Dear Shareholders,

During the past year of 2006, the Company continued to move forward on a number of fronts to make our revolutionary biometric security technology available to the world. I’m very pleased to report to you at this time the progress that has been made toward this goal and to bring to you a year-end update of the Company’s activities on your behalf.

It was, indeed, a busy and productive year. During the year, the Company was well represented at security trade conferences and exhibitions where we had the opportunity to demonstrate the unique and unlimited advantages of our biometric security system technology. These included my giving the keynote addresses at the Annual Meeting of the Central Station Alarm Association in Oahu, Hawaii, and being a featured speaker at the Conference on E-Passports (InterFest) in Singapore, the 4th International Interoperability Testing Workshop. I also delivered a keynote address at the 4th Middle East & Africa Card Technology Exhibition and Conference in Cairo, Egypt, and was a featured speaker at the “Children in Slavery” – The 21st “Century” Summit at Georgetown University in Washington, D.C. Also, Mr. Richard Kim, the Company’s Managing Director of e-Smart Korea, was a featured speaker at the 6th Annual CardTech Korea Conference in Seoul, Korea and Robert Pang, represented the Company at the 11th Annual Asian Casinos Executive Summit (ACE) in Singapore.

While we can count our blessings that in 2006 the world enjoyed a relative respite from major terrorist activity, the threat remains constant and the Company’s primary focus continues to be that of bringing our much needed security technology to nations around the world in order that we all may continue to live in a safe and secure world. Despite this year’s welcomed relief, we at e-Smart Technologies know the important difference our Biometric Verification Security System, (BVS2)™ can make in guaranteeing not only the freedom from terrorist threats, but also protection from identity theft and financial fraud – two of the fastest growing crimes in the world today.

Steps have been taken to better position the Company to expedite these goals. As all of you are aware, Charlie R. Black, Jr., a leading political strategist who served as senior advisor to Presidents Reagan and Bush and also served as a principal public spokesman for President Bush in the 1992 Presidential campaign, and Gary S. Messina, Corporate Director of L-3 Communications Headquarters; Operations, and formerly CIO of the Bureau of Citizenship and Immigration Services for the Department of Homeland Security, and Executive Associate Commissioner of the INS were appointed to the Board in June. Messrs Black and Messina bring to the Company the experience and expertise necessary to move forward the Company’s long-term plans and, along with the other board members, I am confident in the Company’s direction and long-term success.

In this regard a long-term funding commitment, which is instrumental in guaranteeing world-wide implementation of our biometric security system, was negotiated and agreed. At the same time, we are also in the process of finalizing parallel funding agreements which I will report to you in more detail upon conclusion.

Our super marketing team has been hard at work around the world and we look forward to announcing new project agreements that have been signed and additional contracts which are in the final stages, and ready to be signed. We will report more to you regarding these promising and exciting projects soon.

We have also continued our efforts to ensure that the unique technology of e-Smart is protected, enhanced and marketed for the benefit of our shareholders. In this highly competitive industry, we inevitably encounter those who seek to appropriate the company’s valuable intellectual assets. We have, and we will continue, to take all necessary and appropriate steps to prevent any unauthorized use of our products and the technology upon which they are based.

While it seems as though the year has flown by, we worked hard to establish the foundation and means to make the New Year of 2007 a successful and prosperous one for all of you.