An Interview With SmartMetric CEO Chaya Hendrick

| About: SmartMetric, Inc. (SMME)
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(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)


The release of Apple's (NASDAQ:AAPL) latest iPhone models is attention grabbing. A fingerprint reader is a new feature for the products. Fortunately, I have been able to gain the contact of an industry authority on biometric technology devices, Chaya Hendrick, CEO of SmartMetric (OTCQB:SMME). Hendrick sheds light on a variety of other matters too, including her own business and intellectual property ("IP").

While I may emphasize her company's patent infringement claims against MasterCard (NYSE:MA) and Visa (NYSE:V), two corporations that have continuously rewarded investors, one reason SmartMetric has an interesting case against them is that it aims to be a successful practitioner of the patented invention it asserts. Because of the litigation, and also the fact that there currently are no meaningful revenues, its stock is risky.

Further, the tiny company's shares trade on the over the counter bulletin board and have hazards that stocks listed on the New York Stock Exchange of The NASDAQ lack. Such equity can have liquidity issues, be particularly volatile, and tends to involve corporations with unproven business models.

I have been able to write about SmartMetric previously, here and here. An investment pursuant to either article would have been up over 100% within months. It is plausible that the stock can go much higher in the near term.

The affable CEO continues to illuminate technological matters. The majority of her September 13th telephone-based interview (available in its entirety here) follows:

Commentary On Apple's Biometrics

I know from a past discussion that you are familiar with stories about Apple's use of fingerprint technology to enable security. In fact, you have pertinently informed me that it would not be adequate for a hypothetical Near Field Communications ("NFC") payment system. Do you have a reaction, or a preliminary opinion, regarding the new iPhone implementation of a fingerprint reader?

We welcome Apple's use of biometrics in phones in that it validates the superiority of a fingerprint over a password. Our approach as a company has been to replace the vulnerable ATM number and make a fingerprint even smaller than what Apple has done so that it fits inside a credit card…the security issue with NFC is that it is using radio waves connected to a receiver...and they can be intercepted. Apple's system is being used to turn a phone off and on and it does not overcome the issue of hackers and they can access the phone once it is turned on.

Smartphones can actually be turned on, even the Apple phones, with malicious software. Malicious people can use the phones and interrogate the software on the phones. National Security Agency and police…(can) use a phone…as a means to listen in to a room when they think a phone is turned off…People actually think the phone is turned off. There are severe security issues. Always connected means always hackable.

Apple is using biometrics to replace the password. SmartMetric thoroughly endorses and embraces the fact that Apple is using it. Everyone in the security industry knows that passwords are very vulnerable. It is definitely an advancement in terms of security but does not overcome network hackability.

It seems that fingerprint reading technology could also be used in tablet devices, such as Apple's iPad?

Yes, no question.

SmartMetric's Products

SmartMetric has been working toward rolling out a product with a major pharmacy chain, though you have declined to say which one. Can you offer any comment on the status, I notice that your 8GB medical key ring is listed as "sold out" on your web site?

Very pleased with our trial release…early release of the product. (It is) outside of negotiations and arrangements to specify the pharmacy chain until they are finalized. Also happy with discussions that are going on overseas. Believe we will see substantial sales in the next 12 months. Very happy that we have been able to make sales after two weeks of radio campaign marketing with WABC in New York.

An August 3rd Press Release discusses your work on biometric form factors. How far off in the future would you estimate successful adoption and prevalence of biometric facial recognition to be?

We are working on fingerprint activation and facial recognition for validation next year. It is for a high security card product.

Litigation With MasterCard and Visa

You have a top attorney working for you in asserting your claim against MasterCard and Visa. Is there also a Wagner or an Anderson on the case?

The law firm is called Wagner, Anderson, & Bright. They are based in California. The lead attorney is Mr. Patrick Bright. He has other attorneys. We also have a woman who was in international marketing for MasterCard, based out of their office in Purchase, NY.

Are there specific details from your expert reports that you think are especially valuable to the investing community?

That is a good question. It is a Pandora's Box if I answer it. Given the Judge will be hearing the argument in two weeks, the company's legal (advice) is not to make any comment.

Though you have recently asked for a record sum, $13.4 billion, to my knowledge neither defendant has mentioned your specific case in their SEC filings?

We are perturbed by that. According to our SEC counsel it is a serious breach of securities law, but that is only our opinion. It is our legal advice that any company that is involved in a major litigation has to disclose it to shareholders.

Can you comment on the motions for summary judgment ("MSJ") from each side (I recall Vringo's (VRNG) stock surging to an all-time high pursuant to the Judge's pre-trial denial of the defense's MSJ)?

We moved first for summary judgment in the wake of discovery and after two Markman hearings and the federal appeals court hearing. Moved for MSJ on basis of infringement and also on the question of damages, our $13.4 billion claim against both (defendants).

Visa and MasterCard have also put forward motions after we put forward ours. They have put forward a summary judgment to have the case dismissed.

We do not want to prejudge or second guess the judge. We prefer not to comment on the outcome of this hearing. Nor to speculate on its impact on our share price.

Is there a new trial date?

The judge has said that depending on the outcome of the hearing on September 25th. It would be up to the Judge to set a new date for a trial by jury…of course, it is all contingent by what is ruled by the judge on the 25th.

In the event that you are awarded anything close to what you are claiming, is some sort of capital return to shareholders, perhaps through a dividend, likely?

Don't count your chickens until they are hatched. We are very conservative. We are not basing our fortunes in the future of the company on this patent litigation.

As a company we would make a determination, in the event that we win in the court substantial amounts of money, we would make a determination on whether it would be reinvested into new products and further research and development and also whether there would be a dividend to shareholders. A decision on a dividend has not been decided by the company. Money in the company's bank account would have a positive effect on our share price.


SmartMetric's CEO has made it quite clear that nothing is guaranteed on the 25th and after. However, the odds of a substantial payoff are better than those of a lottery ticket - if Vringo is an indication. SmartMetric's own products are also part of the equation, and it is trying to roll out a medical key ring and a fingerprint reading card in order to become a viable commercial enterprise. Thus, anyone taking a stake in the matter outside of entertainment or educational purposes should carefully assess the risk.

The backdrop involves important matters of digital security. Success of Apple's new iPhones should give some indication toward marketplace acceptance of biometrics. Fingerprint readers are feasible in new tablets, such as the iPad. Facial recognition sounds like the next stage of protection from glomming.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At this time I would like to purchase shares of SMME.ob before September 25th. However, my preference is to publish this interview with the CEO at last 72 hours prior.