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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: June 30, 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 ̈

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 sharesat June 30,
2006.

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

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes ̈No  x



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e-SMART TECHNOLOGIES, INC. & SUBSIDARIES

FORM 10-QSB - QUARTER ENDED JUNE 30, 2006

INDEX



|        |  |                                                                                                                             |  |     
|------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                                             |  | Page
|PART I  |  | FINANCIAL INFORMATION                                                                                                       |  | 2   
|        |  |                                                                                                                            
|Item 1. |  | Financial Statements                                                                                                        |  | 2   
|        |  | Condensed Consolidated Balance Sheets at June 30, 2006 and December 31, 2005                                                |  | 3   
|        |  | Condensed Consolidated Statements of Operations for the Six Months and Three Months Ended June 30, 2006 and 2005            |  | 4   
|        |  | Condensed Consolidated Statements of Shareholders Equity (Deficiency) for the Period January 1, 2005 through June 30, 2006 |  | 5   
|        |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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                                                                                                           |  | 12  
|        |  |                                                                                                                            
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                            |  | 12  
|        |  | SIGNATURES                                                                                                                  |  | 12  
|        |  | EXHIBITS                                                                                                                    |  |     

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The unaudited condensed consolidated balance sheet of the Registrant at
June 30, 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 six months and three months ended
June 30, 2006 and June 30, 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. & SUBSIDARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

[Unaudited]





|                                                                                           |  |               |             |   |                   |   |             |  
|------------------------------------------------------------------------------------------ |  | ------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                           |  | June 30, 2006 |             |   | December 31, 2005 |  
|Assets                                                                                     |  |               |             |   |                   |   |             |  
|Current assets -                                                                           |  |               |             |   |                   |   |             |  
|Cash                                                                                       |  | $             | 399,149     |   |                   | $ | 164,584     |  
|Prepaid expenses                                                                           |  |               | 6,385       |   |                   |   | 2,692       |  
|                                                                                           |  |               |             |   |                   |   |             |  
|Total current assets                                                                       |  |               | 405,534     |   |                   |   | 167,276     |  
|                                                                                           |  |              
|Equipment, net                                                                             |  |               | 50,370      |   |                   |   | 44,701      |  
|License of Super Smart Card  Technology, net                                              |  |               | 96,075      |   |                   |   | 99,290      |  
|Officers advances                                                                         |  |               | 19,985      |   |                   |   | 51,674      |  
|Lease deposits                                                                             |  |               | 81,319      |   |                   |   | 73,484      |  
|                                                                                           |  |               |             |   |                   |   |             |  
|Total assets                                                                               |  | $             | 653,283     |   |                   | $ | 436,425     |  
|                                                                                           |  |               |             |   |                   |   |             |  
|Liabilities and Shareholders Equity (Deficiency)                                          |  |               |             |   |                   |   |             |  
|                                                                                           |  |              
|Current liabilities -                                                                      |  |               |             |   |                   |   |             |  
|Accounts payable                                                                           |  | $             | 811,494     |   |                   | $ | 640,197     |  
|Note payable  IVI Smart Technologies, Inc., a related party                               |  |               | 450,000     |   |                   |   | 450,000     |  
|Notes payable  others                                                                     |  |               | 47,500      |   |                   |   | 47,500      |  
|Due Associated Business Group, a related party                                             |  |               | 12,427      |   |                   |   | 12,427      |  
|Accrued officers compensation                                                             |  |               | 448,870     |   |                   |   | 371,060     |  
|Accrued expenses                                                                           |  |               | 272,093     |   |                   |   | 170,932     |  
|                                                                                           |  |               |             |   |                   |   |             |  
|Total current liabilities                                                                  |  |               | 2,042,384   |   |                   |   | 1,692,116   |  
|Note payable  IVI Smart Technologies, Inc., a related party                               |  |               | 4,269,855   |   |                   |   | 2,274,722   |  
|                                                                                           |  |               |             |   |                   |   |             |  
|Total liabilities                                                                          |  |               | 6,312,239   |   |                   |   | 3,966,838   |  
|                                                                                           |  |               |             |   |                   |   |             |  
|Shareholders Equity (Deficiency) -                                                        |  |               |             |   |                   |   |             |  
|Common stock, $.001 par, 200,000,000 shares authorized, 200,000,000 issued and outstanding |  |               | 200,000     |   |                   |   | 200,000     |  
|Additional paid in capital                                                                 |  |               | 63,777,497  |   |                   |   | 63,777,497  |  
|Retained earnings (deficiency)                                                             |  |               | (69,636,453 | ) |                   |   | (67,507,910 | )
|                                                                                           |  |               |             |   |                   |   |             |  
|Total shareholders equity (deficiency)                                                    |  |               | (5,658,956  | ) |                   |   | (3,530,413  | )
|                                                                                           |  |               |             |   |                   |   |             |  
|Total liabilities and shareholders equity (deficiency)                                    |  | $             | 653,283     |   |                   | $ | 436,425     |  
|                                                                                           |  |               |             |   |                   |   |             |  

See notes to condensed consolidated financial statements.



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e-SMART TECHNOLOGIES, INC. & SUBSIDARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

[Unaudited]







|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|--------------------------------------------------- |  | ------------------------- | ----------- | - | --------------------------- | - | ----------- | ----------------------------------------------------- |  | - | ----------- | - |  | ---- | ----------- | - |  | - | ----------- | -
|                                                    |  | Six Months Ended June 30, |             |   | Three Months Ended June 30, |   |             | January 1, 2001 (inception of operations) to June 30, | 
|                                                    |  | 2006                      |             |   | 2005                        |   |             | 2006                                                  |  |   | 2005        |   |  | 2006 |            
|Net Revenue                                         |  | $                         |            |   |                             | $ |            |                                                       |  | $ |            |   |  | $    |            |   |  | $ |            |  
|Cost of revenue                                     |  |                           |            |   |                             |   |            |                                                       |  |   |            |   |  |      |            |   |  |   |            |  
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Gross profit                                        |  |                           |            |   |                             |   |            |                                                       |  |   |            |   |  |      |            |   |  |   |            |  
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Operating expenses:                                 |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Research and development                            |  |                           | 327,574     |   |                             |   | 507,239     |                                                       |  |   | 175,099     |   |  |      | 428,516     |   |  |   | 14,894,308  |  
|General and administrative                          |  |                           | 1,698,461   |   |                             |   | 1,574,714   |                                                       |  |   | 880,946     |   |  |      | 862,602     |   |  |   | 54,458,584  |  
|Interest                                            |  |                           | 101,008     |   |                             |   | 45,640      |                                                       |  |   | 55,000      |   |  |      | 25,225      |   |  |   | 275,761     |  
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Total operating expenses                            |  |                           | 2,127,043   |   |                             |   | 2,127,593   |                                                       |  |   | 1,111,045   |   |  |      | 1,316,343   |   |  |   | 69,628,653  |  
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Loss before taxes                                   |  |                           | (2,127,043  | ) |                             |   | (2,127,593  | )                                                     |  |   | (1,111,045  | ) |  |      | (1,316,343  | ) |  |   | (69,628,653 | )
|                                                    |  |                           |             |   |                            
|Provision for taxes                                 |  |                           | 1,500       |   |                             |   | 650         |                                                       |  |   | 460         |   |  |      | 400         |   |  |   | 7,800       |  
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Net Loss                                            |  | $                         | (2,128,543  | ) |                             | $ | (2,128,243  | )                                                     |  | $ | (1,111,505  | ) |  | $    | (1,316,743  | ) |  | $ | (69,636,453 | )
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Net loss per common share - basic and fully-diluted |  | $                         | (0.01       | ) |                             | $ | (0.01       | )                                                     |  | $ | (0.00       | ) |  | $    | (0.00       | ) |  | $ | (0.45       | )
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  
|Weighted average common shares outstanding          |  |                           | 200,000,000 |   |                             |   | 180,346,118 |                                                       |  |   | 200,000,000 |   |  |      | 185,453,748 |   |  |   | 155,465,824 |  
|                                                    |  |                           |             |   |                             |   |             |                                                       |  |   |             |   |  |      |             |   |  |   |             |  

See notes to condensed consolidated financial statements.



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e-SMART TECHNOLOGIES, INC.& SUBSIDARIES

CONDENSED CONSOLIDATED STATEMENT OF

SHAREHOLDERS EQUITY (DEFICIENCY)



|                           |  |              |  |        |         |                            |   |                     |  |   |             |   |  |   |            |  
|-------------------------- |  | ------------ |  | ------ | ------- | -------------------------- | - | ------------------- |  | - | ----------- | - |  | - | ---------- | -
|                           |  |              |  |        |         | Additional Paid-in Capital |   | Accumulated Deficit |  |   | Total       |  
|                           |  | Common Stock |  |        |        
|                           |  | 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                   |  |             |  |        |        |                            |   |                    |  |   | (2,128,543  | ) |  |   | (2,128,543 | )
|                           |  |              |  |        |         |                            |   |                     |  |   |             |   |  |   |            |  
|Balance, June 30, 2006     |  | 200,000,000  |  | $      | 200,000 |                            | $ | 63,777,497          |  | $ | (69,636,453 | ) |  | $ | (5,658,956 | )
|                           |  |              |  |        |         |                            |   |                     |  |   |             |   |  |   |            |  

See notes to condensed consolidated financial statements.



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e-SMART TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

[Unaudited]





|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|--------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---------------------------------------------------------- |  | - | ----------- | -
|                                                                            |  | 2006 |            |   | 2005 |   |            | January 1, 2001 (inception of Operations)
to June 30, 2006 | 
|Cash flows from Operating Activities -                                      |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Net loss                                                                    |  | $    | (2,128,543 | ) |      | $ | (2,128,243 | )                                                          |  | $ | (69,636,453 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Issuance of common stock and common stock options for services              |  |      |           |   |      |   |           |                                                            |  |   | 55,812,844  |  
|Depreciation and amortization                                               |  |      | 8,256      |   |      |   | 13,078     |                                                            |  |   | 61,608      |  
|Bad debt expense                                                            |  |      |           |   |      |   |           |                                                            |  |   | 312,505     |  
|Changes in Assets and Liabilities -                                         |  |      |            |   |      |   |            |                                                            |  |   |             |  
|(Increase) decrease in prepaid expenses                                     |  |      | (3,693     | ) |      |   | 1,793      |                                                            |  |   | (6,385      | )
|(Increase) decrease in officers advances                                    |  |      | 31,689     |   |      |   |           |                                                            |  |   | (19,985     | )
|(Increase) decrease in deposits                                             |  |      |           |   |      |   |           |                                                            |  |   | (73,484     | )
|Increase (decrease) in accounts payable                                     |  |      | 171,297    |   |      |   | (83,198    | )                                                          |  |   | 811,494     |  
|Increase in accrued expenses                                                |  |      | 178,971    |   |      |   | 143,461    |                                                            |  |   | 720,963     |  
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Net Cash Used in Operating Activities                                       |  |      | (1,742,023 | ) |      |   | (2,053,109 | )                                                          |  |   | (12,016,893 | )
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Cash Flows from Investing Activities -                                      |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Acquisition of equipment                                                    |  |      | (10,710    | ) |      |   | (6,582     | )                                                          |  |   | (79,453     | )
|Cash used for intangible asset                                              |  |      |           |   |      |   |           |                                                            |  |   | (128,600    | )
|Advances to Biosensor, LLC                                                  |  |      |           |   |      |   |           |                                                            |  |   | (312,505    | )
|Increase in lease deposit                                                   |  |      | (7,835     | ) |      |   | (1,861     | )                                                          |  |   | (7,835      | )
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Net Cash Used in Investing Activities                                       |  |      | (18,545    | ) |      |   | (8,443     | )                                                          |  |   | (528,393    | )
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Cash Flows from Financing Activities -                                      |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Advances from IVI Technologies, Inc., a related party                       |  |      | 1,995,133  |   |      |   | 703,144    |                                                            |  |   | 5,387,688   |  
|Proceeds from other borrowings, net                                         |  |      |           |   |      |   | (30,000    | )                                                          |  |   | 47,500      |  
|Proceeds from sale of common shares                                         |  |      |           |   |      |   | 1,403,254  |                                                            |  |   | 7,509,247   |  
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Net Cash Provided by Financing Activities                                   |  |      | 1,995,133  |   |      |   | 2,076,398  |                                                            |  |   | 12,944,435  |  
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Net Increase (decrease) in Cash                                             |  |      | 234,565    |   |      |   | 14,846     |                                                            |  |   | 399,149     |  
|Cash at Beginning of Period                                                 |  |      | 164,584    |   |      |   | 42,857     |                                                            |  |   |            |  
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  
|Cash at End of Period                                                       |  | $    | 399,149    |   |      | $ | 57,703     |                                                            |  | $ | 399,149     |  
|                                                                            |  |      |            |   |      |   |            |                                                            |  |   |             |  

See notes to condensed consolidated financial statements.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

The Company has been in the development stage since the commencement of its operations on January 1, 2001. 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 six month and three month periods ended June 30, 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.

Certain prior year amounts disclosed in the accompanying financial statements and notes thereto have been reclassified to conform to the
current periods presentation.

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 (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, June 30, and
September 30, 2005, and its Form 8-K Reports filed August 4, and November 21, 2005. In February 2006, the Company filed a preliminary response to the Letter of Comment and completed its response on July 21, 2006.

Note 3  Related Party Transactions

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 Delaware



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corporation (the Licensor), that is the sole owner of all of the Super Smart Card technology licensed to the Registrant, 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 has advanced the Registrant at various dates throughout 2006 and 2005 an aggregate of
$4,269,855 in 6% term notes and $450,000 in 5% demand notes at June 30, 2006.

Mary A. Grace, the Registrants President and Chief Executive
Officer, is a director, executive officer and principal stockholder of the Licensor. Tamio Saito, our chief inventor, is also a principal stockholder of the Licensor. 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 June 30, 2006, of $1,636,850. In addition, the Registrant has
incurred an accumulated deficit of $(69,636,453) through June 30, 2006. The Registrant is dependent upon the efforts of its management to obtain financing from continued debt or equity placements or alternative financing structures 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.

Six Months Ended June 30, 2006 and 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 six month periods ended June 30, 2006 (6M6) or June 30, 2005 (6M5).

Cost of Revenues  Consistent with the Registrant still being in its development stage, it did not experience cost of revenues in either 6M6 or 6M5.

Operating Expenses - Operating expenses were $2,127,043 for 6M6 compared to $2,127,593 for 6M5 resulting in a decrease of $550 or 0%. The principal
elements of this decrease were reduced research and development expenses, net of increased marketing as we approach commercialization, and greater interest charges in line with our borrowings.

Loss Before Taxes and Income Taxes As a result of the foregoing, loss before taxes for 6M6 was $(2,127,043) compared to $(2,127,593) for 6M5, upon which
the Registrants tax provision in both periods related solely to minimum franchise taxes.

Net Loss  Consistent with the foregoing
analysis, the Registrant reported a net loss of $(2,128,543) or $(0.01) per share for 6M6, compared to a net loss of $(2,128,243) or $(0.01) per share for 6M5, based upon weighted average shares outstanding of 200,000,000 and 180,346,118,
respectively.

Three Months Ended June 30, 2006 and 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 June 30, 2006 (2Q6) or June 30, 2005 (2Q5).

Cost of Revenues  Consistent with the Registrant still being in its development stage, it did not experience cost of revenues in either 2Q6 or 2Q5.



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Operating Expenses - Operating expenses were $1,111,045 for 2Q6 compared to $1,316,343 for 2Q5, resulting in a
decrease of $205,298 or 16%. The principal reasons for this decrease were reduced research and development expenses, net of increased marketing as we approach commercialization, and greater interest charges in line with our borrowings.

Loss Before Taxes and Income Taxes As a result of the foregoing, loss before taxes for 2Q6 was $(1,111,045) compared to $(1,316,343) for 2Q5, upon which
the Registrants tax provision in both periods related solely to minimum franchise taxes.

Net Loss  Consistent with the foregoing
analysis, the Registrant reported a net loss of $(1,111,505) or $(0.00) per share for 2Q6, compared to a net loss of $(1,316,743) or $(0.00) per share for 2Q5, based upon weighted average shares outstanding of 200,000,000 and 185,453,748,
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 or alternative financing arrangements 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 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 June 30, 2006, the Registrant had current assets of $405,534 (including cash of $399,149), current liabilities of $2,042,384,
and an accumulated deficit of $(69,636,453). 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 June 30, 2006, the Registrant maintained 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



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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 are sufficient.

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 5. OTHER MATTERS

Effective June 2006, the Companys consulting relationships with Wayne Drizin and Associated Business Group were terminated. The Company thereafter commenced an investigation into the activities of Mr. Drizin and
Associated Business Group.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2003

32.2  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2003

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: December 13, 2006



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