Form 10-QSB for March 31, 2005

F-1

SMARTMETRIC, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)

										Cumulative
										During the
										Development
										Stage
		Nine Months				Three Months				(December 18, 2002
		Ended March 31,				Ended March 31,				to March 31,
		2005		2004		2005		2004		2005)

Revenues	$	-	$	-	$	-	$	-	$	-

Expenses:
Officer's salary		42,500		-		42,500		-		42,500
Other general and
administrative		35,504		3,489		14,614		2,428		42,207
Research and development		52,627		20,000		12,217		20,000		81,962

Total expenses		130,631		23,489		69,331		22,428		166,669

Net loss	$	(130,631)	$	(23,489)	$	(69,331)	$	(22,428)	$	(166,669)

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

Weighted average
number of common
shares outstanding,
basic and diluted		58,621,167		33,333,333		58,674,779		50,000,000


See notes to consolidated financial statements.

F-2

SMARTMETRIC, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)

						Cumulative
						During the
						Development
						Stage
		Nine Months				(December 18, 2002
		Ended March 31,				to March 31,
		2005		2004		2005)

Cash flows from operating activities:
Net loss	$	(130,631)	$	(23,489)	$	(166,669)
Amortization of patent costs		750		-		750
Changes in assets and liabilities:
Prepaid expenses		(2,328)		-		(2,328)
Organization costs		90		90		(330)
Accounts payable and accrued expenses		20,236		-		21,486
Accrued salary due to president		42,500		-		42,500

Net cash used for operating activities		(69,383)		(23,399)		(104,591)

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

Net cash used for investing activities		(15,000)		-		(15,000)

Cash flows from financing activities:
Loans from related party		2,577		-		54,427
Repayment of loans from related party		(44,300)		-		(44,300)
Stock subscriptions collected, net		111,485		100,000		211,485
Deferred offering costs incurred		(27,500)		-		(80,000)

Net cash provided by financing activities		42,262		100,000		141,612

Net increase (decrease) in cash		(42,121)		76,601		22,021

Cash, beginning of period		64,142		-		-

Cash, end of period	$	22,021	$	76,601	$	22,021

Supplemental disclosures
of cash flow information:
Interest paid	$	-	$	-	$

Income taxes paid	$	-	$	-	$


See notes to consolidated financial statements.

F-3

SMARTMETRIC, INC. AND SUBSIDIARY

(A Development Stage Company)

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended March 31, 2005 and 2004

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

to March 31, 2005

(Unaudited)

NOTE 1 - INTERIM FINANCIAL STATEMENTS

The unaudited financial statements as of March 31, 2005 and for the three and nine months ended March 31, 2005 and 2004 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-QSB. 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, 2005 and the results of operations and cash flows for the three month and nine month periods ended March 31, 2005 and 2004. 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 month and nine month period ended March 31, 2005 are not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending June 30, 2005. The balance sheet at June 30, 2004 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, 2004 as included in our report on Form 10-KSB.

NOTE 2 - ORGANIZATION

SmartMetric, Inc. (“SmartMetric”) 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 October 2003, the Company sold 50,000,000 shares of Class A common stock to the president of the Company at a price of $.001 per share, or $50,000 total. From October 2003 to June 30, 2004, the Company sold 8,560,257 shares of common stock (the “Additional Shares”) to the president of the Company at a price of $.01 per share, or $85,602 total. These Additional Shares were assigned by the president of the Company in varying amounts to approximately 600 shareholders for no consideration.

On November 3, 2004, the Company deposited $102,311 from the sale of a total of 68,207 shares of common stock to 9 investors at a price of $1.50 per share. The net proceeds to the Company, after deducting $44,052 in costs relating to this private placement for fees paid to an unrelated third party, was $58,259.

The Company closed a second private placement on January 30, 2005, which resulted in the sale of a total of 92,630 shares of common stock to 11 investors at a price of $1.50 per share, or $138,945 gross proceeds. The net proceeds to the Company, after deducting $51,000 in fees paid to an unrelated third party and $825 in other costs, is $87,120.

The Class A common stock and the common stock have identical voting and other rights.

NOTE 4 - PLANNED PUBLIC OFFERING

The Company filed a Form SB-2 registration statement with the U.S. Securities and Exchange Commission in September 2004 in connection with a planned public offering (the “Public Offering”) of up to 6,666,666 shares of common stock at $1.50 per share or $9,999,999 total. The Company plans on offering the shares directly on a “best efforts, all or none basis” as to the first 333,333 shares and on a best efforts basis as to the remaining 6,333,333 shares. The shares are planned to be sold by SmartMetric’s officers and directors in a self-underwritten offering (although the Company may decide to engage registered broker-dealers to assist in the sale) for a period of 90 days (which may be extended for an additional 90 days at the Company’s option). The Public Offering plans that subscription proceeds will be placed in an escrow account until the minimum offering of $500,000 is achieved, after which proceeds shall be released directly to the Company; if the minimum offering is not sold by the end of the offering period, or extended offering period if so extended, the escrowed proceeds would be returned to investors. Also, certain selling shareholders plan on offering 11,721,094 shares for sale in this offering.

NOTE 5 - COMMITMENTS

Marketing agreement - On October 30, 2003, SmartMetric executed an agreement with Information Spectrum, Inc. (“ISI”). Pursuant to this agreement, ISI shall seek to market SmartMetric’s Smart Card technology by actively seeking customers interested in purchasing credential cards which incorporate SmartMetric’s patented Smart Card technology. Prior to ISI offering SmartMetric products by submitting a formal proposal, ISI and SmartMetric shall enter into a “Teaming Agreement” which will define each party’s rights and obligations concerning that particular sales opportunity. Every proposal will require its own Teaming Agreement. Pursuant to this Agreement, ISI is the exclusive reseller of SmartMetric products to agencies of the United States government and the Government of Canada. In addition, ISI has the right of first refusal for other marketing, sales or re-sales opportunities for customers other than the United States or Canadian governments. The term of this agreement is two years and may be extended upon mutual agreement of the parties.

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 patent-pending technological applications anywhere in the world without limitation.

Employment agreement - Effective July 1, 2004, SmartMetric executed an employment agreement with its president. Pursuant to this one-year employment agreement, the president shall receive an annual salary of $170,000 commencing January 1, 2005. This salary will commence upon the Company achieving gross revenues of $1,000,000. Until that time, the salary shall be accrued and SmartMetric may pay the president as salary up to 25% of any offering proceeds received by the Company, which amount shall not exceed $170,000 in any given 12 month period. The president is also eligible for an annual bonus based on certain performance criteria to be determined by a Compensation Committee of the board of directors at a later date. His employment may be terminated for cause at any time. According to the employment agreement, any inventions, ideas, disclosures and improvements made or conceived by him during his employment, including adoptions and improvements to existing patents, shall be his property.

Rental agreement - The Company currently uses office space provided by its president at no cost to the Company. It is anticipated that the Company will start paying rent for this space following the successful completion of the Public Offering.

Lease agreement - In November 2004, SmartMetric executed a lease agreement for office space in Aventura, Florida. This agreement provides for monthly rentals of $800 and an initial term of six months ending May 31, 2005. Unless the lessor is notified in writing at least 60 days prior to the Termination Date, this agreement shall renew for additional one-year terms. Lessor has the right to terminate the lease agreement at any time upon 45 days advance written notice to SmartMetric.

F-4

Item 2. PLAN OF OPERATION

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 SmartCard but has not yet begun to manufacture SmartCards utilizing its licensed technology. To date, SmartMetric has had no sales revenues.

In December 2001 SmartMetric’s CEO, Colin Hendrick, applied for a patent for this biometric card technology connecting SmartCards to networks, and providing secure access for such connections. In June 2004, Mr. Hendrick transferred this technology to Applied Cryptology, Inc., a Nevada corporation, he owns and controls, and which owns 49,500,000 shares of SmartMetric common stock. On August 1, 2004, Applied Cryptology entered into a license agreement with SmartMetric pursuant to which Applied Cryptology agreed to license this technology to SmartMetric in perpetuity in exchange for a royalty payment. This patent was granted on September 14, 2004.

We had $0 sales revenue for the year ended June 30, 2004, with a net loss of $35,978. For the quarter ending March 31, 2005, there were no sales revenues and a net loss of $69,331.

In October 2003, we sold 50,000,000 shares of common stock to the President of SmatMetric at $.001 per share for a total of $50,000. From November 2003 to June 30, 2004, SmartMetric sold 8,560,257 shares of common stock to the President of the corporation, Colin Hendrick, at $.01 per share for a total of $85,602.57. Mr. Hendrick rendered complete payment for these shares by October 2004. In August 2004, Mr. Hendrick transferred these shares to approximately 600 shareholders for no consideration. All shares are restricted from resale, except 11,560,257 shares which are being registered for resale. Of these 11,560,257 shares, 3,000,000 are Class A common shares which are identical to undesignated common stock. In March 2005, Mr. Hendrick transferred 49,500,000 shares to Applied Cryptology, Inc., a company owed and controlled by Mr. Hendrick. Applied Cryptology is party to a license agreement with SmartMetric.

In September 2004, we sold 68,207 shares to 9 people at $1.50 per share. Between December 2004 and January 2005, SmartMetric sold 92,630 shares of common stock to 11 investors at $1.50 per share. All shares issued in these two private placements are being registered by the Company in its proposed registered offering.

PLAN OF OPERATION

Over the next 12 months, SmartMetric intends to commence marketing in an attempt to generate sales. We will use the proceeds of this offering to contract the production of our prototype and commence marketing. We believe that proceeds from the Maximum Offering will be sufficient to cover these costs, as well as working capital, for at least 12 months. We expect that we will have to raise additional funds starting 12 months after completion of the offering if we raise less than the Maximum Offering. The amount we raise will depend on the amount raised in this offering. In the event we raise the Minimum Offering, we will be able to contract the production of a maximum of 1,000 SmartCards and commence marketing. With the Minimum Offering, we will have working capital for 12 months, but will need to raise funds after that period. We believe a minimum of $500,000 is required for us to begin this limited production of our SmartCards.

We expect to outsource manufacturing of our SmartCards once we have sales orders. We do not intend to purchase any plants or significant equipment.

Once we have begun to generate sales, we intend to hire additional employees. However, until that time, we may only hire a few employees to market the SmartMetric SmartCard.

For the nine months ended March 31, 2005, we spent $52,627 on research and development, and for the year ended June 30, 2004, we spend an additional $29,395.00. These funds were applied toward the production of a SmartCard prototype and its components. To date, Mr. Hendrick has neither been paid, nor reimbursed, for any of this research and development costs.

COMPLETION OF PROTOTYPE

A prototype of our SmartCard was completed in February 2005. The finished product is the prototype or model for our SmartCards, which will be manufactured upon receipt of customer orders. We intend to revise some of the engineering of the prototype so as to decrease the size of the circuitry contained in the SmartCard.

PRODUCTION OF SMARTCARDS

Now that we have a working prototype of our SmartCard, we will seek to obtain orders for it. Because SmartMetric does not own or rent a manufacturing facility, we have entered into a contract with a manufacturing facility to produce our SmartCards. Although we have begun negotiation s with two potential manufacturer, no contract has been signed.

SmartMetric believes its current sources of credit and liquidity, including funds raised in its private placement are insufficient to begin operations, including production of our SmartCards. SmartMetric believes the Maximum Offering proceeds will be sufficient to proceed with its plan of operations for the next twelve months. Our plan includes outsourcing or contract manufacturing of approximately 75,000 SmartCards. A key element of SmartMetric's growth strategy is raising adequate funding to begin to outsource the manufacture of its biometric card. We believe that $499,999.50 will suffice to begin outsourcing the manufacturing of our SmartCard. The amount of funds required will depend on the size of the orders we receive. We estimate that $499,999.50 will allow us to outsource production of 1,000 SmartCards, begin marketing them and provide us with enough working capital to last 12 months. We expect that orders larger than will require additional financing. Such financing may be in the form of debt or equity. Currently, SmartMetric has no material commitments for capital expenditures.

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

On October 30, 2003, we entered into an agreement with Information Spectrum, Inc. Pursuant to this agreement, ISI will seek to market our SmartCards. Once ISI begins such marketing efforts and is able to find companies and/or government agencies to purchase our SmartCards, we will begin production of our SmartCards. We intend to enter into an agreement with a third party to manufacture our SmartCards, but have not yet done so.

Item 3. CONTROLS AND PROCEDURES

As of March 31, 2005, an evaluation has been carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of our "disclosure controls and procedures" (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are reasonably designed and effective to ensure that (i) information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There were no changes in internal control over financial reporting identified in connection with the evaluation of our disclosure controls and procedures.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None

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

Between November 2004 and June 30, 2004, SmartMetric sold 8,560,257 shares to Colin Hendrick, President, Chief Executive Officer and Chief Financial Officer of SmartMetric at $.01 per share for a total of $85,602.57. Mr. Hendrick completed payment of these shares in July 2004. This sale was made pursuant to Section 4(2) of the Securities Act of 1933. There was no general solicitation or advertising, and Mr. Hendrick did not purchase the shares with intent to resell them. In August 2004, Mr. Hendrick transferred 8,560,257 shares to approximately 600 friends, acquaintances and associates for no consideration.

In September 2004, SmartMetric sold 68,207 shares of SmartMetric common stock at $1.50 per share to 9 people. These shares are restricted from transfer. SmartMetric relied on Section 4(2) of the Securities Act when selling such securities. SmartMetric did not engage in a general solicitation or advertising, and the purchasers did not purchase the common stock with the intent to resell it. Between December 2004 and January 2005, SmartMetric sold 92,630 shares of common stock to 11 investors at $1.50 per share. These shares are restricted from transfer. SmartMetric relied on Section 4(a) of the Securities Act when selling such securities. SmartMetric did not engage in any general solicitation or advertising, and the purchasers did not purchase the common stock with the intent to resell it.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS

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

Exhibit No.	Description

3(i)	Articles of Incorporation⁽¹⁾

3(ii)	Bylaws⁽¹⁾

10	Contract with Information Spectrum, Inc.⁽¹⁾

31.1	Certification of HOMI’s Chief Exective Officer and Chief Financial Officer pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934

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

(1) Incorporated by reference from SmartMetric’s Registration Statement filed on Form SB-2 filed with the Securities and Exchange Commission on September 3, 2004.

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 25, 2005		By: /s/ Colin Hendrick
		Colin Hendrick, President

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

PART I - FINANCIAL INFORMATION		PAGE
		3
Item 1 - FINANCIAL STATEMENTS (UNAUDITED)

	Consolidated Balance Sheets -	F-1
	March 31, 2005 and June 30, 2004

	Consolidated Statements of Operations -	F-2
	Three Months Ended March 31, 2005 and 2004

	Consolidated Statements of Cash Flows -	F-3
	Three Months Ended March 31, 2005 and 2004

	Notes to Financial Statements -	F-4
	Three Months Ended March 31, 2005 and 2004

Item 2 - PLAN OF OPERATION		4

Item 3 - CONTROLS AND PROCEDURES		6

PART II- OTHER INFORMATION

Item 1 - LEGAL PROCEEDINGS		6

Item 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		6

Item 3 - DEFAULTS UPON SENIOR SECURITIES		7

Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		7

Item 5 - OTHER INFORMATION		7

Item 6 - EXHIBITS		7

SMARTMETRIC, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets

		March 31,		June 30,
		2005		2004
Assets		(Unaudited)

Current assets:
Cash	$	22,021	$	64,142
Stock subscriptions receivable		69,496		35,602
Prepaid expenses		2,328		-

Total current assets		93,845		99,744

Other assets:
Patent costs, less accumulated amortization
of $750 and $0, respectively		14,250		-
Deferred offering costs		80,000		52,500
Organization costs - net		330		420

Total assets	$	188,425	$	152,664

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued expenses	$	21,486	$	1,250
Accrued salary due to president		42,500		-
Due to related party		10,127		51,850

Total current liabilities		74,113		53,100

Other liabilities		-		-

Total liabilities		74,113		53,100

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, 50,000,000 shares
issued and outstanding		50,000		50,000
Common stock, $.001 par value; 45,000,000 shares
authorized, issued and outstanding 8,721,094 and
8,560,257 shares, respectively		8,721		8,560
Additional paid-in capital		222,260		77,042
Deficit accumulated during the development stage		(166,669)		(36,038)

Total stockholders' equity		114,312		99,564

Total liabilities and stockholders' equity	$	188,425	$	152,664

See notes to consolidated financial statements.