U.S. SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(X)  QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934.





For the
quarterly period ended September 30, 2009





(
)  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934.





For the
transition period
from             to





Commission
File No.  333-118801














SMARTMETRIC,
      INC.(Exact
      name of small business issuer as specified in its
  charter)Nevada
            05-0543557(State
      or other jurisdiction of incorporation or
      organization)
            (IRS
      Employer Identification No.)1150
      Kane Concourse, Suite 400, Bay Harbor Islands, FL 33154(Address
      of principal executive offices)(305)
      495-7190(Issuer’s
      telephone number)








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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company:





Large
      accelerated filer
            [
      ]
            Accelerated
      filer
            [
      ]Non-accelerated
      filer
            [
      ]
            Smaller
      reporting company
            [√]





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


Yes [ ]         No
[√]





As of
November 16, 2009, there were 75,546,222 shares issued and outstanding of
the registrant’s common stock.

















1


INDEX





PagePART
      I.
            FINANCIAL
      INFORMATION
            F-1Item
      1.
            Financial
      Statements
            F-2CondensedConsolidated Balance Sheets as of September 30, 2009
      (unaudited) and June 30, 2009
            F-2CondensedConsolidated Statements of Operations for the three months ended
      September 30, 2009 and 2008 (unaudited)
            F-3Consolidated
      Statements of Changes in Stockholders' Equity (Deficit) for the period
      December 18, 2002 (inception) to September 30, 2009 (unaudited)
            F-4CondensedConsolidated Statements of Cash Flows for the three months ended
      September 30, 2009 and 2008 (unaudited)
            F-6Notes
      to Unaudited Financial Statements
            F-7Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            3Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            5Item
      4. (T).
            Controls
      and Procedures
            5PART
      II.
            OTHER
      INFORMATION
            6Item
      1.
            Legal
      Proceedings
            6Item
      1A.
            Risk
      Factors
            6Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            6Item
      3.
            Defaults
      Upon Senior Securities
            7Item
      4.
            Submission
      of Matters to Vote of Security Holders
            7Item
      5.
            Other
      Information
            7Item
      6.
            Exhibits
            7Signatures
            
            8


























2











PART I — FINANCIAL INFORMATION





Item
1.                                
FINANCIAL
STATEMENTS


SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  CONDENSED
      CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 (UNAUDITED) AND JUNE
      30, 2009
                F -
      2CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER
      30, 2009 AND 2008 WITH CUMULATIVE TOTALS SINCE DECEMBER 18, 2002
      (INCEPTION) (UNAUDITED)
                F-
      -3CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE PERIOD
      DECEMBER 18, 2002 (INCEPTION) TO SEPTEMBER 30, 2009
      (UNAUDITED)
                F -
      4CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER
      30, 2009 AND 2008 WITH CUMULATIVE TOTALS SINCE DECEMBER 18, 2002
      (INCEPTION) (UNAUDITED)
                F -
      6NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 AND
      2008
                F -
      7
 F -
1
 
 SMARTMETRIC,
      INC. AND SUBSIDIARY(A
      DEVELOPMENT STAGE COMPANY)CONDENSED
      CONSOLIDATED BALANCE SHEETSSEPTEMBER
      30, 2009 (UNAUDITED) AND JUNE 30, 2009ASSETS
              
              (unaudited)SEPTEMBER
      30,
              
              
              JUNE
      30,2009
              
              
              2009Current
      Assets:Cash
      and cash equivalents
              
              $
              -
              
              
              $
              42,519Prepaid
      expenses and other current assets
              
              
              10,954
              
              
              
              38,758Total
      Current Assets
              
              
              10,954
              
              
              
              81,277Equipment,
      net of depreciation of $13,599 and $9,315, respectively
              
              
              1,193
              
              
              
              2,385Other
      Assets:Patent
      costs, net of amortization of $7,125 and $5,625,
    respectively
              
              
              7,500
              
              
              
              7,875Total
      Other Assets
              
              
              7,500
              
              
              
              7,875TOTAL
      ASSETS
              
              $
              19,647
              
              
              $
              91,537LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)LIABILITIESCurrent
      Liabilities:Accounts
      payable and accrued expenses
              
              $
              125,768
              
              
              $
              129,244Cash
      overdraft
              
              
              47,917
              
              
              
              -Payroll
      tax liabilities, accrued interest and penalties
              
              
              287,474
              
              
              
              240,677Liability
      for stock to be issued
              
              
              243,329
              
              
              
              146,454Total
      Current Liabilities
              
              
              704,488
              
              
              
              516,375Total
      Liabilities
              
              
              704,488
              
              
              
              516,375STOCKHOLDERS’
      EQUITY (DEFICIT)Preferred
      stock, $.01 Par Value; 5,000,000 shares authorizedand
      0 shares issued and outstanding
              
              
              -
              
              
              
              -Class
      A common stock, $.001 Par Value; 50,000,000 shares
    authorizedand
      0 shares issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, $.001 Par Value; 100,000,000 shares authorizedand
      75,546,222 and 75,546,222 shares issued and outstanding
              
              
              75,546
              
              
              
              75,546Additional
      paid-in capital
              
              
              4,569,388
              
              
              
              4,569,388Deficits
      accumulated during the development stage
              
              
              (5,329,775
              )
              
              
              (5,069,772
              )Total Stockholders’ Equity
      (Deficit)
              
              
              (684,841
              )
              
              
              (424,838
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
              
              $
              19,647
              
              
              $
              91,537
   F -
2


SMARTMETRIC,
      INC. AND SUBSIDIARY(A
      DEVELOPMENT STAGE COMPANY)CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONSFOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008WITH
      CUMULATIVE TOTALS SINCE DECEMBER 18, 2002 (INCEPTION)
      (UNAUDITED)CUMULATIVETOTALS
      SINCETHREE
      MONTHS ENDED
              
              
              INCEPTIONSEPTEMBER
      30,
              
              
              DECEMBER
      18,2009
              
              
              2008
              
              
              2002OPERATING
      REVENUESRevenues
              
              $
              -
              
              
              $
              -
              
              
              $
              -OPERATING
      EXPENSESResearch
      and development
              
              
              27,376
              
              
              
              181,392
              
              
              
              840,975Officer's
      salary
              
              
              50,000
              
              
              
              42,500
              
              
              
              815,000Other
      general and administrative expenses
              
              
              176,059
              
              
              
              133,649
              
              
              
              3,629,344Total
      Operating Expenses
              
              
              253,435
              
              
              
              357,541
              
              
              
              5,285,319LOSS
      BEFORE OTHER INCOME (EXPENSE)
              
              
              (253,435
              )
              
              
              (357,541
              )
              
              
              (5,285,319
              )OTHER
      INCOME (EXPENSE)Interest
      expense
              
              
              (6,568
              )
              
              
              (1,794
              )
              
              
              (45,113
              )Interest
      income
              
              
              -
              
              
              
              -
              
              
              
              657Total
      Other Income (expense)
              
              
              (6,568
              )
              
              
              (1,794
              )
              
              
              (44,456
              )NET
      LOSS BEFORE PROVISION FOR INCOME TAXES
              
              
              (260,003
              )
              
              
              (359,335
              )
              
              
              (5,329,775
              )Provision
      for Income Taxes
              
              
              -
              
              
              
              -
              
              
              
              -NET
      LOSS APPLICABLE TO COMMON SHARES
              
              $
              (260,003
              )
              
              $
              (359,335
              )
              
              $
              (5,329,775
              )NET
      LOSS PER BASIC AND DILUTED SHARES
              
              
              (0.00
              )
              
              
              (0.01
              )WEIGHTED
      AVERAGE NUMBER OF COMMONSHARES
      OUTSTANDING
              
              
              75,546,222
              
              
              
              70,024,531
   F -
3


SMARTMETRIC,
      INC. AND SUBSIDIARY(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)FOR
      THE PERIOD DECEMBER 18, 2002 (INCEPTION) THROUGH SEPTEMBER 30, 2009
      (UNAUDITED)DeficitsAccumulatedPreferred
      Stock
                
                
                Class
      A Common Stock
                
                
                Common
      Stock
                
                
                
                
                
                AdditionalPaid-in
                
                
                During
      theDevelopmentShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                Stage
                
                
                TotalBalance
      - December 18, 2002
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Net
      loss for the period December 18, 2002 (incpetion)through
      June 30, 2003
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (60
                )
                
                
                (60
                )Balance
      June 30, 2003
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (60
                )
                
                
                (60
                )Shares
      issued of Class A Common stock
                
                
                -
                
                
                
                -
                
                
                
                50,000,000
                
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                50,000Shares
      issued of common stock for cash
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                8,560,257
                
                
                
                8,560
                
                
                
                77,042
                
                
                
                -
                
                
                
                85,602Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (35,978
                )
                
                
                (35,978
                )Balance
      June 30, 2004
                
                
                -
                
                
                
                -
                
                
                
                50,000,000
                
                
                
                50,000
                
                
                
                8,560,257
                
                
                
                8,560
                
                
                
                77,042
                
                
                
                (36,038
                )
                
                
                99,564Costs
      associated with sale of common stock subject to possible
      rescission
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (95,877
                )
                
                
                -
                
                
                
                (95,877
                )Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (258,355
                )
                
                
                (258,355
                )Balance
      June 30, 2005
                
                
                -
                
                
                
                -
                
                
                
                50,000,000
                
                
                
                50,000
                
                
                
                8,560,257
                
                
                
                8,560
                
                
                
                (18,835
                )
                
                
                (294,393
                )
                
                
                (254,668
                )Shares
      issued of common stock for cash, net of offeringcosts
      of $138,509
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                936,112
                
                
                
                936
                
                
                
                1,197,361
                
                
                
                -
                
                
                
                1,198,297Shares
      issued of common stock for services rendered
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                20,000
                
                
                
                20
                
                
                
                19,980
                
                
                
                -
                
                
                
                20,000Conversion
      of loans payable and accrued interest to common shares
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                40,000
                
                
                
                40
                
                
                
                62,360
                
                
                
                -
                
                
                
                62,400Conversion
      of Class A common shares to common shares
                
                
                -
                
                
                
                -
                
                
                
                (50,000,000
                )
                
                
                (50,000
                )
                
                
                50,000,000
                
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,225,045
                )
                
                
                (1,225,045
                )Balance
      June 30, 2006
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                59,556,369
                
                
                
                59,556
                
                
                
                1,260,866
                
                
                
                (1,519,438
                )
                
                
                (199,016
                )Shares
      issued of common stock for cash
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,208,887
                
                
                
                1,209
                
                
                
                759,140
                
                
                
                -
                
                
                
                760,349Shares
      issued of common stock for services rendered
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                191,505
                
                
                
                192
                
                
                
                (192
                )
                
                
                -
                
                
                
                -Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,050,189
                )
                
                
                (1,050,189
                )Balance
      June 30, 2007
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                60,956,761
                
                
                
                60,957
                
                
                
                2,019,814
                
                
                
                (2,569,627
                )
                
                
                (488,856
                )
  F -
4
  SMARTMETRIC,
      INC. AND SUBSIDIARY(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)FOR
      THE PERIOD DECEMBER 18, 2002 (INCEPTION) THROUGH SEPTEMBER 30, 2009
      (UNAUDITED)(CONTINUED)
  Shares
      issued of common stock for cash
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              6,629,634
              
              
              
              6,629
              
              
              
              1,293,595
              
              
              
              -
              
              
              
              1,300,224Shares
      issued of common stock for services rendered
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,327,000
              
              
              
              2,327
              
              
              
              471,073
              
              
              
              -
              
              
              
              473,400Net
      loss for the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,397,056
              )
              
              
              (1,397,056
              )Balance
      June 30, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              69,913,395
              
              
              
              69,913
              
              
              
              3,784,482
              
              
              
              (3,966,683
              )
              
              
              (112,288
              )


Transfer
      of shares from temporary equity to common stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              160,837
              
              
              
              161
              
              
              
              241,095
              
              
              
              -
              
              
              
              241,256Shares
      issued of common stock for cash
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,412,596
              
              
              
              4,413
              
              
              
              438,931
              
              
              
              -
              
              
              
              443,344Shares
      issued of common stock for services rendered
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,059,394
              
              
              
              1,059
              
              
              
              104,880
              
              
              
              -
              
              
              
              105,939Net
      loss for the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,103,089
              )
              
              
              (1,103,089
              )Balance
      June 30, 2009
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              75,546,222
              
              
              
              75,546
              
              
              
              4,569,388
              
              
              
              (5,069,772
              )
              
              
              (424,838
              )Net
      loss for the period
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (260,003
              )
              
              
              (260,003
              )Balance
      September 30, 2009
              
              
              -
              
              
              $
              -
              
              
              
              -
              
              
              $
              -
              
              
              
              75,546,222
              
              
              $
              75,546
              
              
              $
              4,569,388
              
              
              $
              (5,329,775
              )
              
              $
              (684,841
              )




F -
5
 
 SMARTMETRIC,
      INC. AND SUBSIDIARY(A
      DEVELOPMENT STAGE COMPANY)CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSFOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008WITH
      CUMULATIVE TOTALS SINCE DECEMBER 18, 2002 (INCEPTION)
      (UNAUDITED)CUMULATIVETHREE
      MONTHS ENDED
                
                
                TOTALS
      SINCESEPTEMBER
      30,
                
                
                DECEMBER 18,2009
                
                
                2008
                
                
                2002CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (260,003
                )
                
                $
                (359,335
                )
                
                $
                (5,329,775
                )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
                
                
                1,193
                
                
                
                1,071
                
                
                
                14,792Amortization
                
                
                375
                
                
                
                375
                
                
                
                7,500Common
      stock issued for consulting services
                
                
                -
                
                
                
                -
                
                
                
                599,339Interest
      accrued on convertible notes payable
                
                
                -
                
                
                
                -
                
                
                
                2,400Changes
      in assets and liabilities(Increase)
      decrease in prepaid expenses
                
                
                27,803
                
                
                
                3,203
                
                
                
                (10,955
                )Increase
      (decrease) in accounts payable and accrued expenses
                
                
                (3,476
                )
                
                
                87,433
                
                
                
                125,768Increase
      (decrease) in payroll taxes, accrued interest and
penalties
                
                
                46,797
                
                
                
                (25,778
                )
                
                
                287,474Increase
      (decrease) in liability for stock to be issued
                
                
                96,875
                
                
                
                -
                
                
                
                243,329Total
      adjustments
                
                
                169,567
                
                
                
                66,304
                
                
                
                1,269,647Net
      cash (used in) operating activities
                
                
                (90,436
                )
                
                
                (293,031
                )
                
                
                (4,060,128
                )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of equipment
                
                
                -
                
                
                
                -
                
                
                
                (15,984
                )Patent
      costs
                
                
                -
                
                
                
                -
                
                
                
                (15,000
                )Net
      cash (used in) investing activities
                
                
                -
                
                
                
                -
                
                
                
                (30,984
                )CASH
      FLOWS FROM FINANCING ACTIVITESProceeds
      from notes payable
                
                
                -
                
                
                
                -
                
                
                
                60,000Loans
      from related parties
                
                
                -
                
                
                
                -
                
                
                
                54,427Repayments
      of loans from related parties
                
                
                -
                
                
                
                -
                
                
                
                (54,427
                )Stock
      subscriptions received from private placements
                
                
                -
                
                
                
                26,950
                
                
                
                3,006,194Sale
      of common stock in public offering
                
                
                -
                
                
                
                -
                
                
                
                1,115,472Increase
      (decrease) in cash overdraft
                
                
                47,917
                
                
                
                -
                
                
                
                47,917Public
      offering costs incurred
                
                
                -
                
                
                
                -
                
                
                
                (138,471
                )Net
      cash provided by financing activities
                
                
                47,917
                
                
                
                26,950
                
                
                
                4,091,112NET
      INCREASE (DECREASE) INCASH
      AND CASH EQUIVALENTS
                
                
                (42,519
                )
                
                
                (266,081
                )
                
                
                -CASH
      AND CASH EQUIVALENTS -BEGINNING
      OF PERIOD
                
                
                42,519
                
                
                
                266,417
                
                
                
                -CASH
      AND CASH EQUIVALENTS - END OF PERIOD
                
                $
                -
                
                
                $
                336
                
                
                $
                -CASH
      PAID DURING THE PERIOD FOR:Income
      taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -Interest
      expense
                
                $
                -
                
                
                $
                1,050
                
                
                $
                28,174
 
 F -
6
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 
 
 NOTE
1
-                      ORGANIZATION AND BASIS OF
PRESENTATION
 
 The
unaudited financial statements included herein have been prepared, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”).  The financial statements and notes are presented
as permitted on Form 10-Q and do not contain information included in the
Company’s annual statements and notes.  Certain information and
footnote disclosure normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to make the
information presented not misleading.  It is suggested that these
financial statements be read in conjunction with the June 30, 2009 10-K and
audited financial statements and the accompanying notes
thereto.  While management believes the procedures followed in
preparing these financial statements are reasonable, the accuracy of the amounts
are in some respects dependent upon the facts that will exist, and procedures
that will be accomplished by the Company later in the year.
 
 These
unaudited financial statements reflect all adjustments, including normal
recurring adjustments which, in the opinion of management, are necessary to
present fairly the operations and cash flows for the periods
presented.
 
 SmartMetric,
Inc. (the “Company” or “SmartMetric”) was incorporated in the State of Nevada on
December 18, 2002. The Company is developing a credit card size plastic card
embedded with an integrated circuit chip and biometric fingerprint sensor which
provides identification of the user (the “SmartMetric Smart Card”) to market to
government agencies, corporations, and organizations interested in
identification cards.
 
 Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted
Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB
Accounting Standards Codification (the “Codification”) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Positions or Emerging
Issue Task Force Abstracts. Instead, it will issue Accounting Standards Updates
(“ASUs”). The FASB will not consider ASUs as authoritative in their own right.
ASUs will serve only to update the Codification, provide background information
about the guidance and provide the bases for conclusions on the change(s) in the
Codification. References made to FASB guidance throughout this document have
been updated for the Codification.
 
 
 F -
7
  SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 
 NOTE
1
-                      ORGANIZATION AND BASIS OF
PRESENTATION (CON TINUED)
 
 Going
Concern
 
 As shown
in the accompanying condensed consolidated financial statements the Company has
incurred recurring losses of $260,003 and $359,335 for the three months ended
September 30, 2009 and 2008 respectively, and has incurred a cumulative loss of
$5,329,775 since inception (December 18, 2002).  In addition, the
Company has a working capital deficit in the amount of $693,534 as of September
30, 2009. The Company is currently in the development stage and has been
spending a majority of their time in the development of their
technology.
 
 There is
no guarantee that the Company will be able to raise enough capital or generate
revenues to sustain its operations.  These conditions raise
substantial doubt about the Company’s ability to continue as a going concern for
a reasonable period.
 
 Management
believes that the Company’s capital requirements will depend on many
factors.  These factors include the final phase of development being
successful as well as product implementation and distribution.
 
 The
condensed consolidated financial statements do not include any adjustments
relating to the carrying amounts of recorded assets or the carrying amounts and
classification of recorded liabilities that may be required should the Company
be unable to continue as a going concern.
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
 Development Stage
Company
 
 The
Company is considered to be in the development stage as defined in ASC 915-10,
"Accounting and Reporting by
Development Stage Enterprises".The Company has devoted substantially all
of its efforts to the development of their technology.  Additionally,
the Company has allocated a substantial portion of their time and investment in
bringing their services to the market, and the raising of capital.
 
 Principles of
Consolidation
 
 The
condensed consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, SmartMetric Australia Pty. Ltd.  All
significant intercompany accounts and transactions have been eliminated in
consolidation.
 
 
 F -
8
  
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  On an ongoing basis, the Company
evaluates its estimates, including, but not limited to, those related to
derivative liabilities, bad debts, income taxes and
contingencies.  The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources.  Actual results could differ from
those estimates.
 
 Cash and Cash
Equivalents
 
 The
Company considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents.  Any amounts of cash in financial institutions over FDIC
insured limits, exposes the Company to cash concentration risk.
 
 Fair Value of Financial
Instruments
 
 The
carrying amounts reported in the condensed consolidated balance sheet for cash
and cash equivalents, accounts payable, and accrued expenses including payroll
withholdings, interest and penalties approximate fair value because of the
immediate or short-term maturity of these financial instruments.
 
 Research and
Development
 
 The
Company annually incurs costs on activities that relate to research and
development of new technology and products.  Research and development
costs are expensed as incurred.
 
 Revenue
Recognition
 
 The
Company has not recognized revenues to date.  The Company anticipates
recognizing revenue in accordance with the contracts it enters into for the sale
and distribution of the SmartCard.
 
 Accounts
Receivable
 
 The
Company when it will conduct business it will extend credit based on an
evaluation of the customers’ financial condition, generally without requiring
collateral.  Exposure to losses on receivables is expected to vary by
customer due to the financial condition of each customer.  The Company
monitors exposure to credit losses and maintains allowances for anticipated
losses considered necessary under the circumstances.  The Company has
not recorded any receivables, and therefore no allowance for doubtful accounts
at September 30, 2009.  Accounts receivable will generally be due
within 30 days and collateral is not required.
  F -
9
 
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 Income
Taxes
 
 The
Company accounts for income taxes utilizing the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
 
 Uncertainty in Income
Taxes
 
 In July
2006, ASC 740-10 “Accounting for Uncertainty in Income Taxes” was issued (“ASC
740-10”).  This interpretation requires recognition and measurement of
uncertain income tax positions using a “more-likely-than-not”
approach.  ASC 740-10 is effective for fiscal years beginning after
December 15, 2006.  Management has adopted ASC 740-10 for 2007, and
they evaluate their tax positions on an annual basis and have determined that as
of September 30, 2009 no additional accrual for income taxes is
necessary.
 
 Advertising
Costs
 
 The
Company expenses the costs associated with advertising as
incurred.  Advertising expenses for the three months ended September
30, 2009 and 2008 are included in other general and administrative expenses in
the condensed consolidated statements of operations.
 
 Equipment
 
 Equipment
is stated at cost.  Depreciation is computed using the straight-line
method over the estimated useful lives of the assets – 3 - 5 years.
 
 When
assets are retired or otherwise disposed of, the costs and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in income for the period.  The cost of maintenance and
repairs is charged to income as incurred; significant renewals and betterments
are capitalized.  Deduction is made for retirements resulting from
renewals or betterments.
 
 Impairment of Long-Lived
Assets
 
 Long-lived
assets, primarily fixed assets, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets might
not be recoverable.  The Company does not perform a periodic
assessment of assets for impairment in the absence of such information or
indicators.  Conditions that would necessitate an impairment
assessment include a significant decline in the observable market value of an
asset, a significant change in the extent or manner in which an asset is used,
or a significant adverse change that would indicate that the carrying amount of
an asset or group of assets is not recoverable.  For long-lived assets
to be held and used, the Company recognizes an impairment loss only if its
carrying amount is not recoverable through its undiscounted cash flows and
measures the impairment loss based on the difference between the carrying amount
and estimated fair value.
 
 F -
10
 
 
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 (Loss) Per Share of Common
Stock
 
 Basic net
(loss) per common share is computed using the weighted average number of common
shares outstanding.  Diluted earnings per share ("EPS") include
additional dilution from common stock equivalents, such as stock issuable
pursuant to the exercise of stock options and warrants.  Common stock
equivalents were not included in the computation of diluted earnings per share
on the consolidated statement of operations due to the fact that the Company
reported a net loss and to do so would be anti-dilutive for the periods
presented.
 
 The
following is a reconciliation of the computation for basic and diluted
EPS:
  September
      30,
                  2009
                
                
                September
      30,
                  2008Net
      loss
                
                $
                (260,003
                )
                
                $
                (359,335
                )Weighted-average
      common sharesOutstanding
      (Basic)
                
                
                75,546,222
                
                
                
                70,024,531Weighted-average
      common stockEquivalentsStock
      options
                
                
                -
                
                
                
                -Warrants
                
                
                3,667,569
                
                
                
                4,362,953Weighted-average
      commons sharesOutstanding
      (Diluted)
                
                
                79,213,791
                
                
                
                74,387,484
  Stock-Based
Compensation
 
 In 2006,
the Company adopted the provisions of ASC 718-10, “Share-Based Payments” (“ASC
718-10”).  ASC 718-10 requires that compensation cost related
to share-based payment transactions be recognized in the financial
statements.  Share-based payment transactions within the scope of ASC
718-10 include stock options, restricted stock plans, performance-based awards,
stock appreciation rights, and employee share purchase plans.  The
provisions of ASC 718-10 are effective for small business issuers beginning as
of the next interim period after December 15, 2005.
 
 F -
11
  
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 Stock-Based
Compensation (Continued)
 
 The
Company has elected to use the modified-prospective approach
method.  Under that transition method, the calculated expense in 2006
is equivalent to compensation expense for all awards granted prior to, but not
yet vested as of July 1, 2006, based on the grant-date fair
values.  Stock-based compensation expense for all awards granted after
July 1, 2006 is based on the grant-date fair values. The Company recognizes
these compensation costs, net of an estimated forfeiture rate, on a pro rata
basis over the requisite service period of each vesting tranche of each
award.  The Company considers voluntary termination behavior as well
as trends of actual option forfeitures when estimating the forfeiture
rate.
 
 The
Company measures compensation expense for its non-employee stock-based
compensation under ASC 505-50, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services" (“ASC 505-50”).The fair value of
the option issued is used to measure the transaction, as this is more reliable
than the fair value of the services received.  The fair value is
measured at the value of the Company’s common stock on the date that the
commitment for performance by the counterparty has been reached or the
counterparty’s performance is complete.  The fair value of the equity
instrument is charged directly to compensation expense and additional paid-in
capital.
 
 Segment
Information
 
 The
Company follows the provisions of ASC 280-10, "Disclosures about Segments of an
Enterprise and Related Information”.This standard requires
that companies disclose operating segments based on the manner in which
management disaggregates the Company in making internal operating
decisions.  The Company only operates in one reporting segment as of
September 30, 2009 and for the three months ended September 30, 2009 and
2008.
 
 Reclassifications
 
 Certain
balances for the three months ended September 30, 2008 have been reclassified to
conform with the presentation for the three months ended September 30, 2009. The
reclassifications have had no effect on the net loss for the three months ended
September 30, 2008.
 
 F -
12
  
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 Recent Accounting
Pronouncements
 
 In
September 2006, ASC issued 820, “Fair Value Measurements.”  ASC 820
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosure about fair
value measurements.  This statement is effective for financial
statements issued for fiscal years beginning after November 15,
2007.  Early adoption is encouraged.  The adoption of ASC
820 did not have a material impact on the consolidated financial
statements.
 
 In
February 2007, ASC issued 825-10, “The Fair Value Option for Financial Assets
and Financial Liabilities - Including an amendment of ASC 320-10” (“ASC 825-10”)
which permits entities to choose to measure many financial instruments and
certain other items at fair value at specified election dates.  A
business entity is required to report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date.  This statement is expected to expand the use of fair
value measurement.  ASC 825-10 is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years.
 
 In
December 2007, ASC issued ASC 810-10-65, “Non-controlling Interests in
Consolidated Financial Statements” (“ASC 810-10-65”).  ASC 810-10-65
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, changes in a parent’s
ownership of a non-controlling interest, calculation and disclosure of the
consolidated net income attributable to the parent and the non-controlling
interest, changes in a parent’s ownership interest while the parent retains its
controlling financial interest and fair value measurement of any retained
non-controlling equity investment.
 
 ASC
810-10-65 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years.  Early adoption is prohibited.  The adoption of ASC
810-10-65 did not have a material impact on the Company’s consolidated financial
position, results of operations or cash flows.
 
 
 F -
13
  
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 Recent Accounting
Pronouncements (Continued)
 
 In
December 2007, the Company adopted ASC 805, Business Combinations(“ASC
805”), ASC 805 retains the fundamental requirements that the acquisition method
of accounting be used for all business combinations and for an acquirer to be
identified for each business combination.  ASC 805 defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control.  ASC 805 will require an entity to record
separately from the business combination the direct costs, where previously
these costs were included in the total allocated cost of the
acquisition.  ASC 805 will require an entity to recognize the assets
acquired, liabilities assumed, and any non-controlling interest in the acquired
at the acquisition date, at their fair values as of that date.  ASC
805 will require an entity to recognize as an asset or liability at fair value
for certain contingencies, either contractual or non-contractual, if certain
criteria are met.  Finally, ASC 805 will require an entity to
recognize contingent consideration at the date of acquisition, based on the fair
value at that date.  This will be effective for business combinations
completed on or after the first annual reporting period beginning on or after
December 15, 2008.  Early adoption of this ASC is not permitted and
the ASC is to be applied prospectively only.  The adoption of ASC 805
did not have a material effect on the Company’s consolidated financial position,
results of operations or cash flows.
 
 In March
2008, the ASC issued ASC 815, “Disclosures about Derivative Instruments and
Hedging Activities” (“ASC 815”). ASC 815 requires enhanced disclosures about an
entity’s derivative and hedging activities. These enhanced disclosures will
discuss: how and why an entity uses derivative instruments; how derivative
instruments and related hedged items are accounted for and its related
interpretations; and how derivative instruments and related hedged items affect
an entity’s financial position, financial performance, and cash flows. ASC 815
is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. The Company does not believe that ASC
815 will have an impact on their results of operations or financial
position.
 
 In April
2008, the ASC issued ASC 350, “Determination of the Useful Life of Intangible
Assets”. This amends the factors that should be considered in developing renewal
or extension assumptions used to determine the useful life of a recognized
intangible asset under ASC 350. The guidance is used for determining the useful
life of a recognized intangible asset shall be applied prospectively to
intangible assets acquired after adoption, and the disclosure requirements shall
be applied prospectively to all intangible assets recognized as of, and
subsequent to, adoption. The Company does not believe ASC 350 will materially
impact their financial position, results of operations or cash
flows.
  F -
14
 
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
2
-                      SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
 
 Recent Accounting
Pronouncements (Continued)
 
 Effective
April 1, 2009, the Company adopted ASC 855, Subsequent Events (“ASC
855”). ASC 855 establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. It requires disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date – that is, whether that date represents the date the financial statements
were issued or were available to be issued. This disclosure should alert all
users of financial statements that an entity has not evaluated subsequent events
after that date in the set of financial statements being presented. Adoption of
ASC 855 did not have a material impact on the Company’s results of operations or
financial condition. The Company has evaluated subsequent events through
November 19, 2009, the date the financial statements were issued.
 
 
 Effective
July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurement and
Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments
to ASC 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances in which a
quoted market price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using certain
techniques. ASU 2009-05 also clarifies that when estimating the fair value of a
liability, a reporting entity is not required to include a separate input or
adjustment to other inputs relating to the existence of a restriction that
prevents the transfer of a liability. ASU 2009-05 also clarifies that both a
quoted price in an active market for the identical liability at the measurement
date and the quoted price for the identical liability when traded as an asset in
an active market when no adjustments to the quoted price of the asset are
required for Level 1 fair value measurements. Adoption of ASU 2009-05 did not
have a material impact on the Company’s results of operations or financial
condition.
 
 Other
ASU’s that have been issued or proposed by the FASB ASC that do not require
adoption until a future date and are not expected to have a material impact on
the financial statements upon adoption.
 
 F -
15
  
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
3
-                      EQUIPMENT
 
 Equipment
as of September 30, 2009 (unaudited) and June 30, 2009 were as
follows:
 
 Estimated
                  Useful Lives
                  (Years)
                
                
                
                September
      30,
                  2009
                
                
                
                June
      30,
                  2009Computer
      equipment
                
                
                3 -
      5
                
                
                $
                15,984
                
                
                $
                15,984Less:
      accumulated depreciation
                
                
                
                
                
                
                (14,791
                )
                
                
                (13,599
                )Equipment,
      net
                
                
                
                
                
                $
                1,193
                
                
                $
                2,385
 There was
$1,192 and $696 charged to operations for depreciation expense for the three
months ended September 30, 2009 and 2008, respectively.
 
 
 NOTE
4
-                      PATENT
COSTS
 
 Patent
costs as of September 30, 2009 (unaudited) and June 30, 2009 were as
follows:
  Estimated
                    Useful Lives
                    (Years)
                  
                  
                  
                  September
      30,
                    2009
                  
                  
                  
                  June
      30,
                    2009Computer
      equipment
                  
                  
                  10
                  
                  
                  $
                  15,000
                  
                  
                  $
                  15,000Less:
      accumulated depreciation
                  
                  
                  
                  
                  
                  
                  (7,500
                  )
                  
                  
                  (7,125
                  )Equipment,
      net
                  
                  
                  
                  
                  
                  $
                  7,500
                  
                  
                  $
                  7,875
 There was
$375 and $375 charged to operations for amortization expense for the three
months ended September 30, 2009 and 2008, respectively.
 
 NOTE
5
-                      COMMON STOCK SUBJECT TO
POSSIBLE RESCISSION
 
 On
November 3, 2004, the Company deposited $102,311 from the sale of a total of
68,207 shares of common stock to investors at a price of $1.50 per share. The
net proceeds to the Company, after deducting $44,052 in costs relating to this
private placement for fees paid to an unrelated third party, was
$58,259.
 
 On
January 30, 2005, the Company closed a second private placement which resulted
in the sale of a total of 92,630 shares of common stock to investors at a price
of $1.50 per share, or $138,945 gross proceeds. The net proceeds to the Company,
after deducting $51,825 in costs relating to this private placement for fees
paid to an unrelated third party, was $87,120.
 
 
 F -
16
 
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
5
-                      COMMON STOCK SUBJECT TO
POSSIBLE RESCISSION (CONTINUED)
 
 Since the
private placements referred to in the preceding paragraphs occurred after the
filing of the Company’s registration statement on Form SB-2 on September 3, 2004
and before its effectiveness on August 12, 2005, the related investors may have
had rescission rights under the federal securities laws. Accordingly, the
Company classified the $241,256 as temporary equity and the related costs of
$95,877 as a deduction from stockholders’ equity (deficit).
 
 The
Company believes that the statute of limitations for claiming rescission ran on
August 12, 2008 (three years from the date the shares were offered to the
public). To date, none of the investors has made a claim for rescission. The
Company has reclassified the temporary equity to permanent equity in the year
ended June 30, 2009.
 
 NOTE
6
-                      COMMITMENTS
 
 PATENT LICENSE
AGREEMENT
 
 Effective
August 1, 2004, the Company executed a license agreement with Applied
Cryptology, Inc. (“ACI”), a corporation controlled by the Company’s president
and the owner of certain technology. Pursuant to the license agreement, the
Company has the right to make use of this technology for the purpose of
developing software and systems to be used by the Company to provide any or all
of the following: 1) secure transactions over the Internet from home and office
computers; 2) an automatic method for connecting to remote computers; 3) a
method of developing targeted advertising to home and/or office computers; and
4) identity verification and access control as provided for in the patent.
Pursuant to this license agreement, ACI will receive 2% of all revenues
generated by the Company on products which utilize this patented technology. The
license fee will be paid within 45 days of the end of each quarter. In the event
no revenues are generated through the use of any of the licensed patents during
a given quarter, no money shall be owed ACI for such quarter. ACI may rescind
the license agreement and reclaim all rights and interest in the patents if
certain events, such as the Company’s filing for bankruptcy protection or
reorganization, occur. This license agreement will remain in effect for the
lives of the patents. The Company may utilize the technological applications
anywhere in the world without limitation.
 
 Employment
Agreement
 
 Effective
July 1, 2004, the Company executed a one-year employment agreement with its
president, which in June 2005 was renewed for one-year to June 30, 2006.
Pursuant to the employment agreement, the president received an annual salary of
$170,000. The employment agreement has not been renewed in writing however, the
president continues to serve the Company and is being paid the same annual
salary of $170,000.
 
 Lease
Agreement
 
 The
Company leases office space in Bay Harbor Islands, Florida under a month to
month agreement at a monthly rental of $4,815 per month. Rent expense for the
three months ended September 30, 2009 and 2008 was $7,900 and $22,245,
respectively.
  F -
17
 
 
 
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 
 NOTE
7
-                      STOCKHOLDERS’ EQUITY
(DEFICIT)
 
 Preferred
Stock
 
 As of
September 30, 2009, the Company has 5,000,000 shares of preferred stock, par
value $0.01, authorized and no shares issued and outstanding. There have been no
issuances of preferred stock since the Company’s inception.
 
 Class A Common
Stock
 
 As of
September 30, 2009, the Company has 50,000,000 shares of Class A common stock,
par value $0.001, authorized and no shares issued and outstanding. The Company
in October 2003 issued 50,000,000 shares of Class A common stock at par value
($50,000). These shares were converted into 50,000,000 shares of common stock in
February and May 2006.
 
 Common
Stock
 
 The
Company was incorporated on December 18, 2002, with 45,000,000 shares, par value
$0.001. In 2006, the Company amended their articles of incorporation to increase
the 45,000,000 shares to 100,000,000 shares.
 
 As of
September 30, 2009, the Company has 75,546,222 shares of common stock issued and
outstanding.
 
 From
October 2003 to June 2004, the Company issued 8,560,257 shares to investors at
$0.01 for $85,602.
 
 From
August 2005 to February 2006, the Company sold a total of 743,648 shares of
common stock at $1.50 per share in its public offering resulting in gross
proceeds of $1,115,472. The net proceeds to the Company after deducting $138,471
in offering costs, was $977,001.
 
 From May
2006 to June 2006, the Company sold a total of 192,464 Units at $1.15 per Unit
in private placements resulting in gross proceeds of $221,334 and net proceeds
of $221,296. Each Unit consisted of one share of common stock and one warrant
exercisable for 12 months from the date of issue into one share of common stock
at $1.50 per share.
 
 In July
2006, the Company sold a total of 56,522 Units at $1.15 per Unit in private
placements resulting in net proceeds of $65,000.  In August and
September 2006, the Company sold a total of 128,377 Units at prices ranging
between $0.60 to $0.79 per Unit in private placements resulting in net proceeds
of $83,558. In the three months ended December 31, 2006, the Company sold a
total of 344,115 Units at prices ranging from $0.48 to $1.00 per Unit in private
placements resulting in net proceeds of $229,284. In the three months ended
March 31, 2007, the Company sold a total of 297,228 Units at prices ranging from
$0.55 to $1.00 per Unit in private placements resulting in net proceeds of
$200,641. In the three months ended June 30, 2007, the Company sold a total of
382,645 Units at prices ranging from $0.36 to $0.56 per Unit in private
placements resulting in net proceeds of $181,866. Each Unit consisted of one
share of common stock and one warrant exercisable for 12 months from the date of
issue into one share of common stock at $1.50 per share.
  F -
18
 
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 NOTE
8
-                      STOCKHOLDERS’ EQUITY
(DEFICIT) (CONTINUED)
 
 Common Stock
(Continued)
 
 In the
year ended June 30, 2007, the Company also authorized the issuance of a total of
82,893 Units to various parties for services rendered relating to the public
offering and the private placements and a total of 108,612 shares of common
stock to various parties relating to the financings.
 
 In the
three months ended September 30, 2007, the Company sold a total of 903,813 Units
at prices ranging from $0.30 to $0.34 per Unit in private placements resulting
in net proceeds of $297,633. In the three months ended December 31, 2007, the
Company sold a total of 332,500 Units at prices ranging from $0.20 to $0.25 per
Unit in private placements resulting in net proceeds of $64,284. In the three
months ended March 31, 2008, the Company sold a total of 1,042,300 Units at a
price of $0.20 per Unit in private placements resulting in net proceeds of
$207,967.  In the three months ended June 30, 2008, the Company sold a
total of 2,961,203 Units at prices ranging from $0.20 to $0.25 per Unit in
private placements resulting in net proceeds of $597,542. Each Unit consisted of
one share of common stock and one warrant exercisable for 12 months from the
date of issue into one share of common stock at $1.00 per share.
 
 On March
25, 2008, the Company sold 200,000 shares of its common stock at a price of
$0.10 per share resulting in net proceeds of $20,000. In the three months ended
June 30,2 008, the Company sold 1,189,818 shares of its common stock at prices
ranging from $0.07 to $0.13 per share resulting in net proceeds of
$112,798.
 
 In the
three months ended September 30, 2007, the Company authorized the issuance of a
total of 80,000 shares, valued at $24,000 to non-officer directors of the
Company for services rendered.
 
 On
January 14, 2008, the Company issued a total of 2,107,000 shares of its common
stock, valued at $421,400 to its attorney and two consultants for services
rendered. On February 26, 2008, the Company issued 140,000 shares of common
stock, valued at $28,000 to its attorney for services rendered.
 
 In the
year ended June 30, 2009, the Company issued 1,059,394 shares of stock for
services rendered valued at $105,939; 662,027 shares of common stock in private
placements at prices ranging from $0.08 to $0.10 resulting in net proceeds of
$49,587; and 3,750,569 Units at a price of $0.10 resulting in net proceeds of
$393,757. Each Unit consisted of one share of common stock and one warrant
exercisable for 12 months from the date of issue into one share of common stock
at $1.00 per share.
 
 In the
three months ended September 30, 2009, the Company has not issued any shares of
stock and has received $96,875 of stock subscriptions for 972,000 shares which
has been recorded as a liability for stock to be issued.
 
 F -
19
  SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
  NOTE
8
-                      STOCKHOLDERS’ EQUITY
(DEFICIT) (CONTINUED)
 
 Warrants
 
 The
Company granted from time to time warrants in connection with private placements
at various prices as noted herein. Each warrant is exercisable for 12 months
from the date of issue into one share of common stock at various prices. As of
September 30, 2009 and 2008, the following is a breakdown of the
activity:
 
 September
30, 2009:
  Outstanding
      - beginning of period
                
                
                3,750,569Issued
                
                
                -Exercised
                
                
                -Expired
                
                
                (83,000
                )Outstanding
      - end of period
                
                
                3,667,569
 
 September
30, 2008:
 
 Outstanding
      - beginning of period
                
                
                5,239,816Issued
                
                
                26,950Exercised
                
                
                -Expired
                
                
                (903,813
                )Outstanding
      - end of period
                
                
                4.362,953
 
 The
3,667,569 warrants outstanding at September 30, 2009, expire at various times
through September 30, 2010.
 
 The
warrant agreements contain no clauses regarding adjustments to exercise price,
net settlement provisions, registration rights or liquidated damages
clauses.
 
 NOTE
9
-                      PROVISION FOR INCOME
TAXES
 
 Deferred
income taxes are determined using the liability method for the temporary
differences between the financial reporting basis and income tax basis of the
Company’s assets and liabilities.  Deferred income taxes are measured
based on the tax rates expected to be in effect when the temporary differences
are included in the Company’s tax return.  Deferred tax assets and
liabilities are recognized based on anticipated future tax consequences
attributable to differences between financial statement carrying amounts of
assets and liabilities and their respective tax bases.
 
 F -
20
 
 SMARTMETRIC
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008 (UNAUDITED)
 
 
 NOTE
9
-                      PROVISION FOR INCOME
TAXES (CONTINUED)
 
 At
September 30, 2009, deferred tax assets consist of the following:
 
 Net
      operating losses
                
                $
                1,812,124Valuation
      allowance
                
                
                (1,812,124
                )$
                -
 At
September 30, 2009, the Company had a net operating loss carryforward in the
amount of $5,329,775 available to offset future taxable income through
2029.  The Company established valuation allowances equal to the full
amount of the deferred tax assets due to the uncertainty of the utilization of
the operating losses in future periods.  A reconciliation of the
Company’s effective tax rate as a percentage of income before taxes and federal
statutory rate for the periods ended September 30, 2009 and 2008 is summarized
as follows:
 
 2009
                
                
                
                2008Federal
      statutory rate
                
                
                (34.0
                %)
                
                
                (34.0
                %)State
      income taxes, net of federal benefits
                
                
                3.3
                
                
                
                3.3Valuation
      allowance
                
                
                30.7
                
                
                
                30.70
                %
                
                
                0
                %
  NOTE
10
-                    FAIR VALUE
MEASUREMENTS
 
 ASC 820
defines fair value, provides a consistent framework for measuring fair value
under generally accepted accounting principles and expands fair value financial
statement disclosure requirements. ASC 820’s valuation techniques are based on
observable and unobservable inputs. Observable inputs reflect readily obtainable
data from independent sources, while unobservable inputs reflect our market
assumptions. ASC 820 classifies these inputs into the following
hierarchy:
 
 Level 1
inputs: Quoted prices for identical instruments in active markets.
 
 Level 2
inputs: Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant value
drivers are observable.
 
 Level 3
inputs: Instruments with primarily unobservable value drivers.
  F -
21


Item 2.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS





Cautionary
Notice Regarding Forward-Looking Statements





In this
quarterly report (“Report”), references to “Smartmetric,” “SMME,” “the Company,”
“we,” “us,” and “our” refer to Smartmetric, Inc.





We make
certain forward-looking statements in this report. Statements concerning our
future operations, prospects, strategies, financial condition, future economic
performance (including growth and earnings), demand for our services, and other
statements of our plans, beliefs, or expectations, including the statements
contained under the captions “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” “Business,” as well as captions elsewhere
in this document, are forward-looking statements. In some cases these statements
are identifiable through the use of words such as “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can”, “could,”
“may,” “should,” “will,” “would,” and similar expressions. We intend such
forward-looking statements to be covered by the safe harbor provisions contained
in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”)
and in Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). The forward-looking statements we make are not guarantees of
future performance and are subject to various assumptions, risks, and other
factors that could cause actual results to differ materially from those
suggested by these forward-looking statements. Because such statements are
subject to risks and uncertainties, actual results may differ materially from
those expressed or implied by the forward-looking statements. Indeed, it is
likely that some of our assumptions will prove to be incorrect. Our actual
results and financial position will vary from those projected or implied in the
forward-looking statements and the variances may be material. You are cautioned
not to place undue reliance on such forward-looking statements. These risks and
uncertainties, together with the other risks described from time to time in
reports and documents that we file with the SEC should be considered in
evaluating forward-looking statements.





The
nature of our business makes predicting the future trends of our revenue,
expenses, and net income difficult. Thus, our ability to predict results or the
actual effect of our future plans or strategies is inherently uncertain. The
risks and uncertainties involved in our business could affect the matters
referred to in any forward-looking statements and it is possible that our actual
results may differ materially from the anticipated results indicated in these
forward-looking statements. Important factors that could cause actual results to
differ from those in the forward-looking statements include, without limitation,
the following:





· the
effect of political, economic, and market conditions and geopolitical
events;





·
legislative and regulatory changes that affect our business;





· the
availability of funds and working capital;





· the
actions and initiatives of current and potential competitors;





·
investor sentiment; and





· our
reputation.





We do not
undertake any responsibility to publicly release any revisions to these
forward-looking statements to take into account events or circumstances that
occur after the date of this report. Additionally, we do not undertake any
responsibility to update you on the occurrence of any unanticipated events which
may cause actual results to differ from those expressed or implied by any
forward-looking statements.





The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto as filed with
the SEC and other financial information contained elsewhere in this
Report.





Overview





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





A
prototype of our biometric card was completed in February 2005 and we have been
adjusting and developing software for the card since that date.  The
finished product will be the prototype or model for our biometric cards, which
will be manufactured upon receipt of customer orders.   We are in
the process of revising some of the engineering of the prototype so as to
decrease the size of the circuitry contained in the card. We expect that the
revised prototype will be completed by January 2010.





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




3





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





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





Results
of Operations





Comparison
of the Three Months Ended September 30, 2009 and 2008





Revenue and Net Income
(Loss)





For the
three months ended September 30, 2009, there was $0 sales revenue and a net loss
of $260,003.  For the three months ended September 30, 2008, there was
$0 sales revenue and a net loss of $359,335. This decreased loss of $99,332 or
27.6% resulted primarily from lower research and development costs
..





General and Administrative
Expenses





General
and administrative expenses for the three months ended September 30, 2009 were
$176,059, an increase of $42,410 or 31.7% compared to $133,649 for the
comparable period in 2008. The increase was primarily attributable to increased
promotional and travel costs.





Research and Development
Expenses





Research
and development expenses for the three months ended September 30, 2009 were
$27,376, an decrease of $154,016 or 84.9% compared to $181,392 for the
comparable period in 2008. The decrease was primarily attributable to the
prototype nearing completion.





Interest
Expenses





Interest
expense for the three months ended September 30, 2009 was $6,568 compared to
$1,794 for the comparable period in 2008, an increase of $4,774 or 266.1%. The
increase was primarily attributable to interest accrued and/or paid to the
Internal Revenue Service relating to payroll taxes.





Income Tax
Expenses





Income
tax for the three months ended September 30, 2009 was $0, unchanged from
September 30, 2008.





Liquidity
and Capital Resources





Cash
and Cash Equivalent





Our cash
and cash equivalents were $42,519 at the beginning of three months ended
September 30, 2009 and decreased to ($47,917) by the end of such period, a
decrease of $90,436 or 212%.  The decrease was primarily attributable
to increased travel costs and a bank overdraft.





Net
cash provided by operating activities





Net
cash used in operating activities was $90,436 for the three months
ended September 30, 2009, an decrease of $202,595 or 69.1% from the comparable
period in 2008.





Net
cash used in investing activities





Net cash
used in investing activities was $0 for three months ended September 30, 2009,
unchanged from September 30, 2008.





Net
cash provided by financing activities





Net cash
provided by financing activities was $47,917 for the three months ended
September 30, 2009, an increase of $20,967 or 77.8%, from the comparable period
in 2008.





Contractual
Obligations and Off-Balance Sheet Arrangements.





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




4





The
following table (in thousands) summarizes our contractual obligations as of
September 30, 2009, and the effect these obligations are expected to have on our
liquidity and cash flows in future periods.





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





Critical
accounting policies and estimates





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





Intangible
assets





SmartMetric
did not purchase any intangible assets for the three months ended September 30,
2009.





Item 3.
            QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET
  RISK





N/A.





Item
      4T.
            CONTROLS AND
  PROCEDURES





Evaluation of
Disclosure Controls and Procedures




As
required by Rule 13a-15 of the Exchange Act, our management, including our Chief
Executive Offer and our Chief Financial Officer evaluated the effectiveness of
the design and operation of our disclosure controls and procedures as of
September 30, 2009.





Disclosure
controls and procedures refers to controls and other procedures designed to
ensure that information required to be disclosed in the reports we file or
submit under the Securities Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.  In designing and evaluating our disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply
its judgment in evaluating and implementing possible controls and
procedures.





Management
conducted its evaluation of disclosure controls and procedures under the
supervision of our Chief Executive Officer and Chief Financial
Officer.  Based on that evaluation, we have concluded that because of
significant deficiencies in internal control over financial reporting described
below, our disclosure controls and procedures were not effective as of September
30, 2009.





Management’s
Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act.    Our management is also
required to assess and report on the effectiveness of our internal control over
financial reporting in accordance with section 404 of the Sarbanes-Oxley of 2002
(“section 404”).  Management assessed the effectiveness of our
internal control over financial reporting as of September 30,
2009.  In making this assessment we used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework. During our assessment of the
effectiveness of internal control over financial reporting as of September 30,
2009, management identified significant deficiencies related to (i) the U.S.
GAAP expertise of our internal accounting staff, (ii) our internal audit
functions and (iii) a lack of segregation of duties within accounting
functions.  These deficiencies have, on occasion, prevented us from
timely filing of our 8-K and 10-K.  However, management believes that
these deficiencies do not amount to a material weakness.  Therefore
our internal controls over financial reporting were effective as of September
30, 2009.





We became
a reporting company in December 2002.  We began preparing to be in
compliance with the internal control obligations, including section 404, for our
fiscal year ending June 30, 2003, with an accounting staff that was relatively
inexperienced in working for a U.S. public company.  During most of
our first fiscal year, our internal accounting staff was primarily engaged in
insuring compliance with accounting and reporting requirements to meet U.S. GAAP
requirements.  As a result, with the exception of certain additional
persons hired towards the end of fiscal year ending June 30, 2003 to address
these deficiencies, including the hiring of our Chief Financial Officer, our
current internal accounting department responsible for financial reporting of
the Company, on a consolidated basis, is relatively new to U.S. GAAP and the
related internal control procedures required of U.S. public
companies.  Although our accounting staff is professionally trained in
accounting requirements and procedures required by U.S. GAAP, management has
determined that they require additional training and assistance in U.S. GAAP
matters.  Management has determined that our internal audit function
is also deficient due to insufficient qualified resources to perform internal
audit functions.




5





Changes
in Internal Control over Financial Reporting





In order
to correct the foregoing deficiencies, we have taken the following remediation
measures:





1)
            We
      have committed to the establishment of effective internal audit functions,
      however, due to the scarcity of qualified candidates with extensive
      experience in U.S. GAAP reporting and accounting in the region, we were
      not able to hire sufficient internal audit resources as of November 19,
      2009.  However, we will increase our search for qualified
      candidates with assistance from recruiters and through
      referrals.





2)
            Due
      to our size and nature, segregation of all conflicting duties may not
      always be possible and may not be economically
      feasible.  However, to the extent possible, we will implement
      procedures to ensure that the initiation of transactions, the custody of
      assets and the recording of transactions will be performed by separate
      individuals, and will ensure the timely filing of our 8-K and 10-K in the
      future.





We
believe that the foregoing steps will remediate the deficiency identified above,
and we will continue to monitor the effectiveness of these steps and make any
changes that our management deems appropriate.





A
material weakness (within the meaning of PCAOB auditing standard No. 5) is a
deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis.  A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control over financial
reporting that is less severe than a material weakness, yet important enough to
merit attention by those responsible for oversight of the company’s financial
reporting.





Our
management is not aware of any material weaknesses in our internal control over
financial reporting, and nothing has come to the attention of management that
causes them to believe that any material inaccuracies or errors exist in our
financial statements as of September 30, 2009.  The reportable
conditions and other areas of internal control over financial reporting
identified by us as needing improvement have not resulted in a material
misstatement of our financial statements.  Nor are we aware of any
instance where such reportable conditions or other identified areas of weakness
have resulted in a material misstatement or omission in any report we have filed
with or submitted to the Commission.  Accordingly, we believe that our
financial controls were effective.  These deficiencies, as stated
above, have on occasion cause late filing of our 8-K, 10-Q and
10-K.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements or prevent late required quarterly filing with
the SEC.  Projections of any evaluations of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or the degree of compliance with the policies and
procedures may deteriorate.





Limitations
on Controls





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





PART
II.  OTHER INFORMATION





Item
1.                     
 LEGAL
PROCEEDINGS





None.  Notwithstanding
the foregoing, the Company intends to protect its patents and to vigorously
pursue actions against defendants that infringe on any of its intellectual
property rights.





Item
1A.                    RISK
FACTORS





Not
Applicable.





Item
2.                      
UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS





None.




6





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





Item
3.                      
DEFAULTS UPON SENIOR
SECURITIES





None.





Item
4.                      
SUBMISSIONS OF MATTERS
TO A VOTE OF SECURITY HOLDERS





None.





Item
5.                      
OTHER
INFORMATION





There
were no matters required to be disclosed on Form 8-K during the three months
ended September 30, 2009 which were not disclosed on such form.





Item
6.                      
EXHIBITS





The
following exhibits are attached to this Form 10-Q and made a part
hereof.





Exhibit No.
            Description31.1
            Certification
      of SmartMetric’s Chief Executive Officer pursuant to Rule13a- 14(a) of the
      Securities Exchange Act of 193431.2
            Certificate
      of SmartMetric’s Chief Financial Officer pursuant to Rule13a- 14(a) of the
      Securities Exchange Act of 193432.1
            Certification
      of SmartMetric’s Chief Executive Officer 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)








7











SIGNATURE





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.











SMARTMETRIC,
      INC.Dated:  November
      23, 2009
            By:
            /s/ Colin
      HendrickColin
      Hendrick, President (Principal Executive Officer)








Dated:  November
      23, 2009
            By:
            /s/ Jay
      NeedelmanJay
      Needelman , Chief Financial Officer (Principal Financial and Accounting
      Officer)