| Delaware                                | 05-0543557                                 |
|-----------------------------------------|--------------------------------------------|
| (State                of Incorporation) | (IRS                Identification Number) |

| Common                Stock | 60,085,383 | December                31, 2006 |
|-----------------------------|------------|----------------------------------|
|                        |       |                             |

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|                                          | PAGE                                                                                               |
|-----------------------------------------------|----------------------------------------------------------------------------------------------------|
| PART                I - FINANCIAL INFORMATION | 3                                                                                                  |
|                                          |                                                                                               |
|                                          | Item                1 - FINANCIAL STATEMENTS (UNAUDITED)                                           | 3 |
|                                          |                                                                                               |
|                                          | Item                2 - PLAN OF OPERATION                                                          | 3 |
|                                          |                                                                                               |   |
|                                          | Item                3 - CONTROLS                AND PROCEDURES                                     | 5 |
|                                          |                                                                                               |
| PART                II- OTHER INFORMATION     | 5                                                                                                  |
|                                          |                                                                                               |
|                                          | Item                1 - LEGAL PROCEEDINGS                                                          | 5 |
|                                          |                                                                                               |   |
|                                          | Item                2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF                PROCEEDS | 5 |
|                                          |                                                                                               |   |
|                                          | Item                3 - DEFAULTS UPON SENIOR SECURITIES                                            | 6 |
|                                          |                                                                                               |   |
|                                          | Item                4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                        | 6 |
|                                          |                                                                                               |   |
|                                          | Item                5 - OTHER INFORMATION                                                          | 6 |
|                                          |                                                                                               |   |
|                                          | Item                6 - EXHIBITS                                                                   | 7 |

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| 1.   | Colin                Hendrick |
|----------------|-------------------------------|

| 2.   | Joseph                Katzman |
|----------------|-------------------------------|

| 3.   | Elizabeth                Ryba |
|----------------|-------------------------------|

----

| Exhibit                No. | Description                                                                                                                                                                                                                                                                                     |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                            |
| 3(i)                       | Articles                of Incorporation(1)                                                                                                                                                                                                                                                     |
|                       |                                                                                                                                                                                                                                                                                            |
| 3(i)(a)                    | Amended                Articles of Incorporation                                                                                                                                                                                                                                                |
|                       |                                                                                                                                                                                                                                                                                            |
| 3(ii)                      | Bylaws(1)                                                                                                                                                                                                                                                                                       |
|                       |                                                                                                                                                                                                                                                                                            |
| 10                         | Contract                with Information Spectrum, Inc.(1)                                                                                                                                                                                                                                      |
|                       |                                                                                                                                                                                                                                                                                            |
| 31.1                       | Certification                of SmartMetric’s Chief Executive Officer pursuant to Rule13a- 14(a) of the                Securities Exchange Act of 1934                                                                                                                                    |
|                       |                                                                                                                                                                                                                                                                                            |
| 31.2                       | Certificate                of SmartMetric’s Chief Financial Officer pursuant to Rule13a- 14(a) of the                Securities Exchange Act of 1934                                                                                                                                      |
|                       |                                                                                                                                                                                                                                                                                            |
| 32.1                       | Certification                of SmartMetric’s Chief Executive Officer required by Rule 13a-14(b) under                the Securities Exchange Act of 1934 and Section 1350 of Chapter 63                of                Title 18 the United States Code (18 U.S.C. 1350)                |
|                       |                                                                                                                                                                                                                                                                                            |
| 32.2                       | Certification                of SmartMetric’s Chief Financial Officer required by Rule 13a-14(b) under                the Securities Exchange Act of 1934 and Section 1350 of Chapter 63                of                Title 18 the United States Code (18 U.S.C.                1350) |

----

----

|                                          |  SMARTMETRIC,              INC. |
|-----------------------------------------------|--------------------------------------|
|                                          |                                 |   |   |
| Dated:                 February 12, 2007 | By:                                  | /s/                Colin Hendrick |   |
|                                          |                                 | Colin                Hendrick, President |

----

**SMARTMETRIC,        INC. AND SUBSIDIARY**

**(A          Development Stage Company)**

**Index          to Financial Statements**

|                                                                                |                                                                    | Page   |
|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------|--------|
|                                                                                |                                                                    |   |
| Consolidated                    Balance Sheets as of September 30, 2006             |                                                                    |
|                                                                                | (Unaudited)                    and June 30, 2006                        | F-2    |
|                                                                                |                                                                    |   |
| Consolidated                    Statements of Operations for the three months       |                                                                    |
|                                                                                | ended                    September 30, 2006 and 2005 and for the period |   |
|                                                                                | December                    18, 2002 (inception) to September 30, 2006  |   |
|                                                                                | (Unaudited)                                                             | F-3    |
|                                                                                |                                                                    |   |
| Consolidated                    Statements of Changes in Stockholders’ Equity |                                                                    |
|                                                                                | for                    the period December 18, 2002 (inception)         | F-4    |
|                                                                                | to                    September 30, 2006                                |   |
|                                                                                |                                                                    |   |
| Consolidated                    Statements of Cash Flows for the three months       |                                                                    |
|                                                                                | ended                    September 30, 2006 and 2005 and for the period |   |
|                                                                                | December                    18, 2002 (inception) to September 30, 2006  |   |
|                                                                                | (Unaudited)                                                             | F-6    |
|                                                                                |                                                                    |   |
| Notes                    to Consolidated Financial Statements                       | F-7                                                                     |
|                                                                                |                                                                    |   |

----

| **SMARTMETRIC,                  INC. AND SUBSIDIARY**                         |
|-------------------------------------------------------------------------------|
| **(A                  Development Stage Company)**                            |
| **Consolidated                  Balance Sheets**                              |
|                                                                          |   |   |   |   |   |
|                                                                          |   | **September                  30,** |   |   | **June                  30,** |
|                                                                          |   | **2006** |   |   | **2006** |
|                                                                          |   | **(Unaudited)** |   |   |   |
| **Assets**                                                                    |   |   |   |   |   |
| Current                  assets:                                              |   |   |   |   |   |
| Cash                                                                          | $ | 35,298 |   | $ | 63,243 |
| Due                  from related party                                       |   | 36,484 |   |   | 37,484 |
| Prepaid                  expenses                                             |   | 3,900 |   |   | 2,900 |
|                                                                          |   |   |   |   |   |
| Total                  current assets                                         |   | 75,682 |   |   | 103,627 |
|                                                                          |   |   |   |   |   |
| Equipment,                  less accumulated depreciation of                  |   |   |   |   |   |
| $2,513                  and $629, respectively                                |   | 12,571 |   |   | 5,102 |
|                                                                          |   |   |   |   |   |
| Other                  assets:                                                |   |   |   |   |   |
| Patent                  costs, less accumulated amortization                  |   |   |   |   |   |
| of                  $3,000 and $2,625, respectively                           |   | 12,000 |   |   | 12,375 |
| Organization                  costs - net                                     |   | 150 |   |   | 180 |
|                                                                          |   |   |   |   |   |
| Total                  assets                                                 | $ | 100,403 |   | $ | 121,284 |
|                                                                          |   |   |   |   |   |
| **Liabilities                  and Stockholders' Equity**                     |   |   |   |   |   |
|                                                                          |   |   |   |   |   |
| Current                  liabilities:                                         |   |   |   |   |   |
| Accounts                  payable and accrued expenses                        | $ | 123,466 |   | $ | 75,775 |
| Accrued                  salary due to president                              |   | - |   |   | 3,269 |
|                                                                          |   |   |   |   |   |
| Total                  current liabilities                                    |   | 123,466 |   |   | 79,044 |
|                                                                          |   |   |   |   |   |
| Other                  liabilities                                            |   | - |   |   | - |
|                                                                          |   |   |   |   |   |
| Total                  liabilities                                            |   | 123,466 |   |   | 79,044 |
|                                                                          |   |   |   |   |   |
| Common                  stock subject to possible rescission (160,837 shares) |   | 241,256 |   |   | 241,256 |
|                                                                          |   |   |   |   |   |
| Stockholders'                  equity :                                       |   |   |   |   |   |
| Preferred                  stock, $.01 par value; 5,000,000 shares            |   |   |   |   |   |
| authorized,                  0 shares issued and outstanding                  |   | - |   |   | - |
| Class                  A common stock, $.001 par value; 50,000,000            |   |   |   |   |   |
| shares                  authorized, 0 shares issued and outstanding           |   | - |   |   | - |
| Common                  stock, $.001 par value; 100,000,000 shares            |   |   |   |   |   |
| authorized,                  issued and outstanding 59,741,268 and            |   |   |   |   |   |
| 59,556,369                  shares, respectively                              |   | 59,741 |   |   | 59,556 |
| Additional                  paid-in capital                                   |   | 1,409,239 |   |   | 1,260,866 |
| Deficit                  accumulated during the development stage             |   | (1,733,299) |   |   | (1,519,438) |
|                                                                          |   |   |   |   |   |
| Total                  stockholders' equity (deficiency)                      |   | (264,319) |   |   | (199,016) |
|                                                                          |   |   |   |   |   |
| Total                  liabilities and stockholders' equity                   | $ | 100,403 |   | $ | 121,284 |
|                                                                          |   |   |   |   |   |
| See                  notes to consolidated financial statements.              |   |   |   |   |   |

----

| **SMARTMETRIC,                  INC. AND SUBSIDIARY**            |
|------------------------------------------------------------------|
| **(A                  Development Stage Company)**               |
| **Consolidated                  Statements of Operations**       |
| **(Unaudited)**                                                  |
|                                                             |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   | **Cumulative** |
|                                                             |   |   |   |   |   |   |   |   | **During                  the** |
|                                                             |   |   |   |   |   |   |   |   | **Development** |
|                                                             |   |   |   |   |   |   |   |   | **Stage** |
|                                                             |   | **Three                  Months Ended** |   |   |   | **(December                  18, 2002** |
|                                                             |   | **September                  30,** |   |   |   | **to                  September 30,** |
|                                                             |   | **2006** |   |   | **2005** |   |   |   | **2006)** |
|                                                             |   |   |   |   |   |   |   |   |   |
| Revenues                                                         | $ | - |   | $ | - |   |   | $ | - |
|                                                             |   |   |   |   |   |   |   |   |   |
| Expenses:                                                        |   |   |   |   |   |   |   |   |   |
| Officer's                  salary                                |   | 42,500 |   |   | 42,500 |   |   |   | 297,500 |
| Other                  general and administrative                |   | 155,735 |   |   | 120,927 |   |   |   | 1,084,743 |
| Research                  and development                        |   | 15,626 |   |   | 18,129 |   |   |   | 351,056 |
|                                                             |   |   |   |   |   |   |   |   |   |
| Total                  expenses                                  |   | 213,861 |   |   | 181,556 |   |   |   | 1,733,299 |
|                                                             |   |   |   |   |   |   |   |   |   |
| Net                  loss                                        | $ | (213,861) |   | $ | (181,556) |   |   | $ | (1,733,299) |
|                                                             |   |   |   |   |   |   |   |   |   |
| Net                  loss per share, basic and diluted           | $ | (0.00) |   | $ | (0.00) |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of common               |   |   |   |   |   |   |   |   |   |
| shares                  outstanding, basic and diluted           |   | 59,648,819 |   |   | 58,762,235 |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |
| See                  notes to consolidated financial statements. |   |   |   |   |   |   |   |   |   |

----

| **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 period                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December                  18, 2002                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (date                  of inception)                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to                  June 30, 2003                                               | - |   | $ | - |   | - |   | $ | - |   | $ | - |   | $ | (60) | $ | (60) |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                  June 30, 2003                                        | - |   |   | - |   | - |   |   | - |   |   | - |   |   | (60) |   | (60) |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                  of Class A                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| common                  stock in                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| October                  2003 at a price                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of                  $.001 per share                                             | 50,000,000 |   |   | 50,000 |   | - |   |   | - |   |   | - |   |   | - |   | 50,000 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                  of common stock                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| from                  October 2003                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to                  June 2004 at a                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| price                  of $.01 per share                                        | - |   |   | - |   | 8,560,257 |   |   | 8,560 |   |   | 77,042 |   |   | - |   | 85,602 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss for year ended                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June                  30, 2004                                                  | - |   |   | - |   | - |   |   | - |   |   | - |   |   | (35,978) |   | (35,978) |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                  June 30, 2004                                        | 50,000,000 |   |   | 50,000 |   | 8,560,257 |   |   | 8,560 |   |   | 77,042 |   |   | (36,038) |   | 99,564 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs                  associated with                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sale                  of common stock                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subject                  to possible                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| rescission                                                                      | - |   |   | - |   | - |   |   | - |   |   | (95,877) |   |   | - |   | (95,877) |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss for year ended                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June                  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 stock                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| from                  August 2005 to                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| February                  2006 in public                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| offering                  at $1.50 per                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share,                  less offering                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| costs                  of $138,471                                              | - |   |   | - |   | 743,648 |   |   | 744 |   |   | 976,257 |   |   | - |   | 977,001 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  notes to consolidated financial statements.                |   |   |   |   |   |   |   |   |   |   |   |

----

| **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 A                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| common                  stock to                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| common                  stock by                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| related                  parties in                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| February                  and May 2006                                          | (50,000,000) |   |   | (50,000) |   | 50,000,000 |   |   | 50,000 |   |   | - |   |   | - |   | - |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion                  of $60,000                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loans                  payable and                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued                  interest to                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| common                  stock in                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March                  2006                                                     | - |   |   | - |   | 40,000 |   |   | 40 |   |   | 62,360 |   |   | - |   | 62,400 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                  issued for services                                     | - |   |   | - |   | 20,000 |   |   | 20 |   |   | 19,980 |   |   | - |   | 20,000 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                  of Units from May                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2006                  to June 2006 in                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| private                  offering at $1.15                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                  Unit less offering                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| costs                  of $38                                                   | - |   |   | - |   | 192,464 |   |   | 192 |   |   | 221,104 |   |   | - |   | 221,296 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss for year ended                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June                  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) |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaudited:                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                  of Units in                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| private                  offerings                                              | - |   |   | - |   | 184,899 |   |   | 185 |   |   | 148,373 |   |   | - |   | 148,558 |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss for three                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| months                  ended                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September                  30, 2006                                             | - |   |   | - |   | - |   |   | - |   |   | - |   |   | (213,861) |   | (213,861) |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September                  30, 2006                                             | - |   | $ | - |   | 59,741,268 |   | $ | 59,741 |   | $ | 1,409,239 |   | $ | (1,733,299) | $ | (264,319) |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  notes to consolidated financial statements.                |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **SMARTMETRIC,                  INC. AND SUBSIDIARY**                       |
|-----------------------------------------------------------------------------|
| **(A                  Development Stage Company)**                          |
| **Consolidated                  Statements of Cash Flows**                  |
| **(Unaudited)**                                                             |
|                                                                        |   |   |   |   |   |   |   |   | **Cumulative** |
|                                                                        |   |   |   |   |   |   |   |   | **During                  the** |
|                                                                        |   |   |   |   |   |   |   |   | **Development** |
|                                                                        |   |   |   |   |   |   |   |   | **Stage** |
|                                                                        |   | **Three                  Months Ended**. |   |   |   | **(December                  18, 2002** |
|                                                                        |   | **September                  30,** |   |   |   | **to                  September 30,** |
|                                                                        |   | **2006** |   |   | **2005** |   |   |   | **2006)** |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Cash                  flows from operating activities:                      |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                   | $ | (213,861) |   | $ | (181,556) |   |   | $ | (1,733,299) |
| Interest                  accrued on convertible notes payable              |   | - |   |   | - |   |   |   | 2,400 |
| Shares                  issued for services                                 |   | - |   |   | - |   |   |   | 20,000 |
| Depreciation                  of equipment                                  |   | 1,884 |   |   | 342 |   |   |   | 2,513 |
| Amortization                  of patent costs                               |   | 375 |   |   | 375 |   |   |   | 3,000 |
| Changes                  in operating assets and liabilities:               |   |   |   |   |   |   |   |   |   |
| Due                  from related party                                     |   | 1,000 |   |   | (56,173) |   |   |   | (36,484) |
| Prepaid                  expenses                                           |   | (1,000) |   |   | - |   |   |   | (3,900) |
| Organization                  costs                                         |   | 30 |   |   | 30 |   |   |   | (150) |
| Accounts                  payable and accrued expenses                      |   | 47,691 |   |   | (50,225) |   |   |   | 123,466 |
| Accrued                  salary due to president                            |   | (3,269) |   |   | 42,500 |   |   |   | - |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Net                  cash used for operating activities                     |   | (167,150) |   |   | (244,707) |   |   |   | (1,622,454) |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Cash                  flows from investing activities:                      |   |   |   |   |   |   |   |   |   |
| Equipment                  purchased                                        |   | (9,353) |   |   | (2,281) |   |   |   | (15,084) |
| Patent                  costs incurred                                      |   | - |   |   | - |   |   |   | (15,000) |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Net                  cash used for investing activities                     |   | (9,353) |   |   | (2,281) |   |   |   | (30,084) |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Cash                  flows from financing activities:                      |   |   |   |   |   |   |   |   |   |
| Proceeds                  from notes payable                                |   | - |   |   | 60,000 |   |   |   | 60,000 |
| Loans                  from related party                                   |   | - |   |   | - |   |   |   | 54,427 |
| Repayment                  of loans from related party                      |   | - |   |   | - |   |   |   | (54,427) |
| Stock                  subscriptions collected from private placements, net |   | 148,558 |   |   | 15,000 |   |   |   | 650,835 |
| Sale                  of common stock in public offering                    |   | - |   |   | - |   |   |   | 1,115,472 |
| Public                  offering costs incurred                             |   | - |   |   | 602,506 |   |   |   | (138,471) |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Net                  cash provided by financing activities                  |   | 148,558 |   |   | 677,506 |   |   |   | 1,687,836 |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Net                  increase (decrease) in cash                            |   | (27,945) |   |   | 430,518 |   |   |   | 35,298 |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Cash,                  beginning of period                                  |   | 63,243 |   |   | 928 |   |   |   | - |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Cash,                  end of period                                        | $ | 35,298 |   | $ | 431,446 |   |   | $ | 35,298 |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Supplemental                  disclosures of cash flow information:         |   |   |   |   |   |   |   |   |   |
| Interest                  paid                                              | $ | - |   | $ | - |   |   | $ | - |
|                                                                        |   |   |   |   |   |   |   |   |   |
| Income                  taxes paid                                          | $ | - |   | $ | - |   |   | $ | - |
|                                                                        |   |   |   |   |   |   |   |   |   |
| See                  notes to consolidated financial statements.            |   |   |   |   |   |   |   |   |   |

----

**SMARTMETRIC,        INC. AND SUBSIDIARY**

**(A        Development Stage Company)**

**Notes        to Consolidated Financial Statements**

**For        the Three Months Ended September 30, 2006 and 2005 **

**and        For the Period December 18, 2002 (Date of Inception) **

**to        September 30, 2006 **

**(Unaudited)**

**NOTE        1 - INTERIM FINANCIAL STATEMENTS**

**NOTE        2 - ORGANIZATION**

**NOTE        3 - DUE FROM RELATED PARTY**

----

**SMARTMETRIC,        INC. AND SUBSIDIARY**

**(A        Development Stage Company)**

**Notes        to Consolidated Financial Statements**

**For        the Three Months Ended September 30, 2006 and 2005 **

**and        For the Period December 18, 2002 (Date of Inception) **

**to        September 30, 2006 **

**(Unaudited)**

**NOTE        4 - COMMON STOCK SUBJECT TO POSSIBLE RESCISSION **

**NOTE        5 - STOCKHOLDERS’ EQUITY**

----

**SMARTMETRIC,        INC. AND SUBSIDIARY**

**(A        Development Stage Company)**

**Notes        to Consolidated Financial Statements**

**For        the Three Months Ended September 30, 2006 and 2005 **

**and        For the Period December 18, 2002 (Date of Inception) **

**to        September 30, 2006 **

**(Unaudited)**

**NOTE        6 - COMMITMENTS AND CONTINGENCIES**

**NOTE        7 - SUBSEQUENT EVENTS **

----