SmartMetric Inc (SMME)

[optimisticbutpatient]

Agreements with Representatives (Hogier and Protec).

I had a wander through the SMME website tonight looking for the agreements we have to date.

There are two agreements currently in place. The first with Protec and the second with Hogier Gartner CIA. To get to them you will need to go to the Smartmetric website and then to the Investors / Sec XBRL filings page. Both agreements appear to be the same at a cursory look. Both list Smartmetric as “the manufacturer” and Protec or Hogier Gartner CIA as “the representative” in the relevant contracts.

It appears that Protec/Hogier Gartner CIA will not be manufacturing the cards, but acting as sales agents. I’d say this as Smartmetric is listed as “the manufacturer” in both contracts and that paragraph 9d of both contracts states the contract can be cancelled “By Representative if the Manufacturer fails to supply or fulfill orders for its biometric cards on a reasonably timely basis providing such orders are within the normal stated production capacity of the Manufacturer.” Given the type of business Protec and Hogier are in I had personally assumed they would have been manufacturing the cards also but apparently this is not the case.

The Agreement with Protec is attached to the 8-K dated 12/26/17 as Exhibit 10.1.

The Agreement with Hogier Gartner CIA is attached to the 8-K dated 2/23/18 as Exhibit 10.0.

The Agreement with Protec gives the rights “to promote and sell the security access control and identity biometric cards and all credit/debit biometric cards” (paragraph 3) in "the United States and other regions/areas by written mutual agreement” (paragraph 2).

The Agreement with Hogier Gartner CIA gives the rights “to promote and sell the security access control and identity biometric cards and all credit/debit biometric cards” (paragraph 3) in “All countries in South America excluding Brazil and Argentina (other territories to be added by mutual agreement)” (paragraph 2).

Interestingly it appears that the representatives may also sell outside their territories as paragraph 4 goes on to state "Order shall mean any commitment to purchase Manufacturer’s Products that calls for shipment into Representative’s Territory or which is purchased outside of the Territory through sales by the Representative."

Furthermore, paragraph 4 gives the impression that Smartmetric may already have some customers lined up in one of these territories as the agreement states "Any person or entity already being solicited or that has previously purchased Products from Manufacturer outside of the Territory will not be a Customer hereunder."

Protec/Hogier Gartner CIA will receive 5% commission based on the invoiced value of the product (paragraph 4). Smartmetric will forward compensation to Protec/Hogier Gartner CIA within 30 days of payment being received by them, or interest will be charged at 5% per annum (paragraph 5a).

This seems quite reasonable as Smartmetric are only responsible for supplying "samples, catalogs, literature and any other material necessary for the proper promotion and sale of its Products in the Territory" (paragraph 8h), while Protec/Hogier Gartner CIA are responsible for "all expenses of any and all kind including any expenses directly related in efforts to sell Products under this Agreement" (paragraph 8b).

Smartmetric is responsible for all collections and may at it’s discretion or it’s credit department decline a customer order (paragraph 6). While Smartmetric is responsible for collections Smartmetric may require Protec/Hogier Gartner CIA to assist in the collection of overdue accounts and provide details of credit rating of customers (paragraph 8e).

All Products shall be sold at prices and upon terms established by Smartmetric, who can vary the price as they wish (paragraph 7).

Protec/Hogier Gartner CIA "will maintain a sales office in the Territory and devote such time as may be reasonably necessary to sell and promote Smartmetric’s product within the Territory "(paragraph 8a).

The cards shall be "sold, marketed, presented by the Representative (Protec/Hogier Gartner CIA) as a SmartMetric branded product" (paragraph 8j) and "products shall bear Manufacturers trademark and patent marks as stipulated by the Manufacturer" (paragraph 8k).

The agreement can be terminated by Smartmetric if Protec/Hogier Gartner CIA "fails to conclude one sales order for a minimum 1,000 cards within the later to occur of (i) six months from the date of this agreement or (ii) six months from the date which production capability begins". (paragraph 9c). It can also be terminated by Protec/Hogier Gartner CIA if Smartmetric “fails to supply or fulfill orders for its biometric cards on a reasonably timely basis providing such orders are within the normal stated production capacity of the Manufacturer.” (paragraph 9d).

Yeah, too much time on my hands in the middle of the night.

OBP.