January 14, 2004

Dear Shareholders,

We begin the New Year of 2004 with a great horizon of opportunity before us. At this moment, the eyes of governments around the world are now focused on e-Smart’s "Homeland Defense Technologies." I believe our Company is now in position to have a "Great" 2004, and I further believe that this is the year that we should finally began to reap the benefits that we have been working and waiting for, and you, dear Shareholders, deserve it.

Since 9/11, thousands came out of the woodwork proclaiming to have the "best in the world" terrorist solution technologies. Many were touted and tested. Virtually all have been hacked, counterfeited and/or otherwise not performed as proclaimed. Now, after much study by agencies of the US and other governments, leaders around the world are more educated as to the strengths, vulnerabilities, pros and cons of various biometric and other security technologies — all purported to be solutions to deter terrorists and to stop the rising crime of financial and identity fraud (which terrorists and criminals use to exploit and harm innocent people). Armed with this new education, many of these leaders and governments from around the world are now turning their eyes to e-Smart's "Biometric Verification Security System™" ("BVS2™") featuring e-Smart’s "Super Smart Card™" and other related e-Smart technologies as the best solution currently available to protect and defend their respective countries.

If we are successful in contracting with any single agency or multiple agencies of the U.S. Government or with any one of the countries that we are currently in negotiations with (and we are working extremely hard to do so), this should be a banner year for our company and for you our shareholders.

Last November we attended ‘Cartes 2003’ in Paris, which was billed as the world’s premier smart card and IT security trade show. Based on the Company and other experts’ observations, I believe it is safe to say that our products were generally recognized as extraordinarily unique and more advanced than the others from the major companies around the world. This is not a coincidence. We were ahead of our time before 9/11, and finally, our time is NOW. Long before the many 9/11 afterthought technologies, our CTO was not only the first to patent the IC (Smart) Card nearly 25 years ago but also was the first to patent the use of biometrics with Smart Cards (in 1983). For this and other reasons, it appears that we remain generations ahead of the field — technology wise.

Put another way if we were competing JUST on technology, I feel certain that e-Smart would win each contract it competes for, hands down. Our competitors, however, are the world’s largest IT companies with established track records and vendor history in each of the countries we try to compete in. They spend a lot of time and money to get contracts. In the end, however, it is my belief that our e-Smart technology will prevail throughout the world— just like it did the last time it was in a major nationwide contest.

At this time in history, e-Smart’s products are critically needed to protect and defend innocent citizens against terrorism and the growing crime of identity theft and fraud. As we go forward in 2004 to cover the world with a safety net to protect people, our systems can act to unite people in ways unforeseen. It is little disputed that over 95% of people in every country in the world would choose peace over terrorism and war for their families and their children. The less than 5% of those who would be terrorists should be identified and monitored with advanced biometric verification systems before they can wage their war of terror on the innocents. Then, 95% of the people in the world could freely cross borders without fear in their eyes, but instead, with peace in their hearts and smiles on their faces. A system designed to protect innocent citizens from terrorists and fraud could become an instrument of peace and good will for all men, women and children in a world that could be a wonderful place for all.

May God Bless You, all of our shareholders, our company, our country and the world with peace and prosperity in the new year of 2004!

Warmest wishes,

Mary Grace
President

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