 
  F-11
  SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 In August
2008, the Company filed the March 31, 2008 and June 30, 2008 payroll tax returns
and paid $57,000 of the $137,508 June 30, 2008 liability.
 
 NOTE
5 – COMMON STOCK SUBJECT TO POSSIBLE RESCISSION
 
 On
November 3, 2004, the Company deposited $102,311 from the sale of a total of
68,207 shares of common stock to 9 investors at a price of $1.50 per
share.  The net proceeds to the Company, after deducting $44,052 in
costs relating to this private placement for fees paid to an unrelated third
party, was $58,259.
 
 On
January 30, 2005, the Company closed a second private placement which resulted
in the sale of a total of 92,630 shares of common stock to 11 investors at a
price of $1.50 per share, or $138,945 gross proceeds.  The net
proceeds to the Company, after deducting $51,000 in fees paid to an unrelated
third party and $825 in other costs, was $87,120.
 
 Since the
private placements referred to in the two preceding paragraphs occurred after
the Company’s filing of its Registration Statement on Form SB-2 on September 3,
2004 and before its effectiveness on August 12, 2005, the related investors may
have had rescission rights under the federal securities
laws.  Accordingly, the Company classified the $241,256 gross proceeds
from these private placements as temporary equity separate and apart from
stockholders’ equity and classified the $95,877 related costs as a deduction
from stockholders’ equity.
 
 The
Company believes that the statute of limitations for claiming rescission ran on
August 12, 2008 (three years from the date the shares were offered to the
public).  To date, none of the investors has made a claim for
rescission.  Accordingly, the Company will reclassify the $241,256
gross proceeds as stockholders’ equity in the three months ended September 30,
2008.
 
 NOTE
6 – STOCKHOLDERS’ EQUITY
 
 From
August 2005 to February 2006, the Company sold a total of 743,648 shares of
common stock at $1.50 per share in its public offering resulting in gross
proceeds of $1,115,472.  The net proceeds to the Company, after
deducting $138,471 in offering costs, was $977,001.
 
 From May
2006 to June 2006, the Company sold a total of 192,464 Units at $1.15 per Unit
in private placements resulting in gross proceeds of $221,334 and net proceeds
of $221,296.  Each Unit consisted of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.50 per share.
 
 
 
 F-12
   SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 
 In July
2006, the Company sold a total of 56,522 Units at $1.15 per Unit in private
placements resulting in net proceeds of $65,000.  In August 2006 and
September 2006, the Company sold a total of 128,377 Units at prices ranging from
$.60 to $.79 per Unit in private placements resulting in net proceeds of
$83,558.  In the three months ended December 31, 2006, the Company
sold a total of 344,115 Units at prices ranging from $.48 to $1.00 per Unit in
private placements resulting in net proceeds of $229,284.  In the
three months ended March 31, 2007, the Company sold a total of 297,228 Units at
prices ranging from $.55 to $1.00 per Unit in private placements resulting in
net proceeds of $200,641.  In the three months ended June 30, 2007,
the Company sold a total of 382,645 Units at prices ranging from $.36 to $.56
per Unit in private placements resulting in net proceeds of
$181,866.  Each Unit consisted of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.50 per share.
 
 In the
year ended June 30, 2007, the Company also authorized the issuance of a total of
82,893 Units to various parties for services rendered relating to the public
offering and the private placements and a total of 108,612 shares of common
stock to various parties for adjustments relating to such
financings.
 
 In the
three months ended September 30, 2007, the Company sold a total of 903,813 Units
at prices ranging from $.30 to $.34 per Unit in private placements resulting in
net proceeds of $297,633.  In the three months ended December 31,
2007, the Company sold a total of 332,500 Units at prices ranging from $.20 to
$.25 per Unit in private placements resulting in net proceeds of
$64,284.  In the three months ended March 31, 2008, the Company sold a
total of 1,042,300 Units at a price of $.20 per Unit in private placements
resulting in net proceeds of $207,967. In the three months ended June 30, 2008,
the Company sold a total of 2,961,203 Units at prices ranging from $0.20 to
$0.25 per Unit in private placements resulting in net proceeds of
$597,542.  Each Unit consists of one share of common stock and one
warrant exercisable for 12 months from the date of issue into one share of
common stock at $1.00 per share.
 
 On March
25, 2008, the Company sold 200,000 shares of its common stock at a price of $.10
per share resulting in net proceeds of $20,000.  In the three months
ended June 30, 2008, the Company sold 1,189,818 shares of its common stock at
prices ranging from $0.07 to $0.13 per share resulting in net proceeds of
$112,798.
 
 In the
three months ended September 30, 2007, the Company authorized the issuance of a
total of 80,000 shares (valued at $24,000) to two non-officer directors of the
Company for services rendered.
 
 
 F-13
  SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 
 On
January 14, 2008, the Company issued a total of 2,107,000 shares of its common
stock (valued at $421,400) to its attorney and two consultants for services
rendered.
 
 On
February 26, 2008, the Company issued 140,000 shares of its common stock (valued
at $28,000) to its attorney for services rendered.
  A summary
of warrant activity follows:
 
 Year
      Ended June 30,2008
                
                
                2007Outstanding
      at beginning of year
                
                
                1,291,780
                
                
                
                192,464Issued
                
                
                5,239,816
                
                
                
                1,291,780Exercised
                
                
                -
                
                
                
                -Expired
                
                
                (1,291,780
                )
                
                
                (192,464
                )Outstanding
      at end of year
                
                
                5,239,816
                
                
                
                1,291,780
 
 The
5,239,816 warrants outstanding at June 30, 2008 are exercisable into a total of
5,239,816 shares of common stock at $1.00 per share and expire at various dates
from July 2008 to June  2009.
 
 NOTE
7 – INCOME TAXES
 
 No
provisions for income taxes have been recorded since the Company has incurred
losses since inception.
 
 Deferred
tax assets consist of:
 
 F-14
 
 
 
 SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 June
      30,2008
                
                
                2007Net
      operating loss carryforwards
                
                $
                1,388,339
                
                
                $
                873,673Less
      valuation allowance
                
                
                (1,388,339
                )
                
                
                (873,673
                )Net
                
                $
                -
                
                
                $
                -
 
 Based on
management’s present assessment, the Company has not yet determined it to be
more likely than not that a deferred tax asset of $1,388,339 attributable to the
future utilization of $3,966,683 of net operating loss carryforwards as of June
30, 2008 will be realized.  Accordingly, the Company has provided a
100% allowance against the deferred tax asset in the financial statements at
June 30, 2008.  The Company will continue to review this valuation
allowance and make adjustments as appropriate.  The net operating loss
carryforwards expire $60 in 2023, $35,978 in 2024, $258,355 in 2025, $1,225,045
in 2026, $1,050,189 in 2027, and $1,397,056 in 2028.
 
 NOTE
8 – COMMITMENTS AND CONTINGENCIES
 
 Patent
license agreement – Effective August 1, 2004, SmartMetric executed a license
agreement with Applied Cryptology, Inc. (“ACI”), a corporation controlled by
SmartMetric’s president and the owner of certain technology.  Pursuant
to the license agreement, SmartMetric has the right to make use of this
technology for the purpose of developing software and systems to be used by
SmartMetric to provide any or all of the following:  1) secure
transactions over the Internet from home and office computers; 2) an automatic
method for connecting to remote computers; 3) a method of developing targeted
advertising to home and/or office computers; 4) identity verification and access
control as provided for in the patent.  Pursuant to this license
agreement, ACI will receive 2% of all revenues generated by SmartMetric on
products which utilize this patented technology.  The license fee will
be paid on a quarterly basis based on revenues received during the
quarter.  The license fee shall be due within 45 days of the end of
each quarter.  In the event no revenues are generated through the use
of any of the licensed patents during a given quarter, no money shall be owed
ACI for such quarter.  ACI may rescind the license agreement and
reclaim all rights and interest in the patents if certain events, such as
SmartMetric’s filing for bankruptcy protection or reorganization,
occur.  This license agreement will remain in effect for the lives of
the patents.  SmartMetric may utilize the technological applications
anywhere in the world without limitation.
   F-15
  SMARTMETRIC,
INC. AND SUBSIDIARY
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and
 For
the Period December 18, 2002
 (Date
of Inception) to June 30, 2008
 
 Employment
agreement – Effective July 1, 2004, SmartMetric executed a one year employment
agreement with its president, which in June 2005 was renewed for one year to
June 30, 2006.  Pursuant to this employment agreement, the president
received a salary of $170,000 and $85,000 for the years ended June 30, 2006 and
2005, respectively. Although the employment agreement has not been renewed in
writing, the president continues to serve SmartMetric  and is being
paid on the basis of a $170,000 annual salary.
 
 Lease
agreement – SmartMetric leases office space in Bay Harbor Islands, Florida under
a month to month agreement at a monthly rental of $3,650 per
month.  Rent expense for the years ended June 30, 2008 and 2007 was
$54,872 and $34,776, respectively.
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 F-16