10-Q: SmartMetric Inc. Reports Q3 2024 Results, Cites Ongoing Development and Funding Needs

SmartMetric Inc. released its Q3 2024 financial results, highlighting continued development of its biometric credit card and ongoing efforts to secure funding.

Summary

• SmartMetric Inc. reported a net loss of $759,234 for the nine months ended March 31, 2024, compared to a net loss of $1,005,910 for the same period in 2023.
• The company's accumulated deficit reached $32,190,673 as of March 31, 2024.
• Operating expenses decreased to $133,122 for the three months ended March 31, 2024, from $187,023 in the same period of 2023.
• Research and development expenses were $9,000 for the three months ended March 31, 2024, a decrease from $31,807 in the same period of 2023.
• The company's cash balance was $14,861 as of March 31, 2024.
• SmartMetric is in the final stages of development for its biometric credit card and anticipates its release is imminent.
• The company has funded its operations primarily through private sales of equity and equity-linked debt securities.
• SmartMetric expects to continue incurring significant operating losses as it continues development and advances its technology to market.
• The company is seeking additional funding through private or public sales of equity or debt securities.
• There is no assurance that financing will be available when needed or on terms acceptable to the company.

Sentiment

Score: 3

Explanation: The document highlights ongoing losses, a very low cash balance, and a material weakness in internal controls, which are significant negative factors. While there is progress in product development, the financial situation and reliance on future funding are major concerns.

Positives

• The company's net loss decreased compared to the same period last year.
• Operating expenses and research and development costs have been reduced.
• The company has completed development of its biometric card and is in the final stages of production.
• The company has sufficient cash to continue as a going concern throughout all of calendar year 2024.

Negatives

• The company continues to operate at a loss and has an accumulated deficit of $32,190,673.
• The company's cash balance is very low at $14,861.
• The company is dependent on raising additional capital to fund operations.
• There is no assurance that additional financing will be available or on acceptable terms.
• The company's disclosure controls and procedures were not effective.

Risks

• The company's ability to continue as a going concern is dependent on raising additional capital.
• The company may be forced to curtail operations, delay or stop clinical trials, cease operations, or file for bankruptcy if sufficient funds are not raised.
• The company's future operating results are dependent on many factors outside of its control.
• The company's disclosure controls and procedures were not effective.
• The company has a material weakness in internal controls due to a lack of segregation of duties.

Future Outlook

The company expects to continue incurring significant operating losses for the foreseeable future as it continues the development of its technologies and advances them to market. The company anticipates raising additional cash through the private or public sales of equity or debt securities to continue to fund its operations and the development of its technologies.

Management Comments

• Management believes that the Company's capital requirements will depend on many factors, including product marketing and distribution.
• Management plans include equity sales and borrowing in order to fund the operations.
• 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.

Industry Context

The company is operating in the competitive biometric security and payment card technology sector. The company's success depends on its ability to bring its product to market and secure partnerships with major payment networks and card issuing banks. The company's financial results reflect the high costs associated with research and development in this sector.

Comparison to Industry Standards

• SmartMetric's financial performance is not directly comparable to established companies in the payment card industry, such as Visa or Mastercard, as it is still in the development stage and has not yet generated revenue from product sales.
• Compared to other early-stage technology companies, SmartMetric's high operating losses and reliance on equity financing are typical, but its low cash balance and lack of revenue are concerning.
• The company's focus on biometric technology is in line with industry trends towards enhanced security and user authentication, but its ability to compete with larger, more established players remains to be seen.
• The company's lack of revenue and high operating losses are similar to other pre-revenue technology companies, but its ability to secure funding and bring its product to market will be critical for its long-term success.

Related Party Transactions

• The company has accrued $880,142 as deferred officer's salary as of March 31, 2024.
• The company has accrued $348,693 as related party interest payable as of March 31, 2024.
• The company has a license agreement with its CEO, Chaya Hendrick, for certain patents, which includes royalty payments and minimum required payments.

Stakeholder Impact

• Shareholders face the risk of further dilution if the company raises additional capital through equity sales.
• Employees may be impacted by potential cost-cutting measures if the company faces financial difficulties.
• Customers may experience delays in the release of the biometric card due to ongoing development and production challenges.
• Creditors face the risk of non-payment if the company is unable to secure additional funding.

Next Steps

• The company plans to continue the development of its biometric card.
• The company plans to seek additional funding through private or public sales of equity or debt securities.
• The company plans to remediate the material weakness in internal controls over the next 6 months.

Key Dates

Keywords

biometric credit card, fingerprint sensor, financial results, capital raise, operating loss, research and development, equity financing, going concern, convertible preferred stock, securities purchase agreement