| 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)                                                |

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

----

|                                                             |                                                                                                               | Page     |
|------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|----------|
|                                                             |                                                                                                               |     |
| PART I.      FINANCIAL INFORMATION |                                                                                                               |
|                                                             |                                                                                                               |     |
| Item 1.                                           | Financial Statements                                                                                               | F-1      |
|                                                             |                                                                                                               |     |
|                                                             | Consolidated Balance Sheets as of March 31, 2010 and June 30, 2009 (unaudited)                                | F-1      |
|                                                             |                                                                                                               |     |
|                                                             | Consolidated Statements of Operations for the three and nine months ended March 31, 2010 and 2009 (unaudited) | F-2      |
|                                                             |                                                                                                               |     |
|                                                             | Consolidated Statements of Cash Flows for the nine months ended March 31, 2010 and 2009 (unaudited)                | F-3      |
|                                                             |                                                                                                               |     |
|                                                             | Notes to Unaudited Financial Statements                                                                            | F-8-F-20 |
|                                                             |                                                                                                               |     |
| Item 2.                                           | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 3        |
|                                                             |                                                                                                               |     |
| Item 3.                                                          | Quantitative and Qualitative Disclosures About Market Risk.                                                        | 5        |
|                                                             |                                                                                                               |     |
| Item 4T.                                                    | Controls and Procedures                                                                                            | 5        |
|                                                             |                                                                                                               |     |
| PART II.    OTHER INFORMATION                | 7                                                                                                                  |
|                                                             |                                                                                                               |     |
| Item 1.                                                     | Legal Proceedings                                                                                                  | 7        |
|                                                             |                                                                                                               |     |
| Item 1A.                                                    | Risk Factors                                                                                                       | 7        |
|                                                             |                                                                                                               |     |
| Item 2.                                                     | Unregistered Sales of Equity Securities and Use of Proceeds                                                        | 7        |
|                                                             |                                                                                                               |     |
| Item 3.                                                     | Defaults Upon Senior Securities                                                                                    | 7        |
|                                                             |                                                                                                               |     |
| Item 4.                                                     | Removed and Reserved.                                                                                              | 7        |
|                                                             |                                                                                                               |     |
| Item 5.                                                     | Other Information                                                                                                  | 7        |
|                                                             |                                                                                                               |     |
| Item 6.                                           | Exhibits                                                                                                           | 7        |
|                                                             |                                                                                                               |     |
| Signatures                                                       | 8                                                                                                                  |

----

|                                                                                         |   | March 31, |       |   | June 30, |   |
|----------------------------------------------------------------------------------------------|--------|-----------|------------|--------|----------|--------|
|                                                                                         |   | 2010      |       |   | 2009     |   |
|                                                                                         |   |      |       |   |     |   |
| ASSETS                                                                                       |   |      |       |   |     |   |
| Current assets:                                                                              |   |      |       |   |     |   |
|   Cash                                                                             |   | $         | 7,353      |   |     | $      | 42,519 |   |
|   Prepaid expenses and other current assests                                       |   | $         | 10,954     |   |     | $      | 38,758 |   |
|                                                                                         |   |      |       |   |     |   | - |   |
| Total current assets                                                                         |   |      | 18,307     |   |     |   | 81,277 |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| Equipment, net accumulated depreciation of                                                   |   |      |       |   |     |   |   |   |
|   $15,984 and $13,599, respectively                                                |   |      | -          |   |     |   | 2,385 |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| Other assets:                                                                                |   |      |       |   |     |   |   |   |
|   Patent costs, net accumulated amortization                                       |   |      |       |   |     |   |   |   |
|   of $8,250 and $7,125, respectively                                               |   |      | 6,750      |   |     |   | 7,875 |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| Total assets                                                                                 |   | $         | 25,057     |   |     | $      | 91,537 |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| LIABILITIES AND STOCKHOLDERS' CAPITAL                                                        |   |      |       |   |     |   |   |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| Current Liabilities                                                                          |   |      |       |   |     |   |   |   |
|   Accounts payable and accrued expenses                                            |   | $         | 231,067    |   |     | $      | 129,244 |   |
|   Liability for stock to be issued                                                 |   | $         | 324,154    |   |     | $      | 146,454 |   |
|   Payroll taxes, withholdings, and accrued                                         |   |      |       |   |     |   |   |   |
|    interest and penalties                                                     |   |      | 378,052    |   |     |   | 240,677 |   |
| Total current liabilities                                                                    |   |      | 933,273    |   |     |   | 516,375 |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| Commitments and Contingencies                                                                |   |      |       |   |     |   |   |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| Stockholders' equity:                                                                        |   |      |       |   |     |   |   |   |
| Preferred stock, $.01 par value; 5,000,000 shares                                            |   |      |       |   |     |
|    authorized, 200,000 and 0 shares issued and outstanding, respectively |   |      | 200        |   |     |   |  - |   |
| Class A common stock, $.001 par value; 50,000,000                                            |   |      |       |   |     |
| shares authorized, 0 shares issued and outstanding                                           |   |      |       |   |     |
| Common stock, $.001 par value; 100,000,000 shares                                            |   |      |       |   |     |
| authorized, issued and outstanding 81,976,222 and                                            |   |      |       |   |     |
|    74,037,942 shares, respectively                                            |   |      | 81,976     |   |     |   | 75,546 |   |
|   Additional paid-in-capital                                                       |   |      | 5,284,258  |   |     |   | 4,569,388 |   |
|   Deficit accumulated during the development stage                                 |   |      | (6,274,650 | )      |     |   | (5,069,772 | ) |
|                                                                                         |   |      |       |   |     |   |   |   |
| Total stockholders' equity                                                                   |   |      | (908,216   | )      |     |   | (424,838 | ) |
|                                                                                         |   |      |       |   |     |   |   |   |
| Total liabilities and stockholders' equity                                                   |   | $         | 25,057     |   |     | $      | 91,537 |   |
|                                                                                         |   |      |       |   |     |   |   |   |
|                                                                                         |   |      |       |   |     |   |   |   |
| See notes to condensed consolidated financial statements.                               |

----

|                             |   |    |  Three Months EndedMarch 31, |   |   |    | Nine Months EndedMarch 31, |   |   |    | CumulativeDuringDevelopmentStage(December18, 2002to March 31, |   |
|----------------------------------|--------|---------|-----------------------------------|--------|--------|---------|----------------------------|--------|--------|---------|---------------------------------------------------------------|--------|
|                             |   |    | 2010                              |   |   |    | 2009                       |   |   |    | 2010                                                          |   |   |   | 2009 |   |   |   | 2010) |   |
| REVENUES                         |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                             |   | $  |  -                           |   |   | $  |  -                    |   |   | $  |  -                                                       |   |   | $  |  - |   |   | $  |  - |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Operating expenses:              |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Officer's salary                 |   |    | 17,000                            |   |   |    | 42,500                     |   |   |    | 109,500                                                       |   |   |   | 127,500 |   |   |   | 874,500 |   |
| Other general and administrative |   |    | 120,854                           |   |   |    | 136,255                    |   |   |    | 1,023,884                                                     |   |   |   | 432,188 |   |   |   | 4,477,169 |   |
| Research and development         |   |    | 17,388                            |   |   |    | 59,518                     |   |   |    | 58,119                                                        |   |   |   | 242,997 |   |   |   | 871,718 |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Total operating expenses         |   |    | 155,242                           |   |   |    | 238,273                    |   |   |    | 1,191,503                                                     |   |   |   | 802,685 |   |   |   | 6,223,387 |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Loss from operations             |   | $       | (155,242                          | )      |   | $       | (238,273                   | )      |   | $       | (1,191,503                                                    | )      |   | $ | (802,685 | ) |   | $ | (6,223,387 | ) |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Interest income                  |   |    | -                                 |   |   |    | -                          |   |   |    |                                                          |   |   |   |   |   |   |   | 657 |   |
| Interest expense                 |   |    | (3,577                            | )      |   |    | (2,089                     | )      |   |    | (13,375                                                       | )      |   |   | (5,387 | ) |   |   | (51,920 | ) |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Total other expenses and income  |   |    | (3,577                            | )      |   |    | (2,089                     | )      |   |    | (13,375                                                       | )      |   |   | (5,387 | ) |   |   | (51,263 | ) |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Net loss                         |   | $       | (158,819                          | )      |   | $       | (240,362                   | )      |   | $       | (1,204,878                                                    | )      |   | $ | (808,072 | ) |   | $ | (6,274,650 | ) |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Net loss per share,              |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|   basic and diluted    |   |    | (0.00                             | )      |   |    | (0.00                      | )      |   |    | (0.02                                                         | )      |   |   | (0.01 | ) |   |   |   |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Weighted average number          |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|   of common shares     |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|   outstanding,         |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|   basic and diluted    |   |    | 80,251,666                        |   |   |    | 73,252,658                 |   |   |    | 78,786,744                                                    |   |   |   | 71,533,425 |   |   |   |   |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                             |   |    |                              |   |   |    |                       |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |

----

|                                                                |   |              |       |    |        |     |     | Cumulative  |   |
|---------------------------------------------------------------------|--------|-------------------|------------|---------|-------------|----------|----------|-------------|--------|
|                                                                |   |              |       |    |        |     |     | During the  |   |
|                                                                |   |              |       |    |        |     |     | Development |   |
|                                                                |   |              |       |    |        |     |     | Stage       |   |
|                                                                |   |              |       |    |        |     |     | (December   |   |
|                                                                |   | Nine Months Ended |       |    |        | 18, 2002 |     |
|                                                                |   | March 31,         |       |    | to March 31 |     |
|                                                                |   | 2010              |       |    | 2009        |     |     |        | 2010)  |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                |   |              |       |    |        |     |     |        |   |   |
| Reconciliation of net loss to net cash used in operating activities |   | $                 | (1,204,878 | )       |        | $        | (808,072 | )           |   | $ | (6,274,650 | ) |
| Interest accrued on convertible notes payable                       |   |              | -          |    |        |     | -        |        |   |   | 2,400 |   |
| Common stock issued for consulting services                         |   |              | 575,000    |    |        |     |     |        |   |   | 1,174,339 |   |
| Depreciation of equipment                                           |   |              | 2,385      |    |        |     | 3,213    |        |   |   | 15,984 |   |
| Amortization of patent costs                                        |   |              | 1,125      |    |        |     | 1,125    |        |   |   | 8,250 |   |
| Changes in Current Assets and Liabilities                           |   |              |       |    |        |     |     |        |   |   |   |   |
|   Prepaid expenses                                        |   |              | 27,804     |    |        |     | (12,837  | )           |   |   | (10,954 | )  |
|   Organization costs                                      |   |              | -          |    |        |     |     |        |   |   |   |   |
|   Accounts payable and accrued expenses                   |   |              | 101,823    |    |        |     | 111,700  |        |   |   | 231,067 |   |
|   Liability for stock to be issued                        |   |              | 177,700    |    |        |     |  -  |        |   |   | 324,154 |   |
|   Payroll taxes, withholdings, and accrued                |   |              | -          |    |        |     |     |        |   |   |   |   |
|     interest and penalties                      |   |              | 137,375    |    |        |     | 49,538   |        |   |   | 378,052 |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| Net Cash Used in Operating Activities                     |   |              | (181,666   | )  |        |     | (655,333 | )           |   |   | (4,151,358 | ) |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                |   |              |       |    |        |     |     |        |   |   |   |   |
| Equipment purchased                                                 |   |              | -          |    |        |     | -        |        |   |   | (15,984 | ) |
| Patent costs incurred                                               |   |              | -          |    |        |     | -        |        |   |   | (15,000 | ) |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| Net Cash Used in Investing Activities                               |   |              | -          |    |        |     | -        |        |   |   | (30,984 | ) |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                |   |              |       |    |        |     |     |        |   |   |   |   |
| Proceeds from notes payable                                         |   |              |  -    |    |        |     | -        |        |   |   | 60,000 |   |
| Loans from related party                                            |   |              | -          |    |        |     |  -  |        |   |   | 54,427 |   |
| Repayment of loans from related party                               |   |              |       |    |        |     |     |        |   |   | (54,427 | ) |
| Stock subscriptions collected from private placements, net          |   |              | 146,500    |    |        |     | 405,290  |        |   |   | 3,152,694 |   |
| Sale of common stock in public offering                             |   |              | -          |    |        |     |  -  |        |   |   | 1,115,472 |   |
| Public offering costs incurred                                      |   |              |       |    |        |     |     |        |   |   | (138,471 | ) |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| Net cash provided by financing activities                           |   |              | 146,500    |    |        |     | 405,290  |        |   |   | 4,189,695 |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH                                     |   |              | (35,166    | )       |        |     | (250,043 | )           |   |   | 7,353 |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| CASH - BEGINNING OF PERIOD                                          |   |              | 42,519     |    |        |     | 266,417  |        |   |   | - |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| CASH - END OF PERIOD                                                |   | $                 | 7,353      |    |        | $        | 16,374   |        |   | $ | 7,353 |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                   |   |              |       |    |        |     |     |        |   |
| Cash paid during the period for interest                            |   | $                 | 13,375     |    |        | $        | 1,050    |        |   | $  |  41,549 |   |
| Cash paid during the period for income taxes                        |   |              | -          |    |        |     | -        |        |   |   | - |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |
|                                                                |   |              |       |    |        |     |     |        |   |   |   |   |

----

|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |
|--------------------------------|--------|----------------------|------------|--------|--------------|--------|--------|---------|--------|--------|-------------|--------|--------|
|                           |   |                 |       |   |         |   |   |
|                           |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   | Deficit |   |   |   |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   | Accumulated |   |   | Total |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   | Additional |   |   | During the |   |   | Stockholders' |   |
|                           |   | Class A Common Stock |       |   | Common Stock |   |   | Paid-In |   |   | Development |   |   | Equity |   |
|                           |   | Shares               |       |   | Amount       |   |   | Shares  |   |   | Amount      |   |   | Capital |   |   | Stage |   |   | (Deficiency) |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |
| Net loss for period            |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |
| December 18,                   |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |
| 2002                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |
|  (date of                 |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |
|   inception)              |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |
|   to June 30, 2003        |   |                 | -          |   |         | $      | -      |    |   |   | -           |   |   | $ | - |   |   | $ | - |   |   | $ | (60 | ) |   | $ | (60 | ) |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, June 30,             |   |                 | -          |   |         |   | -      |    |   |   | -           |   |   |   | - |   |   |   | - |   |   |   | (60 | ) |   |   | (60 | ) |
| 2003                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale of Class A                |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   common stock in         |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   October 2003 at a price |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |
|   of $.001 per share      |   |                 | 50,000,000 |   |         |   | 50,000 |    |   |   | -           |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 50,000 |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale of Common                 |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                          |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   from October            |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2003                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   to June 2004 at a       |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   price of $.01 per       |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                          |   |                 | -          |   |         |   | -      |    |   |   | 8,560,257   |   |   |   | 8,560 |   |   |   | 77,042 |   |   |   | - |   |   |   | 85,602 |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for year              |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ended                          |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   June 30, 2004           |   |                 | -          |   |         |   | -      |    |   |   | -           |   |   |   | - |   |   |   | - |   |   |   | (35,978 | ) |   |   | (35,978 | ) |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, June 30              |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2004                           |   |                 | 50,000,000 |   |         |   | 50,000 |    |   |   | 8,560,257   |   |   |   | 8,560 |   |   |   | 77,042 |   |   |   | (36,038 | ) |   |   | 99,564 |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs Associated               |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| with                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  sale of common           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                          |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subject to              |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| possible                       |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   rescission              |   |                 | -          |   |         |   | -      |    |   |   | .           |   |   |   | - |   |   |   | (95,877 | ) |   |   | - |   |   |   | (95,877 | ) |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for year              |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ended                          |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   June 30, 2005           |   |                 | -          |   |         |   | -      |    |   |   | -           |   |   |   | - |   |   |   | - |   |   |   | (258,355 | ) |   |   | (258,355 | ) |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, June 30,             |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2005                           |   |                 | 50,000,000 |   |         |   | 50,000 |    |   |   | 8,560,257   |   |   |   | 8,560 |   |   |   | (18,835 | ) |   |   | (294,393 | ) |   |   | (254,668 | ) |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale of Common                 |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                          |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   from August             |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2005 to                        |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   February 2006 in public |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |
|   offering at $1.50       |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                            |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   share, less             |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| offering                       |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   costs of $138,471       |   |                 | -          |   |         |   | -      |    |   |   | 743,648     |   |   |   | 744 |   |   |   | 976,257 |   |   |   | - |   |   |   | 977,001 |   |
|                           |   |                 |       |   |         |   |   |    |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   | Deficit     |   |   |          |       |
|-----------------------------|--------|--------|-------------|----------------------|--------|--------|--------------|--------|--------|---------|------------|--------|-------------|--------|--------|------------|--------|--------|-------------|--------|--------|---------------|------------|
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   | Accumulated |   |   | Total         |       |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   | Additional |   |   | During the  |   |   | Stockholders' |       |
|                        |   |   |        | Class A Common Stock |   |   | Common Stock |   |   | Paid-In |       |   | Development |   |   | Equity     |   |
|                        |   |   |        | Shares               |   |   | Amount       |   |   | Shares  |       |   | Amount      |   |   | Capital    |   |   | Stage       |   |   | (Deficiency)  |       |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |
| Conversion of               |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |
| Class A                     |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |
|  common stock to       |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |
|  common stock by       |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |
|  related parties in    |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |
|  February and          |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |
| May 2006                    |   |   | (50,000,000 | )                    |   |   | (50,000      | )      |   |    | 50,000,000 |   |        |   | 50,000 |       |   |   | -           |   |   |          | -          |   |   |   | - |   |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Conversion of               |   |   | -           |                 |   |   | -            |   |   |    | -          |   |        |   | -      |       |   |   | -           |   |   |          | (60        | ) |   |   | (60 | ) |
|     $60,000  |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
|  common stock to       |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
|  loans payable and     |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
|  accrued interest      |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
| to                          |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
|  common stock in       |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
|  March 2006            |   |   | -           |                 |   |   | -            |   |   |    | 40,000     |   |        |   | 40     |       |   |   | 62,360      |   |   |          | -          |   |   |   | 62,400 |   |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Shares issued for           |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
| services                    |   |   | -           |                 |   |   | -            |   |   |    | 20,000     |   |        |   | 20     |       |   |   | 19,980      |   |   |          | -          |   |   |   | 20,000 |   |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Sale of Units from          |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
| May                         |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
|  2006 to June          |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| 2006 in                     |   |   | -           |                 |   |   | -            |   |   |    | 8,560,257  |   |        |   | 8,560  |       |   |   | 77,042      |   |   |          | -          |   |   |   | 85,602 |   |
|  private offering at   |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
|     $1.15    |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
|  per Unit less         |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| offering                    |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
|  costs of $38          |   |   | -           |                 |   |   | -            |   |   |    | 192,464    |   |        |   | 192    |       |   |   | 221,104     |   |   |          | -          |   |   |   | 221,104 |   |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Net loss for year           |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
| ended                       |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
|  June 30, 2006         |   |   | -           |                 |   |   | -            |   |   |    | -          |   |        |   | -      |       |   |   | -           |   |   |          | (1,225,045 | ) |   |   | (1,225,045 | ) |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Balances, June 30,          |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
|     2006     |   |   | -           |                 |   |   | -            |   |   |    | 59,556,369 |   |        |   | 59,556 |       |   |   | 1,260,866   |   |   |          | (1,519,438 | ) |   |   | (199,016 | ) |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Sale of Units in            |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |
|     private  |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| placements                  |   |   | -           |                 |   |   | -            |   |   |    | 1,208,887  |   |        |   | 1,209  |       |   |   | 759,140     |   |   |          | -          |   |   |   | 760,349 |   |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Shares issues for           |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
| services                    |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
|   and adjustments |   |   | -           |                 |   |   | -            |   |   |    | 191,505    |   |        |   | 192    |       |   |   | (192        | )      |   |          | -          |   |   |   | - |   |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Net loss for year           |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
| ended                       |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
|  June 30, 2007         |   |   | -           |                 |   |   | -            |   |   |    | -          |   |        |   | -      |       |   |   | -           |   |   |          | (1,050,189 | ) |   |   | (1,050,189 | ) |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |
| Balances, June 30,          |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |
|    2007      |   |   | -           |                 |   |   | -            |   |   |    | 60,956,761 |   |        |   | 60,957 |       |   |   | 2,019,814   |   |   |          | (2,569,627 | ) |   |   | (488,856 | ) |
|                        |   |   |        |                 |   |   |         |   |   |    |       |   |        |   |   |       |   |   |        |   |   |          |       |   |   |   |   |   |   |

----

|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   | Deficit     |      |      |          |   |
|--------------------------|--------|--------|----------------------|--------|--------|--------------|--------|--------|---------|--------|-----------|-------------|--------|--------|------------|--------|--------|-------------|-----------|-----------|---------------|--------|
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   | Accumulated |      |      | Total         |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   | Additional |   |   | During the  |      |      | Stockholders' |   |
|                     |   |   | Class A Common Stock |   |   | Common Stock |   |   | Paid-In |   |      | Development |   |   | Equity     |   |
|                     |   |   | Shares               |   |   | Amount       |   |   | Shares  |   |      | Amount      |   |   | Capital    |   |   | Stage       |      |      | (Deficiency)  |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |
| Sale of Units in         |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |
|   private           |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |
| placements               |   |   | -                    |   |   |         | -      |   |    |   | 5,239,816 |        |   |   | 5,239      |   |   |        | 1,162,187 |      |          |   | - |   |   |   | 1,167,426 |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Sale of Units in         |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
|   private           |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |
| placements               |   |   | -                    |   |   |         | -      |   |    |   | 1,389,818 |        |   |   | 1,390      |   |   |        | 131,408   |      |          |   | - |   |   |   | 132,798 |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Shares issued for        |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
| services                 |   |   | -                    |   |   |         | -      |   |    |   | 2,327,000 |        |   |   | 2,327      |   |   |        | 471,073   |      |          |   |   |   |   |   | 473,400 |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Net loss for year        |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |
| ended                    |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |
|   June 30, 2008     |   |   | -                    |   |   |         | -      |   |    |   | -         |        |   |   | -          |   |   |        | -         |      |          |   | (1,397,056 | ) |   |   | (1,397,056 | ) |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Balances, June 30,       |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
| 2008                     |   |   |                 | -      |   |         |   | -      |    |   |      | 69,913,395  |   |   |       | 69,913 |   |        |      | 3,784,482 |          |   |   | (3,966,683 | ) |   |   | (112,288 | ) |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Transfer of shares       |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
| from temporary equity    |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
|   to common stock   |   |   | -                    |   |   |         | -      |   |    |   | 160,837   |        |   |   | 161        |   |   |        | 241,095   |      |          |   | - |   |   |   | 241,256 |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Shares issued of common  |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
| stock for                |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |
|   cash              |   |   | -                    |   |   |         | -      |   |    |   | 4,412,593 |        |   |   | 4,413      |   |   |        | 438,931   |      |          |   | - |   |   |   | 443,344 |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Shares issued of common  |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
| stock for                |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |
|   services rendered |   |   | -                    |   |   |         | -      |   |    |   | 1,059,394 |        |   |   | 1,059      |   |   |        | 104,880   |      |          |   | - |   |   |   | 105,939 |   |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Net loss for year        |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |
| ended                    |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |
|   June 30, 2009     |   |   | -                    |   |   |         | -      |   |    |   | -         |        |   |   | -          |   |   |        | -         |      |          |   | (1,103,089 | ) |   |   | (1,103,089 | ) |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |
| Balances, June 30,       |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |
| 2009                     |   |   |                 | -      |   |         |   | -      |    |   |      | 75,546,222  |   |   |       | 75,546 |   |        |      | 4,569,388 |          |   |   | (5,069,772 | ) |   |   | (424,838 | ) |
|                     |   |   |                 |   |   |         |   |   |    |   |      |        |   |   |       |   |   |        |      |      |          |   |   |   |   |   |   |   |   |

----

|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   | Deficit |   |   |         |      |
|--------------------------|--------|--------|----------------------|---------|--------|----------------------------|--------|--------|--------------|--------|--------|---------------|--------|--------|-------------|--------|--------|-------------|-----------|------------|---------|--------|--------|---------|--------|--------|--------------|-----------|
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   | Accumulated |      |       | Total   |   |
|                     |   |   | Series B Convertible |    |   | Additional                 |   |   | During the   |   |   | Stockholders' |   |
|                     |   |   | Preferred Stock      |    |   |  Class A Common Stock |   |   | Common Stock |   |   | Paid-In       |   |   | Development |   |   | Equity      |      |
|                     |   |   | Shares               |    |   | Amount                     |   |   | Shares       |   |   | Amount        |   |   | Shares      |   |   | Amount      |      |       | Capital |   |   | Stage   |   |   | (Deficiency) |      |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |
| Unaudited                |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |
| Shares issued            |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |
| for                      |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |
| patent                   |   |   | 200,000              |    |   |                       | 200    |   |         |   | -      |          |   |   | -           |   |   |        | -         |       |    |   | -      |    |   |   | (200         | )         |   |   | - |   |   |   | - |   |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |
| Shares issued of common  |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |
| stock for                |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |
|   services rendered |   |   | -                    |    |   |                       | -      |   |         |   | -      |          |   |   | -           |   |   |        | 3,500,000 |       |    |   | 3,500  |    |   |   | 329,000      |      |   |   | - |   |   |   | 332,500 |   |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |
| Warrants issued          |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |
| for services rendered    |   |   | -                    |    |   |                       | -      |   |         |   | -      |          |   |   | -           |   |   |        | -         |       |    |   | -      |    |   |   | 242,500      |      |   |   |   |   |   |   | 242,500 |   |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |
| Net loss for the period  |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |
| ended                    |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |
|   December 31, 2009 |   |   | -                    |    |   |                       | -      |   |         |   | -      |          |   |   | -           |   |   |        | -         |       |    |   | -      |    |   |   | -            |      |   |   | (1,046,059 | ) |   |   | (1,046,059 | ) |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |
| Balances, December 31,   |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |
| 2009                     |   |   |                 | 200,000 |   |                       |   | 200    |         |   |   | -             |   |   |        | -      |   |        |      | 79,046,222 |    |   |   | 79,046  |   |   |         | 5,140,688 |   |   |   | (6,115,831 | ) |   |   | (895,897 | ) |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |
| Shares issued of common  |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |
| stock for                |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |
|   cash              |   |   | -                    |    |   |                       | -      |   |         |   | -      |          |   |   | -           |   |   |        | 2,930,000 |       |    |   | 2,930  |    |   |   | 143,570      |      |   |   | - |   |   |   | 146,500 |   |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |
| Net loss for the period  |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |
| ended                    |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |
|   March 31, 2010    |   |   | -                    |    |   |                       | -      |   |         |   | -      |          |   |   | -           |   |   |        | -         |       |    |   | -      |    |   |   | -            |      |   |   | (158,819 | ) |   |   | (158,819 | ) |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |
| Balances, March 31,      |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |
| 2010                     |   |   |                 | 200,000 |   |                       | $      | 200    |         |   |   | -             |   |   | $           | -      |   |        |      | 81,976,222 |    |   | $      | 81,976  |   |   | $            | 5,284,258 |   |   | $ | (6,274,650 | ) |   | $ | (908,216 | ) |
|                     |   |   |                 |    |   |                       |   |   |         |   |   |          |   |   |        |   |   |        |      |       |    |   |   |    |   |   |         |      |   |   |   |   |   |   |   |   |   |

----

----

----

----

----

----

----

|                           |   |                                |   |    |          |   |   |          |   |
|--------------------------------|--------|-------------------------------------|--------|---------|---------------|--------|--------|---------------|--------|
|                           |   | Estimated Useful Lives( Years) |   |    | March 31,2010 |   |   | June 30, 2009 |   |
|                           |   |                                |   |    |          |   |   |          |   |
| Computer equipment             |   |                                | 3-5    |    |          | $      | 15,984 |          |   | $ | 15,984 |   |
|                           |   |                                |   |    |          |   |   |          |   |   |   |   |
| Less: accumulated depreciation |   |                                |   | (15,984 | )             |   |   | (13,599       | )      |
| Equipment, net                 |   |                                | $      | -       |          |   | $      | 2,385         |   |

|                                                  |   | Estimated Useful Lives( Years) |   |   | March 31,2010 |   |   | June 30,2009 |   |
|-------------------------------------------------------|--------|-------------------------------------|--------|--------|---------------|--------|--------|--------------|--------|
|                                                  |   |                                |   |   |          |   |   |         |   |
| Legal fees paid in connection with patentApplications |   |                                | 10     |   |          | $      | 15,000 |         |   | $ | 15,000 |   |
|                                                  |   |                                |   |   |          |   |   |         |   |   |   |   |
| Less: accumulated amortization                        |   |                                |   | (8,250 | )             |   |   | (7,125       | )      |
| Patent costs, net                                     |   |                                | $      | 6,750  |          |   | $      | 7,875        |   |

----

----

----

----

----

| Outstanding - beginning of period |   |   | 5,332,569 |   |
|-----------------------------------|--------|--------|-----------|--------|
| Issued                            |   |   | 2,500,000 |   |
| Exercised                         |   |   | -         |   |
| Expired                           |   |   | (918,000  | )      |
|                              |   |   |      |   |
| Outstanding - end of period       |   |   | 6,914,569 |   |

| Outstanding - beginning of period |   |   | 5,239,816        |   |
|-----------------------------------|--------|--------|------------------|--------|
| Issued                            |   |   | 1,785,000        |   |
| Exercised                         |   |   | -                |   |
| Expired                           |   |   | (1,236,313       | )      |
|                              |   |   |             |   |
| Outstanding - end of period       |   |   |   5,788,503 |   |

----

| Net operating losses |   | $      | 1,204,878   |   |
|----------------------|--------|--------|-------------|--------|
|                 |   |   |        |   |
| Valuation allowance  |   |   | ( 1,204,878 | )      |
|                 |   | $      | -           |   |

|                                        |   | 2010   |   |          | 2009   |   |
|---------------------------------------------|--------|--------|--------|---------------|--------|--------|
|                                        |   |   |   |          |   |   |
| Federal statutory rate                 |   |   | (34.0  | %)       |   |   | (34.0 | %) |
| State income taxes, net of federal benefits |   |   | 3.3    |          |   |   | 3.3 |   |
| Valuation allowance                         |   |   | 30.7   |          |   |   | 30.7 |   |
|                                        |   |   | 0      | %   |   |   | 0 | % |

----

----

----

| Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|---------|------------------------------------------------------------|

| Item 4T. | CONTROLS AND PROCEDURE |
|----------|------------------------|

----

| 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 May 21, 2010.  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 all timely filings in the future. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| a)   | For an order pursuant to 35 U.S.C. section 271 declaring that both MasterCard and Visa have infringed one or more claims of the ‘464 Patent;   |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| b)   | A preliminary and permanent injunction against both MasterCard and Visa prohibiting each of them from further infringement of the ‘464 Patent; |

| c)   | An award of actual damages the Company has suffered by reason of the infringement charged in the complaint in an amount not less than a reasonable royalty on both MasterCard’s and Visa’s infringement of the ‘464 Patent; |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| d)   | An award to the Company of its costs; and                                                                                                                                                                                                     |

| e)   | Such other relief as the Court may deem just and proper. |
|----------------|----------------------------------------------------------|

| Exhibit No. | Description                                                                                                                                                                                                          |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                 |
| 31.1        | Certification of SmartMetric’s Chief Executive Officer pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934                                                                                       |
|        |                                                                                                                                                                                                                 |
| 31.2        | Certificate of SmartMetric’s Chief Financial Officer pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934                                                                                         |
|        |                                                                                                                                                                                                                 |
| 32.1        | Certification of SmartMetric’s Chief Executive Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 the United States Code (18 U.S.C. 1350) |

| 32.2 | Certification of SmartMetric’s Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 the United States Code (18 U.S.C. 1350) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                           | SMARTMETRIC, INC. |                      |
|--------------------------------|-------------------|---------------------------|
|                           |              |                      |   |
| Dated:  May 24, 2010 | By:               | /s/ Colin Hendrick   |   |
|                           |              | Colin Hendrick, President |   |
|                           |              |                      |   |
|                           |              |                      |   |

|                           |   |                                    |   |
|--------------------------------|--------|-----------------------------------------|--------|
| Dated:  May 24, 2010 | By:    | /s/ Jay Needelman                  |   |
|                           |   | Jay Needelman , Chief Financial Officer |   |
|                           |   |                                    |   |
|                           |   |                                    |   |