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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2021

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________.

 

Commission file number: 000-54853

 

SMARTMETRIC, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   05-0543557

(State or Other Jurisdiction of

Incorporation or Organization)

  (IRS Employer
Identification No.)

 

3960 Howard Hughes Parkway, Suite 500, Las Vegas, NV   89169
Address of Principal Executive Offices   Zip Code

 

(702) 990-3687
Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

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 every Interactive Data File required to be submitted 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 such files). Yes ☐   No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

 

The number of shares outstanding of the registrant’s common stock, $0.001 par value per share, as of December 31, 2021 was 539,310,756.

 

 

 

 

 

 

SMARTMETRIC, INC.

 

TABLE OF CONTENTS

 

INDEX

 

PART I.   FINANCIAL INFORMATION    
Item 1.   Financial Statements    
    Condensed consolidated balance sheets as of December 31, 2021 and June 30, 2021 (unaudited)   1
    Condensed consolidated statements of operations for the three months and six months ended December 31, 2021 and 2020 (unaudited)   2
    Condensed consolidated statements of stockholders’ deficit for the three months and six months ended December 31, 2021 and 2020 (unaudited)   3
    Condensed consolidated statements of cash flows for the six months ended December 31, 2021 and 2020 (unaudited)   4
    Notes to condensed consolidated financial statements (unaudited)   5
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   14
Item 3.   Quantitative and Qualitative Disclosures about Market Risk   20
Item 4.   Controls and Procedures   20
         
PART II   OTHER INFORMATION    
Item 1.   Legal Proceedings   22
Item 1A.   Risk Factors   22
Item 2.   Unregistered sales of equity securities and use of proceeds   22
Item 3.   Defaults Upon Senior Securities   22
Item 4.   Mine Safety Disclosures   23
Item 5.   Other Information   23
Item 6.   Exhibits   24
    Signatures   26

 

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

In this Quarterly Report on Form 10-Q, references to “SmartMetric, Inc.,” “SmartMetric,” “SMME,” the “Company,” “we,” “us,” and “our” refer to SmartMetric, Inc. Also, any reference to “common shares,” or “common stock” refers to our $0.001 par value common stock.

 

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to our business development plans, timing strategies, expectations, anticipated expense levels, business prospects, business outlook, technology spending and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards and interpretations). These statements express our current intentions, beliefs, expectations, strategies or predictions as well as historical information. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “could,” “continue,” 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 Quarterly Report. Additionally, statements concerning future matters are forward-looking statements.

 

Although forward-looking statements in this Quarterly Report 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. These statements are no guarantee of future performance and involve risks and uncertainties that are difficult to predict. Our future operating results are dependent upon many factors which are outside our control. You should not place undue reliance on forward-looking statements. Forward-looking statements may not be realized due to a variety of factors, including, without limitation, our ability to:

 

  ● manage our business given continuing operating losses and negative cash flows;
     
  ● obtain sufficient capital to fund our operations, development, and expansion plans;
     
  ● manage competitive factors and developments beyond our control;
     
  ● maintain and protect our intellectual property;
     
  ● obtain patents based on our current and/or future patent applications;
     
  ● obtain and maintain other rights to technology required or desirable to conduct or expand our business; and
     
  ● manage any other factors, if any, discussed in in this report and in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K.

 

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 Quarterly Report, except as required by federal securities laws. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Quarterly 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.

 

ii

 

 

PART I. FINANCIAL INFORMATION

 

SMARTMETRIC, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheet
(Unaudited)

 

                 
    December 31,     June 30,  
    2021     2021  
Assets                
Current assets:                
Cash   $ 39,790     $ 10,325  
Prepaid expenses and other current assets     8,761       5,000  
                 
Total current assets     48,551       15,325  
                 
Non-current assets                
Deferred financing costs     35,000       35,000  
                 
Total assets   $ 83,551     $ 50,325  
                 
Liabilities and Stockholders’ Deficit                
                 
Current liabilities:                
Accounts payable and accrued expenses   $ 1,046,931     $ 1,073,786  
Liability for stock to be issued     105,187       127,321  
Deferred Officer’s salary     737,642       737,642  
Related party interest payable     227,665       201,846  
Dividends payable     8,667       2,442  
Due to shareholders     49,010       41,343  
Covid19 SBA loan     20,832       41,664  
Convertible note payable, net of discount     331,466       35,000  
Derivative liability     476,075       45,524  
Convertible interest payable     29,330       3,801  
Interest payable     875       875  
                 
Total current liabilities     3,033,680       2,311,244  
                 
Commitments and contingencies (See note 4)                
Series C mandatory redeemable convertible preferred stock, net of discount, authorized 1000,000 shares, 146,084 and 196,083 shares issued and outstanding, respectively     146,084       196,083  
                 
Stockholders’ deficit:                
Preferred stock, $.001 par value; 5,000,000 shares authorized, 610,000 and 610,000 shares issued and outstanding     610       610  
Class A Preferred stock, $.001 par value; 50,000,000 shares authorized 0 and 0 shares issued and outstanding     -       -  
Common stock, $.001 par value; 1,200,000,000 shares authorized, 539,310,756 and 446,385,628 shares issued and outstanding, respectively     539,311       446,386  
Additional paid-in capital     26,647,576       25,955,367  
Accumulated deficit     (30,283,710 )     (28,859,365 )
                 
Total stockholders’ deficit     (3,096,213 )     (2,457,002 )
                 
Total liabilities and stockholders’ deficit   $ 83,551     $ 50,325  

 

See notes to condensed consolidated financial statements.

 

1

 

 

SMARTMETRIC, INC. AND SUBSIDIARY
Condensed Consolidated Statements Of Operations
(Unaudited)

 

                         
    Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
    December 31,     December 31,     December 31,     December 31,  
    2021     2020     2021     2020  
Revenues   $ -     $ -     $ -     $ -  
                         
Expenses:                                
Officer’s salary     47,500       47,500       95,000       95,000  
Other general and administrative     267,110       109,683       759,485       234,279  
Research and development     44,500       21,733       68,895       43,939  
                                 
Total operating expenses     359,110       178,916       923,380       373,218  
                                 
Loss from operations before income taxes     (359,110 )     (178,916 )     (923,380 )     (373,218 )
                                 
Other income (expenses)                                
Interest & Financing Expense     (48,844 )     (52,637 )     (79,627 )     (81,306 )
Gain on PPP loan forgiveness      20,832               20,832          
Gain (loss) on change in derivatives     68,240       (113,629 )     (437,368 )     (112,565 )
 Total other income (expenses)      40,228       (166,266 )     (496,163 )     (193,871 )
                                 
Net loss     (318,882 )     (345,182 )     (1,419,543 )     (567,089 )
Preferred stock dividends     (3,379 )      (112,546 )     (4,802 )      (116,575 )
Net loss available for common stockholders   $ (322,261 )   $ (457,728 )   $ (1,424,345 )   $ (683,664 )
                                 
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     518,255,935       403,288,668       493,850,474       392,521,660  

 

See notes to condensed consolidated financial statements.

 

2

 

 

SMARTMETRIC, INC. AND SUBSIDIARY
Consolidated Statements of Changes In Stockholders’ (Deficit)
(Unaudited)

 

                                                                         
    Preferred Series C
Stock 		                Common Stock     Additional
Paid In
Capital 		    Accumulated
Deficit 		    Total  
Balance June 30, 2020     610,000     $ 610       -     $ -       379,523,000     $ 379,523     $ 25,429,261     $ (27,771,062 )   $ (1,961,671 )
                                                                         
Shares issued of common stock for warrants and cash     -       -       -       -       -       -       -       -       -  
                                                                         
Preferred C shares Converted to Common     -       -       -       -       5,447,260       5,447       31,921       -       37,368  
                                                                         
Beneficial conversion feature related to convertible debt     -       -       -       -       -       -       -       -       -  
                                                                         
Series C dividends     -       -       -       -       -       -       -       (4,029 )     (4,029 )
                                                                         
Shares of Common Stock issued for services     -       -       -       -       585,000       585       2,340       -       2,925  
                                                                         
Net loss for period     -       -       -       -       -       -       -       (221,907 )     (221,907 )
                                                                         
Balance September 30, 2020     610,000     $ 610       -     $ -       385,555,260     $ 385,555     $ 25,463,522     $ (27,996,998 )   $ (2,147,312 )
                                                                         
Shares issued of common stock for warrants and cash             -                        15,000,000       15,000       60,000               75,000  
                                                                         
Preferred C shares Converted to Common                                     16,034,876       16,035       54,965               71,000  
                                                                         
Valuation of Preferred C and derivative liability                                                     208,177               208,177  
                                                                         
Series C Preferred Dividends                                                             (112,547 )     (112,547 )
                                                                         
Net loss for period                                                             (345,183 )     (345,183 )
                                                                         
Balance December 31, 2020     610,000     $ 610       -     $ -       416,590,136     $ 416,590     $ 25,786,662     $ (28,454,728 )   $ (2,250,865 )
                                                                         
Balance June 30, 2021     610,000     $ 610       -     $ -       446,385,628     $ 446,386     $ 25,955,367     $ (28,859,365 )   $ (2,457,002 )
                                                                         
Common shares issued for services     -       -       -       -       4,095,238       4,095       31,905       -       36,000  
                                                                         
Shares issued of common stock and warrants for cash     -       -       -       -       8,133,333       8,133       59,367       -       67,500  
                                                                         
Shares converted from Preferred C shares to common     -       -       -       -       17,534,387       17,535       89,466       -       107,001  
                                                                         
Shares issued for finder’s fee     -       -       -       -       12,500,000       12,500       237,500       -       250,000  
                                                                         
Preferred C dividends     -       -       -       -       -       -       -       (1,423 )     (1,423 )
                                                                         
Net loss for period     -       -       -       -       -       -       -       (1,100,661 )     (1,100,661 )
                                                                         
Balance September 30, 2021     610,000     $ 610       -     $ -       488,648,586     $ 488,649     $ 26,373,605     $ (29,961,449 )   $ (3,098,585 )
                                                                         
Shares issued of common stock and warrants for cash                                     11,032,663       11,033       57,294               68,327  
                                                                         
Common shares issued for services                                     7,981,455       7,981       16,325               24,306  
                                                                         
Common shares issued for AJB finder’s fee                                     12,500,000       12,500       112,500               125,000  
                                                                         
Shares converted from Preferred C shares to common                                     19,148,052       19,148       87,852               107,000  
                                                                         
Preferred C dividends      -        -        -        -        -        -        -        (3,379 )       (3,379 ) 
                                                                         
Net loss for period     -         -        -        -        -        -        -       (318,882 )     (318,882 )
                                                                         
Balance December 31, 2021     610,000     $ 610       -     $ -       539,310,756     $ 539,311     $ 26,647,576     $ (30,283,710 )   $ (3,096,213 )

 

3

 

 

SMARTMETRIC, INC. AND SUBSIDIARY
Condensed Consolidated Statements Of Cash Flows
(Unaudited)

 

             
    Six Months Ended     Six Months Ended  
    December 31,     December 31,  
  2021     2020  
CASH FLOWS FROM OPERATING ACTIVITIES            
             
Net loss   $ (1,419,543 )   $ (567,089 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:                
Common stock issued and issuable for services     435,306       2,926  
Non cash financing expense             49,322  
Gain (loss) on fair value of derivative liability     437,368       112,565  
Gain on PPP loan forgiveness      (20,832 )       -  
Amortization of debt discount     26,466       2,873  
                 
Changes in assets and liabilities                
Increase (Decrease) in prepaid expenses and other current assets     -       2,142  
Increase in accounts payable and accrued expenses     (30,166 )     50,048  
(Decrease) in deferred officer salary     -       (15,833 )
Increase in Due to shareholder     -          
Increase in Convertible interest payable     1,750       2,926  
Increase in accrued interest payable     25,819       26,183  
                 
Net cash used in operating activities     (543,832 )     (333,937 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Loans from related parties     7,668       4,286  
Proceeds from sale of common stock     135,827       159,865  
Proceeds from AJB Note     270,000          
Proceeds from sale of Series C Preferred stock     155,000       120,000  
Change in dividends payable     4,802       -  
Net cash provided by financing activities     573,297       284,151  
                 
NET INCREASE (DECREASE) IN CASH     29,465       (49,786 )
                 
CASH BEGINNING OF PERIOD     10,325       71,377  
                 
END OF PERIOD     39,790       21,591  
                 
Non-cash investing and financing activities   $ 107,000     $ 109,000  
Conversion of 125,675 & 72,600 Preferred C Shares into 19,148,052 and 21,482,136 shares of common stock                
                 
CASH PAID DURING THE PERIOD FOR:                
Income taxes   $ -     $ -  
Interest   $ -     $ -  

 

See notes to condensed consolidated financial statements.

 

4

 

 

SMARTMETRIC INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

 

SmartMetric, Inc. (the “Company” or “SmartMetric”) was incorporated in the State of Nevada on December 18, 2002. SmartMetric’s main product is a fingerprint sensor-activated card with a finger sensor onboard the 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 Datacard. SmartMetric has completed development of its card along with pre-mass manufacturing cards but has not yet begun to mass manufacture the biometric fingerprint activated cards.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, the accompanying unaudited financial statements contain all the adjustments (which are of a normal recurring nature) necessary for a fair presentation. Operating results for the three and six months ended December 31, 2021 are not necessarily indicative of the results that may be expected for the year ending June 30, 2022. For further information, refer to the financial statements and the footnotes thereto contained in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, as filed with the Securities and Exchange Commission on October 12, 2021. The consolidated balance sheet as of June 30, 2021, has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by US GAAP for complete financial statements.

 

Going Concern

 

As shown in the accompanying condensed consolidated financial statements the Company has sustained recurring losses of $1,419,543 for the six months ended December 31, 2021 and has an accumulated deficit of $30,283,710 at December 31, 2021.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date of this filing. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The COVID-19 has had an impact on SmartMetric’s final card production. While the delays are due to supply line disruption, the Company is confident that these delays will be short-lived based on advice from our manufacturing partners, manufacturing alternatives and alternative supply lines that are being put into place by the Company.

 

Management believes that the Company’s capital requirements will depend on many factors. These factors include product marketing and distribution. The management plans include equity sales and borrowing in order to fund the operations.

 

There are no assurances that the Company will be able to achieve the level of revenues adequate to generate sufficient cash flow from operations to support the Company’s working capital requirements. To the extent that funds generated are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may not continue its operations.

 

In December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan, China (“COVID-19”) and has since spread worldwide, including to the Unites States, posing public health risks that have reached pandemic proportions (the “COVID-19 Pandemic”). The COVID-19 Pandemic poses a threat to the health and economic wellbeing of our employees, customers and vendors. Like most businesses world-wide, the COVID-19 Pandemic has impacted the Company financially; delaying the beginning of production.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, SmartMetric Australia Pty. Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

5

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. 

 

Research and Development

 

Research and development costs are charged to expense as incurred. Our research and development expenses consist primarily of expenditures for electronics design and engineering, software design and engineering, component sourcing, component engineering, manufacturing, product trials, compensation and consulting costs.

 

Recent Accounting Pronouncements

 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

Loss Per Share of Common Stock

 

In accordance with FASB ASC 260, “Earnings Per Share,” the basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Basic net loss per share excludes the dilutive effect of stock options or warrants and convertible notes. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of December 31, 2021 and 2020, 69,163,518 and 112,170,182 dilutive shares were excluded from the calculation of diluted loss per common share, with all dilutive shares being common stock warrants at December 31, 2021 and 2020, as their effect would be anti-dilutive.

 

Stock-Based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

 

6

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Fair value of financial instruments

 

The Company measures fair value in accordance with ASC 820 - Fair Value Measurements. ASC 820 defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurements. ASC 820 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by ASC 820 are:

 

Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

 

Level 2 - Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

 

Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

As defined by ASC 820, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale, which was further clarified as the price that would be received to sell an asset or paid to transfer a liability (“an exit price”) in an orderly transaction between market participants at the measurement date.

 

The reported fair values for financial instruments that use Level 2 and Level 3 inputs to determine fair value are based on a variety of factors and assumptions. Accordingly, certain fair values may not represent actual values of the Company’s financial instruments that could have been realized as of December 31, 2021 or that will be recognized in the future, and do not include expenses that could be incurred in an actual settlement. The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, receivables from related parties, prepaid expenses and other, accounts payable, accrued liabilities, and related party and third-party notes payables approximate fair value due to their relatively short maturities. The Company’s notes payable to related parties approximates the fair value of such instrument based upon management’s best estimate of terms that would be available to the Company for similar financial arrangements at December 31, 2021.

 

NOTE 3 - PREPAID EXPENSES

 

Prepaid expenses represent the unexpired terms of various consulting agreements as well as advance rental payments. Prepaid expenses at December 31, 2021 were $5,000.

 

NOTE 4 - COMMITMENTS AND CONTINGENCIES

 

Lease Agreement

 

The Company’s main office is in Las Vegas, Nevada. Rent expense under all leases for the three months ended December 31, 2021 and 2020 was $1,590 and $1,666 respectively. The Company maintains only one office. This office is in Las Vegas, NV and is a month-to-month lease.

 

7

 

 

NOTE 4 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

Related Party Transactions

 

As of December 31, 2021 and 2020, the Company has accrued the amounts of $737,642 and $744,115, respectively, as deferred Officer’s salary for the difference between the president’s annual salary and the amounts paid. 

 

As a result of shareholder loans and deferred officer salary, the Company has accrued a balance of $227,665 and $175,664 as interest payable as of December 31, 2021 and 2020.

 

On September 11, 2017, we received a license to certain patents from Chaya Hendrick, our founder and CEO, related to our technologies until the expiration of the patents. As consideration, we issued Chaya Hendrick, or her assigns, (i) 200,000 shares of Series B Convertible Preferred Stock, (ii) a royalty equal to 5% of gross revenues derived from products sold related to the patents, and (iii) certain minimum required payments beginning at $50,000 and doubling each year thereafter. The Series B Preferred Stock may be converted at the election of holder on a basis for 50 common shares for each preferred share at any time or an aggregate of 10,000,000 common shares in exchange for all 200,000 shares of Series B Convertible Preferred Stock.

 

Our CEO maintains an employment agreement that stipulates a $190,000 annual salary. This agreement is in effect until mutual agreement between its CEO and the Company to terminate.

 

Litigation

 

From time to time we may be a defendant or plaintiff in various legal proceedings arising in the normal course of our business. As of the date of this Quarterly Report, there are no material pending legal or governmental proceedings relating to us or properties to which we are a party, and, to our knowledge, there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.

 

NOTE 5 - DEBT

 

On April 17, 2020, we received funds under the Paycheck Protection Program, a part of the CARES Act. The loan is serviced by Chase Bank, and the application for these funds required us to, in good faith, certify that the current economic uncertainty made the loan necessary to support our ongoing operations. We used the funds for payroll and related costs. The receipt of these funds, and the forgiveness of the loan attendant to these funds, was dependent on our ability to adhere to the forgiveness criteria. The loan bears interest at a rate of 0.98% per annum and had a maturity date of April 6, 2022, with the first payment being deferred until April 17, 2021. Under the terms of the PPP, certain amounts may be forgiven if they are used in accordance with the CARES Act. The Company applied for forgiveness of this loan as of October 2021 and forgiveness was granted by the Small Business Administration. Therefore, the loan is considered paid in full.

 

On March 5, 2020, the Company issued a $35,000 10% convertible note to an investor, GHS Investments, LLC, in relation to an equity financing agreement (see Note 6). The note was due on December 5, 2020 and is convertible at a rate of $0.0175 per share which resulted in a discount from the beneficial conversion feature totaling $5,000. During the year ended June 30, 2020, $2,127 of the debt discount was amortized. For the three month period ended December 31, 2021, $3,804 of the debt discount was amortized. As of December 31, 2021, all $5,000 of the debt discount was fully amortized and the note was at its full amount of $35,000. As of December 31, 2021, the note has not been paid and currently is in default. The default conversion rate is convertible at a variable rate. Accordingly, the Company concluded there is an embedded derivative which was required to be bifurcated and accounted for as a derivative liability. The Company chose to use the Black Scholes model to calculate the derivative liability. The assumptions in the derivative liability calculation included the price of the Company’s common stock of $0.0070 at the valuation date, term of zero, a risk free rate of between $0.0010 and $0.0011 and a volatility rate of between 337% and 341%.

 

8

 

 

NOTE 5 - DEBT (CONTINUED)

 

On July 23, 2021, the Company entered into a Securities Purchase Agreement with AJB Capital Investments, LLC (the “Investor”) with respect to the sale and issuance of: (i) a commitment fee in the amount of $250,000 in the form of 12,500,000 shares of the Company’s common stock (the “Commitment Fee Shares”), (ii) a promissory note in the aggregate principal amount of $300,000 (the “Note”), (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 10,000,000 shares of the common stock (the “Warrants”), and (iv) 5,000 shares of the Company’s Series D Convertible Preferred Stock. The Note and Warrants were issued on July 23, 2021. The Commitment Fee Shares were issued at a value of $250,000, the Note was issued in a principal amount of $300,000 for a purchase price of $270,000, resulting in an original issue discount of $30,000; the Warrants were issued, with an initial exercise price of $0.05 per share, subject to adjustment; and 5,000 Series D Shares were issued to be converted into the shares of common stock of the Company solely in the event of default under the Purchase Agreement. The aggregate cash subscription amount received by the Company from the Investor for the issuance of the Commitment Fee Shares, Note and Warrants was $253,000, due to a reduction in the $270,000 purchase price as a result of broker, legal, and transaction fees.

 

NOTE 6 - STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

Series B Convertible Preferred Stock

 

On December 11, 2009, the Company filed a Certificate of Designation with the State of Nevada, to designate 500,000 shares of preferred stock as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”). Effective November 5, 2014, the number of shares designated as Series B Convertible Preferred Stock was increased to 5,000,000 shares.

 

The Company issued 200,000 shares of Series B Convertible Preferred Stock upon its inception in 2004.

 

In October 2015, the Company issued 200,000 shares of Series B Convertible Preferred Stock.

 

On September 11, 2017, the Company issued an additional 210,000 shares Series B Convertible Preferred Stock to its CEO, Chaya Hendrick, in consideration for grant of exclusive rights to the licensed patent.

 

As of December 31, 2021, the Company has 5,000,000 shares of Series B Convertible Preferred Stock, par value $0.001, authorized and 610,000 shares of Series B Convertible Preferred Stock issued and outstanding.

 

Holders of the Series B Convertible Preferred Stock are entitled to receive dividends or other distributions with the holders of the common stock of the Company on an as converted basis when, as, and if declared by the directors of the Company. Holders of the Series B Convertible Preferred Stock are entitled to convert each share of the Series B Convertible Preferred Stock into fifty (50) shares of common stock.

 

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, holders of the Series B Convertible Preferred Stock are entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the Stated Value, pro rata with the holders of the common stock.

 

Series C Convertible Preferred Stock

 

From time to time, the Company issues Series C Convertible Preferred Stock in exchange for cash. These shares are convertible into shares of the Company’s common stock.

 

The number of issued and outstanding shares of Series C Convertible Preferred Stock were 146,084 and 196,083, respectively, for December 31, 2021 and June 30, 2021.

 

9

 

 

NOTE 6 - STOCKHOLDERS’ DEFICIT (CONTINUED)

 

Series D Convertible Preferred Stock

 

On July 27, 2021 the Company designated Series D Convertible Preferred Stock (the “Series D Shares”). The Series D Shares have a stated value of $100.00 (the “Stated Value”), and carry a conversion price of the volume weighted average price (for the 20 trading days immediate prior to the conversion date. The amount of shares of Common Stock to be issued upon any conversion shall be calculated as the quotient of (i) the product of the issued shares of the Series D Shares to be converted and the Stated Value, and (ii) the Conversion Price. The Series D Shares are not entitled to receive dividends or other distributions, and have no voting rights.

 

Common Stock

 

During the last fiscal quarter of fiscal year ending June 30, 2021, the Company increased its authorized shares of common stock from 600,000,000 to 1,200,000,000.

 

As of September 30, 2021, the Company had 488,648,586 shares of common stock issued and outstanding.

 

  ● During the three months ended September 30, 2021, the Company sold 5,500,000 shares of common stock for net proceeds of $27,462. With these issuances the company also issued warrants to purchase: (i) 5,500,000 shares of common stock at a price of $0.10 per share and (ii) 5,500,000 shares of common stock at a price of $0.20 per share. The warrants expire at various times through September 21, 2022. None of the 12,000,000 shares of common stock were issued during the quarter ended September 30, 2021, and were recognized as stock payable.

 

  ● During the three months ended September 30, 2021, the Company issued 42,262,958 shares of common stock, of which 8,133,333 were issued from stock payable, 17,534,387 were converted from 116,050 Preferred stock and 4,095,238 shares were issued for legal services and 12,500,000 shares were issued as a finder’s fee.

 

As of December 31, 2021, the Company had 539,310,756 shares of common stock issued and outstanding.

 

● During the three months ended December 31, 2021, the Company sold 8,625,000 shares of common stock for net proceeds of $86,230. With these issuances the Company also issued warrants to purchase: (i) 8,625,000 shares of common stock at a price of $0.70 per share and (ii) 4,312,500 shares of common stock at a price of $1.00 per share. The warrants expire at various times through December 14, 2022. None of the 8,625,000 shares of common stock were issued during the quarter ended December 31, 2021, and were recognized as stock payable.

 

● During the three months ended December 31, 2021, the Company issued 50,662,170 shares of common stock, of which 11,032,663 were issued from stock payable, 19,148,052 were converted from 107,000 shares of Preferred stock, 7,981,455 shares were issued for legal services and 12,500,000 shares were issued as a finder’s fee to AJB Capital.

 

Equity Financing Agreement

 

On March 5, 2020, the Company entered into an equity financing agreement (the “Equity Financing Agreement”) with GHS Investments, LLC, a Nevada limited liability company (“GHS”). Pursuant to the Equity Financing Agreement, the Company agreed to sell to GHS an indeterminate amount of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), up to an aggregate price of four million dollars ($4,000,000).

 

10

 

 

NOTE 6 - STOCKHOLDERS’ DEFICIT (CONTINUED)

 

Following effectiveness of the Registration Statement, the Company shall have the discretion to deliver puts to GHS and GHS will be obligated to purchase shares of the Company’s Common Stock based on the investment amount specified in each put notice. The maximum amount that the Company shall be entitled to put to GHS in each put notice shall not exceed two hundred percent (200%) of the average daily trading dollar volume of the Company’s Common Stock during the ten (10) trading days preceding the put, so long as such dollar amount does not exceed $500,000. Pursuant to the Equity Financing Agreement, GHS and its affiliates will not be permitted to purchase and the Company may not put shares of the Company’s Common Stock to GHS that would result in GHS’s beneficial ownership, equaling more than 4.99% of the Company’s outstanding Common Stock. The price of each put share shall be equal to eighty percent (80%) of the Market Price (as defined in the Equity Financing Agreement). Puts may be delivered by the Company to GHS until the earlier of thirty-six (36) months after the effectiveness of the Registration Statement.

 

Concurrently with the execution of the Equity Financing Agreement, the Company entered into a convertible promissory note, for the principal balance of $35,000. Per the terms of the convertible promissory note, the Company agreed to pay GHS interest at the rate of ten percent (10%) until it became due on December 5, 2020. The holder of the convertible promissory note shall have the right at any time to convert all or any part of the outstanding and unpaid principal and interest at a fixed conversion price of $0.0175. See Note 5. The principal balance of $35,000 has been recognized as deferred financing costs in current assets on the accompanying Consolidated Balance Sheet, and will be charged against the gross proceeds of each put when received. Although the Company has not delivered any put to GHS yet, the Equity Financing Agreement is in effect for three (3) years, through March 2023, and as the Company does plan to put to GHS, the Company has determined it is proper for the deferred costs to remain for the length of the Equity Financing Agreement.

 

Pursuant to the Equity Financing Agreement, the Company is required, within sixty (60) calendar days upon the date of execution of the Equity Financing Agreement, to use its best efforts to file with the SEC a registration statement or registration statements (as is necessary) on Form S-1, covering the resale of all of the registrable securities, which registration statement(s) shall state that, in accordance with Rule 416 promulgated under the 1933 Act, such registration statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon stock splits, stock dividends or similar transactions. Pursuant to the Equity Financing Agreement, the Company filed a registration statement on Form S-1 (the “Registration Statement”) on August 6, 2020. The Registration Statement has been withdrawn as of the date of this filing and never became effective.

 

Warrants

 

From time to time the Company granted warrants in connection with private placements of securities, as described herein.

 

As of December 31, 2021, and June 30, 2021, the following is a breakdown of the warrant activity:

 

                                       
Range of Exercise Prices   Number of
Warrants
Outstanding 		    Weighted-
Average
Contractual Life
Remaining in Years 		    Weighted-
Average
Exercise Price 		    Number
Exercisable 		    Weighted-
Average
Exercise Price 		 
Warrants Outstanding and Exercisable at December 31, 2021:                                        
$0.70 - $1.00     69,163,518       1.24     $ 0.27       69,163,518     $ 0.27  
                                         
Warrants Outstanding and Exercisable at June 30, 2021:                                        
$0.10 - $0.20     124,888,519       1.12     $ 0.33       124,888,519     $ 0.33  

 

11

 

 

NOTE 6 - STOCKHOLDERS’ DEFICIT (CONTINUED)

 

Warrant Activity:

 

December 31, 2021:

 

       
Outstanding - June 30, 2021     124,888,519  
Issued     19,937,499  
Exercised     —  
Expired     (75,662,500 )
Outstanding - December 31, 2021     69,163,518  

 

December 31, 2020:

 

Outstanding - June 30, 2020     53,280,406  
Issued     66,500,000  
Exercised     —  
Expired     (7,610,224 )
Outstanding - December 31, 2020     112,170,182  

 

At December 31, 2021, all 69,163,518 warrants are vested and all 69,163,518 warrants expire at various times prior to December 14, 2022.

 

NOTE 7 - MANDATORY REDEEMABLE CONVERTIBLE PREFERRED STOCK

 

Issuances of Series C Convertible Preferred Stock

 

On January 10, 2019, the Board of Directors of the Company adopted a resolution pursuant to the Company’s Certificate of Incorporation, as amended, providing for the designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions, of the Series C Convertible Preferred Stock.

 

On January 14, 2019, the Company filed a Certificate of Designations for its Series C Convertible Preferred Stock. The authorized number of Series C Convertible Preferred Stock is 1,000,000 shares, par value 0.001. The Series C Convertible Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Company’s common stock, (b) junior with respect to dividends and right of liquidation with respect to the Company’s Series B Preferred Stock; and (c) junior with respect to dividends and right of liquidation to all existing indebtedness of the Company. The Series C Convertible Preferred Stock will carry an annual ten percent (10%) cumulative dividend, compounded daily, payable solely upon redemption, liquidation or conversion. The Company will have a right, at any time in the period of 180 days from the date of the issuance, at the Company’s option, to redeem all or any portion of the Series C Preferred Stock at prices ranging from 105% to 130%, based on the passage of time.

 

The number of shares of Series C Convertible Preferred Stock issued and outstanding were 146,084 and 196,084, respectively, for December 31, 2021 and June 30, 2021.

 

The holders of Series C Convertible Preferred Stock shall have the right at any time during the period beginning on the date which is six (6) months following the date of their issuance, to convert all or any part of the outstanding Series C Convertible Preferred Stock into fully paid and non-assessable shares of Common Stock at the Variable Conversion Price. The “Variable Conversion Price” shall mean 71% multiplied by the Market Price (representing a discount rate of 29%). “Market Price” means the average of the two (2) lowest Trading Prices (which means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the "OTC") as reported by a reliable reporting service ("Reporting Service") designated by the Holder (i.e. Bloomberg) for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading Day prior to the date of conversion.

 

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NOTE 7 - MANDATORY REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)

 

The Series C Convertible Preferred stock is convertible after six months at 71% of the average market price of the Company’s stock based on the lowest two (2) market closes fifteen (15) days prior. Consequently, the shares were converted at different rates. The Company analyzed the conversion feature and determined it was required to be bifurcated and recognized as a derivative liability. Three (3) batches of Preferred stock were subject to derivative liability valuation based on the Black Scholes Merton pricing model. As the fair value of each of the three (3) derivative and the shares issued at inception were in excess of the face amount of the Preferred stock, the Company recorded a discount in the amount of $35,000 to be amortized utilizing the effective interest method of accretion over the term of the note.

 

On the date which is eighteen (18) months following the Issuance Date or upon the occurrence of an Event of Default (the “Mandatory Redemption Date”), the Company shall redeem all of the shares of Series C Convertible Preferred Stock of the Holder (which have not been previously redeemed or converted). With five (5) days of the Mandatory Redemption Date, the Company shall make payment to each Holder of an amount in cash equal to the total number of shares of Series C Convertible Preferred Stock held by such Holder multiplied by the then current Stated Value.

 

All shares of mandatorily redeemable convertible preferred stock have been presented outside of permanent equity in accordance with ASC 480, Classification and Measurement of Redeemable Securities. The Company accretes the carrying value of its Series C Convertible Preferred Stock to its estimate of fair value (i.e., redemption value) at period end.

 

The carrying value of the Series C Convertible Preferred Stock at December 31, 2021 and June 30, 2021 was $146,084 and $196,083 net of discount, respectively. There were 96,250 shares of Series C Preferred Stock issued for net proceeds of $80,000, and 107,000 shares of Series C Preferred Stock converted to 19,148,092 shares of Common Stock for the three months ended December 31, 2021.

 

NOTE 8 - DERIVATIVE LIABILITIES

 

The conversion rates of the convertible notes and Series C Convertible Preferred Stock are convertible at a variable rate. Accordingly, the Company concluded there is an embedded derivative which was required to be bifurcated and accounted for as a derivative liability. The Company chose to use the Black Scholes model to calculate the derivative liability. The assumptions in the derivative liability calculation included the price of the Company’s common stock of $0.0141 at the valuation date, term of zero, a risk free rate of between $0.0010 and $0.0011 and a volatility rate of between 150% and 341%. The Company has recorded the embedded derivative liability at its’ fair value utilizing the Black-Scholes Merton option pricing model, as follows:

 

    Level 1     Level 2     Level 3     Total  
Derivative liability   $ -     $ -     $ 476,075     $ 476,075  

 

NOTE 9 - INCOME TAXES

 

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year. Cumulative adjustments to the Company’s estimate are recorded in the interim period in which a change in the estimated annual effective rate is determined.

 

The Company has estimated its effective tax rate to be 0%, based primarily on losses incurred and the uncertainty of realization of the tax benefit of such losses.

 

NOTE 10 - SUBSEQUENT EVENTS

 

In accordance with ASC 855-10, the Company has reviewed its operations subsequent to December 31, 2021 to the date these financial statements were issued. Between January 1, 2022 and February 11, 2022, other than as described in “Recent Developments” in Part I, Item 2 of this Quarterly Report, there were no subsequent events.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

SmartMetric, Inc. is a company engaged in the technology industry. SmartMetric has secured a patent covering technology that involves connection to networks using data cards (smart cards and EMV cards). In addition, SmartMetric holds the sole license to five (5) issued patents covering features of its biometric fingerprint activated cards. SmartMetric’s main products are a fingerprint sensor activated payments card and a security card with a finger sensor and fully functional fingerprint reader embedded inside the card. The cards have a rechargeable battery allowing for portable biometric identification and card activation. These cards are herein sometimes referred to as a biometric card or the SmartMetric Biometric Card.

 

Recent Developments

 

The COVID-19 pandemic has had an impact on SmartMetric’s final card production. While the delays are due to supply line disruption, the Company is confident that these delays will be short-lived based on advice from our manufacturing partners, manufacturing alternatives and alternative supply lines that are being put into place by the Company.

 

GHS Equity Financing Agreement and Registration Rights Agreement

 

On March 5, 2020, the Company entered into an equity financing agreement (the “Equity Financing Agreement”), and a registration rights agreement (the “Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $4,000,000 over the course of 36 months in return for shares of the Company’s common stock. The 36-month period was expected to commence upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) on August 6, 2020.

 

Following effectiveness of the Registration Statement, the Company would have had the discretion to deliver puts to GHS and GHS will be obligated to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) based on the investment amount specified in each put notice. The maximum amount that the Company shall be entitled to put to GHS in each put notice shall not exceed two hundred percent (200%) of the average daily trading dollar volume of the Company’s Common Stock during the ten (10) trading days preceding the put, so long as such amount does not exceed $500,000. Pursuant to the Equity Financing Agreement, GHS and its affiliates will not be permitted to purchase, and the Company may not put shares of the Company’s Common Stock to GHS that would result in GHS’s beneficial ownership equaling more than 4.99% of the Company’s outstanding Common Stock. The price of each put share shall be equal to eighty percent (80%) of the Market Price (as defined in the Equity Financing Agreement). Puts may be delivered by the Company to GHS until the earlier of thirty-six (36) months after the effectiveness of the Registration Statement, the date on which GHS has purchased an aggregate of $4,000,000 worth of Common Stock under the terms of the Equity Financing Agreement, or at such time that the Registration Statement is no longer in effect. Additionally, in accordance with the Equity Financing Agreement, the Company issued GHS a convertible promissory note in the principal amount of $35,000 and a 9 month maturity date (the “Commitment Note”), with the first $20,000 of the Commitment Note deemed earned upon execution of the Equity Financing Agreement and the remaining $15,000 of the Commitment Note deemed earned upon payment by GHS of the Company’s legal fees. As of December 31, 2021, the Commitment Note has not been paid.

 

The Registration Rights Agreement provides that the Company shall (i) use its best efforts to file with the Commission the Registration Statement within 60 days of the date of the Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the Commission within 30 days after the date the Registration Statement is filed with the Commission, but in no event more than 90 days after the Registration Statement is filed.

 

On March 11, 2021 the Company withdrew the Registration Statement pursuant to Rule 477 of the Securities Act of 1933. As a result, the Company cannot avail itself of the benefits of the Equity Financing Agreement. 

 

Issuance of Commitment Fee Shares, Note, Warrants, and Series D Preferred Stock to AJB Capital Investments, LLC

 

On July 23, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) a commitment fee in the amount of $250,000 in the form of 12,500,000 shares (the “Commitment Fee Shares”) of the Company’s common stock, (ii) a promissory note in the aggregate principal amount of $300,000 (the “Note”), (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 10,000,000 shares of Common Stock (the “Warrants”), and (iv) 5,000 shares of the Company’s Series D Convertible Preferred Stock (the “Series D Shares”). The Note and Warrants were issued on July 23, 2021 (the “Original Issue Date”).

 

Pursuant to the terms of the Purchase Agreement, the Commitment Fee Shares were issued at a value of $250,000; the Note was issued in a principal amount of $300,000 for a purchase price of $270,000, resulting in an original issue discount of $30,000; the Warrants were issued, with an initial exercise price of $0.05 per share, subject to adjustment as described therein; and 5,000 Series D Shares were issued to be converted into the shares of Common Stock of the Company solely in the event of default under the Purchase Agreement. The aggregate cash subscription amount received by the Company from the Investor for the issuance of the Commitment Fee Shares, Note and Warrants was $253,000, due to a reduction in the $270,000 purchase price as a result of broker, legal, and transaction fees. The Purchase Agreement limits the Company’s ability to solicit any offers for, respond to any unsolicited offers for, or conduct any negotiations with any other person or entity in respect of any variable rate debt transactions (as more particularly described therein) and provides for Investor’s right of first refusal in connection with a wide range of equity and debt securities of the Company.

 

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Subsequently, in order to alleviate the aforementioned contractual restrictions and to address the Company’s potential liquidity concerns, the Company and the Investor entered a waiver and consent agreement dated as of November 3, 2021 (the “Waiver and Consent”), whereby in consideration of additional 12,500,000 shares of Common Stock of the Company treated as the Commitment Fee Shares and the elimination of rights to redeem the Commitment Fee Shares, the Investor agreed to delete the provisions of the Purchase Agreement in connection with its right of first refusal. The Waiver and Consent, however, did not eliminate the restriction on the variable rate transactions in accordance with Section 4(k)(c) of the Purchase Agreement.

 

Terms of AJB Note

 

The Note was scheduled to mature on January 23, 2022, six (6) months after the Original Issue Date, and provides for interest to accrue at an interest rate equal to 10% per annum, or, upon an Event of Default (as defined in the Note), the lesser of (i) 18% per annum, and (ii) the maximum amount permitted under law (the “Default Interest”). The Investor shall have the right, only following an Event of Default (as defined in the Note), to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the Note into fully paid and non-assessable shares of the Company’s Common Stock, as such Common Stock exists on the date of issuance of the shares underlying the Note, or any shares of capital stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified (the “Conversion Shares”). The initial conversion price, following and during an Event of Default, for the principal and interest of the Note shall equal the lesser of 90% representing a 10% discount multiplied by the lowest trading price (i) during the previous twenty (20) trading day period ending on the date of issuance of the Conversion Shares, or (ii) during the previous twenty (20) Trading Day period ending on date of conversion of the Note, subject to adjustment as provided therein. The Note is subject to adjustment upon certain events such as distributions and mergers, and has full ratchet anti-dilution protections for issuance of securities by the Company at a price that is lower than the then-current conversion price except for certain exempt issuances. In addition, if, at any time while the Note is issued and outstanding, the Company issues any convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of common stock, then the Investor will be entitled to acquire, upon the terms applicable to such sales, the aggregate number of shares could have acquired if the Note had been converted.

 

Payoff of AJB Note

 

On February 1, 2022, the Company paid $302,717 to the Investor in satisfaction of all amounts due by the Company to the Investor under the Purchase Agreement and the Note. Following the Company’s repayment of the Note, the Investor returned 5,000 Series D Shares back to the Company for cancellation.

 

Issuance of Commitment Shares, Note and Warrant to Talos Victory Fund, LLC

 

On January 24, 2021, the Company entered into a Securities Purchase Agreement (the “TVF Purchase Agreement”) with Talos Victory Fund, LLC (“TVF”) with respect to the sale and issuance to TVF of: (i) a convertible promissory note in the aggregate principal amount of $250,000 (the “TVF Note”), (ii) a common stock purchase warrant to purchase 12,500,000 shares of the Company’s Common Stock (the “TVF Warrant”) and (iii) a commitment fee in the form of 12,500,000 shares of the Company’s Common Stock (the “Commitment Shares”). The TVF Note and TVF Warrant were issued on January 24, 2022 (the “Issuance Date”).

 

Pursuant to the terms of the TVF Purchase Agreement, the TVF Note was issued in a principal amount of $250,000 for a purchase price of $225,000, resulting in an original issue discount of $25,000, and the TVF Warrant was issued with an initial exercise price of $0.05 per share, subject to adjustment as described therein. The aggregate cash subscription amount received by the Company from the Investor for the issuance of the Commitment Shares, Note and Warrants was $219,000, due to a $6,000 reduction in the $225,000 purchase price as a result of broker, legal, and transaction fees. The TVF Purchase Agreement limits the Company’s ability to solicit any offers for, respond to any unsolicited offers for, or conduct any negotiations with any other person or entity in respect of any variable rate debt transactions and provides for TVF’s registration rights (each, as more particularly described therein).

Terms of TVF Note

 

The TVF Note is scheduled to mature on January 24, 2023, twelve (12) months after the Issuance Date, and provides for interest to accrue at an interest rate equal to 10% per annum, or, upon an Event of Default (as defined in the TVF Note), the lesser of (i) 10% per annum, and (ii) the maximum amount permitted under law. TVF shall have the right, only following an Event of Default (as defined in the TVF Note), to convert all or any part of the outstanding and unpaid principal and interest into fully paid and non-assessable shares of the Company’s Common Stock, as such Common Stock exists on the date of issuance of the shares underlying the TVF Note, or any shares of capital stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified. The initial conversion price, following and during an Event of Default, for the principal and interest of the TVF Note shall equal $0.08, subject to adjustment as provided therein. The TVF Note is subject to adjustment upon certain events such as distributions and mergers, and has anti-dilution protections for issuance of securities by the Company at a price that is lower than the then-current conversion price except for certain exempt issuances. The TVF Note also imposes certain restrictions or obligations on the Company with respect to the Company’s ability to incur other indebtedness, make distributions on capital stock, stock repurchases and debt repayments.

 

Going Concern

 

The condensed consolidated financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.

 

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As shown in the accompanying consolidated financial statements the Company has incurred recurring losses of $359,215 for the three month period ending December 31, 2021 and has incurred a cumulative loss of $30,320,663 since inception (December 18, 2002). The Company is currently in the development stage and has spent a substantial portion of its time in the development of its technology.

 

There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

Management believes that the Company’s capital requirements will depend on many factors. These factors include the final phase of development and mass production being successful as well as product implementation and distribution.

 

The consolidated financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern. 

 

Effect of Covid-19

 

In December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan, China (“COVID-19”) and has since spread worldwide, including to the Unites States, posing public health risks that have reached pandemic proportions (the “COVID-19 Pandemic”). The COVID-19 Pandemic poses a threat to the health and economic wellbeing of our employees, customers and vendors. Like most businesses world-wide, the COVID-19 Pandemic has impacted the Company financially; however, management cannot presently predict the scope and severity with which COVID-19 will impact our business, financial condition, results of operations and cash flows.

 

SmartMetric’s commitment to the health and safety of its employees remains our first priority. Our rigorous precautionary measures include the formation of global and regional response teams that maintain contact with authorities and experts to actively manage the situation, restrictions on company travel, quarantine protocols for employees who may have had exposure or have symptoms, frequent disinfecting of our locations and other measures designed to help protect employees, customers and suppliers. We expect to continue these measures until the COVID-19 pandemic is adequately contained for our business.

 

In the near-term, our operating results are going to be challenged due to this crisis. We continue to manage our cost structure to meet the uncertain demand, while making additional cost reductions as needed. Our customers’ businesses are subject to the fluctuations in global economic cycles and conditions and other business risk factors which may impact their ability to operate their businesses. The performance and financial condition of our customers may cause us to alter our business terms or to cease doing business with a particular customer. Further, the potential impact of the COVID-19 pandemic on their businesses could adversely impact our customers’ ability to pay us for work performed, increasing our future estimate of credit losses. 

 

Critical Accounting Policies

 

We have prepared our financial statements in conformity with accounting principles generally accepted in the United States, which requires management to make significant judgments and estimates 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 expenses during the reporting period. We base these significant judgments and estimates on historical experience and other applicable assumptions we believe to be reasonable based upon information presently available. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Actual results could materially differ from our estimates under different assumptions, judgments or conditions.

 

All of the Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our financial statements, included above in this Quarterly Report. We have identified the following as our significant accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions.

 

We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements:

 

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Research and Development Costs – Research and development costs are charged to expense as incurred. Our research and development expenses consist primarily of expenditures for electronics design and engineering, software design and engineering, component sourcing, component engineering, manufacturing, product trials, compensation and consulting costs. Due to the small size of the Company’s research & development staff as well as the lack of any long term research and development-related contracts, we do not believe that the use of this critical accounting estimate will have a material impact on the results of financial operations.

 

Results of Operations

 

Comparison of the Three Months Ended December 31, 2021 and 2020

 

Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue for the three months ending December 31, 2021 and 2020. Net loss for the three months ended December 31, 2021 and 2020 were $359,215 and $457,728, respectively, resulting from the operational activities described below.

 

Operating Expenses

 

Operating expense totaled $337,931 and $178,916 during the three months ended December 31, 2021 and 2020, respectively. The increase in operating expenses is the result of higher consulting expenses and legal expenses.

 

    Quarter Ended
December 31, 		    Change in 2021
Versus 2020 		 
    2021     2020     $     %  
Operating expense                                
Officer salary   $ 66,333     $ 47,500     $ 18,833       39.6 %
Research and development     44,500       21,733       22,767       104.8 %
General and administrative     227,098       109,683       117,415       107.0 %
Total operating expense   $ 337,931     $ 178,916     $ 159,015       88.9 %

 

Research and Development

 

Research and development expenses totaled $44,500 and $21,733 for the three months ended December 31, 2021 and 2020, respectively. The increase of $22,767, or 104.8%, in 2021 compared to 2020 was primarily attributable to increased engineering expenses. Our research and development expenses consist primarily of expenditures related to engineering.

 

General and Administrative

 

General and administrative expenses totaled $227,098 and $109,683 for the three months ended December 31, 2021 and 2020, respectively. The increase of $117,415 or 107.0%, in 2021 compared to 2020 was primarily the result of an increase in consulting and legal expenses. Our general and administrative expenses consist primarily of expenditures related to employee compensation, legal, accounting and tax, other professional services, and general operating expenses.

 

Other Expense

 

Other income (expense) totaled $21,284 and $166,266 for the three months ended December 31, 2021 and 2020, respectively. 

 

   

Quarter Ended

December 31,

   

Change in 2021

Versus 2020

 
    2021     2020     $     %  
Gain (loss) on change in derivatives     68,240       (113,629 )     181,869       160.1 %
Gain on PPP loan forgiveness     20,832       -       20,832       -
Interest Expense     (48,844 )     (52,637 )     3,793       7.2 %
Total other (income) expense   $ 40,228     $ 166,266     $ 206,494       124.2 %

 

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Interest income (expense)

 

We had net interest expense of $48,844 in the three months ended December 31, 2021 compared to $52,637 net interest expense for the three months ended December 31, 2020. The decrease of $3,793 was attributable to lower amortization of debt discounts.

 

Gain (loss) on change in derivatives

 

We had a gain (loss) on change in derivatives of $68,240 in the three months ended December 31, 2021 compared to a $113,629 loss on change in derivatives for the three months ended December 31, 2020. The increase of $181,869 was attributable to a decrease in convertible debt and Series C Preferred Stock.

 

Gain on PPP loan forgiveness 

 

We recognized $20,832 on the forgiveness of a PPP loan during the three months ended December 31, 2021. 

 

Liquidity and Capital Resources

 

We have incurred losses since our inception in 2002 as a result of significant expenditures for operations and research and development and the lack of any revenue. We have an accumulated deficit of $30,320,663 as of December 31, 2021 and anticipate that we will continue to incur additional losses for the foreseeable future. Through December 31, 2021, we have funded our operations through the private sale of our equity securities and exercises of options and warrants, resulting in gross proceeds of approximately $27.2 million from inception through December 31, 2021.

 

    Six Months Ended
December 31, 		    Change in 2021
Versus 2020 		 
    2021     2020     $     %  
Cash at beginning of period   $ 10,325     $ 71,377     $ (61,052 )     (85.6 )%
Net cash used in operating activities     (543,832 )      (333,937 )      (209,895 )      62.9 %
Net cash used in investing activities     —       —       —       —  
Net cash provided by financing activities     573,297       284,151       289,146       101.8 %
Cash at end of period   $ 39,790     $ 21,591     $ 18,199       84.3 %

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities was $543,832 and $333,937 for the six months ended December 31, 2021 and 2020, respectively. The increase of $209,895 in cash used during 2021 compared to 2020 was primarily attributable to an increase in consultant costs and legal expenses.

 

Net Cash Used in Investing Activities

 

Cash used in investing activities was $0 and $0 for the six months ended December 31, 2021 and 2020, respectively.

 

Net Cash Provided by Financing Activities

 

During the six months ended December 31, 2021, net cash provided by financing activities was $573,297, compared to $284,151 for the six months ended December 31, 2020. The increase of $289,146 was due to higher sales of the Company’s securities in private placements. We continue to seek funding through private placement sales of equity to fund our continued operations, sales and marketing and ongoing research and development programs.

 

Equity Financing Agreement

 

On March 5, 2020, the Company entered into an equity financing agreement (the “Equity Financing Agreement”) with GHS Investments, LLC, a Nevada limited liability company (“GHS”). Pursuant to the Equity Financing Agreement, the Company agreed to sell to GHS an indeterminate amount of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), up to an aggregate price of four million dollars ($4,000,000).

 

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Pursuant to the Equity Financing Agreement, the Company is required, within sixty (60) calendar days upon the date of execution of the Equity Financing Agreement, to use its best efforts to file with the SEC a registration statement or registration statements (as is necessary) on Form S-1, covering the resale of all of the registrable securities under the Equity Financing Agreement. However, on March 11, 2021, the Company withdrew, pursuant to Rule 477 of the Securities Act of 1933, the registration statement it filed in connection with the Equity Financing Agreement. As a result, the Company cannot avail itself of the benefits of the Equity Financing Agreement with GHS.

 

On March 5, 2020, the Company issued a $35,000 10% convertible note to the investor, GHS Investments, LLC in relation to the Equity Financing Agreement. The convertible note was due on December 5, 2020 and is convertible at a rate of $0.0175 per share which resulted in a discount from the beneficial conversion feature totaling $5,000. During the year ended June 30, 2020, $2,127 of the debt discount was amortized. For the three month period ended September 30, 2020, $3,804 of the debt discount was amortized. As of December 31, 2021, all $5,000 of the debt discount was fully amortized and the note was at its full amount of $35,000. As of December 31, 2021, the note has not been paid and currently is in default.

 

Comparison of the Six Months Ended December 31, 2021 and 2020

 

Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue for the six months ending December 31, 2021 and 2020. Net loss for the six months ended December 31, 2021 and 2020 were $1,461,298 and $567,089, respectively, resulting from the operational activities described below.

 

Operating Expenses

 

Operating expense totaled $917,150 and $373,218 during the six months ended December 31, 2021 and 2020, respectively. The increase in operating expenses is the result of higher consulting expenses and legal expenses.

 

    Six Months Ended
December 31, 		    Change in 2021
Versus 2020 		 
    2021     2020     $     %  
Operating expense                                
Officer salary   $ 95,000     $ 95,000     $ -0-       -0- %
Research and development     68,895       43,939       24,956       56.8 %
General and administrative     759,485       234,279       525,206       224.2 %
Total operating expense   $ 923,380     $ 373,218     $ 550,162       147.4 %

 

Research and Development

 

Research and development expenses totaled $68,895 and $43,939 for the six months ended December 31, 2021 and 2020, respectively. The increase of $24,956, or 56.8%, in 2021 compared to 2020 was primarily attributable to increased engineering expenses. Our research and development expenses consist primarily of expenditures related to engineering.

 

General and Administrative

 

General and administrative expenses totaled $759,485 and $234,279 for the six months ended December 31, 2021 and 2020, respectively. The increase of $525,206 or 224.2%, in 2021 compared to 2020 was primarily the result of an increase in consulting and legal expenses. Our general and administrative expenses consist primarily of expenditures related to employee compensation, legal, accounting and tax, other professional services, and general operating expenses.

 

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Other Expense

 

Other income (expense) totaled $544,148 and $193,871 for the six months ended December 31, 2021 and 2020, respectively.

 

   

Six Months Ended

December 31,

   

Change in 2021

Versus 2020

 
    2021     2020     $     %  
Gain (loss) on change in derivatives     (437,368 )     (112,565 )     (324,803 )     (288.5 )%
Gain on PPP loan forgiveness     20,832       -       20,832       -  
Interest Expense     (79,627 )     (81,306 )     1,679       2.1 %
Total other (income) expense   $ 496,163     $ 193,871     $ 302,292       155.9 %

 

Interest income (expense)

 

We had net interest expense of $79,627 in the six months ended December 31, 2021 compared to $81,306 net interest expense for the six months ended December 31, 2020. The decrease of $1,679 was attributable to lower amortization of debt discounts.

 

Gain (loss) on change in derivatives

 

We had a loss on change in derivatives of $437,368 in the six months ended December 31, 2021 compared to $112,565 loss on change in derivatives for the six months ended December 31, 2020. The increase of $324,803 was attributable to a decrease in convertible debt and Series C Preferred Stock.

 

Gain on PPP loan forgiveness

 

We recognized $20,832 on the forgiveness of a PPP loan during the six months ended December 31, 2021. 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are not required to provide the information required by this item as we are considered a smaller reporting company, as defined by Rule 229.10(f)(1).

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our condensed consolidated financial statements in conformity with GAAP. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

In connection with the preparation of this Form 10-Q, our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures were not effective.

 

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Limitations on Controls

 

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

 

Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions are being performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties in all of our financially significant processes and have concluded that this control deficiency represented a material weakness. We plan to remediate this weakness over the next 12 months..

 

Notwithstanding the assessment that our disclosure controls and procedures and our internal controls over financial reporting were not effective and that there are material weaknesses as identified herein, we believe that our condensed consolidated financial statements contained in this Form 10-Q fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.

 

Changes in Internal Controls

 

During the three months ended December 31, 2021, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time we may be a defendant or plaintiff in various legal proceedings arising in the normal course of our business. 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 1A. RISK FACTORS

 

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended June 30, 2021 filed with the Commission on October 12, 2021 and our subsequent filings with the Commission, which could materially affect our business, financial condition or future results. These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Commission.

 

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

 

The following information is given with regard to unregistered securities sold since July 1, 2021 and not previously reported on a Current Report on Form 8-K. The following securities were issued in private offerings pursuant to the exemption from registration contained in the Securities Act and the rules promulgated thereunder in reliance on Section 4(a)(2) thereof of the Securities Act of 1933, as amended and Regulation D and Regulation S promulgated thereunder, relating to offers of securities by an issuer not involving any public offering, though none of these were used as of the date of this filing.

 

  ● During the three months ended September 30, 2021, the Company sold 5,500,000 shares of Common Stock for net proceeds of $27,462. With these issuances the Company also issued warrants to purchase: (i) 5,500,000 shares of Common Stock at a price of $0.10 per share and (ii) 5,500,000 shares of Common Stock at a price of $0.20 per share. The warrants expire at various times through September 21, 2022. All of these shares were recognized as stock payable.

 

  ● During the three months ended September 30, 2021, the Company issued 42,262,958 shares of Common Stock, of which 8,133,333 were issued from stock payable, 17,534,387 were converted from 116,050 Preferred stock, 4,095,238 shares were issued for legal services and 12,500,000 shares were issued as a finder’s fee.

 

  ● During the three months ended December 31, 2021, the Company sold 8,625,000 shares of Common Stock for net proceeds of $86,230. With these issuances the company also issued warrants to purchase: (i) 8,625,000 shares of Common Stock at a price of $0.70 per share and (ii) 4,312,500 shares of Common Stock at a price of $1.00 per share. The warrants expire at various times through December 14, 2022. All of these shares were recognized as stock payable.

 

● During the three months ended December 31, 2021, the Company issued 50,662,170 shares of common stock, of which 11,032,663 were issued from stock payable, 19,148,052 were converted from 107,000 shares of Preferred stock, 7,981,455 shares were issued for legal services and 12,500,000 shares were issued as a finder’s fee.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

On March 5, 2020, the Company issued a $35,000 10% convertible note to the investor in relation to the equity financing agreement. The note was due on December 5, 2020 and is convertible at a rate of $0.0175 per share which resulted in a discount from the beneficial conversion feature totaling $5,000. During the year ended June 30, 2020, $2,127 of the debt discount was amortized. For the three month period ended September 30, 2020, $3,804 of the debt discount was amortized. As of December 31, 2021, all $5,000 of the debt discount was fully amortized and the note was at its full amount of $35,000. As of December 31, 2021, the note has not been paid and currently is in default.

 

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ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

The Company and the Investor, GHS Investments, LLC, entered the Waiver and Consent dated as of November 3, 2021, whereby in consideration of additional 12,500,000 shares of common stock of the Company treated as the Commitment Fee Shares (as defined in the Purchase Agreement) and the elimination of rights to redeem the Commitment Fee Shares, the Investor agreed to delete the provisions of the Agreement in connection with its right of first refusal. Although the Waiver and Consent were entered outside of the reporting period of this Quarterly Report on Form 10-Q, the Company elected to disclose its terms herein to communicate the steps taken by the Company in connection with its ability to effect private and public offerings of the Company’s securities.

 

The foregoing description of the Waiver and Consent does not purport to be complete and is qualified in its entirety by reference to the Waiver and Consent filed as Exhibit

 

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ITEM 6. EXHIBITS

 

INDEX TO EXHIBITS

 

       

Filed or

Furnished

  Incorporated by Reference
Exhibit No.   Description   Herewith   Form   Exhibit No.   Filing Date
3.01   Articles of Incorporation of SmartMetric, Inc. filed 12/18/02       SB-2   3.1   09/03/04
                     
3.02   Amendment to Articles of Incorporation dated 12/11/09       8-K   3.1   12/18/09
                     
3.03   Amendment to Articles of Incorporation dated June 8, 2016       10-K   3.5   09/28/16
                     
3.04   Certificate of Designation of Series B Preferred Stock       8-K   3.2   12/18/09
                     
3.05   Amendment to Certificate of Designation of Series B Preferred Stock dated 11/5/14       10-Q   3.1   11/14/14
                     
3.06   Amendment to Certificate of Designation of Series B Preferred Stock dated 6/8/16       10-K   3.4   09/28/16
                     
3.07   Series C Preferred Stock Certificate of Designations dated 1/14/19       8-K   3.1   01/18/19
                     
3.08   Certificate of Amendment to Articles of Incorporation dated May 24, 2021       8-K   3.1   05/28/2021
                     
3.09   Certificate of Designation of Series D Convertible Preferred Stock       8-K   3.1   07/29/2021
                     
3.10   Amended and Restated Bylaws of SmartMetric       8-K   3.1   04/26/16
                     
4.1   Promissory Note in the principal amount of $300,000 dated July 23, 2021       8-K   4.1   07/29/2021
                     
4.2   Common Stock Purchase Warrant dated July 23, 2021       8-K   4.2   07/29/2021
                     
10.1   Securities Purchase Agreement dated July 23, 2021       8-K   10.1   07/29/2021
                     
10.2**   Waiver and Consent Agreement dated November 3, 2021   X            
                     
31.1   Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).   X            
                     
31.2   Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).   X            
                     
32.1*   Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   X            
                     
32.2*   Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   X            

 

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101.INS   XBRL Instance Document   X            
                     
101.SCH   XBRL Taxonomy Extension Schema Document   X            
                     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document   X            
                     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document   X            
                     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document   X            
                     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document   X            
                     
104   Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).                

 

 

* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
** Certain schedules, exhibits and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of such omitted materials supplementally upon request by the SEC.

 

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SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  SMARTMETRIC, INC.
     
Dated: February 15, 2022 By: /s/ Chaya Hendrick
   

Chaya Hendrick, President,

    Chief Executive Officer and Chairman
    (Principal Executive Officer)
     
Dated: February 15, 2022 By: /s/ Jay Needelman
    Jay Needelman, Chief Financial Officer
    (Principal Financial Officer)

 

26

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