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

                                   FORM 10-KSB


|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                   For the fiscal year ended            December 31, 2006
                                                  ------------------------------

|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                   For the transition period from              To
                                                 --------------   --------------

                   Commission file number               000-31037
                                         ---------------------------------------

                         eRoomSystem Technologies, Inc.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

               Nevada                                87-0540713
-----------------------------------    -----------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
  incorporation or organization)

   1072 Madison Ave., Lakewood, NJ                     08701
-----------------------------------    -----------------------------------------
(Address and telephone number of                      (Zip Code)
   principal executive offices)

Issuer's telephone number: (732) 730-0116
                                           -------------------------------------

           Securities registered pursuant to Section 12(b) of the Act:

       Title of each class          Name of each exchange on which registered
-----------------------------    -----------------------------------------------
-----------------------------    -----------------------------------------------

          Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
--------------------------------------------------------------------------------
                              (Title of each class)

--------------------------------------------------------------------------------
                              (Title of each class)

      Check whether the issuer (1) 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 |_|

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|

      State issuer's revenues for its most recent fiscal year: $1,337,485

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

                                                                  Yes |X| No |_|

      State the aggregate market value of voting stock held by non-affiliates
computed by reference to the price at which the common equity was sold, or the
average bid and asked price of such common equity, as of a specified date within
the past 60 days. $4,301,669 ($0.18 per share as of March 1, 2007).

      State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

      Common Stock, $.001 par value        23,898,165 shares as of March 1, 2007

DOCUMENTS INCORPORATED BY REFERENCE

      None.

Transitional Small Business Disclosure Format (check one):

      Yes |_| No |X|

                                       -i-
<PAGE>

                                TABLE OF CONTENTS

PART I                                                                         1
ITEM 1.          DESCRIPTION OF BUSINESS                                       1
ITEM 2.          DESCRIPTION OF PROPERTY                                       6
ITEM 3.          LEGAL PROCEEDINGS                                             6
ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           6

PART II                                                                        6
ITEM 5.          MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS      6
ITEM 6.          MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION     7
ITEM 7.          FINANCIAL STATEMENTS                                         21
ITEM 8.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                 ACCOUNTING AND FINANCIAL DISCLOSURE                          37
ITEM 8A.         CONTROLS AND PROCEDURES                                      37
ITEM 8B.         OTHER INFORMATION                                            38

PART III                                                                      38
ITEM 9.          DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                 PERSONS; COMPLIANCE WITH SECTION 16(a) OF
                 THE EXCHANGE ACT                                             38
ITEM 10.         EXECUTIVE COMPENSATION                                       39
ITEM 11.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                 MANAGEMENT                                                   40
ITEM 12.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
                 DIRECTOR INDPENDENCE                                         42
ITEM 13.         EXHIBITS AND REPORTS ON FORM 8-K                             44
ITEM 14.         PRINCIPAL ACCOUNTANT FEES AND SERVICES                       44
SIGNATURES                                                                    45
EXHIBIT INDEX                                                                 46

                                      -ii-
<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

      Overview

      eRoomSystem Technologies has developed and introduced to the lodging
industry an intelligent, in-room computerized platform and communications
network, or the eRoomSystem. The eRoomSystem is a computerized platform and
processor-based system that is installed within our eRoomServ refreshment
centers and designed to collect and control data. The eRoomSystem also supports
our eRoomSafe, an electronic in-room safe, eRoomTray, an in-room ambient tray
that can sell a wide variety of products at room temperature, and eRoomEnergy,
an in-room digital thermostat that is designed to control virtually any fan coil
unit or packaged-terminal air conditioner found in hotel rooms.

      Our eRoomSystem and related products deliver in-room solutions that reduce
operating costs, enhance hotel guest satisfaction and provide higher operating
profits to our customers. The solutions offered by our eRoomSystem and related
products have allowed us to establish relationships with many premier hotel
chains. In addition to providing our customers with valuable in-room solutions,
our revenue-sharing program has allowed us to partner with our customers.
Through our revenue-sharing program, we have been able to install our products
at little upfront cost to hotels and share in the recurring revenues generated
from the sale of goods and services related to our products.

      Currently, we have more than 10,000 eRoomServ refreshment centers, and
over 6,000 eRoomSafes installed at over 30 hotel properties. Of this amount,
approximately 5,000 refreshment centers and 3,500 eRoomSafes are installed
pursuant to revenue sharing or fixed-payment agreements. At the present time, we
do not intend to install new products at hotels, but will continue to maintain
our existing product placements on revenue sharing contracts through the end of
such contracts. We anticipate that future placements of eRoomServ refreshment
centers and eRoom Safes in new hotels, if any, will be limited to the continued
deployment of such products at hotels following the maturity of their respective
revenue sharing agreements.

      Summary of Our Diversification Initiatives

      In addition to our core competencies noted above, in May 2005 we commenced
our diversification plan by investing in Identica Holdings Corporation, or
Identica, a privately held distributor and integrator of next-generation
biometric security solutions, including the TechSphere hand vascular pattern
biometric technology. Specifically, we invested $10,000 in Identica by
purchasing 1,666,667 shares of common stock, or $0.006 per share. Our $10,000
investment in Identica represented 10% of Identica's then issued and outstanding
capital stock on a fully-diluted basis. In addition, we provided a loan to
Identica in the amount of $150,000. The loan is secured by a security interest
in all the assets of Identica and is evidenced by a promissory note. In
consideration for making the loan, we were issued a warrant to purchase one
million (1,000,000) shares of common stock of Identica, exercisable at $0.15 per
share at any time through May 20, 2010.

      On September 7, 2005, Identica purchased certain assets of our wholly
owned subsidiary, eRoomSystem Services, Inc., a Nevada corporation, or
eRoomServices, pursuant to an Asset Purchase Agreement, or the Purchase
Agreement. Specifically, the assets sold consisted of furniture and computer
equipment held by eRoomServices, as well as a perpetual license to our web
technologies package utilized by our personnel in the maintenance of automated
refreshment centers, electronic safes and energy management products, or the
Equipment, installed at hotels. The Purchase Agreement provided that Identica
pay us sixty thousand ($60,000) dollars for the assets, which amount was
evidenced by a one-year note bearing interest at the rate of eight percent (8%)
per annum, compounded monthly, or the Note. Under the terms of the Note,
Identica would make seven (7) principal and interest payments in the amount of
$9,098 per month, commencing on the six-month anniversary of the Note.

      In addition, on September 7, 2005, the Company and Identica entered into a
Professional Services and Support Agreement (the "Services Agreement") whereby
Identica employed the technical personnel of eRoomServices. In conjunction
therewith, eRoomServices continued to be responsible, for a period of six (6)
months from the date of the Agreement, for all expenses less seven thousand
($7,000) dollars per month related to such technical personnel. Commencing on
the six-month anniversary of the Agreement, Identica is now solely responsible
for all fixed and variable expenses associated with the technical personnel and
the Salt Lake City facility, including the lease of the existing premises.
However, we have retained the rights to part of the offices located at the
facility. The terms of the Services Agreement provide that Identica shall, at
all times, ensure that the Company receives first priority with respect to the
ongoing maintenance of the Equipment by the technical personnel. eRoomServices
will continue to exist as a wholly owned subsidiary of the Company and all
existing contracts by and between eRoomServices and its hotel clients shall
remain outstanding.

      On October 31, 2005, we loaned an additional fifty thousand ($50,000)
dollars to Identica, evidenced by a promissory note that bore no interest and
matured on January 31, 2006. This promissory note has been repaid.

                                       -1-
<PAGE>

      In March 2006, we invested the sum of $50,000 in a private placement of
Aprecia, LLC, or Aprecia, prior to its recent registration statement that became
effective in January, 2007, a provider of applied artificial intelligence
solutions for gaming and homeland security applications. Aprecia's MonitorPlus
solution automatically examines large amounts of transaction data and issues
alerts upon discovery of potential fraud and potential money-laundering. In
consideration for our investment, we received 2,083,333 shares of common stock
of Aprecia, which at the time of issuance constituted 12% of Aprecia's issued
and outstanding common stock.

      We are continuously performing due diligence on third party companies for
the purpose of making additional investments in privately-held or publicly
traded emerging growth stage companies. In the future, we may acquire an
existing operating company if the opportunity arises. At this time, we have not
reached a definitive agreement with any such third party companies.

      Our Products and Services

      eRoomSystem

      Since our inception, it has been our objective to provide innovative
in-room amenities to the lodging industry. Our technologies provide an
intelligent, in-room computerized platform and communications network that
comprises the eRoomSystem. At the core of the eRoomSystem is our proprietary
hardware and software that operate as a multi-tasking imbedded operating system.
Our hardware and software can operate multiple devices and provide an
interactive environment that allows the hotel guest to input and receive
information.

      Installed as part of our eRoomServ refreshment center, the eRoomSystem
provides the communication link between the hotel guest, our products, our file
server located at the hotel (the eRoomSystem file server), the hotel's property
management system, and the file server located at our headquarters (the
eRoomSystem master file server). Our software is remotely upgradeable from our
facility, which reduces the need for costly on-site visits. We can also remotely
adjust pricing, change messages on the liquid crystal display, lock and unlock
our units and change the input touchpad layout. From our headquarters, we can
also determine whether our products are active and working properly and, in the
event a participating hotel fails to pay outstanding invoices or otherwise
violates the terms of its agreement, control the use of our products by remotely
locking the units.

      The eRoomSystem consists of a microprocessor, memory, input/output ports,
communications transceiver, liquid crystal display, touchpad, power supply and
our proprietary software. The proprietary architecture of our circuit boards has
been designed to minimize the need for hardware upgrades. The eRoomSystem
includes an embedded system processor that handles simple instructions and
routes all billing functions and processor-intensive instructions to the
eRoomSystem file server.

      eRoomServ Refreshment Centers

      Our eRoomServ refreshment centers consist of the eRoomSystem, a small
refrigeration unit, electronic controls, LCD display and vending racks. Our
newest models utilize an upright multi-vending rack. The upright multi-vending
rack offers greater flexibility for the snack and beverage products offered by
hotels, and is viewed more favorably by our hotel clients than our prior
side-vend rack design.

      The upright multi-vending rack displays up to 30 different beverages
and/or snacks and provides an environment similar to that of a convenience store
beverage cooler. Upon removal of a product, the gravity-based design uses the
weight of the remaining products to cause the products to roll or slide forward.
In addition to the upright multi-vending rack in the refreshment center, the
eRoomTray allows hotel properties to separately vend a variety of products at
room temperature within the eRoomSystem environment, including snacks, wine,
disposable cameras, film, souvenirs, maps and other sundries.

      Our eRoomServ refreshment center and eRoomTray communicate through the
eRoomSystem, which uses the hotel property's existing telephone lines, network
cabling or cable television lines. Our eRoomServ refreshment centers and
eRoomTray operate as follows:

      o     A hotel guest selects a beverage or snack from our eRoomServ
            refreshment center or eRoomTray;

      o     The purchase is either immediately confirmed on the liquid crystal
            display and acknowledged with an audible beep or subject to a
            countdown of a predetermined (by the hotel) number of seconds prior
            to purchase confirmation;

      o     Upon confirmation, the transaction information, such as product
            type, price and time of purchase, is simultaneously transferred to
            the eRoomSystem file server;

      o     The eRoomSystem file server communicates on a real-time basis with
            the hotel's property management system and periodically with our
            eRoomSystem master file server located at our headquarters; and

      o     The hotel's property management system posts the purchase to the
            hotel guest's room account.

                                      -2-
<PAGE>

      The sales data from the eRoomSystem is transmitted to the eRoomSystem file
server from which hotel employees can access real-time sales reports, inventory
levels for restocking purposes and demographic data. As for the maintenance of
our refreshment centers, the repair or replacement of any component of our
refreshment center is relatively simple and is typically provided at no
additional charge to the property pursuant to the terms of our service and
maintenance agreement.

      eRoomSafe

      Our eRoomSafes are electronic in-room safes offered in conjunction with
our eRoomSystem. The eRoomSafes have storage space large enough for laptop
computers, video cameras and briefcases and include an encrypted electronic
combination that can be changed by the hotel guest. The eRoomSafes utilize the
eRoomSystem to interface with the eRoomSystem file server that communicates with
the hotel's property management system.

      The following diagram represents the structure and communications network
      of our eRoomSystem, the eRoomSystem file server, the hotel property
      management system, and the eRoomSystem master file server:

                                   [DIAGRAM]


      Our eRoomTray is an ambient tray for dry goods. The eRoomTray has a
terraced design and can hold three, to more than twenty, different products. The
eRoomTray utilizes cross-sensing technology that provides significant
flexibility in product selection for hotels. The eRoomTray uses the visible
countdown timer located on the liquid crystal display of the eRoomServ
Refreshment Center. This solution allows the hotel to sell music CD's souvenirs,
disposable cameras, maps, snacks and other profitable items. The eRoomTray is
unique in that it can generally be located anywhere in a guestroom.

      eRoomEnergy Management

      In 2001, we announced our agreement with INNCOM International, Inc., a
leader in hotel guest-room control systems, through which INNCOM private-labels
its e4 Smart Digital Thermostat for us as eRoomEnergy and provides assistance in
the installation and maintenance of the units. The e4 Smart Digital Thermostat
is designed to control virtually any fan coil unit or packaged terminal air
conditioner found in hotel rooms and comes standard with an illuminated digital
display, a Fahrenheit/Celsius button, one-touch temperature selection, an
off/auto button, fan and display buttons. In addition to these user-friendly
features, the e4 Smart Digital Thermostat includes five relays, an optional
on-board infrared transceiver, a passive infrared occupancy sensor, and is
expandable to include functions such as humidity control, outside temperature
display, refreshment center access reporting, occupancy reporting to
housekeeping and automatic lighting control.

      eRoomData Management

      One of the byproducts of our technology is the information we have
collected since our first product installation. To date, we have collected
several million room-nights of data. The eRoomSystem file server collects
information regarding the usage of our eRoomServ refreshment centers on a
real-time basis. We use this information to help our customers increase their
operational efficiencies. The information we obtain is unique because we are
able to categorize the information according to specific consumer buying
patterns and demographics.

                                      -3-
<PAGE>

      The information we collect is currently offered to our customers as part
of our service and maintenance agreement, including specific information about
their guests' buying patterns and non-confidential information about other
hotels in similar geographic regions. To this end, our hotel clients benefit in
various ways from the information we provide. The hotels are responsible for
restocking the goods sold from our refreshment centers and the real-time sales
data generated by our refreshment centers helps the hotel maximize personnel
efficiencies. The transfer of sales data to the hotel prevents guest pilferage
and minimizes disputes over refreshment center usage, both of which are
prevalent in the lodging industry, particularly with non-automated units.
Finally, the ability to track product sales performance allows the hotel to
stock the refreshment centers with more popular items, which generally leads to
increased sales of product from the refreshment centers. Our system can provide
reports on daily restocking requirements, daily, monthly and annual product
sales statistics, overnight audits, inventory control and a variety of
customized reports.

      Research and Development

      At the core of our products and services is our proprietary software and
hardware that make up our eRoomSystem. Currently, we have suspended all further
research and development projects in conjunction with our existing product line.
We do not expect to undertake research and development projects in the future.

      Sales and Marketing

      Currently, we have more than 10,000 eRoomServ refreshment centers, and
over 6,000 eRoomSafes installed at over 30 hotel properties. Of this amount,
approximately 5,000 refreshment centers and 3,500 eRoomSafes are installed
pursuant to revenue sharing or fixed-payment agreements. Our sales and marketing
efforts have been eliminated with respect to new product placements, and we do
not expect to re-commence such efforts in the future. However, we may redeploy
products following the maturity of certain outstanding revenue sharing
agreements.

      Manufacturing

      We do not anticipate the placement of new products in the future and,
accordingly, the manufacture of our products has become immaterial. We will
continue to service our existing products placed pursuant to existing revenue
sharing and maintenance agreements.

      Competition

      The market for in-room amenities in the lodging industry is quite
competitive, and the competition has further intensified in recent years.
Management has made the decision to cease placing new products in the field and
focus on servicing our existing client base. If we decide to redeploy products
following the maturity of certain outstanding revenue sharing agreements, we
will be subject to significant competition in doing so from our historical
competitors, including Bartech, MiniBar America and Dometic, among others.

      Intellectual Property

      We rely on a combination of trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
customers and business partners to protect our proprietary rights in our
products, services, know-how and information. We currently hold one patent,
Patent No. 4,939,352, filed under the name "Credit Card Storage System," which
protects the use of our credit card technology. This patent expires on July 2,
2007. This patent has not been highly utilized by us.

      We have registered RoomSystems, RoomSafe, eRoomEnergy, eRoomData,
eRoomSystem, and eRoomServ with the United States Patent and Trademark Office.
In addition, we have pending applications for the following trademarks and
service marks: eRoomSafe; eRoomManagement; and eRoomSystem Technologies. We have
also registered our logo and have one pending patent application titled
"Personalized Smart Room", Application No. 10/126,468.

      Our proprietary software consists of three modules and provides the
operating system for our eRoomSystem. The first module is an operating system
that permits messages to be scrolled on the flat panel display of our
eRoomSystem and allows hotel guests to interface with our products. The second
module is a Windows(R) based program that provides a communication link between
our eRoomSystem, our products, our eRoomSystem hotel file server and the hotel's
property management system. The third module is a Windows(R) based program that
collects data from our eRoomSystem hotel file server and produces a wide-variety
of management and operational reports. Three years ago, we introduced our
eRoomSystem version 4 software and thereafter our newest version 4.1 software.
All but one of our existing hotel clients are utilizing our version 4.1 software
that provides users with a friendly, easy-to-learn graphical environment which
generally expands the report generating capabilities of the property.

      We do not know if our future patent applications will be issued with the
full scope of claims we seek, if at all, or whether any patents we receive will
be challenged or invalidated. Our means of protecting our proprietary rights in
the United States, and abroad, may not be adequate and competitors may
independently develop similar technology. We cannot be certain that our services
do not infringe on patents or other intellectual property rights that may relate
to our services. Like other technology-based businesses, we face the risk that
we will be unable to protect our intellectual property and other proprietary
rights, and the risk that we will be found to have infringed on the proprietary
rights of others. Further, as previously mentioned, it is our intention to focus
solely on servicing our existing hotel clients and we do not intend on placing
new products in the lodging market.

                                      -4-
<PAGE>

      Historical Summary

      We were originally incorporated under the laws of the State of North
Carolina on March 17, 1993 as InnSyst! Corporation. On September 28, 1993, the
operations of InnSyst! were transferred to RoomSystems, Inc., a Virginia
corporation, incorporated on August 12, 1993, or RoomSystems Virginia. On April
29, 1996, the operations of RoomSystems Virginia were transferred to
RoomSystems, Inc., a Nevada corporation, or RoomSystems. Through an agreement
and plan of reorganization approved by a majority of our stockholders dated
December 31, 1999, RoomSystems became the wholly owned subsidiary of RoomSystems
International Corporation. Pursuant to this agreement and plan of
reorganization, all shares of RoomSystems common stock, including all shares of
common stock underlying outstanding options and warrants, Series A convertible
preferred stock and Series B convertible preferred stock were exchanged for the
identical number and in the same form of securities of RoomSystems International
Corporation. On February 1, 2000, we changed our name from RoomSystems
International Corporation to RoomSystems Technologies, Inc. Subsequently, on
March 29, 2000, with the approval of our stockholders, we changed our name to
eRoomSystem Technologies, Inc. Thereafter, we changed the name of RoomSystems,
Inc. to eRoomSystem Services, Inc.

      We have two wholly owned subsidiaries, eRoomSystem Services, Inc.
(formerly RoomSystems) and eRoomSystem SPE, Inc. RSi BRE, Inc., or RSi BRE, a
former wholly-owned subsidiary, was liquidated into eRoomSystem Technologies,
Inc. in 2004.

      eRoomSystem Services is our service and maintenance subsidiary that
installs all of our products, provides electronic software upgrades to our
customers, provides customer service and maintenance for our products and trains
hotel personnel on the use and maintenance of our products. Pursuant to a series
of agreements entered into with Identica in 2005, we sold furniture and computer
equipment, as well as a perpetual license to our web technologies package
utilized by our personnel in the maintenance of automated refreshment centers,
electronic safes and energy management products installed at hotels. In
addition, the technical personnel, formerly employed by us for the purpose of
servicing our existing products installed at hotels, have been hired by
Identica. We continue to use these individuals for our entire product servicing
needs pursuant to the Professional Services Agreement between us and Identica
detailed above.

      RSi BRE was formed as part of the Equipment Transfer Agreement we entered
into in September 1998 with RSG Investments, LLC, or RSG, a privately held
company. Previously, RSi BRE held title to 1,717 eRoomServ refreshment centers
and 1,304 eRoomSafes. On February 29, 2004, we entered into a Settlement
Agreement and Mutual Release Agreement with RSG whereby we paid the sum of
$152,823 as a full and final cancellation of the Equipment Transfer Agreement
and subsequent Settlement Agreement dated September 1999. As a result, the
Company immediately commenced recognizing all revenue generated from the four
revenue sharing lease agreements relating to the 1,717 eRoomServ refreshment
centers and 1,304 eRoomSafes. In 2004, RSi BRE was liquidated into eRoomSystem
Technologies, Inc.

      eRoomSystem SPE was formed as part of our long-term financing arrangement
with AMRESCO Leasing Corporation, which was terminated in August 2002.
eRoomSystem SPE owns all of the equipment previously funded by AMRESCO under our
revenue-sharing program, consisting of nine properties comprising 2,775
eRoomServ refreshment centers and 2,622 eRoomSafes. AMRESCO had taken a senior
security interest in all of the assets of eRoomSystem SPE. We control
eRoomSystem SPE and its financial results are consolidated with those of
eRoomSystem Technologies and eRoomSystem Services. On July 14, 2006, the Company
repaid the full amount due and owing under the financing arrangement.

      Government Regulation

      We are subject to laws and regulations applicable to businesses generally,
as well as to laws and regulations directly applicable to the lodging industry
and minibars in particular. These laws and regulations relate to qualifying to
do business in the various states and in foreign nations in which we currently
have, or propose to have, our products.

      Apart from laws and regulations applicable to us, some of our existing and
potential customers are subject to additional laws or regulations, such as laws
and regulations related to liquor and gaming, which may have an adverse effect
on our operations. Due to the licensing requirements relating to the sale of
alcohol in each state, the failure of any of our revenue-sharing partners to
obtain or maintain its liquor license would result in the loss of revenue for
our revenue-sharing partner and us. In addition, due to the heightened
hotel-casino regulatory environment and our ongoing revenue-sharing agreements
with hotel-casinos, our operations may be subject to review by a hotel-casino's
compliance committee to verify that its involvement with us would not jeopardize
its gaming license. The regulatory compliance committee of a hotel-casino has
broad discretion in determining whether or not to approve a transaction with a
third party, which review typically includes the character, fitness and
reputation of the third party and its officers, directors and principals. If our
history or operations present problems for a hotel-casino, we would either have
to expend resources to address or eliminate the concerns or forego the business.

                                      -5-
<PAGE>

      Employees

      We currently employ two full-time employees and have one consultant. In
addition, pursuant to the Professional Services Agreement with Identica, we
utilize their technical support team in the service and maintenance of our
existing installed products. None of our employees are subject to a collective
bargaining agreement.


ITEM 2.  DESCRIPTION OF PROPERTY.

      We currently utilize an office and warehouse space in Salt Lake City, Utah
pursuant to our Professional Services Agreement with Identica. We maintain all
inventory and replacement parts at this facility. In addition, we lease
approximately 600 square feet of office space at 1072 Madison Ave., Lakewood, NJ
08701. This lease is month-to-month and the monthly lease rate is $600.

ITEM 3.  LEGAL PROCEEDINGS.

      We are, from time to time, parties to various legal proceedings arising
out of our business. As of the date of this filing, there are no proceedings
pending or threatened against us which, if determined adversely, would have a
material adverse effect on our business, financial condition, and results of
operations or liquidity. Further, all outstanding accounts payable are current
as of the date of filing of this Annual Report on Form 10-KSB.

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

      Not applicable.

PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      Our authorized capital stock consists of 50,000,000 shares of common
stock, $0.001 par value; 5,000,000 shares of preferred stock, $0.001 par value
including; 500,000 shares of Series A convertible preferred stock, $0.001 par
value; 2,500,000 shares of Series B convertible preferred stock, $0.001 par
value; 2,000,000 shares of Series C convertible preferred stock, $0.001 par
value; and 2,777,778 shares of Series D convertible preferred stock, $0.001 par
value. Our current authorized capital was effected through an amendment and
restatement of our articles of incorporation on March 29, 2000, and the filing
of a Certificate of Rights, Preferences and Privileges relating to the Series D
convertible preferred stock in November 2002. As of March 1, 2007, there were
23,898,165 shares of common stock outstanding and no shares of any class of
preferred stock outstanding.

      High And Low Closing Sale Prices Of Our Common Stock

      Prior to August 3, 2000, there was no public market for our common stock.
In conjunction with our initial public offering, our common stock was accepted
for listing on the NASDAQ SmallCap Market under the trading symbol "ERMS". In
April 2003, our common stock was delisted from the NASDAQ SmallCap market. Our
common stock is currently quoted on the Over-The-Counter Bulletin Board under
the same symbol. As of March 1, 2007, there were approximately 400 stockholders
of record holding our outstanding common stock.

      The following table sets forth the high and low bid information of our
common stock, as quoted on the Over The Counter Bulletin Board (which quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions) for each quarter during the period
January 1, 2005 through December 31, 2006:


Calendar Quarter Ended             Low           High
----------------------          --------       --------
   March 31, 2005               $   0.22       $   0.35
   June 30, 2005                $   0.19       $   0.48
   September 30, 2005           $   0.30       $   0.44
   December 31, 2005            $   0.17       $   0.40
   March 31, 2006               $   0.17       $   0.30
   June 30, 2006                $   0.22       $   0.29
   September 30, 2006           $   0.13       $   0.27
   December 31, 2006            $   0.11       $   0.17

      The last reported price of our common stock on the Over-The-Counter
Bulletin Board on March 1, 2007 was $0.18 per share. We are not aware of any
public market for our options or warrants.

                                      -6-
<PAGE>

      Dividend Policy

      We have never declared or paid any cash dividends on our common stock. Our
board presently, and for the foreseeable future, intends to retain all of our
earnings, if any, for the purchase of securities in private or publicly traded
emerging growth companies, or possibly, the acquisition of an operating company
if the opportunity arises. The declaration and payment of cash dividends in the
future will be at the discretion of our board and will depend upon a number of
factors, including, among others, our future earnings, operations, funding
requirements, restrictions under our credit facility, our general financial
condition and any other factors that our board considers important. Investors
should not purchase our common stock with the expectation of receiving cash
dividends.

      Recent Sales of Unregistered Securities; Use of Proceeds

      On November 8, 2002, we issued a promissory note to Ash Capital, LLC for
proceeds of up to $322,500 (the "Ash Capital Note"). The note bears interest at
8%. The principal and interest were originally due on November 8, 2003. All past
due amounts and accrued interest thereon bear interest at 18%. The Company
transferred $25,000 from an accounts payable due to Ash Capital, which increased
the principal amount of the promissory note to $347,500. According to the terms
of the note, principal and accrued interest on the promissory note could convert
into Series D Convertible Preferred Stock at $0.90 per share. Each share of the
Series D Convertible Preferred Stock is convertible into six shares of common
stock, at the rate of $0.15 per share of Series D Preferred Stock. The
promissory note could be converted into 17.8% of the lesser of the authorized
capital stock or the outstanding capital stock of the Company.

      On October 1, 2003, Ash Capital, LLC agreed to amend the terms of its
secured convertible promissory note with us to (i) extend the maturity date to
the earlier of November 8, 2007 or the maturity date of the Notes issued to
Gestetner Group, LLC and certain third parties and (ii) include as an additional
event of default any default by us of the secured convertible promissory notes
with Gestetner Group, LLC and certain third parties. In addition, we issued Ash
Capital, LLC a contingent warrant to purchase shares of common stock,
exercisable at $0.13 per share through October 1, 2008. The terms of the warrant
provided Ash Capital, LLC may purchase seven percent of the aggregate number of
shares of the Company's common stock issued to and held on that date by any of
the Note Holders from the October 1, 2003 funding in excess of 10,000,000 common
shares. We have utilized all monies loaned by Ash Capital, LLC for our business
operations.

      On October 1, 2003, we issued secured convertible promissory notes in the
original principal amount of $250,000 (the "Notes"), collectively, to Gestetner
Group, LLC, a New Jersey limited liability company, and several third parties,
the Noteholders. David A. Gestetner, our Chief Executive Officer and President
is the Managing Member of the Gestetner Group, LLC. The terms of the Notes
include (i) for interest to accrue at the rate of 8% per annum, (ii) a maturity
date of the earlier of (a) October 1, 2008, (b) the date of approval of the
Board of Directors regarding the merger of the Company with or into any third
party or the sale of all or substantially all of our assets, or (c) the date of
the closing of any financing (other than commercial credit facilities), the
gross proceeds of which are at least $1,000,000 and (iii) the right of the
Noteholders, at any time, to convert all outstanding principal and accrued and
unpaid interest into shares of our common stock at the rate of $0.05 per share;
provided, however, that we shall have the right to not permit the conversion if
such conversion would result in the Noteholders holding, in the aggregate and on
a fully-diluted basis, more than 49% of our outstanding common stock. In
addition, the Noteholders have been issued, collectively, warrants to purchase
5,000,000 shares of our common stock, exercisable at $0.05 per share at any time
through October 1, 2008. We used the proceeds provided by the Noteholders for
our business operations.

      On September 1, 2005, Gestetner Group, LLC and the Noteholders converted
the Notes, in the collective principal amount of $250,000 plus accrued interest
of $38,411, into 5,768,219 shares of common stock. The Notes were converted into
common stock at $0.05 per share.

      On September 1, 2005, Ash Capital, LLC converted the Ash Capital Note, in
the original principal amount of $347,500 plus accrued interest of $82,332, into
2,865,550 shares of common stock. The Ash Capital Note was converted at $0.15
per share. The foregoing conversion triggered the issuance of warrants to
purchase 53,775 shares of common stock in favor of Ash Capital at an exercise
price of $0.13 per share through October 1, 2008.

      On September 7, 2005, Gestetner Group, LLC and the Noteholders exercised
warrants to purchase a total of 5,000,000 shares of common stock for a
collective exercise price of $250,000. The warrants were exercised at $0.05 per
share.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

      Overview

      Our core business was the development and installation of an intelligent,
in-room computer platform and communications network, or the eRoomSystem, for
the lodging industry. The eRoomSystem is a computerized platform and
processor-based system designed to collect and control data. The eRoomSystem
supports our fully automated and interactive eRoomServ refreshment centers,
eRoomSafes, eRoomEnergy products, and the eRoomTray. In 2005, we commenced our
diversification strategy of investing in third party emerging growth companies.
To this end, we have made investments totaling $60,000, consisting of $10,000 in
Identica Holdings Corporation and $50,000 in Aprecia, LLC. In addition, we have
loaned Identica $150,000 in cash. The loan is secured by a security interest in
all the assets of Identica and is evidenced by a promissory note. In
consideration for making the loan, we were issued a warrant to purchase one
million (1,000,000) shares of common stock of Identica, exercisable at $0.15 per
share at any time through May 20, 2010. We may make additional investments in
promising emerging growth companies, and potentially acquire an operating
company if the opportunity arises.

                                      -7-
<PAGE>

      Our existing products interface with the hotel's property management
system through our eRoomSystem communications network. The hotel's property
management system posts usage of our products directly to the hotel guest's room
account. The solutions offered by our eRoomSystem and related products have
allowed us to install our products and services in several premier hotel chains,
including Marriott International, Hilton Hotels and Carlson Hospitality
Worldwide, in the United States and internationally.

      One of the byproducts of our technology is the information we have
collected since our first product installation. To date, we have collected
several million room-nights of data. Through our eRoomSystem, we are able to
collect information regarding the usage of our products on a real-time basis. We
use this information to help our customers increase their operating
efficiencies.

      Description of Revenues

      Historically, we have received most of our revenues from the sale or
placement under a revenue-sharing program of our products in hotels. We expect
that these revenues will account for a substantial majority of our revenues for
the foreseeable future. In addition, we may receive revenues in the future upon
the sale of securities received in consideration for investments made in third
party companies in 2005 and 2006; however, the return on such investments is not
assured.

      We also generate revenues from maintenance and support services relating
to our existing installed products. Our dependence on the lodging industry,
including its guests, makes us extremely vulnerable to downturns in the lodging
industry caused by the general economic environment. Such a downturn could
result in fewer purchases by hotel guests of goods and services from our
products installed in hotels, and accordingly lower revenues where our products
are placed pursuant to a revenue sharing agreement. Time spent by individuals on
travel and leisure is often discretionary for consumers and may be particularly
affected by adverse trends in the general economy. The success of our operations
depends, in part, upon discretionary consumer spending and economic conditions
affecting disposable consumer income such as employment, wages and salaries,
business conditions, interest rates, availability of credit and taxation.

      Our revenue-sharing program provides us with a seven-year revenue stream
under each revenue-sharing agreement. Because many of our customers in the
lodging industry traditionally have limited capacity to finance the purchase of
our products, we designed our revenue-sharing program accordingly. Through our
revenue-sharing plan, we have installed our products at little or no upfront
cost to our customers and share in the recurring revenues generated from sales
of goods and services related to our products. We retain the ownership of the
eRoomServ refreshment centers and eRoomSafes throughout the term of the
revenue-sharing agreements and the right to re-deploy any systems returned to us
upon the expiration or earlier termination of the revenue-sharing agreements. We
have failed to place any products, either on a revenue sharing or sale basis in
the prior three years, and we have no present intention of placing new products
in the future. We do, however, intend to continue to service and maintain our
existing installed product base for the remaining life of the contracts relating
thereto.

      Our revenues over the past few years have been fairly stable as we have
focused on service and maintenance of our existing installed products and have
not installed new products at hotels. Over time, our revenues relating to our
installed products will decline as existing revenue sharing agreements conclude.
Given the foregoing, in 2005 we commenced our diversification strategy to invest
in emerging growth companies. To date we have invested in Identica Holdings
Corporation, a privately held distributor and integrator of next-generation
biometric security solutions, including the TechSphere hand vascular pattern
biometric technology, and Aprecia, LLC, a provider of applied artificial
intelligence solutions for gaming and homeland security applications. We
continue to explore opportunities and perform due diligence on third parties
with respect to additional potential investments. At this time, we have not
reached a definitive agreement to make further investments. In addition, we may
acquire an operating company in the future if the opportunity arises. Over time,
we may realize revenues from the sale of securities purchased from Identica,
Aprecia and other third party companies in the future, if applicable. The timing
and return on such investments, however, cannot be assured.

      We anticipate that we will receive more than 50% of the recurring revenues
from the sale of goods and services generated by our currently installed
eRoomServ refreshment centers, eRoomSafes and eRoomTray solutions under
revenue-sharing agreements. Our customers receive the remainder of the recurring
revenues.

      No new products were installed during the years ended December 31, 2006
and 2005.

      Revenue Recognition

      Sales revenue from our products is recognized upon completion of
installation and acceptance by the customer. We do not, however, expect to
generate meaningful sales revenue as such revenues are limited to the sales of
replacement equipment and parts to hotel clients who previously purchased our
products. Sales revenue from the placement of our eRoomServ refreshment centers
and eRoomSafes under our revenue-sharing program are accounted for similar to an
operating lease, with the revenues recognized as earned over the term of the
agreement. In some instances, our revenue-sharing agreements provide for a
guaranteed minimum daily payment by the hotel. We negotiated our portion of the
revenues generated under our revenue-sharing program based upon the cost of the
equipment installed and the estimated daily sales per unit for the specific
customer.

                                      -8-
<PAGE>

      We have entered into installation, maintenance and license agreements with
most of our existing hotel customers. Installation, maintenance and license
revenues are recognized as the services are performed, or pro rata over the
service period. We defer all revenue paid in advance relating to future services
and products not yet installed and accepted by our customers.

      Our installation, maintenance and license agreements stipulate that we
collect a maintenance fee per eRoomServ refreshment center per day, payable on a
monthly basis. Our objective is to generate gross profit margins of
approximately 50% from our maintenance-related revenues. We base this
expectation on our historical cost of maintenance of approximately $0.04 per
unit per day and, pursuant to our maintenance agreements, our projected receipt
of generally not less than $0.08 per unit per day.

      Description of Expenses

      Cost of product sales consists primarily of production, shipping and
installation costs. Cost of revenue-sharing arrangements consists primarily of
depreciation of capitalized costs for the products placed in service. We
capitalize the production, shipping, installation and sales commissions related
to the eRoomServ refreshment centers, eRoomSafes, eRoomTrays and eRoomEnergy
management products placed under revenue-sharing agreements. Cost of maintenance
fee revenues primarily consists of expenses related to customer support and
maintenance.

      Selling, general and administrative expenses primarily consist of general
and administrative expenses including professional fees, salaries and related
costs for accounting, administration, finance, human resources, information
systems and legal personnel.

      Research and development expenses consist of payroll and related costs for
hardware and software engineers, quality assurance specialists, management
personnel, and the costs of materials used by our consultants in the maintenance
of our existing installed products. As we have elected not to install new
products at hotels, there were no research and development expenses in fiscal
year 2006 and we do not expect this to change in the future periods.

      In accordance with Financial Accounting Standards Board, or FASB,
Statement of Financial Accounting Standards, or SFAS, No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
development costs incurred in the research and development of new software
products to be sold, leased or otherwise marketed are expensed as incurred until
technological feasibility in the form of a working model has been established.
Internally generated capitalizable software development costs have not been
material to date. We have charged our software development costs to research and
development expense in our consolidated statements of operations.

                                      -9-
<PAGE>

      Results of Operations

      The following table sets forth selected statement of operations data as a
percentage of total revenues for the years indicated:

                                              Fiscal Years ended December 31,
                                                     2006       2005
                                                     ----       ----
Statement of Operations Data:
Revenue:
   Revenue-sharing arrangements                      73.2%      77.3%
   Maintenance fees                                  20.9       22.2
   Product sales                                      5.9        0.5
                                                    -----      -----
        Total revenue                               100.0%     100.0
                                                    =====      =====
Cost of revenue:
   Revenue-sharing arrangements                      33.6%      32.9%
   Maintenance                                        4.9        3.8
   Product sales                                      5.2        0.1
                                                    -----      -----
        Total cost of revenue                        43.7       36.8
                                                    =====      =====
Gross margin                                         56.3       63.2
                                                    =====      =====

Operating expenses:
   Selling, general and administrative expense       41.0%      41.3%
   Research and development expense                  --          0.1
   Interest expense                                   8.2       20.5
   Gain on sale of assets                            --         (3.4)
   Interest and other income                         (5.0)      (5.4)
                                                    -----      -----
        Net operating expenses                       44.2       53.1
                                                    =====      =====
Income from operations                               12.1%      10.2%
                                                    =====      =====
Other income (expense):
   Gain on forgiveness of liabilities and debt       --          0.1
                                                    -----      -----
Net income (loss)                                    12.1%      10.3%
                                                    -----      -----

      Years Ended December 31, 2006 and 2005

      Revenues

      Revenue Sharing Arrangements -- Our revenue from revenue-sharing
arrangements was $979,470 in 2006 as compared to $1,204,219 for 2005,
representing a decrease of $224,749, or 18.7%. The decrease in revenue from
revenue-sharing arrangements was due to completion of a number of
revenue-sharing agreements as well as the default by a customer of their
revenue-sharing agreement. During the years ended December 31, 2006 and 2005, we
did not place additional products on a revenue sharing basis.

      Maintenance Fee Revenue -- Our maintenance fee revenue was $278,464 for
2006 and $345,738 for 2005, representing a decrease of $67,274, or 19.5%. The
decrease in maintenance fee revenue was due to a decreased number of products
under revenue-sharing and maintenance contracts.

      Product Sales -- Our revenue from product sales was $79,551 in 2006, as
compared to $7,331 in 2005, representing an increase of $72,220, or 985.1%. The
increase in revenue from product sales in 2006 was a result of the sales to
Hotels of their equipment upon completion of their revenue-sharing agreement.

      Cost of Revenue

      Cost of Revenue-Sharing Revenue -- Our cost of revenue-sharing revenue was
$449,815 for 2006 and $512,316 for 2005, representing a decrease of $62,501, or
12.2%. The decrease in the cost of revenue-sharing revenue resulted from a
decrease in depreciation expense due to the sale of equipment to customers upon
completion of their revenue-sharing contract. The gross margin percentage on
revenue-sharing revenue was 54.1% in 2006 as compared to 57.5% in 2005.

      Cost of Maintenance Revenue -- Our cost of maintenance revenue was $64,365
for 2006 as compared to $58,786 for 2005, representing an increase of $5,579, or
9.5%. The increase in the cost of maintenance revenue was primarily due to
outsourcing in 2006 of the maintenance services to Identica. The gross margin
percentage on maintenance revenues was 76.9% in 2006 as compared to 83.0% in
2005.

                                      -10-
<PAGE>

      Cost of Product Sales Revenue -- Our cost of product sales revenue was
$70,085 for 2006 as compared to $1,261 for 2005, representing an increase of
$68,824, or 5457.9%. The increase was due to the expensing the remaining basis
of the equipment sold in 2006. The gross margin percentage on revenue from
product sales revenue was 11.9% in 2006 as compared to 82.8% in 2005.

The changes and percent changes with respect to our revenues and our cost of
revenue for the years ended December 31, 2006 and 2005 are as follows:

<TABLE>
<CAPTION>
                                                For the Years Ended
                                                   December 31,
                                                                                    Percent
                                                2006          2005       Change      Change
                                          ----------    ----------    ---------      -------
<S>                                       <C>           <C>           <C>            <C>
REVENUE
     Revenue-sharing arrangements         $  979,470    $1,204,219    $(224,749)        18.7%
     Maintenance fees                        278,464       345,738      (67,274)        19.5%
     Product sales                            79,551         7,331       72,220        985.1%
                                          ----------    ----------    ---------      -------
          Total Revenue                    1,337,485     1,557,288     (219,803)        14.1%
                                          ----------    ----------    ---------      -------

COST OF REVENUE
     Revenue-sharing arrangements            449,815       512,316      (62,501)        12.2%
     Maintenance                              64,365        58,786        5,579          9.5%
     Product sales                            70,085         1,261       68,824      5,457.9%
                                          ----------    ----------    ---------      -------
          Total Cost of Revenue           $  584,265    $  572,363    $  11,902          2.1%
                                          ----------    ----------    ---------      -------

GROSS MARGIN PERCENTAGE
     Revenue-sharing arrangements               54.1%         57.5%
     Maintenance                                76.9%         83.0%
     Product sales                              11.9%         82.8%
          Total Gross Margin Percentage         56.3%         63.2%
</TABLE>

      Although the preceding table summarizes the net changes and percent
changes with respect to our revenues and our cost of revenue for the years ended
December 31, 2006 and 2005, the trends contained therein are limited to a
two-year comparison and should not be viewed as a definitive indication of our
future results.

      Operating Expenses

      Selling, General and Administrative -- Selling, general and administrative
expenses were $548,421 for 2006 and $642,508 for 2005, representing a decrease
of $94,087, or 14.6%. Selling, general and administrative expenses represented
41% of our total revenues in 2006 and 41.3% of our total revenues in 2005. The
decrease in selling, general and administrative expenses related to our
continued reduction in fixed overhead expenses.

      Research and Development Expenses -- Research and development expenses
were $0 for 2006 and $1,959 for 2005, representing a decrease of $1,959, or
100%. The decrease in research and development expenses was due to our decision
not to undertake new research and development projects given that we do not
anticipate making further placements of new products at hotels. Research and
development expenses represented 0% of our total revenue in 2006 and 0.1% of our
total revenue in 2005.

      Interest expense was $109,946 for 2006 as compared to $319,062 for 2005, a
decrease of $209,116, or 65.5%. The decrease in interest expense was due to the
payoff of AMRESCO in July 2006 as well as the early conversion of the
outstanding notes payable on September 7, 2005 of which the remainder of the
unamortized discount of $154,109 was recognized in 2005. We did not realize a
gain on the sale of assets in 2006 as compared to a gain of $52,624 in 2005. The
gain on sale of assets in 2005 related to the sale of equipment to Identica
Corporation. Interest and other income in the amount of $67,230 was realized in
2006 as compared to $84,385 in 2005. Income from operations for 2006 was
$162,083, as compared to $158,405 in 2005. The Company also realized a gain on
forgiveness of liabilities and debt of $2,097 in 2005.

                                      -11-
<PAGE>

      Net Income Attributable to Common Stockholders

      We realized net income attributable to common stockholders of $162,083 in
2006, as compared to $160,502 in 2005. The $1,581 increase in net income was
immaterial.

      Financing Arrangement with AMRESCO Leasing Corporation

      Under the terms of a financing agreement with AMRESCO Leasing Corporation,
(the "finance company"), the finance company had agreed to fund up to 150% of
the Company's product costs for each eRoomServ refreshment center that had been
in service for 90 days, subject to the related hotel customer meeting certain
requirements and conditions during that period. As part of the financing
agreement, the Company formed eRoomSystem SPE, Inc. ("SPE"), a wholly owned,
consolidated subsidiary. SPE owns all of the eRoomServ refreshment centers
funded by the finance company as well as the related revenue-sharing agreements.
The finance company had a senior security interest in the eRoomServ refreshment
centers financed under the financing agreement and the corresponding revenue
sharing agreements. SPE was obligated to repay the amount borrowed under the
terms of a note payable corresponding to each funding, pursuant to the financing
agreement over seven years, plus interest, at a variable interest rate
determined at the time of each funding.

      The notes payable were repaid by the Company on July 14, 2006. SPE held
payments from hotel customers in several restricted bank accounts for payment to
the finance company and to the Company. The funds were released on July 18,
2006.

      As a requirement of the October 1, 2003, Gestetner Group, LLC funding
arrangement, the Company entered into an agreement that amended the terms of the
notes payable due to AMRESCO Leasing Corporation. The amendment states that for
the two-year period commencing on October 1, 2003, the rate at which interest is
accruing on debt obligations owed by the Company to AMRESCO shall be reduced to
eight percent per annum, and from October 1, 2005 until the debt obligations
have been paid in full, the rate at which interest is accruing will be ten
percent per annum. Previously, the debt obligations were accruing interest at
the seven-year treasury rate plus 12.5 percent.

      In consideration for the reduction in the interest rate, the Company
issued AMRESCO a warrant to purchase 400,000 shares of common stock, exercisable
at $0.10 per share through October 1, 2008. If at anytime after December 31,
2006, the warrant has an intrinsic value greater than $300,000 based upon the
then current trading price of the Company's common stock, then AMRESCO will have
the right to "put" the warrant back to the Company in exchange for $200,000
payable in 12 equal consecutive monthly installments with the first payment to
be made on the last day of the month in which the "put" occurs. The warrants to
purchase 400,000 shares of common stock were recognized in October 2003 as a
troubled debt restructuring, with the $97,956 fair value of the warrants
recorded as a discount to the notes payable to be amortized over the remaining
life of the notes as a charge to interest expense. The discount was fully
amortized in July 2006 upon full repayment of the notes.

Liquidity and Capital Resources

      At December 31, 2006, we had $1,480,720 of cash and working capital of
$1,599,398, as compared to $1,316,515 of cash and working capital of $1,211,956
at December 31, 2005. In addition, our stockholders' equity was $2,664,563 at
December 31, 2006 as compared to $2,469,730 at December 31, 2005, an increase of
$194,833. The increase in cash, working capital and stockholders' equity
reflects the continued decrease in cash used in our operations and reduction in
fixed overhead expenses.

      Our accumulated deficit decreased to $31,484,848 at December 31, 2006 as
compared to $31,646,931 at December 31, 2005. The decrease in accumulated
deficit is a direct result of our net income of $162,083 in the year ended
December 31, 2006.

      Net cash provided by operating activities for the year ended December 31,
2006 was $683,126, as compared to $901,677 of net cash provided by operating
activities during the year ended December 31, 2005. The $218,551 decrease in net
cash provided by operating activities resulted primarily from the release of the
deposit of $225,000 in 2005.

      Net cash provided by investing activities for the year ended December 31,
2006 was $190,329, as compared to net cash used of $202,244 during the year
ended December 31, 2005. The change resulted primarily from the investments made
in Identica Holdings Corporation as well as the loans made to Identica in 2005,
payment of which were received in 2006 as well as the proceeds from the sale of
refreshment centers.

      Net cash used in financing activities for the year ended December 31, 2006
was $709,250, as compared to $29,304 during the year ended December 31, 2005.
The increase in cash used in financing activities resulted from the payoff of
the long-term debt relating to AMRESCO in 2006, and the receipt of proceeds from
the exercise of options and warrants in 2005.

      We currently believe that our cash on hand will provide sufficient capital
resources and liquidity to fund our expected operating expenditures for the next
twelve months.

                                      -12-
<PAGE>

Years Ended December 31, 2005 and 2004

      Revenues

      Revenue Sharing Arrangements -- Our revenue from revenue-sharing
arrangements was $1,204,219 in 2005 as compared to $1,103,945 for 2004,
representing an increase of $100,274, or 9.1%. The increase in revenue from
revenue-sharing arrangements was due to better performance of our products
installed pursuant to revenue sharing agreements. During the years ended
December 31, 2005 and 2004, we did not place additional products on a revenue
sharing basis.

      Maintenance Fee Revenue -- Our maintenance fee revenue was $345,738 for
2005 and $363,501 for 2004, representing a decrease of $17,763, or 4.9%. The
decrease in maintenance fee revenue was due to a decreased number of products
installed with maintenance agreements.

      Product Sales -- Our revenue from product sales was $7,331 in 2005, as
compared to $123,713 in 2004, representing a decrease of $116,382, or 94.1%. The
decrease in revenue from product sales was a result of no material equipment
sales occurring in 2005.

      Cost of Revenue

      Cost of Revenue-Sharing Revenue -- Our cost of revenue-sharing revenue was
$512,316 for 2005 and $515,124 for 2004, representing a decrease of $2,808, or
0.5%. The decrease in the cost of revenue-sharing revenue was not material. The
gross margin percentage on revenue-sharing revenue was 57.5% in 2005 as compared
to 53.3% in 2004.

      Cost of Maintenance Revenue -- Our cost of maintenance revenue was $58,786
for 2005 as compared to $72,915 for 2004, representing a decrease of $14,129, or
19.4%. The decrease in the cost of maintenance revenue was primarily due to
fewer repair issues with respect to installed products, in 2005 as compared to
2004. The gross margin percentage on maintenance revenues was 83.0% in 2005 as
compared to 79.9% in 2004.

      Cost of Product Sales Revenue -- Our cost of product sales revenue was
$1,261 for 2005 as compared to $3,142 for 2004, representing a decrease of
$1,881, or 59.9%. The decrease, while significant from a percentage standpoint,
was not material. The gross margin percentage on revenue from product sales
revenue was 82.8% in 2005 as compared to 97.5% in 2004. The high gross margin
percentage in 2004 relates to the sale of 260 refreshment centers that were
previously written-off and, accordingly, no cost of product sales was attributed
to such sale.

The changes and percent changes with respect to our revenues and our cost of
revenue for the years ended December 31, 2005 and 2004 are as follows:

<TABLE>
<CAPTION>
                                            For the Years Ended
                                               December 31,
                                            -------------------
                                                                                 Percent
                                            2005          2004         Change     Change
                                         ----------    ----------    ---------    ------
<S>                                      <C>           <C>           <C>           <C>
REVENUE
   Revenue-sharing arrangements          $1,204,219    $1,103,945    $ 100,274       9.1%
   Maintenance fees                         345,738       363,501      (17,763)      4.9%
   Product sales                              7,331       123,713     (116,382)     94.1%
                                         ----------    ----------    ---------    ------
         Total Revenue                    1,557,288     1,591,159      (33,871)      2.1%
                                         ----------    ----------    ---------    ------


COST OF REVENUE
   Revenue-sharing arrangements             512,316       515,124       (2,808)      0.5%
   Maintenance                               58,786        72,915      (14,129)     19.4%
   Product sales 3,142                        1,261         3,142       (1,881)     59.9%
                                         ----------    ----------    ---------    ------
         Total Cost of Revenue              572,363       591,181      (18,818)      3.2%
                                         ----------    ----------    ---------    ------

GROSS MARGIN PERCENTAGE
   Revenue-sharing arrangements                57.5%         53.3%
   Maintenance                                 83.0%         79.9%
   Product sales                               82.8%         97.5%
         Total Gross Margin Percentage         63.2%         62.8%
</TABLE>


                                      -13-
<PAGE>

      Although the preceding table summarizes the net changes and percent
changes with respect to our revenues and our cost of revenue for the years ended
December 31, 2005 and 2004, the trends contained therein are limited to a
two-year comparison and should not be viewed as a definitive indication of our
future results.

      Operating Expenses

      Selling, General and Administrative -- Selling, general and administrative
expenses were $642,508 for 2005 and $784,110 for 2004, representing a decrease
of $141,602, or 18.1%. Selling, general and administrative expenses represented
41.3% of our total revenues in 2005 and 49.3% of our total revenues in 2004. The
decrease in selling, general and administrative expenses related to our
continued reduction in fixed overhead expenses.

      Research and Development Expenses -- Research and development expenses
were $1,959 for 2005 and $38,527 for 2004, representing a decrease of $36,568,
or 94.9%. The decrease in research and development expenses was due to our
decision not to undertake new research and development projects given that we do
not anticipate making further placements of new products at hotels. Research and
development expenses represented 0.1% of our total revenue in 2005 and 2.4% of
our total revenue in 2004.

      Interest expense was $319,062 for 2005 as compared to $209,961 for 2004,
an increase of $109,101, or 52.0%. The increase in interest expense related
primarily to the remainder of the unamortized discount of $154,109 that was
recognized upon the early conversion of the outstanding notes payable on
September 7, 2005. In 2005, we did not realize a gain on collection of
previously written off receivables, as compared to a gain on collection of
previously written off receivables in the amount of $312,500 in 2004. We
realized a gain on the sale of assets in 2005 of $52,624, as compared to no gain
on the sale of assets in 2004. Income from operations for 2005 was $158,405, as
compared to $287,308 in 2004. The Company also realized a gain on forgiveness of
liabilities and debt of $2,097 in 2005 as compared to $612,718 in 2004.

      Net Income Attributable to Common Stockholders

      We realized net income attributable to common stockholders of $160,502 in
2005, as compared to $900,072 in 2004. The $739,570 decrease in net income was
primarily due to not realizing a gain on collection of previously written off
receivables in 2005 as well as realizing a significantly reduced gain on
forgiveness of liabilities and debt offset, in part, by realizing a gain on the
sale of assets in 2005.

      Financing Arrangement with AMRESCO Leasing Corporation

      In 1999, we entered into the amended and restated program agreement with
AMRESCO, which represented an exclusive, post-installation, financing
arrangement for the funding of units placed with domestic hotel customers under
our revenue-sharing agreements. On May 11, 2000, we replaced this agreement with
a master business lease financing agreement. Thereafter, on February 23, 2001,
we amended and restated the master business lease financing agreement and
related exhibits.

      In September 2002, we announced the receipt of written notice from AMRESCO
Leasing Corporation of its intention to cease funding any future loans pursuant
to the Amended and Restated Master Business Lease Financing Agreement. AMRESCO
indicated that the decision to cease funding future loans was based on its
determination that the Company was not able to meet its debt obligations in the
ordinary course of business, and also that it had altered its policy not to
originate any new loans and to only service its existing portfolio of loans.

      Under the terms of this terminated agreement, we were able to finance up
to 150% of the fully burdened cost to manufacture and install our products,
through an open-ended line of credit, over the seven-year term of the agreement.

      As part of the AMRESCO financing, we formed eRoomSystem SPE, a wholly
owned subsidiary. eRoomSystem SPE owns all of the units funded by AMRESCO under
our revenue-sharing agreements, which funding totals $1,684,416 in original
principal amount. AMRESCO has taken a senior security interest in the units
financed under the financing agreement and all proceeds generated by, and
derived from, those products.

      Until October 1, 2003, the interest rate for the funds under the AMRESCO
financing arrangement was based upon the seven-year treasury rate plus an
additional incremental rate that varies depending upon the total amount
outstanding under the financing arrangement. The incremental rate varied
according to the thresholds provided in the following table:

<TABLE>
<CAPTION>
Threshold                                                                   Interest Rate
-----------------------------------------------------------------------     ------------------------------------
<S>                                                                         <C>
Aggregate fundings of less than $25 million                                 Seven-year treasury rate plus 12.5%
Aggregate fundings from $25 million and equal to $125 million               Seven-year treasury rate plus 10.0%
Aggregate fundings of more than $125 million and equal to $150 million      Seven-year treasury rate plus 8.5%
Aggregate fundings of more than $150 million and equal to $175 million      Seven-year treasury rate plus 7.5%
Aggregate fundings of more than $175 million                                Seven-year treasury rate plus 6.5%
</TABLE>

                                      -14-
<PAGE>

      On October 1, 2003, as a condition to receiving $250,000 in debt financing
from the Gestetner Group, LLC and several third parties, AMRESCO and the Company
entered into an agreement for the purpose of modifying the notes payable to
AMRESCO. The terms of such agreement provide that all loan fundings, and all
corresponding notes payable, made by AMRESCO to the Company shall bear interest
at the rate of 8% per annum during the period October 1, 2003 to September 30,
2005. From October 1, 2005 until all debt obligations in favor of AMRESCO are
paid in full, all promissory notes in favor of AMRESCO shall bear interest at
the rate of 10% per annum. The Company has realized a sizable cost savings based
upon the interest reduction from the former rate of 17.19% per annum.

      In consideration for the interest rate reduction, the Company issued
AMRESCO a warrant to purchase 400,000 shares of common stock, exercisable at
$0.10 per share through October 1, 2008. If such warrant has an intrinsic value
greater than $300,000 at any time during such period, AMRESCO has the right to
exercise a "put" regarding the warrant to the Company for $200,000, payable in
twelve equal monthly installments.

      Liquidity and Capital Resources

      On August 9, 2000, we closed our initial public offering for 1,800,000
shares of common stock. We received gross proceeds of $11,700,000 and, after
deducting underwriting discounts and commissions and offering expenses, net
proceeds of approximately $9,860,000. The net offering proceeds were used for
funding the production and installation of our products and services, the
repayment of a substantial portion of our outstanding indebtedness and related
accrued interest, the payment of cash dividends on our Series A and Series C
convertible preferred stock, our advertising and promotional expenses,
additional research and development to improve our existing products and
services and to develop our future products and services, and general corporate
purposes and working capital, including the payment of accounts payable incurred
prior to the closing of our initial public offering. We used the net proceeds
from our initial public offering through the nine months ended September 30,
2001.

      In addition to the funds received pursuant to our initial public offering,
we have received $1,684,416 in funding through our prior financial arrangements
with AMRESCO in 2001 and 2002, collectively, and $1,416,029 in gross proceeds
from our private placement of common stock in March 2002. The funds from AMRESCO
and our private placement have been used to fund working capital and general
corporate purposes.

      On November 8, 2002, we issued a promissory note to Ash Capital, LLC for
proceeds of up to $322,500. The note bore interest at 8%. The principal and
interest were originally due on November 8, 2003. All past due amounts and
accrued interest thereon bear interest at 18%. During the period November 8,
2002 through September 30, 2003, we received loan proceeds of $322,500, and also
transferred $25,000 from an accounts payable due to Ash Capital, which increased
the principal amount of the promissory note to $347,500, or the Ash Capital
Note. At any time, principal and accrued interest on the promissory note is
convertible into Series D Convertible Preferred Stock at $0.90 per share. Each
share of the Series D Convertible Preferred Stock is convertible into six shares
of common stock, at the rate of $0.15 per share of Series D Preferred Stock. On
October 1, 2003, Ash Capital, LLC agreed to amend the terms of its secured
convertible promissory note with us to (i) extend the maturity date to the
earlier of November 8, 2007 or the maturity date of the Notes issued to
Gestetner Group, LLC and several third parties and (ii) include as an additional
event of default any default by us the secured convertible promissory notes with
Gestetner Group, LLC and several third parties. In addition, we have issued Ash
Capital, LLC a contingent warrant to purchase shares of common stock,
exercisable at $0.13 per share through October 1, 2008. The terms of the warrant
provide that the number of shares exercisable by Ash Capital, LLC will be
determined by a formula, [A - B] times C, whereby (i) A equals the aggregate
number of shares of our common stock that are, on the date of the exercise of
the Ash Capital warrant, issued to and held by any of the Gestetner Group, LLC
and several third parties that purchased, collectively, $250,000 of secured
convertible promissory notes on October 1, 2003, (ii) B equals 10,000,000 and
(iii) C equals .07. We have utilized all monies loaned by Ash Capital, LLC for
our business operations. On September 1, 2005, Ash Capital, LLC converted the
Ash Capital Note, in the original principal amount of $347,500 plus accrued
interest of $82,332, into 2,865,550 shares of common stock. The Ash Capital Note
was converted at $0.15 per share. The foregoing conversion triggered the
issuance of warrants to purchase 53,775 shares of common stock in favor of Ash
Capital.

      On October 1, 2003, we issued secured convertible promissory notes in the
original principal amount of $250,000 (the "Notes"), collectively, to Gestetner
Group, LLC, a New Jersey limited liability company, and several third parties,
the Noteholders. David A. Gestetner, our Chief Executive Officer and President
is the Managing Member of the Gestetner Group, LLC. The terms of the Notes
include (i) for interest to accrue at the rate of 8% per annum, (ii) a maturity
date of the earlier of (a) October 1, 2008, (b) the date of approval of the
Board of Directors regarding the merger of the Company with or into any third
party or the sale of all or substantially all of our assets, or (c) the date of
the closing of any financing (other than commercial credit facilities), the
gross proceeds of which are at least $1,000,000 and (iii) the right of the
Noteholders, at any time, to convert all outstanding principal and accrued and
unpaid interest into shares of our common stock at the rate of $0.05 per share;
provided, however, that we shall have the right to not permit the conversion if
such conversion would result in the Noteholders holding, in the aggregate and on
a fully-diluted basis, more than 49% of our outstanding common stock. In
addition, the Noteholders have been issued, collectively, warrants to purchase
5,000,000 shares of our common stock, exercisable at $0.05 per share at any time
through October 1, 2008. We have used the proceeds provided by the Noteholders
for our business operations. On September 1, 2005, Gestetner Group, LLC and the
Noteholders converted the Notes, in the collective principal amount of $250,000
plus accrued interest of $38,411, into 5,768,219 shares of common stock. The
Notes were converted into common stock at $0.05 per share. On September 7, 2005,
Gestetner Group, LLC and the Noteholders exercised warrants to purchase a total
of 5,000,000 shares of common stock for a collective exercise price of $250,000.
The warrants were exercised at $0.05 per share.

                                      -15-
<PAGE>

      At December 31, 2005, we had $1,316,515 of cash and working capital of
$1,211,956, as compared to $646,386 of cash and working capital of $445,482 at
December 31, 2004. In addition, our stockholders' equity was $2,469,730 at
December 31, 2005 as compared to $1,312,657 at December 31, 2004, an increase of
$1,157,073. The increase in cash, working capital and stockholders' equity
reflects the continued decrease in cash used in our operations and reduction in
fixed overhead expenses along with the elimination, on generally favorable
terms, of accounts payable and other previously existing current liabilities.

      Our accumulated deficit decreased to $31,646,931 at December 31, 2005 as
compared to $31,807,433 at December 31, 2004. The decrease in accumulated is a
direct result of our net income of $160,502 for the year ended December 31,
2005.

      Net cash provided by operating activities for the year ended December 31,
2005 was $901,677, as compared to $730,322 of net cash provided by operating
activities during the year ended December 31, 2004. The $171,355 increase in net
cash provided by operating activities resulted primarily from the significant
reduction in gain realized, the increase in accretion of debt discount, the
deposit of $225,000 from attorney's escrow, offset, in part, by lower net income
and an increase in accounts receivable.

      Net cash used in investing activities for the year ended December 31, 2005
was $202,244, as compared to $19,716 during the year ended December 31, 2004.
The increase in net cash used in investing activities resulted primarily from
the investments made in Identica Holdings Corporation offset, in part, by the
change in long-term deposits and restricted funds.

Net cash used in financing activities for the year ended December 31, 2005 was
$29,304, as compared to $446,205 during the year ended December 31, 2004. The
decrease in cash used in financing activities resulted from a significant
decrease in principal payments on long-term debt relating to AMRESCO, and the
receipt of proceeds from the exercise of options and warrants.

      Qualitative and Quantitative Disclosures About Market Risk

      As we have decided to cease the placement of new products at hotels, the
potential currency risks associated with manufacturing the majority of our
products overseas no longer exist. In addition, given that we have a very
limited number of products placed internationally, and we are paid in U.S.
dollars by our hotel clients not located in the United States, foreign currency
exposure risks no longer apply.

                                      -16-
<PAGE>

                                  RISK FACTORS

We are subject to a high degree of risk as we are considered to be in unsound
financial condition. The following risks, if any one or more occurs, could
materially harm our business, financial condition or future results of
operations. If that occurs, the trading price of our common stock could decline.

                    Risks Related to eRoomSystem Technologies

As management for the Company has decided to forego further placements of new
products at hotels and our existing revenue sharing agreements have fixed terms,
we will experience declining revenues in future periods upon the conclusion of
such existing revenue sharing agreements

The revenue sharing agreements that we have entered into with our hotel
customers have a seven-year term. As of December 31, 2006, the average remaining
life of these agreements is 1.4 years. Each year, certain of our existing
revenue sharing agreements will conclude, unless hotels elect to continue under
the terms of the existing agreement, for which there are no assurances. As the
revenue sharing agreements conclude, and hotels elect to not extend the term
thereof, we will experience an incremental decrease in revenue sharing revenue
as well as maintenance revenue. We do, however, own the equipment and upon the
conclusion of such agreements may decide to re-deploy such equipment at a new
hotel, either on a revenue sharing basis or sale basis. To date, we have not
utilized this strategy given that in our experience most equipment, upon the
conclusion of the seven-year revenue sharing agreement, would require
significant capital expense to redeploy at another hotel. Given the foregoing,
as revenue sharing agreements conclude and our revenues decline as a result
thereof, our financial condition and operating results will likely be materially
adversely affected.

While we have realized net income for fiscal years 2006 and 2005, we have a
history of significant operating losses and may experience operating losses in
the future, particularly given the fixed term of our revenue sharing agreements
which comprise nearly all of our revenues

For the year ended December 31, 2006, we realized net income of $162,083, as
compared to net income of $160,502 for the fiscal year ended December 31, 2005.
In addition, our operations provided net cash of $683,126 for the year ended
December 31, 2006, as compared to $901,677 for the year ended December 31, 2005.
However, we have a history of significant operating losses and may realize
operating losses in the future, specifically upon the conclusion of a measurable
percentage of our existing revenue sharing agreements. While we are actively
embarking upon our diversification strategy of investing in third party emerging
growth companies and, potentially, acquiring an operating company if the
opportunity arises, we have not realized any revenues to date from such
activities. Further, there is no assurance that our investments in third party
companies to date will result in us realizing meaningful revenues, if at all, or
that we will be successful in acquiring an operating company. To the extent that
we do not replace revenue sharing revenue as it decreases, our financial
condition and results of operations will likely be materially adversely
affected.

Although we commenced our diversification strategy in 2005 by making investments
in third party companies, there is no assurance that we will realize a return on
such investments

The securities issued to us from our investments in Identica Holdings
Corporation and Aprecia, LLC are not marketable. Identica is privately held and
Aprecia's stock has not started trading yet even though the recent registration
statement covering its securities has been declared effective by the SEC. It is
not known when, or if, these securities will be readily marketable, if at all.
Furthermore, even if such securities become readily marketable, there is no
assurance that we will receive a return on our investment sufficient to offset
the anticipated decline in our revenues relating to existing revenue sharing
agreements which will expire. Thus, in the event we do not realize a material
return on our investments in Identica and Aprecia, our future operating results
will likely be materially adversely affected.

While we are exploring the possibility of acquiring an operating company to
augment our historical business and recent investments in third party emerging
growth companies, given our cash position, among other things, there is no
assurance that we will be successful in consummating a transaction on favorable
terms, if at all

We have undertaken a significant amount of due diligence on several operating
companies regarding a potential acquisition. To date, we have not been
successful in reaching a definitive agreement with such companies. While we
intend to continue our search for a suitable operating company, there is no
assurance that we will be successful given our relatively limited cash on hand,
lack of liquidity in our common stock, and our common stock not being listed on
a national securities exchange, among other factors. Nevertheless, we intend to
continue to explore potential acquisitions, along with additional investments in
third party emerging growth companies. We view the acquisition of an operating
company on favorable terms as our most important objective for 2007. Should we
not achieve this objective in 2007, our financial condition and results of
operation will likely be adversely affected as existing revenue sharing
agreements reach their conclusion.

Due to the limited number of personnel that we have at the present time, we may
fail to disclose in our periodic reports under the Securities Exchange Act
information required to be disclosed in such reports, which may have an adverse
effect on the price and liquidity of our common stock.

                                      -17-
<PAGE>

      For the fiscal year ended December 31, 2005, our management evaluated the
design of our disclosure controls and procedures and had concluded that they
were not effective and did not provide reasonable assurance that information
required to be disclosed in our reports filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 is accumulated and
communicated on a timely basis. Such deficiencies to our disclosure controls and
procedures resulted from not having sufficient resources allocated to disclosure
functions, insufficient training of personnel regarding disclosure matters, and
the absence of multiple parties confirming the Company's disclosures against the
Commission's rules and regulations. Though we have taken steps to remediate such
deficiencies in December 2005 and in the second quarter of 2006, such as
improved training of personnel and implementation of multiple party review of
our filings, we still have limited personnel to carry out those procedures.
Commencing with our annual report for the fiscal year ending December 31, 2007,
we will be required to provide a report in our annual report in which our
management will be required to provide an assessment, as of fiscal 2007, of the
effectiveness of our internal control structure and procedures for financial
reporting. Additionally the new rules may also require our registered public
accounting firm to attest to, and report on, our management's assessment. Our
management will also be required to provide certifications to such assessments.
Given the deficiencies and problems that we have experienced in the past
regarding disclosure controls and procedures, we may have the same problems with
the internal control and procedures for financial reporting. We may experience
the same kinds of deficiencies in regard to internal control structure and
procedures for financial reporting, such as inadequate training in a new law and
limited personnel that we experienced with the disclosure controls and
procedures. Our registered public accounting firm may report negatively on our
management's assessment on internal control structure and procedures for
financial reporting or our management may determine that our internal control
structure and procedures for financial reporting are subject to material
deficiencies. Such assessments by our management or our registered public
accounting firm may cause negative perception by investors and result in a
decrease in the price and/or liquidity of our stock.

Based on the numerous reductions-in-force we have effected in the past several
years to reduce fixed overhead expenses along with outsourcing our ongoing
maintenance and service operation and given the current composition of employees
the loss of additional key personnel would seriously impact our operations

We are dependent upon the abilities and efforts of certain personnel,
specifically David A. Gestetner. Our future success will depend in large part
upon Mr. Gestetner. We currently do not carry key man life insurance on Mr.
Gestetner, and we have no present intention of doing so in the near future.
There can be no assurance that we will be able to locate and retain a suitable
replacement for Mr. Gestetner in the event Mr. Gestetner is no longer employed
by us.

                          Risks Related to Our Industry

We rely on the economic health of the lodging industry to generate revenues from
our existing revenue sharing agreements, and any condition that may adversely
impact the lodging industry will adversely impact the revenues we receive from
revenue sharing agreements

Nearly all of our revenue is generated from our existing revenue sharing
agreements and maintenance agreements associated therewith. The economic health
of the lodging industry, and, therefore, our revenues, are affected by a number
of factors beyond our control, including:

      o     general economic conditions;

      o     levels of disposable income of the hotel patrons;

      o     acts of terrorism and anti-terrorism efforts;

      o     increased transportation costs resulting in decreased travel by
            patrons and decreased hotel occupancy and RevPar;

      o     changes or proposed changes in tax laws;

      o     legal and regulatory issues affecting the development, operation and
            licensing of hotels; and

      o     competitive conditions in the lodging industry, including the effect
            of such conditions on the pricing of the merchandise sold in our
            products installed at hotels.

      The foregoing factors may impact our hotel clients and their guests as
relates to the consumption of merchandise sold in our products installed on a
revenue sharing basis.

                                      -18-
<PAGE>

      Terrorist attacks or acts of war may seriously harm our business

      Terrorist attacks or acts of war may cause damage or disruption to our
company, our employees, our facility and our customers, which could
significantly impact our revenues, costs and expenses, and financial condition.
The terrorist attacks that took place in the United States on September 11, 2001
were unprecedented events that have created many economic and political
uncertainties, especially to the lodging industry, some of which have materially
adversely affected our business, results of operations, and financial condition
and may do so again in the future. In particular, the lodging industry was
materially affected by the downturn in the tourism industry as a result of the
September 11 attacks. While it has since recovered, we experienced a fairly
significant decrease in utilization of our revenue sharing products for a
significant period following September 11, 2001 particularly in the New York
metro area given the lower occupancy rates and the significant number of
installations we have in this region. The potential for future terrorist
attacks, the national and international responses to terrorist attacks, and
other acts of war or hostility have created many economic and political
uncertainties, which could materially adversely affect our business, results of
operations, and financial condition in ways that we currently cannot predict.

      The strength and profitability of our business depends on the overall
demand for our existing installed products at hotels. Lodging industry revenues
are sensitive to general economic conditions and generally rise or fall more
rapidly in relation to the condition of the overall economy. Although we cannot
accurately estimate the economic impact of a future terrorist attack at this
time, the lodging industry was negatively affected by the reduction in air
travel and tourism.

      We have experienced loss of market share due to the intense competition
from companies with longer operating histories, greater resources and more
established brand names that market in-room amenities to the lodging industry,
the conclusion of some of our revenue sharing agreements, and the lack of new
product sales in the last four fiscal years.

      The market for in-room amenities in the lodging industry is very
competitive, and we expect competition to intensify in the future. The foregoing
served as a primary reason for implementation of our diversification strategy.
Our competitors vary in size and in the scope and breadth of the products and
services they offer and include Bartech Systems International, Dometic
Corporation and MiniBar Systems, among others. Each of our competitors have
longer operating histories, larger customer bases, greater brand recognition,
and substantially greater capital, research and development, manufacturing,
marketing, service, support, technical and other resources than we currently do.
While we do not intend to manufacture and install new products in the lodging
industry, the foregoing factors directly impact our ability to the continued
deployment of such products at hotels following the maturity of their respective
revenue sharing agreements.

                        Risks Related to Our Common Stock

      Our diversification strategy, particularly a potential acquisition of an
operating company, will likely require us to obtain additional financing in the
form of the sale of debt or equity securities, the result of which would have a
dilutive effect on the relative ownership of our existing stockholders

      Based upon our existing cash on hand, which was $1,480,720 as of December
31, 2006, we will likely require additional capital to successfully implement
our diversification strategy. Funding may take the form of common stock,
preferred stock or convertible debt. The issuance of additional equity or
convertible debt securities will have the effect of reducing the percentage
ownership of our current stockholders. In addition, such equity or convertible
debt securities may have additional rights, preferences or privileges to those
of our common stock, such as registration rights. There are no assurances that
funding will be available to us on favorable terms, if at all.

      Our executive officers and members of our board of directors beneficially
own 40.6% of the outstanding shares of our common stock and could limit the
ability of our other stockholders to influence the outcome of director elections
and other transactions submitted to a vote of stockholders

      Our executive officers and members of our board of directors beneficially
own 9,910,515 shares of common stock, or approximately 40.6% of the outstanding
shares of our common stock. These stockholders may have the power to influence
all matters requiring approval by our stockholders, including the election of
directors and approval of mergers and other significant corporate transactions.

      Our stock price may fall as a result of the 23,898,165 shares of common
stock, or 100% of our outstanding common stock, that is currently eligible for
resale

      Sales of a substantial number of shares of common stock in the public
market could cause the market price for our common stock to decline. Of the
23,898,165 shares of common stock outstanding as of March 1, 2007, 13,684,907
shares have been registered pursuant to selling stockholder registration
statements, and 1,800,000 shares were sold in our initial public offering, which
closed on August 9, 2000. The foregoing shares, representing 64.8% of our
outstanding shares of common stock, are immediately available for resale.

      In addition to the foregoing shares, up to 8,413,258 shares of common
stock, or 35.2% of our outstanding shares of common stock, are available for
resale in accordance with Rule 144(k) under the Securities Act. These shares,
along with the shares of common stock sold in our initial public offering and
the shares registered in the selling stockholder offering, represent 23,898,165
shares, or 100% of our outstanding shares of common stock.

                                      -19-
<PAGE>

      As of December 31, 2006, we had options and warrants outstanding to
purchase 3,317,621 shares of common stock at a weighted average exercise price
of $0.28 per share, all of which are immediately exercisable.

      The sale of a substantial number of shares of our common stock within a
short period of time could cause our stock price to fall. In addition, the sale
of these shares could impair our abilities to raise capital through the sale of
additional common stock.
                                      -20-
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS.

                 eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of Independent Certified Public Accountants                       22

Consolidated Balance Sheets                                              23

Consolidated Statements of Operations                                    24

Consolidated Statements of Stockholders' Equity                          25

Consolidated Statements of Cash Flows                                    26

Notes to Consolidated Financial Statements                               27

                                      -21-
<PAGE>

HANSEN, BARNETT & MAXWELL, P.C.          Registered with the Public Company
  A Professional Corporation                 Accounting Oversight Board
CERTIFIED PUBLIC ACCOUNTANTS
             AND                           [Baker Tilly International Logo]
    BUSINESS CONSULTANTS
  5 Triad Center, Suite 750
Salt Lake City, UT 84180-1128
    Phone: (801) 532-2200
     Fax: (801) 532-7944
       www.hbmcpas.com

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors and the Stockholders
eRoomSystem Technologies, Inc.

We have audited the accompanying consolidated balance sheets of eRoomSystem
Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2006 and
2005, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of eRoomSystem
Technologies, Inc. and subsidiaries as of December 31, 2006 and 2005, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 123(R), Share-Based
Payment, effective January 1, 2006.

                                                 HANSEN, BARNETT & MAXWELL, P.C.

Salt Lake City, Utah
March 21, 2007

                                      -22-
<PAGE>

                 eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                           ----------------------------------
                                                                                                2006               2005
                                                                                           ---------------    ---------------
<S>                                                                                        <C>                <C>
                                     ASSETS
CURRENT ASSETS
    Cash and cash equivalents ............................................................ $     1,480,720    $     1,316,515
    Accounts receivable, net of allowance for doubtful accounts of $49,520 and $49,294
     at December 31, 2006 and 2005, respectively .........................................         280,608            263,392
    Notes receivable .....................................................................          17,534            111,231
    Prepaid expenses . ...................................................................           1,797             11,519
                                                                                           ---------------    ---------------
      Total Current Assets ...............................................................       1,780,659          1,702,657
                                                                                           ---------------    ---------------
REFRESHMENT CENTERS IN SERVICE, net of accumulated depreciation of
    $2,512,447 and $2,289,694 at December 31, 2006 and 2005, respectively ................         840,991          1,357,827
PROPERTY AND EQUIPMENT
    Computer and office equipment, net of accumulated depreciation of
     $4,147 and $1,861, at December 31, 2006 and 2005, respectively .......................           5,183              2,805
INVESTMENT IN MARKETABLE SECURITIES ......................................................          64,075             14,075
NOTE RECEIVABLE, net of unamortized discount of $896 and $2,852 at December 31, 2006 and
    December 31, 2005, respectively ......................................................         149,103            147,147
DEPOSITS .................................................................................           5,813             85,300
                                                                                           ---------------    ---------------
Total Assets . ........................................................................... $     2,845,824    $     3,309,811
                                                                                           ===============    ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Notes payable and current portion of long-term debt .................................. $            --    $       301,696
    Accounts payable .....................................................................          57,512             56,837
    Accrued liabilities ..................................................................          99,634            109,778
    Customer deposits ....................................................................          11,758             11,758
    Deferred maintenance revenue .........................................................          12,357             10,632
                                                                                           ---------------    ---------------
      Total Current Liabilities ..........................................................         181,261            490,701
LONG-TERM DEBT, net of current portion . .................................................              --            349,380
                                                                                           ---------------    ---------------
Total Liabilities . ......................................................................         181,261            840,081
                                                                                           ---------------    ---------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Preferred stock, $0.001 par value; 5,000,000 shares authorized; none outstanding .....              --                 --
    Common stock, $0.001 par value; 50,000,000 shares authorized;  23,898,165 shares
     and 24,228,902 shares outstanding at December 31, 2006
     and December 31, 2005, respectively .. ..............................................          23,898             24,229
    Additional paid-in capital ...........................................................      33,751,605         33,754,361
    Warrants and options outstanding .....................................................         373,908            416,071
    Note receivable from shareholder .....................................................              --            (78,000)
    Accumulated deficit . ................................................................     (31,484,848)       (31,646,931)
                                                                                           ---------------    ---------------
      Total Stockholders' Equity .. ......................................................       2,664,563          2,469,730
                                                                                           ---------------    ---------------

Total Liabilities and Stockholders' Equity ............................................... $     2,845,824    $     3,309,811
                                                                                           ===============    ===============
</TABLE>

           See accompanying notes to consolidated financial statements

                                      -23-
<PAGE>

<TABLE>
<CAPTION>
                                   eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                              For the years ended
                                                                                   December 31,
                                                                           --------------------------
                                                                               2006           2005
                                                                           -----------    -----------
<S>                                                                        <C>            <C>
REVENUE
    Revenue-sharing arrangements ........................................  $   979,470    $ 1,204,219
    Maintenance fees ....................................................      278,464        345,738
    Product sales .......................................................       79,551          7,331
                                                                           -----------    -----------
       Total Revenue ....................................................    1,337,485      1,557,288
                                                                           -----------    -----------
COST OF REVENUE
    Revenue-sharing arrangements ........................................      449,815        512,316
    Maintenance .........................................................       64,365         58,786
    Product sales .......................................................       70,085          1,261
                                                                           -----------    -----------
       Total Cost of Revenue ............................................      584,265        572,363
                                                                           -----------    -----------
GROSS MARGIN . ..........................................................      753,220        984,925
                                                                           -----------    -----------

OPERATING EXPENSES
    Selling, general and administrative expense,
     including non-cash compensation of $33,563 and
     $14,869, respectively ...............................................     548,421        642,508
    Research and development expense ....................................           --          1,959
    Interest expense ....................................................      109,946        319,062
    Gain on sale of assets . ............................................           --        (52,624)
    Interest and other income .. ........................................      (67,230)       (84,385)
                                                                           -----------    -----------
       Net Operating Expenses .. ........................................      591,137        826,520
                                                                           -----------    -----------
Income from Operations ..................................................      162,083        158,405

Gain on forgiveness of liabilities and debt .............................           --          2,097
                                                                           -----------    -----------
Net Income ..............................................................  $   162,083    $   160,502
                                                                           ===========    ===========
Basic Earnings Per Common Share .. ......................................  $      0.01    $      0.01
                                                                           ===========    ===========
Diluted Earnings Per Common Share .......................................  $      0.01    $      0.01
                                                                           ===========    ===========
</TABLE>

           See accompanying notes to consolidated financial statements

                                      -24-
<PAGE>

                 eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
<TABLE>
<CAPTION>
                                                                        Shares                       Amount
                                                               -------------------------   ----------------------------
                                                                  2006           2005           2006            2005
                                                               ----------     ----------   ------------    ------------
<S>                                                            <C>            <C>          <C>             <C>
COMMON STOCK
Balance at Beginning of Year ...............................   24,228,902     10,465,133   $     24,229    $     10,465
Exercise of stock options ..................................           --      5,130,000             --           5,130
Issuance to directors for services .........................       50,000             --             50              --
Conversion of notes outstanding ............................           --      8,633,769             --           8,634
Relinquishment of shares in settlement of notes receivable .     (380,737)            --           (381)             --
                                                               ----------     ----------   ------------    ------------
      Balance at End of Year ...............................   23,898,165     24,228,902         23,898          24,229
                                                               ----------     ----------   ------------    ------------
ADDITIONAL PAID-IN-CAPITAL
Balance at Beginning of Year .............................................................   33,754,361      32,074,454
Exercise of stock options ................................................................           --         499,726
Issuance to directors for services .......................................................       11,950              --
Conversion of notes outstanding ..........................................................           --         709,609
Expiration of warrants and options .......................................................       63,726         470,572
Relinquishment of shares in settlement of notes receivable ...............................      (78,432)             --
                                                                                           ------------    ------------
      Balance at End of Year .............................................................   33,751,605      33,754,361
                                                                                           ------------    ------------
WARRANTS AND OPTIONS OUTSTANDING
Balance at Beginning of Year .............................................................      416,071       1,109,930
Expiration of warrants and options .......................................................      (63,726)       (708,728)
Increase in value of variable options ....................................................           --          (4,244)
Issuance of options and warrants related to
 consulting services and financing activities ............................................       10,960          19,113
Issuance of options to employees .........................................................        6,465              --
Issuance of options to a member of the Board .............................................        4,138              --
                                                                                           ------------    ------------
      Balance at End of Year .............................................................      373,908         416,071
                                                                                           ------------    ------------
NOTES RECEIVABLE FROM SHAREHOLDER
Balance at Beginning of Year .............................................................      (78,000)        (74,759)
Shares received in settlement of notes receivable ........................................       78,813              --
Interest accrued .........................................................................         (813)         (3,241)
                                                                                           ------------    ------------
      Balance at End of Year .............................................................           --         (78,000)
                                                                                           ------------    ------------
ACCUMULATED DEFICIT
Balance at Beginning of Year .............................................................  (31,646,931)    (31,807,433)
Net income ...............................................................................      162,083         160,502
                                                                                           ------------    ------------
      Balance at End of Year .............................................................  (31,484,848)    (31,646,931)
                                                                                           ------------    ------------
Total Stockholders' Equity at End of Year ................................................ $  2,664,563    $  2,469,730
                                                                                           ============    ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                      -25-
<PAGE>

                 eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             For the years ended
                                                                                                 December 31,
                                                                                         --------------------------
                                                                                            2006           2005
                                                                                         -----------    -----------
<S>                                                                                      <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                          $   162,083    $   160,502
     Adjustments to reconcile net income to net cash provided by operating activities:
        Depreciation                                                                         452,101        517,292
        Gain on forgiveness of debt and liabilities                                               --         (2,097)
        Gain on sale of refreshment centers                                                   (1,479)            --
        Gain on sale of assets                                                                    --        (52,624)
        Interest income from shareholder receivable                                             (813)        (3,241)
        Interest income from other receivable                                                 (3,309)        (1,231)
        Accretion of debt discount                                                            58,174        205,062
        Amortization of discount on note receivable                                           (1,956)        (1,222)
        Non-cash compensation expense                                                         33,563         14,869
     Changes in operating assets and liabilities:
           Cash released from escrow                                                              --        225,000
           Accounts receivable                                                               (17,216)       (98,806)
           Prepaid expenses                                                                    9,722          4,798
           Accounts payable                                                                      675        (50,155)
           Accrued liabilities                                                               (10,144)        11,414
           Customer deposits and deferred maintenance revenue                                  1,725        (27,884)
                                                                                         -----------    -----------
             Net Cash Provided By Operating Activities                                       683,126        901,677
                                                                                         -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of fixed assets                                                                 (4,664)        (2,244)
     Proceeds from sale of refreshment centers                                                68,500             --
     Purchase of investment and note receivable                                              (50,000)      (210,000)
     Proceeds from note receivable                                                            97,006             --
     Change in long term deposits and restricted funds                                        79,487         10,000
                                                                                         -----------    -----------
             Net Cash Provided by (Used In) Investing Activities                             190,329       (202,244)
                                                                                         -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Principal payments on long-term debt                                                   (709,250)      (296,004)
     Proceeds from exercise of options and warrants                                               --        266,700
                                                                                         -----------    -----------
             Net Cash Used in Financing Activities                                          (709,250)       (29,304)
                                                                                         -----------    -----------
Net Increase in Cash                                                                         164,205        670,129
                                                                                         -----------    -----------
Cash at Beginning of Period                                                                1,316,515        646,386
                                                                                         -----------    -----------
Cash at End of Period                                                                    $ 1,480,720    $ 1,316,515
                                                                                         ===========    ===========
Supplemental Cash Flows Information
     Cash paid for interest                                                              $    35,291    $    74,872
                                                                                         ===========    ===========
Supplemental Disclosure of Noncash Investing and Financing Activities
     Outstanding notes payable converted to stock                                        $        --    $   718,243
                                                                                         -----------    -----------
     Note received for assets sold                                                       $        --    $    60,000
                                                                                         -----------    -----------
     Shares of common stock cancelled in settlement of notes receivable                  $    78,813    $        --
                                                                                         -----------    -----------
</TABLE>

           See accompanying notes to consolidated financial statements

                                      -26-
<PAGE>

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization, Nature of Operations and Business Condition - eRoomSystem
Services, Inc. was organized under the laws of the State of Nevada in 1993. In
1999, eRoomSystem Services, Inc. was reorganized as a wholly-owned subsidiary of
eRoomSystem Technologies, Inc., also a Nevada corporation. During 1999 and 2000,
RSi BRE, Inc. ("RSi BRE") and eRoom System SPE, Inc. ("SPE") were formed,
respectively, as wholly-owned subsidiaries of eRoomSystem Technologies, Inc.
eRoomSystem Technologies, Inc. and its subsidiaries are collectively referred to
as the "Company." In 2004 the Company liquidated RSi BRE into eRoomSystem
Technologies, Inc.

The Company markets a complete line of fully-automated eRoomServ refreshment
centers and eRoomSafes traditionally installed in hotels. The eRoomServ
refreshment centers and eRoomSafes use proprietary software that integrates with
a data collection computer in each hotel.

Up until the year ended December 31, 2004, the Company had suffered recurring
losses. During the years ended December 31, 2006 and 2005, the Company realized
net income of $162,083 and $160,502, respectively. During the years ended
December 31, 2006 and 2005, the Company's operations provided $683,126 and
$901,677 of cash, respectively. The Company had cash of $1,480,720 as of
December 31, 2006. At December 31, 2006, the Company had working capital of
$1,599,398. Although the Company realized a profit in 2006 as well as in 2005,
the Company is anticipating decreasing revenue as the Company's existing hotel
revenue-sharing and maintenance contracts conclude over the next couple of
years. This raises substantial doubt about the Company's ability to continue as
a going concern. Realization of continued profitable operations is not assured.
The accompanying financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result should the Company be unable
to continue as a going concern. Management would like to acquire an existing
operating company to enable the Company to grow and is continuously performing
due diligence on third party companies for this purpose. The Company has also
been performing research in order to invest in privately-held or publicly traded
emerging growth stage companies.

On October 1, 2003 the Company had a change in management and issued secured
convertible promissory notes in the original principal amount of $250,000. On
September 7, 2005, the holders of the notes converted the principal amount of
$250,000 together with accrued interest into 5,768,219 shares of common stock.

Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of eRoomSystem Technologies, Inc. and its wholly-owned
subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.

Use of Estimates in the Preparation of Financial Statements - 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, 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 these estimates.

Cash Equivalents and Fair Value of Financial Instruments - Cash equivalents
include highly liquid debt investments with original maturities of three months
or less, readily convertible to known amounts of cash. The Company had $0 and
$73,688 of restricted cash, classified as deposits, to be distributed as loan
repayments to a financing company as of December 31, 2006 and 2005,
respectively.

The carrying amounts reported in the accompanying consolidated financial
statements for cash, accounts receivable, notes receivable and accounts payable
approximate fair values because of the immediate or short-term maturities of
these financial instruments. The Company's long term note receivable is carried
at principal plus accrued interest. The carrying amounts of the Company's debt
obligations approximated fair value based on current interest rates available to
the Company.

Accounts Receivable - Accounts Receivable are stated at the historical carrying
amount, net of write-offs and allowances. The Company has established an overall
allowance based upon historical experience of 15% of the outstanding balance in
addition to any specific customer collection issues identified by the Company.
Uncollectible accounts receivable are written off when a settlement is reached
or when the Company has determined that the balance will not be collected.

Loan Receivable - Loan Receivables are stated at the historical carrying amount
and evaluated were evaluated for impairment. When projections indicate that the
carrying value of the note is not recoverable, the carrying value is reduced by
the estimated excess of the carrying value over the projected discounted cash
flows. No impairment was deemed necessary

eRoomServ Refreshment Centers in Service and Property and Equipment - eRoomServ
refreshment centers (including eRoomSafes, if applicable) and property and
equipment are stated at cost, less accumulated depreciation and amortization.
Major additions and improvements are capitalized, while minor equipment as well
as repairs and maintenance costs are expensed when incurred. Depreciation and
amortization are computed using the straight-line method over the estimated
useful lives of the related assets, after taking into consideration residual
values for eRoomServ refreshment centers, which lives are as follows:

                                      -27-
<PAGE>

Depreciation and amortization expense related to eRoomServ refreshment centers
in service and property and equipment was $452,101 and $517,292 for the years
ended December 31, 2006 and 2005, respectively.

eRoomServ refreshment centers in service     7 years
Production equipment                         3 - 5 years
Computer and office equipment                3 - 7 years
Vehicles and other                           7 years

On retirement or disposition of property and equipment, the cost and related
accumulated depreciation and amortization are removed from the accounts and any
resulting gain or loss is recognized in the statement of operations. In the year
ended December 31, 2006, the Company sold refreshment centers with a carrying
value of $67,021 for $68,500, recognizing a gain on sale of $1,479. In the year
ended December 31, 2005, the Company exchanged fixed assets with a carrying
value of $7,376 for a note receivable of $60,000, recognizing a gain on disposal
of $52,624.

Capitalized Software Costs - In accordance with FASB Statement of Financial
Accounting Standards ("SFAS") No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, development costs incurred in
the research and development of new software products to be sold, leased or
otherwise marketed are expensed as incurred until technological feasibility in
the form of a working model has been established. Internally generated
capitalizable software development costs have not been material for the years
ended December 31, 2006 and 2005. The Company has charged its software
development costs to research and development expense in the accompanying
consolidated statements of operations.

Deferred Offering and Financing Costs - The Company capitalizes direct costs
associated with the acquisition of debt financing. These costs are amortized
over the life of the related debt as additional interest expense. If the
underlying debt is repaid or extinguished prior to the scheduled maturity, the
costs are removed from the accounts and considered in the determination of the
gain or loss from extinguishment. The Company also capitalizes direct costs
associated with the acquisition of equity financing which are netted against the
actual equity proceeds.

Impairment of Long-Lived Assets - The carrying values of the Company's
long-lived assets were reviewed for impairment. When projections indicate that
the carrying value of the long-lived asset is not recoverable, the carrying
value of the long-lived asset is reduced by the estimated excess of the carrying
value over the projected discounted cash flows. No impairment was deemed
necessary.

Revenue Recognition - The Company generates revenues from either the sale of
eRoomServ refreshment centers and eRoomSafes or from leases of eRoomServ
refreshment centers and eRoomSafes under revenue-sharing agreements. Under the
revenue-sharing agreements, the Company receives a non-guaranteed portion of the
sales generated by the units. The Company also generates revenues from
maintenance services.

Revenue from the sale of eRoomServ refreshment centers and eRoomSafes is
recognized upon completion of installation and acceptance by the customer. The
revenue-sharing agreements are accounted for as operating leases with revenue
being recognized as earned over the lease period. Maintenance revenue is
recognized as the services are performed or pro rata over the service period.

With respect to the sale of products, the maintenance services are not integral
to the functionality of the eRoomServ refreshment centers and are at the option
of the customer. Maintenance services are mandatory for eRoomServ refreshment
centers placed under revenue-sharing agreements and are incorporated into those
agreements. In connection with the revenue-sharing agreements, a portion of the
revenues received by the Company are classified as maintenance fee revenue based
upon vendor-specific objective evidence of fair value. The Company defers
customer's deposits paid in advance relating to future services and products not
yet installed and accepted by the customer.

The Company generates interest income on notes receivable. Interest income is
accrued to income based on the principal amount outstanding.

Stock-Based Compensation The Company has one stock-based employee compensation
plan, which is described more fully in Note 9. Prior to January 1, 2006, the
Company accounted for the plan under the recognition and measurement provisions
of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, ("APB 25") and related Interpretations, as permitted by SFAS No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"). No stock-based
compensation was recognized under the fair value recognition provisions for
stock options in the statements of operations for the year ended December 31,
2005, as all grants under the plan had an exercise price equal to the market
value of the underlying common stock on the date of grant. Effective January 1,
2006, the Company adopted the fair value recognition provisions of SFAS No. 123
(Revised 2004), Share-Based Payment, ("SFAS 123(R)") using the modified
prospective transition method. Accordingly, the Company will record expense for
(i) the unvested portion of grants issued during 2006 and (ii) new grant
issuances, both of which will be expensed over the requisite service (i.e.,
vesting) periods.

                                      -28-
<PAGE>

As a result of adopting SFAS 123(R), the Company's results of operations for the
year ended December 31, 2006 included compensation expense of $10,603,
representing no impact to either basic or diluted earnings per share.

SFAS 123R requires presentation of pro forma information for the comparative
period prior to the adoption as if the Company had accounted for all stock
options under the fair value method of the original SFAS 123. The following
table illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of SFAS 123 to stock-based
employee compensation in the prior year:

For the year ending December 31,                                          2005
--------------------------------------------------------------------------------
Net income, as reported                                            $   160,502

Add: Stock-based employee and consultant compensation
   expenses included in net income                                      14,869

Deduct: Total stock-based employee and consultant
   compensation expense determined under fair value based method
   for all awards                                                      (29,600)
--------------------------------------------------------------------------------
Pro forma net earnings                                             $   145,771
--------------------------------------------------------------------------------
Earnings per common share:
   Basic as reported                                               $      0.01
   Basic pro forma                                                 $      0.01
   Diluted as reported                                             $      0.01
   Diluted pro forma                                               $      0.01
--------------------------------------------------------------------------------

Income Taxes - The Company recognizes an asset or liability for the deferred tax
consequences of all temporary differences between the tax basis of assets or
liabilities and their reported amounts in the financial statements that will
result in taxable or deductible amounts in future years when the reported
amounts of the assets or liabilities are recovered or settled. These deferred
tax assets or liabilities are measured using the enacted tax rates that will be
in effect when the differences are expected to reverse. Deferred tax assets are
reviewed periodically for recoverability and valuation allowances are provided,
as necessary.

Net Earnings per Common Share - Basic earnings per common share is computed by
dividing net income by the weighted-average number of common shares outstanding.
Diluted earnings per common share is computed by dividing net income, adjusted
to add back interest associated with convertible debt, by the weighted-average
number of common shares and dilutive potential common share equivalents
outstanding. Potential common share equivalents consist of shares issuable upon
the exercise of stock options and warrants, and shares issuable upon the
conversion of debt.

The following table is a reconciliation of the numerators and denominators used
in the calculation of basic and diluted weighted-average common shares
outstanding for the years ending December 31, 2006 and 2005:

                                                         2006          2005
--------------------------------------------------   -----------   -------------
Basic net income                                     $   162,083   $   160,502
--------------------------------------------------   -----------   -------------
Diluted net income                                   $   162,083   $   160,502
--------------------------------------------------   -----------   -------------
Basic weighted-average common shares outstanding      23,980,591    15,005,581

Effect of dilutive securities
   Stock options and warrants                            309,269       667,801
--------------------------------------------------   -----------   -------------
Diluted weighted-average common shares outstanding    24,289,860    15,673,382
--------------------------------------------------   -----------   -------------
Basic earnings per share                             $      0.01   $      0.01
--------------------------------------------------   -----------   -------------
Diluted earnings per share                           $      0.01   $      0.01
--------------------------------------------------   -----------   -------------

                                      -29-
<PAGE>

As of December 31, 2006 and 2005, there were potential common stock equivalents
from options and warrants of 3,008,352 and 2,836,820, respectively that were not
included in the computation of diluted earnings per common share because their
effect would have been anti-dilutive.

Recent Accounting Pronouncements - In December 2004, FASB issued SFAS No.
123(R), "Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R) revises FASB
Statement No. 123, "Accounting for Stock-Based Compensation," and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123(R) focuses
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS 123(R) requires companies to
recognize in the statement of operations the cost of employee services received
in exchange for awards of equity instruments based on the grant-date fair value
of such awards (with limited exceptions). SFAS 123(R) is effective as of the
first reporting period beginning after June 15, 2005 for large business issuers,
and December 15, 2005 for small business issuers. Accordingly, the Company has
adopted SFAS 123(R) in first quarter of fiscal 2006 as noted above.
Implementation of the provisions of this pronouncement have not had a materially
significant effect on the Company's consolidated financial statement
presentation.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments" an amendment to SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" and SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities". This
statement resolves issues addressed in Statement 133 Implementation Issue No.
D1, "Application of Statement 133 to Beneficial Interests in Securitized
Financial Assets." This statement is effective for all financial instruments
acquired or issued after the beginning of the Company's first fiscal year that
begins after September 15, 2006 with early adoption permitted. The Company does
not expect the adoption of SFAS No. 155 to have a material impact on its
consolidated financial statements.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets" - an amendment of SFAS No. 140. This Statement requires that
all separately recognized servicing assets and servicing liabilities be
initially measured at fair value, if practicable. This statement should be
adopted as of the beginning of its first fiscal year that begins after September
15, 2006 with early adoption permitted. The Company does not expect the adoption
of SFAS No. 156 to have a material impact on its consolidated financial
statements

In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes- an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109. This
Interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. This Interpretation also provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The Company does not expect the adoption of
FIN 48 to have a material impact on its consolidated financial statements.

In September 2006, the U.S. Securities and Exchange Commission ("SEC") issued
SEC Staff Bulletin No. 108 ("SAB 108") which describes the SEC staff position
regarding the process of quantifying financial statement misstatements. The
interpretations in SAB 108 were issued to address diversity in practice in
quantifying financial statement misstatements and the potential current practice
for the build up of improper amounts on the balance sheet. The adoption of SAB
108 did not have a material effect on our consolidated financial statements.

NOTE 2 - INVESTMENT SPECIAL PURPOSE ENTITIES

During 2000, eRoom System Technologies, Inc. formed eRoom System SPE, Inc.
("SPE"), as a wholly owned subsidiary. SPE was formed for the purposes of
purchasing certain revenue-sharing agreements and related eRoomServ refreshment
centers from eRoomSystem Technologies, Inc., obtaining the rights, through
licensing, to certain intellectual property relating to the use of the eRoomServ
refreshment centers and obtaining financing secured by pledging the
revenue-sharing agreements and refreshment centers.

NOTE 3 - INVESTMENTS

On May 20, 2005 the Company invested $10,000 in Identica Holdings Corporation, a
Nevada corporation, by purchasing 1,666,667 shares of common stock, at $0.006
per share. This investment represented 10% of Identica's then outstanding
capital stock on a fully-diluted basis. Identica is a privately held company
that has expressed an interest in becoming a public company in the future and
has filed a registration statement with the SEC for this purpose, which has not
yet been declared effective. This investment will be carried at the lower of
cost or market and will be periodically evaluated for impairment.

In addition, the Company loaned Identica $150,000 in cash. The loan is secured
by a security interest in all the assets of Identica and is evidenced by a
promissory note. The terms of the promissory note include interest accruing on
the unpaid principal balance commencing twenty-four (24) months from date of the
loan at the rate of ten percent per annum and a maturity date of June 20, 2007.
In consideration for making the loan, the Company was issued a warrant to
purchase one million (1,000,000) shares of common stock of Identica, exercisable
at $0.15 per share at any time through May 20, 2010. The warrants were valued at
$4,075 using the Black-Scholes pricing model with the following assumptions:
risk free interest rate 3.88%, dividend yield of 0.0%, volatility of 150% and
expected life of 5 years. The discount will be amortized over the expected
twenty-five month term as interest income.

                                      -30-
<PAGE>

In September 2005, the Company entered into an Asset Purchase Agreement with
Identica. Pursuant to the Agreement, Identica has purchased certain assets of
the Company. Specifically, the assets consist of furniture and computer
equipment held by the Company, as well as the Company's web technologies package
utilized by the Company's technical support team to which the Company retained a
perpetual license. The Agreement provided that Identica would pay the sum of
$60,000 for the assets, which amount was evidenced by a one-year note bearing
interest at the rate of 8% per annum, compounded monthly. Under the terms of the
Note, Identica would make seven principal and interest payments in the amount of
$9,098 per month, commencing on the six-month anniversary of the Note with a
maturity date of September 7, 2006. In addition, at the same time, the Company
entered into a Professional Services and Support Agreement whereby Identica will
employ the technical personnel of the Company. In conjunction therewith, the
Company would continue to be responsible, for a period of 6 months from the date
of the Agreement for all expenses less $7,000 dollars per month related to such
technical personnel. Thereafter, the Company would pay Identica $0.50 per Hotel
room per month to service all equipment that the Company is contractually
obligated to service. As of December 31, 2006, Identica owed the Company $17,534
for the Note.

In October, 2005, the Company loaned Identica an additional $50,000 in cash. The
loan is not secured and is evidenced by a promissory note. The terms of the
promissory note include zero interest and a maturity date of January 31, 2006.
The note was paid in full in March 2006.

On March 7, 2006, the Company invested $50,000 in Aprecia, Inc., a Deleware
corporation, by purchasing 2,083,333 shares of common stock, at $0.024 per
share. This investment represented 12% of Aprecia's then outstanding capital
stock. Aprecia's stock has not started trading on a public exchange, although it
has filed a registration statement covering its securities with the SEC which
has been declared effective. This investment will be carried at the lower of
cost or market and will be periodically evaluated for impairment.

NOTE 4 - NET INVESTMENT IN SALES-TYPE LEASE

During June 2004, the Company entered into an agreement with a hotel property
owner that amended a previous revenue sharing lease agreement that had
previously been non-performing.

The new lease agreement terminates on December 31, 2008 at which time the hotel
property owner takes ownership of the refreshment centers. The property is to
make monthly payments of $7,200. The new lease agreement has been classified as
a sales-type capital lease. Because the property has a history of
non-performance and is still under the supervision of a bankruptcy court, the
net investment in the capital lease has been fully allowed against. The
following lists the components of the net investment in the sales-type lease as
of December 31, 2006:

Total minimum lease payments to be received               $ 172,800
Less:  Allowance for uncollectibles                         145,326
                                                        -----------
Net minimum lease payments receivable                        27,474
Less:  Unearned income                                      (27,474)
                                                        -----------
Net investment in sales-type lease                        $       -
                                                        -----------

The Company recorded revenue-sharing and maintenance fee revenue in the amounts
of $86,400 and $86,400 for the years ended December 31, 2006 and 2005,
respectively.

Minimum lease payments through the end of the lease term are as follows: $86,400
in 2007, and $86,400 in 2008.

NOTE 5 - NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consists of the following:

                                      -31-
<PAGE>

For the Years Ending December 31,                         2006         2005
---------------------------------------------------   -----------   -----------
Notes payable to financing company, interest
at 10% per annum secured by eRoomServ refreshment
centers held by SPE, less unamortized discount of
$58,173 as of December 31, 2005
Paid in full on July 14, 2006                          $       --   $  651,076
---------------------------------------------------   -----------   ------------
Total Notes Payable and Long-Term Debt                         --      651,076
---------------------------------------------------   -----------   ------------
Less: Current Portion of Long-Term Debt                        --     (301,696)
---------------------------------------------------   -----------   ------------
Long-Term Debt, Net of Current Portion                 $       --   $  349,380
---------------------------------------------------   -----------   ------------

On July 14, 2006, the Company repaid its outstanding loan payable to Amresco
Commercial Finance in the principal amount of $553,542 plus accrued interest of
$2,217. The remaining unamortized discount on the note of $49,414 was recognized
as interest expense.

Amresco Financing Agreement - Under the terms of a financing agreement with
AMRESCO Leasing Corporation, (the "finance company"), the finance company had
agreed to fund up to 150% of the Company's product costs for each eRoomServ
refreshment center that had been in service for 90 days, subject to the related
hotel customer meeting certain requirements and conditions during that period.
As part of the financing agreement, the Company formed eRoomSystem SPE, Inc.
("SPE"), a wholly owned, consolidated subsidiary. SPE owns all of the eRoomServ
refreshment centers funded by the finance company as well as the related
revenue-sharing agreements. The finance company had a senior security interest
in the eRoomServ refreshment centers financed under the financing agreement and
the corresponding revenue sharing agreements. SPE was obligated to repay the
amount borrowed under the terms of a note payable corresponding to each funding,
pursuant to the financing agreement over seven years, plus interest, at a
variable interest rate determined at the time of each funding.

The notes payable were repaid by the Company on July 14, 2006. SPE held payments
from hotel customers in several restricted bank accounts for payment to the
finance company and to the Company. The funds were released on July 18, 2006.

As a requirement of the October 1, 2003, Gestetner Group, LLC funding
arrangement, the Company entered into an agreement that amended the terms of the
notes payable due to AMRESCO Leasing Corporation. The amendment states that for
the two-year period commencing on October 1, 2003, the rate at which interest is
accruing on debt obligations owed by the Company to AMRESCO shall be reduced to
eight percent per annum, and from October 1, 2005 until the debt obligations
have been paid in full, the rate at which interest is accruing will be ten
percent per annum. Previously, the debt obligations were accruing interest at
the seven-year treasury rate plus 12.5 percent.

In consideration for the reduction in the interest rate, the Company issued
AMRESCO a warrant to purchase 400,000 shares of common stock, exercisable at
$0.10 per share through October 1, 2008. If at anytime after December 31, 2006,
the warrant has an intrinsic value greater than $300,000 based upon the then
current trading price of the Company's common stock, then AMRESCO will have the
right to "put" the warrant back to the Company in exchange for $200,000 payable
in 12 equal consecutive monthly installments with the first payment to be made
on the last day of the month in which the "put" occurs. The warrants to purchase
400,000 shares of common stock were recognized in October 2003 as a troubled
debt restructuring, with the $97,956 fair value of the warrants recorded as a
discount to the notes payable to be amortized over the remaining life of the
notes as a charge to interest expense. The discount was fully amortized in July
2006 upon full repayment of the notes.

Convertible Note Payable to Stockholder - On November 8, 2002, the Company
entered into a promissory note with Ash Capital, LLC for proceeds of up to
$322,500. The note bears interest at 8%. All past due amounts and accrued
interest thereon bear interest at 18%. The Company borrowed $322,500, under the
terms of the promissory note. The Company transferred $25,000 from an accounts
payable due to Ash Capital, which increased the principal amount of the
promissory note to $347,500.

According to the terms of the note, principal and accrued interest on the
promissory note could convert into Series D Convertible Preferred Stock at $0.90
per share. Each share of the Series D Convertible Preferred Stock is convertible
into six shares of common stock, at the rate of $0.15 per share of Series D
Preferred Stock. The promissory note could be converted into 17.8% of the lesser
of the authorized capital stock or the outstanding capital stock of the Company.
The Company agreed not to increase the outstanding capital stock of the Company
or issue securities convertible into capital stock without prior consent of Ash
Capital.

                                      -32-
<PAGE>

The Company determined that Ash Capital LLC received a beneficial conversion
option valued at $322,500 on November 8, 2002. Accordingly, the Company
allocated all of the $120,500 of proceeds received during the year ended
December 31, 2003 to the beneficial conversion option that resulted in an
offsetting discount to the note payable. The discount on the note payable was
amortized to interest expense from the dates proceeds were received through
November 8, 2003, in accordance with EITF 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable Ratios
, and EITF 00-27, Application of Issue No. 98-5 to Certain Convertible
Instruments.

As a requirement of the October 1, 2003, Gestetner Group, LLC and several
unrelated parties, funding arrangement, Ash Capital, LLC agreed to amend the
terms of its secured convertible promissory note with the Company to (i) extend
the maturity date to the earlier of November 8, 2007 or the maturity date of the
Notes to Gestetner Group and several unrelated parties issued to the Note
Holders and (ii) include as an additional event of default any default of the
Company under the Notes to Gestetner Group and the other unrelated parties.

In addition, the Company issued Ash Capital, LLC a contingent warrant to
purchase shares of common stock, exercisable at $0.13 per share through October
1, 2008. The terms of the warrant provided that on the dates exercised, Ash
Capital, LLC may purchase seven percent of the aggregate number of shares of the
Company's common stock issued to and held on that date by any of the Note
Holders from the October 1, 2003 funding in excess of 10,000,000 common shares.
The Company would record the fair value of the warrants as a charge to interest
expense.

On October 1, 2003, Ash Capital, LLC and Gestetner Group, LLC entered into an
Intercreditor and Collateral Agency Agreement that provided for the secured
obligations of the Company to both parties to rank equally. Ash Capital is to
serve on its own behalf and as the agent for Gestetner Group, LLC, based upon
its written instruction, to foreclose upon, collect and dispose of all or any
portion of the collateral set forth in Ash Capital's secured convertible
promissory note and the Gestetner Group and other unrelated parties Notes,
should a default occur by the Company under the terms of such agreements. In
addition, for the term of the Gestetner Group and several unrelated parties
Notes, Ash Capital has agreed, subject to obtaining the prior written consent of
Gestetner Group, LLC otherwise, to vote or to cause any of its affiliates or
subsidiaries to vote all of its or their shares of common stock of the Company
(i) for the election of any two nominees of the Gestetner Group and several
unrelated parties Note Holders and (ii) against any increase in the size of the
Board of Directors of the Company above four members.

On September 1, 2005, Ash Capital converted its note and accrued interest into
2,865,550 shares of common stock. The foregoing conversion triggered the
issuance of warrants to purchase 53,775 shares of common stock in favor of Ash
Capital.

Gestetner Group Secured Promissory Notes - On October 1, 2003, the Company
issued secured convertible promissory notes ("Notes"), in the original principal
amount of $250,000, collectively, to Gestetner Group, LLC, a New Jersey limited
liability company, and several third parties (collectively, the "Note Holders").
David A. Gestetner, the Chief Executive Officer and President of the Company, is
the Managing Member of the Gestetner Group, LLC. The terms of the Notes
included, inter alia, (i) for interest to accrue at the rate of 8% per annum,
(ii) a maturity date of the earlier of (a) October 1, 2008, (b) the date of
approval of the Board of Directors regarding the merger of the Company with or
into any third party or the sale of all or substantially all of the assets of
the Company, or (c) the date of the closing of any financing (other than
commercial credit facilities), the gross proceeds of which are at least
$1,000,000 and (iii) the right of the Note Holders, at any time, to convert all
outstanding principal and accrued and unpaid interest into shares of common
stock of the Company at the rate of $0.05 per share; provided, however, that the
Company shall have the right to not permit the conversion if such conversion
would result in the Note Holders holding, in the aggregate and on a
fully-diluted basis, more than 49% of the outstanding common stock of the
Company. In addition, the Note Holders have been issued, collectively, warrants
to purchase 5,000,000 shares of common stock of the Company, exercisable at
$0.05 per share at any time through October 1, 2008.

The proceeds were allocated between the Notes and warrants based on their
relative fair values, with $42,389 allocated to the Notes and $207,611 allocated
to the warrants. In addition, the Note Holders received a beneficial conversion
option of $42,389. The resulting $250,000 discount to the Notes was being
amortized over the expected five-year term of the Notes as interest expense.

On September 1, 2005, Gestetner Group LLC and the other unrelated parties
converted their notes and accrued interest into 5,768,219 shares of common
stock, and the unamortized discount of $154,109 was recognized as interest
expense.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Employment and Consulting Agreements - On January 1, 2007, the Company entered
into a new employment agreement with its chief executive officer and president
for a two year term. The agreement provides for an annual salary of $150,000.
The agreement requires that the chief executive officer not compete with the
Company during the term of employment and for three years subsequent to
termination.

                                      -33-
<PAGE>

Registration Rights - The Company had granted certain common stock and warrant
holders the right, subject to applicable terms and conditions, to require the
Company to register their common stock (or equivalent common shares upon the
exercise of the warrants) on a best efforts basis under the Securities Act for
offer to sell to the public. In compliance with these rights, the Company filed
a Form SB-2 Registration Statement with the SEC on May 4, 2006. The registration
was declared effective by the SEC on September 15, 2006.

Operating Leases as Lessor - The Company accounts for its revenue-sharing
agreements as operating leases. As of December 31, 2006, the Company had three
revenue-sharing agreements for which the customers were contractually obligated
to pay minimum monthly payments. Carrying value of these leased assets was
$165,546 as of December 31, 2006. Agreements with all other customers provide
for an allocation of revenues to the Company with no minimum monthly payment.
Accordingly, the Company is unable to estimate future amounts to be received
under these agreements.

Future minimum payments to be received under contracts that provide for minimum
monthly amounts were as follows as of December 31, 2006:

Years ending December 31,
----------------------------------   --------------
    2007                                   $147,515
    2008                                     48,266
----------------------------------   --------------
Total                                      $195,781
----------------------------------   --------------

Operating Leases as Lessee - In November 2003 the Company moved to a new
facility in Salt Lake City, Utah. The Company entered into a 38-month lease
agreement that terminated in December 2006. Identica sub-let the premises from
the Company and paid for the rent directly starting in April 2006. The lease
provided for monthly rent payments of $1,612. There are no future lease
payments.

Rent expense for the years ended December 31, 2006 and 2005 was $32,912 and
$17,935, respectively.

NOTE 7 -- INCOME TAXES

The Company has paid no federal income taxes. The following is a schedule of
state income taxes paid in 2006 and 2005:

For the years ended December 31,     2006     2005
--------------------------------   ------   ------
Massachusetts                      $1,368   $   --
New Jersey                          1,622    3,389
New York                            2,435    1,369
Tennessee                             380       --
--------------------------------   ------   ------
Total income tax paid              $5,805   $4,758
--------------------------------   ------   ------


The significant components of the Company's deferred income tax assets as of
December 31, 2006 and 2005 are as follows:

For the years ending December 31,                         2006           2005
--------------------------------                   -----------    -----------
Deferred Income Tax Assets:
Net operating loss carryforwards                   $ 7,822,321    $ 7,894,574
Reserves and accrued liabilities                        23,988         27,224
Other assets                                            17,881         17,801
--------------------------------                   -----------    -----------
Total Deferred Income Tax Assets                   $ 7,864,190    $ 7,939,599
Valuation allowance                                 (7,631,192)    (7,720,512)
Deferred Income Tax Liability -
   Depreciation and Amortization                      (232,998)      (219,087)
--------------------------------                   -----------    -----------
Net Deferred Income Tax Asset                      $        --    $        --
--------------------------------                   -----------    -----------

The amount of, and ultimate realization of, the deferred income tax assets are
dependent, in part, upon the tax laws in effect, the Company's future earnings,
and other future events, the effects of which cannot be determined. The Company
has established a valuation allowance against its deferred income tax assets.
Management believes that, based on a number of factors, the available objective
evidence creates sufficient uncertainty regarding the realizability of these
deferred income tax assets to warrant the valuation allowance.

                                      -34-
<PAGE>

The following is a reconciliation of the income taxes computed using the federal
statutory rate to the provision for income taxes:

For the years ending December 31,                  2006          2005
---------------------------------------------   ----------    ----------
Tax at statutory rate (34%)                     $   55,108    $   54,571
Other non-deductible expenses and adjustments       32,121       714,645
Change in valuation allowance                      (89,320)     (771,286)
State tax, net of federal tax benefit                2,091         2,070
---------------------------------------------   ----------    ----------
Provision for Income Taxes                      $       --    $       --
---------------------------------------------   ----------    ----------

The following summarizes the tax net operating loss carryforwards and their
respective expiration dates as of December 31, 2006:

Years ending December 31,
------------------------------------------    -----------
   2011                                       $2,012,244
   2017                                        1,082,373
   2018                                        3,642,857
   2019                                        3,298,047
   2020                                        5,087,650
   2021                                        2,378,318
   2022                                        3,459,340
   2023                                        1,205,001
------------------------------------------    -----------
Total net operating loss carryforwards        $22,165,830
------------------------------------------    -----------

NOTE 8 -- STOCKHOLDERS' EQUITY

During the year ended December 31, 2006, the Company issued 50,000 shares of
common stock valued at $12,000 ($0.24 per share) to its Board of Directors for
extraordinary services rendered.

During the year ended December 31, 2005, warrants and options to purchase
4,000,000 shares of common stock were exercised by Gestetner Group, LLC, a
related party, for cash proceeds of $200,000. The exercise price was $0.05 per
share.

During the year ended December 31, 2005, warrants and options to purchase
1,130,000 shares of common stock, were exercised for cash proceeds of $64,621,
respectively. The exercise price ranged from $0.05 - $0.26 per share.

On September 1, 2005, Gestetner Group, LLC, and Ash Capital, LLC, both related
parties, and several unrelated parties, converted their secured convertible
promissory notes, in the original principal amount of $597,500, plus accrued
interest of $120,743, into 8,633,769 shares of common stock. The notes in the
cumulative amount of $250,000 to Gestetner Capital, LLC and the unrelated
parties, were originally issued on October 1, 2003 and were converted at $0.05
per share. The Ash Capital Note was converted at $0.15 per share. The foregoing
conversion and warrant exercise triggered the issuance of warrants to purchase
53,775 shares of common stock in favor of Ash Capital. These warrants, which
vested immediately, have an exercise price of $0.13 per share and are
exercisable through October 1, 2008. These options were valued at $19,113 using
the Black-Scholes option pricing model with the following assumptions: risk free
interest rate of 4.05%, dividend yield of 0.0%, volatility of 138%, and expected
life of 3 years.

On March 30, 2006, Ash Capital, an affiliate of the Company and managed by
Providence Management, LLC, the managing member of which is James C. Savas, a
director of the Company, relinquished 380,737 shares of common stock, or the
Share Payment, as full and final payment of an outstanding promissory note in
the original principal amount of $65,000 issued in favor of the Company on
December 31, 2001, or the 2001 Ash Capital Note. The 2001 Ash Capital Note was
issued in conjunction with Ash Capital's exercise of a stock option to purchase
250,000 shares at an exercise price of $0.26 per share on December 31, 2001. The
Ash Capital Note had a term of four years and accrued simple interest at the
rate of 5% per annum. As of the date of the Share Payment, the Ash Capital Note
had accrued interest in the amount of $13,813, for a total outstanding amount of
$78,813, or the Ash Capital Note Balance, as of March 30, 2006.

NOTE 9 - STOCK OPTIONS AND WARRANTS

Employee Grants - During 2000, the stockholders of the Company approved adoption
of the 2000 Stock Option Plan (the "2000 Plan"). During 2002, the stockholders
of the Company approved an amendment to the 2000 Plan to increase the authorized
number of shares of common stock reserved for issuance upon the exercise of
stock options under the 2000 Plan from 2,400,000 shares to 2,700,000. During
November 2004, the stockholders of the Company approved a second amendment to
the 2000 Plan to increase the authorized number of shares of common stock
reserved for issuance upon the exercise of stock options under the 2000 Plan
from 2,700,000 shares to 3,000,000 shares.

                                      -35-
<PAGE>

The 2000 Plan, as amended, provides for both the direct award of shares and the
grant of options to purchase shares. The Company's compensation committee
administers the plan and has discretion in determining the employees, directors,
independent contractors and advisors who receive awards, the type of awards
(stock, incentive stock options or non-qualified stock options) granted, the
term, vesting and exercise prices. The exercise price for the options may be
paid in cash or in shares of the Company's common stock that have been
outstanding for more than six months, which shares are valued at their fair
value on the exercise date. In the event of a change in control (as defined in
the Plan), all restrictions on awards issued under the 2000 Plan will lapse and
unexercised options will become fully vested.

During the year ended December 31, 2006, the Company granted options to purchase
65,000 shares of common stock to an employee and a member of the Board of
Directors. These options, which vested immediately, have exercise prices ranging
from $0.13 to $0.24 per share, and are exercisable through January 17, 2016. In
compliance with SFAS 123 (R) as further discussed in Note 1, these options were
valued at $10,603 using the Black-Scholes option pricing model with the
following assumptions: risk free interest rate ranging from 4.34% to 5.10%,
dividend yield of 0.0%, volatility ranging from 130% to 135%, and expected
average life ranging between 5 and 10 years.

During the year ended December 31, 2005, the Company granted options to purchase
40,000 shares of common stock to employees and members of the Board of
Directors. These options, which vested immediately, have exercise prices ranging
from $0.22 to $0.35 per share, and are exercisable through August 10, 2010. The
Company recognized compensation expense of $0, which was the intrinsic value of
the options on the date granted.

See Note 8 regarding warrants issued to Ash Capital during the year ended
December 31, 2005.

During the year ended December 31, 2006, the Company granted options to purchase
53,000 shares of common stock to consultants. These options, which vested
immediately, have an exercise price ranging from $0.17 to $0.24 per share and
are exercisable through June 29, 2011. These options were valued at $10,960
using the Black-Scholes option pricing model with the following assumptions:
risk free interest rate ranging from 4.31% to 5.10%, dividend yield of 0.0%,
volatility ranging from 131% to 135% and expected life of 5 years.

During the years ended December 31, 2006 and 2005, options to purchase 305,000
and 180,000 shares of common stock, respectively, expired. The Company
recognized the value of these options in the amounts of $63,726 and $470,572
during 2006 and 2005 respectively, as additional paid in capital.


Outstanding Stock Options and Warrants - A summary of stock option and warrant
activity for the years ended December 31, 2006 and 2005 is as follows:
<TABLE>
<CAPTION>
                                                                            Weighted -
                                              Options and     Exercise        Average
   ~                                            Warrants    Price Range    Exercise Price
                                               ---------    -----------    --------
<S>                                            <C>          <C>   <C>      <C>
Balance, December 31, 2005                     3,504,621    $0.10-$1.55    $   0.28
                                               ---------    -----------    --------
   Granted                                       118,000     0.13- 0.24        0.20
   Expired                                      (305,000)    0.15- 0.26        0.22
                                               ---------    -----------    --------
Balance, December 31, 2006                     3,317,621    $0.10- 1.55     $  0.28
                                               ---------    -----------    --------
Exercisable, December 31, 2006                 3,317,621    $0.10- 1.55     $  0.28
                                               ---------    -----------    --------
Weighted-average fair value of options
   granted during the year ended
   December 31, 2005                                                       $   0.32
                                               =========    ===========    ========
Weighted-average fair value of options
   granted during the year ended
   December 31, 2006                                                       $   0.18
                                               ---------    -----------    --------
</TABLE>

The fair value of stock options was determined at the grant dates using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for the years ended December 31, 2006 and 2005, respectively:
risk-free interest rate of 4.9% and 4.0%, dividend yield of 0 percent,
volatility of 132% and 139%, and expected lives of 6.1 and 3.6 years.

                                      -36-
<PAGE>

A summary of the options and warrants outstanding and exercisable as of December
31, 2006 follows:

<TABLE>
<CAPTION>

                                            Outstanding                                               Exercisable
                  -----------------------------------------------------------------    -------------------------------------------
                                      Weighted -
                                       Average         Weighted -      Aggregate                      Weighted -     Aggregate
    Range of          Number          Remaining         Average        Intrinsic         Number        Average       Intrinsic
Exercise Prices    Outstanding    Contractual Life   Exercise Price      Value         Exercisable   Exercise Price     Value
----------------- --------------- ------------------ --------------- --------------    ------------- --------------- -------------
<S>               <C>             <C>                <C>             <C>               <C>           <C>             <C>
 $ 0.10 - 0.37         3,303,978           7.5years           $0.27       $907,229        3,303,978           $0.27      $907,229
   0.90 - 1.91            13,643          10.0years            0.94         12,760           13,643            0.94        12,760
----------------- --------------- ------------------ --------------- --------------    ------------- --------------- -------------
 $ 0.10 - 7.80         3,317,621           7.5years           $0.28       $919,989        3,317,621           $0.28      $919,989
----------------- --------------- ------------------ --------------- --------------    ------------- --------------- -------------
</TABLE>

NOTE 10 -- CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

The Company's historical revenues and receivables have been derived solely from
the lodging industry. The Company offers credit terms on the sale of its
eRoomServ refreshment centers and in connection with its revenue-sharing
contracts. The Company performs ongoing credit evaluations of its customers'
financial condition and does not require collateral from its customers. The
Company maintains an allowance for uncollectible accounts receivable based upon
a percentage of accounts receivable at year end.

At December 31, 2006, the Company had cash in excess of federally insured limits
of $1,337,676.

At December 31, 2006, the Company had accounts receivable from two customers
accounting for 43% of total accounts receivable.

During the year ended December 31, 2006, revenues from one customer accounted
for 12% of total revenues.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

      Not applicable.


ITEM 8A. CONTROLS AND PROCEDURES.

      EVALUATION OF DISCLOSURE CONTROLS

      Our Chief Executive Officer and Chief Financial Officer, after evaluating
the effectiveness of the Company's "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or
15d-15(e)) as of the end of the period covered by this annual report, has
concluded that our disclosure controls and procedures are effective at a
reasonable assurance level based on his evaluation of these controls and
procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

      The evaluation of our Chief Executive Officer and Chief Financial Officer
for the year ended December 31, 2005 revealed that our disclosure controls and
procedures were subject to significant design and operational deficiencies that
did not ensure that the Company reported all the information required to be
disclosed by us in this report and the procedures in place failed to result in
our disclosure of all such required information. The design and deficiencies in
our disclosure controls and procedures were discovered by our in-house counsel
following receipt of a comment letter from the Securities and Exchange
Commission, dated October 17, 2005, relating to our registration statement on
Form S-3. Specifically, we failed to have the disclosure required by Items 307
and 308 of Regulation S-B and failed to include the certification by our Chief
Executive Officer and Chief Financial Officer required by SEC Rules 13a-14(a)
and 15d-14(a).

      The deficiencies in our disclosure controls and procedures specifically
resulted from not having had sufficient resources allocated to disclosure
functions, insufficient training of personnel regarding disclosure matters, and
the absence of multiple parties confirming the Company's disclosures against the
Commission's rules and regulations.

      In the fourth quarter of 2005, the Company took the following steps, among
others, to remediate the deficiencies in its disclosure controls and procedures:
(i) an in-depth review of the Commission's rules and regulations relating to
periodic filings made pursuant to the Exchange Act; (ii) attendance by in-house
counsel of a multiple day seminar on Exchange Act filings, with particular
emphasis on small business issuers; and (iii) implementation of a multiple party
review of all periodic reports and other filings made by the Company pursuant to
the Exchange Act, as well as filings made pursuant to the Securities Act of
1933, as amended. The costs associated with the foregoing remediation measures
did not materially impact our results of operations. These steps were utilized
in fiscal year 2006. The engagement of special securities counsel has materially
impacted the effectiveness of the Company's disclosure controls and procedures
by improving the Company's ability to properly and adequately fulfill its
disclosure obligations for its periodic reports and other SEC filings.

                                      -37-
<PAGE>

      LACK OF SEGREGATION OF DUTIES

      Management is aware that there is a lack of segregation of duties at the
Company due to the small number of employees dealing with general administrative
and financial matters. However, at this time management has decided that
considering the abilities of the employees now involved and the control
procedures in place, the risks associated with such lack of segregation are low
and the potential benefits of adding employees to clearly segregate duties do
not justify the substantial expenses associated with such increases. Management
will periodically reevaluate this situation.

      CHANGES IN INTERNAL CONTROLS

      During the fiscal quarter ended December 31, 2006, there have been no
changes in our internal control over financial reporting that have materially
affected or are reasonably likely to materially affect our internal controls
over financial reporting.

ITEM 8B. OTHER INFORMATION.

      Not applicable.

PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

      The following information is furnished with respect to each member of our
board and our executive officers who are not directors. There are no family
relationships between or among any of our directors or executive officers. Each
of our executive officers is an employee of eRoomSystem Technologies and serves
at the discretion of our board.

      Directors and Executive Officers

Name                 Age   Position
------------------   ---   ----------------------------------------------------
David A. Gestetner   34    President, Chief Executive Officer, Secretary and
                           Chairman of the Board
Herbert A. Hardt     64    Director
James C. Savas       46    Director
Lawrence K. Wein     64    Director

          Set forth below is a description of the background of each of our
executive officers and directors:

      David A. Gestetner has served as president, chief executive officer,
secretary and chairman of the board since October 1, 2003. Throughout his
career, Mr. Gestetner has been involved in various applications of technology,
both as an operator as well as a financier, including founding and operating a
telecommunications business abroad. Mr. Gestetner has received awards for his
innovations and advance applications of technology, including the Howard Golden
Award for an intuitive scientific invention consisting of a system that enables
emergency call routing in telephone systems. Mr. Gestetner possesses a Master's
degree from The Aron Kotler Higher Institute of Learning in New Jersey.

      Herbert A. Hardt has served as director since June 13, 2002. Mr. Hardt is
a co-founder and principal of Monness, Crespi, Hardt & Co., Inc. Prior to
co-founding Monness, Crespi, Hardt & Co., Inc. in 1979, Mr. Hardt served as vice
president of Fidelity Management and Research Bermuda from 1971 to 1978. Mr.
Hardt received his Bachelor of Arts with a concentration in Engineering and
Applied Physics from Harvard College in 1965 and his Master of Business
Administration from Harvard University in 1971.

      James C. Savas has served as director since June 13, 2002. For more than
seven years, Mr. Savas has been a member of Savas Greene & Company, LLC, an
accounting and business consulting firm located in Salt Lake City, Utah. From
1988 to 1995, Mr. Savas was a tax accountant for Price Waterhouse. Since April
1999, Mr. Savas has also served as co-manager of Providence Management, LLC,
which is manager of Ash Capital, LLC, an investment company controlled by Dr.
Alan C. Ashton, a former director and one of the largest stockholders of the
Company. Mr. Savas also serves on the boards of Bullfrog Spas International and
Vortex Products, both privately-held companies. Mr. Savas received his Bachelor
of Science in Accounting from the University of Utah.

                                      -38-
<PAGE>

      Lawrence K. Wein has served as director since October 2003. Mr. Wein held
several key positions at AT&T for over 30 years. Mr. Wein received his Master's
in Business Administration from Harvard Business School, and his Bachelor of
Science in Engineering from Columbia University.

      Committees of the Board of Directors

      Our board has authorized two standing committees, an audit committee and a
compensation committee

      Audit Committee. The audit committee, which was formed on August 18, 2000,
is currently comprised of Messrs. Hardt and Savas. The chairman of the audit
committee is Mr. Hardt. The audit committee met four times during the fiscal
year ended December 31, 2006. The audit committee has the responsibility to:

      o     recommend the firm that will serve as our independent public
            accountants;

      o     review the scope and results of the audit and services provided by
            the independent public accountants;

      o     meet with our financial staff to review accounting procedures and
            policies and internal controls; and

      o     perform the other responsibilities set forth in its written charter.

      The audit committee is comprised exclusively of directors who are not our
salaried employees and all of whom, in the opinion of our board, are free from
any relationship that would interfere with the exercise of independent judgment
as a committee member. Our Board of Directors has determined that Mr. Savas is
an "audit committee financial expert" within the applicable definition of the
Securities and Exchange Commission.

      Compensation Committee. The compensation committee, which was formed on
August 18, 2000, is currently comprised of Messrs. Hardt and Wein. The
compensation committee met once during the fiscal year ended December 31, 2006.
In general, the compensation committee's authority and oversight extends to
total compensation, including base salaries, bonuses, stock options, and other
forms of compensation.

      Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our reporting directors and executive officers, and persons who own more than
ten percent of a registered class of our equity securities, to file initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of eRoomSystem Technologies with the Securities and
Exchange Commission, or the Commission. Officers, directors and stockholders
holding more than 10% of the class of stock are required to furnish us with
copies of all Section 16(a) forms they file with the Commission.

      To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations, we believe that during the fiscal
year ended December 31, 2006 all applicable filing requirements were complied
with by our executive officers and directors.

      Code of Ethics

      Our Board of Directors has not yet adopted a written Code of Business
Conduct and Ethics. We expect to adopt a written Code of Business Conduct and
Ethics in 2007.


ITEM 10.  EXECUTIVE COMPENSATION.

      Summary Compensation Table

      The following table sets forth summary information concerning the total
remuneration paid or accrued by eRoomSystem Technologies, to or on behalf of our
chief executive officer and our executive officers whose total annual salary
exceeded $100,000 during the fiscal years ended December 31, 2006 and 2005 . In
accordance with the rules of the Commission, the compensation described in this
table does not include perquisites and other personal benefits received by the
executive officers named in the table below which does not exceed the lesser of
$10,000 or 10% of the total salary and bonus reported for the executive
officers.

                                      -39-
<PAGE>

<TABLE>
<CAPTION>

                                   Summary Compensation Table
--------------------------------------------------------------------------------------------------
Name and Principal Position          Year     Salary     Bonus   All Other Compensation      Total
---------------------------          ----   --------   -------   ----------------------   --------
<S>                                  <C>    <C>        <C>       <C>                      <C>
David A. Gestetner,                  2006   $100,000   $50,000   $                2,400   $152,400
President, Chief Executive           2005   $100,000   $50,000   $                2,400   $152,400
   Officer, Secretary and Chairman
</TABLE>

      David A. Gestetner commenced serving in the capacities of President, Chief
Executive Officer, Secretary and Chairman of the Board on October 1, 2003. On
January 1, 2007, an amendment was made to Mr. Gestetner's employment agreement
in which he will be receiving an annual salary of $150,000 and a monthly car
allowance of $400. Mr. Gestetner is eligible to receive a performance based
bonus at the end of the fiscal year at the discretion of the compensation
committee. In addition the agreement provides for one year of severance upon
termination without cause with salary and benefits continuing at the same rate.

      There were no equity awards granted to or held by our chief executive
officer during the fiscal year ended December 31, 2006.

      Compensation of Directors

      The following table sets forth the equity awards made to members of our
board of directors during the fiscal year ended December 31, 2006:

                   DIRECTOR COMPENSATION
-------------------------------------------------------------
Name               Stock Awards     Option Awards    Total
Herbert A. Hardt   $    6,000 (1)   $       --       $    6,000
Lawrence K. Wein   $    6,000 (1)   $       --       $    6,000
James C. Savas     $       --       $    4,138 (2)   $    4,138

------------------

      (1)   Reflects the issuance of 25,000 shares of common stock to each of
            Mssrs. Hardt and Wein.
      (2)   Reflects the issuance of options to purchase 25,000 shares of common
            stock.

      As compensation for their services, our non-employee directors receive
either stock options to purchase 25,000 shares of our common stock or 25,000
unregistered shares of common stock as determined by the compensation committee.
Directors who are our employees do not receive compensation for their services
as directors.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      The following table is a list of the beneficial ownership of common stock
as of March 1, 2007 of (i) all persons who beneficially owned more than 5% of
our outstanding common stock, (ii) all directors, (iii) all executive officers
and (iv) all directors and executive officers as a group, according to
record-ownership listings as of that date, according to the Forms 3, 4 and 5 and
Schedules 13D and 13G, of which we have received copies, and according to
verification as of March 1, 2007 which we have solicited and received from each
director and executive officer. The beneficial ownership is calculated based on
23,898,165 shares of common stock outstanding as of March 1, 2007. Beneficial
ownership is determined in accordance with the rules of the Commission and
generally includes voting or investment power with respect to securities and,
accordingly, includes shares issuable upon exercise of options that are
exercisable or become exercisable within 60 days of March 1, 2007.

      Unless otherwise indicated, the persons identified in this table have sole
voting and sole investment power with regard to the shares beneficially owned
with the following address, c/o eRoomSystem Technologies, Inc., 1072 Madison
Ave., Lakewood, NJ 08701.

                                      -40-
<PAGE>

<TABLE>
<CAPTION>

Executive Officer,  Directors and Stockholders with Beneficial   Amount and Nature of            Percent of
Ownership of 5% or More                                          Beneficial Ownership              Class
<S>                                                              <C>                             <C>
Ash Capital, LLC                                                    3,884,537 (5)                  16.1%
David A. Gestetner                                                  5,157,644 (1)                  21.6%
James C. Savas                                                      4,047,050 (2)                  16.7%
Herbert A. Hardt                                                      600,821 (3)                   2.5%
Lawrence K. Wein                                                      105,000 (4)                   0.4%
                                                                    ---------                      ----
Executive Officers and Directors, as a group (4 individuals)        9,910,515                      40.6%
</TABLE>

------------------
      (1) Reflects the direct ownership of 4,000 shares of common stock. In
addition, also includes the beneficial ownership of (i) 5,153,644 shares of
common stock held by Gestetner Group, LLC.

      (2) Reflects the direct ownership of 48,321 shares of common stock and
options to purchase 80,000 shares of common stock, the beneficial ownership of
19,231 shares of common stock and an option to purchase 14,961 shares of common
stock held by Providence Management, LLC, an entity for which Mr. Savas is
co-manager and 50% owner, and the beneficial ownership of the following
securities held by Ash Capital, LLC, or Ash Capital, an entity which Providence
Management, LLC serves as the manager and holds a 20% profits interest, (a)
3,685,449 shares of common stock held by Ash Capital, (b) an option to purchase
145,313 shares of common stock, and (c) a warrant to purchase 53,775 shares of
common stock. Mr. Savas disclaims any beneficial ownership of the shares of
common stock and options to purchase shares of common stock beneficially owned
as a result of his affiliation with Ash Capital, except to the extent of his
pecuniary interest in such securities.

     (3) Reflects the direct ownership of 420,821 shares of common stock and
options to purchase 80,000 shares of common stock, and the beneficial ownership
of options to purchase 100,000 shares of common stock held by Monness, Crespi &
Hardt, an entity of which Mr. Hardt is a principal.

     (4)Reflects the direct ownership of 55,000 shares of common stock and
options to purchase 50,000 shares of common stock.

     (5) Reflects the direct ownership of 3,685,449 shares of common stock, an
option to purchase 145,313 shares of common stock, and a warrant to purchase
53,775 shares of common stock. Ash Capital is controlled by Alan C. Ashton, a
former member of our board of directors, audit and compensation committees.

Securities authorized for issuance under equity compensation plans

      The following table sets forth information about the common stock
available for issuance under compensatory plans and arrangements as of December
31, 2006.

<TABLE>
<CAPTION>

                                       Number of securities to be     Weighted-average
                                          issued upon exercise       exercise price of
                                        of outstanding options,     outstanding options,       Number of securities
         Plan Category                    warrants and rights       warrants and rights    available for future issuance
------------------------------------   --------------------------   --------------------   -----------------------------
                                                  (a)                       (b)                         (c)
------------------------------------   --------------------------   --------------------   -----------------------------
<S>                                    <C>                          <C>                    <C>
Equity compensation plan approved by
security holders                                        2,486,946   $               0.31                         513,054

Equity compensation plans not
approved by security holders                            1,030,673   $               0.18                              --
                                       --------------------------   --------------------   -----------------------------
                              Total                     3,517,619   $               0.28                         513,054
                                       --------------------------   --------------------   -----------------------------
</TABLE>

Equity Compensation Plans Approved by Security Holders

      The 2000 Stock Option and Incentive Plan, or the 2000 Plan, was adopted by
our board on February 3, 2000 and approved by our stockholders on March 29,
2000. The 2000 Plan was amended by our stockholders on May 7, 2001 when the
shares of common stock authorized under the 2000 Plan were increased from
2,000,000 shares to 2,400,000 shares, amended on July 29, 2002 by our
stockholders effectively increasing the number of shares issuable hereunder to
2,700,000, and amended further on November 15, 2004 by our stockholders
effectively increasing the number of shares issuable thereunder to 3,000,000.
The 2000 Plan provides us with the vehicle to grant to employees, officers,
directors and consultants stock options and bonuses in the form of stock and
options. Under the 2000 Plan, we can grant awards for the purchase of up to
3,000,000 shares of common stock in the aggregate, including "incentive stock
options" within the meaning of Section 422 of the United States Internal Revenue
Code of 1986 and non-qualified stock options. As of March 1, 2007, we had
options to purchase 2,486,946 shares of our common stock outstanding under the
2000 Plan.

                                      -41-
<PAGE>

Equity Compensation Plans Not Approved by Security Holders

      Except as otherwise noted below. the options and warrants under the
following compensation plans are transferable. These options and warrants are
exercisable for the remainder of their stated term in the event of death of the
holder or the termination of the holder's employment with the Company. None of
these options or warrants have a cashless exercise provision.

      The 2001 Variable Stock Option and Incentive Plan consists of 205,004
options to purchase shares of common stock of which 205,004 options were issued
to employees in 2001 at an exercise price of $0.26 with a term of 10 years.

      The 2001(B) Stock Option and Incentive Plan consists of 300,894 options to
purchase shares of common stock of which 300,894 options were issued to
consultants in 2001 at an exercise price ranging from $0.26 to $0.33 with terms
ranging from 5 to 10 years.

      The 2003 Stock Option and Incentive Plan consists of 400,000 warrants to
purchase shares of common stock of which 400,000 warrants were issued to a
vendor in 2003 at an exercise price of $0.10 with a term of 5 years.

      The 2004 Stock Option and Incentive Plan consists of 46,000 warrants to
purchase shares of common stock of which 46,000 warrants were issued to vendors
in 2004 at an exercise price ranging from $0.25 to $0.26 with a term of 3 years.

      The 2005 Plan Stock Option and Incentive Plan consists of 78,775 warrants
to purchase shares of common stock of which 78,775 warrants were issued to a
vendor and member of the board at an exercise price ranging from $0.13 to $0.35
with terms ranging from 3 to 5 years.

      The compensation committee has authority to determine the persons to whom
awards will be granted, the nature of the awards, the number of shares to be
covered by each grant, the terms of the grant and with respect to options,
whether the options granted are intended to be incentive stock options, the
duration and rate of exercise of each option, the option price per share, the
manner of exercise and the time, manner and form of payment upon exercise of an
option.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.

      Director Independence

      Except for our Chairman, David Gestetner, and James C. Savas, each of our
directors, Messrs. Hebert A. Hardt and Lawrence K. Wein, qualifies as
independent directors under Rule 10A-3 of the Securities Exchange Act of 1934
and as defined in NASD Marketplace Rule 4200(15). Mr. Savas is the beneficial
owner of more than 10% of our outstanding common stock and Mr. Gestetner is an
employee and executive officer of our company. Aside from his beneficial
ownership of more than 10% of our outstanding common stock, Mr. Savas is
independent under Rule 10A-3 of the Securities Exchange Act of 1934 and as
defined in NASD Marketplace Rule 4200(15). The members of our audit committee
are Messrs. Hardt and Savas. While Mr. Hardt is independent for purposes of the
audit committee as defined in NASD Marketplace Rule 4350(d)(2), Mr. Savas is not
independent under such rule because he is the beneficial owner of more than 10%
of our outstanding common stock.. However, in the opinion of our Board of
Directors, Mr. Savas' beneficial stock ownership would not interfere with his
exercise of independent judgment as an audit committee member.

      Transactions Involving Ash Capital, LLC

      On March 30, 2006, Ash Capital, LLC relinquished 380,737 shares of common
stock (the "Share Payment") as full and final payment of an outstanding
promissory note in the original principal amount of $65,000 issued in favor of
the Company on December 31, 2001 (the "Ash Capital Note"). The Ash Capital Note
was issued in conjunction with Ash Capital's exercise of a stock option to
purchase 250,000 shares at an exercise price of $0.26 per share. The Ash Capital
Note had a term of four years and accrued simple interest at the rate of 5% per
annum.

                                      -42-
<PAGE>

      As of the date of the Share Payment, the Ash Capital Note had accrued
interest in the amount of $13,812.50, for a total outstanding amount of
$78,812.50 ("Ash Capital Note Balance") as of March 30, 2006.

      The Share Payment represents a price of $0.207 per share. The number of
shares of common stock relinquished by Ash Capital was determined using the
following formula: (a) shares of common stock equal to the greater of (i) the
Ash Capital Note Balance divided by a ten (10) percent discount on the 30-day
trailing average closing price of the Company's common stock, or (ii) the Ash
Capital Note Balance divided by the ten (10) percent discount on the closing
price of the Company's common stock on March 29, 2006.

      Financial Advisory Agreement with Monness, Crespi & Hardt

      On December 31, 2001, we entered into a financial advisory agreement with
Monness, Crespi & Hardt, or MCH. Herbert A. Hardt is a principal of MCH and has
been a member of our board of directors since June 2002. The agreement provides
that MCH will assist us in structuring and/or placing debt or equity securities
in private or public transactions, and advise us on mergers, acquisitions and
strategic partnerships. In consideration, MCH was issued a warrant to purchase
100,000 shares of common stock exercisable at $0.26 per share.

      Grant and Exercise of Stock Options on December 31, 2001 and Related
Matters Involving Messrs. Harkness, Hrncir and Ellis

      On December 31, 2001, we issued to David S. Harkness, Gregory L. Hrncir,
Derek K. Ellis (each of which are former executive officers of the Company) and
Ash Capital options to purchase 300,000 shares, 225,000 shares, 75,000 shares
and 250,000 shares of common stock, respectively, at $0.26 per share, which was
the closing price of our common stock on December 31, 2001. As of the same date,
Mr. Harkness assigned, as a gift, his options to AK Holding Company, a
limited-liability company affiliated with Dr. Alan C. Ashton. In addition, as of
the same date, Messrs. Hrncir and Ellis, Ash Capital and AK Holding Company
exercised their options to purchase an aggregate of 950,000 shares of common
stock (including 636,578 variable options) by payment of $26,000 in February
2002 and by issuing $221,000 of 5% full-recourse promissory notes to us. The
principal and accrued interest on the promissory notes originally had a maturity
date of December 31, 2005. In addition to the shares purchased with the notes,
the notes were secured by 637,500 shares of common stock that have been held by
Messrs. Hrncir and Ellis, Ash Capital and AK Holding Company for more than six
months and by other assets of each of the foregoing parties.

      On October 1, 2003, David S. Harkness entered into a Termination and
Release Agreement that provides for the surrender by the Company of a promissory
note, previously issued by Mr. Harkness in the original principal amount of
$78,000, in exchange for the surrender by Mr. Harkness of 300,000 shares of
common stock. In conjunction with the surrender of accrued compensation owed to
Mr. Harkness for the period April 1, 2003 to October 1, 2003, the Company issued
Mr. Harkness an option to purchase 300,000 shares of common stock at $0.26 per
share pursuant to the 2000 Plan. Under the terms of the Termination and Release
Agreement, Mr. Harkness resigned as Chief Executive Officer, President and
Chairman of the Board of Directors, as well as all officer and director
positions held in the Company's subsidiaries.

      On October 1, 2003, Gregory L. Hrncir entered into a Termination and
Release Agreement that provides for the surrender by the Company of a promissory
note, previously issued by Mr. Hrncir in the original principal amount of
$58,500, in exchange for the surrender by Mr. Hrncir of 225,000 shares of common
stock. In conjunction with the surrender of accrued compensation owed to Mr.
Hrncir for the period April 1, 2003 to October 1, 2003, the Company issued Mr.
Hrncir an option to purchase 225,000 shares of common stock at $0.26 per share
pursuant to the 2000 Plan. Under the terms of the Termination and Release
Agreement, Mr. Hrncir resigned as Chief Operating Officer, General Counsel and
Secretary of the Company, as well as all officer and director positions held in
the Company's subsidiaries. In addition, on October 1, 2003, the Company entered
into a consulting agreement with Mr. Hrncir that provides for the issuance of an
option to purchase 100,000 shares of common stock, exercisable at $0.10 per
share for a period of five years. Mr. Hrncir no longer serves as a consultant to
the Company.

      On October 2, 2003, Derek K. Ellis entered into a Termination and Release
Agreement that provides for the surrender by the Company of a promissory note,
previously issued by Mr. Ellis in the original principal amount of $19,500, in
exchange for the surrender by Mr. Ellis of 75,000 shares of common stock. In
conjunction with the surrender of past compensation by Mr. Ellis for the period
April 1, 2003 to July 31, 2003, the Company issued Mr. Ellis an option to
purchase 75,000 shares of common stock at $0.26 per share pursuant to the 2000
Plan. Previously, on July 31, 2003, Mr. Ellis had resigned as Chief Financial
Officer and Treasurer of the Company. In addition, on October 2, 2003, the
Company entered into a consulting agreement with Mr. Ellis that provides for the
issuance of a five-year option to purchase up to 180,000 shares of common stock,
which option vests upon the occurrence of certain events, at $0.10 per share and
the payment of a monthly consulting fee of $10,000 for the first month and
$3,120 for a minimum of five, and maximum of seven, subsequent months subject to
the occurrence of certain events. Mr. Ellis no longer serves as a consultant to
the Company.

                                      -43-
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

      (a) Exhibits

      See exhibits listed on the Exhibit Index following the signature page of
this Annual Report on Form 10-KSB which is incorporated herein by reference.

      (b) Reports on Form 8-K

      There are no current reports on Form 8-K.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

      The information required by this item is as follows:

      Hansen, Barnett & Maxwell, P.C., or HB&M, has served as our independent
registered public accounting firm since 2000, and specifically for the fiscal
years ended December 31, 2006 and 2005. HB&M was selected by our board of
directors as our independent registered public accounting firm for the fiscal
year ended December 31, 2006, and by our board of directors and a majority of
our common stockholders for the fiscal year ended December 31, 2004.

      Our board is responsible for pre-approving all audit and permissible
non-audit services provided by HB&M. Our board of directors has concluded that
the non-audit services provided by HB&M are compatible with maintaining auditor
independence. In 2006, no fees were paid to HB&M pursuant to the "de minimus"
exception to the pre-approval policy permitted under the Exchange Act.

Audit Committee's Pre-Approval Policies

      The Audit Committee has adopted a policy that all audit, audit-related,
tax and any other non-audit service to be performed by the Company's Independent
Registered Public Accounting Firm must be pre-approved by the Audit Committee.
It is the Company's policy that all such services be pre-approved prior to
commencement of the engagement. The Audit Committee is also required to
pre-approve the estimated fees for such services, as well as any subsequent
changes to the terms of the engagement.

      For the fiscal years ended December 31, 2006 and 2005, the fees for
services provided by HB&M were as follows:

                           2006     2005
                         -------   -------
Audit fees (1)           $38,110   $37,500
Audit-related fees (2)        --        --
Tax fees (3)                  --        --
All other fees                --        --
                         -------   -------
                         $38,110   $37,500
                         -------   -------

      (1)   Audit fees: Fees for the professional services rendered for the
            audit of our annual financial statements, review of financial
            statements included in our Form 10-QSB filings, and services
            normally provided in connection with statutory and regulatory
            filings or engagements.

      (2)   Audit-related fees: Fees for assurance and related services that are
            reasonably related to the performance of the audit or review of our
            financial statements.

      (3)   Tax fees: Fees for professional services rendered with respect to
            tax compliance, tax advice and tax planning. This includes
            preparation of tax returns, claims for refunds, payment planning and
            tax law interpretation.

                                      -44-
<PAGE>

SIGNATURES

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

                  eRoomSystem Technologies, Inc.


                   By:     /s/ David A. Gestetner
                           --------------------------------------------------
                           David A. Gestetner
                   Its:    President, Chief Executive Officer, Secretary and
                           Chairman of the Board

                   Date:   March 26, 2007

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Signature                              Title                      Date
                          President, Chief Executive Officer,
/s/ David A. Gestetner    Secretary and Chairman of the Board     March 26, 2007
----------------------    (Principal Executive Officer and
David A. Gestetner        Principal Financial and Accounting Officer)


/s/ Herbert A. Hardt      Director                                March 26, 2007
----------------------
Herbert A. Hardt


/s/ James C. Savas        Director                                March 26, 2007
----------------------
James C. Savas


/s/ Lawrence K. Wein      Director                                March 26, 2007
----------------------

                                      -45-
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit Number   Document Name                                                                                      Page
--------------   -----------------------------------------------------------------------------------------------   -----
<S>              <C>                                                                                               <C>
1.01             Form of Underwriting Agreement relating to the registrant's initial public offering that             (3)
                 closed on August 9, 2000
--------------   -----------------------------------------------------------------------------------------------   -----
2.01             Agreement and Plan of Reorganization by and between RoomSystems International Corporation and        (1)
                 RoomSystems, Inc. dated December 31, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
2.02             Transfer Pricing Agreement by and between RoomSystems International Corporation and                  (1)
                 RoomSystems, Inc. dated December 31, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
3.01             Amendment and Restatement of Articles of Incorporation                                               (1)
--------------   -----------------------------------------------------------------------------------------------   -----
3.02             Certificate of Correction dated May 30, 2000                                                         (2)
--------------   -----------------------------------------------------------------------------------------------   -----
3.03             Amended and Restated Certificate of Designation, Preferences, Rights and Limitation of Series        (1)
                 A convertible preferred stock
--------------   -----------------------------------------------------------------------------------------------   -----
3.04             Amended and Restated Certificate of Designation, Preferences, Rights and Limitation of Series        (1)
                 B convertible preferred stock
--------------   -----------------------------------------------------------------------------------------------   -----
3.05             Certificate of Designation, Preferences, Rights and Limitation of Series C convertible               (1)
                 preferred stock
--------------   -----------------------------------------------------------------------------------------------   -----
3.06             Amended and Restated Bylaws                                                                          (2)
--------------   -----------------------------------------------------------------------------------------------   -----
3.07             Second Amendment and Restatement of Articles of Incorporation                                        (3)
--------------   -----------------------------------------------------------------------------------------------   -----
3.08             Second Amended and Restated Bylaws                                                                   (3)
--------------   -----------------------------------------------------------------------------------------------   -----
4.01             Form of Common Stock Certificate                                                                     (1)
--------------   -----------------------------------------------------------------------------------------------   -----
4.02             Form of Certificate for Series A convertible preferred stock                                         (1)
--------------   -----------------------------------------------------------------------------------------------   -----
4.03             Form of Certificate for Series B convertible preferred stock                                         (1)
--------------   -----------------------------------------------------------------------------------------------   -----
4.04             Form of Certificate for Series C convertible preferred stock                                         (1)
--------------   -----------------------------------------------------------------------------------------------   -----
10.01            Amended and Restated 2000 Stock Option and Incentive Plan                                            (2)
--------------   -----------------------------------------------------------------------------------------------   -----
10.02            Lease Agreement by and between RoomSystems Finance Corporation and 3770 Howard Hughes Parkway        (1)
                 Associates Limited Partnership dated October 8, 1997
--------------   -----------------------------------------------------------------------------------------------   -----
10.02A           Exhibits to Lease Agreement by and between RoomSystems Finance Corporation and 3770 Howard           (2)
                 Hughes Parkway Associates Limited Partnership dated October 8, 1997
--------------   -----------------------------------------------------------------------------------------------   -----
10.03            Lease Agreement by and between RoomSystems, Inc. and Pam Joy Realty, Inc. dated October 10,          (2)
                 1997
--------------   -----------------------------------------------------------------------------------------------   -----
10.04            Master Corporate Agreement by and between Innco Corporation and RoomSystems, Inc. dated              (1)
                 April 6, 1998
--------------   -----------------------------------------------------------------------------------------------   -----
10.04A           Exhibits to Master Corporate Agreement by and between Innco Corporation and RoomSystems, Inc.        (2)
                 dated April 6, 1998
--------------   -----------------------------------------------------------------------------------------------   -----
10.05            Indemnification Agreement by and between RoomSystems, Inc. and Alan C. Ashton dated August 17,       (1)
                 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.06            Agreement of Understanding by and between RoomSystems, Inc. and Ash Capital, LLC, C&W/RSI            (1)
                 Partners, LLC, SKM Investment, LLC and Thunder Mountain Investments, LC dated August 17, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.06A           Exhibits to Agreement of Understanding by and between RoomSystems, Inc. and Ash Capital, LLC,        (2)
                 C&W/RSI Partners, LLC, SKM Investment, LLC and Thunder
                 Mountain Investments, LC dated August 17, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.07            First Amendment to Agreement of Understanding by and between RoomSystems, Inc. and Ash               (1)
                 Capital, LLC, C&W/RSI Partners, LLC, SKM Investment,LLC and Thunder Mountain Investments,
                 LC dated September 30, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.08            Promissory Note Repurchase Agreement by and between Steven L. Sunyich and RoomSystems, Inc.          (1)
                 dated September 1, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.09            Indemnification Agreement by and between RSi BRE, Inc. and Donnelly Prehn dated                      (1)
                 September 27, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.10            Equipment Transfer Agreement by and between RoomSystems, Inc., RoomSystems International             (1)
                 Corporation, RSi BRE, Inc. and RSG Investments, LLC dated September 28, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.10A           Exhibits to Equipment Transfer Agreement by and between RoomSystems, Inc., RoomSystems               (2)
                 International Corporation, RSi BRE, Inc. and RSG Investments, LLC dated September 28, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
</TABLE>

                                      -46-
<PAGE>

<TABLE>
<CAPTION>
Exhibit Number   Document Name                                                                                      Page
--------------   -----------------------------------------------------------------------------------------------   -----
<S>              <C>                                                                                               <C>
10.11            Amendment to Equipment Transfer Agreement by and between RoomSystems, Inc., RoomSystems              (1)
                 International Corporation, RSi BRE, Inc. and RSG Investments, LLC dated November 23, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.12            Conversion Agreement by and between Steven L. Sunyich and RoomSystems, Inc. dated                    (1)
                 December 30, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.13            Loan and Security Agreement by and between RoomSystem Technologies, Inc. and Ash Capital,            (1)
                 LLC dated February 15, 2000
--------------   -----------------------------------------------------------------------------------------------   -----
10.13A           Exhibits to Loan and Security Agreement by and between RoomSystem Technologies, Inc. and             (2)
                 Ash Capital, LLC dated February 15, 2000
--------------   -----------------------------------------------------------------------------------------------   -----
10.14            Letter Agreement by and between eRoomSystem Technologies, Inc. and Hall Communications,              (1)
                 Inc. dated March 30, 2000
--------------   -----------------------------------------------------------------------------------------------   -----
10.15            Form of Hotel Revenue-Sharing Lease Agreement                                                        (2)
--------------   -----------------------------------------------------------------------------------------------   -----
10.16            Form of Noncompetition and Nondisclosure Agreement (Sales)                                           (1)
--------------   -----------------------------------------------------------------------------------------------   -----
10.17            Form of Consulting Agreement                                                                         (1)
--------------   -----------------------------------------------------------------------------------------------   -----
10.18            Form of Sales Representation Agreement                                                               (1)
--------------   -----------------------------------------------------------------------------------------------   -----
10.19            Form of Executive Employment Agreement                                                               (1)
--------------   -----------------------------------------------------------------------------------------------   -----
10.20            Form of Offshore Loan Subscription Agreement dated as of April 13, 2000                              (1)
--------------   -----------------------------------------------------------------------------------------------   -----
10.21            Form of Secured Subordinated Promissory Note dated as of April 13, 2000                              (1)
--------------   -----------------------------------------------------------------------------------------------   -----
10.22            Form of Installation, Co-Maintenance and Software Licensing and Upgrade Agreement                    (2)
--------------   -----------------------------------------------------------------------------------------------   -----
10.23            Master Business Lease Financing Agreement by and among AMRESCO Leasing Corporation,                  (4)
                 eRoomSystem SPE, Inc., RoomSystems, Inc. and eRoomSystem Technologies, Inc. dated May 11, 2000
--------------   -----------------------------------------------------------------------------------------------   -----
10.24            Indemnification Agreement by and between eRoomSystem Technologies, Inc. and John J. Prehn            (2)
                 dated May 31, 2000
--------------   -----------------------------------------------------------------------------------------------   -----
10.25            Amended and Restated Executive Employment Agreement of Steven L. Sunyich dated June 6, 2000          (2)
--------------   -----------------------------------------------------------------------------------------------   -----
10.26            Second Amended and Restated Executive Employment Agreement of Steven L. Sunyich dated                (3)
                 July 12, 2000
--------------   -----------------------------------------------------------------------------------------------   -----
10.27            Amended and Restated Executive Employment Agreement of Derek K. Ellis dated July 12, 2000            (3)
--------------   -----------------------------------------------------------------------------------------------   -----
10.28            Executive Employment Agreement of Stephen M. Nelson dated July 12, 2000                              (4)
--------------   -----------------------------------------------------------------------------------------------   -----
10.29            Amended and Restated Executive Employment Agreement of Gregory L. Hrncir dated July 12, 2000         (3)
--------------   -----------------------------------------------------------------------------------------------   -----
10.30            Shareholders' Agreement and Proxy by and among Ash Capital, LLC, RoomSystems, Inc. and               (1)
                 certain stockholders of RoomSystems, Inc. dated August 17, 1999
--------------   -----------------------------------------------------------------------------------------------   -----
10.31            Employment Agreement of David S. Harkness dated as of December 20, 2000                              (6)
--------------   -----------------------------------------------------------------------------------------------   -----
10.32            Employment Agreement of Stephen M. Nelson dated as of January 29, 2001                               (7)
--------------   -----------------------------------------------------------------------------------------------   -----
10.33            Employment Agreement of Derek K. Ellis dated as of January 29, 2001                                  (7)
--------------   -----------------------------------------------------------------------------------------------   -----
10.34            Employment Agreement of Gregory L. Hrncir dated as of January 29, 2001                               (7)
--------------   -----------------------------------------------------------------------------------------------   -----
10.35            Amended and Restated Master Business Lease Financing Agreement by and among AMRESCO Leasing          (7)
                 Corporation, eRoomSystem SPE, Inc., RoomSystems, Inc. and eRoomSystem Technologies, Inc.
                 dated February 23, 2001
--------------   -----------------------------------------------------------------------------------------------   -----
10.36            Employment Agreement of David S. Harkness dated as of December 31, 2001                              (8)
--------------   -----------------------------------------------------------------------------------------------   -----
10.37            Consulting Agreement by and between eRoomSystem Technologies, Inc. and Ash Capital, LLC              (8)
                 dated as of December 31, 2001
--------------   -----------------------------------------------------------------------------------------------   -----
10.38            Stock Purchase Agreement by and between eRoomSystem Technologies, Inc. and Ash                       (9)
                 Capital, LLC dated November 8, 2002
--------------   -----------------------------------------------------------------------------------------------   -----
10.39            Secured Convertible Promissory Note issued in favor of Ash Capital, LLC dated November               (9)
                 8, 2002.
--------------   -----------------------------------------------------------------------------------------------   -----
10.40            Note Purchase Agreement between eRoomSystem Technologies, Inc., Gestetner Group, LLC and            (10)
                 Other Lenders dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.41            Amendment Agreement between eRoomSystem Technologies, Inc., eRoomSystem Services, Inc.,             (10)
                 eRoomSystem SPE, Inc., RSi BRE, Inc., AMRESCO Commercial Finance, Inc., AMRESCO Leasing
                 Corporation and Gestetner Group, LLC dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.42            Agency Agreement between Gestetner Group, LLC and Other Lenders dated October 1, 2003               (10)
--------------   -----------------------------------------------------------------------------------------------   -----
</TABLE>

                                      -47-
<PAGE>

<TABLE>
<CAPTION>
Exhibit Number   Document Name                                                                                      Page
--------------   -----------------------------------------------------------------------------------------------   -----
<S>              <C>                                                                                               <C>
10.43            Warrant to Purchase Shares of Common Stock issued in favor of AMRESCO Commercial Finance,           (10)
                 Inc. dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.44            Warrant to Purchase Shares of Common Stock issued in favor of Ash Capital, LLC dated                (10)
                 October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.45            Intercreditor and Collateral Agency Agreement between Gestetner Group, LLC, Ash Capital,            (10)
                 LLC and eRoomSystem Technologies, Inc. dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.46            Investors Rights Agreement between eRoomSystem Technologies, Inc., Ash Capital, LLC, and            (10)
                 certain security holders dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.47            Termination and Release Agreement between eRoomSystem Technologies, Inc. and David S.               (10)
                 Harkness dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.48            Termination and Release Agreement between eRoomSystem Technologies, Inc. and Gregory L.             (10)
                 Hrncir dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.49            Consulting Agreement between eRoomSystem Technologies, Inc. and Gregory L. Hrncir dated             (10)
                 October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.50            Termination and Release Agreement between eRoomSystem Technologies, Inc. and Derek K. Ellis         (10)
                 dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.51            Consulting Agreement between eRoomSystem Technologies, Inc. and DM Family Limited Partnership       (10)
                 dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.52            Secured Convertible Promissory Note issued in favor of Adele Schwartz dated October 1, 2003         (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.53            Secured Convertible Promissory Note issued in favor of David Heller dated October 1, 2003           (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.54            Secured Convertible Promissory Note issued in favor of Evelyn Gestetner dated October 1, 2003       (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.55            Secured Convertible Promissory Note issued in favor of Frieda Wolman dated October 1, 2003          (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.56            Secured Convertible Promissory Note issued in favor of Gestetner Group, LLC dated October 1,        (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.57            Secured Convertible Promissory Note issued in favor of Hannah Sarah Frenkel dated October 1,        (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.58            Secured Convertible Promissory Note issued in favor of Helmsbridge Holdings Limited dated           (10)
                 October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.59            Secured Convertible Promissory Note issued in favor of Leah Weinstein dated October 1, 2003         (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.60            Secured Convertible Promissory Note issued in favor of Liba Pappenheim dated October 1, 2003        (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.61            Secured Convertible Promissory Note issued in favor of Maurice B. Brenig dated October 1, 2003      (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.62            Secured Convertible Promissory Note issued in favor of Rose Kaminer dated October 1, 2003           (10)
--------------   -----------------------------------------------------------------------------------------------   -----
10.63            Warrant to Purchase Shares of Common Stock issued in favor of Adele Schwartz dated October 1,       (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.64            Warrant to Purchase Shares of Common Stock issued in favor of David Heller dated October 1,         (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.65            Warrant to Purchase Shares of Common Stock issued in favor of Evelyn Gestetner dated October        (10)
                 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.66            Warrant to Purchase Shares of Common Stock issued in favor of Frieda Wolman dated October 1,        (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.67            Warrant to Purchase Shares of Common Stock issued in favor of Gestetner Group, LLC dated            (10)
                 October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.68            Warrant to Purchase Shares of Common Stock issued in favor of Hannah Sarah Frenkel dated            (10)
                 October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.69            Warrant to Purchase Shares of Common Stock issued in favor of Helmsbridge Holdings Limited          (10)
                 dated October 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.70            Warrant to Purchase Shares of Common Stock issued in favor of Leah Weinstein dated October 1,       (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.71            Warrant to Purchase Shares of Common Stock issued in favor of Liba Pappenheim dated October 1,      (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.72            Warrant to Purchase Shares of Common Stock issued in favor of Maurice B. Brenig dated October       (10)
                 1, 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.73            Warrant to Purchase Shares of Common Stock issued in favor of Rose Kaminer dated October 1,         (10)
                 2003
--------------   -----------------------------------------------------------------------------------------------   -----
10.74            Secured Promissory Note issued in favor of eRoomSystem Technologies, Inc. by Identica               (11)
                 Corporation dated May 23, 2005
--------------   -----------------------------------------------------------------------------------------------   -----
</TABLE>

                                      -48-
<PAGE>

<TABLE>
<CAPTION>
Exhibit Number   Document Name                                                                                      Page
--------------   -----------------------------------------------------------------------------------------------   -----
<S>              <C>                                                                                               <C>
10.75            Security Agreement by and between eRoomSystem Technologies, Inc. and Identica Corporation           (11)
                 dated May 23, 2005.
--------------   -----------------------------------------------------------------------------------------------   -----
10.76            Warrant issued in favor of eRoomSystem Technologies, Inc. by Identica Corporation dated May         (11)
                 23, 2005.
--------------   -----------------------------------------------------------------------------------------------   -----
10.77            Asset Purchase Agreement between eRoomSystem Technologies, Inc. and Identica Corporation dated      (12)
                 September 7, 2005
--------------   -----------------------------------------------------------------------------------------------   -----
10.78            Professional Services Agreement between eRoomSystem Technologies, Inc. and Identica                 (12)
                 Corporation dated September 7, 2005
--------------   -----------------------------------------------------------------------------------------------   -----
10.79            Settlement Agreement by and between eRoomSystem Technologies, Inc. and Hall Communications,         (13)
                 Inc. dated December 31, 2001.
--------------   -----------------------------------------------------------------------------------------------   -----
10.80            Employment Agreement of David Gestetner dated as of January 1, 2007
--------------   -----------------------------------------------------------------------------------------------   -----
21.01            List of Subsidiaries                                                                                (14)
--------------   -----------------------------------------------------------------------------------------------   -----
31               Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                              52
--------------   -----------------------------------------------------------------------------------------------   -----
32               Certification Pursuant to 18 U.S.C. Section 1350 as adopted by Section 906 of the                    53
                 Sarbanes-Oxley Act of 2002
--------------   -----------------------------------------------------------------------------------------------   -----
</TABLE>

<TABLE>
<CAPTION>
--------------   -------------------------------------------------------------------------------------------------------
<S>              <C>
(1)              Previously filed as an exhibit to the registrant's Registration Statement on Form SB-2, as
                 filed with the Commission on April 14, 2000, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(2)              Previously filed as an exhibit to the registrant's Pre-Effective Amendment No. 1 to its
                 Registration Statement on Form SB-2, as filed with the Commission on June 9, 2000, and
                 incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(3)              Previously filed as an exhibit to the registrant's Pre-Effective Amendment No. 2 to its Registration
                 Statement on Form SB-2, as filed with the Commission on July 14, 2000, and incorporated herein by
                 reference.
--------------   -------------------------------------------------------------------------------------------------------
(4)              Previously filed as an exhibit to the registrant's Pre-Effective Amendment No. 3 to its Registration
                 Statement on Form SB-2, as filed with the Commission on July 19, 2000, and incorporated herein by
                 reference.
--------------   -------------------------------------------------------------------------------------------------------
(5)              Previously filed as an exhibit to the registrant's Registration Statement on Form SB-2, as filed with
                 the Commission on December 22, 2000, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(6)              Previously filed as an exhibit to the registrant's Pre-Effective Amendment No. 1 to its Registration
                 Statement on Form SB-2, as filed with the Commission on February 5, 2000, and incorporated herein by
                 reference.
--------------   -------------------------------------------------------------------------------------------------------
(7)              Previously filed as an exhibit to the registrant's Annual Report on Form 10-KSB, as filed with the
                 Commission on April 2, 2001, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(8)              Previously filed as an exhibit to the registrant's Annual Report on Form 10-KSB, as filed with the
                 Commission on April 1, 2002, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(9)              Previously filed as an exhibit to the registrant's Quarterly Report on Form 10-QSB, as filed with the
                 Commission on November 14, 2002, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(10)             Previously filed as an exhibit to the registrant's Annual Report on Form 10-KSB, as filed with the
                 Commission on March 30, 2004, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(11)             Previously filed as an exhibit to the registrant's Current Report on Form 8-K, as filed with the
                 Commission on May 25, 2005, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(12)             Previously filed as an exhibit to the registrant's Current Report on Form 8-K, as filed with the
                 Commission on September 13, 2005, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(13)             Previously filed as an exhibit to the registrants's Registration Statement on Form SB-2/A, as filed
                 with the Commission on August 30, 2006, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
(14)             Previously filed as an exhibit to the registrants's Annual Report on From 10-KSB, as filed with the
                 Commission on March 31, 2006, and incorporated herein by reference.
--------------   -------------------------------------------------------------------------------------------------------
+                Confidential treatment has been granted with respect to certain portions of this agreement,
                 including the exhibits thereto, of which certain portions have been omitted and filed separately
                 with the Commission.
--------------   -------------------------------------------------------------------------------------------------------
</TABLE>

                                      -49-