| NEVADA                                                                       | 88-0433489                                     |
|------------------------------------------------------------------------------|------------------------------------------------|
| (State                or other jurisdiction of                incorporation) | (IRS Employer Identification              No.) |

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|                                                                                                                                                                                                         | Page     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                         | Number   |
| **Part I -Financial              Information**                                                                                                                                                               |     |
|                                                                                                                                                                                                         |     |
| *Item 1. Financial              Statements:*                                                                                                                                                                 |     |
|                                                                                                                                                                                                         |     |
| Interim Consolidated Balance Sheets              - April              30, 2006 (Unaudited) and January 31, 2006 (Audited)                                                                                    |  1  |
|                                                                                                                                                                                                         |     |
| Interim Consolidated Statement of Income              and              Retained Earnings for the Three Month Periods Ended April 30, 2005              and              2006 (Unaudited)                     |  3  |
|                                                                                                                                                                                                         |     |
| Schedule                to Interim Consolidated Statement of Income and Retained Earnings                for the                Three Month Periods Ended April 30, 2005 and 2006                (Unaudited) |  4  |
|                                                                                                                                                                                                         |     |
| Interim                Consolidated Statements of Cash Flows for the Three Month Periods                Ended                April 30, 2005 and 2006 (Unaudited)                                             |  5  |
|                                                                                                                                                                                                         |     |
| Notes                to the Interim Consolidated Financial Statements                                                                                                                                        |  6  |
|                                                                                                                                                                                                         |     |
| Item                2. Management’s Discussion and Analysis of Financial Condition and Results                of Operations                                                                            |  14 |
|                                                                                                                                                                                                         |     |
| Item              3. Controls and Procedures                                                                                                                                                                 |  20 |
|                                                                                                                                                                                                         |     |
| **Part II - Other              Information**                                                                                                                                                                 | 21       |
|                                                                                                                                                                                                         |     |
| Item 1. Legal Proceedings                                                                                                                                                                                    |     |
|                                                                                                                                                                                                         |     |
| Item 6. Exhibits and Reports on Form              8-K                                                                                                                                                        |  21 |

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**KMA      GLOBAL SOLUTIONS INTERNATIONAL, INC.**

**INTERIM      CONSOLIDATED FINANCIAL STATEMENTS**

**APRIL      30, 2006**

**(unaudited)**

**(expressed      in U.S. dollars)**

| **INDEX **                                                                                      | **  PAGE** |
|------------------------------------------------------------------------------------------------------|----------------------|
|                                                                                                 |                 |
| Consolidated Balance Sheet                                                                           | 1                - 2 |
|                                                                                                 |                 |
| Consolidated Statements of Income and              Retained Earnings                                 | 3                    |
|                                                                                                 |                 |
| Schedules to Consolidated Statements              of              Income and Retained Earnings  | 4                    |
|                                                                                                 |                 |
| Consolidated Statements of Cash              Flows                                                   | 5                    |
|                                                                                                 |                 |
| Notes to the Consolidated Financial              Statements                                          | 6-                11 |

**                                                            **

----

| KMA                  GLOBAL SOLUTIONS INTERNATIONAL, INC.           |   |                            |      |                                |   |
|---------------------------------------------------------------------|--------|---------------------------------|-----------|-------------------------------------|--------|
| **INTERIM                  CONSOLIDATED BALANCE SHEET**             |   |                            |      |                                |   |
| AS                  AT APRIL 30, 2006                               |   |                            |      |                                |   |
| (unaudited)                                                         |   |                            |      |                                |   |
| (expressed                  in U.S. dollars)                        |   |                            |      |                                |   |
|                                                                |   | April                  30, 2006 |      |  Jan                  31, 2006 |   |
|                                                                |   | (unaudited)                     |      | (audited)                           |   |
|                                                                |   |  $                         |      | $                                   |   |
|                                                                |   |                            |      |                                |   |
|  **ASSETS**                                                    |
| **CURRENT**                                                         |   |                            |      |                                |   |
| Cash                                                                |   |                            | -         |                                |   | 126,727 |   |
| Accounts                  receivable (net of allowance of $243)     |   |                            | 173,546   |                                |   | 74,773 |   |
| Inventories                  (Note 3)                               |   |                            | 483,313   |                                |   | 452,055 |   |
| Advances                  to shareholders (Note 4)                  |   |                            | 4,472     |                                |   | 50,922 |   |
| Prepaid                  expenses                                   |   |                            | 127,435   |                                |   | 104,980 |   |
|                                                                |   |                            |      |                                |   |   |   |
| **TOTAL                  CURRENT ASSETS**                           |   |                            | 788,766   |                                |   | 809,457 |   |
|                                                                |   |                            |      |                                |   |   |   |
| **DEPOSITS                  ON EQUIPMENT AND PATENTS**              |   |                            | 238,991   |                                |   | 231,867 |   |
|                                                                |   |                            |      |                                |   |   |   |
| **EQUIPMENT                  AND PATENTS**(Note                  5) |   |                            | 501,480   |                                |   | 498,917 |   |
|                                                                |   |                            |      |                                |   |   |   |
| **FUTURE                  INCOME TAXES**(Note                  6)   |   |                            | 80,083    |                                |   | - |   |
|                                                                |   |                            |      |                                |   |   |   |
|                                                                |   |                            |      |                                |   |   |   |
|                                                                |   |                            |      |                                |   |   |   |
|                                                                |   |                            |      |                                |   |   |   |
|                                                                |   |                            |      |                                |   |   |   |
|                                                                |   |                            |      |                                |   |   |   |
|                                                                |   |                            | 1,609,320 |                                |   | 1,540,241 |   |

| _____________________________, | Director |
|--------------------------------|----------|
| _____________________________, | Director |

----

| KMA                    GLOBAL SOLUTIONS INTERNATIONAL, INC.                                                                                          |   |                              |      |                                  |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------------|--------|
| **INTERIM                    CONSOLIDATED BALANCE SHEET**                                                                                            |   |                              |      |                                  |   |
| AS                    AT APRIL 30, 2006                                                                                                              |   |                              |      |                                  |   |
| (unaudited)                                                                                                                                          |   |                              |      |                                  |   |
| (expressed                    in U.S. dollars)                                                                                                       |   |                              |      |                                  |   |
|                                                                                                                                                 |   | April                    30, 2006 |      |  Jan                    31, 2006 |   |
|                                                                                                                                                 |   | (unaudited)                       |      | (audited)                             |   |
|                                                                                                                                                 |   |  $                           |      | $                                     |   |
|  **LIABILITIES**                                                                                                                                |
|                                                                                                                                                 |   |                              |      |                                  |   |
| **CURRENT**                                                                                                                                          |   |                              |      |                                  |   |
| Bank                    indebtedness                                                                                                                 |   |                              | 145,731   |                                  |   | - |   |
| Accounts                    payable and accrued liabilities                                                                                          |   |                              | 936,210   |                                  |   | 829,769 |   |
| Current                    portion of capital lease obligation (Note 7)                                                                              |   |                              | 53,013    |                                  |   | 52,419 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
| **TOTAL                    CURRENT LIABILITIES**                                                                                                     |   |                              | 1,134,954 |                                  |   | 882,188 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
| **ADVANCES                    FROM SHAREHOLDERS**(Note                    4)                                                                         |   |                              | 37,567    |                                  |   | - |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
| **CAPITAL                    LEASE OBLIGATION**(Note                    7)                                                                           |   |                              | 45,026    |                                  |   | 56,787 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
| **FUTURE                    INCOME TAXES**(Note                    6)                                                                                |   |                              | -         |                                  |   | 12,836 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
|                                                                                                                                                 |   |                              | 1,217,547 |                                  |   | 951,811 |   |
|  **SHAREHOLDERS’                    EQUITY**                                                                                              |   |                              |      |
| **CAPITAL                    STOCK**(Note                    8)                                                                                      |   |                              |      |                                  |   |   |   |
| Common                      stock, $0.001 par value, 175,000,000 shares authorized and                      41,890,991 shares issued and outstanding |   |                              |      |                                  |   |   |   |
| Preferred                      stock, $0.001 par value, 25,000,000 shares authorized                      and none issued and outstanding            |   |                              | 41,891    |                                  |   | 461,901 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
| **ADDITIONAL                    PAID-IN CAPITAL**(Note                    8)                                                                         |   |                              | 472,182   |                                  |   | - |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
| **ACCUMULATED                    COMPREHENSIVE INCOME**(Note                    8)                                                                   |   |                              | 39,690    |                                  |   | 43,547 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
| **(DEFICIT)                    RETAINED EARNINGS**(Note                    8)                                                                        |   |                              | (161,990  | )                                     |   | 82,982 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
|                                                                                                                                                 |   |                              | 391,773   |                                  |   | 588,430 |   |
|                                                                                                                                                 |   |                              |      |                                  |   |   |   |
|                                                                                                                                                 |   |                              | 1,609,320 |                                  |   | 1,540,241 |   |

----

**INTERIM        CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS**

| (unaudited)                                                                                                            |   |    |       |   |   |
|------------------------------------------------------------------------------------------------------------------------|--------|---------|------------|--------|--------|
| (expressed                  in U.S. dollars)                                                                           |   |    |       |   |   |
|                                                                                                                   |   | 2006    |       | 2005   |   |
|                                                                                                                   |   |  $ |       | $      |   |
|                                                                                                                   |   |    |       |   |   |
| **SALES**                                                                                                              |   |    | 1,137,676  |   |   | 1,117,370 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| **COST                  OF SALES**                                                                                     |   |    |       |   |   |   |   |
| Inventories,                  beginning of period                                                                      |   |    | 452,055    |   |   | 616,157 |   |
| Purchases                                                                                                              |   |    | 941,572    |   |   | 497,138 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
|                                                                                                                   |   |    | 1,393,627  |   |   | 1,113,295 |   |
| Less:                  Inventories, end of period                                                                      |   |    | 483,313    |   |   | 233,261 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
|                                                                                                                   |   |    | 910,314    |   |   | 880,034 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| **GROSS                  MARGIN**                                                                                      |   |    | 227,362    |   |   | 237,336 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
|  **SELLING,                  GENERAL AND ADMINISTRATIVE****EXPENSES**(Schedule)                                   |   |    | 562,899    |   |   | 192,132 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| (Loss)                  income before income taxes                                                                     |   |    | (335,537   | )      |   | 45,204 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| Income                  taxes - future (Note 6)                                                                        |   |    | (90,565    | )      |   | 19,700 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| **NET                  (LOSS) INCOME FOR THE PERIOD**                                                                  |   |    | (244,972   | )      |   | 25,504 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
|                                                                                                                   |   |    |       |   |   |   |   |
|  **RETAINED                  EARNINGS (DEFICIT)**,                  beginning of period                  (Note 8) |   |    | 82,982     |   |   | (12,200 | ) |
|                                                                                                                   |   |    |       |   |   |   |   |
| **(DEFICIT)                  RETAINED EARNINGS**,                  end of period                  (Note 8)             |   |    | (161,990   | )      |   | 13,304 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| **(LOSS)                  EARNINGS PER SHARE**                                                                         |   |    |       |   |   |   |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| Basic                                                                                                                  |   |    | (0.01      | )      |   | 0.00 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| Diluted                                                                                                                |   |    | (0.01      | )      |   | 0.00 |   |
|                                                                                                                   |   |    |       |   |   |   |   |
| Weighted                  average number of common shares                                                              |   |    | 35,634,074 |   |   | 28,289,000 |   |

----

**SCHEDULE        TO INTERIM CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS**

| (unaudited)                                                       |   |   |    |       |   |
|-------------------------------------------------------------------|--------|--------|---------|------------|--------|
| (expressed                in U.S. dollars)                        |   |   |    |       |   |
|                                                              |   | 2006   |    |  2005 |   |
|                                                              |   | $      |    | $          |   |
|                                                              |   |   |    |       |   |
| **SELLING,                  GENERAL AND ADMINISTRATIVE EXPENSES** |   |   |    |       |   |
| Wages                  and benefits                               |   |   | 129,611 |       |   | 35,435 |   |
| Professional                  fees                                |   |   | 121,400 |       |   | 5,167 |   |
| Outside                  services and sales commissions           |   |   | 67,926  |       |   | 17,847 |   |
| Travel                  and automotive                            |   |   | 48,119  |       |   | 14,579 |   |
| Occupancy                  costs                                  |   |   | 46,600  |       |   | 30,954 |   |
| Marketing                  and promotion                          |   |   | 37,622  |       |   | 13,172 |   |
| Production                  and warehouse costs                   |   |   | 24,331  |       |   | 13,157 |   |
| Delivery                  and freight                             |   |   | 18,926  |       |   | 7,869 |   |
| Factor                  fees                                      |   |   | 18,264  |       |   | 20,361 |   |
| General                                                           |   |   | 14,909  |       |   | 7,093 |   |
| Telephone                                                         |   |   | 11,349  |       |   | 4,833 |   |
| Bank                  charges and interest                        |   |   | 5,928   |       |   | 5,917 |   |
| Bad                  debts (recovered)                            |   |   | (3,419  | )          |   | - |   |
| Amortization                                                      |   |   | 21,333  |       |   | 15,748 |   |
|                                                              |   |   | 562,899 |       |   | 192,132 |   |

----

| KMA                  GLOBAL SOLUTIONS INTERNATIONAL, INC.                                             |   |   |     |   |   |
|-------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|
| **INTERIM                  CONSOLIDATED STATEMENT OF CASH FLOWS**                                     |   |   |     |   |   |
| FOR                  THE THREE MONTH PERIODS ENDED APRIL 30                                           |   |   |     |   |   |
| (unaudited)                                                                                           |   |   |     |   |   |
| (expressed                  in U.S. dollars)                                                          |   |   |     |   |   |
|                                                                                                  |   | 2006   |     | 2005   |   |
|                                                                                                  |   | $      |     | $      |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES**                                             |   |   |     |   |   |
| Net                  (loss) income for the period                                                     |   |   | (244,972 | )      |   | 25,504 |   |
| Adjustments                  for:                                                                     |   |   |     |   |   |   |   |
| Amortization                                                                                          |   |   | 21,333   |   |   | 15,748 |   |
| Shares                  issued for services provided                                                  |   |   | 52,172   |   |   | - |   |
| Future                  income taxes                                                                  |   |   | (90,565  | )      |   | 19,700 |   |
|                                                                                                  |   |   | (262,032 | )      |   | 60,952 |   |
| Changes                  in non-cash working capital:                                                 |   |   |     |   |   |   |   |
| (Increase)                  in accounts receivable                                                    |   |   | (94,656  | )      |   | (187,426 | ) |
| (Increase)                  decrease in inventories                                                   |   |   | (22,132  | )      |   | 382,916 |   |
| (Increase)                  decrease in prepaid expenses                                              |   |   | (19,912  | )      |   | 55,484 |   |
| Increase                    (decrease) in accounts payable and accrued                    liabilities |   |   | 88,324   |   |   | (417,491 | ) |
|                                                                                                  |   |   | (48,376  | )      |   | (166,517 | ) |
| Cash                  flows from operating activities                                                 |   |   | (310,408 | )      |   | (105,565 | ) |
|                                                                                                  |   |   |     |   |   |   |   |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES**                                             |   |   |     |   |   |   |   |
| Increase                  in bank indebtedness                                                        |   |   | 141,672  |   |   | - |   |
| (Decrease)                  increase in capital lease obligation                                      |   |   | (12,850  | )      |   | 137,465 |   |
| Increase                  (decrease) in advances from shareholders (net)                              |   |   | 36,521   |   |   | (4,063 | ) |
| Cash                  flows from financing activities                                                 |   |   | 165,343  |   |   | 133,402 |   |
|                                                                                                  |   |   |     |   |   |   |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES**                                             |   |   |     |   |   |   |   |
| Decrease                  in advances to shareholders                                                 |   |   | 46,086   |   |   | - |   |
| Purchase                  of equipment and patents                                                    |   |   | (14,713  | )      |   | (156,551 | ) |
| Deposits                  on equipment and patents                                                    |   |   | (2,691   | )      |   | 105,456 |   |
| Cash                  flows from investing activities                                                 |   |   | 28,682   |   |   | (51,095 | ) |
|                                                                                                  |   |   |     |   |   |   |   |
| **EFFECT                  OF CUMULATIVE CURRENCY TRANSLATION****ADJUSTMENTS**                         |   |   | (10,344  | )      |   | (134 | ) |
| (Decrease)                  in cash                                                                   |   |   | (126,727 | )      |   | (23,392 | ) |
|                                                                                                  |   |   |     |   |   |   |   |
| Cash,                  beginning of period                                                            |   |   | 126,727  |   |   | 41,885 |   |
|                                                                                                  |   |   |     |   |   |   |   |
| Cash,                  end of period                                                                  |   |   | -        |   |   | 18,493 |   |
|                                                                                                  |   |   |     |   |   |   |   |
| **SUPPLEMENTAL                  INFORMATION:**                                                        |   |   |     |   |   |   |   |
| Interest                  paid                                                                        |   |   | 5,928    |   |   | 5,917 |   |
| Income                  taxes paid                                                                    |   |   | -        |   |   | - |   |
| Equipment                  acquired by capital lease                                                  |   |   | -        |   |   | 151,129 |   |

----

**NOTES      TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS**

----

|  | **1.** | **DESCRIPTION                OF THE BUSINESS** |
|--|--------|------------------------------------------------|

|   | KMA                Global Solutions International, Inc. (“KMA International” or the                “Company”) was the result of a merger between Espo’s Ltd. (“Espo’s”), a                corporation incorporated under the laws of the State of New York                on                September 7, 2001 and KMA Global Solutions International, Inc. (“KMA                Global”), a corporation formed on March 9, 2006 under the laws of the                State of Nevada. Pursuant to the merger, Espo’s issued 1,700,000 shares of                common stock to the former shareholders of KMA Global. KMA Global                controlled 1,700,000 common shares of KMA Global Solutions Inc. (“KMA                Canada”), a corporation formed in April 1996 under the laws of the                Province of Ontario. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On                March 15, 2006, KMA International entered into an acquisition agreement                with KMA Canada whereby KMA International purchased from the remaining                shareholders of KMA Canada an aggregate amount of 314,400 common                shares in                exchange for 1,179,000 common shares of KMA International. Through                these                series of transactions, KMA International acquired 100% of the issued                and                outstanding shares of KMA Canada. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company is engaged in the supply of Electronic Article Surveillance                (“EAS”) solutions, focusing on providing customized solutions in the                apparel, multi media, sporting goods, food and pharmaceutical                industries. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under                generally accepted accounting principles, this acquisition is considered                in substance to be a capital transaction rather than a business                combination. For accounting purposes, the acquired company is deemed                to                have issued its stock for the net monetary assets of the acquiring                company. The transaction is accompanied by a recapitalization, and                is                accounted for as a change in capital structure. Accordingly, the                accounting for the acquisition is identical to that resulting from                a                reverse acquisition, except that no goodwill is recorded. Under reverse                takeover accounting, the comparative historical financial statements                are                primarily those of KMA Canada. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NOTES      TO THE CONSOLIDATED FINANCIAL STATEMENTS**

|  | **2.** | **BASIS                OF PRESENTATION** |
|--|--------|------------------------------------------|

|  | **3.** | **INVENTORIES** |
|--|--------|-----------------|

|                          |   | April                30, |    | January                31, |   |
|-------------------------------|--------|--------------------------|---------|----------------------------|--------|
|                          |   | 2006                     |    | 2006                       |   |
|                          |   | $                        |    | $                          |   |
|                          |   |                     |    |                       |   |
| Finished                goods |   |                     | 171,465 |                       |   | 206,654 |   |
| Raw                materials  |   |                     | 311,848 |                       |   | 245,401 |   |
|                          |   |                     |    |                       |   |   |   |
|                          |   |                     | 483,313 |                       |   | 452,055 |   |

|  | **4.** | **ADVANCES                TO (FROM) SHAREHOLDERS** |
|--|--------|----------------------------------------------------|

----

| KMA                  GLOBAL SOLUTIONS INTERNATIONAL, INC.              |   |         |   |       |   |
|------------------------------------------------------------------------|--------|--------------|--------|------------|--------|
| **NOTES                  TO THE CONSOLIDATED FINANCIAL STATEMENTS**    |   |         |   |
| APRIL                  30, 2006                                        |   |         |   |       |   |   |   |
| (unaudited)                                                            |   |         |   |       |   |   |   |
| (expressed                  in U.S. dollars)                           |   |         |   |       |   |   |   |
|                                                                   |   |         |   |       |   |   |   |
| ** 5**.**  **EQUIPMENT                  AND PATENTS**** |   |         |   |       |   |   |   |   |   |
|                                                                   |   |    |   |       |   |   |   | April                  30, |   |
|                                                                   |   |    |   |       |   | Accumulated |   | 2006 |   |
|                                                                   |   |    |   |  Cost |   | Amortization |   | Net |   |
|                                                                   |   |    |   | $          |   | $ |   | $ |   |
|   Equipment                                                  |   |         |   |       |   | 715,555 |   |   | 439,718 |   |   | 275,837 |   |
|   Equipment                  under capital lease             |   |         |   |       |   | 170,122 |   |   | 18,430 |   |   | 151,692 |   |
|   Patents                                                    |   |         |   |       |   | 80,792 |   |   | 16,165 |   |   | 64,627 |   |
|   Computer                  equipment                        |   |         |   |       |   | 20,375 |   |   | 11,971 |   |   | 8,404 |   |
|   Office                  furniture                          |   |         |   |       |   | 3,769 |   |   | 2,849 |   |   | 920 |   |
|                                                                   |   |         |   |       |   |   |   |   |   |   |   |   |   |
|                                                                   |   |         |   |       |   | 990,613 |   |   | 489,133 |   |   | 501,480 |   |
|                                                                   |   |         |   |       |   |   |   |   |   |   |   |   |   |
|                                                                   |   |         |   |       |   |   |   |   |   |   |   | January                  31, |   |
|                                                                   |   |         |   |       |   |   |   |   | Accumulated |   |   | 2006 |   |
|                                                                   |   |         |   |       |   | Cost |   |   | Amortization |   |   | Net |   |
|                                                                   |   |         |   |       |   | $ |   |   | $ |   |   | $ |   |
|   Equipment                                                  |   |         |   |       |   | 684,211 |   |   | 414,623 |   |   | 269,588 |   |
|   Equipment                  under capital lease             |   |         |   |       |   | 166,985 |   |   | 13,916 |   |   | 153,069 |   |
|   Patents                                                    |   |         |   |       |   | 79,303 |   |   | 14,676 |   |   | 64,627 |   |
|   Computer                  equipment                        |   |         |   |       |   | 22,779 |   |   | 12,375 |   |   | 10,404 |   |
|   Office                  furniture                          |   |         |   |       |   | 4,214 |   |   | 2,985 |   |   | 1,229 |   |
|                                                                   |   |         |   |       |   |   |   |   |   |   |   |   |   |
|                                                                   |   |         |   |       |   | 957,492 |   |   | 458,575 |   |   | 498,917 |   |

|  | **6.** | **INCOME                TAXES** |
|--|--------|---------------------------------|

|                                                                                                                                      |   | April                  30, |     | April                  30, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|----------------------------|--------|
|                                                                                                                                      |   | 2006                       |     | 2005                       |   |
|                                                                                                                                      |   | $                          |     | $                          |   |
|                                                                                                                                      |   |                       |     |                       |   |
| Income                  tax provision at combined Canadian federal and provincial                  statutory rate of 36.12% (2005-18.62%) |   |                       | (121,197 | )                          |   | 8,417 |   |
| Increase                  (decrease) due to:                                                                                              |   |                       |     |                       |   |   |   |
| Change                  in effective tax rate                                                                                             |   |                       | 24,655   |                       |   | - |   |
| Other                                                                                                                                     |   |                       | 5,977    |                       |   | 11,283 |   |
|                                                                                                                                      |   |                       |     |                       |   |   |   |
|                                                                                                                                      |   |                       | (90,565  | )                     |   | 19,700 |   |

----

**NOTES      TO THE CONSOLIDATED FINANCIAL STATEMENTS**

|  | 6. | **INCOME TAXES**(Continued) |
|--|----|-----------------------------|

|   |   |
|--------|--------|
|   | Significant                components of the Company’s future income tax assets and liabilities are                as follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |   | April                  30, |    | January                  31, |   |
|-------------------------------------------------------|--------|----------------------------|---------|------------------------------|--------|
|                                                  |   | 2006                       |    | 2006                         |   |
|                                                  |   | $                          |    | $                            |   |
|  Future                  income tax assets:      |   |                       |    |                         |   |
|  Losses                  carried forward         |   |                       | 148,498 |                         |   | 19,908 |   |
|  Future                  income tax liabilities: |   |                       |    |                         |   |   |   |
|  Equipment                  and patents          |   |                       | (68,415 | )                            |   | (32,744 | ) |
| Future                  tax asset (liability)         |   |                       | 80,083  |                         |   | (12,836 | ) |

|  | **7.** | **OBLIGATIONS                UNDER CAPITAL LEASE** |
|--|--------|----------------------------------------------------|

|                                                             |   |  2006 |   |
|------------------------------------------------------------------|--------|------------|--------|
|                                                             |   |  $    |   |
| Periods                  ending: April 30,                  2007 |   |       | 53,013 |   |
| April                  30,                  2008                 |   |       | 45,026 |   |
|                                                             |   |       |   |   |
|                                                             |   |       | 98,039 |   |

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**NOTES      TO THE CONSOLIDATED FINANCIAL STATEMENTS**

|  | **8.** | **SHAREHOLDERS’                EQUITY** |
|--|--------|-----------------------------------------------|

**Continuity      of Shareholders’Equity**

|                                                                          |   |   |       |   |   | Additional |   |        |    |              |   |
|-------------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|-------------|---------|-------------------|--------|
|                                                                          |   | Common |       | Par    |   | Paid-in    |   |  Comp. |    |  Accumulated |   |
|                                                                          |   | Shares |       | Value  |   | Capital    |   | Income      |    | Earnings          |   |
|                                                                          |   |   | $          |   |   | $          |   |        | $       |              |   | $ |   |   | $ |   |
| January                  31, 2006                                             |   |   | 4,920,250  |   |   | 4,920      |   |        | 166,421 |              |   | - |   |   | (171,341 | ) |
| Retired                  to treasury                                          |   |   | (4,225,427 | )      |   | (4,225     | )      |        | 4,225   |              |   | - |   |   | - |   |
| 17:1                  share split                                             |   |   | 11,117,168 |   |   | 11,117     |   |        | (11,117 | )                 |   | - |   |   | - |   |
|                                                                          |   |   | 11,811,991 |   |   | 11,812     |   |        | 159,529 |              |   | - |   |   | (171,341 | ) |
|                                                                          |   |   |       |   |   |       |   |        |    |              |   |   |   |   |   |   |
|  Issuance                  of common stock in reverse merger             |   |   | 28,289,000 |   |   | 28,289     |   |        | 262,271 |              |   | 43,547 |   |   | 82,982 |   |
|  Accumulated                  deficit acquired in reverse merger         |   |   | -          |   |   | -          |   |        | -       |              |   | - |   |   | 171,341 |   |
|  Issuance                  of common stock                  for services |   |   | 1,790,000  |   |   | 1,790      |   |        | 50,382  |              |   | - |   |   | - |   |
| Currency                  translation adjustment                              |   |   | -          |   |   | -          |   |        | -       |              |   | (3,857 | ) |   | - |   |
| Net                  loss                                                     |   |   | -          |   |   | -          |   |        | -       |              |   | - |   |   | (244,972 | ) |
|                                                                          |   |   |       |   |   |       |   |        |    |              |   |   |   |   |   |   |
| April                  30, 2006                                               |   |   | 41,890,991 |   |   | 41,891     |   |        | 472,182 |              |   | 39,690 |   |   | (161,990 | ) |

|  | a) | On                February 15, 2006, KMA Canada issued 120,000 common shares with a                deemed                value of Cdn$0.50 per share in exchange for services rendered by                a group                of consultants of KMA Canada. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | b) | On                February 28, 2006, KMA Canada issued 500,000 common shares as an                advance                on finders fees in relation to a planned equity                financing. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c) | On                March 1, 2006, pursuant to a resolution of the Board of Directors,                the                issued and outstanding common shares of KMA Canada were subject to                a                reverse stock split at a ratio of five (5) shares to one (1), reducing                the                number of shares outstanding from 10,072,000 to                2,014,400. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**NOTES      TO THE CONSOLIDATED FINANCIAL STATEMENTS**

----

|  | **8.** | **SHAREHOLDERS’                EQUITY**(Continued) |
|--|--------|----------------------------------------------------------|

|  | (d) | KMA                Canada and KMA International, a corporation organized under the laws                of                the State of Nevada entered into an acquisition agreement dated March                15,                2006. Pursuant to the terms of the agreement and upon the completion                of                satisfactory due diligence and receipt of applicable regulatory and                shareholder approvals, KMA International acquired 100% of the outstanding                shares of the capital stock of the KMA Canada in exchange for 34,244,800                post split reorganization common shares. (34,244,800 post split                reorganization shares being the aggregate of 28,900,000 owned by                KMA LLC                and 5,344,800 owned by KMA Canada shareholders.) Pursuant to an agreement                between the KMA Canada shareholders and KMA International, the shares                in                KMA International owned by the KMA Canada shareholders were retired                to                treasury and cancelled and the KMA Canada shareholders received 1,179,000                post split reorganization shares. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   |   | KMA                International is the surviving corporation as a result of a merger                transaction with Espo’s, Ltd., a corporation formed under the laws of the                State of New York. The merger occurred March 15, 2006. At the time                of the                merger transaction, Espo’s, Ltd. was a non-SEC reporting corporation. As a                result of the merger transaction and subsequent acquisition of the                Company                an agent for Espo’s, Ltd. received 149,991 post split reorganization                common shares of KMA International. Existing shareholders received                in                aggregate 11,649,403 post split reorganization shares of common stock                of                KMA International in exchange for future financing and investor relation                services. 12,597 post split reorganization shares of common stock                of KMA                International are unaccounted for. Pursuant to the merger agreement,                71,832,259 post split reorganization shares, held by individuals                that were                the shareholders of Espo’s, were retired to treasury and cancelled on May                19, 2006. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   |   | The                terms of the merger transaction and the acquisition agreement provided                that the mind and management of KMA International would be replaced                by the                officers and directors of KMA Canada and having had no significant                business activity for a number of years, upon the effective time                of the                acquisition, KMA International adopted the business plan of KMA Canada.                The transaction was therefore accounted for as a reverse acquisition                with                KMA Canada as the acquiring party and KMA International as the acquired                party, in substance, a reorganization of the KMA Canada. Generally                accepted accounting principles in the United States of America require,                among other considerations, that a company whose stockholders retain                a                majority interest in a business combination be treated as the acquirer                for                accounting purposes. Accordingly, the results of operations for the                periods prior to the combination are those of KMA                Canada. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NOTES      TO THE CONSOLIDATED FINANCIAL STATEMENTS**

----

|  | **9.** | **COMMITMENTS** |
|--|--------|-----------------|

|   | a) | The                Company is committed to minimum annual rentals under a long-term                lease for                premises which expires October 31, 2008. Minimum rental commitments                remaining under this lease approximate $257,827 including $103,131                due                within one year, $103,131 due in 2008, and $51,565 due in 2009. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | The                Company has entered into various vehicle leases and has accounted                for them                as operating leases. Obligations due approximate $43,337 including                $25,819                within one year, $16,237 due in 2008 and $1,281 due in fiscal                2009. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **10.** | **RESEARCH                AND DEVELOPMENT COSTS** |
|--|---------|---------------------------------------------------|

|  | **11.** | **FINANCIAL                INSTRUMENTS** |
|--|---------|------------------------------------------|

**Fair      Value**

----

**NOTES      TO THE CONSOLIDATED FINANCIAL STATEMENTS**

|  | **11.** | **FINANCIAL                INSTRUMENTS**(Continued) |
|--|---------|-----------------------------------------------------|

**Foreign      Exchange Risk**

**Credit      Risk**

**Interest      Rate Risk**

----

**CAUTIONARY      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

**Item      2. **
**Management’s      Discussion and Analysis. **

***OVERVIEW***

----

***RESULTS      OF OPERATIONS***

|                                                         | Quarter                Ended April 30, |
|--------------------------------------------------------------|----------------------------------------|
|                                                         | **2006**                               | **2005** |
| Sales                                                        | $1,137,676                             | *100%* | $1,117,370 | *100%* |
| Cost                of Sales                                 | $                910,314               | *80.0%* | $                880,034 | *78.8%* |
| Gross                Profit                                  | $                227,362               | *20.0%* | $                237,336 | *21.2%* |
| Selling                General & Administrative Expenses | $                562,899               | *49.5%* | $                192,132 | *17.2%* |
| Income                Before Income Taxes                    | ($                335,537)             | *(29.5)%* | $                45,204 | *4.0%* |
| Net                Income                                    | ($                244,972)             | *(21.5)%* | $                25,504 | *2.3%* |

----

***Sales***

The      markets for both NEXTagTM and DUAL TagTM are growing. However it is management’s      belief that the long term growth potential of DUAL TagTM is much higher of the      two, due primarily to higher volume sales of products using the DUAL TagTMapplication as compared to sales of soft goods using the NEXTagTMapplication.

***Gross      Profit***

***Selling,      General and Administrative (***
*“*
***SG&A”)      Expenses***

----

***Operating      Income (Loss)***

***Taxes      on Income***

***Liquidity      and Capital Resources***

|                                                       |   |   | Fiscal                quarter ended April 30, |   |
|------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                                       |   |   | **2006**                                      |   |   | **2005** |   |
| Net                cash from operating activities:         |   | $      | (310,408                                      | )      | $ | (105,565 | ) |
| Net                cash from investing activities:         |   | $      | 28,682                                        |   | $ | (51,095) | ) |
| Net                cash from financing activities:         |   | $      | 165,343                                       |   | $ | 133,402 |   |
| Effect                of currency translation adjustments: |   | $      | (10,344                                       | )      | $ | (134 | ) |
| Total                Change in cash and cash equivalents:  |   | $      | (126,727                                      | )      | $ | (23,392 | ) |

----

**.**

----

***CRITICAL      ACCOUNTING POLICIES***
***AND      ESTIMATES***

***Revenue      Recognition***

(3)      the      fee is fixed or determinable; and (4) collectibility is reasonably assured.      Should changes in conditions cause management to determine that these criteria      are not met for certain future transactions, revenue recognized for a reporting      period could be adversely affected.

***Sales      Returns and Allowances***

***Allowance      for Doubtful Accounts***

***Inventories***

----

***Goodwill***

***Accounting      for Income Taxes***

***Recently      Issued Accounting Pronouncement***

**Item      3. CONTROLS AND PROCEDURES **

***Evaluation      of Disclosure Controls and Procedures***

***Changes      in Internal Controls***

----

|  | 31.1 | Certification                of Chief Executive Officer and Chief Financial Officer of the Company                required by Rule 13a- 14(a)                under the Securities Exchange Act of 1934, as                amended. |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 32.1 | Certification                of Chief Executive Officer and Chief Financial Officer of the Company                required by Rule 13a- 14(b)                under the Securities Exchange Act of 1934, as                amended |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  |                                 |                                  |
|---------------------------------------|--------------------------------------|---------------------------------------|
|                                  |                                 |
|                             |                            |                             |
| Date: July              28, 2006 | By:                        | /s/ Jeffrey              D. Reid |
|                                  | Jeffrey D. Reid                      |
|                                  | Chief              Executive Officer |

|  | 31.1 | Certification                of Chief Executive Officer and Chief Financial Officer of the                Company required                by Rule 13a-14(a) under the Securities Exchange Act of 1934, as                amended |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 32.1 | Certification                of Chief Executive Officer and Chief Financial Officer of                the Company                required by Rule 13a-14(b) under the Securities Exchange Act of 1934,                as amended |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----