Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. S
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer £
Accelerated filer £
Non-accelerated filer £(Do not check if a smaller reporting
company) Smaller reporting company
S
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
£
Yes S
No
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.
Note – If a determination as
to whether a particular person or entity is an affiliate cannot be made without
involving unreasonable effort and expense, the aggregate market value of the
common stock held by non-affiliates may be calculated on the basis of
assumptions reasonable under the circumstances, provided that the assumptions
are set forth in this Form.
The
aggregate market value of the voting and non-voting common stock of the issuer
held by non-affiliates as of October 21, 2009 was approximately $2,531,844 based
upon the closing price of the common stock as quoted by Nasdaq OTC Bulletin
Board on such date.
APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.£ Yes £ No
(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
As of
October 21, 2009 there were 75,546,222 issued and outstanding shares of the
issuer’s common stock.
DOCUMENTS
INCORPORATED BY REFERENCE
List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g. Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be
clearly described for identification purposes (e.g. annual report to security
holders for fiscal years ended December 24, 1980).
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PART
I
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Item
1.
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DESCRIPTION
OF BUSINESS
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Item
1A
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RISK
FACTORS
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Item
1B
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UNRESOLVED
STAFF COMMENTS
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Item
2.
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DESCRIPTION
OF PROPERTY
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Item
3.
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LEGAL
PROCEEDINGS
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Item
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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PART
II
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Item
5.
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MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS ISSUER PURCHASES OF EQUITY
SECURITIES
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Item
6
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SELECT
FINANCIAL DATA
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Item
7.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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Item
7A
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Item
8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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Item
9.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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Item
9A.
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CONTROLS
AND PROCEDURES
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Item
9B.
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OTHER
INFORMATION
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PART
III
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Item
10.
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DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(b) OF THE EXCHANGE ACT
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Item
11.
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EXECUTIVE
COMPENSATION
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Item
12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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Item
13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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Item
14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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Item
15.
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EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
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SIGNATURES
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FORWARD
LOOKING STATEMENTS
In this
annual report, references to “SmartMetric, Inc.,” “Smartmetric,” “SMME,” “the
Company,” “we,” “us,” and “our” refer to SmartMetric, Inc.
This
Annual Report on Form 10-KSB contains forward-looking statements regarding our
business, financial condition, results of operations and prospects. Words such
as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,”
“estimates” and similar expressions or variations of such words are intended to
identify forward-looking statements, but are not deemed to represent an
all-inclusive means of identifying forward-looking statements as denoted in this
Annual Report on Form 10-KSB/A. Additionally, statements concerning future
matters are forward-looking statements.
Although
forward-looking statements in this Annual Report on Form 10-K reflect the good
faith judgment of our management, such statements can only be based on facts and
factors currently known by us. Consequently, forward-looking statements are
inherently subject to risks and uncertainties and actual results and outcomes
may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking statements. Factors that could cause or contribute to
such differences in results and outcomes include, without limitation, those
specifically addressed under the headings “Risks Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” You
are urged not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Annual Report on Form 10-K. We file reports
with the SEC. The SEC maintains a website (www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC, including us. You can also read and copy any
materials we file with the SEC at the SEC’s Public Reference Room at 100 F
Street, NE, Washington, DC 20549. You can obtain additional information about
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
We
undertake no obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
Annual Report on Form 10-K, except as required by law. Readers are urged to
carefully review and consider the various disclosures made throughout the
entirety of this Annual Report, which are designed to advise interested parties
of the risks and factors that may affect our business, financial condition,
results of operations and prospects.
PART
I
Item
1. Business
Corporate
History and Overview
SmartMetric
was incorporated pursuant to the laws of Nevada on December 18,
2002. SmartMetric is a development stage company engaged in the
technology industry. SmartMetric has a license to utilize proprietary technology
to manufacture and sell a fingerprint sensor activated card with a finger sensor
on the board card and a built-in rechargeable battery for portable biometric
identification. This card may be referred to as a "biometric card" or the
SmartMetric "Biometric Smartcard."
On
September 14, 2004, Mr. Hendrick received a United States patent with regard to
the use of the Biometric card. Mr. Hendrick transferred the patent, which was
then pending, to Applied Cryptography, Inc., a Nevada corporation, owned by Mr.
Hendrick, in June 2004. On August 1, 2004, Applied Cryptography, Inc. entered
into a license agreement with SmartMetric pursuant to which SmartMetric has the
right to use, manufacture and sell products utilizing the patented technology in
perpetuity. This patent was granted on September 14, 2004.
As of
June 30, 2009, SmartMetric had a total stockholders' deficiency of $424,838, and
cash of $42,519. SmartMetric has no off-balance sheet arrangements
that are reasonably likely to have a material current or future effect on
SmartMetric's financial condition, results of operations or
liquidity.
The
SmartMetric Biometric Card
SmartMetric
has designed a biometric card utilizing patented technology licensed to the
company. A prototype of this card was completed in February 2005. The
company is in the process of finalizing its biometric card and expects to have a
final product by January 2010. The product, due to exposure in
specialty trade publications and numerous press releases, is receiving much
interest in the private sector, especially amongst banking
entities. Also, the product has received interest from the
governmental sector, including, but not limited to the Department of Homeland
Security and the Department of Defense.
SmartMetric
believes that its biometric card will have several functions:
|
·
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The
fingerprint sensor will facilitate instant authorization
verification;
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·
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In
card biometric measurement storage will safeguard personal
information;
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·
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In
card biometric storage will permit access, identity and transaction
control verification;
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·
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Instant
identity verification will be secure since such information is contained
in the card and not in centralized
database
|
The
SmartMetric Biometric Smartcard is a credit card size plastic
card. On the cards surface are two components. The first
is a standard Smartcard chip that is a standard interface that connects to USB
computer smartcard readers, ATM machines and smartcard able Point Of Sale
machines in retail outlets. The second component is a sensor that
protrudes through the cards surface. This sensor is connected to a
sophisticated miniature circuit board that allows the sensor to read a person’s
fingerprint and match it with the user’s pre-stored fingerprint encrypted and
resident inside the circuit board.
The
challenge SmartMetric sought to overcome was having a truly portable
Identification credential that incorporated biometrics and yet was the standard
size of an employee ID Card or Drivers License. As it stood standard
biometric fingerprint scanners were too large to fit inside a credit card sized
card and none were portable needing to be attached to a computer that powered
the scanning process thereby not allowing for true
portability. In order to achieve the goal of Biometric
portability in the form factor to fit inside a users wallet or purse and work
across both computer and banking platforms SmartMetric had to achieve incredible
reductions in electronics and develop specialized manufacturing
techniques. The miniaturization to all intents and purposes of a
laptop computer circuit board to the size that fits inside a credit card has
taken years of research and development.
The
SmartMetric Biometric Smartcard contains over 150 active and passive components
mounted onto a paper-thin circuit board. Reducing a powerful ARM
processor to a thin sliver of silicon along with many other complex computer
components including memory chips and then mounting them on the super thin board
has required innovations in electronic manufacturing and the use of Nano
technology.
Today
SmartMetric has created the World’s first and to its knowledge the only portable
biometric fingerprint scanner that resides inside a credit card sized card and
acts independently of any other computing device.
Unlike a
picture-based identification system, the SmartMetric biometric card has been
designed to operate exclusively with the registered user. And unlike biometric
security systems where the biometric information is stored at a central
location, the Company believes that security cannot be compromised during the
verification process since the biometric information is embedded in the card
itself, in a memory chip protected by encryption and no data is travelling over
a network. The built-in fingerprint scanner is designed to activate
the card. Without a match with the encrypted fingerprint already stored on the
card, the Biometric Smartcard will not operate.
In the
case of an employee Identity Card application when a match occurs on the card a
green light lights up, if no match then a red light is activated on the cards
surface.
SmartMetric
believes its Biometric Smartcard may be used for a variety of security
applications such as airport employee access and identity, building access and
identity, computer network access, drivers licenses, passports, and check
cashing identity verification, etc. Additionally, the Biometric
Smartcard contains a powerful on-card ARM Processor and up to 1 gigabyte of
encrypted memory, enabling the Biometric Smartcard to not only store the full
image of a fingerprint but also maintain a database capable of storing
information such as medical records, financial or banking records or human
resource data.
As an
online purchasing card, the Biometric Smartcard helps protect against identity
theft and related fraudulent crimes that consumers can be exposed to when making
purchases over the internet. Unlike conventional credit cards, which
require a consumer to type and deliver sensitive information over the internet
in order to make a purchase, the Biometric Smartcard is designed to be inserted
into the USB port of a computer and any purchasing information can only be
released from the card when the owner’s fingerprint unlocks the
card. The consumer’s information then travels across the internet
encrypted, minimizing exposure to interception by hackers and Identity
Thieves.
As an
online money transfer card, the company has developed software and systems to
allow money to be transferred from one card to another over the internet with
user confirmation of transaction by both sender and receiver. Much as
in the same way that digital files are transferred in a process called Peer to
Peer transfer. Because fingerprint activation is required at both
ends of the transaction the sending and receiving party’s can be confident that
only the appropriate person is receiving the funds. This allows the
low cost of internet communication to now be used for person to person money
transfer.
SmartMetric
believes that its biometric card, by way of containing information unique to the
individual user, will be useless in the hands of others. Unlike a picture-based
identification system, the SmartMetric biometric card has been designed to
operate exclusively with the registered user. And unlike biometric security
systems where the biometric information is stored at a central location, we
believe that confirmation of identify with the SmartMetric system may not be
interrupted during the verification process or while it is stored at the remote
location since the biometric information is embedded in the card, itself, in a
memory chip protected by encryption. The fingerprint sensor built into the card
has been designed to activate the card. Without a match with the encrypted
fingerprint already stored on the card, the biometric card will not
operate.
The
SmartMetric biometric card is a card that authorized persons will carry with
them and activate to obtain access. Such activation will take place by placing a
finger on a fingerprint sensor. The SmartMetric biometric cards are designed to
be read by both contact and contactless card acceptor devices. For contact card
acceptor devices, the device must touch a chip mounted on the surface of the
Biometric card. This contact allows the card to transmit data to the reading
device. For contactless acceptor devices, a radio frequency signal will be sent
from the card to a radio frequency signal receiver in the acceptor device. In
both types of acceptor devices, the activation signal is sent only when there
has been a positive match of fingerprint by fingerprint sensor. The card
acceptor devices are available from several different third parties and do not
require any licenses.
The
company expects that the memory and computational capacities of the biometric
card will be used to store a template of each user's fingerprint(s). The memory
capacity will store a template of a user's fingerprint(s). The computational
capacity will be used to process a digitized image from the fingerprint sensor
to confirm a match (or no match) with the fingerprint template. Additional
computational processes such as increased Cryptography will depend on the
requirements of specific customers.
SmartMetric
believes its biometric card may be used for a variety of security applications
such as airport employed access and identity, building access and identity,
computer network access, drivers licenses, passports and check cashing identity
verification.
Fingerprint
Sensor
The
fingerprint sensor used in the SmartMetric biometric card is known as the
"Metric 60" fingerprint sensor. The Metric 60 allows for fingerprints which are
either wet or dry to be recognized or authenticated. It is also pressure
sensitive. SmartMetric purchases the fingerprint sensor from an unrelated third
party, but has no signed agreement with such party. The fingerprint sensor is
available from other suppliers. SmartMetric has designed a method of integrating
the fingerprint sensor on the card, which is then connected to a microprocessor,
which is connected to a rechargeable power supply in the card and a memory chip
for storage, retrieval and matching of the fingerprint on the card.
The
SmartMetric biometric card has been designed to utilize a rechargeable, lithium
polymer battery. Because this battery is available in a variety of shapes and
sizes, SmartMetric can design its cards in similar variety of shapes. This
lithium polymer battery is owned and manufactured by a third party unaffiliated
with SmartMetric. This battery will be integrated into the card. SmartMetric has
located a supplier for this battery and has purchased battery’s that meet the
requirements and specifications of the Biometric Card.
While
SmartMetric has already purchased these batteries, other raw materials which are
part of the product have been purchased as well. Examples include,
but are not limited to, microchips, memory chips and processor
chips. The sources and availability of these materials are numerous
and readily available, and should not affect the ability of SmartMetric to meet
future demand.
The
SmartMetric card has been designed to meet the International Standard
Organization 7816 Flex requirements so that it will not break or crack when bent
or flexed. The prototype card has been designed to meet ISO requirements for
crush test, drop test and nail test. It has been designed to operate in a wide
range of temperatures.
The
Biometric card has been designed to offer the option of a built-in radio
frequency transmitter for contactless entry and identity
verification.
The
Security Technology Industry
Biometrics
Biometric
technologies identify users by electronically capturing a specific biological or
behavioral characteristic of that individual, such as a fingerprint or voice or
facial feature, and creating a unique digital identifier from that
characteristic. Because this process relies on largely unalterable human
characteristics, positive identification can be achieved independent of any
information possessed by the individual seeking authorization.
The
process of identity authentication typically requires that a person present for
comparison one or more of the following factors:
|
·
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Something
known such as a password, PIN or mother's maiden
name;
|
|
·
|
Something
carried such as a token, card, or key;
or
|
|
·
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Something
physical such as fingerprint, voice pattern, signature motion, facial
shape or other biological or behavioral
characteristic.
|
Comparison
of biological and behavioral characteristics has historically been the most
reliable and accurate of the three factors, but has also been the most difficult
and costly to implement into a single product that can automatically verify the
identity of a user accessing a computer network or the Internet. However, recent
advances in biometric collection technologies (both biometric hardware products
and their associated processing software) have increased the speed and accuracy
and reduced the cost of implementing biometrics in commercial environments.
Management believes that individuals, Web site operators, government
organizations, and businesses will increasingly use this method of identity
authentication.
Biometrics
refers to the automatic identification of a person based on his/her
physiological or behavioral characteristics. This method of identification is
preferred over traditional methods involving passwords and personal
identification numbers ("PINs") for various reasons: (i) the person to be
identified is required to be physically present at the point of identification
to be identification; (ii) identification based on biometric techniques obviates
the need to remember a password or carry a token. By replacing PINs, biometric
techniques can potentially prevent unauthorized access to or fraudulent use of
cellular phones, Biometric cards, desktop PCs, workstations and computer
networks. It can be used during transactions conducted via telephone and
Internet (e-commerce and e-banking). In automobiles, biometrics could replace
keys-less entry devices.
PINs and
passwords may be forgotten, and token-based methods of identification, e.g.,
passports and driver's licenses, may be forged, stolen or lost. Various types of
biometric systems are being used for real-time identification, with the most
popular based on face recognition and fingerprint matching. Other biometric
systems utilize iris and retinal scanning, speech, facial thermograms and hand
geometry.
A
biometric system is essentially a pattern recognition system, which makes a
personal identification by determining the authenticity of a specific
physiological or behavioral characteristic possessed by the user. An important
issue in designing a practical system is to determine how an individual is
identified.
There are
two different ways to resolve a person's identity: verification and
identification. Verification (Am I whom I claim I am?) involves confirming or
denying a person's claimed identity. In identification, one has to establish a
person's identity (Who am I?).
The
SmartMetric biometric card has been designed as a credit-card sized plastic card
embedded with an integrated circuit chip and biometric fingerprint sensor. While
we have completed a prototype of this card, we are in the process of completing
the final product. The SmartMetric card has been designed to provide not only
memory capacity, but also computational capability along with secure
non-refutable identification of the user. We believe that the self-containment
of SmartMetric's card will make it substantially resistant to attack, as it will
not need to depend upon potentially vulnerable external resources. Because of
this characteristic, we expect that the SmartMetric biometric card may be used
in different applications which require strong security protection and
authentication.
The
physical structure of a card is specified by the International Standards
Organization ("ISO") 7810, 7816/1 and 7816/2. Generally, it is made up of three
elements. The plastic card is the most basic one and has the dimensions of
85.60mm x 53.98 x 0.80mm. A printed circuit and an integrated circuit chip are
embedded on the card.
The
SmartMetric card has been designed so that the printed circuit conforms to ISO
standard 7816/3 which provides five connection points for power and data. It
will be hermetically fixed in the recess provided for the card and will be
burned onto the circuit chip, filled with a conductive material and sealed with
contracts protruding. The printed circuit is a part of, and not distinct from,
the Biometric card. The printed circuit is intended to protect the circuit chip
from mechanical stress and static electricity. Communication with the chip will
be accomplished through contacts that overlay the printed circuit. The
integrated circuit chip defines the capability of a smart chip. Typically, an
integrated circuit chip consists of a microprocessor, read only memory (ROM),
non-static random access memory and electrically erasable programmable read only
memory which will retain its state when the power is removed. The current
circuit chip is made from silicon, which is not flexible and particularly easy
to break. In order to avoid breakage when the card is bent, the chip is
restricted to only a few millimeters in size.
Furthermore,
it is our intent that the physical interface which allows data exchange between
the integrated circuit chip and the card acceptor device will be limited to 9600
bits per second. The communication line is intended to be a bi-directional
serial transmission line, which conforms to ISO standard 7816/3. We intend that
all the data exchanges will be under the control of the central processing unit
in the integrated circuit chip. Card commands and input data will be sent to the
chip that responds with status words and output data upon the receipt of these
commands and data. Information will be sent in half duplex mode (transmission of
data is in one direction at a time). This protocol, together with the
restriction of the bit rate, is designed to prevent massive data attack on the
card.
In
general, the size, the thickness and bend requirements for the biometric card
were designed to protect the card from being spoiled physically. However, this
also limits the memory and processing resources that may be placed on the card.
In the past, industry participants have encountered particular difficulty in
attempting to integrate high memory chips and finger sensor technology that will
withstand both the size constraints and physical daily usage such as bending in
a user's wallet sitting in his back pocket. We believe our biometric card has
met and overcome the physical demands of the credit card to produce what is a
powerful on-card computer processor with state-of-the-art biometric technology.
However, we believe that additional engineering is necessary to reduce the size
to the circuitry of the card prototype. We expect that such re-engineering will
be complete by January 2010.
Sales
and Marketing
When
we have completed the prototype of our biometric card and received any required
regulatory approval, we plan to market and sell our product to banking interests
in the private sector and governmental agencies such as the Department of
Homeland Security and the Department of Defense. As noted previously,
we have received interest in the product from the aforementioned.
We do not
currently have a marketing or sales force or a distribution arrangement in
place. We will need to expend resources to develop our own marketing and
sales force or enter into third-party distribution arrangements.
Manufacturing
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.
Intellectual
Property
We rely
on patents, licenses, trade secrets, trademarks, copyright registrations and
non-disclosure agreements to establish and protect our proprietary rights in our
technologies and products.
Patents
Applied
Cryptography, Inc., a company owned and controlled by Colin Hendrick, President
and CEO of SmartMetric, owns the patent for a Biometric card process. This
patent has been licensed to SmartMetric. The patent expires September 30,
2014.
The
patent asserts claims to the following processes:
|
·
|
A
system for managing digital rights of digital content over a
network.
|
|
·
|
A
data card contains user information including digital rights information
specific to a users, the data card having memory component for enabling
information to be stored within the data
card.
|
|
·
|
A
data card reader is adapted to access the user information contained on
the data card when the data card is in communication with a card reading
device.
|
|
·
|
A
data processor in communication with the data card reader is adapted to be
connected to the network.
|
|
·
|
An
application program resides on the memory component of the data card, the
application program being configured to operate in conjunction with a
universal language for creating and controlling digital rights, to manage
user rights of the digital content available on the network based on the
digital rights information specific to the user which is contained on the
data card.
|
License
Agreements
On August
1, 2004, SmartMetric entered into a license agreement with Applied Cryptography,
Inc., a Nevada corporation which is owner of certain technology for which a
patent was issued from the United States. 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 certain
applications including 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. Colin Hendrick, President, Chief Executive Officer
and Chairman of the Board of Directors of SmartMetric, is the sole officer and
shareholder of Applied Cryptography, Inc.
Pursuant
to this license agreement, Applied Cryptography, Inc. 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 that quarter. The license fee shall be due within 45 days of the
end of each quarter. In the event no revenues were generated through the use of
any of the licensed patents during a given quarter, no money shall be owed
Applied Cryptography, Inc. for such quarter. Late license fees shall accrue
interest at a rate of 2% per quarter. Applied Cryptography, Inc. 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 life of the patent. SmartMetric
may utilize their patented technological applications anywhere in the world
without limitation.
Our
technology is also dependent upon unpatented trade secrets. However, trade
secrets are difficult to protect. In an effort to protect our trade
secrets, we have a policy of requiring our employees, consultants and advisors
to execute non-disclosure agreements. These agreements provide that
confidential information developed or made known to an individual during the
course of their relationship with us must be kept confidential, and may not be
used, except in specified circumstances. In addition, our employees are
parties to agreements that require them to assign to us all inventions and other
technology that they create while employed by us.
Research
and Development
Our
research and development program is focused on completing development of our
Biometric card. We continue to refine existing technology and develop
further improvements to our product. We are in the very final stages
of finalizing the product. We expect research and development costs
to trend lower in fiscal year ending June 30, 2009, due to the product expected
to be ready for market in January 2010. Almost all research and
development costs now center around an adjustment being made to a second antenna
in the card.
Competition
SmartMetric
is a company involved in identity management. This industry is dominated by
several large international corporations such as BioNetrix, Keyware, Gemplus and
Precise Biometrics, all of which manufacture and/or distribute and market
identity management products. These companies and many others are more
established than SmartMetric, which will put it at a competitive disadvantage.
For example, Precise Biometrics, a company whose stock is listed on the
Stockholm Stock Exchange, sells products which utilize its patented biometric
fingerprint authentication technology which allows it to isolate the
characteristic features of a human fingerprint and to match such features with a
stored template to secure identity. However, Precise Biometrics is publicly
traded and better funded then SmartMetric, and thus better known. SmartMetric's
licensed patent allows for such data to be stored on a credit card sized device;
however, SmartMetric only has a prototype of its biometric card.
BioNetrix
offers a solution for systems security - user authentication and sign on. This
company was founded in 1997.
Keyware
was founded in 1996 and went public in 2000 and is headquartered in Brussels,
Belgium. While Keyware’s primary business model is transaction
processing, they maintain a significant platform in identity tracking technology
and maintain a competitive advantage through high capitalization.
Gemplus
manufactures a powerful, yet user friendly software focusing on bar-code
technology. Gemplus incorporates identity verification tools
within their software. Gemplus maintains a large internet
presence and their software is easily downloadable, making them a market
force.
SmartMetric
is a newcomer to this industry, with no proven track record and an untested
product. We are not as well known as our potential competitors, nor are we
certain our card will work as intended or that it will meet clients' needs. We
are at a competitive disadvantage when compared to those better known, better
funded and experienced identity management companies. SmartMetric will be
competing with these as well as smaller and mid-size identity management
manufactures, distributors, and developers.
Employees
As of the
date of this annual report, SmartMetric has three full time employees including
Colin Hendrick, SmartMetric’s CEO, and no part-time employees. None of these
employees belongs to any union.
Government
Regulation
There are
currently no governmental regulations which have any bearing on the raw
materials or the manufacturing of our product.
Item
1A. Risk Factors.
Not
Applicable.
Item
1B. Unresolved Staff Comments.
Not
Applicable.
Item
2. Properties.
Our
executive offices are located at 1150 Kane Concourse, Suite 400, Bay Harbor
Islands, Florida 33154. We lease this office space under a lease
expiring June 30, 2008 and renewable to June 30, 2012. Rent expense
for the years ended June 30, 2009 and 2008 were $66,325 and $54,872,
respectively.
|
Location
|
Use
|
Square
Feet
|
Rent Payments
|
Term
|
Leased From
|
|||||||||||
|
1150
Kane Concourse, Suite 400, Bay Harbor Islands, Florida
33154
|
Offices
|
Approximately 1200
square feet
|
|
$
|
4,815 per month
|
1
year
|
June
2008
|
|||||||||
Item
3. Legal Proceedings.
We know
of no material, active, pending or threatened proceeding against us or our
subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or
defendant in any material proceeding or pending litigation.
Item
4. Submission of Matters to a Vote of Security
Holders.
None.
PART
II
Item
5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities.
Market
Information
Our
common stock has been traded over-the-counter on the Over-the-Counter (“OTC”)
Bulletin Board and “Pink Sheets” since April 7, 2006 under the symbol SMME and
the market for the stock has been relatively inactive. The range of high and low
bid quotations for the quarters of the last two years ended June 30, 2008 is
listed below. The quotations are taken from the OTC Bulletin Board. They reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.
|
Calendar
Quarter
|
Low
Bid
|
High
Bid
|
|||||
|
2008
First Quarter
|
0.25
|
0.51
|
|||||
|
2008
Second Quarter
|
0.12
|
0.45
|
|||||
|
2008
Third Quarter
|
0.15
|
0.38
|
|||||
|
2008
Fourth Quarter
|
0.08
|
0.40
|
|||||
|
2009
First Quarter
|
0.07
|
0.25
|
|||||
|
2009
Second Quarter
|
0.08
|
0.18
|
|||||
|
2009
Third Quarter
|
0.06
|
0.18
|
|||||
|
2009
Fourth Quarter
|
0.08
|
0.19
|
|||||
As of
October 21, 2009, we had approximately 858 shareholders of record of our common
stock, including the shares held in street name by brokerage firms. The holders
of common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders. Holders of the common
stock have no preemptive rights and no right to convert their common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock.
Dividends
Any
payment of dividends will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company. At the
present time, the Company's anticipated financial capital requirements are such
that it intends to follow a policy of retaining earnings in order to finance the
development of its business.
Securities
authorized for issuance under equity compensation plans
As of the
date of this report, we do not have any securities authorized for issuance under
any equity compensation plans and we do not have any equity compensation
plans.
Penny
Stock Regulations
Our
shares of common stock are subject to the "penny stock" rules of the Securities
Exchange Act of 1934 and various rules under this Act. In general terms, "penny
stock" is defined as any equity security that has a market price less than $5.00
per share, subject to certain exceptions. The rules provide that any equity
security is considered to be a penny stock unless that security is registered
and traded on a national securities exchange meeting specified criteria set by
the SEC, issued by a registered investment company, and excluded from the
definition on the basis of price (at least $5.00 per share), or based on the
issuer's net tangible assets or revenues. In the last case, the issuer's net
tangible assets must exceed $3,000,000 if in continuous operation for at least
three years or $5,000,000 if in operation for less than three years, or the
issuer's average revenues for each of the past three years must exceed
$6,000,000.
Trading
in shares of penny stock is subject to additional sales practice requirements
for broker-dealers who sell penny stocks to persons other than established
customers and accredited investors. Accredited investors, in general, include
individuals with assets in excess of $1,000,000 or annual income exceeding
$200,000 (or $300,000 together with their spouse), and certain institutional
investors. For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of the security and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, the rules
require the delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock. A broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered representative,
and current quotations for the security. Finally, monthly statements must be
sent disclosing recent price information for the penny stocks. These rules may
restrict the ability of broker-dealers to trade or maintain a market in our
common stock, to the extent it is penny stock, and may affect the ability of
shareholders to sell their shares.
The
following summarizes the securities that we sold during the fiscal year
ended June 30, 2009 without registering the securities under the Securities
Act:
On July
4, 2008, the Company sold 13,000 shares of its common stock at prices of $0.23
per share in private placement offerings resulting in net proceeds of
$2,990.
In July
2008, the Company sold a total of 206,666 Units at prices ranging from $0.15 and
$0.25 per Unit in private placement offerings resulting in net proceeds of
$23,960. 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.
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 1,720,000
Units at a price of $0.10 per Unit in private placements resulting in
net proceeds of $170,200. 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.
In the
month of November 2008, the Company sold a total of 668,141 shares of common
stock at a share price of $0.084 per share in private placements resulting in
net proceeds of $51,083.
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.
In the
three months ended June 30, 2009, the Company sold a total of 1,865,000 Units at
a price of $0.10 per Unit in private placements resulting in net proceeds of
$185,894. 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
6. Selected Financial Data.
The
following selected statement of operations data contains statement of operations
data and balance sheet data for the fiscal years ended June 30, 2009 and 2008.
The statement of operations data and balance sheet data were derived from the
audited financial statements. Such financial data should be read in conjunction
with the financial statements and the notes to the financial statements starting
on page F-1 and with the section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” below.
Statements of Operation Data:
|
Year ended June
30,
(unaudited)
|
||||||||
|
|
|
|||||||
|
Net
revenues
|
$ | $ | ||||||
|
Cost
of sales
|
||||||||
|
Gross
profit
|
||||||||
|
Operating
expenses:
|
||||||||
|
Selling
|
250,436 | 85,167 | ||||||
|
General
and administrative
|
847,189 | 1,293,946 | ||||||
|
Operating
income
|
||||||||
|
Other
income
|
||||||||
|
Interest
income
|
||||||||
|
Interest
expenses
|
5,464 | 17,943 | ||||||
|
Income
(Loss) before income taxes
|
(1,103,089 | ) | (1,397,056 | ) | ||||
|
Income
tax
|
||||||||
|
Net
income (Loss)
|
(1,103,089 | ) | (1,397,056 | ) | ||||
Balance Sheet Data:
|
As at June
30
|
As at June
30
|
|||||||
|
|
|
|||||||
|
Cash
and cash equivalents
|
$ | 42,519 | $ | 266,417 | ||||
|
Working
capital
|
(435,098 | ) | 112,924 | |||||
|
Total
assets
|
91,537 | 334,362 | ||||||
|
Total
debts
|
516,375 | 205,394 | ||||||
|
Total
shareholders’ equity (deficit)
|
(424,838 | ) | (112,288 | ) | ||||
Item
7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The
following discussion of the financial condition and results of operation of the
Company for the fiscal years ended June 30, 2009 and 2008 should be read in
conjunction with the selected financial data, the financial statements and the
notes to those statements that are included elsewhere in this registration
statement. Our discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and
Business sections in this registration statement. We use terms such as
“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.
General
Incorporated
in 2002, SmartMetric and its founder and CEO, Colin Hendrick, have been engaged
in research and development of a biometric security solution which would
authenticate the identity of a person in a self-contained credit card-sized
device. SmartMetric’s biometric card has been designed to use an on-board finger
print sensor which is imbedded in the card along with an integrated circuit chip
which will provide one gigabyte of memory capacity. SmartMetric has recently
completed a prototype of its card but has not yet begun to manufacture the
biometric cards utilizing its licensed technology. To date, SmartMetric has had
no sales revenues.
A
prototype of our biometric card was completed in February 2005 and we have been
adjusting and developing software for the card since that date. The
finished product will be the prototype or model for our biometric cards, which
will be manufactured upon receipt of customer orders. We are in
the process of revising some of the engineering of the prototype so as to
decrease the size of the circuitry contained in the card. We expect that the
revised prototype will be completed by January 2010.
We expect
to outsource manufacturing of our biometric cards once we have sales orders. We
do not intend to purchase any plants or significant
equipment. Because SmartMetric does not own or rent a
manufacturing facility, we will enter into a contract with a manufacturing
facility to produce our biometric cards. Although we have engaged in
preliminary negotiations with two potential manufacturers, no contract has been
signed.
We
currently have three full time employees, including Colin Hendrick, our
President and Chief Executive Officer. Once we have begun to generate sales, we
intend to hire additional employees.
SmartMetric
does not believe its business is seasonal in any way.
Results
of Operations
Comparison of the
Year Ended June 30, 2009 and 2008
Revenue and Net Income
(Loss)
For the
fiscal year ended June 30, 2009, there were $0 sales revenues and a net loss of
$1,103,089. For the year ended June 30, 2008, there were $0 sales revenues and a
net loss of $1,397,056. This decreased loss of $293,967 or 21% is the result
largely of reduced administrative expenses.
General and Administrative
Expenses
General
and administrative expenses for the year ended June 30, 2009 were $677,189, a
decrease of $446,757or 40% compared to $1,123,946 for the comparable period in
2008. The decrease was primarily attributable to lower consultation
expenses.
Research and Development
Expenses
Research
and development expenses for the year ended June 30, 2009 were $250,436, a
increase of $165,269 or 194% compared to $85,167 for the comparable period in
2008. The increase was primarily attributable to a re-working of the prototype
to decrease its size.
Interest
Expenses
There was
$5,464 interest expense for the year ended June 30, 2009 compared to $17,943 for
the comparable period in 2008, a decrease of $12,479 or 70%. The
decrease was primarily attributable to less debt service.
Income Tax
Expenses
Income
tax for the year ended June 30, 2009 was $0, unchanged from June 30,
2008.
Liquidity
and Capital Resources
Cash
and Cash Equivalent
Our cash
and cash equivalents were $266,417 at the beginning of the year ended June 30,
2009 and decreased to $42,519 by the end of such period, an decrease of $223,898
or 84%. The decrease was attributable to the $667,242 net cash
used in operating activities offset by the $443,344 net cash provided by
financing activities.
Net
cash used in operating activities
Net cash
used by operating activities was $667,242 for the year ended June 30,
2009, compared to $1,039,341 for the same period in
2008. The difference was primarily due to a lower net loss and
increases in operating liabilities in 2009.
Net
cash used in investing activities
Net cash
used in investing activities was $0 for the year ended June 30, 2009, unchanged
from June 30, 2008.
Net
cash provided by financing activities
Net cash
provided in financing activities was $443,344 for the year ended June 30, 2009,
compared to $1,300,224 for the same period in 2008. The difference was primarily
attributable to lower sales of common stock in 2009.
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 June
30, 2009, and the effect these obligations are expected to have on our liquidity
and cash flows in future periods.
|
Totals
|
Less Than
1 Year
|
1
to 3
Years
|
Thereafter
|
|||||||||||||||||
|
Capital
expenditures
|
$ | $ | $ | — | ||||||||||||||||
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 (See Note 2 in the Notes to Financial
Statements).
Intangible
assets
SmartMetric
did not purchase any intangible assets for the year ended June 30,
2009.
New
Financial Accounting Pronouncements
There
have been no new financial accounting pronouncements that have or are expected
to have a material effect on our financial statements.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk.
Not
Applicable.
Interest Rates.
Our
exposure to market risk for changes in interest rates relates primarily to our
short-term investments; thus, fluctuations in interest rates would not have a
material impact on the fair value of these investments. At October 21, 2009, we
had approximately $15,500 in cash and cash equivalents. A hypothetical 5%
increase or decrease in either short term or long term interest rates would not
have a material impact on our earnings or loss, or the fair market value or cash
flows of these instruments.
Item
8. Financial Statements and Supplementary
Data.
Our
audited consolidated financial statements for the fiscal years ended June 30,
2009 and 2008, together with the reports of the independent certified public
accounting firms thereon and the notes thereto, are presented beginning at page
F-2.
SMARTMETRIC
INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS
ENDED JUNE 30, 2009 AND 2008
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – JUNE 30,
2009
|
F-2 |
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – JUNE 30,
2008
|
F-3 |
|
CONSOLIDATED
BALANCE SHEETS AS OF JUNE 30, 2009 AND 2008
|
F-4 |
|
CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2009 AND 2008 WITH
CUMULATIVE TOTALS SINCE DECEMBER 18, 2002 (INCEPTION)
|
F-5 |
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE PERIOD
DECEMBER 18, 2002 (INCEPTION) TO JUNE 30, 2009
|
F-6 |
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2009 AND 2008 WITH
CUMULATIVE TOTALS SINCE DECEMBER 18, 2002 (INCEPTION)
|
F-7 |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2009 AND
2008
|
F-8-F-23 |
F-1
Report
of Independent Registered Public Accounting Firm
To the Directors of
Smartmetric, Inc. and Subsidiary
We have audited the accompanying balance sheet
of Smartmetric, Inc. and Subsidiary (the "Company") (a development stage
company) as of June 30, 2009, and the related statements of operations, changes
in stockholders' equity (deficit) and cash flows for the year ended June 30,
2009 and the statements of operations, changes in stockholders’ equity (deficit)
and cash flows for the period December 18, 2002 (Inception) through June 30,
2009. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with
standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. We were not engaged to perform an audit of
the Company’s internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we
express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial
position of Smartmetric, Inc. and Subsidiary (a development stage company) as of
June 30, 2009, and the results of its statements of operations, changes in
stockholders’ equity (deficit), and cash flows for year ended June 30, 2009 in
conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company is in process of
developing its technology and has not generated any revenue to this point,
however, has been successful in raising funds in their private placements. The
lack of profitable operations and the need to continue to raise funds raise
significant doubt about the Company’s ability to continue as a going concern.
Management’s plans in this regard are described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/KBL, LLP
New York, NY
October 15, 2009
F-2
To the
Board of Directors and Stockholders of
SmartMetric,
Inc.
I have
audited the accompanying consolidated balance sheets of SmartMetric, Inc. and
subsidiary (the “Company”), a development stage company, as of June 30, 2008,
and the related consolidated statements of operations, changes in stockholders’
equity, and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company’s management. My
responsibility is to express an opinion on these consolidated financial
statements based on my audits.
I
conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. I believe
that my audit provides a reasonable basis for my opinion.
In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of SmartMetric, Inc. and
subsidiary, a development stage company, as of June 30, 2008, and the results of
their operations and cash flows for the year then in conformity with accounting
principles generally accepted in the United States.
The
accompanying financial statements referred to above have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company’s present financial
situation raises substantial doubt about its ability to continue as a going
concern. Management’s plans in regard to this matter are also
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Michael
T. Studer CPA P.C.
Michael
T. Studer CPA P.C.
Freeport,
New York
October
10, 2008
F-3
SMARTMETRIC,
INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
JUNE
30, 2009 AND 2008
|
ASSETS
|
||||||||
|
|
|
|||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 42,519 | $ | 266,417 | ||||
|
Prepaid
expenses and other current assets
|
38,758 | 51,901 | ||||||
|
Total
Current Assets
|
81,277 | 318,318 | ||||||
|
Equipment,
net of depreciation of $13,599 and $9,315, respectively
|
2,385 | 6,669 | ||||||
|
Other
Assets:
|
||||||||
|
Patent
costs, net of amortization of $7,125 and $5,625,
respectively
|
7,875 | 9,375 | ||||||
|
Total
Other Assets
|
7,875 | 9,375 | ||||||
|
TOTAL
ASSETS
|
$ | 91,537 | $ | 334,362 | ||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
||||||||
|
LIABILITIES
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 129,244 | $ | 67,886 | ||||
|
Payroll
tax liabilities, accrued interest and penalties
|
240,677 | 137,508 | ||||||
|
Liability
for stock to be issued
|
146,454 | - | ||||||
|
Total
Current Liabilities
|
516,375 | 205,394 | ||||||
|
Total
Liabilities
|
516,375 | 205,394 | ||||||
|
Common
stock subject to possible recission (160,837 shares)
|
- | 241,256 | ||||||
|
STOCKHOLDERS’
EQUITY (DEFICIT)
|
||||||||
|
Preferred
stock, $.01 Par Value; 5,000,000 shares authorized
|
||||||||
|
and
0 shares issued and outstanding
|
- | - | ||||||
|
Class
A common stock, $.001 Par Value; 50,000,000 shares
authorized
|
||||||||
|
and
0 shares issued and outstanding
|
- | - | ||||||
|
Common
stock, $.001 Par Value; 100,000,000 shares authorized
|
||||||||
|
and
75,546,222 and 69,913,395 shares issued and outstanding
|
75,546 | 69,913 | ||||||
|
Additional
paid-in capital
|
4,569,388 | 3,784,482 | ||||||
|
Deficits
accumulated during the development stage
|
(5,069,772 | ) | (3,966,683 | ) | ||||
|
Total Stockholders’ Equity
(Deficit)
|
(424,838 | ) | (112,288 | ) | ||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$ | 91,537 | $ | 334,362 | ||||
F-4
SMARTMETRIC,
INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
WITH CUMULATIVE TOTALS SINCE DECEMBER 18, 2002
(INCEPTION)
|
CUMULATIVE
|
|||||||||||||
|
TOTALS
SINCE
|
|||||||||||||
|
YEARS
ENDED
|
INCEPTION
|
||||||||||||
|
JUNE
30,
|
DECEMBER
18,
|
||||||||||||
|
|
|
|
|||||||||||
|
OPERATING
REVENUES
|
|||||||||||||
|
Revenues
|
$ | - | $ | - | $ | - | |||||||
|
OPERATING
EXPENSES
|
|||||||||||||
|
Research
and development
|
250,436 | 85,167 | 813,599 | ||||||||||
|
Officer's
salary
|
170,000 | 170,000 | 765,000 | ||||||||||
|
Other
general and administrative expenses
|
677,189 | 1,123,946 | 3,453,285 | ||||||||||
|
Total
Operating Expenses
|
1,097,625 | 1,379,113 | 5,031,884 | ||||||||||
|
LOSS
BEFORE OTHER INCOME (EXPENSE)
|
(1,097,625 | ) | (1,379,113 | ) | (5,031,884 | ) | |||||||
|
OTHER
INCOME (EXPENSE)
|
|||||||||||||
|
Interest
expense
|
(5,464 | ) | (17,943 | ) | (38,545 | ) | |||||||
|
Interest
income
|
- | - | |||||||||||
|
Total
Other Income (expense)
|
(5,464 | ) | (17,943 | ) | (37,888 | ) | |||||||
|
NET
LOSS BEFORE PROVISION FOR INCOME TAXES
|
(1,103,089 | ) | (1,397,056 | ) | (5,069,772 | ) | |||||||
|
Provision
for Income Taxes
|
- | - | - | ||||||||||
|
NET
LOSS APPLICABLE TO COMMON SHARES
|
$ | (1,103,089 | ) | $ | (1,397,056 | ) | $ | (5,069,772 | ) | ||||
|
NET
LOSS PER BASIC AND DILUTED SHARES
|
(0.02 | ) | (0.02 | ) | |||||||||
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|||||||||||||
|
SHARES
OUTSTANDING
|
71,908,264 | 64,207,052 | |||||||||||
F-5
SMARTMETRIC,
INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE PERIOD DECEMBER 18, 2002 (INCEPTION) THROUGH JUNE 30, 2009
|
Preferred
Stock
|
Class
A
Common
Stock
|
Common
Stock
|
Additional Paid-in |
Deficits Accumulated |
||||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||||||||||||||
|
Balance
- December 18, 2002
|
- | $ | - | - | - | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
|
Net
loss for the period December 18, 2002
(incpetion) through June 30, 2003 |
- | - | - | - | - | - | - | (60 | ) | (60 | ) | |||||||||||||||||||||||||
|
Balance
June 30, 2003
|
- | - | - | - | - | - | - | (60 | ) | (60 | ) | |||||||||||||||||||||||||
|
Shares
issued of Class A Common stock
|
- | - | 50,000,000 | 50,000 | - | - | - | - | 50,000 | |||||||||||||||||||||||||||
|
Shares
issued of common stock for cash
|
- | - | - | - | 8,560,257 | 8,560 | 77,042 | - | 85,602 | |||||||||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | - | - | (35,978 | ) | (35,978 | ) | |||||||||||||||||||||||||
|
Balance
June 30, 2004
|
- | - | 50,000,000 | 50,000 | 8,560,257 | 8,560 | 77,042 | (36,038 | ) | 99,564 | ||||||||||||||||||||||||||