SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB





Annual
      Report Pursuant to Section 13 or 15(d) of


the
      Securities Exchange Act of 1934





For
      the
      Fiscal Year Ended June 30, 2007


Commission
      File Number: 333-118801





SMARTMETRIC,
                INC.(Name
                of Small Business Issuer in its charter)Nevada
            05-0543557(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)9553
                Harding Avenue, Suite 303 Surfside, Florida
            33154(Address
                of principal executive offices)
            (Zip
                Code)(786)
              623-5690Registrant's
                telephone number, including area codeSecurities
                registered pursuant to Section 12(g) of the Act:Common
                Stock $.001 Par Value(Title
                of Class)





Check
      whether the issuer: (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. Yes X No
      ____.





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will 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-KSB
      or
      any amendment to this Form 10-KSB X





The
      issuer's revenues for its most recent fiscal year were $0.





The
      aggregate market value of the voting stock held by non-affiliates of the
      Registrant was approximately $2,263,762 on October 15, 2007 based on the last
      sale reported at $0.21 per share. For the purposes of the foregoing sentence,
      the term "affiliate" includes each director and officer of the
      Registrant.





The
      number of shares outstanding of the Registrant's common stock on October 15,
      2007 was 61,117,598.





Documents
      Incorporated By Reference - See Item 13 to this Form 10-KSB.





TABLE
      OF
      CONTENTS




Page
                #PART
                IItem
                1:
            Description
                of Business
            3Item
                2:
            Description
                of Property
            9Item
                3:
            Legal
                Proceedings
            9Item
                4:
            Submission
                of Matters to a Vote if Security Holders
            9PART
                IIItem
                5:
            Market
                for the Registrant’s Common Stock, Related Stockholder Matters and Small
                Business Issuer Purchase of Equity Securities
            10Item
                6:
            Management’s
                Discussion & Analysis of Financial Condition and Results of
                Operations
            11Item
                7:
            Financial
                Statements
            14Item
                8:
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            14Item
                8A:
            Control
                and Procedures
            14Item
                8B:
            Other
                Information
            14PART
                IIIItem
                9:
            Directors
                and Executive Officers of the Registrant
            14Item
                10:
            Executive
                Compensation
            16Item
                11:
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            17Item
                12:
            Certain
                Relationships and Related Transactions
            17Item
                13:
            Exhibits
            18Item
                14:
            Principal
                Accountant Fees and Services
            19Signatures
            20






2


**PART
      I**





ITEM
                1.
            DESCRIPTION
                OF BUSINESS





**General**





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





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. In March 2005, Mr. Hendrick
      transferred his shares of SmartMetric to Applied Cryptography.





As
      of
      June 30, 2007, SmartMetric had a total stockholders' deficiency of $488,856,
      and
      cash of $5,534. In February 2006, SmartMetric closed on its initial public
      offering. The company sold 743,648 shares of common stock at $1.50 per share
      for
      a total gross offering proceeds of $1,115,472. On April 2, 2006, our shares
      began trading on the over-the-counter bulletin board under the symbol SMME.OB.
      The company’s common stock currently trades on the “pink sheets” under the
      symbol SMME.





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 2005. The company
      is
      in the process of finalizing its biometric card and expects to have a final
      product by December 2007.





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




3


The
      SmartCard 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 SmartCard may be used as a credit card, building access
      card or computer access card.





SmartMetric
      believes that its SmartCard, because it contains 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 SmartCard 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 SmartCards 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
      SmartCard. 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.





The
      company expects that the memory and computational capacities of the SmartCard
      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 SmartCard 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 SmartCard 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.


4


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, but has not entered into an agreement
      with
      such supplier. When negotiating an agreement for the purchase of lithium polymer
      batteries, we will take into such consideration the price of the batteries,
      the
      quality of the batteries, the reputation of the supplier, and its ability to
      supply us with batteries in the quantities we require.





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
      SmartCard 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.






5


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.





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, SmartCards, 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 SmartCard**





The
      SmartMetric biometric SmartCard 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 SmartCard 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 SmartCard 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
      SmartCard may be used in different applications which require strong security
      protection and authentication.


6


The
      physical structure of a SmartCard 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 SmartCard 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 SmartCard. 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 SmartCard 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 SmartMetric 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 SmartCard prototype. We expect that such re-engineering will
      be
      complete by January 2008.


7


**The
      Patent**





Applied
      Cryptography, Inc., a company owned and controlled by Colin Hendrick, President
      and CEO of SmartMetric, owns a patent for a SmartCard process. This patent
      has
      been licensed to SmartMetric.





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.


8


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





**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 SmartCard.





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 SmartCard 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. Facilities





**Employees**





As
      of
      December 31, 2006, SmartMetric has three full time employees including Colin
      Hendrick, SmartMetric’s CEO, and three part-time employees. None of these
      employees belongs to any union.





ITEM
                2.
            DESCRIPTION
                OF PROPERTY





SmartMetric
      leases office space in Surfside, Florida under two month-to-month verbal
      agreements. Rent expenses for the years ended June 30, 2007 and 2006 were
      $34,776 and $24,560, respectively.





ITEM
                3.
            LEGAL
                PROCEEDINGS





Neither
      SmartMetric, nor any of its officers, directors or controlling shareholders
      are
      parties to any current litigation or aware of any threatened litigation against
      them.





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





SmartMetric
      held its annual shareholders meeting on April 26, 2007. Shareholders
      representing 50,606,782 shares were in attendance. At the meeting, Elizabeth
      Ryba, Colin Hendrick and Joseph Katzman were re-elected to the Board of
      Directors. Shareholders voted unanimously to retain Michael T. Studer, CPA,
      as
      SmartMetric’s independent auditor.


9


**PART
      II**





ITEM
                5.
            MARKET
                FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
                MATTERS:





As
      of
      June 30, 2007, there were 61,117,598 shares of common stock outstanding held
      by
      approximately 700 shareholders. SmartMetric’s securities currently trade on the
      Nasdaq “pink sheets” under the symbol SMME.





October
                1 - December 31, 2006High
                Bid
            
            Low
                Bid$1.00
            
            $0.80January
                1 - March 31, 2007High
                Bid
            
            Low
                Bid$0.95
            
            $0.20April
                1 - June 30, 2007High
                Bid
            
            Low
                Bid$0.45
            
            $0.35July
                1 - September 30, 2007High
                Bid
            
            Low
                Bid$0.38
            
            $0.20





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.





On
      February 15, 2006, the board of directors passed a resolution authorizing the
      conversion of all outstanding shares of Class A common stock into an equal
      number of shares of undesignated common stock upon an amendment to the company’s
      certificate of incorporation to increase the authorized number of common shares
      to 100,000,000. The certificate of amendment became effective on May 25, 2006.
      The 50,000,000 remaining shares of Class A common stock were converted into
      common shares effective May 25, 2006.


10





ITEM
                6.
            PLAN
                OF OPERATION





This
      analysis of the Company's financial condition, capital resources and operating
      results should be reviewed in conjunction with the accompanying Financial
      Statements, including the notes thereto.





SmartMetric
      was incorporated in the State of Nevada on December 18, 2002 to serve as a
      developer of identity management products. SmartMetric has been engaged in
      research and development of a biometric security solution, which can
      authenticate the identity of an individual in a self-contained credit card-sized
      device. SmartMetric refers to this device as a "biometric card" or a
      "SmartCard." A company controlled by Mr. Hendrick has granted SmartMetric a
      license to use, market and distribute this patented technology.





**Overview**





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 SmartCard but has not yet begun to manufacture
      SmartCards utilizing its licensed technology. To date, SmartMetric has had
      no
      sales revenues.





In
      February 2001 SmartMetric's CEO, Colin Hendrick, applied for a patent for this
      biometric card technology connecting SmartCards to networks, and providing
      secure access for such connections. In June 2004, Mr. Hendrick transferred
      his
      rights to this technology to Applied Cryptography, Inc., a Nevada corporation,
      he owns and controls, and which owns 49,277,778 shares of SmartMetric common
      stock. On August 1, 2004, Applied Cryptography entered into a license agreement
      with SmartMetric pursuant to which Applied Cryptography agreed to license this
      technology to SmartMetric in perpetuity in exchange for a royalty payment.
      This
      patent was granted on September 14, 2004.





We
      had $0
      sales revenue for the years ended June 30, 2006 and 2007, with a net loss of
      $(1,225,045) in 2006 and a net loss of $(1,050,189) for 2007.





**Plan
      of Operation**





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.


11


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.





Over
      the
      next 12 months, SmartMetric intends to commence marketing in an attempt to
      generate sales. We expect that we will have to raise additional funds within
      the
      next 12 months to complete the development of our SmartCard, to contract the
      production of our prototype and to commence marketing. We anticipate needing
      between $1,000,000 and $3,000,000, depending on our production and marketing
      costs.





We
      expect
      to outsource manufacturing of our SmartCards once we have sales orders. We
      do
      not intend to purchase any plants or significant equipment.





Once
      we
      have begun to generate sales, we intend to hire additional employees. However,
      until that time, we may only hire a few employees to market the SmartMetric
      SmartCard.





For
      the
      years ended June 30, 2006 and 2007, we spent $198,578 and $142,566 on research
      and development. Our research and development costs decreased by 28% from 2006
      to 2007, due to a decrease in development costs associated with our biometric
      SmartCard. To date, Mr. Hendrick has neither been paid, nor reimbursed, for
      any
      of these research and development costs.





**Completion
      of Prototype**





A
      prototype of our SmartCard was completed in February 2005. The finished product
      is the prototype or model for our SmartCards, which will be manufactured upon
      receipt of customer orders. We intend to revise some of the engineering of
      the
      prototype so as to decrease the size of the circuitry contained in the
      SmartCard.


12


**Production
      of SmartCards**





Once
      we
      have completed development of our SmartCard we will seek to obtain orders for
      it. Because SmartMetric does not own or rent a manufacturing facility, we will
      have to contract with one or more manufacturing facilities to produce our
      SmartCards.





SmartMetric
      believes its current sources of credit and liquidity, including funds raised
      in
      its private placements are insufficient to begin operations, including
      production of our SmartCards. Our plan includes outsourcing or contract
      manufacturing of approximately 75,000 SmartCards. A key element of SmartMetric's
      growth strategy is raising adequate funding to begin to outsource the
      manufacture of its biometric card. We believe that we will need to raise a
      minimum of $500,000 to begin outsourcing the manufacturing of our SmartCard.
      The
      amount of funds required will depend on the size of the orders we receive.
      We
      estimate that $500,000 will allow us to outsource production of 1,000 SmartCards
      and to begin marketing them. We will need to raise at least an additional
      $500,000 for working capital to last 12 months. We expect that orders larger
      than that will require additional financing. Such financing may be in the form
      of debt or equity. Currently, SmartMetric has no material commitments for
      capital expenditures.





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





YEAR
                ENDED
              JUNE
                302007
            2006Net
                Sales
            $
            0
            $
            0Cost
                of Sales
            $
            0
            $
            0Expenses
            $
            1,037,582
            $
            1,222,646Income
                (loss) from operation
            $
            (1,037,582)
            $
            (1,222,646)




Net
      sales
      for the years ended June 30, 2006 and 2007 were $0. Operating expenses for
      the
      year ended June 30, 2006 and 2007 were $1,222,582 and $1,037,582 respectively,
      which decrease was primarily due to a decrease in research and development
      costs. SmartMetric expended $198,578 in research and development for the year
      ended June 30, 2006, and $142,566 for the year ended June 30, 2007, a decrease
      of 28%. Net loss was $1,225,045 in the year ended June 30, 2006 and $1,050,189
      in the year ended June 30, 2007, a decreased loss of 14%. This decrease is
      the
      result of decreased costs related to research and development and general and
      administrative costs.





**Forward
      Looking Statements**





This
      Form
      10-KSB and the preceding Management's Discussion and Analysis contains various
      forward-looking statements, which represent the Company's beliefs or
      expectations regarding future events. The words “believes,” “expect,"
      "estimates" and similar expressions are intended to identify forward-looking
      statements. Forward-looking statements include, without limitation, discussions
      as to sales outlooks and outlooks for operating result. All forward-looking
      statements involve a number of risks and uncertainties that could cause the
      actual results to differ materially from the projected results, including
      problems that may arise on the part of third parties over whom the Company
      has
      little or no control. The impact of the foregoing could, in turn, have a
      material adverse effect on the Company's results of operations and financial
      condition.


13





ITEM
                7.
            FINANCIAL
                STATEMENTS





Attached





ITEM8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE





None





ITEM
                8A.
            CONTROL
                AND PROCEDURES





Under
      the
      supervision and with the participation of our management, including our
      Principal Executive Officer and Principal Financial Officer, we evaluate the
      effectiveness of the design and operation of our disclosure controls and
      procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
      of
      1934 (the “Exchange Act”)). Based on that evaluation, our Principal Executive
      Officer and Principal Financial Officer concluded that, as of the end of the
      period covered by this report, our disclosure controls and procedures are
      adequately designed to ensure that information required to be disclosed by
      us in
      the reports we file or submit under the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the applicable
      rules and forms. During the period covered by this Annual Report on Form 10-KSB,
      there was no change in our internal control over financial reporting (as defined
      in Rule13a-15(f) under the Exchange Act) that materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.





ITEM
                8B.
            OTHER
                INFORMATION





None





**PART
      III**





ITEM
                9.
            DIRECTORS
                AND EXECUTIVE OFFICERS OF THE
                REGISTRANT





The
      Company's Officers and Directors are as follows:




**Name******
            **Age**
            **Position
                with the Company**Colin
                Hendrick
              9195
                Collins Ave #302
              Surfside,
                Fl. 33154
            51
            President,
                Chief Executive Officer, Chief Financial Officer and Chairman of
                the
                BoardPeter
                Sleep
              3
                Bernadette Court
              East
                Doncaster, Victoria Australia
            62
            Vice
                President of Sales - Asia PacificJoseph
                Katzman
              790
                Montgomery Street Brooklyn, New York 11213
            50
            DirectorElizabeth
                Ryba
              73
                Brown Road
              Scarsdale,
                New York 10583
            56
            Director






14


**Biography**





**COLIN
      HENDRICK** ,
      has
      been President, Chief Executive Officer, Chief Financial 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.





**PETER
      SLEEP,** was
      Secretary and a director of SmartMetric from January 2003 to April 2006. Since
      April 2006, he has been Secretary and Vice President of Sales - Asia Pacific.
      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.





**JOSEPH
      KATZMAN** ,
      has
      been a director of SmartMetric since January 2003. 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.





**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. ****





**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.


15


**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, 2007,
      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
      10.
      EXECUTIVE COMPENSATION:





The
      following table sets forth the amount of all cash compensation paid to the
      Company's most highly compensated executive officers and for all executive
      officers as a group for the fiscal years ended June 30, 2006 and
      2007.





SUMMARY
                COMPENSATION TABLEAnnual
                Compensation
            Long
                Term CompensationAwards
            PayoutsName
                and Principal
              Position
            Year
            Salary
                (US$)
            Bonus
                (US$)
            Other
                Annual Compen-sation (US$)
            Securities
                Underlying Options/
              SAR
                Granteds
            Restricted
                Shares or Restricted Share Units
            LTIP
                Payouts (US$)
            All
                Other Compen-sationColin
                Hendrick(1)
              President,
                Chief Executive Officer, Chief Financial Officer, Chairman of the
                Board
            20052006
            85,000
              170,000
            Nil
              Nil
            Nil
              Nil
            Nil
              Nil
            Nil
              Nil
            Nil
              Nil
            Nil
              Nil2007
            170,000
            Nil
            Nil
            Nil
            Nil
            Nil
            NilPeter
                Sleep
              Vice
                President, Asia Pacific Sales, Director
            2005
            Nil
            Nil
            Nil
            Nil
            Nil
            Nil
            Nil2006
            Nil
            Nil
            52,920
            Nil
            Nil
            Nil
            Nil2007
            Nil
            Nil
            46,000
            Nil
            Nil
            Nil
            Nil





**(1)**
            SmartMetric
                has entered into an employment agreement with 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.




16


ITEM11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT





The
      following table sets forth as of June 30, 2007, certain information regarding
      the beneficial ownership of all officers, directors, nominees, and the
      beneficial ownership of those persons owning five (5%) percent or more of the
      outstanding shares of SmartMetric's Common Stock, and the beneficial ownership
      of all officers and directors as a group. Each of these persons exercises sole
      discretion to vote and dispose of the shares beneficially owned.





**NAME/ADDRESS**
              **BENEFICIAL**
              **OWNER****(1)**
            **NUMBER**
              **OF**
              **SHARES**
            **%
                OF CLASS**
            **TITLE
                OF CLASS**Colin
                Hendrick(2)
              9195
                Collins Ave #302
              Surfside,
                Fl. 33154
            49,277,778
            80.6
            Common
                StockPeter
                Sleep
              3
                Bernadette Court
              East
                Doncaster, Victoria
              Australia
            1,060,000(3)
            1.7%
            Common
                StockJoseph
                Katzman
              790
                Montgomery Street
              Brooklyn,
                New York 11213
            0
            0%
            Common
                StockElizabeth
                Ryba
              73
                Brown Road
              Scarsdale,
                New York 10583
            0
            0%
            Common
                StockAll
                Officers and Directors
              as
                a Group (4 persons)
            50,337,778
            86.1%
            Common
                Stock





(1)
            Each
                shareholder has sole voting and investment power with respect to
                his/her
                shares. Each shareholder has sole voting and investment power with
                respect
                to his/her shares.





(2)
            Effective
                May 25, 2006, Applied Cryptography, Inc., a Nevada corporation owned
                and
                controlled by Mr. Hendrick, converted its 49,500,000 shares of Class
                A
                common stock into 49,500,000 shares of common
                stock.





(3)
            Includes
                300,000 shares owned by Carolyn Dianne Sleep (Mr. Sleep’s wife) and
                500,000 shares owned by Trinity Trust. Mr. Sleep is trustee of the
                Trinity
                Trust.




ITEM
        12.
        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





SmartMetric
      was incorporated in the State of Nevada on December 18, 2002. In October 2003,
      SmartMetric sold 50,000,000 shares of common stock to its president and chief
      executive officer, Colin Hendrick, at $.001 per share for a total of $50,000.
      Between November 2003 and June 30, 2004 SmartMetric sold 8,560,257 shares to
      Mr.
      Hendrick at $0.01 per share for a total of $85,602.57. In August 2004, these
      8,560,257 shares were assigned to approximately 600 people for no consideration.
      The transferees were all friends, family and business acquaintances of Mr.
      Hendrick. Mr. Hendrick distributed shares because he wanted to create a large
      shareholder base for SmartMetric.





On
      August
      1, 2004, SmartMetric entered into a license agreement with Applied Cryptography,
      Inc., a company owned and controlled by Colin Hendrick, President and CEO of
      SmartMetric, pursuant to which Applied Cryptography, Inc. has agreed to license
      a patent then -pending owned by that company. Applied Cryptography, Inc. shall
      receive a license fee of the greater of 2% of the sales price of any licensed
      product or the fair market value of any license products. SmartMetric believes
      the license agreement is on terms at least as favorable to SmartMetric as those
      it would expect to negotiate with unaffiliated party.


17





ITEM
                13.
            EXHIBITS




(a)
            The
                exhibits required by Item 601 of Regulation S-B are as
                follows: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)14.1
            Code
                of Ethics(1)21.1
            Subsidiaries
                of SmartMetric(2)23.2
            Independent
                Auditor’s Consent31.1
            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 Office pursuant to Rule13a- 14(a) of the
                Securities Exchange Act of 193432.1
            Certification
                of SmartMetric’s Chief Executive Office and Chief Financial 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)99.1
            Subscription
                Agreement.(4)99.2
            Lease
                Agreement for Florida Office(3)





(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, 3005




18


ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES





**Audit
      Fees**





The
      Audit
      fees relating to years ended June 30, 2006 and 2007 were $19,500 and $24,000,
      respectively. All services provided by the principal accountants were approved
      by the audit committee.





**Audit
      - Related Fees**





The
      Audit-related fees relating to years ended June 30, 2006, and 2007 were $0
      and
      $0, respectively.





**Tax
      fees**





Fees
      relating to periods ended June 30, 2006 and 2007 for professional services
      rendered by the principal accountant for tax compliance, tax advice and/or
      tax
      planning were $0 and $0, respectively.





**All
      other Fees**





There
      were no other fees for 2006 or 2007.





**Audit
      Committee Pre-Approval Policies and Procedures**





The
      Audit
      Committee will be directly and solely responsible for oversight, engagement
      and
      termination of any independent auditor employed by the Company for the purpose
      of preparing or issuing an audit report or related work. Currently, the entire
      SmartMetric board serves as its audit committee.





The
      Committee will meet with the independent auditor prior to the audit and
      discusses the planning and staffing of the audit, approves in advance the
      engagement of the independent auditor for all audit services and non-audit
      services and approves the fees and other terms of any such engagement; and
      obtain periodically from the independent auditor a formal written statement
      of
      the matters required to be discussed by Statement of Auditing Standards No.
      61,
      as amended, and, in particular, describing all relationships between the auditor
      and the Company, and discusses with the auditor any disclosed relationships
      or
      services that my impact auditor objectivity and independence.


19


**SIGNATURES**





Pursuant
      to the requirements of Section 13 of 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





SMARTMETRIC,
                INC. (Registrant)By:
            /S/Colin
              HendrickColin
                HendrickPresident,
                Chief Executive OfficerDated:
            October
              15, 2007





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the following
      persons on behalf of the Registrant and in the capacities and on the date
      indicated have signed this report below.





By:
            /S/Colin
              HendrickColin
                HendrickPresident,
                Chief Executive Officer, Chief Financial Officer, Chairman of the
                BoardDated:
            October
              15,
              2007




By:Peter
                J. SleepVice
                President of Sales - Asia Pacific, SecretaryDated:





By:
            /S/Joseph
              KatzmanJoseph
                KatzmanDirectorDated:
            October
              15,
              2007





By:
            /S/Elizabeth
              RybaElizabeth
                RybaDirectorDated:
            October
              15,
              2007









20


**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, 2007 and 2006
              F-3Consolidated
                  Statements of Operations for the years endedJune
                  30, 2007 and 2006 and for the period December 18,2002
                  (inception) to June 30, 2007
              F-4Consolidated
                  Statements of Changes in Stockholders’ Equityfor
                  the period December 18, 2002 (inception)to
                  June 30, 2007
              F-5Consolidated
                  Statements of Cash Flows for the years endedJune
                  30, 2007 and 2006 and for the period December 18,2002
                  (inception) to June 30, 2007
              F-7Notes
                  to Consolidated Financial Statements
              F-8
 
 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, 2007 and
      2006, 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, 2007. 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
      audit.





I
      conducted my audit 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 audit provides 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, 2007 and 2006, 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, 2007 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
      12, 2007


F-2


**SMARTMETRIC,
                  INC. AND SUBSIDIARY****(A
                  Development Stage Company)****Consolidated
                  Balance Sheets****June
                  30,****2007**
              
              
              **2006****Assets**Current
                  assets:Cash
              $
              5,534
              
              $
              63,243Prepaid
                  expenses
              
              58,952
              
              
              32,449Total
                  current assets
              
              64,486
              
              
              95,692Equipment,
                  less accumulated depreciation of$5,031
                  and $629, respectively
              
              10,953
              
              
              5,102Other
                  assets:Patent
                  costs, less accumulated amortizationof
                  $4,125 and $2,625, respectively
              
              10,875
              
              
              12,375Organization
                  costs - net
              
              60
              
              
              180Total
                  assets
              $
              86,374
              
              $
              113,349**Liabilities
                  and Stockholders' Equity**Current
                  liabilities:Accounts
                  payable and accrued expenses
              $
              141,905
              
              $
              40,482Payroll
                  taxes, withholdings, and accruedinterest
                  and penalties
              
              192,069
              
              
              30,627Total
                  current liabilities
              
              333,974
              
              
              71,109Other
                  liabilities
              
              -
              
              
              -Total
                  liabilities
              
              333,974
              
              
              71,109Common
                  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 60,956,761 and59,556,369
                  shares, respectively
              
              60,957
              
              
              59,556Additional
                  paid-in capital
              
              2,019,814
              
              
              1,260,866Deficit
                  accumulated during the development stage
              
              (2,569,627)
              
              
              (1,519,438)Total
                  stockholders' equity (deficiency)
              
              (488,856)
              
              
              (199,016)Total
                  liabilities and stockholders' equity
              $
              86,374
              
              $
              113,349See
                  notes to consolidated financial statements.




F-3


**SMARTMETRIC,
                  INC. AND SUBSIDIARY****(A
                  Development Stage Company)****Consolidated
                  Statements of Operations****Cumulative****During
                  the****Development****Stage****Year
                  Ended**
              
              
              **Year
                  Ended**
              
              
              
              **(December
                  18, 2002****June
                  30,**
              
              
              **June
                  30,**
              
              
              
              **to
                  June 30,****2007**
              
              
              **2006**
              
              
              
              **2007)**Revenues
              $
              -
              
              $
              -
              
              
              $
              -Expenses:Officer's
                  salary
              
              170,000
              
              
              170,000
              
              
              
              425,000Other
                  general and administrative
              
              725,016
              
              
              854,068
              
              
              
              1,652,150Research
                  and development
              
              142,566
              
              
              198,578
              
              
              
              477,996Total
                  expenses
              
              1,037,582
              
              
              1,222,646
              
              
              
              2,555,146Loss
                  from operations
              
              (1,037,582)
              
              
              (1,222,646)
              
              
              
              (2,555,146)Interest
                  income
              
              131
              
              
              1
              
              
              
              657Interest
                  expense
              
              (12,738)
              
              
              (2,400)
              
              
              
              (15,138)Net
                  loss
              $
              (1,050,189)
              
              $
              (1,225,045)
              
              
              $
              (2,569,627)Net
                  loss per share, basic and diluted
              $
              (0.02)
              
              $
              (0.02)Weighted
                  average number of commonshares
                  outstanding, basic and diluted
              
              60,115,405
              
              
              59,119,659See
                  notes to consolidated financial statements.




F-4




**SMARTMETRIC,
                  INC. AND SUBSIDIARY****(A
                  Development Stage Company)****Consolidated
                  Statements of Changes in Stockholders' Equity****Deficit****Accumulated**
              
              **Total****Additional**
              
              
              **During
                  the**
              
              **Stockholders'****Class
                  A Common Stock**
              
              **Common
                  Stock**
              
              
              **Paid-In**
              
              
              **Development**
              
              **Equity****Shares**
              
              
              **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
              
              
              -
              
              977,001See
                  notes to consolidated financial statements.




F-5


**SMARTMETRIC,
                  INC. AND SUBSIDIARY****(A
                  Development Stage Company)****Consolidated
                  Statements of Changes in Stockholders' Equity****Deficit****Accumulated**
              
              **Total****Additional**
              
              
              **During
                  the**
              
              **Stockholders'****Class
                  A Common Stock**
              
              **Common
                  Stock**
              
              
              **Paid-In**
              
              
              **Development**
              
              **Equity****Shares**
              
              
              **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 Cash Flows****Cumulative****During
                  the****Development****Stage****Year
                  Ended**
              
              
              **Year
                  Ended**
              
              
              **(December
                  18, 2002****June
                  30,**
              
              
              **June
                  30,**
              
              
              **to
                  June 30,****2007**
              
              
              **2006**
              
              
              **2007)**Cash
                  flows from operating activities:Net
                  loss
              $
              (1,050,189)
              
              $
              (1,225,045)
              
              $
              (2,569,627)Interest
                  accrued on convertible notes payable
              
              -
              
              
              2,400
              
              
              2,400Shares
                  issued for services
              
              -
              
              
              20,000
              
              
              20,000Depreciation
                  of equipment
              
              4,402
              
              
              629
              
              
              5,031Amortization
                  of patent costs
              
              1,500
              
              
              1,500
              
              
              4,125Changes
                  in operating assets and liabilities:Prepaid
                  expenses
              
              (26,503)
              
              
              (31,049)
              
              
              (58,952)Organization
                  costs
              
              120
              
              
              120
              
              
              (60)Accounts
                  payable and accrued expenses
              
              101,423
              
              
              (139,433)
              
              
              141,905Payroll
                  taxes, withholdings, and accruedinterest
                  and penalties
              
              161,442
              
              
              30,627
              
              
              192,069Net
                  cash used for operating activities
              
              (807,805)
              
              
              (1,340,251)
              
              
              (2,263,109)Cash
                  flows from investing activities:Equipment
                  purchased
              
              (10,253)
              
              
              (5,731)
              
              
              (15,984)Patent
                  costs incurred
              
              -
              
              
              -
              
              
              (15,000)Net
                  cash used for investing activities
              
              (10,253)
              
              
              (5,731)
              
              
              (30,984)Cash
                  flows from financing activities:Proceeds
                  from notes payable
              
              -
              
              
              60,000
              
              
              60,000Loans
                  from related party
              
              -
              
              
              -
              
              
              54,427Repayment
                  of loans from related party
              
              -
              
              
              -
              
              
              (54,427)Stock
                  subscriptions collected from private placements, net
              
              760,349
              
              
              236,296
              
              
              1,262,626Sale
                  of common stock in public offering
              
              -
              
              
              1,115,472
              
              
              1,115,472Public
                  offering costs incurred
              
              -
              
              
              (3,471)
              
              
              (138,471)Net
                  cash provided by financing activities
              
              760,349
              
              
              1,408,297
              
              
              2,299,627Net
                  increase (decrease) in cash
              
              (57,709)
              
              
              62,315
              
              
              5,534Cash,
                  beginning of period
              
              63,243
              
              
              928
              
              
              -Cash,
                  end of period
              $
              5,534
              
              $
              63,243
              
              $
              5,534Supplemental
                  disclosures of cash flow information:Interest
                  paid
              $
              12,738
              
              $
              -
              
              $
              12,738Income
                  taxes paid
              $
              -
              
              $
              -
              
              $
              -See
                  notes to consolidated financial statements.




F-7


**SMARTMETRIC,
        INC. AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended June 30, 2007 and 2006 and**
 **For
        the Period December 18, 2002**
 **(Date
        of Inception) to June 30, 2007**
 
 **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 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, 2007 and 2006, the Company
        had a stockholders’ deficiency of $488,856 and $199,016, respectively. For the
        years ended June 30, 2007 and 2006, the Company incurred net losses of
        $1,050,189 and $1,225,045, respectively. These factors create uncertainty
        as to
        the Company’s ability to continue as a going concern. As discussed in Note 8 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-8
 **SMARTMETRIC,
        INC. AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended June 30, 2007 and 2006 and**
 **For
        the Period December 18, 2002**
 **(Date
        of Inception) to June 30, 2007**
 
 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-9
 **SMARTMETRIC,
        INC. AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended June 30, 2007 and 2006 and**
 **For
        the Period December 18, 2002**
 **(Date
        of Inception) to June 30, 2007**
 
 **NOTE
        3 - PATENT COSTS**
 
 Patent
        costs consist of:
 June
                    30,2007
                
                
                2006Legal
                    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
                
                
                (4,125)
                
                
                (2,625)Net
                
                $
                10,875
                
                $
                12,375
  Amortization
        expense relating to the patent costs for the years ended June 30, 2007 and
        2006
        was $1,500 and $1,500, respectively. Estimated amortization expense for each
        of
        the Company’s five succeeding fiscal years ending June 30, 2008, 2009, 2010,
        2011, and 2012 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, 2007, the Company had not filed payroll tax returns for the quarterly
        periods ended June 30, 2006, September 30, 2006, December 31, 2006, March
        31,
        2007, and June 30, 2007 and had not paid any of the related withholdings
        or
        employer taxes. The liability consists of:
 **June
                    30,****2007**
                
                
                **2006**Social
                    security and Federal income tax withheld
                
                $
                117,143
                
                $
                23,687Social
                    security taxes
                
                
                26,764
                
                
                6,940Accrued
                    interest
                
                
                5,540
                
                
                -Accrued
                    penalties
                
                
                42,622
                
                
                -Total
                
                $
                192,069
                
                $
                30,627
   F-10
 **SMARTMETRIC,
        INC. AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended June 30, 2007 and 2006 and**
 **For
        the Period December 18, 2002**
 **(Date
        of Inception) to June 30, 2007**
 
 In
        August
        and September 2007, the Company filed all of the delinquent payroll tax returns
        and paid $144,041 of the $192,069 June 30, 2007 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 rescission rights under the federal securities laws.
 
 Accordingly,
        the Company has classified the $241,256 gross proceeds from these private
        placements as temporary equity separate and apart from stockholders’ equity and
        has classified the $95,877 related costs as a deduction from stockholders’
equity.
 
 In
        the
        event that a claim for rescission arises and is allowed, the Company will
        deduct
        such amount from “common stock subject to possible rescission”. In the event
        that it is determined an investor no longer has a possible rescission right,
        the
        gross proceeds will be recorded as stockholders’ equity.
 
 Management
        is unable to determine at this time whether any claim for rescission will
        be
        filed against the Company; however, there is no assurance that claims will
        not
        be asserted.
 
 **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.
 F-11
 **SMARTMETRIC,
        INC. AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended June 30, 2007 and 2006 and**
 **For
        the Period December 18, 2002**
 **(Date
        of Inception) to June 30, 2007**
 
 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.
 
 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.
 
 A
        summary
        of warrant activity follows:
 
 **Year
                    Ended June 30,****2007**
                
                **2006**Outstanding
                    at beginning of year
                
                192,464
                
                -Issued
                
                1,291,780
                
                192,464Exercised
                
                -
                
                -Expired
                
                (192,464)
                
                -Outstanding
                    at end of year
                
                1,291,780
                
                192,464
 
 F-12
 **SMARTMETRIC,
        INC. AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended June 30, 2007 and 2006 and**
 **For
        the Period December 18, 2002**
 **(Date
        of Inception) to June 30, 2007**
 
 The
        1,291,780 warrants outstanding at June 30, 2007 are exercisable into a total
        of
        1,291,780 shares of common stock at $1.50 per share and expire at various
        dates
        from July 6, 2007 to June 28, 2008.
 
 **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:
 June
                    30,2007
                
                
                2006Net
                    operating loss carryforwards
                
                $
                873,673
                
                $
                516,609Less
                    valuation allowance
                
                
                (873,673)
                
                
                (516,609)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 $873,673 attributable to
        the
        future utilization of $2,569,627 of net operating loss carryforwards as of
        June
        30, 2007 will be realized. Accordingly, the Company has provided a 100%
        allowance against the deferred tax asset in the financial statements at June
        30,
        2007. 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, and $1,050,189
        in
        2007.
 
 **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
 
  F-13
 **SMARTMETRIC,
        INC. AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended June 30, 2007 and 2006 and**
 **For
        the Period December 18, 2002**
 **(Date
        of Inception) to June 30, 2007**
 
 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.
 
 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
        agreements - SmartMetric leases office space in Surfside, Florida under two
        month to month verbal agreements. Rent expense for the years ended June 30,
        2007
        and 2006 were $34,776 and $24,560, respectively.
 
  
 
 
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