SmartMetric, Inc. - Quarter Report: 2009 March (Form 10-Q)

form10q.htm

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 March 31, 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 May 11, 2009, there were 74,037,942 shares issued and outstanding of the registrant’s common stock.

INDEX

	Page

PART I. FINANCIAL INFORMATION	F-1
Item 1. Financial Statements	F-2
Consolidated Balance Sheets as of March 31, 2009 (unaudited) and March 31, 2008	F-3
Consolidated Statements of Operations for the nine months ended March 31, 2009 and 2008 (unaudited)	F-4
Consolidated Statements of Cash Flows for the nine months ended March 31, 2009 and 2008 (unaudited)	F-6
Notes to Unaudited Financial Statements	F-7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3A(T). Controls and Procedures	6

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	6
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3. Defaults Upon Senior Securities	7
Item 4. Submission of Matters to Vote of Security Holders	7
Item 5. Other Information	7
Item 6. Exhibits	8
Signatures	9

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Index to Financial Statements

								Page
Consolidated Balance Sheets as of March 31, 2009
(Unaudited) and June 30, 2008								F-2

Consolidated Statements of Operations for the three and nine
months ended March 31, 2009 and 2008 and for the period
December 18, 2002 (inception) to March 31, 2009
(Unaudited)								F-3

Consolidated Statements of Changes in Stockholders’ Equity
for the period December 18, 2002 (inception)
to March 31, 2009 (Unaudited)								F-4

Consolidated Statements of Cash Flows for the nine months
ended March 31, 2009 and 2008 and for the period
December 18, 2002 (inception) to March 31, 2009
(Unaudited)								F-7

Notes to Consolidated Financial Statements								F-8

F-1

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Balance Sheets

	March 31,			June 30,
	2009			2008
	(Unaudited)
Assets
Current assets:
Cash	$	16,374		$	266,417
Prepaid expenses		64,738			51,901

Total current assets		81,112			318,318

Equipment, less accumulated depreciation of
$12,528 and $9,315, respectively		3,456			6,669

Other assets:
Patent costs, less accumulated amortization
of $6,750 and $5,625, respectively		8,250			9,375

Total assets	$	92,818		$	334,362

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued expenses	$	179,586		$	67,886
Payroll taxes, withholdings, and accrued
interest and penalties		187,046			137,508

Total current liabilities		366,632			205,394

Other liabilities		-			-

Total liabilities		366,632			205,394

Common stock subject to possible rescission
(160,837 shares at June 30, 2008)		-			241,256

Stockholders' equity :
Preferred stock, $.01 par value; 5,000,000 shares
authorized, 0 shares issued and outstanding		-			-
Class A common stock, $.001 par value; 50,000,000
shares authorized, 0 shares issued and outstanding		-			-
Common stock, $.001 par value; 100,000,000 shares
authorized, issued and outstanding 74,037,942 and
69,913,395 shares, respectively		74,038			69,913
Additional paid-in capital		4,426,903			3,784,482
Deficit accumulated during the development stage		(4,774,755	)		(3,966,683	)

Total stockholders' equity (deficiency)		(273,814	)		(112,288	)

Total liabilities and stockholders' equity	$	92,818		$	334,362

See notes to consolidated financial statements.

F-2

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Operations

(Unaudited)

													Cumulative
													During the
													Development
													Stage
	Three Months Ended						Nine Months Ended						(December 18, 2002
	March 31,						March 31,						to March 31,
	2009			2008			2009			2008				2009	)

Revenues	$	-		$	-		$	-		$	-		$	-

Operating expenses:
Officer's salary		42,500			42,500			127,500			127,500			722,500
Other general and
administrative		136,255			561,501			432,188			874,648			3,208,284
Research and development		59,518			1,600			242,997			33,363			806,160

Total operating expenses		238,273			605,601			802,685			1,035,511			4,736,944

Loss from operations		(238,273	)		(605,601	)		(802,685	)		(1,035,511	)		(4,736,944	)

Interest income		-			-			-			-			657
Interest expense		(2,089	)		-			(5,387	)		(6,971	)		(38,468	)

Net loss	$	(240,362	)	$	(605,601	)	$	(808,072	)	$	(1,042,482	)	$	(4,774,755	)

Net loss per share,
basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.02	)

Weighted average number
of common shares
outstanding,
basic and diluted		73,252,658			63,359,318			71,533,425			62,304,937

See notes to consolidated financial statements.

F-3

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders' Equity

												Deficit
												Accumulated			Total
									Additional			During the			Stockholders'
	Class A Common Stock				Common Stock				Paid-In			Development			Equity
	Shares		Amount		Shares		Amount		Capital			Stage			(Deficiency)

Net loss for period
December 18, 2002
(date of inception)
to June 30, 2003		-	$	-		-	$	-	$	-		$	(60	)	$	(60	)

Balances, June 30, 2003		-		-		-		-		-			(60	)		(60	)

Sale of Class A
common stock in
October 2003 at a price
of $.001 per share		50,000,000		50,000		-		-		-			-			50,000

Sale of common stock
from October 2003
to June 2004 at a
price of $.01 per share		-		-		8,560,257		8,560		77,042			-			85,602

Net loss for year ended
June 30, 2004		-		-		-		-		-			(35,978	)		(35,978	)

Balances, June 30, 2004		50,000,000		50,000		8,560,257		8,560		77,042			(36,038	)		99,564

Costs associated with
sale of common stock
subject to possible
rescission		-		-		-		-		(95,877	)		-			(95,877	)

Net loss for year ended
June 30, 2005		-		-		-		-		-			(258,355	)		(258,355	)

Balances, June 30, 2005		50,000,000		50,000		8,560,257		8,560		(18,835	)		(294,393	)		(254,668	)

Sale of common stock
from August 2005 to
February 2006 in public
offering at $1.50 per
share, less offering
costs of $138,471		-		-		743,648		744		976,257			-			977,001

See notes to consolidated financial statements

F-4

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders' Equity

														Deficit
														Accumulated			Total
											Additional			During the			Stockholders'
	Class A Common Stock						Common Stock				Paid-In			Development			Equity
	Shares			Amount			Shares		Amount		Capital			Stage			(Deficiency)

Conversion of Class A
common stock to
common stock by
related parties in
February and May 2006		(50,000,000	)		(50,000	)		50,000,000		50,000		-			-			-

Conversion of $60,000
loans payable and
accrued interest to
common stock in
March 2006		-			-			40,000		40		62,360			-			62,400

Shares issued for services		-			-			20,000		20		19,980			-			20,000

Sale of Units from May
2006 to June 2006 in
private offering at $1.15
per Unit less offering
costs of $38		-			-			192,464		192		221,104			-			221,296

Net loss for year ended
June 30, 2006		-			-			-		-		-			(1,225,045	)		(1,225,045	)

Balances, June 30, 2006		-			-			59,556,369		59,556		1,260,866			(1,519,438	)		(199,016	)

Sale of Units in
private placements		-			-			1,208,887		1,209		759,140			-			760,349

Shares issued 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	)

See notes to consolidated financial statements.

F-5

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders' Equity

											Deficit
											Accumulated			Total
									Additional		During the			Stockholders'
	Class A Common Stock				Common Stock				Paid-In		Development			Equity
	Shares		Amount		Shares		Amount		Capital		Stage			(Deficiency)

Sale of Units in
private placements		-		-		5,239,816		5,239		1,162,187		-			1,167,426

Sale of shares 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	)

Unaudited:
Sale of Units in
private placements		-		-		3,355,569		3,356		350,851		-			354,207

Sale of shares in
private placements		-		-		608,141		608		50,475		-			51,083

Lapse of rescission rights
for common stock
subject to possible
rescission		-		-		160,837		161		241,095		-			241,256

Net loss for nine
months ended
March 31, 2009		-		-		-		-		-		(808,072	)		(808,072	)

Balances, March 31,
2009		-	$	-		74,037,942	$	74,038	$	4,426,903	$	(4,774,755	)	$	(273,814	)

See notes to consolidated financial statements.

F-6

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended March 31,						Cumulative During the Development Stage (December 18, 2002 to March 31, 2009)
	2009			2008

Cash flows from operating activities:
Net loss	$	(808,072	)	$	(1,042,482	)	$	(4,774,755	)
Interest accrued on convertible notes payable		-			-			2,400
Shares issued for services		-			473,400			493,400
Depreciation of equipment		3,213			3,213			12,528
Amortization of patent costs		1,125			1,125			6,750
Changes in operating assets and liabilities:
Prepaid expenses		(12,837	)		54,883			(64,738	)
Organization costs		-			60			-
Accounts payable and accrued expenses		111,700			(9,426	)		179,586
Payroll taxes, withholdings, and accrued
interest and penalties		49,538			(49,149	)		187,046

Net cash used for operating activities		(655,333	)		(568,376	)		(3,957,783	)

Cash flows from investing activities:
Equipment purchased		-			-			(15,984	)
Patent costs incurred		-			-			(15,000	)

Net cash used for 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		405,290			589,884			2,968,140
Sale of common stock in public offering		-			-			1,115,472
Public offering costs incurred		-			-			(138,471	)

Net cash provided by financing activities		405,290			589,884			4,005,141

Net increase (decrease) in cash		(250,043	)		21,508			16,374

Cash, beginning of period		266,417			5,534			-

Cash, end of period	$	16,374		$	27,042		$	16,374

Supplemental disclosures of cash flow information:
Interest paid	$	1,050		$	5,833		$	34,131

Income taxes paid	$	-		$	-		$	-

See notes to consolidated financial statements.

F-7

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended March 31, 2009 and 2008

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

to March 31, 2009

(Unaudited)

NOTE 1 – INTERIM FINANCIAL STATEMENTS

The unaudited financial statements as of March 31, 2009 and for the three and nine months ended March 31, 2009 and 2008 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of March 31, 2009 and the results of operations and cash flows for the periods ended March 31, 2009 and 2008. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine month period ended March 31, 2009 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending June 30, 2009. The balance sheet at June 30, 2008 has been derived from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended June 30, 2008 as included in our report on Form 10-KSB.

NOTE 2 – ORGANIZATION

SmartMetric, Inc. (“SmartMetric” or the “Company”) was incorporated in the State of Nevada on December 18, 2002. SmartMetric is developing a credit card size plastic card embedded with an integrated circuit chip and biometric fingerprint sensor which provides identification of the user (the “SmartMetric Smart Card”) to market to government agencies, corporations, and organizations interested in identification cards.

NOTE 3 – STOCKHOLDERS’ EQUITY

In the three months ended September 30, 2008, the Company sold a total of 83,000 Units at prices ranging from $0.25 to $0.33 per Unit in private placements resulting in net proceeds of $26,950. In the three months ended December 31, 2008, the Company sold a total of 1,702,000 Units at a price of $0.10 per Unit in private placements resulting in net proceeds of $170,200. In the three months ended March 31, 2009, the Company sold a total of 1,570,569 Units at a price of $0.10 per Unit in private placements resulting in net proceeds of $157,057. Each Unit consists 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.

F-8

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended March 31, 2009 and 2008

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

to March 31, 2009

(Unaudited)

In the three months ended December 31, 2008, the Company sold a total of 608,141 shares of common stock at a price of $0.084 per share in private placements resulting in net proceeds of $51,083.

A summary of warrant activity follows:

	Nine Months Ended March 31, 2009			Year Ended June 30, 2008
Outstanding at beginning of period		5,239,816			1,291,780
Issued		3,355,569			5,239,816
Exercised		-			-
Expired		(2,278,613	)		(1,291,780	)

Outstanding at end of period		6,316,772			5,239,816

The 6,316,772 warrants outstanding at March 31, 2009 are exercisable into a total of 6,316,772 shares of common stock at $1.00 per share and expire at various dates from April 2009 to March 2010.

NOTE 4 – COMMITMENTS AND CONTINGENCIES

Patent license agreement – Effective August 1, 2004, SmartMetric executed a license agreement with Applied Cryptology, Inc. (“ACI”), a corporation controlled by SmartMetric’s president and the owner of certain technology. Pursuant to the license agreement, SmartMetric has the right to make use of this technology for the purpose of developing software and systems to be used by SmartMetric to provide any or all of the following: 1) secure transactions over the Internet from home and office computers; 2) an automatic method for connecting to remote computers; 3) a method of developing targeted advertising to home and/or office computers; 4) identity verification and access control as provided for in the patent. Pursuant to this license agreement, ACI will receive 2% of all revenues generated by SmartMetric on products which utilize this patented technology. The license fee will be paid on a quarterly basis based on revenues received during the quarter. The license fee shall be due within 45 days of the end of

each quarter. In the event no revenues are generated through the use of any of the licensed patents during a given quarter, no money shall be owed ACI for such quarter. ACI may rescind the license agreement and reclaim all rights and interest in the patents if certain events, such as SmartMetric’s filing for bankruptcy protection or reorganization, occur. This license agreement will remain in effect for the lives of the patents. SmartMetric may utilize the technological applications anywhere in the world without limitation.

F-9

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended March 31, 2009 and 2008

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

to March 31, 2009

(Unaudited)

Employment agreement – Effective July 1, 2004, SmartMetric executed a one year employment agreement with its president, which in June 2005 was renewed for one year to June 30, 2006. Pursuant to this employment agreement, the president received a salary of $170,000 and $85,000 for the years ended June 30, 2006 and 2005, respectively. Although the employment agreement has not been renewed in writing, the president continues to serve SmartMetric and is being paid on the basis of a $170,000 annual salary.

Lease agreements – SmartMetric leases office space in Bay Harbor Islands, Florida under two agreements providing for total monthly rentals of approximately $4,650. One agreement is month to month and provides for a monthly rental of $3,650; the other agreement has a term ending May 31, 2009 at a monthly rental of $1,000. Rent expense for the nine months ended March 31, 2009 and 2008 were $61,925 and $35,427, respectively.

F-10

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. The prototype is expected to be completed by the end of July 2009 and is already being marketed in various specialty trade publications and press releases. 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 in July 2009.

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.

We currently have four 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 March 31, 2009 and 2008

Revenue and Net Income (Loss)

For the three months ended March 31, 2009, there was $0 sales revenue and a net loss of $240,362. For the three months ended March 31, 2008, there was $0 sales revenue and a net loss of $605,601. This decreased loss of $365,239 or 60% was primarily attributable to decreased other general and administrative expenses.

Other General and Administrative Expenses

Other general and administrative expenses for the three months ended March 31, 2009 were $136,255, a decrease of $425,246 or 76% compared to $561,501 for the comparable period in 2008. The decrease was primarily attributable to $473,400 stock-based compensation recognized in 2008.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2009 were $59,518, an increase of $57,918 or 3,620% compared to $1,600 for the comparable period in 2008. The increase was primarily attributable to increased developmental costs as the prototype nears completion.

Interest Expenses

Interest expense for the three months ended March 31, 2009 was $2,089 compared to $0 for the comparable period in 2008, an increase of $2,089. The increase was primarily attributable to interest expense on unpaid payroll taxes.

Income Tax Expenses

Income tax for the three months ended March 31, 2009 was $0, unchanged from March 31, 2008.

Comparison of the Nine Months Ended March 31, 2009 and 2008

Revenue and Net Income (Loss)

For the nine months ended March 31, 2009, there was $0 sales revenue and a net loss of $808,072. For the nine months ended March 31, 2008, there was $0 sales revenue and a net loss of $1,042,482. This decreased loss of $234,410 or 22.0% resulted primarily from a reduction in other general and administrative expenses.

Other General and Administrative Expenses

Other general and administrative expenses for the nine months ended March 31, 2009 were $432,188, a decrease of $442,460 or 51.% compared to $874,648 for the comparable period in 2008. The decrease was primarily attributable to $473,400 stock-based compensation recognized in 2008.

Research and Development Expenses

Research and development expenses for the nine months ended March 31, 2009 were $242,997, an increase of $209,634 or 628% compared to $33,363 for the comparable period in 2008. The increase was primarily attributable to increased developmental costs as the prototype nears completion.

Interest Expenses

Interest expense for the nine months ended March 31, 2009 was $5,387 compared to $6,971 for the comparable period in 2008, a decrease of $1,584 or 23%. The decrease was primarily attributable to reduced interest expense on unpaid payroll taxes.

Income Tax Expenses

Income tax for the nine months ended March 31, 2009 was $0, unchanged from March 31, 2008.

Liquidity and Capital Resources

Cash and Cash Equivalent

Our cash and cash equivalents were $266,417 at June 30, 2008 and decreased to $16,374 at March 31, 2009, a decrease of $250,043 or 94%. The decrease was primarily attributable to the $808,072 net loss, offset partially by $405,290 collected from private placements.

Net cash used by operating activities

Net cash used by operating activities was $655,333 for the nine months ended March 31, 2009, an increase of $86,957 or 15% from the comparable period in 2008.

Net cash used in investing activities

Net cash used in investing activities was $0 for the nine months ended March 31, 2009, an increase of $0 or 0% from March 31, 2008.

Net cash provided by financing activities

Net cash provided by financing activities was $405,290 for the nine months ended March 31, 2009, a decrease of $184,594 or 31%, 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.

The following table (in thousands) summarizes our contractual obligations as of March 31, 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				Thereafter
Capital 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 March 31, 2009.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

N/A.

Item 4T.

CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including Colin Hendrick, the Company’s Chief Executive Officer (“CEO”), and Jay Needelman, the Company’s Chief Financial Officer (“SFO”) of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the nine months ended March 31, 2009. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal controls

Our management, with the participation of our CEO and CFO, performed an evaluation as to whether any change in our internal controls over financial reporting occurred during the nine months ended March 31, 2009. Based on that evaluation, our CEO and CFO concluded that no change occurred in the Company's internal controls over financial reporting during the nine months ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None.

Item 1A. RISK FACTORS

Not Applicable.

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

In the three months ended March 31, 2009, the Company sold a total of 1,570,569 Units at a price of $0.10 per Unit in private placements resulting in net proceeds of $157,057. Each Unit consists 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.

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 March 31, 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.	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)

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: May 15, 2009	By:	/s/ Colin Hendrick
		Colin Hendrick, President


Dated: May 15, 2009	By:	/s/ Jay Needelman
		Jay Needelman , Chief Financial Officer