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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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Form 10-QSB



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(Mark One)

|x | Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended: March 31, 2006



| ̈ | Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------

For the transition period from  to
.

Commission File No: 0-30717



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e-SMART TECHNOLOGIES, INC.

(Name of small business in its charter)



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|                                               |  |                       
|---------------------------------------------- |  | ----------------------
|Nevada                                         |  | 88-0409261            
|(State or other jurisdiction of incorporation) |  | (IRS Employer Id. No.)

526 West 26thStreet, Suite 710, New York, NY 10001

(Address of Principal Office including
Zip Code)

Issuers telephone Number: (212) 727-3790



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Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 90 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

State the number of shares outstanding of each of the issuers classes of common equity, as
of the latest practicable date:

Common Stock, $.001 par value, 200,000,000 shares at March 31, 2006.

Transitional Small Business Disclosure Format (Check one):    Yes ̈No  x



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e-SMART TECHNOLOGIES, INC.

FORM 10-QSB - QUARTER ENDED MARCH 31, 2006

INDEX



|        |  |                                                                                                                              |  |       
|------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | ------
|        |  |                                                                                                                              |  | Page  
|PART I  |  | FINANCIAL INFORMATION                                                                                                        |  | 2     
|        |  |                                                                                                                             
|Item 1. |  | Financial Statements                                                                                                         |  | 2     
|        |  | Condensed Consolidated Balance Sheets at March 31, 2006 and December 31, 2005                                                |  | 3     
|        |  | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2006 and 2005                           |  | 4     
|        |  | Condensed Consolidated Statements of Shareholders Equity (Deficiency) for the Period January 1, 2005 through March 31, 2006 |  | 5     
|        |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005                           |  | 6     
|        |  | Notes to the Condensed Consolidated Financial Statements                                                                     |  | 7     
|        |  |                                                                                                                             
|Item 2. |  | Managements Discussion and Analysis                                                                                         |  | 8     
|        |  |                                                                                                                             
|Item 3. |  | Controls and Procedures                                                                                                      |  | 10    
|        |  |                                                                                                                             
|PART II |  | OTHER INFORMATION                                                                                                            |  | 11    
|        |  |                                                                                                                             
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                             |  | 11    
|        |  | SIGNATURES                                                                                                                   |  | 11    
|        |  | EXHIBITS                                                                                                                     |  | 12 -13

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The unaudited condensed consolidated balance sheet of the Registrant at
March 31, 2006, the audited balance sheet at December 31, 2005, and the unaudited condensed consolidated statements of operations, shareholders equity (deficiency), and cash flows for the three months ended March 31, 2006 and
March 31, 2005 follow. The unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to a fair statement of the results for the periods presented.



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e-SMART TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

[Unaudited]



|                                                                                     |  |                |             |   |                  |   |             |  
|------------------------------------------------------------------------------------ |  | -------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                     |  | March 31, 2006 |             |   | December 31,2005 |  
|Assets                                                                               |  |                |             |   |                  |   |             |  
|Current assets -                                                                     |  |                |             |   |                  |   |             |  
|Cash                                                                                 |  | $              | 135,183     |   |                  | $ | 164,584     |  
|Prepaid expenses                                                                     |  |                | 2,542       |   |                  |   | 2,692       |  
|                                                                                     |  |                |             |   |                  |   |             |  
|Total current assets                                                                 |  |                | 137,725     |   |                  |   | 167,276     |  
|                                                                                     |  |               
|Leasehold Improvements and Equipment, net                                            |  |                | 48,507      |   |                  |   | 44,701      |  
|License of Super Smart Card  Technology, net                                        |  |                | 97,682      |   |                  |   | 99,290      |  
|Officers advances                                                                   |  |                | 35,523      |   |                  |   | 51,674      |  
|Lease deposit                                                                        |  |                | 77,195      |   |                  |   | 73,484      |  
|                                                                                     |  |                |             |   |                  |   |             |  
|Total assets                                                                         |  | $              | 396,632     |   |                  | $ | 436,425     |  
|                                                                                     |  |                |             |   |                  |   |             |  
|Liabilities and Shareholders Equity (Deficiency)                                    |  |                |             |   |                  |   |             |  
|                                                                                     |  |               
|Current liabilities -                                                                |  |                |             |   |                  |   |             |  
|Accounts payable                                                                     |  | $              | 796,481     |   |                  | $ | 640,197     |  
|Note payable - InterMarket Ventures, a related party                                 |  |                | 450,000     |   |                  |   | 450,000     |  
|Notes payable - other                                                                |  |                | 47,500      |   |                  |   | 47,500      |  
|Due Associated Business Group, a related party                                       |  |                | 12,427      |   |                  |   | 12,427      |  
|Accrued officers compensation                                                       |  |                | 395,996     |   |                  |   | 371,060     |  
|Accrued expenses                                                                     |  |                | 216,633     |   |                  |   | 170,932     |  
|                                                                                     |  |                |             |   |                  |   |             |  
|Total current liabilities                                                            |  |                | 1,919,037   |   |                  |   | 1,692,116   |  
|Note Payable - InterMarket Ventures, a related party                                 |  |                | 3,025,046   |   |                  |   | 2,274,722   |  
|                                                                                     |  |                |             |   |                  |   |             |  
|Total liabilities                                                                    |  |                | 4,944,083   |   |                  |   | 3,966,838   |  
|                                                                                     |  |                |             |   |                  |   |             |  
|Shareholders Equity (Deficiency) -                                                  |  |                |             |   |                  |   |             |  
|Common shares, $.001 par, 200,000,000 authorized, 200,000,000 issued and outstanding |  |                | 200,000     |   |                  |   | 200,000     |  
|Additional paid in capital                                                           |  |                | 63,777,497  |   |                  |   | 63,777,497  |  
|Retained deficit                                                                     |  |                | (68,524,948 | ) |                  |   | (67,507,910 | )
|                                                                                     |  |                |             |   |                  |   |             |  
|Total shareholders deficiency                                                       |  |                | (4,547,451  | ) |                  |   | (3,530,413  | )
|                                                                                     |  |                |             |   |                  |   |             |  
|Total liabilities and shareholders (deficiency)                                     |  | $              | 396,632     |   |                  | $ | 436,425     |  
|                                                                                     |  |                |             |   |                  |   |             |  

See notes to condensed consolidated financial statements.



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e-SMART TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

[Unaudited]



|                                                             |  |                              |             |   |      |   |             |  
|------------------------------------------------------------ |  | ---------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                             |  | Three Months Ended March 31, |            
|                                                             |  | 2006                         |             |   | 2005 |  
|Net Revenue                                                  |  | $                            |            |   |      | $ |            |  
|                                                             |  |                             
|Cost of revenue                                              |  |                              |            |   |      |   |            |  
|                                                             |  |                              |             |   |      |   |             |  
|Gross profit                                                 |  |                              |            |   |      |   |            |  
|Operating expenses:                                          |  |                              |             |   |      |   |             |  
|                                                             |  |                              |             |   |      |   |             |  
|Research and development                                     |  |                              | 152,475     |   |      |   | 78,723      |  
|Selling, general and administrative                          |  |                              | 817,515     |   |      |   | 712,112     |  
|Interest                                                     |  |                              | 46,008      |   |      |   | 20,415      |  
|                                                             |  |                              |             |   |      |   |             |  
|Total operating expenses                                     |  |                              | 1,015,998   |   |      |   | 811,250     |  
|                                                             |  |                              |             |   |      |   |             |  
|Loss before taxes                                            |  |                              | (1,015,998  | ) |      |   | (811,250    | )
|                                                             |  |                             
|Income tax                                                   |  |                              | 1,040       |   |      |   | 250         |  
|                                                             |  |                              |             |   |      |   |             |  
|Net Loss                                                     |  | $                            | (1,017,038  | ) |      | $ | (811,500    | )
|                                                             |  |                              |             |   |      |   |             |  
|Net income (loss) per common share - basic and fully-diluted |  | $                            | (0.01       | ) |      | $ | (0.01       | )
|                                                             |  |                              |             |   |      |   |             |  
|Weighted average number of common shares outstanding         |  |                              | 200,000,000 |   |      |   | 173,535,944 |  
|                                                             |  |                              |             |   |      |   |             |  

See notes to condensed consolidated financial statements.



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e-SMART TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF

SHAREHOLDERS IMPAIRMENT



|                           |  |              |  |                            |         |                     |   |            |       |   |             |   |  |   |            |  
|-------------------------- |  | ------------ |  | -------------------------- | ------- | ------------------- | - | ---------- | ----- | - | ----------- | - |  | - | ---------- | -
|                           |  | Common Stock |  | Additional Paid-in Capital |         | Accumulated Deficit |   |            | Total |  
|                           |  | Shares       |  | Amount                     |         |                     |  
|Balance, January 1, 2005   |  | 173,535,944  |  | $                          | 173,536 |                     | $ | 61,053,801 |       | $ | (62,642,602 | ) |  | $ | (1,415,265 | )
|Shares issued for cash     |  | 26,464,056   |  |                            | 26,464  |                     |   | 2,723,696  |       |   |            |   |  |   | 2,750,160  |  
|Net loss                   |  |             |  |                            |        |                     |   |           |       |   | (4,865,308  | ) |  |   | (4,865,308 | )
|                           |  |              |  |                            |         |                     |   |            |       |   |             |   |  |   |            |  
|Balance, December 31, 2005 |  | 200,000,000  |  |                            | 200,000 |                     |   | 63,777,497 |       |   | (67,507,910 | ) |  |   | (3,530,413 | )
|Unaudited                  |  |              |  |                            |         |                     |   |            |       |   |             |   |  |   |            |  
|Balance January 1, 2006    |  | 200,000,000  |  |                            | 200,000 |                     |   | 63,777,497 |       |   | (67,507,910 | ) |  |   | (3,530,413 | )
|Net loss                   |  |             |  |                            |        |                     |   |           |       |   | (1,017,038  | ) |  |   | (1,017,038 | )
|                           |  |              |  |                            |         |                     |   |            |       |   |             |   |  |   |            |  
|Balance, March 31, 2006    |  | 200,000,000  |  | $                          | 200,000 |                     | $ | 63,777,497 |       | $ | (68,524,948 | ) |  | $ | (4,547,451 | )
|                           |  |              |  |                            |         |                     |   |            |       |   |             |   |  |   |            |  

See notes to condensed consolidated financial statements.



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e-SMART TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

[Unaudited]



|                                                                            |  |                       |            |   |      |   |          |  
|--------------------------------------------------------------------------- |  | --------------------- | ---------- | - | ---- | - | -------- | -
|                                                                            |  | Three Ended March 31, |           
|                                                                            |  | 2006                  |            |   | 2005 |  
|Cash flows from Operating Activities -                                      |  |                       |            |   |      |   |          |  
|Net loss                                                                    |  | $                     | (1,017,038 | ) |      | $ | (811,500 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                       |            |   |      |   |          |  
|Depreciation and amortization                                               |  |                       | 3,511      |   |      |   | 2,200    |  
|Changes in Assets and Liabilities -                                         |  |                       |            |   |      |   |          |  
|(Increase) decrease in prepaid expenses                                     |  |                       | 150        |   |      |   | 13,905   |  
|(Increase) decrease in officers advances                                    |  |                       | 16,151     |   |      |   |         |  
|Increase (decrease) in accounts payable                                     |  |                       | 156,284    |   |      |   | 15,360   |  
|Increase (decrease) in accrued expenses                                     |  |                       | 70,637     |   |      |   | 91,545   |  
|                                                                            |  |                       |            |   |      |   |          |  
|Net Cash Used in Operating Activities                                       |  |                       | (770,305   | ) |      |   | (688,490 | )
|                                                                            |  |                       |            |   |      |   |          |  
|Cash Flows from Investing Activities -                                      |  |                       |            |   |      |   |          |  
|Leasehold and improvements                                                  |  |                       | (5,709     | ) |      |   |         |  
|Addition to lease deposit                                                   |  |                       | (3,711     | ) |      |   |         |  
|                                                                            |  |                       |            |   |      |   |          |  
|Net Cash Used in Investing Activities                                       |  |                       | (9,420     | ) |      |   |         |  
|                                                                            |  |                       |            |   |      |   |          |  
|Cash Flows from Financing Activities -                                      |  |                       |            |   |      |   |          |  
|Advances from InterMarket Ventures, a related party                         |  |                       | 750,324    |   |      |   | 655,600  |  
|                                                                            |  |                       |            |   |      |   |          |  
|Net Cash Provided by Financing Activities                                   |  |                       | 750,324    |   |      |   | 655,600  |  
|                                                                            |  |                       |            |   |      |   |          |  
|Net Increase (decrease) in Cash                                             |  |                       | (29,401    | ) |      |   | (32,890  | )
|Cash at Beginning of Period                                                 |  |                       | 164,584    |   |      |   | 42,857   |  
|                                                                            |  |                       |            |   |      |   |          |  
|Cash at End of Period                                                       |  | $                     | 135,183    |   |      | $ | 9,967    |  
|                                                                            |  |                       |            |   |      |   |          |  

See notes to condensed consolidated financial statements.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of the Registrant and those of its wholly-owned subsidiary e-Smart Korea, Inc., and have
been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended March 31, 2006
and 2005, are not necessarily indicative of the results that may be expected for the respective years ended December 31, 2006 and 2005.

The unaudited
condensed consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes included in the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005,
supplemented by the notes included herein.

The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Note 2  Letter of Comment

From time to time the Staff of the Securities and Exchange Commissions Division of Corporate Finance may examine the periodic reports of a Registrant for compliance
and form (a Letter of Comment). In January 2006, the Company received a Letter of Comment relating to its Annual Report on Form 10-KSB for the year ended December 31, 2004, its Quarterly Reports on Form 10-QSB for the quarters
ending March 31, 2005, June 30, 2005, and September 30, 2005, and its Form 8-K Reports filed August 4, 2005 and November 21, 2005. During February 2006, the Company filed a preliminary response to the Letter of Comment
and expects to file its complete response on or before July 23, 2006.

Note 3  Related Party Transactions

Common Ownership

Pursuant to the
Companys Plan of Reorganization and subject to the filing of an Amendment increasing its authorized common shares, approximately 68% of the Registrants outstanding common shares are owned by IVI Smart Technologies, Inc., a



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Delaware corporation (the Licensor), that is the sole owner of all of the Super Smart Card technology
licensed to the Registrant in November 2000, August 2001, and September 2001, for a 20-year term for commercialization throughout China, the remainder of Asia exclusive of China, and the United States of America, respectively. In addition, the
Licensors parent, InterMarket Ventures, Inc., a Utah corporation (Ventures) has advanced the Registrant $2,274,722 in 6% term notes and $450,000 in 5% demand notes at various dates throughout 2005, and $3,025,046 and $450,000,
respectively, during the three months ended March 31, 2006. Mary A. Grace, the Registrants President and Chief Executive Officer, is a director, executive officer and principal stockholder of the Licensor and Ventures. Tamio Saito, the
Registrants Chief Technology Officer, is also an executive officer and principal stockholder of the Licensor and Ventures. The Licensor is in a position to materially influence the direction of the Registrant, its efforts in raising the
additional capital critical to its success, and the strategies employed in commercialization of the licensed technology, assuming the Registrants business plan is ultimately successful.

Note 4  Going Concern

The Registrants condensed
consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

As shown in the accompanying financial statements, the Registrant had negative working capital at March 31, 2006, of $1,781,312. In addition, the Registrant has
incurred an accumulated deficit of $(68,524,948) through March 31, 2006. The Registrant is dependent upon the efforts of its management to raise proceeds from continued debt or equity placements to sustain the research and development and
ultimate commercialization of their respective interests in the Super Smart Card technology. The Registrants ability to continue to receive the necessary level of funding support through the efforts of its management cannot be
guaranteed. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Registrant is unable to continue as a going concern.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS

The following discussion contains forward-looking statements regarding
the Registrant, its business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause the Registrants actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include the Registrants ability to successfully exploit its licensed technology, develop new
products and new markets for its licensed technology; the impact of competition on the Registrants proposed operations, changes in law or regulatory requirements that adversely affect or preclude customers from using the Registrants
licensed technology, delays in the Registrants introduction of new products or services, and failure by the Registrant to keep pace with emerging technologies.



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When used in this discussion, words such as believes, anticipates, expects,
intends, and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. The Registrant undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully
review and consider the various disclosures made by the Registrant in this report and other reports filed with the Securities and Exchange Commission (SEC) that attempt to advise interested parties of the risks and factors that may
affect the Registrants business.

Three Months Ended March 31, 2006 and March 31, 2005

Revenues Since obtaining the license to the Super Smart Card technology in November 2000, the Registrant has been engaged in research and development
efforts to enhance and broaden the technologys applications and in exploring the global market for its optimal commercialization. In the opinion of management, the Registrants Super Smart Card is ready for commercialization. This
fact notwithstanding, the Registrant is still in its development stage for accounting purposes as it has not experienced revenues in either of the three month periods ended March 31, 2006 (1Q06) or March 31, 2005
(1Q05).

Cost of Revenues  Consistent with the Registrant still being in its development stage, it did not experience cost of
revenues in either 1Q06 or 1Q05.

Operating Expenses - Operating expenses were $1,015,998 for 1Q06 compared to $811,250 for 1Q05 resulting in an
increase of $204,748 or 25%. The principal factors underlying this increase were increased marketing and research and development expenses as we get closer to the commercialization of our technologies.

Loss Before Taxes and Income Taxes As a result of the foregoing, loss before taxes for 1Q06 was $(1,015,998) compared to $(811,250) for 1Q05 upon which the
Registrants provision for taxes in both periods was solely attributable to minimum state franchise taxes payable.

Net Loss  Consistent
with the foregoing analysis, the Registrant reported a net loss of $(1,017,038) or $(0.01) per share for 1Q06, compared to a net loss of $(811,250) or $(0.01) per share for 1Q05, based upon weighted average shares outstanding of 200,000,000 and
173,535,944, respectively.

Liquidity and Capital Resources - The Registrant has limited working capital and is dependent upon the efforts of its
management in raising proceeds derived from private securities offerings for funds for the continuation of its proposed smart card business. Currently, the Registrant does not have any existing credit facilities or similar bank borrowing
arrangements. The Registrant will need to obtain additional financing in order to carry out its entire business plan. There can be no assurance that any additional financing will be available to the Registrant on acceptable terms, if at all. If the



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Registrant raises additional funds by issuing additional equity securities, further dilution to existing equity holders
will result. If adequate additional funds are not available, the Registrant may be required to curtail significantly its long term business objectives and the Registrant still may not be able to transition out of the development stage,
notwithstanding that the BVS2 systems and Super Smart Card and other smart card system technologies are ready for commercialization.

At
March 31, 2006, the Registrant had current assets of $137,725 (including cash of $135,183, current liabilities of $1,919,037, and an accumulated deficit of $(68,524,948). The Registrant periodically evaluates its liquidity requirements, capital
needs and availability of capital resources in view of its plans for commercialization of its technology, and other operating cash needs. In the opinion of Registrants management, the Registrant is entirely dependent upon a material infusion
of capital from the sale of securities to its accredited investors during the next several months in order to sustain its current developmental efforts, commence commercial operations, and ultimately transition out of the development stage.

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

During the quarter ended March 31, 2006, the Registrant continued to implement controls and procedures designed to ensure that information
required to be disclosed in the reports that the Registrant files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), are recorded, processed, summarized and reported within the time periods specified in
the rules and forms of the SEC. Based upon their evaluation of the controls and procedures implemented within 90 days of the filing date of this Quarterly Report, the Chief Executive and Chief Financial Officer of the Registrant concluded that the
Registrants disclosure controls and procedures have been improved during the past three months. Such officer also concluded that the Registrants controls and procedures will likely equal or exceed those required of the Registrant within
one or two more operating quarters.

Changes in Internal Controls

The Registrant made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the
evaluation of those controls by the Chief Executive and Chief Financial Officer.



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PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

31.1  Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Reports on Form 8-K: None.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

e-Smart Technologies, Inc.



|    |  |                                      
|--- |  | -------------------------------------
|By: |  | /s/ Mary A. Grace                    
|    |  | Chief Executive Officer, and Director
|    | 
|By: |  | /s/ Mary A. Grace                    
|    |  | Chief Financial Officer              

Dated: June 27, 2006



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