UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                                   (Mark One)

     [X] Quarterly report pursuant to Sections 13 or 15(d) of the Securities
                              Exchange Act of 1934

                  For the quarterly period ended March 31, 2006

    [_] Transition report pursuant to Sections 13 or 15(d) of the Securities
                              Exchange Act of 1934

        For the transition period from _______________ to _______________

                         COMMISSION FILE NUMBER: 0-24431

                            INKSURE TECHNOLOGIES INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

           DELAWARE                                             84-1417774
(State or Other Jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

                 1770 N.W. 64TH STREET FORT LAUDERDALE, FL 33309
          (Address of Principal Executive Offices, Including Zip Code)


                                 (954) 772-8507
                (Issuer's Telephone Number, Including Area Code)

              ----------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past ninety days.

                               Yes [X]     No [_]

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                               Yes [_]     No [X]

The number of shares outstanding of our Common Stock, $0.01 par value per share,
as of May 11, 2006, was 15,252,051 shares.

Transitional Small Business Disclosure Format.

                               Yes [_]     No [X]

<PAGE>


                            INKSURE TECHNOLOGIES INC.
                              INDEX TO FORM 10-QSB

                                                                           PAGE

PART I.      FINANCIAL INFORMATION                                          1

Item 1.      Financial Statements                                           1

             Consolidated Balance Sheet as of March 31, 2006 (unaudited)    1

             Statements of Operations (unaudited) for the
             Three Months Ended March 31, 2006 and 2005                     3

             Consolidated Statements of Stockholders' Equity as of
             March 31, 2006 (unaudited after December 31, 2005)             4

             Consolidated Statements of Cash Flows (unaudited) for the
             Three Months Ended March 31, 2006 and 2005                     5

             Notes to Consolidated Financial Statements                     6

Item 2.      Management's Discussion and Analysis or Plan of Operation      8

Item 3.      Controls and Procedures                                       12

PART II.     OTHER INFORMATION                                             12

Item 1.      Legal Proceedings                                             12

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds   12

Item 3.      Defaults Upon Senior Securities                               12

Item 4.      Submission of Matters to a Vote of Security Holders           12

Item 5.      Other Information                                             12

Item 6.      Exhibits                                                      12

SIGNATURES                                                                 13

                                     - i -
<PAGE>


                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

Part I.  Financial Information

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

                                                    MARCH 31,
                                                      2006
                                                     ------
                                                    UNAUDITED
                                                     ------
    ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                          $  416
  Short-term deposit                                  3,905
  Trade receivables                                     420
  Other accounts receivable and prepaid expenses        182
  Inventories                                           665
                                                     ------

TOTAL current assets                                  5,588


PROPERTY AND EQUIPMENT, NET                             363

DEFERRED CHARGES                                        636

GOODWILL                                                271
                                                     ------

TOTAL assets                                         $6,858
                                                     ======

The accompanying notes are an integral part of the consolidated financial
statements.


                                       2
<PAGE>


                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

                                                                  MARCH 31,
                                                                    2006
                                                                  --------
                                                                  UNAUDITED
                                                                  --------

     LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES:
   Trade payables                                                 $    395
   Employees and payroll accruals                                      115
   Deferred income                                                     206
    Accrued expenses and other payables                                191
                                                                  --------

 TOTAL current liabilities                                             907

 ACCRUED SEVERANCE PAY                                                  18

 Convertible notes, net                                              5,291
 Warrants to purchase Convertible notes                                484
                                                                  --------

Total amount related to Convertible notes                            5,775


 STOCKHOLDERS' EQUITY:
   Stock capital :
     Preferred stock of $ 0.01 par value -
       Authorized: 10,000,000 shares; Issued and outstanding:
       0 shares as of 03/31/2006
     Common stock of $ 0.01 par value -
       Authorized: 35,000,000; Issued and outstanding:
       15,234,854 as of 03/31/2006                                     152
   Additional paid-in capital                                       12,480
   Accumulated other comprehensive income                              118
   Accumulated deficit                                             (12,592)
                                                                  --------

 TOTAL stockholders' equity                                            158
                                                                  --------

 TOTAL liabilities and stockholders' equity                       $  6,858
                                                                  ========

The accompanying notes are an integral part of the consolidated financial
statements.


                                       3
<PAGE>


                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                          MARCH 31,
                                                                ------------------------------
                                                                   2006              2005
                                                                ------------      ------------
                                                                          UNAUDITED
                                                                ------------------------------
<S>                                                             <C>               <C>
Revenues                                                        $        538      $        494
Cost of revenues                                                         197               302
                                                                ------------      ------------

Gross profit                                                             341               192
                                                                ------------      ------------

Operating expenses:
  Research and development                                               231               182
  Selling and marketing                                                  516               350
  General and administrative                                             371               125
                                                                ------------      ------------

TOTAL operating expenses                                               1,118               657
                                                                ------------      ------------

Operating loss                                                          (777)             (465)
                                                                ------------      ------------

Financial income                                                           6                11
Non cash financial income related to convertible notes, net              166                 -
                                                                ------------      ------------
Financial income (expenses), net                                         172                11

Net loss                                                        $       (605)     $       (454)
                                                                ============      ============

Basic and diluted net loss per share                            $      (0.04)     $      (0.03)
                                                                ============      ============

Weighted average number of Common Stock used in computing
  basic and diluted net loss per share                            15,071,152        15,011,579
                                                                ============      ============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       4
<PAGE>


                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS


<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                                            ADDITIONAL      DEFERRED      OTHER                        TOTAL
                                                  SHARE       PAID-IN     STOCK-BASED  COMPREHENSIVE  ACCUMULATED   STOCKHOLDERS'
                                                 CAPITAL      CAPITAL     COMPENSATION    INCOME        DEFICIT        EQUITY
                                                 --------     --------     --------      --------       --------      --------
<S>                                              <C>          <C>               <C>      <C>            <C>           <C>
Balance as of January 1, 2004                    $    119     $  9,683            -      $    118       $ (7,713)     $  2,207

  Issuance of Common stock and warrants, net           31        2,348            -             -              -         2,379
  Net loss                                              -            -            -             -         (2,061)       (2,061)
                                                 --------     --------     --------      --------       --------      --------

Balance as of December 31, 2004                       150       12,031            -           118         (9,774)        2,525

Grant of warrant                                                    58          (58)                                         -
Amortization of deferred stock-based
 compensation                                                                    46                                         46
Conversion of 368,429 warrants into 223,278
 ordinary shares                                        2           71                          -              -            73
  Net loss                                              -            -                          -         (2,213)       (2,213)
                                                 --------     --------     --------      --------       --------      --------

Balance as of December 31, 2005                       152       12,160          (12)          118        (11,987)          431

Stock based compensation                                -          320            -             -              -           320


Amortization of deferred stock-based
 compensation                                           -            -           12             -              -            12

  Net loss                                              -            -            -             -           (605)         (605)
                                                 --------     --------     --------      --------       --------      --------
Balance as of March 31, 2006                     $    152     $ 12,480            -      $    118       $(12,592)     $    158
                                                 ========     ========     ========      ========       ========      ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       5
<PAGE>


                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED
                                                                                        MARCH 31,
                                                                                  --------------------
                                                                                   2006         2005
                                                                                  -------      -------
                                                                                       UNAUDITED
                                                                                  --------------------
<S>                                                                               <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net loss                                                                        $  (605)     $  (454)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                                     354           25
    Accrued severance pay, net                                                          1            -
    Decrease (increase) in trade receivables                                          (60)          45
    Non cash financial expenses related to convertible notes, net                     202            -
    Increase in other accounts receivable and prepaid expenses                        (27)         (49)
    Decrease (increase) in inventories                                                (70)          84
    Increase (decrease) in trade payables                                             (99)          23
    Increase (decrease) in employees and payroll accruals                              10           (1)
    Increase (decrease) in other payables                                             (22)          24
                                                                                  -------      -------

Net cash used in operating activities                                                (316)        (303)
                                                                                  -------      -------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property and equipment                                                  (48)          (4)
  Proceeds from short-term bank deposits                                              452
                                                                                  -------      -------

Net cash provided by (used in) investing activities                                   404           (4)
                                                                                  -------      -------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Receipts on account of stock                                                          -            -
                                                                                  -------      -------

Net cash provided by (used in) financing activities                                     -            -
                                                                                  -------      -------

Decrease in cash and cash equivalents                                                (316)        (307)
Cash and cash equivalents at the beginning of the period                              732        1,648
                                                                                  -------      -------

Cash and cash equivalents at the end of the period                                $   416      $ 1,341
                                                                                  =======      =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       6
<PAGE>


                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

NOTE 1:-  BASIS OF PRESENTATION

     The accompanying condensed unaudited interim consolidated financial
     statements have been prepared by INKSURE TECHNOLOGIES INC. (the "Company")
     in accordance with accounting principles generally accepted in the United
     States of America for interim financial information and the instructions to
     Form 10-QSB and Article 10 of Regulation S-X. These financial statements
     reflect all adjustments, consisting of normal recurring adjustments and
     accruals, which are, in the opinion of management, necessary for a fair
     presentation of the financial position of the Company as of March 31, 2006
     and the results of operations and cash flows for the interim periods
     indicated in conformity with generally accepted accounting principles
     applicable to interim periods. Accordingly, certain information and
     footnote disclosures normally included in annual financial statements
     prepared in accordance with generally accepted accounting principles have
     been condensed or omitted. These financial statements should be read in
     conjunction with the audited financial statements and notes thereto of the
     Company for the year ended December 31, 2005 that are included in the
     Company's Form 10-KSB filed with the Securities and Exchange Commission on
     March 30, 2006 (the "2005 10-KSB"). The results of operations presented are
     not necessarily indicative of the results to be expected for future
     quarters or for the year ending December 31, 2006.

NOTE 2:-  STOCK-BASED COMPENSATION

     In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
     Payment." SFAS No. 123(R) which requires the Company to measure all
     employee stock-based compensation awards using a fair value method and
     record such expense in its consolidated financial statements. In March
     2005, the SEC issued Staff Accounting Bulletin (SAB) 107, which provides
     the Staff's views regarding interactions between SFAS No. 123(R) and
     certain SEC rules and regulations and provides interpretations of the
     valuation of share-based payments for public companies. The adoption of
     SFAS No. 123(R) requires additional accounting related to the income tax
     effects and additional disclosure regarding the cash flow effects resulting
     from share-based payment arrangements. The adoption of SFAS No. 123(R) in
     the fiscal quarter ended March 31, 2006, had a material impact on the
     Company's consolidated results of operations, financial position and
     statement of cash flows. Inksure adopted the provisions of SFAS No. 123(R),
     "Share-Based Payment". SFAS No. 123(R) establishes accounting for
     stock-based awards exchanged for employee services. Accordingly,
     stock-based compensation cost is measured at grant date, based on the fair
     value of the award, and is recognized as expense over the employee
     requisite service period. The Company previously applied Accounting
     Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
     Employees," and related Interpretations and provided the required pro forma
     disclosures of SFAS No. 123, "Accounting for Stock-Based Compensation".

     PRIOR TO THE ADOPTION OF SFAS NO. 123(R)

     Prior to the adoption of SFAS No. 123(R), the Company provided the
     disclosures required under SFAS No. 123, "Accounting for Stock-Based
     Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based
     Compensation - Transition and Disclosures."

     The pro-forma information for the three months ended March 31, 2005 was as
     follows:


                                       7
<PAGE>


                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                                  --------
                                                                    2005
                                                                  --------
                                                                  UNAUDITED
                                                                  --------


Net loss, as reported                                             $   (454)
Deduct: Total stock-based compensation expense determined under
  fair value method for all awards                                     (76)
                                                                  --------

Pro forma net loss                                                $   (530)
                                                                  ========

Basic and diluted net loss per share, as reported                 $  (0.03)
                                                                  ========

Basic and diluted net loss per share, pro forma                   $  (0.04)
                                                                  ========


                                       8
<PAGE>


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     In this section, "Management's Discussion and Analysis or Plan of
Operation," references to "we," "us," "our," and "ours" refer to InkSure
Technologies, Inc. and its consolidated subsidiaries.

     This Quarterly Report on Form 10-QSB contains statements that may
constitute "forward-looking statements" within the meaning, and made pursuant to
the Safe Harbor provisions, of the Private Securities Litigation Reform Act of
1995. Such statements are based on management's current expectations and are
subject to a number of risks and uncertainties, including, but not limited to,
the difficulty inherent in operating an early-stage company in a new and rapidly
evolving market, market and economic conditions, the impact of competitive
products, product demand and market acceptance risks, changes in product mix,
costs and availability of raw materials, fluctuations in operating results,
delays in development of highly complex products, risk of customer contract or
sales order cancellations and other risks detailed from time to time in our
filings with the Securities and Exchange Commission. These risks and
uncertainties could cause our actual results to differ materially from those
described in the forward-looking statements. Any forward-looking statement
represents our expectations or forecasts only as of the date it was made and
should not be relied upon as representing its expectations or forecasts as of
any subsequent date. Except as required by law, we undertake no obligation to
correct or update any forward-looking statement, whether as a result of new
information, future events or otherwise, even if our expectations or forecasts
change.

     The following discussion and analysis should be read in conjunction with
the financial statements, related notes and other information included in this
Quarterly Report on Form 10-QSB.

     OVERVIEW

     We specialize in comprehensive security solutions, designed to protect
branded products and documents of value from counterfeiting, fraud, and
diversion. By creating "Smart Protection" systems from proprietary
machine-readable authentication technologies, we help companies and
organizations worldwide regain control over their most valuable assets, their
products, their reputation and their revenues. We employ a team of experts in
the fields of material science, electro-optics and software. We utilize
cross-disciplinary technological innovations to implement customized and cost
efficient security systems for data and asset integrity within the customer'
existing infrastructure and environment.

     Our SmartInk(TM) solutions enable authentication and tracking of documents
and products by adding special chemical markers to standard inks and coatings.
The combination of markers, inks and materials produce electro-optic
"signatures", unique codes that are seamlessly incorporated into the printed
media used by the customer. Proprietary computerized readers, available in
hand-held, stationary and modular kit configurations, quickly verify these codes
by manual or automatic operation. By focusing on customer driven solutions, we
are able to offer added value through enhanced reader functionality, including
high-speed automatic sorting, one-to-many code matching, first and second level
track and trace, code activation at the point of distribution and detrimental
authentication for debit applications. The inherent flexibility of our
technology also enables overlaying the machine-readable codes onto holograms and
other overt features, resulting in multi-layered security that is both effective
and economical.


                                       9
<PAGE>


     FACTORS AFFECTING FUTURE RESULTS

     INDUSTRY AND ECONOMIC FACTORS: Our operations and earnings are affected by
local, regional and global events or conditions that affect supply and demand
for products and services. These events or conditions are generally not
predictable and include, among other things, general economic growth rates and
the occurrence of economic recessions; the development of new supply sources;
supply disruptions; technological advances, including advances in security
technology and advances in technology relating to security usage; changes in
demographics, including population growth rates and consumer preferences; and
the competitiveness of alternative security sources or product substitutes.
Currently, the economy in general is suffering. As a result, raising capital has
become extremely difficult, and there is pressure on the pricing of our products
and services.

     COMPETITIVE FACTORS: The brand and document protection industry is
competitive. There is competition with the traditional document protection
suppliers (mainly protection for bank notes) and also with other emergent "next
generation" technology providers. We compete with other firms in the sale and
purchase of various products and services in many national and international
markets and employ all methods of competition, which are lawful and appropriate
for such purposes. We believe that a key component of our competitive position
is our technology.

     POLITICAL FACTORS: Our operations and earnings have been, and may in the
future be, affected from time to time in varying degree by political instability
and by other political developments and laws and regulations, such as forced
divestiture of assets; restrictions on production; imports and exports; war or
other international conflicts; civil unrest and local security concerns that
threaten the safe operation of our facilities, particularly those that are
located in Israel; price controls; expropriation of property; and the
cancellation of contract rights. Both the likelihood of such occurrences and
their overall effect upon us vary greatly from country to country and are not
predictable.

     PROJECT FACTORS: In addition to the factors cited above, the advancement,
cost and results of particular projects depend on the outcome of negotiations
with potential partners, governments, suppliers, customers or other third
parties; changes in operating conditions or costs; and the occurrence of
unforeseen technical difficulties.

     REVENUES

     We are currently concentrating on entering and implementing large-scale
projects. These potential contracts are subject to a long sales cycle and the
timetable is lengthy for entering and implementing such projects. These projects
involve high volume sales through multiple-year sales contracts. We have
completed several successful field trials during the last year related to these
projects. Our revenues in the first quarter of 2006 consisted of revenues from
(i) our sales agreements for brand protection with two North American customers;
and (ii) ink and readers sales related to projects in Turkey (iii) initial sales
to new customers.. In the first quarter of 2006 approximately 86% of our
revenues were earned from customers located in the United States

     COSTS AND OPERATING EXPENSES

     Costs and operating expenses consist of cost of revenues, research and
development expenses, selling and marketing expenses, general and administrative
expense and depreciation.

     Our cost of revenues consists primarily of materials including taggants and
electronic and optical parts, payments to sub-contractors and compensation costs
for our operations staff.

     Our research and development expenses consist primarily of costs associated
with development of new generic products. These expenses may fluctuate as a
percentage of revenue depending on the projects undertaken during the reporting
period. Since our inception, we have expensed all research and development costs
in each of the periods in which they were incurred.


                                       10
<PAGE>


     Our selling and marketing expenses consist primarily of costs associated
with our direct sales force that have been incurred to attract potential
business customers, professional advisors and commissions. We anticipate that as
we add new customers we will be able to spread these costs over a larger revenue
base and accordingly improve our operating margins.

     Our general and administrative expenses consist primarily of costs related
to compensation and employees benefits of our management (including the costs of
directors' and officers' insurance), legal and accounting fees, as well as the
expenses associated with being a publicly traded company.

     We have not recorded any income tax benefit for net losses and credits
incurred for any period from inception to March 31, 2006. The utilization of
these losses and credits depends on our ability to generate taxable income in
the future. Because of the uncertainty of our generating taxable income, we have
recorded a full valuation allowance with respect to these deferred assets.

     CRITICAL ACCOUNTING POLICIES

     Our financial statements are prepared in accordance with US GAAP. The
significant accounting policies followed in the preparation of the financial
statements, applied on a consistent basis and which have been prepared in
accordance with the historical cost convention, are set forth in Note 2 to the
Consolidated Financial Statements as of December 31, 2005.

     Of these significant accounting policies, certain policies may be
considered critical because they are most important to the portrayal of our
financial condition and results, and they require management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements.

     REVENUE RECOGNITION. Revenues from product sales are recognized in
accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition in
Financial Statements", or SAB No. 104, when delivery has occurred, persuasive
evidence of an agreement exists, the vendor's fee is fixed or determinable, no
further obligation exists and collectability is probable. Delivery is considered
to have occurred upon shipment of products. When a right of return exists, we
defer revenues until the right of return expires. We do not grant a right of
return to our customers.

     Revenues from certain arrangements may include multiple elements within a
single contract. Our accounting policy complies with the provisions of Emerging
Issues Task Force Issue 00-21, "Revenue Arrangements with Multiple Deliverables"
("EITF 00-21"), relating to the separation of multiple deliverables into
individual accounting units with determinable fair value.

     In cases where we have partial delivery at the cut off dates and no fair
value exist for the undelivered elements revenues are being deferred and
recognized only at the point where the entire arrangement has been delivered.

     INVENTORIES. Inventories are stated at the lower of cost or net realizable
value. Cost is determined by calculating raw materials using the "first in,
first out" method, work in process and finished products on the basis of direct
manufacturing costs with the addition of allocable indirect manufacturing costs.

     OTHER ACCRUED EXPENSES. We also maintain other accrued expenses. These
accruals are based on a variety of factors including past experience and various
actuarial assumptions and, in many cases, require estimates of events not yet
reported to us. If future experience differs from these estimates, operating
results in future periods would be impacted.


                                       11
<PAGE>


THREE MONTHS ENDED MARCH 31, 2006 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2005

     REVENUES. Revenues consist of gross sales of our products. We are currently
concentrating on entering and implementing large-scale projects. These potential
contracts are subject to a long sales cycle and fluctuated timetable for
entering and implementing such projects. In the three months ended March 31,
2006, we had revenue of $538,000, compared to $494,000 in the three months ended
March 31, 2005, primarily due to the increase of demand from our customers
located in the United States. Revenues increased by $44,000, or 8.9%, in the
three months ended March 31, 2006 compared to the three months ended March 31,
2005.

     COST OF REVENUE. Our cost of revenue consists of materials, sub-contractors
and compensation costs. Cost of revenues decreased by $105,000, or 34.8%, to
$197,000 in the three months ended March 31, 2006 from $302,000 in the three
months ended March 31, 2005. The decrease in cost of revenues is mainly due to
the decrease of cost as a percentage of revenues. Cost of revenues as a
percentage of sales was 36.6% in the three months ended March 31, 2006, compared
with 61% in the three months ended March 31, 2005. This decrease is due to the
fact that we sold more ink and less readers during the last quarter, and such
ink have a lower cost of sales compared to the cost of sales of our readers.

     Cost of revenue included a non cash expenses of $1,000 related to the
implementation of SFAS No. 123(R).

     RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist primarily of compensation costs attributable to employees engaged in
ongoing research and development activities, development-related raw materials
and sub-contractors, and other related costs. Research and development expenses
increased by $49,000, or 26.9%, to $231,000 in the three months ended March 31,
2006 from $182,000 in the three months ended March 31, 2005. This increase in
research and development expenses is primarily related to a non cash expenses of
$33,000 as a result of the implementation of SFAS No. 123(R) and higher research
and development expenses related to our RFID project.

     SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist
primarily of costs relating to compensation attributable to employees engaged in
sales and marketing activities, promotion, advertising, trade shows and
exhibitions, sales support, travel, commissions and related expenses. Selling
and marketing expenses increased by $166,000, or 47.4%, to $516,000 in the three
months ended March 31, 2006 from $350,000 in the three months ended March 31,
2005. This increase in selling and marketing expenses was primarily due to a non
cash expenses of $79,000 as a result of the implementation of SFAS No. 123(R)
and higher sales and marketing expenses related to the expansion of our
marketing team in the US.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of compensation costs for administration, finance and general
management personnel, insurance, legal, accounting and administrative costs.
General and administrative expenses increased by $246,000, or 196.8% to $371,000
in the three months ended March 31, 2006 from $125,000 in the three months ended
March 31, 2005. The increase was primarily related to a non cash expenses of
$207,000 as a result of the implementation of SFAS No.123(R) and higher legal
expenses.

     FINANCIAL INCOME, NET. Financial income, net increased by $161,000, or
1463.6% to $172,000 in the three months ended March 31, 2006 from $11,000 in the
three months ended March 31, 2005. This increase is mainly due to non cash
financial income related to the convertible note of $166,000.and to changes in
the exchange rate between the United States Dollar and the Israeli New Shekel.


                                       12
<PAGE>


     NET LOSS. We had a net loss of $605,000 in the three months ended March 31,
2006, compared with a net loss of $454,000 in the three months ended March 31,
2005. The increase in net loss in the three months ended March 31, 2006 in
comparison with the three months ended March 31, 2005 is attributable mainly to
the a non cash expenses of $320,000 as a result of the implementation of SFAS
No. 123(R) . Without it, our net loss would have been decreased by $169,000
mainly because of higher financial income.

     LIQUIDITY AND CAPITAL RESOURCES

     We have incurred substantial losses since our inception in May 2000. We had
an accumulated deficit of approximately $12,592,000 at March 31, 2006, and had a
working capital (current assets less current liabilities) of approximately
$4,681,000 at March 31, 2006.

     Capital expenditures were approximately $48,000 in the three months ended
March 31, 2006 and $4,000 in the three months ended March 31, 2005. We do not
have any material commitments for capital expenditures for the year ending
December 31, 2006.

     At March 31, 2006, we had cash, cash equivalents and short-term deposits of
approximately $4,321,000, compared to $1,341,000 in March 2005. The difference
from March 31, 2006 to March 31, 2005 is due to the issuance of convertible note
with net proceeds of $5,304,000 as such amount is offset by our continuing
investments in research and development and selling and marketing expenses

     We generated negative cash flow from operating activities of approximately
$316,000 in the three months ended March 31, 2006 compared to $303,000 in the
three months ended March 31, 2005. This increase is attributable mainly to the
increase in operating expenses described above.

     We believe that cash generated from operations and cash from the 2005
private placement will provide sufficient cash resources to finance our
operations and the projected expansion of our marketing and research and
development activities for the next twenty-four months. However, if our
operations do not generate cash to the extent currently anticipated, or we grow
more rapidly than currently anticipated, it is possible that we would require
more funds than presently anticipated.

     RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

     We believe that our future success will depend upon our ability to enhance
our existing products and systems and introduce new commercially viable products
and systems addressing the demands of the evolving markets for brand and
document protection. As part of the product development process, we work closely
with current and potential customers, distribution channels and leaders in
certain industry segments to identify market needs and define appropriate
product specifications. Our employees also participate in industry forums in
order to stay informed about the latest industry developments.

     Our research and development expenses were approximately $231,000 in the
three months ended March 31, 2006, compared to $182,000 in the three months
ended March 31, 2005. To date, all research and development expenses have been
charged to operating expense as incurred.

     We currently hold one pending patent in the United States and we have been
issued two patents in Israel relating to our technology of marking documents for
the purpose of authentication.

     With respect to the RFID technology being developed by us, we have applied
for four patents: we have been issued patents for our first application in each
of the United States, France, Germany, Switzerland and the United Kingdom; we
have been issued a patent in the United States for our second application and
hold one pending patent before the European Patent Office; we have been issued a
patent in the United States for our third application and we hold one pending
patent before the European Patent Office; and we have only recently made an
application before the United States Patent and Trademark Office with respect to
our fourth patent application.


                                       13
<PAGE>


     CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     Our contractual obligations and commitments at March 31, 2006 principally
include obligations associated with our future-operating lease obligations and
the lease of several automobiles. Our total future obligation is approximately
$140,000 until 2007. We expect to finance these contractual commitments from
cash on hand and cash generated from operations.

ITEM 3.   CONTROLS AND PROCEDURES

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our principal
executive officer and principal financial officer, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Quarterly Report on Form 10-QSB, have concluded that, based on such evaluation,
our disclosure controls and procedures were adequate and effective to ensure
that material information relating to us, including our consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Quarterly Report on Form 10-QSB was
being prepared.

     (b) CHANGES IN INTERNAL CONTROLS. There were no changes in our internal
control over financial reporting, identified in connection with the evaluation
of such internal control that occurred during our last fiscal quarter, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS.

     We are not currently subject to any material legal proceedings. However, we
may from time to time become a party to legal proceedings arising in the
ordinary course of our business.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

     None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

ITEM 5.   OTHER INFORMATION.

     None.


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<PAGE>


ITEM 6.   EXHIBITS.

(a)  Exhibits.

     The following exhibits are being filed with this Report:

Exhibit
Number         Description
------         -----------

31.1*          Certification of Principal Executive Officer Pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

31.2*          Certification of Principal Financial Officer Pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.1*          Certification of Principal Executive and Financial Officers
               Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
               U.S.C. Section 1350.

* Filed herewith

(b)  Reports on Form 8-K.

     During the three months ended March 31, 2006, we filed no current reports
on Form 8-K.


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<PAGE>


                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                    INKSURE TECHNOLOGIES INC.

Dated: As of May 11, 2006           By: /S/ Elie Housman
                                    --------------------
                                    Elie Housman
                                    Chief Executive Officer
                                    (Principal Executive Officer)

Dated: As of May 11, 2006           By: /S/ Eyal Bigon
                                    ------------------
                                    Eyal Bigon
                                    Chief Financial Officer,
                                    Secretary, and Treasurer
                                    (Principal Financial and Accounting Officer)