News From the Chairman: Vol. I, Issue 3: June 2004

Volume 1, Issue 3

June 2004

NEWS FROM THE CHAIRMAN
Volume 1, Issue 3 | June 2004

CORPORATE:
Our excellent e-Smart team has been very busy during June in Asia. Because so much is going on and being finalized I waited as long as I could, until the end of the month, to get this newsletter to you, so I could give you more details about the agreements we have and are finalizing and other activities of the Company.

I am pleased to report that the Company’s accounting and legal team continues to do an outstanding job. Per discussions held with the SEC, we have filed a 10-Q on June 30, 2004, covering the “Quarterly Periods ended March 31, 2003 and March 31, 2002”. In connection with our Administrative Proceeding before the SEC, our legal team filed a Brief in Support of the Petition for Review on June 9, 2004 and submitted a Motion for Oral Argument on June 18, 2004. Although no assurances can be given as to the outcome, we and our full legal team are doing all in our power to resolve this matter successfully and promptly with the SEC for the benefit of you, our shareholders.

ASIA IC CARD FORUM – “ONE CARD, ONE ASIA”:
During the first week of June, it was an honor for e-Smart to be chosen as the sole US Smart Card and Systems company to deliver one of the keynote speeches to some of the world’s foremost experts in the IT field. Distinguished government officials from Korea, China, Japan and Singapore as well as top executives and engineers from some of Asia’s most important companies all met together at the historic Inaugural General Meeting and First Conference of the Asia IC Card Forum. Attendees included Chairman and members of the Smart Card Standardization Authorities and Committees from Korea, China, Japan and Singapore.

Speakers at the conference included Directors and Executives of Korea’s Samsung Electronics, KT (Korea Telecom), SK Telecom, Japan’s NTT, Hitachi and Sharp. e-Smart was not only the sole US Company to address the conference, but was the only company to address the delegation on biometric smartcard technology. I was asked to speak on “A More Secure IT World – Biometrics – Fingerprint Sensor on Card” and in the speech I set forth the structure and blueprint of how creating “A More Secure IT World” can create a “More Secure and Peaceful World for All”. The speech and our BVS2™ platform featuring the Super Smart Card™ and our other technologies that I presented were received with overwhelming accolades and enthusiasm.

Government attendees at this gathering included, from Korea: the Minister of Information Planning Office, Ministry of Information and Communications, Ministry of Government Administration and Home Affairs, Ministry of Education and Human Resource Development, Ministry of Health and Welfare, and Ministry of Labor, Director of Information Protection Industry, Chairman, ISO/TC215 and Director of Agency for Technology and Standards; from Japan: the Director of the Ministry of Economy, Trade and Industry; from China: the Chief of the Government Authorized IC Card Registration Center and Chairman of China Smart Card Forum; and from Singapore: the Chairman of the Cards and Personal Identification Technology Committee and CTO of IDA (INFOCOM Development Authority of Singapore).

A series of meetings followed the Conference culminating in our being asked to present proposals for pilot systems or to enter into negotiations for systems in a number of countries. Each of these countries, their government and commercial entities are looking to e-Smart’s BVS2™ platform, Super Smart Card™ and unique system technologies to provide the most advanced solutions to their growing burden of identity theft, financial fraud and/or the threat of terrorism.

SAMSUNG SDS AGREEMENT BEARS FRUIT:
The first fruit from the Master Teaming Agreement signed by e-Smart with Samsung SDS several months ago materialized last week with the execution and announcement of a joint project with Samsung SDS and private Korean company, Kobile, for the supply, implementation and operation of a “Student Management Card Project” in Korea. The Company has already made provision for the without recourse to the Company project finance necessary to implement this system with a major U.S. based financial institution. The feasibility study prepared for this project by Samsung SDS over the course of approximately twelve months, projects a very profitable business for our Company for many years to come. As previously stated, Samsung SDS has forecasted minimum revenues of in excess of US$ 600 million over the course of the first six years of operation alone. The project will commence upon the execution of final project finance and project documents.

DEVELOPMENTS IN KYRGYZSTAN:
Our Kyrgyzstan project is on course and our Korean subsidiary is in the process of finalizing our team partners and final project specifications. In addition, we have decided to bid on a World Bank financed, central banking system project for interbank payments in Kyrgyzstan. This approximate US$ 10 million project is ideally suited for the implementation of the Company’s BVS2™ platform. Regardless of the outcome of this tender, we will still proceed with our previously agreed project there for a Super Smart Card™ based payment and ID system.

MASS PRODUCTION ON TRACK:
Saving the best news for last, I am pleased to tell you that final preparations are under way for commencement of mass production of our Super Smart Card™. We anticipate first deliveries to commence in October with a build-up and full roll out of millions of pieces per month beginning in January 2005. Revenues are expected to begin concurrently with delivery. At this point in our corporate development, with sales already under our belt and many new sales pending, it is our manufacturing capacity that will drive our revenues. I have been informed by our engineering group, that barring some extraordinary disaster, there is no doubt that we will be in the position to deliver in excess of 100 million cards during calendar 2005. My research has confirmed that our manufacturing partners are among the biggest, best and most reliable manufacturers in the world (for competitive reasons, I can not yet reveal names. I will do so as soon as practicable). If and as we need additional production capacity, these same suppliers will be able to accommodate our needs. We are looking forward to a very long term and mutually beneficial relationship with these companies.

Well, that’s it for now. We expect July to be another very hectic travel month for our entire team. In addition to any required announcements, I will do my best to update you as soon as possible as developments occur. As re-confirmed at the Asia IC Card Forum, the Company’s products are exactly what the IT knowledgeable world is looking for and needs to counter many of today’s problems. I am more proud than ever with the Company, its technologies and its entire team. I look forward to the day when the entire world knows the name of e-Smart Technologies and the Super Smart Card™. I look forward to the day when everyone is protected by the e-Smart umbrella of products. I believe that day is very rapidly approaching.

ABOUT e-SMART TECHNOLOGIES, INC.
e-Smart Technologies seeks to be and is focused on becoming the leading provider of high technology security systems that can be used to combat fraud and terrorism. e-Smart products such as the BVS™ (Biometric Verification Security System™) or the BV-HDS™ (Biometric Verification Homeland Defense System™) working with the Super Smart Card™ subsystem enabling government agencies and commercial enterprises to continuously verify, certify and manage identification and access of citizens, personnel, customers and any other persons seeking physical or logical access. e-Smart Technologies offers what it believes, and experts agree, is the highest form of identity based and credential based security available without discriminating profiling or erosion of civil or human rights.

Note: Statements in this Newsletter that relate to future plans, financial results or projections, events or performance are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Act of 1933, as amended. Although these statements are made to convey to the public the Company’s progress, business opportunities and growth prospects, readers are cautioned that such forward-looking statements represent management's opinion. Although management believes such representations to be true and accurate based on information available to the Company at this time, actual results may differ materially from those described.