News From the Chairman: Vol. I, Issue 7: November 2004

With the election behind us, there seems little doubt that President Bush will continue to move forward his agenda to bring safety and security to the American people, and the use of biometric technology is very much in the forefront of any program dealing with Homeland Security.

As many of you are aware, just recently the American Civil Liberties Union, ACLU, has raised serious questions about the standards developed for the proposed U.S. Passport to be issued by the end of next year, concerned that Radio Frequency Identification Chips, RFID, may leave Americans open to identity theft and other intrusions of privacy. This pressing issue, along with other concerns such as dealing with U.S. ports and border security, is just one of many that the incoming Homeland Security Chief will have to confront.

In addition, Attorney General, John Ashcroft, reiterated the continued threat of further terrorist attacks against the US, warning that al Qaeda “has not lost its thirst for American blood.” There is no question that the need for e-Smart's technology has never been greater. I commit to you that we are doing everything possible to provide our technology in order to protect the nation from another terrorist attack and also prevent individuals from suffering personal damages from criminal and financial fraud, now estimated to affect 1 out of 3 Americans. At the same time, e-Smart's system, the BVS2' platform, Super Smart Card', Super Smart Passport' and related technologies, can provide the most secure and advanced privacy protection available today, preventing any “big brother” intrusion into personal lives and businesses.

We at e-Smart have long been aware of the privacy concerns connected to biometric technology and, as a result, made it our top priority to design the Super Smart Card' and Super Smart Passport' based on standards that are far more advanced, secure and privacy protected than other technologies currently offered in the market. Now, more than ever, e-Smart's advanced systems and Super Smart Card' can protect citizens from terrorists, criminal activity and identity and financial fraud, while at the same time protecting privacy and civil liberties - and US citizens deserve this – and we are going to do everything in our power to make this a reality for our shareholders and all US citizens. In the coming months, it is our intention to alleviate some of these burdens by aggressively working toward bringing our privacy protected biometric technology to the attention of the incoming officials tasked with implementing these important programs.

In the meantime, with our partners, the e-Smart marketing team has been extraordinarily busy in Asia, where we are negotiating with leaders in the private sector and the government to bring our advanced technology to a growing number of countries who share many of the same safety and personal and financial security concerns that now plague the U.S. We have either signed, are finalizing or are negotiating agreements with the goal of providing our advanced technology to protect the citizens in over 20 other countries on three continents.

In November we entered into a “Cooperation Agreement” with PT Primrose Gantari, Indonesia. With our partners, we are working toward our goal of providing e-Smart's proprietary biometric system and Super Smart Card' and related technologies for payment and processing services in banking institutions and other corporate and government entities in Indonesia. PT Primrose was created by former principals of the Indonesian Bank Restructuring Agency (IBRA), which is one of the most respected and experienced financial services organizations in Indonesia.

The company also has signed an agreement with Mybi., Ltd., the largest public transportation system and e-Currency infrastructure provider in Korea with a 20 million customer base, and Samsung SDS, to provide an initial rollout of more than 1 million “Mybi –e-Smart Cards” in ten major cities in Korea with multiple applications such as financial transactions, including merchants, internet malls, public transportation and vending machines. The “Mybi-e-Smart Card” project will also be used for payment of hospital, pharmacy, medical and insurance fees.

I am pleased to announce that, with our partner Daewoo International, we have entered into a “Cooperation Agreement and a Memorandum of Understanding” with IMS System Co., Inc., (IMS), a leading supplier of banking solutions in Asia and KCom Co., Ltd., leading systems integrators, to collaborate on a National ID Card, bank payment and central bank payment gateway and other Smart Card projects in the Republic of Uzbekistan. Each of the parties have agreed to perform specific services connected to the Project and all are investing much time and financial resources to make this an enormously successful project.

Furthermore, in Turkey, with our partner Daewoo International, we have entered into a Partnering Agreement with Olscan CAD Teknolojileri, prominent system integrators in Turkey, with a joint goal to collaborate to provide a City Smart Card and government Smart Card, including a national ID card for the country.

Also, I am pleased to report that we have mutually agreed with our partner, Daewoo International Corporation, to extend e-Smart-Daewoo's already impressive global presence in fifteen countries to include five additional countries, including Russia. I will keep you updated as we move forward on these new horizons in 2005.

I'm sure many of you now are aware that the Department of Commerce provided the company a formal export classification, which effectively removes any barriers to exporting our Super Smart Card'. According to the approval notice, the Super Smart Card is classified under Export Control Classification No. 5A992, which means the Super Smart Card is not subject to export restrictions under the Crime Control provisions of the Export Administration Regulations. Under the same classification, however, the Super Smart Card is restricted from being exported to N. Korea, Syria and Sudan and to countries subject to U.S. terrorist embargoes, including Cuba, Iran, and Iraq. We are pleased with the certification approval and are eager to move forward on projects that have been on hold in anticipation of this decision.

As the company has received the requisite regulatory approvals to proceed, we are moving forward in China, which is predicted to be the world's largest economy in the next two decades and the country's 1.3 billion people will benefit from the security and protection of e-Smart's technologies.

As you know, in October we rolled out the first of our advanced Next Generation Super Smart Cards's and demonstrated our Super Smart Cards' and Super Smart Passports', which many experts agree are the most advanced of their kind in the world, at the AICF Forum in Singapore, whose member committees are currently in the process of setting the standards for Asia.

We are working to finalize arrangements for the agreements already signed so that we may begin delivery on projects in Korea, which is expected to be in the first part of 2005. This roll out includes the Samsung, Kobile Student Card project, which our partners, Samsung and Kobile, have advised us they have signed contracts with five hundred institutions so far and are moving toward their goal of having one thousand institutions signed by the end of this year.

During the last month we have been working hard to bring the website up to date in order that you may get a clearer picture of how the company is working for you. Over the last few months I have been a guest on several radio shows and excerpts of those interviews are now available on the companies website. In addition, a Picture Page is being added with photographs taken at various conferences and signing ceremonies. As they say “a picture is worth a thousand words” and these photographs will allow a first-hand look at the e-Smart team at work.

It has been a very busy and gratifying month and, as you can see from the above, we are well on our way toward our goal of becoming the leader in biometric Smart Cards and security systems in the world. As the year comes to a close, we will continue to push to finalize projects currently under consideration that virtually encompass more than half of the world.

As we enter the Holiday season it is our sincere wish, and desire, to reward all of you with the successful implementation of these projects in 2005, which are some of the largest contracts of their kind in the field of biometric smart cards in the world. From all of us here at the e-Smart family let me wish you the happiest holiday season!