June 13, 2005
By facsimile to (212) 480-0717 and U.S. Mail
Mr. Colin Hendrick
President and Chief Executive Officer
SmartMetric, Inc.
67 Wall Street, 22nd Floor
New York, NY 10005
Re: SmartMetric, Inc.
Pre-effective Amendments 3 and 4 to Registration Statement on
Form SB-2
Filed May 23 and 27, 2005
Amendment 1 to Quarterly Report on Form 10-QSB for September 30,
2004
and December 31, 2004
Filed May 27 and 31, 2005
File No. 333-118801
Dear Mr. Hendrick:
We reviewed the filings and have the comments below. Except
for
exhibits, page references below are to pre-effective amendment 4
as
filed on the EDGAR system and not to pre-effective amendment 3.
1. Update the registration statement to include the unaudited
interim
financial statements and notes for the period ended March 31, 2005
as
required by Item 310(g) of Regulation S-B.
2. Include a currently dated consent of SmartMetric`s independent
public accountants in the next amendment to the registration
statement.
3. We note your response to prior comment 1 and the risk factor
added
as the seventeenth risk factor on page 12. As noted in comment 39
in
our March 3, 2005 letter, it is our position that the filing of
the
registration statement on September 3, 2004 constitutes a general
and
public solicitation for the sale of shares of SmartMetric`s common
stock. An offering made in reliance on section 4(2) of the
Securities Act may not involve a general solicitation. In
SmartMetric`s case, it appears that a general solicitation for
shares
of common stock because of the registration statement having been
filed was ongoing when SmartMetric sold shares without
registration
in September 2004 and January 2005. Revise the seventeenth risk
factor:
* To state that the investors in the September 2004 and December
2004
through January 31, 2005 private offerings may have rescission
rights
under the federal securities laws.
* To discuss the consequences or effects of the rescission rights`
exercise upon SmartMetric, including its financial condition.
* To revise the statement that if integrated with public offering,
the number of shares that may be sold to the public will be
reduced
by the shares sold without registration. Since SmartMetric has
sold
those shares without registration, SmartMetric may not replace
them
with registered shares.
4. We reviewed your response to prior comment 37, but we are still
unclear about the nature of the private placement costs of
$44,052.
Additionally, we understand that you closed a second private
placement in January 2005 in which $51,000 in fees were deducted
from
the gross proceeds. Clarify the nature of the costs for each of
the
private placement transactions.
Use of Proceeds, page 13
5. Clarify to which item in the table footnote (1) relates.
Dilution, page 15
6. If the minimum shares are sold, the "% of Total Consideration"
column in the table on page 16 paid by public shareholders should
be
57.0% and not 72.1%. Please revise.
Management`s Discussion and Analysis of Financial Condition, page
19
7. Based on the responses to prior comments 5, 16, and 45, revise
this section`s first paragraph to delete the reference to "patent-
pending technology." Further, it is unclear whether Mr. Colin
Hendrick now has "several patents pending" for this biometric
card.
If not, please revise.
Overview, page 20
8. The disclosure in the second paragraph that Mr. Colin Hendrick
applied for a patent in December 2001 is inconsistent with
disclosure
in the first "Whereas" clause of exhibit 10.1 that the application
was filed on February 15, 2001. Please reconcile.
9. Disclosure that SmartMetric sold 68,207 shares to nine persons
in
October and November 2004 is inconsistent with the response to
prior
comment 1 and to the revised disclosure under "Recent Sales of
Unregistered Securities" that the offering was made in September
2004. Please reconcile.
Plan of Operation, page 21
10. We note the response to prior comment 8 and the disclosure in
the
second table under "Summary Financial Information." We assume
that
disclosure in the first paragraph`s second sentence should read
that
SmartMetric believes proceeds from the "minimum" rather than the
"Maximum" offering will be sufficient to cover the costs of
contracting the prototype`s production, beginning marketing, and
working capital for at least 12 months. Please revise or advise.
Production of SmartCards, page 21
11. We note the response to prior comment 12 that although
SmartMetric has begun negotiations with two potential
manufacturers
to produce its SmartCards, no contract has been signed. Delete
the
statement in the first paragraph that "we have entered into a
contract with a manufacturing facility to produce our SmartCards."
Fingerprint Sensor, page 25
12. We note the response to prior comment 20. Clarify whether
SmartMetric has entered into an agreement with the unrelated third
party from which it purchases the fingerprint sensor. Also
clarify
whether the fingerprint sensor is available from other suppliers.
13. We note the response to prior comment 21. The disclosure
suggests that a specific third party that owns and manufactures a
lithium polymer battery will provide the battery that is used in
the
card. Clarify that SmartMetric does not have a supplier for this
battery, and discuss the steps that SmartMetric plans to take to
obtain one.
Marketing Agreement, page 25
14. Based on the response to prior comment 50 and the disclosure
in
paragraph 6 of the nondisclosure agreement, indicate that the
agreement may be terminated earlier by either party giving 30 days
notice in writing.
The SmartMetric SmartCard, page 27
15. We note the response to prior comment 22 that additional
engineering is necessary to reduce the size to the circuitry of
the
SmartCard prototype. Specify the costs of the additional
engineering
that SmartMetric intends to undertake. We note the disclosure in
footnote (1) under "Use of Proceeds."
License Agreements, page 29
16. Based on the response to prior comment 45 that there is no
patent
pending in Australia, delete the phrase "and is pending is
Australia."
Competition, page 29
17. Refer to prior comments 10 and 23. Clarify in the first
paragraph`s last sentence that SmartMetric only has a prototype of
its card.
Selling Shareholders, page 35
18. Refer to prior comment 31. Clarify why footnote (7) appears
with
the name of Celestine Cavallo in the table and why footnote (39)
appears with the name of James Willis in the table.
19. Refer to prior comment 32 and footnote (51). Since Mr. Colin
Hendrick transferred the shares to Applied Cryptology, Inc. in
March
2005, Applied Cryptology, Inc. is the selling shareholder. Thus,
you
should include Applied Cryptology, Inc. as a selling shareholder
in
the table, with footnote disclosure that Mr. Hendrick is the sole
shareholder and control person of Applied Cryptology, Inc.
20. Reconcile the disclosure in this section that Mr. Colin
Hendrick
will control 75% of SmartMetric after his sale of all of the
shares
being registered for resale by him with the disclosure under
"Description of Securities" that he will control 79.6% after the
minimum offering and 71.9% after the maximum offering.
Note 6. Due to Related Party, page F-7
21. You omitted disclosure in the version filed on the EDGAR
system
from the note after the phrase "The balance changed as follows."
Please revise.
Recent Sales of Unregistered Securities, page 43
22. We note the response to prior comment 1. Disclose here the
dates in September 2004 and January 2005 on which the securities
were
sold. See Item 701(a) of Regulation S-K. Also, disclosure in the
seventeenth risk factor suggests that SmartMetric engaged in an
offering "in December through January 2005."
Exhibit 5.1
23. Refer to prior comment 44. Revise the fifth paragraph of the
legality opinion to indicate that 6,666,666 shares and not
4,000,000
of common stock are being offered by SmartMetric.
Exhibit 99.1
24. Refer to prior comment 52. Also revise paragraph 1 to clarify
that the check of money order is payable to the order of Signature
Bank as escrow agent.
Signatures
25. Refer to prior comment 53. As noted previously, SmartMetric`s
controller or principal accounting officer also must sign the
registration statement. Further, any person who occupies more
than
one of the specified positions, for example, principal financial
officer and controller or principal accounting officer, must
indicate
each capacity in which he signs the registration statement. See
instructions 1 and 2 for signatures on Form SB-2, and revise.
March 31, 2005 10-QSB
Exhibits 31.1, Section 302 Certificates
26. Revise by amendment to the 10-QSB the section 302
certifications
to provide the exact wording as specified by Item 601(b)(31) of
Regulation S-B. Specifically,
* In paragraph 4, the Exchange Act rules that you should cite are
"Rules 13a-15(e) and 15d-15(e)."
* In paragraph 5, after the words "recent evaluation," add the
words
"of internal control over financial reporting."
* In paragraph 5(a) after the words "significant deficiencies,"
add
the words "and material weaknesses."
* In paragraph 5(a) after the words "design or operation of
internal
controls," add the words "over financial reporting."
Closing
File amendments to the SB-2 and the March 31, 2005 10-QSB in
response to the comments. To expedite our review, you may wish to
provide us three marked courtesy copies of the amendments.
Include
with the filing any supplemental information requested and a cover
letter tagged as correspondence that keys the responses to the
comments. If you think that compliance with any of the comments
is
inappropriate, provide the basis in the letter. We may have
additional comments after review of the amendments, the responses
to
the comments, and any supplemental information.
We urge all persons responsible for the accuracy and adequacy
of
the disclosure in the registration statement reviewed by us to
ensure
that they have provided all information investors require for an
informed decision. Since SmartMetric and its management are in
possession of all facts relating to the disclosure in the
registration statement, they are responsible for the adequacy and
accuracy of the disclosures that they have made.
If SmartMetric requests acceleration of the registration
statement`s effectiveness, SmartMetric should furnish a letter at
the
time of the request, acknowledging that:
* Should the Commission or the staff acting by delegated authority
declare the registration statement effective, it does not
foreclose
the Commission from taking any action on the filing.
* The action of the Commission or the staff acting by delegated
authority in declaring the registration statement effective does
not
relieve SmartMetric from its full responsibility for the adequacy
and
accuracy of the registration statement`s disclosures.
* SmartMetric may not assert our comments and the declaration of
the
registration statement`s effectiveness as a defense in any
proceeding
initiated by the Commission or any person under the United States`
federal securities laws.
The Commission`s Division of Enforcement has access to all
information that you provide us in our review of the registration
statement or in response to our comments on the registration
statement.
We will consider a written request for acceleration of the
registration statement`s effectiveness under Rule 461 of
Regulation C
under the Securities Act as confirmation that those requesting
acceleration are aware of their responsibilities under the
Securities
Act and the Exchange Act as they relate to the proposed public
offering of the securities specified in the registration
statement.
We will act on the request and by delegated authority grant
acceleration of the registration statement`s effectiveness.
You may direct questions on accounting comments to Dale
Welcome,
Staff Accountant, at (202) 551-3865 or Jeanne K. Baker, Assistant
Chief Accountant, at (202) 551-3691. You may direct questions on
other comments and disclosure issues to Edward M. Kelly, Senior
Counsel, at (202) 551-3728 or me at (202) 551-3760.
Very truly yours,
Pamela A. Long
Assistant Director
cc: Andrea I. Weinstein, Esq.
Schonfeld & Weinstein, L.L.P.
80 Wall Street, Suite 815
New York, NY 10005
Mr. Colin Hendrick
June 13, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE