UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO.1 TO

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SMARTMETRIC, INC.

(Name of small business issuer in its charter)

Nevada	334610	05-0543557
(State or jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities	Amount Being Registered	Proposed Maximum offering Price per share	Proposed Maximum Aggregate Offering Price (1)	Amount of Registration Aggregate Fee
Common Stock	4,000,000	$1.50	$ 6,000,000	$ 760.20
Class A Common Stock by selling shareholders	3,000,000	$1.50	$ 4,500,000	$ 570.15
Common Stock by selling shareholders	8,628,464	$1.50	$12,942,696	$1,639.84
Total	15,628,464	$1.50	$23,442,696	$2,970.19

Cross Reference Sheet

Showing the Location In Prospectus of

Information Required by Items of Form SB-2

Part I. Information Required in Prospectus

 

Item No.	Required Item	Location or Caption
1.	Front of Registration Statement	Front of Registration
	and Outside Front Cover of	Statement and outside
	Prospectus	front cover of Prospectus
2.	Inside Front and Outside Back	Inside Front Cover Page
	Cover Pages of Prospectus	of Prospectus and Outside
		Front cover Page of Prospectus
3.	Summary Information and Risk	Prospectus Summary;
	Factors	High Risk Factors
4.	Use of Proceeds	Use of Proceeds
5.	Determination of Offering	Prospectus Summary -
	Price	Determination of Offering
		Price; Risk Factors
6.	Dilution	Dilution
7.	Selling Security Holders	Selling Security Holders
8.	Plan of Distribution	Plan of Distribution
9.	Legal Proceedings	Legal Proceedings
10.	Directors, Executive Officers,	Management
	Promoters and Control Persons
11.	Security Ownership of Certain	Principal Shareholders
	Beneficial Owners and Management
12.	Description of Securities	Description of Securities
13.	Interest of Named Experts and	Legal Opinions; Experts;
	Counsel
14.	Disclosure of Commission Position	Statement as to
	on Indemnification for Securities	Indemnification
	Act Liabilities
15.	Organization Within Last	Business
	Five Years
16.	Description of Business	Business
17.	Management's Discussion and	Management's Discussion and
	Analysis or Plan of	Analysis of Financial Condition
	Operation
18.	Description of Property	Not Applicable
19.	Certain Relationships and Related	Certain Transactions
	Transactions
20.	Market for Common Stock and	Prospectus Summary
	Related Stockholder Matters
21.	Executive Compensation	Executive Compensation
22.	Financial Statements	Financial Statements

PROSPECTUS

SMARTMETRIC, INC.

(a Nevada corporation)

SmartMetric is offering for sale a minimum of 333,333 shares, par value $.001 (the “Minimum Offering”) and a maximum of 4,000,000 shares (the “Maximum Offering”) of common stock of SmartMetric, Inc., a Nevada corporation (“SmartMetric”) at $1.50 per share. The shares shall be sold exclusively by SmartMetric in a self-underwritten offering on a best efforts basis with a minimum requirement to sell 333,333 shares for a period of ninety (90) days and may be extended for an additional ninety (90) days at SmartMetric’s option, however SmartMetric reserves the right to retain registered broker-dealers for this offering. All investment proceeds will be held in escrow until the Minimum Offering is raised. If the Minimum Offering has not been sold within the first ninety days, the offering may be extended an additional ninety days. In the event SmartMetric does not raise the Minimum Offering during this time period, all escrowed funds shall be returned to investors. The securities offered are not listed on any securities exchange or on the Nasdaq stock market.

This offering also relates to 11,628,464 shares being offered by selling shareholders, 3,000,000 of which are Class A common stock. Selling shareholders will sell at a fixed price of $1.50 per share until our common stock is quoted on the Over-the-Counter Bulletin Board, after which they will sell their common stock at prevailing market rates or privately negotiated prices.

The offering price of $1.50 per share has been arbitrarily determined by the Company.

Per Share	Price to the Public	Minimum offering Proceeds to SmartMetric	Maximum Offering Proceeds to SmartMetric
	$1.50	$499,999.50	$6,000,000
Proceeds to SmartMetric Before offering costs	$1.50	$499,999.50	$6,000,000

       

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE ____ IN THIS

PROSPECTUS.

The date of this Prospectus is __________________.

This offering will terminate on ____________, but may be extended for an additional ninety (90) days at SmartMetric’s option.

TABLE OF CONTENTS
	Page #
PROSPECTUS SUMMARY
RISK FACTORS
USE OF PROCEEDS
CAPITALIZATION
DILUTION
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
BUSINESS
MANAGEMENT
PRINCIPAL SHAREHOLDERS
DESCRIPTION OF SECURITIES
SHARES ELIGIBLE FOR FUTURE SALE
SELLING SHAREHOLDERS
CERTAIN TRANSACTIONS
LEGAL MATTERS
EXPERTS
SMARTMETRIC, INC. FINANCIAL STATEMENTS

PROSPECTUS SUMMARY

The following is a summary of certain information contained in this prospectus and is qualified by the more detailed information and consolidated financial statements (including notes thereto) appearing elsewhere in this prospectus. Investors should carefully consider the information set forth under the heading "Risk Factors". Unless otherwise indicated, the capital structure, the number of shares outstanding and the per share data and information in this Prospectus have been adjusted to give effect to the merger described herein.

SmartMetric, Inc.

SmartMetric was incorporated pursuant to the laws of Nevada on December 18, 2002. SmartMetric is a development stage company engaged in the technology industry. SmartMetric has a license to utilize proprietary technology to manufacture and sell a fingerprint sensor activated card with a finger sensor on the board card, itself. The SmartMetric SmartCard is a credit card size plastic card embedded with an integrated circuit chip and biometric fingerprint sensor, which provides identification of the user. It can also be used to store information. This card may be referred to as a “biometric card” or the SmartMetric “SmartCard.” There is a patent pending for the SmartMetric SmartCard. The technology and use covered by this patent pending has been licensed to SmartMetric. The company intends to begin to outsource the manufacturing of its SmartCards with the proceeds of this offering.

On October 30, 2003, SmartMetric entered into an agreement with Information Spectrum, Inc., a corporation located in Annandale, Virginia. Information Spectrum, Inc. shall hereinafter be referred to as ISI. Pursuant to this agreement, ISI shall market SmartMetric SmartCards and a SmartCard reading device. Neither prices, nor division of expenses or profits has been determined; before submitting each proposal to the prospective purchaser SmartMetric and ISI shall enter into a separate agreement defining the parties’ respective rights and obligations concerning that particular opportunity.

The executive offices of SmartMetric are located at 67 Wall Street, 27 ^th Floor, New York, New York 10005. The telephone number is (212) 859-5007.

Our Strategy

SmartMetric seeks to position itself as a producer of various identity cards utilizing its licensed technology and providing such cards to government agencies, corporations and organizations interested in identification cards.

Plan of Distribution

We are offering our common stock on a best efforts basis with a minimum requirement to sell 333,333 shares. This is a self-underwritten offering; we do not have agreements with any underwriters for the sale of our common stock, although we may enter into such agreements at a later date.

The Offering

SmartMetric is offering a minimum of 333,333 shares and a maximum of 4,000,000 shares of common stock at $1.50 per share. This offering price has been arbitrarily determined. The shares shall be sold by SmartMetric’s officers and directors, although the Company may decide to engage the service of a registered broker-dealer. All investment proceeds from this offering will be held in escrow until the Minimum Offering is raised.

Certain selling shareholders are offering 11,628,464 shares of common stock at $1.50 per share; 3,000,000 of these shares are Class A common stock.

There are currently 58,628,464 shares of common stock outstanding of which 50,000,000 are Class A common stock. Class A common stock is identical in all respects to the other, undesignated class of common stock. Unless otherwise indicated, both the Class A common stock and the common stock shall collectively be referred to as “common stock.” There will be 58,961,797 shares outstanding if the minimum offering is sold and 62,628,464 shares if the maximum offering is sold.

Risk Factors

The securities offered hereby are highly speculative and involve a high degree of risk. Carefully review and consider the factors set forth under “Risk Factors” as well as all other information contained herein.

Use of Proceeds

The proceeds from this offering before offering costs, which are $499,999.50 in the minimum offering and $6,000,000 in the maximum offering, will be used to complete a SmartCard prototype, to contract with a third party to begin manufacturing our SmartCards, for marketing, working capital and offering costs.

 

 

RISK FACTORS

Investment in the securities offered hereby involves a high degree of risk. Prospective investors should carefully consider, together with the other information appearing in this prospectus, the following factors, among others, in evaluating SmartMetric and its business before investing in SmartMetric.

SmartMetric will rely on key existing and future personnel, the loss of whom could negatively impact our ability to conduce a successful business.

SmartMetric's success will depend to a large degree upon the efforts and abilities of Colin Hendrick, Chief Executive Officer, President and Chairman of the Board of SmartMetric. The loss of the services of Mr. Hendrick could have a material adverse effect on SmartMetric's business prospects and potential earning capacity. SmartMetric has entered into a one year employment agreement with Mr. Hendrick, after which Mr. Hendrick may choose not to continue his employment with SmartMetric. SmartMetric currently has no key person life insurance on Mr. Hendrick. SmartMetric will need to recruit and retain additional members of senior management to manage anticipated growth, but may be unable to do so on terms suitable to SmartMetric.

As of the date of this prospectus, we have no product for sale and have yet to produce a prototype.

SmartMetric was incorporated on December 18, 2002. To date, we have been engaged in research and development primarily in the design and production of a SmartCard prototype. We have yet to produce a prototype and have no product for sale. We will not achieve any sales revenues until our prototype is complete and ready to be marketed. Although we plan to use the proceeds of this offering to engage in marketing and outsource production of our SmartCards, such efforts may not be successful.

Even if we are successful in developing our business and gaining market acceptance, we may not become profitable. Further, we may be unable to find a manufacturer to successfully manufacture our biometric card and even if we do, our SmartCard may not gain market acceptance.

We expect to incur significant start up costs, which could delay the commencement of our operations.

SmartMetric expects to incur significant start-up costs in connection with manufacturing and marketing the SmartMetric biometric card. The Company estimates such start up expenses at $300,000, which includes completion of the SmartCard prototype and costs associated with manufacturing. As of December 31, 2004, we have incurred net losses of $52,768 and we anticipate that we will incur additional losses in the future. The extent of these losses will be dependent, in part, on our ability to successfully market our products, and the costs involved in outsourcing production of our SmartCards. In the event start up costs exceed our expectations, we may have to raise additional funds which could delay the commencement of our operations.

Current SmartMetric shareholders, including our president and chief executive officer, will own a majority of the shares after the offering and as a result, will still control the Company which means that investors in this offering will have little influence over how the Company is managed.

After the minimum offering, the current shareholders of SmartMetric will control the vote of 99.4% of SmartMetric's issued and outstanding common shares and after the maximum offering, current shareholders will control 93.6% of SmartMetric’s issued and outstanding shares. As a result, the former SmartMetric shareholders will have the ability to control the outcome of substantially all issues submitted to shareholders.

An investment in SmartMetric stock will result in an immediate dilution of $1.49 in the Minimum Offering and $1.41 in the Maximum Offering which means that your investment will initially be worth less than the amount you are paying for it .

The holders of the restricted common shares of SmartMetric have acquired their interest in SmartMetric at an average cost per share which was significantly less than that which the public investors paid for their securities. Consequently, the public investors’ investment will be immediately diluted. Further, the public investors will bear the majority of the risk of any loss that may be incurred in SmartMetric's operations.

There is no public market for our securities and investors may be unable to sell their shares, which could result in the loss of their investments.

SmartMetric intends to apply for listing of its common stock on the Nasdaq Over-the- Counter Bulletin Board. However, to date, there is no public trading market for our common stock. If such a market does develop, the price of SmartMetric’s common stock may be volatile. Thus, investors run the risk that they will never be able to sell their shares or, if they are able to sell them, the price may be lower than the initial purchase price. No potential market makers have been solicited by SmartMetric, and SmartMetric may be unable to find any brokers willing to make a market in SmartMetric’s securities.

We will need additional financing which could dilute the interests of current shareholders.

If we raise less than the maximum offering, we expect to seek an additional $2,000,000 to $3,000,000 within 12 to 24 months after completion of this offering, depending on how much money we raise in this offering. Such financing could take the form of bank financing or other debt or equity securities in public or private financing. Any such financing could dilute the interest of current shareholders. Such additional financing may not be available or, if it is available, it may not be in such amounts or on terms satisfactory to SmartMetric.

We will face intense competition from better-known and/or better-funded companies which could result in our failure to realize lower than expected sales revenues .

The market for companies involved in security technology is fragmented and highly competitive, and competition is increasing substantially. SmartMetric will be competing with other technology companies both regionally, nationally and internationally. Other competitors, some of which may have greater financial and other resources than SmartMetric, may also enter the markets in which SmartMetric currently operates or intends to expand. We may be unable to compete successfully against these competitors.

We will be depending on qualified personnel and key individuals, none of whom have worked with publicly traded companies before and may not be able to adequately manage certain responsibilities of publicly traded companies which could adversely effect our operations and/or stock price.

None of our officers or directors has any experience working with publicly traded companies and it is possible that they will not be qualified to run a publicly owned company. Their inability to successfully manage SmartMetric’s business and the responsibilities of a publicly traded company could adversely affect our ability to obtain a large customer base and, as a result, our profitability and stock price.

Our business model is based on a product for which we have not yet produced a prototype and, as a result, we cannot be certain the product will function as we expect it to, in which case we will have to invest additional funds into research and development.

Our business plan revolves around sales of the SmartMetric SmartCard which we believe will permit identity and transaction control verification and which, through its fingerprint sensor, we believe will facilitate instant authorization verification. We have licensed patent-pending technology for this purpose. However, while the prototype design is completed, further engineering is required to produce a prototype of this SmartCard. We may be unable to produce such prototype or, if produced, it is possible that the prototype will not function as expected. In the event it does not, we will have to invest additional funds into research and development.

If we sell less than the Maximum Offering, we will not be able to effectively market our SmartCard or produce it in large quantities which could result in low sales and a possible need to finance production of the SmartCards.

SmartMetric is seeking to raise a minimum of $499,999.50 and a maximum of $6,000,000. The Company believes that with the maximum offering proceeds, it will be able to effectively market the Smartmetric SmartCards in addition to paying the costs involved with outsourcing production of the SmartCards. Sales of less than the Maximum Offering will force us to greatly reduce our marketing efforts which could result in lower sales, and which may prohibit us from producing SmartCards in cost-effective quantities and may necessitate the need to finance production of our SmartCards.

Information Spectrum, Inc. may be unsuccessful in marketing SmartMetric’s SmartCards in which case we will have to seek a new marketing company or self market our SmartCard which could delay any potential sales revenues.

In October 2003, SmartMetric entered into an agreement with Information Spectrum, Inc. or ISI, pursuant to which ISI has agreed to market SmartMetric’s SmartCards by generating interest in credential cards and card production systems incorporating SmartMetric’s proprietary technology. ISI is the exclusive reseller of SmartMetric products to agencies of the United States and Canadian governments.

To date, ISI has not begun its marketing efforts. In the event ISI is unable to locate companies interested in purchasing SmartMetric’s products, SmartMetric will be forced to find another marketing partner or start to market its products on its own, which could delay potential sales revenues.

Failure to agree upon the terms of one or more “Teaming Agreements” with ISI could result in the loss of sales opportunities to SmartMetric.

The agreement between ISI and SmartMetric states that ISI and SmartMetric must enter into a Teaming Agreement prior to ISI submitting a formal proposal to a potential SmartMetric customer. A Teaming Agreement will outline each party’s rights with respect to each individual proposal. Failure of SmartMetric and ISI to enter into any particular Teaming Agreement will result in the loss of potential sales opportunities and revenues to SmartMetric.

SmartMetric’s patented technology may infringe upon patents issued to third parties, subjecting SmartMetric to the cost of defending the patent and possibly requiring SmartMetric to stop using the technology or to license it from another party.

In August 2004, Applied Cryptology, Inc., licensed patent-pending technology to SmartMetric. SmartMetric depends on such technology in the building of its SmartCard. The patent was granted on September 14, 2004. However, this patent may infringe on others, in which case SmartMetric may be forced to defend the patent or possibly stop using it or license it from a third party, which could cost SmartMetric a lot in legal fees and which could possibly prevent SmartMetric from selling its SmartCard.

Third parties may infringe on the patent in which case SmartMetric would bear the cost of enforcing the patent.

Although a patent was issued for the technology we license from Applied Cryptology, third parties may infringe on the patent. Such infringement would result in SmartMetric bearing the cost of enforcing the paten tan could reduce funds SmartMetric intended to spend on marketing or producing its SmartCards.

SmartMetric may have difficulty selling shares in this offering as selling shareholders may in effect compete with SmartMetric for investors.

While SmartMetric is offering for sale a minimum of 333,333 shares and a maximum of 4,000,000 shares, at the same time, selling shareholders are offering for sale 11,628,464 shares. As a result, selling shareholders may be competing with SmartMetric for investors, which could result in less money being invested in the Company. Further, if SmartMetric’s shares are listed on an exchange before the Maximum Offering is sold, and if the price of SmartMetric’s shares declines, investors may be able to obtain shares from selling shareholders at a lower price than SmartMetric’s price of $1.50 per share.

The shares being offered are “penny stocks” which are associated with such risks as price fluctuations, additional disclosure requirements and lack of a liquid market. These risks could result in investors finding it difficult to sell their shares.

Broker-dealer practices in connection with transactions in "penny-stock" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure regarding penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Such factors could result in SmartMetric selling less than the Minimum Offering and investors finding it difficult to sell their shares.

(1)	While the   prototype design is completed, further engineering is necessary to complete the prototype.

(2)	This money may be paid to Colin Hendrick from the proceeds of this offering. (See Summary Compensation Table.)

 

DILUTION

At December 31, 2004, SmartMetric had a net tangible book value of $1,163 or $.00 per share of common stock. Net tangible book value per share is equal to SmartMetric's tangible assets less its total liabilities, divided by the number of shares of common stock outstanding on such date.

If we sell only the Minimum Offering under this Prospectus at the offering price of $1.50 per share, after deducting estimated unpaid costs of this offering, our proforma net tangible book value as of December 31, 2004 would be $433,206 or $.01 per share of common stock based on the 58,961,797 shares that would be outstanding. This represents an immediate increase in the net tangible book value per share to our existing shareholders of $.01 per share and an immediate dilution of $1.49 per share to those who purchase shares in this offering.

If we sell 50% of the Maximum Offering under this Prospectus, our proforma net tangible book value as of December 31, 2004 would be $2,937,206 or $.05 per share of common stock based on the 60,628,464 shares that would be outstanding. This represents an immediate increase in the net tangible book value per share to our existing shareholders of $.05 per share and an immediate dilution of $1.45 per share to those who purchase shares in this offering.

If we sell the Maximum Offering under this Prospectus, our proforma net tangible book value as of December 31, 2004 would be $5,933,206 or $.09 per share of common stock based on the 62,628,464 shares that would be outstanding. This represents an immediate increase in the net tangible book value per share to our existing shareholders of $.09 per share and an immediate dilution of $1.41 per share to those who purchase shares in this offering.

The following illustrates the per share dilution to new investors based on certain assumed numbers of shares sold in this offering:

         

The following table sets forth the difference between the price paid by our existing shareholders and the price to be paid by new investors in this offering based on certain assumed numbers of shares sold in this offering.

 

PLAN OF DISTRIBUTION

SmartMetric is offering up to 4,000,000 shares of common stock at $1.50 per share, which price has been arbitrarily determined by SmartMetric. SmartMetric has not yet determined how it will advertise the offering. We have no arrangements with any third party to host or access the party preliminary prospectus on the Internet.

Changes in terms of the offering.

Changes in the material terms of the offering after the registration statement’s effective date will terminate the original offer. Investors would then be entitled to a refund. Example of material changes include:

·	Extension of the offering period;

·	Change in the offering price;

·	Change in the minimum purchase required of investors;

·	Change in the amount of proceeds necessary to release the proceeds in escrow;

·	Change in application proceeds.

SmartMetric proposes to offer the shares directly on a best efforts basis with a minimum requirement to sell 333,333 shares. In the event SmartMetric does not sell the Minimum Offering within the Offering Period, SmartMetric will refund the escrowed funds by the next business day or as soon as possible after the offering’s termination. While SmartMetric reserves the right to sell its securities through registered broker-dealers, it has no commitments to do so. SmartMetric has no plans to sell the offering through registered broker-dealers and has not determined the circumstances under which these plans would change. In the event registered broker-dealers are engaged, SmartMetric contemplates paying a commission of 10% of securities sold by such broker-dealers. All offering proceeds will remain in escrow until the minimum offering is raised.

As of the date of this prospectus, no broker has been retained by the company in connection with the sale of securities being offered hereby. In the event a broker who may be deemed an underwriter is retained by SmartMetric, an amendment to SmartMetric's registration statement will be filed with the Securities and Exchange Commission.

Colin Hendrick, Peter Sleep, Joseph Katzman, Applied Cryptology or any other affiliate of SmartMetric may each purchase up to 10,000 shares to meet the required 333,333 shares. Each such person, however, must purchase such shares for investment purposes and not for resale.

There is no minimum or maximum purchase requirement. Subscription proceeds received by SmartMetric shall be placed in an escrow account with Signature Bank until the minimum offering is achieved, after which proceeds shall be released directly to SmartMetric. If the minimum offering is not sold by the end of the offering period, or extended offering period if so extended, all escrowed proceeds shall be returned to investors.

This offering will be sold by SmartMetric’s offices and directors, none of whom are registered broker-dealers. The officers and directors are in compliance with the Rule 3a4-1 under the Securities Exchange Act of 1934 (the “Exchange Act”) and are not deemed to be brokers because, although they are associated persons they

(1)	are not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act; and

(2)	are not compensated in connection with their participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and

(3)	are not at the time of their participation an associated person of a broker or dealer; and

(4)	they meet the following conditions:

(A)	they perform substantial duties on behalf of SmartMetric otherwise than in connection with transactions in securities;

(B)	were not broker- dealers of associated persons of broker-dealers within the preceding 12 months; and

(C)

they do no participate in selling a offering of securities for any issuer more than once every 12 months other than in reliance on paragraph (a)(4)(i) or (a)(4)(iii) of Rule 3a4-1, except that for securities issued pursuant to Rule 415 under The Securities Act of 1933, the 12 months shall begin with the last sale of any securities including within and Rule 415 registration.

 

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

SmartMetric was incorporated in the State of Nevada on December 18, 2002 to serve as a developer of identity management products. SmartMetric has been engaged in research and development of a biometric security solution, which can authenticate the identity of an individual in a self-contained credit card-sized device. SmartMetric refers to this device as a “biometric card” or a “SmartCard.” SmartMetric’s CEO, Colin Hendrick, has several patents pending for this biometric card. A company controlled by Mr. Hendrick has granted SmartMetric a license to use, market and distribute this patent-pending technology.

The following presentation of management's discussion and analysis of SmartMetric's financial condition should be read in conjunction with SmartMetric's financial statements and notes thereto, as well as other financial information contained in this prospectus.

Overview

Incorporated in 2002, SmartMetric and its founder and CEO, Colin Hendrick, have been engaged in research and development of a biometric security solution which would authenticate the identity of a person in a self-contained credit card-sized device. SmartMetric’s biometric card has been designed to use an on-board finger print sensor which is imbedded in the card along with an integrated circuit chip which will provide one gigabyte of memory capacity. SmartMetric has not yet completed a prototype of its SmartCard and has not yet begun to manufacture SmartCards utilizing its licensed technology. To date, SmartMetric has had no sales revenues.

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

We had $0 sales revenue for the year ended June 30, 2004, with a net loss of $35,978. For the quarter ending December 31, 2004, there were no sales revenues and a net loss of $16,730.

In October 2003, we sold 50,000,000 shares of common stock to the President of SmatMetric at $.001 per share for a total of $50,000. From November 2003 to June 30, 2004, SmartMetric sold 8,560,257 shares of common stock to the President of the corporation, Colin Hendrick, at $.01 per share for a total of $85,602.57. Mr. Hendrick rendered complete payment for these shares by October 2004. In August 2004, Mr. Hendrick transferred these shares to approximately 600 shareholders for no consideration. All shares are restricted from resale, except 11,560,257 shares which are being registered for resale.

In October and November 2004, we sold 68,207 shares to 9 people at $1.50 per share. All 68,207 shares are being registered in this registration statement.

Plan of Operation .

Over the next 12 months, SmartMetric intends to complete the prototype of its SmartCard and commence marketing in an attempt to generate sales. We will use the proceeds of this offering to complete the prototype and commence marketing. We believe that proceeds from the Maximum Offering will be sufficient to cover these costs, as well as working capital, for at least 12 months. However, in the event we raise less than the Maximum Offering, we will have to raise additional funds during the next 12 months.

A key part of our business plan is to complete the prototype of the SmartCard within the next 12 months. Additional research and development may be necessary if the prototype does not work as planned, or if after it is complete, we believe it could be improved upon.

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

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

Completion of Prototype

We have hired a company to design and manufacture a model of our SmartCard utilizing our licensed technology and according to our proposed plans for the SmartCard. That engineering firm has been working on the design and once they have built the prototype, they will need to test it to determine if it works. Any defects will be addressed until all the engineering works to the satisfaction of SmartMetric. The finished product will be the prototype or model for our SmartCards, which will be manufactured upon receipt of customer orders. We expect this prototype to be complete in the first quarter of 2005.

Production of SmartCards

Once we have a working prototype of our SmartCard, we will seek to obtain orders for it. However, because SmartMetric does not own or rent a manufacturing facility, we will have to contract with a manufacturing facility to produce our SmartCards. We will begin to search for one or more manufacturing facilities once we have obtained the completed SmartCard prototype. When searching for a manufacturing facility, we will take into consideration such factors as pricing, timing, location and quality of product. We may contract with one or more facilities to produce our SmartCards. A portion of the proceeds from this offering will be applied toward the production of SmartCard.

SmartMetric believes its current sources of credit and liquidity, including funds raised in its private placement are sufficient to commence operations in a limited capacity, and that, in the event we raise less than the maximum offering, we may have to raise additional capital within the next 12-24 months. SmartMetric believes the Maximum Offering proceeds will be sufficient to proceed with its plan of operations for the next eighteen months. We estimate that we will need approximately $4,000,000 to proceed with our plan of operation for the next 12 months. This amount takes into consideration outsourcing or contract manufacturing approximately 75,000 SmartCards. A key element of SmartMetric's growth strategy is raising adequate funding to begin to outsource the manufacture of its biometric card. We believe that $499,999.50 will suffice to begin outsourcing the manufacturing of our SmartCard. The amount of funds required will depend on the size of the orders we receive. We estimate that $499,999.50 will allow us to outsource production of 5,000 SmartCards. We expect that orders larger than will require additional financing. Such financing may be in the form of debt or equity. Currently, SmartMetric has no material commitments for capital expenditures.

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

On October 30, 2003, we entered into an agreement with Information Spectrum, Inc. Pursuant to this agreement, ISI will seek to market our SmartCards. Once ISI begins such marketing efforts and is able to find companies and/or government agencies to purchase our SmartCards, we will contract with a manufacturer to produce the required number of SmartCards. While we have located several manufacturing facilities, we have not entered into agreements with any of them. There is no guarantee that ISI will locate companies or agencies that are interested in purchasing our SmartCards, or that we will be able to negotiate a manufacturing agreement on terms acceptable to SmartMetric.

	Six Months			Period
	Ended December 31		Year Ended	December 18, 2002,
			June 30,	to June 30,
	2004	2003	2004	2003
	(unaudited)
Net Sales	$0	$0	$0	$0
Cost of Sales	$0	$0	$0	$0
Selling, general and
administrative expenses	$61,300	$1,061	$35,978	$60
Income (loss) from operations	$(61,300)	$(1,061)	$(35,978)	$(60)

Net sales for the year ended June 30, 2004 were $0. Administrative expenses for the year ended June 30, 2004 were $6,643. SmartMetric expended $29,335 in research and development for the year ended June 30, 2004. Net loss was $35,978 in the year ended June 30, 2004.

For the six months ended December 31, 2004, we had no sales. Administrative expenses were $20,890. We spent $40,410 on research and development. Our net loss for the six months ended December 31, 2004 was $61,300.

BUSINESS

General

SmartMetric was incorporated pursuant to the laws of the State of Nevada on December 18, 2002.

SmartMetric’s Chief Executive Officer, Colin Hendrick, has created the SmartMetric “Biometric Card,” a credit card-sized device which utilizes a finger print sensor to authenticate a person’s identity. The embedded sensor takes the image of the person’s fingerprint and matches it with a fingerprint stored on the card. Mr. Hendrick applied for a United States and International patent with regard to the Biometric card and the technology contained therein. Both patents are pending. Mr. Hendrick transferred the patent pending to Applied Cryptology, Inc., a Nevada corporation, owned by Mr. Hendrick in June 2004. On August 1, 2004, Applied Cryptology, Inc. entered into a license agreement with SmartMetric pursuant to which SmartMetric has the right to use, manufacture and sell products utilizing the patented technology in perpetuity. This patent was granted on September 14, 2004

As of December 31, 2004, SmartMetric had total stockholders' equity of $82,834, and cash of $61,192. Management of SmartMetric believes that in the event SmartMetric raises less than the maximum offering, SmartMetric would have to generate additional resources to enable it to continue with research and development related to the prototype of its SmartCard if further research and development is required, and to commence operations. SmartMetric would then have to obtain additional working capital from other sources, including creditors and investors.

SmartMetric has no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on SmartMetric’s financial condition, results of operations or liquidity.

The SmartMetric Biometric Card

SmartMetric has designed a biometric card utilizing patented technology licensed to the company. A portion of the proceeds from this offering will be applied to completion of a prototype of this biometric card.

SmartMetric   believes that its biometric card will have several functions:

·	The fingerprint sensor will facilitate instant authorization verification;

·	In card biometric measurement storage will safeguard personal information;

·	In card biometric storage will permit access, identity and transaction control verification;

·	Instant identity verification will be secure since such information is contained in the card and not in centralized database

The SmartCard has been designed to contain two on-card processors and 1 gigabyte of memory. SmartMetric believes this will enable the card to store the full image of a fingerprint and a database capable of storing information such as medical records, financial or banking records or human resource card. SmartMetric believes its SmartCard may be used as a credit card, building access card or computer access card.

The SmartMetric SmartCard, because it contains information unique to the individual user, will be useless in the hands of others. Unlike a picture-based identification system, the SmartMetric biometric card has been designed to operate exclusively with the registered user. And unlike biometric security systems where the biometric information is stored at a central we believe that confirmation of identify with the SmartMetric system may not be interrupted during the verification process or while it is stored at the remote location since the biometric information is embedded in the card, itself, in a memory chip protected by encryption. The fingerprint sensor built into the card has been designed to activate the card. Without a match with the encrypted fingerprint already stored on the card, the SmartCard will not operate.

SmartMetric believes its SmartCard may be used for a variety of security applications such as airport employed access and identity, building access and identity, computer network access, drivers licenses, passports and check cashing identity verification.

Fingerprint Sensor

The fingerprint sensor designed by Colin Hendrick, CEO of SmartMetric, and licensed to SmartMetric is known as the “Metric 60” fingerprint sensor. The Metric 60 allows for fingerprints which are either wet or dry to be recognized or authenticated. It is also pressure sensitive.

The SmartMetric biometric card has been designed to utilize a patented rechargeable, lithium polymer battery. Because this battery is available in a variety of shapes and sizes, SmartMetric can design its cards in similar variety of shapes. By utilizing this lithium polymer battery, the SmartCard can be as thin as .45mm in width. This lithium polymer battery is owned and manufactured by a third party unaffiliated with SmartMetric.

The SmartMetric card has been designed to meet the International Standard Organization 7816 Flex requirements so that it will not break or crack when bent or flexed. The prototype card, which has yet to be completed, has been designed to meet ISO requirements for crush test, drop test and nail test. It has been designed to operate in a wide range of temperatures.

The SmartCard has been designed to offer the option of a built-in radio frequency fingerprint transmitter for contactless entry and identity verification.

Marketing Agreement

On October 30, 2003, SmartMetric entered into an agreement with Information Spectrum, Inc., a company located in Annandale, Virginia. Information Spectrum, Inc. shall be referred to as ISI. Pursuant to this agreement, ISI shall seek to market SmartMetric’s SmartCard technology by actively seeking customers interested in purchasing, credential cards which incorporate SmartMetric’s patented SmartCard technology. Prior to ISI offering SmartMetric products by submitting a formal proposal, ISI and SmartMetric shall enter into a “Teaming Agreement” which will define each party’s rights and obligations concerning that particular sales opportunity. Every proposal will require its own Teaming Agreement.

Pursuant to this Agreement, ISI is the exclusive reseller of SmartMetric products to agencies of the United States government and the Government of Canada. In addition, ISI has the right of first refusal for other marketing, sales or re-sales opportunities for customers other than the United States or Canadian governments.

The terms of this agreement is two years and may be extended upon mutual agreement of the parties.

The Security Technology Industry

 

Biometrics

Biometric technologies identify users by electronically capturing a specific biological or behavioral characteristic of that individual, such as a fingerprint or voice or facial feature, and creating a unique digital identifier from that characteristic. Because this process relies on largely unalterable human characteristics, positive identification can be achieved independent of any information possessed by the individual seeking authorization.

The process of identity authentication typically requires that a person present for comparison one or more of the following factors:

·	Something known such as a password, PIN or mother’s maiden name;

·	Something carried such as a token, card, or key; or

·	Something physical such as fingerprint, voice pattern, signature motion, facial shape or other biological or behavioral characteristic.

Comparison of biological and behavioral characteristics has historically been the most reliable and accurate of the three factors, but has also been the most difficult and costly to implement into a single product that can automatically verify the identity of a user accessing a computer network or the Internet. However, recent advances in biometric collection technologies (both biometric hardware products and their associated processing software) have increased the speed and accuracy and reduced the cost of implementing biometrics in commercial environments. Management believes that individuals, Web site operators, government organizations, and businesses will increasingly use this method of identity authentication.

Biometrics refers to the automatic identification of a person based on his/her physiological or behavioral characteristics. This method of identification is preferred over traditional methods involving passwords and personal identification numbers (“PINs”)   for various reasons: (i) the person to be identified is required to be physically present at the point of identification to be identification; (ii) identification based on biometric techniques obviates the need to remember a password or carry a token. By replacing PINs, biometric techniques can potentially prevent unauthorized access to or fraudulent use of cellular phones, SmartCards, desktop PCs, workstations and computer networks. It can be used during transactions conducted via telephone and Internet (e-commerce and e-banking). In automobiles, biometrics could replace keys-less entry devices.

PINs and passwords may be forgotten, and token-based methods of identification, e.g., passports and driver’s licenses, may be forged, stolen or lost. Various types of biometric systems are being used for real-time identification, with the most popular based on face recognition and fingerprint matching. Other biometric systems utilize iris and retinal scanning, speech, facial thermograms and hand geometry.

A biometric system is essentially a pattern recognition system, which makes a personal identification by determining the authenticity of a specific physiological or behavioral characteristic possessed by the user. An important issue in designing a practical system is to determine how an individual is identified.

There are two different ways to resolve a person’s identity: verification and identification. Verification ( Am I whom I claim I am?) involves confirming or denying a person’s claimed identity. In identification, one has to establish a person’s identity ( Who am I?) .

The SmartMetric SmartCard

The SmartMetric biometric SmartCard, an intelligent cryptographic platform, is a credit-card sized plastic card embedded with an integrated circuit chip and biometric fingerprint sensor. It has been designed to provide not only memory capacity, but also computational capability along with secure non-refutable identification of the user. We believe that the self-containment of SmartMetric’s SmartCard will make it resistant to attack, as it will not need to depend upon potentially vulnerable external resources. Because of this characteristic, we expect that the SmartMetric SmartCard may be used in different applications which require strong security protection and authentication.

The physical structure of a SmartCard is specified by the International Standards Organization (“ISO”) 7810, 7816/1 and 7816/2. Generally, it is made up of three elements. The plastic card is the most basic one and has the dimensions of 85.60mm x 53.98 x 0.80mm. A printed circuit and an integrated circuit chip are embedded on the card.

In the SmartMetric SmartCard the printed circuit conforms to ISO standard 7816/3 which provides five connection points for power and data. It will be hermetically fixed in the recess provided for the card and will be burned onto the circuit chip, filled with a conductive material and sealed with contracts protruding. The printed circuit will protect the circuit chip from mechanical stress and static electricity. Communication with the chip will be accomplished through contacts that overlay the printed circuit. The integrated circuit chip defines the capability of a smart chip. Typically, an integrated circuit chip consists of a microprocessor, read only memory (ROM), non-static random access memory and electrically erasable programmable read only memory which will retain its state when the power is removed. The current circuit chip is made from silicon, which is not flexible and particularly easy to break. In order to avoid breakage when the card is bent, the chip is restricted to only a few millimeters in size.

Furthermore, the physical interface which allows data exchange between the integrated circuit chip and the card acceptor device will be limited to 9600 bits per second. The communication line is intended to be a bi-directional serial transmission line, which conforms to ISO standard 7816/3. All the data exchanges will be under the control of the central processing unit in the integrated circuit chip. Card commands and input data will be sent to the chip that responds with status words and output data upon the receipt of these commands and data. Information will be sent in half duplex mode (transmission of data is in one direction at a time). This protocol, together with the restriction of the bit rate, is designed to prevent massive data attack on the card.

In general, the size, the thickness and bend requirements for the SmartCard were designed to protect the card from being spoiled physically. However, this also limits the memory and processing resources that may be placed on the card. In the past, industry participants have encountered particular difficulty in attempting to integrate high memory chips and finger sensor technology that will withstand both the size constraints and physical daily usage such as bending in a user’s wallet sitting in his back pocket. We believe SmartMetric has met and overcome the physical demands of the credit card to produce what is a powerful on-card computer processor with state-of-the-art biometric technology.

The Patent

Applied Cryptology, Inc., a company owned and controlled by Colin Hendrick, President and CEO of SmartMetric, owns a patent for a SmartCard process. This patent has been licensed to SmartMetric.

The patent asserts claims to the following processes:

·	A system for managing digital rights of digital content over a network.

·	A data card contains user information including digital rights information specific to a users, the data card having memory component for enabling information to be stored within the data card.

·	A data card reader is adapted to access the user information contained on the data card when the data card is in communication with a card reading device.

·	A data processor in communication with the data card reader is adapted to be connected to the network.

·

An application program resides on the memory component of the data card, the application program being configured to operate in conjunction with a universal language for creating and controlling digital rights, to manage user rights of the digital content available on the network based on the digital rights information specific to the user which is contained on the data card.

License Agreements

On August 1, 2004, SmartMetric entered into a license agreement with Applied Cryptology, Inc., a Nevada corporation which is owner of certain technology for which a patent was issued from the United States and is pending in Australia. Pursuant to the license agreement, SmartMetric has the right to make use of this technology for the purpose of developing software and systems to be used by SmartMetric to provide certain applications including any or all of the following: 1) secure transactions over the Internet from home and office computers; 2) an automatic method for connecting to remote computers; 3) a method of developing targeted advertising to home and/or office computers; 4) identity verification and access control as provided for in the patent. Colin Hendrick, President, Chief Executive Officer and Chairman of the Board of Directors of SmartMetric, is the sole officer and shareholder of Applied Cryptology, Inc.

Pursuant to this license agreement, Applied Cryptology, Inc. will receive 2% of all revenues generated by SmartMetric on products which utilize this patented technology. The license fee will be paid on a quarterly basis based on revenues received during that quarter. The license fee shall be due within 45 days of the end of each quarter. In the event no revenues were generated through the use of any of the licensed patents during a given quarter, no money shall be owed Applied Cryptology, Inc. for such quarter. Late license fees shall accrue interest at a rate of 2% per quarter. Applied Cryptology, Inc. may rescind the license agreement and reclaim all rights and interest in the patents if certain events, such as SmartMetric’s filing for bankruptcy protection or reorganization, occur.

This license agreement will remain in effect for the lives of the patent. SmartMetric may utilize their patented technological applications anywhere in the world without limitation.

Competition

SmartMetric is a company involved in identity management. This industry is dominated by several large international corporations such as BioNetrix, Keyware, Genplus and Precise Biometrics, all of which manufacture and/or distribute and market identity management products. These companies and many others are more established than SmartMetric, which will put it at a competitive disadvantage. For example, Precise Biometrics, a company whose stock is listed on the Stockholm stock exchange, sells products which utilize its patented biometric fingerprint authentication technology which allows it to isolate the characteristic features of a human fingerprint and to match such features with a stored template to secure identity. However, Precise Biometrics is publicly traded and better funded then SmartMetric, and thus better known. This is similar to SmartMetric’s technology, except that SmartMetic’s licensed patent allows for such data to be stored on a credit card sized device.

BioNetrix offers a solution for systems security - user authentication and sign on. This company was found in 1997.

SmartMetric is a newcomer to this industry, with no proven track record and an untested product. We are not as well known as our potential competitors, nor are we certain our SmartCard will work as intended or that it will meet clients’ needs. We are at a competitive disadvantage when compared to those better known, better funded and experienced identity management companies. SmartMetric will be competing with these as well as smaller and mid-size identity management manufactures, distributors, and developers.

Facilities

The company currently uses office space provided by its president at no cost to the Company. It is anticipated that the Company will look for new office space following the successful completion of the Public Offering.

In November 2004, SmartMetric executed a lease agreement for office space in Aventura, Florida. This agreement provides rental fee of $700 and an initial term of six months, ending May 31, 2005. Unless SmartMetric notifies the lessor of its intent to terminate the lease at least 60 days prior to the termination date, it will automatically renew for additional one-year terms.

Employees

SmartMetric currently has 1 full time employee: Colin Hendrick. Mr. Hendrick does not belong to any unions.

BIOGRAPHY

COLLIN HENDRICK , has been President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of SmartMetric since the Company’s inception in 2002. He has served as President and CEO of Smart Micro Chip, Inc., an Australian corporation from 2000 to 2002. From 1999 to 2001, Mr. Hendrick was President and Chief Executive Officer of Smarticom Inc. and Fast Econ, Inc., Australian corporations. From 1994 to 1998, Mr. Hendrick served as executive officer of Applied Computing Science (Australia), an Australian company involved in e-commerce systems, research and development. Mr. Hendrick attended Dandenong College in Australia.

PETER SLEEP, has been Secretary and a director of SmartMetric since January 2003. From November 1996 to January 2003, Mr. Sleep was Vice President of Smart MicroChip, Inc., an Australian corporation. Mr. Sleep attended Brunswick Technology School and Footscray College, both located in Australia.

JOSEPH KATZMAN , has been a director of SmartMetric since January 2003. Since 1993, he has been host and executive producer of A Cable To Jewish Life , a television talk show. From 1991 to 2000, he was the New York office administrator of congregation Yeshiva Tomchei Tmimim Lubavitch. Mr. Katzman is a graduate of KfarChabad and the Rabinical College of Canada.

Executive Compensation

The following summary compensation table sets forth compensation information for services performed during the fiscal years ended June 30, 2003 and 2004 by SmartMetric 's executive officers.

(1) SmartMetric has entered into an employment agreement with Mr. Hendrick. Pursuant to SmartMetric's one-year employment agreement with Mr. Hendrick, he shall receive an annual salary of $170,000, which shall commence upon SmartMetric’s achieving $1,000,000 in sales revenues. Commencing January 1, 2005, Mr. Hendrick shall begin accruing an annual salary of $170,000. Prior to SmartMetric’s achieving $1,000,000 in sales revenues, SmartMetric may pay Mr. Hendrick a salary of 25% of offering proceeds received from this or subsequent offerings, up to $170,000. Mr. Hendrick is eligible for an annual bonus based on certain performance criteria to be determined by a Compensation Committee of the board of directors at a later date. The Compensation Committee shall be comprised of at least three directors, the majority of whom shall be independent. Mr. Hendrick’s employment may be terminated for cause at any time and may be renewed upon mutual agreement of SmartMetric and Mr. Hendrick. According to the employment agreement, any inventions, ideas, disclosures and improvements made or conceived by Mr. Hendrick during his employment, including adoptions and improvements to existing patents, shall be the property of Mr. Hendrick.

DESCRIPTION OF SECURITIES

Common Stock

SmartMetric is authorized to issue 95,000,000 shares of common stock, $.001 par value, of which 50,000,000 have been designated Class A common stock. The Class A common stock and the common stock are identical. There are 50,000,000 Class A common stock outstanding, and 8,560,257 shares of otherwise undesignated common stock issued and outstanding as of December 31, 2004. Each outstanding share of common stock of SmartMetric is entitled to one vote, either in person or by proxy, on all matters that may be voted upon by the owners thereof at meetings of the stockholders. Unless otherwise indicated, reference to “common stock” includes both the Class A common stock and undesignated common stock.

The holders of shares of SmartMetric do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so chose. In such event, the holders of the remaining shares will not be able to elect any of SmartMetric's directors. SmartMetric's current shareholders will own approximately 99.4% of the common shares outstanding after the minimum offering and 93.6% after the maximum offering.

SmartMetric intends to adopt an employee stock option plan in the near future.

Preferred Stock

SmartMetric is authorized to issue 5,000,000 shares of preferred stock, $.01par value. The preferred stock may be issued in one or more series and with such designations, rights, preference, privileges, qualifications, limitations and restrictions as shall be stated and expressed in a resolution of the Board of Directors providing for the creation and issuance of such preferred stock. There are no shares of preferred stock issued or outstanding and SmartMetric has no plans to issue shares of its authorized preferred stock.

DIVIDENDS

SmartMetric has paid no dividends to date, and does not intend to pay dividends in the near future.

TRANSFER AGENT

SmartMetric has appointed Olde Monmouth Stock Transfer to serve as Transfer Agent.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial ownership of the SmartMetric's common stock as of the date of this prospectus by (i) each person known to SmartMetric to beneficially own 5% or more of SmartMetric's common stock, (ii) each director of SmartMetric and (iii) all directors and executive officers of SmartMetric as a group. All information with respect to beneficial ownership has been furnished to SmartMetric by the respective director, executive officer or 5% shareholder, as the case may be.      

         

(1)	Each shareholder has sole voting and investment power with respect to his/her shares.

(2)	Based on 58,961,797 shares to be outstanding after the Minimum Offering and 62,628,464 after the Maximum Offering.

(3)	All shares held by Mr. Hendrick are Class A common stock.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SmartMetric was incorporated in the State of Nevada on December 18, 2002. In October 2003, SmartMetric sold 50,000,000 shares of common stock to its president and chief executive officer, Colin Hendrick, at $.001 per share for a total of $50,000. Between November 2003 and June 30, 2004 SmartMetric sold 8,560,257 shares to Mr. Hendrick at $0.01 per share for a total of $85,602.57. In August 2004, these 8,560,257 shares were assigned to approximately 600 people for no consideration. The transferees were all friends, family and business acquaintances of Mr. Hendrick. Mr. Hendrick distributed shares because he wanted to create a large shareholder base for SmartMetric.

On August 1, 2004, SmartMetric entered into a license agreement with Applied Cryptology, Inc., a company owned and controlled by Colin Hendrick, President and CEO of SmartMetric, pursuant to which Applied Cryptology, Inc. has agreed to license a patent-pending owned by that company. Applied Cryptology, Inc. shall receive a license fee of the greater of 2% of the sales price of any licensed product or the fair market value of any license products. SmartMetric believes the license agreement is on terms at least as favorable to SmartMetric as those it would expect to negotiate with unaffiliated party.

 

LEGAL MATTERS

An opinion as to the validity of the securities offered hereby has been passed upon for SmartMetric by Schonfeld & Weinstein, L.L.P., 80 Wall Street, Suite 815, New York, New York, counsel to SmartMetric. Schonfeld & Weinstein, L.L.P. is a shareholder of SmartMetric. Schonfeld & Weinstein, L.L.P. consents to the use of its name in this registration statement.

EXPERTS

The consolidated balance sheets of SmartMetric as of June 30, 2004 and June 30, 2003, and the related consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows for the year ended June 30, 2004 and for the period December 18, 2002 to June 30, 2003 included in this Prospectus and incorporated by reference in the registration statement, have been audited by Michael T. Studer, CPA, PC, independent auditor, as stated in his report appearing in this prospectus and incorporated by reference in the registration statement, and are included and incorporated by reference in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Michael T. Studer, CPA, PC consents to the use of his name in this registration statement.