Volume 2, Issue 5 October 2005 

NEWS FROM THE CHAIRMAN
Volume 2, Issue 5 | October 2005

For more than four years, the management of e-Smart Technologies Inc. (the “Company”) has devoted its efforts primarily to the refinement and marketing of the Company's technology. As a result of these efforts, the Company has continued its development of, what experts believe to be, a superior technology, has greatly expanded its markets and enhanced its profile, particularly in Asia, and has acquired contracts that, we believe, will generate substantial revenues for the Company. These efforts have been so successful that the Company is now on the brink of its transformation from its development phase to its commercialization phase. To ensure a successful transition, access to capital markets, and the ability to grow the business of e-Smart, management turned it attention to the capital structure and organization of the Company. After a comprehensive review of the Company's structure, the Company developed a plan of reorganization and recapitalization of the Company (the “Plan), which plan is intended to enable the Company to:

  • Achieve a listing on a national securities exchange;
  • Transition the Registrant into the commercialization of its Super Smart Card™ and Biometric Verification Security System (BVS2™) and other technologies;
  • Enhance the Registrant's position with its strategic partners;
  • Position the Registrant to more effectively enter the long term capital markets as a means of delivering its growing backlog of contracts for the use of its technologies;
  • Enable the Registrant to respond more effectively to any takeover efforts; and
  • Maximize shareholder value,
This Plan was presented to the Board of Directors, and, on October 14, 2005, the Board approved and adopted the Plan, and on October 20, 2005 by Unanimous Consent Resolution approved and ratified the Plan, the terms of which are more fully described in the 8K filed today by the Company.

The two principal elements of the Plan are (1) a one for forty reverse split of all issued and outstanding (but not authorized) shares of common stock and options; and (2) the exchange of all management, founders and principal stockholder, IVI Smart Technologies, Inc.(“IVI”) common stock and options for 5,000,000 post reverse shares of designated preferred treasury stock, in proportion to their common stock and options surrendered and debts of considerable cash and common stock forgiven by IVI. The preferred stock will vest management and the principal stockholder with an ongoing, 70%, voting control, roughly the same as currently exists, giving management the ability to respond to any acquisitive overtures or takeover attempts from competitors and others, and will be subject to significant restrictions, which includes being convertible into common shares, on a share for share basis, only in the event that the Company has net profits in any fiscal year of not less than $200,000,000. Agreement to this critical term is an outgrowth of its belief and confidence that those profit figures are readily attainable, and will result in enormous value for all shareholders of the Company, (For more detailed information, please see the form 8K filed today with the SEC).

The Company is in the process of filing all related documents required by the SEC and state and federal regulatory agencies, which documents will provide further details of the Plan to the shareholders and investing public.

Earlier this year, the Chairman's Newsletter provided a review of the agreements and contracts, already signed by the Company and those still in the works, which, we believe, clearly demonstrate the growing worldwide interest in e-Smart Technologies. And we were proud to report to you as recently as July of this year that the Company had begun the inaugural roll out of the Super Smart Card™ in Pusan, Korea.

Despite this enormously positive news, the price of the stock has failed to reflect what we believe to be the Company's actual and potential value. We have received many inquiries from shareholders about this, and, as a result, through the Company's legal counsel, we undertook to obtain and to review trading data. Based on the data that we were able to obtain, it is our belief that it is shorting of the Company's stock that was the underlying cause of the decline in price.

I'm sure many of you will have questions about this move, and any others we may undertake to strengthen the company and to increase shareholder value. We will keep you informed as we proceed. As you know, we are prohibited by law from providing information that is not also made available to all shareholders and the investing public at the same time, so we will keep you advised through the Company's Newsletters posted on the website and Press Releases as significant events occur.

It is our intention to hold a Shareholders Meeting sometime in February, 2006, at which time we hope and believe we will have projects underway which will be actively building substantial shareholder value.

I seek your cooperation and support as we take what we believe will be important steps over the next few months to build and grow the Company into on that I believe all of you can be proud of, and which, I sincerely hope and believe, will increase value and reward all of our dear shareholders.

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 1922, 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.

©2005 e-Smart Technologies, Inc.