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

| Common                Stock | 60,246,220 | December                31, 2006 |
|-----------------------------|------------|----------------------------------|
|                        |       |                             |

----

|                                                                                               | 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      |

----

----

----

----

| 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                         | Certification                of SmartMetric’s Chief Executive Officer and Chief Financial Officer                required by Rule 13a-14(b) under the Securities Exchange Act of 1934                and                Section 1350 of Chapter 63 of Title 18 the United States Code (18                U.S.C.                1350) |

----

|                 SMARTMETRIC,                INC. |
|----------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                             |   |   |
| Dated:                March 6, 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 December 31, 2006              |                                                                      |
|                                                                            | (Unaudited)                and June 30, 2006                              | F-2    |
|                                                                            |                                                                      |   |
| Consolidated                Statements of Operations for the three and six      |                                                                      |
|                                                                            | months                ended December 31, 2006 and 2005 and for the period |   |
|                                                                            | December                18, 2002 (inception) to December 31, 2006         |   |
|                                                                            | (Unaudited)                                                               | F-3    |
|                                                                            |                                                                      |   |
| Consolidated                Statements of Changes in Stockholders’ Equity |                                                                      |
|                                                                            | for                the period December 18, 2002 (inception)               | F-4    |
|                                                                            | to                December 31, 2006                                       |   |
|                                                                            |                                                                      |   |
| Consolidated                Statements of Cash Flows for the three and six      |                                                                      |
|                                                                            | months                ended December 31, 2006 and 2005 and for the period |   |
|                                                                            | December                18, 2002 (inception) to December 31, 2006         |   |
|                                                                            | (Unaudited)                                                               | F-6    |
|                                                                            |                                                                      |   |
| Notes                to Consolidated Financial Statements                       | F-7                                                                       |
|                                                                            |                                                                      |   |

----

| **SMARTMETRIC,                  INC. AND SUBSIDIARY**                         |
|-------------------------------------------------------------------------------|
| **(A                  Development Stage Company)**                            |
| **Consolidated                  Balance Sheets**                              |
|                                                                          |   |   |   |   |   |
|                                                                          |   | **December                  31,** |   |   | **June                  30,** |
|                                                                          |   | **2006** |   |   | **2006** |
|                                                                          |   | **(Unaudited)** |   |   |   |
| **Assets**                                                                    |   |   |   |   |   |
| Current                  assets:                                              |   |   |   |   |   |
| Cash                                                                          | $ | 64,592 |   | $ | 63,243 |
| Due                  from related party                                       |   | 58,411 |   |   | 37,484 |
| Prepaid                  expenses                                             |   | 3,004 |   |   | 2,900 |
|                                                                          |   |   |   |   |   |
| Total                  current assets                                         |   | 126,007 |   |   | 103,627 |
|                                                                          |   |   |   |   |   |
| Equipment,                  less accumulated depreciation of                  |   |   |   |   |   |
| $2,998                  and $629, respectively                                |   | 12,986 |   |   | 5,102 |
|                                                                          |   |   |   |   |   |
| Other                  assets:                                                |   |   |   |   |   |
| Patent                  costs, less accumulated amortization                  |   |   |   |   |   |
| of                  $3,375 and $2,625, respectively                           |   | 11,625 |   |   | 12,375 |
| Organization                  costs - net                                     |   | 120 |   |   | 180 |
|                                                                          |   |   |   |   |   |
| Total                  assets                                                 | $ | 150,738 |   | $ | 121,284 |
|                                                                          |   |   |   |   |   |
| **Liabilities                  and Stockholders' Equity**                     |   |   |   |   |   |
|                                                                          |   |   |   |   |   |
| Current                  liabilities:                                         |   |   |   |   |   |
| Accounts                  payable                                             | $ | 79,075 |   | $ | 48,417 |
| Payroll                  taxes and withholdings                               |   | 86,112 |   |   | 30,627 |
|                                                                          |   |   |   |   |   |
| Total                  current liabilities                                    |   | 165,187 |   |   | 79,044 |
|                                                                          |   |   |   |   |   |
| Other                  liabilities                                            |   | - |   |   | - |
|                                                                          |   |   |   |   |   |
| Total                  liabilities                                            |   | 165,187 |   |   | 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 60,085,383 and            |   |   |   |   |   |
| 59,556,369                  shares, respectively                              |   | 60,085 |   |   | 59,556 |
| Additional                  paid-in capital                                   |   | 1,638,179 |   |   | 1,260,866 |
| Deficit                  accumulated during the development stage             |   | (1,953,969) |   |   | (1,519,438) |
|                                                                          |   |   |   |   |   |
| Total                  stockholders' equity (deficiency)                      |   | (255,705) |   |   | (199,016) |
|                                                                          |   |   |   |   |   |
| Total                  liabilities and stockholders' equity                   | $ | 150,738 |   | $ | 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** |   |   | **Six                  Months Ended** |   |   | **(December                  18, 2002** |
|                                                             |   | **December                  31,** |   |   | **December                  31,** |   |   | **to                  December 31,** |
|                                                             |   | **2006** |   |   | **2005** |   |   | **2006** |   |   | **2005** |   |   | **2006)** |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                         | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | - |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Officer's                  salary                                |   | 42,500 |   |   | 42,500 |   |   | 85,000 |   |   | 85,000 |   |   | 340,000 |
| Other                  general and                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| administrative                                                   |   | 149,438 |   |   | 202,878 |   |   | 305,257 |   |   | 323,205 |   |   | 1,232,391 |
| Research                  and                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| development                                                      |   | 28,778 |   |   | 101,579 |   |   | 44,404 |   |   | 119,708 |   |   | 379,834 |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  expenses                                  |   | 220,716 |   |   | 346,957 |   |   | 434,661 |   |   | 527,913 |   |   | 1,952,225 |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from operations                            |   | (220,716) |   |   | (346,957) |   |   | (434,661) |   |   | (527,913) |   |   | (1,952,225) |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                                 |   | 46 |   |   | - |   |   | 130 |   |   | - |   |   | 656 |
| Interest                  expense                                |   | - |   |   | (900) |   |   | - |   |   | (1,500) |   |   | (2,400) |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                        | $ | (220,670) |   | $ | (347,857) |   | $ | (434,531) |   | $ | (529,413) |   | $ | (1,953,969) |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss per share,                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| basic                  and diluted                               | $ | (0.00) |   | $ | (0.01) |   | $ | (0.01) |   | $ | (0.01) |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| number                  of common                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares                  outstanding,                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| basic                  and diluted                               |   | 59,913,326 |   |   | 59,049,247 |   |   | 59,781,073 |   |   | 58,905,741 |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  notes to consolidated financial statements. |   |   |   |   |   |   |   |   |   |   |   |

----

| **SMARTMETRIC,                  INC. AND SUBSIDIARY**                           |
|---------------------------------------------------------------------------------|
| **(A                  Development Stage Company)**                              |
| **Consolidated                  Statements of Changes in Stockholders' Equity** |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |  | **Deficit **  |   |   |
|                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Accumulate**d****  |   | **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                                              | - |   |   | - |   | 529,014 |   |   | 529 |   |   | 377,313 |   |   | - |   | 377,842 |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loss for six                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| months                ended                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December                31, 2006                                              | - |   |   | - |   | - |   |   | - |   |   | - |   |   | (434,531) |   | (434,531) |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December                31, 2006                                              | - |   | $ | - |   | 60,085,383 |   | $ | 60,085 |   | $ | 1,638,179 |   | $ | (1,953,969) | $ | (255,705) |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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** |
|                                                                      |   | **Six                Months Ended** |   |   |   | **(December                18, 2002** |
|                                                                      |   | **December                31,** |   |   |   | **to                December 31,** |
|                                                                      |   | **2006** |   |   | **2005** |   |   |   | **2006)** |
| Cash                flows from operating activities:                      |   |   |   |   |   |   |   |   |   |
| Net                loss                                                   | $ | (434,531) |   | $ | (529,413) |   |   | $ | (1,953,969) |
| Interest                accrued on convertible notes payable              |   | - |   |   | - |   |   |   | 2,400 |
| Shares                issued for services                                 |   | - |   |   | - |   |   |   | 20,000 |
| Depreciation                of equipment                                  |   | 2,369 |   |   | 380 |   |   |   | 2,998 |
| Amortization                of patent costs                               |   | 750 |   |   | 750 |   |   |   | 3,375 |
| Changes                in operating assets and liabilities:               |   |   |   |   |   |   |   |   |   |
| Due                from related party                                     |   | (20,927) |   |   | 14,657 |   |   |   | (58,411) |
| Prepaid                expenses                                           |   | (104) |   |   | - |   |   |   | (3,004) |
| Organization                costs                                         |   | 60 |   |   | 60 |   |   |   | (120) |
| Accounts                payable                                           |   | 30,658 |   |   | (26,639) |   |   |   | 79,075 |
| Payroll                taxes and withholdings                             |   | 55,485 |   |   | - |   |   |   | 86,112 |
| Accrued                salary due to president                            |   | - |   |   | (85,000) |   |   |   | - |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Net                cash used for operating activities                     |   | (366,240) |   |   | (625,205) |   |   |   | (1,821,544) |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                      |   |   |   |   |   |   |   |   |   |
| Equipment                purchased                                        |   | (10,253) |   |   | (2,281) |   |   |   | (15,984) |
| Patent                costs incurred                                      |   | - |   |   | - |   |   |   | (15,000) |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Net                cash used for investing activities                     |   | (10,253) |   |   | (2,281) |   |   |   | (30,984) |
|                                                                      |   |   |   |   |   |   |   |   |   |
| 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 |   | 377,842 |   |   | 15,000 |   |   |   | 880,119 |
| Sale                of common stock in public offering                    |   | - |   |   | 857,607 |   |   |   | 1,115,472 |
| Public                offering costs incurred                             |   | - |   |   | - |   |   |   | (138,471) |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Net                cash provided by financing activities                  |   | 377,842 |   |   | 932,607 |   |   |   | 1,917,120 |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in cash                            |   | 1,349 |   |   | 305,121 |   |   |   | 64,592 |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Cash,                beginning of period                                  |   | 63,243 |   |   | 928 |   |   |   | - |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Cash,                end of period                                        | $ | 64,592 |   | $ | 306,049 |   |   | $ | 64,592 |
|                                                                      |   |   |   |   |   |   |   |   |   |
| 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 and Six Months Ended December 31, 2006 and 2005 **

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

**to      December 31, 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 and Six Months Ended December 31, 2006 and 2005 **

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

**to      December 31, 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 and Six Months Ended December 31, 2006 and 2005 **

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

**to      December 31, 2006 **

**(Unaudited)**

**NOTE      6 - COMMITMENTS AND CONTINGENCIES**

----