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

                                   FORM 10-QSB

 (Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

|_|   For the quarterly period ended: June 30, 2006
                                      --------------
                                       OR

|_|   TRANSITION REPORT PURSUANT 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.
--------------------------------------------------------------------------------
                     (Exact name of small business issuer as
                            specified in its charter)

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

                      1072 Madison Ave., Lakewood, NJ 08701
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

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

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES |X| NO |_|

Applicable Only to Issuers Involved in Bankruptcy Proceedings During the
Preceding Five Years

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. YES |_| NO |_|

Applicable Only to Corporate Issuers

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

   23,898,165 shares of common stock, $0.001 par value, as of August 14, 2006
--------------------------------------------------------------------------------
Transitional Small Business Disclosure Format (check one):  YES |_|  NO |X|

                                      - i -


<PAGE>

                                   FORM 10-QSB

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

PART I - FINANCIAL INFORMATION.................................................1

      ITEM 1. FINANCIAL STATEMENTS.............................................1

            Condensed Consolidated Balance Sheets (Unaudited)..................1

            Condensed Consolidated Statements of Operations (Unaudited)........2

            Condensed Consolidated Statements of Cash Flows (Unaudited)........3

            Notes to Condensed Consolidated Financial Statements
            (Unaudited)........................................................4

      ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS......................................8

      ITEM 3. CONTROLS AND PROCEDURES.........................................18

PART II - OTHER INFORMATION...................................................19

      ITEM 1. LEGAL PROCEEDINGS...............................................19

      ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.......................19

      ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................19

      ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............19

      ITEM 5. OTHER INFORMATION...............................................19

      ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................19

SIGNATURE.....................................................................20

                                      -ii-


<PAGE>

<TABLE>
<CAPTION>

                                           eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES
                                          CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

                                                                                             June 30       December 31,
                                                                                               2006           2005
                                                                                           ------------    ------------
                                                               ASSETS

<S>                                                                                        <C>             <C>
CURRENT ASSETS
      Cash .............................................................................   $  1,524,467    $  1,316,515
      Accounts receivable, net of allowance for doubtful accounts of $46,097 and
         $49,294 at June 30, 2006 and December 31, 2005, respectively ..................        274,555         263,392
      Notes receivable .................................................................         40,109         111,231
      Prepaid expenses .................................................................         10,576          11,519
                                                                                           ------------    ------------
            Total Current Assets .......................................................      1,849,707       1,702,657
                                                                                           ------------    ------------
REFRESHMENT CENTERS IN SERVICE, net of accumulated depreciation of
      $2,404,276 and $2,289,694 at June 30, 2006 and December 31, 2005, respectively ...      1,077,058       1,357,827
                                                                                           ------------    ------------
PROPERTY AND EQUIPMENT
      Computer equipment ...............................................................          6,615           4,666
      Less accumulated depreciation and amortization ...................................         (2,812)         (1,861)
                                                                                           ------------    ------------
            Net Property and Equipment .................................................          3,803           2,805
                                                                                           ------------    ------------
INVESTMENT IN MARKETABLE SECURITIES ....................................................         64,075          14,075
NOTE RECEIVABLE, net of unamortized discount of $1,874 and $2,853 at June 30, 2006 and
      December 31, 2005, respectively ..................................................        148,125         147,147
DEPOSITS ...............................................................................         83,070          85,300
                                                                                           ------------    ------------
Total Assets ...........................................................................   $  3,225,838    $  3,309,811
                                                                                           ============    ============

                                                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
      Notes payable and current portion of long-term debt ..............................   $    288,197    $    301,696
      Accounts payable .................................................................         52,370          56,837
      Accrued liabilities ..............................................................         52,047         109,778
      Customer deposits ................................................................         11,758          11,758
      Deferred maintenance revenue .....................................................         19,699          10,632
                                                                                           ------------    ------------
            Total Current Liabilities ..................................................        424,071         490,701

LONG-TERM DEBT, net of current portion .................................................        215,933         349,380
                                                                                           ------------    ------------
Total Liabilities ......................................................................        640,004         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 and
      24,228,902 shares outstanding at June 30, 2006 and December 31, 2005, respectively         23,898          24,229
      Additional paid-in capital .......................................................     33,687,873      33,754,361
      Warrants and options outstanding .................................................        436,222         416,071
      Note receivable from shareholder .................................................             --         (78,000)
      Accumulated deficit ..............................................................    (31,562,159)    (31,646,931)
                                                                                           ------------    ------------
            Total Stockholders' Equity .................................................      2,585,834       2,469,730
                                                                                           ------------    ------------

Total Liabilities and Stockholders' Equity .............................................   $  3,225,838    $  3,309,811
                                                                                           ============    ============

                           See accompanying notes to unaudited condensed consolidated financial statements
</TABLE>

                                                               - 1 -
<PAGE>

<TABLE>
<CAPTION>

                                           eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES
                                     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                                          For the Three Months       For the Six Months
                                                                              Ended June 30,            Ended June 30,
                                                                            2006         2005         2006         2005
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>          <C>          <C>          <C>
REVENUE
    Revenue-sharing arrangements .....................................   $ 240,873    $ 306,407    $ 515,151    $ 577,446
    Maintenance fees .................................................      66,080       81,756      147,167      167,489
    Product sales ....................................................       1,469        2,336       54,894        4,943
                                                                         ------------------------------------------------

       Total Revenue .................................................     308,422      390,499      717,212      749,878
                                                                         ------------------------------------------------

COST OF REVENUE
    Revenue-sharing arrangements .....................................     111,574      128,667      223,147      257,333
    Maintenance ......................................................      16,266       17,533       30,198       31,818
    Product sales ....................................................          --        1,254       57,623        1,261
                                                                         ------------------------------------------------

       Total Cost of Revenue .........................................     127,840      147,454      310,968      290,412
                                                                         ------------------------------------------------

GROSS MARGIN .........................................................     180,582      243,045      406,244      459,466
                                                                         ------------------------------------------------

OPERATING EXPENSES
    Selling, general and administrative expense, including non-cash
    compensation of $15,563, $11,034, $32,151 and $9,336, respectively     112,726      135,392      281,901      298,556
    Research and development expense .................................          --          383           --        1,959
    Sales tax settlement .............................................          --           --       32,466           --
    Interest expense .................................................      18,922       47,289       41,834       95,715
    Interest and other income ........................................     (18,143)      (9,931)     (34,729)     (13,999)
                                                                         ------------------------------------------------

       Net Operating Expenses ........................................     113,505      173,133      321,472      382,231
                                                                         ------------------------------------------------

Income from Operations ...............................................      67,077       69,912       84,772       77,235
                                                                         ------------------------------------------------

Net Income ...........................................................   $  67,077    $  69,912    $  84,772    $  77,235
                                                                         ================================================

Basic Earnings Per Common Share ......................................   $    0.00    $    0.01    $    0.00    $    0.01
                                                                         ================================================
Diluted Earnings Per Common Share ....................................   $    0.00    $    0.00    $    0.00    $    0.01
                                                                         ================================================

                  See accompanying notes to unaudited condensed consolidated financial statements
</TABLE>

                                                               - 2 -
<PAGE>

<TABLE>
<CAPTION>
                                           eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES
                                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



For the Six Months Ended June 30,                                                                        2006              2005
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                   <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income .................................................................................      $    84,772       $    77,235
    Adjustments to reconcile net income to net cash provided by operating activities:
       Depreciation ............................................................................          224,098           260,119
       Loss on disposal of refreshment centers .................................................            7,820                --
       Gain on sale of refreshment centers .....................................................             (198)               --
       Interest income from shareholder receivables ............................................             (819)           (1,629)
       Interest income from other receivable ...................................................           (2,194)               --
       Accretion of debt discount ..............................................................            8,760            33,553
       Non-cash compensation expense ...........................................................           32,151             9,336
       Amortization of discount on note receivable .............................................             (978)             (244)
    Changes in operating assets and liabilities:
          Cash released from escrow ............................................................               --           225,000
          Accounts receivable ..................................................................          (11,163)          (54,126)
          Prepaid expenses .....................................................................              943            (4,351)
          Accounts payable .....................................................................           (4,467)          (37,954)
          Accrued liabilities ..................................................................          (57,731)          (40,791)
          Customer deposits and deferred maintenance revenue ...................................            9,067            (6,096)
                                                                                                      -----------       -----------
             Net Cash Provided By Operating Activities .........................................          290,061           460,052
                                                                                                      -----------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of fixed assets ...................................................................           (1,949)           (1,038)
    Proceeds from sale of refreshment centers ..................................................           50,000                --
    Purchase of investment .....................................................................          (50,000)         (160,000)
    Proceeds from note receivable ..............................................................           73,316                --
    Change in long term deposits and restricted funds ..........................................            2,230            20,000
                                                                                                      -----------       -----------
             Net Cash Provided by (Used in) Investing Activities ...............................           73,597          (141,038)
                                                                                                      -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES
    Principal payments on long-term debt .......................................................         (155,706)         (145,866)
    Proceeds from exercise of options ..........................................................               --            14,620
                                                                                                      -----------       -----------
             Net Cash Used in Financing Activities .............................................         (155,706)         (131,246)
                                                                                                      -----------       -----------

Net Increase in Cash ...........................................................................          207,952           187,768
                                                                                                      -----------       -----------
Cash at Beginning of Period ....................................................................        1,316,515           646,386
                                                                                                      -----------       -----------

Cash at End of Period ..........................................................................      $ 1,524,467       $   834,154
                                                                                                      ===========       ===========

Supplemental Cash Flows Information
    Cash paid for interest .....................................................................      $    18,556       $    38,457
                                                                                                      ===========       ===========
Supplemental Disclosure of Noncash Investing and Financing Activities
    Shares of common stock cancelled in settlement of notes receivable .........................      $    78,819                $-
                                                                                                      ===========       ===========

                           See accompanying notes to unaudited condensed consolidated financial statements
</TABLE>


                                                               - 3 -
<PAGE>

       eROOMSYSTEM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED
                 CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

      Condensed Financial Statements - The accompanying unaudited condensed
consolidated financial statements include the accounts of eRoomSystem
Technologies, Inc. and its subsidiaries (the "Company"). These financial
statements are condensed and, therefore, do not include all disclosures normally
required by generally accepted accounting principles. These statements should be
read in conjunction with the Company's annual financial statements included in
the Company's December 31, 2005 Annual Report on Form 10-KSB. In particular, the
Company's organization, nature of operations and significant accounting
principles were presented in Note 1 to the consolidated financial statements in
that report. In the opinion of management, all adjustments necessary for a fair
presentation have been included in the accompanying unaudited condensed
consolidated financial statements and consist of only normal recurring
adjustments. The results of operations presented in the accompanying unaudited
condensed consolidated financial statements for the three and six months ended
June 30, 2006 are not necessarily indicative of the results that may be expected
for the full year ending December 31, 2006.

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

      Stock-Based Compensation - At June 30, 2006, the Company had one
stock-based employee compensation plan. 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 2005 and (ii) new grant
issuances, both of which will be expensed over the requisite service (i.e.,
vesting) periods.

      As a result of adopting SFAS 123(R), the Company's results of operations
for the three and six months ended June 30, 2006 included compensation expense
of $8,342, representing $0.00 impact to both basic and 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 periods:


                                     - 4 -
<PAGE>

<TABLE>
<CAPTION>
                                                                             For the Three    For the Six
                                                                             Months Endeded   Months Ended
                                                                                     June 30, 2005
----------------------------------------------------------------------------------------------------------

<S>                                                                              <C>             <C>
Net income, as reported                                                          $ 69,912        $ 77,235

Add: Stock-based employee and consultant compensation
   expenses included in net income                                                 11,034           9,336

Deduct: Total stock-based employee and consultant
   compensation expense determined under fair value based method
   for all awards                                                                 (12,768)        (12,025)

----------------------------------------------------------------------------------------------------------
Pro forma net earnings                                                           $ 68,178        $ 74,546
----------------------------------------------------------------------------------------------------------

Earnings per common share:
   Basic as reported                                                               $ 0.01          $ 0.01
   Basic pro forma                                                                 $ 0.01          $ 0.01
   Diluted as reported                                                             $ 0.00          $ 0.01
   Diluted pro forma                                                               $ 0.00          $ 0.01
----------------------------------------------------------------------------------------------------------

</TABLE>

      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. Unvested common shares are considered to be stock options for
purposes of computing earnings per share. Diluted earnings per common share is
computed by dividing net income 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 three and six months ended June 30, 2006 and 2005:

<TABLE>
<CAPTION>

                                                          For The Three Months         For The Six Month
                                                             Ended June 30,              Ended June 30,
                                                          2006          2005           2006        2005
----------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>           <C>           <C>
Basic net income                                     $    67,077   $    69,912   $    84,772   $    77,235
Interest expense from convertible debt                        --        24,115            --        48,608
----------------------------------------------------------------------------------------------------------
Diluted net income                                   $    67,077   $    94,027   $    84,772   $   125,843
----------------------------------------------------------------------------------------------------------
Basic weighted-average common shares outstanding      23,898,165    10,565,899    24,147,319    10,517,889
Effect of dilutive securities
   Stock options and warrants                            415,203     4,851,404       399,371     4,851,113
   Convertible debt                                           --     7,316,667            --     7,316,667
----------------------------------------------------------------------------------------------------------

Diluted weighted-average common shares outstanding    24,313,368    22,733,970    24,546,690    22,685,669
----------------------------------------------------------------------------------------------------------
Basic earnings per share                             $      0.00   $      0.01   $      0.00   $      0.01
----------------------------------------------------------------------------------------------------------
Diluted earnings per share                           $      0.00   $      0.00   $      0.00   $      0.01
----------------------------------------------------------------------------------------------------------
</TABLE>

      At June 30, 2006 and 2005, there were potential common stock equivalents
from options, warrants and convertible debt of 3,198,250 and 3,762,733,
respectively, which were not included in the computation of diluted earnings per
share because their effect would have been anti-dilutive.


                                     - 5 -
<PAGE>

NOTE 2 - BUSINESS CONDITION

      During the year ended December 31, 2005 and the six months ended June 30,
2006, the Company realized a net gain of $160,502 and $84,772, respectively.
During the year ended December 31, 2005 and the six months ended June 30, 2006,
the Company's operations provided $901,677 and $290,061 of cash, respectively.
The Company had a cash balance of $1,524,467 as of June 30, 2006. Up until the
year ended December 31, 2004, the Company suffered recurring losses. Although
the Company realized a profit in 2005 it was primarily from non-recurring items,
specifically it was primarily due to a sale of assets and proceeds from
insurance. 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.

NOTE 3 - 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. Under the terms of that agreement, the Company
recovered a receivable that had been written off in the previous year.

      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 June 30, 2006:

      Total minimum lease payments to be received       $        216,000

      Less:  Allowance for uncollectibles                        181,657
                                                        ----------------

      Net minimum lease payments receivable                       34,343

      Less:  Unearned income                                     (34,343)
                                                        ----------------

      Net investment in sales-type lease                $             --
                                                        ================


      The Company recorded revenue sharing and maintenance fee revenue in the
amount of $43,200 for the six months ended June 30, 2006.

      Minimum lease payments for the six months ended December 31, 2006 and each
of the two succeeding fiscal years through the end of the lease term are as
follows: $43,200 in 2006, $86,400 in 2007, and $86,400 in 2008.


                                     - 6 -
<PAGE>

NOTE 4 - INVESTMENT IN APRECIA

      On March 7, 2006, the Company purchased 2,083,333 shares of common stock
of Aprecia, LLC for $50,000 cash. The shares purchased represent 9.98% of the
issued and outstanding common stock of Aprecia. Aprecia is a privately held
provider of applied artificial intelligence solutions for gaming and homeland
security applications.

NOTE 5 - STOCKHOLDERS' EQUITY

      During the six months ended June 30, 2006, the Company issued 50,000
shares of common stock to its Board of Directors in recognition of extraordinary
services rendered. These shares were valued at $12,000 ($0.24 per share).

      During the six months ended June 30, 2006, the Company granted options to
purchase 53,000 shares of common stock to consultants for services rendered.
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 six months ended June 30, 2006, the Company granted options to
purchase 45,000 shares of common stock to an employee and a member of the Board
of Directors for services rendered. These options, which vested immediately,
have an exercise price of ranging from $0.17 to $0.24 per share and are
exercisable through June 29, 2016. These options were valued at $8,342 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 131% to 135% and expected life ranging from 5 to 10 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 6 - SUBSEQUENT EVENTS

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


                                     - 7 -
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

      The following discussion should be read in conjunction with our financial
statements and notes to our financial statements, included elsewhere in this
report. This discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors
discussed elsewhere in this report.

      Certain information included herein contains statements that may be
considered forward-looking statements such as statements relating to our
anticipated revenues, gross margin and operating results, future performance and
operations, plans for future expansion, capital spending, sources of liquidity
and financing sources. Such forward-looking information involves important risks
and uncertainties that could significantly affect anticipated results in the
future, and accordingly, such results may differ from those expressed in any
forward-looking statements made herein. These risks and uncertainties include,
but are not limited to, those relating to our liquidity requirements, the
continued growth of the lodging industry, the success of our
product-development, marketing and sales activities, vigorous competition in the
lodging industry, dependence on existing management, leverage and debt service
(including sensitivity to fluctuations in interest rates), domestic or global
economic conditions, the inherent uncertainty and costs of prolonged arbitration
or litigation, and changes in federal or state tax laws or the administration of
such laws. A complete discussion of these risks and uncertainties are contained
in our Annual Report on Form 10-KSB, as filed with the Securities and Exchange
Commission on March 31, 2006.

OVERVIEW

      Our core business is 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 the following
investments: (i) $10,000 in Identica Holdings Corporation, or Identica, in
consideration for 1,666,667 shares of common stock; (ii) a loan in the amount of
$150,000 to Identica in consideration for a warrant to purchase one million
(1,000,000) shares of common stock, exercisable at $0.15 per share at any time
through May 20, 2010; and (iii) $50,000 in Aprecia, LLC, or Aprecia, in
consideration for 2,083,333 shares of common stock. We may make additional
investments in promising emerging growth companies, and potentially acquire an
operating company if the opportunity arises.

      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.


                                     - 8 -
<PAGE>

      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 fiscal 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, a privately
held distributor and integrator of next-generation biometric security solutions,
including the TechSphere hand vascular pattern biometric technology, and
Aprecia, a privately held 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, but 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, 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. AMRESCO Commercial Finance, or AMRESCO, is paid from our portion of
the revenues pursuant to our financing agreement with AMRESCO, relating solely
to those units for which it previously provided financing. On July 14, 2006, we
paid the outstanding notes payable in favor of AMRESCO. These notes payable
totaled $553,542 plus accrued interest of $2,217. . The unamortized discount on
the note of $49,414 was recognized as interest expense. Following the payment of
the notes payable, we have no further obligations with respect to AMRESCO.


                                     - 9 -
<PAGE>

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.

      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 40% 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, our research and development expenses were zero in the three
and six months ended June 30, 2006, and we do not expect this to change in
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. For the three and six months ended June 30, 2004, we charged
our software development costs to research and development expense in our
consolidated statements of operations.


                                     - 10 -
<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2006 AND 2005

      Revenues

      Revenue Sharing Arrangements -- Our revenue from revenue sharing
arrangements was $240,873 for the three months ended June 30, 2006, compared to
$306,407 for the three months ended June 30, 2005, representing a decrease of
$65,534, or 21.4%. The decrease in revenue from revenue sharing arrangements was
due to a decrease in revenue sharing units in service during the three months
ended June 30, 2006 as compared to the three months ended June 30, 2005. The
decrease in revenue sharing units in service relates to certain revenue sharing
agreements reaching the conclusion of the seven-year term.

      Maintenance Fee Revenues -- Our maintenance fee revenues were $66,080 for
the three months ended June 30, 2006, compared to $81,756 for the three months
ended June 30, 2005, representing a decrease of $15,676, or 19.2%. The decrease
was due to a decreased number of units in service.

      Product Sales -- Revenues from product sales were $1,469 for the three
months ended June 30, 2006, compared to $2,336 for the three months ended June
30, 2005, representing a decrease of $867, or 37.1%. The decrease, while
significant in percentage terms, was not otherwise material given the extremely
limited sales volume.

      Cost of Revenue

      Cost of Revenue Sharing Revenue -- Our cost of revenue sharing revenue was
$111,574 for the three months ended June 30, 2006, compared to $128,667 during
the three months ended June 30, 2005, representing a decrease of $17,093, or
13.3%. The decrease in cost of revenue related to a decrease in the number of
revenue sharing units in service and the revenue sharing revenue. The gross
margin percentage on revenue sharing revenue was 53.7% for the three months
ended June 30, 2006 and 58.0% for the three months ended June 30, 2005. The
decrease in gross margin percentage was primarily due to a slight decrease in
revenue generated on a per unit basis.

      Cost of Maintenance Fee Revenue -- Our cost of maintenance fee revenue was
$16,266 for the three months ended June 30, 2006, compared to $17,533 for the
three months ended June 30, 2005, representing a decrease of $1,267, or 7.2%.
The decrease in our cost of maintenance fee revenue was related to lower
maintenance fee revenue. The gross margin percentage on maintenance fee revenue
was 75.4% for the three months ended June 30, 2006 and 78.6% for the three
months ended June 30, 2005. The decrease in gross margin percentage on
maintenance fee revenue relates to the decrease in maintenance fee revenue as
well as fixed overhead expense comprising a slightly higher percentage of
maintenance fee revenue based upon fewer units in service.

      Cost of Product Sales Revenue -- Our cost of product sales revenue for the
three months ended June 30, 2006 was zero, as compared to $1,254 for the three
months ended June 30, 2005, a decrease of $1,254, or 100.0%. The gross margin
percentage on revenue from product sales revenue was 100.0% for the three months
ended June 30, 2006 as compared to 46.3% for the three months ended June 30,
2005. While the percentage change in cost of product sales revenue is material,
given the limited product sales in the two periods, the change from period to
period is immaterial.


                                     - 11 -
<PAGE>

      The changes and percent changes with respect to our revenues and our cost
of revenue for the three months ended June 30, 2006 and 2005 are summarized as
follows:


<TABLE>
<CAPTION>

                                         For the Three Months
                                             Ended June 30,
                                     ---------------------------                    Percent
                                        2006            2005          Change         Change
                                     -----------     -----------    -----------   -----------
<S>                                  <C>             <C>            <C>                 <C>
REVENUE
   Revenue-sharing arrangements ..   $   240,873     $   306,407    $    65,534         (21.4)%
   Maintenance fees ..............        66,080          81,756         15,676         (19.2)%
   Product sales .................         1,469           2,336            867         (37.1)%
                                     -----------     -----------    -----------   -----------
        Total Revenue ............   $   308,422     $   390,499    $    82,077         (21.0)%
                                     -----------     -----------    -----------   -----------

COST OF REVENUE
   Revenue-sharing arrangements ..       111,574         128,667         17,093         (13.3)%
   Maintenance ...................        16,266          17,533          1,267          (7.2)%
   Product sales .................                                                     (100.0)%
                                                              --          1,254         1,254
                                     -----------     -----------    -----------   -----------
        Total Cost of Revenue ....   $   127,840     $   147,454    $    19,614         (13.3)%
                                     -----------     -----------    -----------   -----------

GROSS MARGIN PERCENTAGE
   Revenue-sharing arrangements ..         53.7%           58.0%
   Maintenance ...................         75.4%           78.6%
   Product sales .................        100.0%           46.3%
     Total Gross Margin Percentage         58.6%           62.2%
</TABLE>

      Although the preceding table summarizes the net changes and percent
changes with respect to our revenues and our cost of revenue for the three
months ended June 30, 2006 and 2005, the trends contained therein are limited
and should not be viewed as a definitive indication of our future results.

      Expenses and Other Income

      Selling, General and Administrative -- Selling, general and administrative
expenses were $112,726 for the three months ended June 30, 2006, compared to
$135,392 for the three months ended June 30, 2005, representing a decrease of
$22,666, or 16.7%. The decrease in our selling, general and administrative
expenses from the three months ended June 30, 2005 to the three months ended
June 30, 2004 reflects our ongoing efforts to further reduce fixed overhead
expenses and is partly due to the cost savings realized from the outsourcing of
maintenance of our automated refreshment center units through Identica.

      Research and Development Expenses -- Research and development expenses
were zero for the three months ended June 30, 2006, compared to $383 for the
three months ended June 30, 2005, representing a decrease of $383, or 100.0%.
Research and development expenses represented zero percent of our total revenue
for the three months ended June 30, 2006 and 0.1% of our total revenue for the
three months ended June 30, 2005. The decrease in research and development
expenses was due to no new research and development projects being undertaken
during the three months ended June 30, 2006. We do not anticipate undertaking
additional research and development in future periods.

      Interest Expense for the three months ended June 30, 2006 was $18,922 as
compared to $47,289 for the same period in 2005, a decrease of $28,367, or
60.0%. Interest and other income for the three months ended June 30, 2006 was
$18,143 as compared to $9,931 for the same period in 2005, an increase of
$8,212, or 82.7%. Income from operations was $67,077 for the three months ended
June 30, 2006, compared to $69,912 for the three months ended June 30, 2005. The
decrease in income from operations was immaterial.


                                     - 12 -
<PAGE>

      Net Income Attributable to Common Stockholders

      We realized net income of $67,077 during the three months ended June 30,
2006 as compared to $69,912 during the three months ended June 30, 2005. The
$2,835 decrease was immaterial.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2006 AND 2005

      Revenues

      Revenue Sharing Arrangements -- Our revenue from revenue sharing
arrangements was $515,151 for the six months ended June 30, 2006, compared to
$577,446 for the six months ended June 30, 2005, representing a decrease of
$62,295, or 10.8%. The decrease in revenue from revenue sharing arrangements was
due to a decrease in revenue sharing units in service resulting from the
conclusion of certain revenue sharing agreements.

      Maintenance Fee Revenues -- Our maintenance fee revenues were $147,167 for
the six months ended June 30, 2006, compared to $167,489 for the six months
ended June 30, 2005, representing a decrease of $20,322, or 12.1%. The decrease
was due to a decrease in units under maintenance contract.

      Product Sales -- Revenues from product sales were $54,894 for the six
months ended June 30, 2006, compared to $4,943 for the six months ended June 30,
2005, representing an increase of $49,951, or 1,010.5%. The significant increase
in cost of product sales revenue relates to the automated refreshment centers
sold in the three months ended March 31, 2006 upon conclusion of the revenue
share arrangements.

      Cost of Revenue

      Cost of Revenue Sharing Revenue -- Our cost of revenue sharing revenue was
$223,147 for the six months ended June 30, 2006, as compared to $257,333 for the
six months ended June 30, 2005, representing a decrease of $34,186, or 13.3%.
The decrease in cost of revenue sharing revenue directly relates to the decrease
in revenue sharing revenue. The gross margin percentage on revenue sharing
revenue was 56.7% for the six months ended June 30, 2006 and 55.4% for the six
months ended June 30, 2004. The increase in gross margin percentage was
immaterial.

      Cost of Maintenance Fee Revenue -- Our cost of maintenance fee revenue was
$30,198 for the six months ended June 30, 2006, compared to $31,818 for the six
months ended June 30, 2005, representing a decrease of $1,620, or 5.1%. The
gross margin percentage on maintenance fee revenue was 79.5% for the six months
ended June 30, 2006 and 81.0% for the six months ended June 30, 2005. The
decrease in cost of maintenance revenue and the gross margin percentage on
maintenance fee revenue was immaterial.

      Cost of Product Sales Revenue -- Our cost of product sales revenue for the
six months ended June 30, 2006 was $57,623 as compared to $1,261 for the six
months ended June 30, 2005, an increase of $56,362, or 4,469.6%. The gross
margin percentage on revenue from product sales revenue was (5.0%) for the six
months ended June 30, 2006 as compared to 74.5% for the six months ended June
30, 2005. The significant increase in cost of product sales revenue relates to a
significant product sale occurring in the six months ended June 30, 2006 and
minimal sales occurring in the same period of 2005.


                                     - 13 -
<PAGE>

      The changes and percent changes with respect to our revenues and our cost
of revenue for the six months ended June 30, 2006 and 2005 are summarized as
follows:

<TABLE>
<CAPTION>
                                        For the Six Months
                                           Ended June 30,
                                     -----------------------                 Percent
                                        2006          2005        Change     Change
                                     ---------     ---------    ---------   ---------
<S>                                  <C>           <C>          <C>             <C>
REVENUE
   Revenue-sharing arrangements ..   $ 515,151     $ 577,446    $  62,295       (10.8)%
   Maintenance fees ..............     147,167       167,489       20,322       (12.1)%
   Product sales .................      54,894         4,943       49,951     1,010.5%
                                     ---------     ---------    ---------   ---------
        Total Revenue ............   $ 717,212     $ 749,878    $  32,666        (4.4)%
                                     ---------     ---------    ---------   ---------

COST OF REVENUE
   Revenue-sharing arrangements ..     223,147       257,333       34,186       (13.3)%
   Maintenance ...................      30,198        31,818        1,620        (5.1)%
   Product sales .................      57,623         1,261       56,362     4,469.6%
                                     ---------     ---------    ---------   ---------
        Total Cost of Revenue ....   $ 310,968     $ 290,412    $  20,556         7.1%
                                     ---------     ---------    ---------   ---------

GROSS MARGIN PERCENTAGE
   Revenue-sharing arrangements ..       56.7%         55.4%
   Maintenance ...................       79.5%         81.0%
   Product sales .................       (5.0)%        74.5%
     Total Gross Margin Percentage       56.6%         61.3%

</TABLE>

      Although the preceding table summarizes the net changes and percent
changes with respect to our revenues and our cost of revenue for the six months
ended June 30, 2006 and 2005, the trends contained therein are limited and
should not be viewed as a definitive indication of our future results.

      Expenses and Other Income

      Selling, General and Administrative -- Selling, general and administrative
expenses were $281,901 for the six months ended June 30, 2006, compared to
$298,556 for the six months ended June 30, 2005, representing a decrease of
$16,655, or 5.6%. The decrease in our selling, general and administrative
expenses from the six months ended June 30, 2006 to the six months ended June
30, 2005 reflects our continued efforts to further reduce fixed overhead
expenses.

      Research and Development Expenses -- Research and development expenses
were zero for the six months ended June 30, 2006, compared to $1,959 for the six
months ended June 30, 2005, representing a decrease of $1,959, or 100.0%.
Research and development expenses represented zero percent of our total revenue
for the six months ended June 30, 2006 and 0.3% of our total revenue for the six
months ended June 30, 2005. We do not anticipate undertaking any research and
development in the future.

      Interest expense for the six months ended June 30, 2006 was $41,834 as
compared to $95,715 for the same period in 2005, a decrease of $53,881, or
56.3%. Interest and other income for the six months ended June 30, 2006 was
$34,729 as compared to $13,999 for the same period in 2005, an increase of
$20,730, or 148.1%. Income from operations was $84,772 for the six months ended
June 30, 2006 as compared to $77,235 for the same period in 2005.

      Net Income Attributable to Common Stockholders

      We realized net income of $84,772 during the six months ended June 30,
2006 as compared to $77,235 during the six months ended June 30, 2005, an
increase of $7,537, or 9.8%.


                                     - 14 -
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      At June 30, 2006, our principal sources of liquidity consisted of
$1,524,467 of cash and $1,425,636 of working capital as compared to $1,316,515
of cash and $1,211,956 of working capital at December 31, 2005. In addition, our
stockholders' equity was $2,585,834 at June 30, 2006, compared to stockholders'
equity of $2,469,730 at December 31, 2005, an increase of $116,104.

      Our accumulated deficit decreased from $31,646,931 at December 31, 2005 to
$31,562,159 at June 30, 2006. The decrease in accumulated deficit resulted
directly from the net income realized for the six months ended June 30, 2006.

      Our operations provided net cash of $290,061 during the six months ended
June 30, 2006, as compared to $460,052 of net cash provided during the six
months ended June 30, 2005. The $169,991 decrease in net cash provided by
operating activities in the six months ended June 30, 2006, as compared to the
same period in 2005, is primarily related to the change of cash held in escrow
of $225,000.

      Investing activities for the six months ended June 30, 2006 provided net
cash of $73,597, as compared to using net cash of 141,038 during the six months
ended June 30, 2005, an increase of $214,635. The increase in net cash used in
investing activities related to $50,000 of proceeds received from the sale of
refreshment centers, a $110,000 decrease in purchase of investment, $73,316 of
proceeds received from a note receivable, offset, in part, by a decrease in long
term deposits and restricted funds in the amount of $17,770.

      Financing activities used $155,706 during the six months ended June 30,
2006 as compared to $131,246 during the six months ended June 30, 2005. The
increase of $24,460 of net cash used in financing activities related to an
increase in principal payments on long-term debt in the amount of $9,840 and a
decrease in proceeds from exercise of options in the amount of $14,620.

      The primary source of cash during the six months ended June 30, 2006 was
the revenue sharing revenue generated by our equipment installed pursuant to
revenue sharing contracts.

      While we have made significant progress in further reducing our fixed
overhead expenses, we may require additional capital to remain viable and to
achieve our long-term business objectives. There can be no assurance that such
financing will be made available, or if it is made available, on acceptable
terms. If a future financing is procured in the form of equity, the
shareholdings of the current stockholders of the Company will be diluted.

CONTRACTUAL CASH OBLIGATIONS AND COMMERCIAL COMMITMENTS

      The following table presents our contractual cash obligations and
commercial commitments as of June 30, 2006. We have no other significant
contractual obligations or commercial commitments either on or off balance sheet
as of this date.

Contractual Cash                      Payments Due by Period
Obligations                Total   < 1 Year   1-3 Years  4-5 Years    > 5 Years
---------------------   --------   --------   --------   ----------   ----------
Long-term Debt          $628,432   $347,604   $280,828   $       --   $       --
--------------------------------------------------------------------------------
Total                   $628,432   $347,604   $280,828   $       --   $       --
--------------------------------------------------------------------------------

                                     - 15 -
<PAGE>

ITEM 3. 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 quarterly 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 required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

      In the three months ended June 30, 2006, the Company engaged special
securities counsel to assist the Company's officers to understand and implement
the disclosure requirements under Regulation S-B in the Company's Annual Reports
and Quarterly Reports as well as review the Company's registration statement on
Form SB-2. 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.


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.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

      We are, from time to time, parties to legal proceedings arising out of our
business. We believe that 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.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

      Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

      Not applicable.

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

      Not applicable.

ITEM 5. OTHER INFORMATION.

      Not applicable.


                                     - 16 -
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

      (a)   Exhibits.

            31    Certifications Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

            32    Certification of President and Chief Financial Officer
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
                  U.S.C. Section 1350).

      (b)   Reports on Form 8-K.

            On April 3, 2006, we filed a current report on Form 8-K which
disclosed our results of operations for the three months ended March 31, 2006.

                                    SIGNATURE

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

                                    eROOMSYSTEM TECHNOLOGIES, INC.
                                    (Registrant)

Date:    August 14, 2006        By:      /s/ David A. Gestetner
                                         ---------------------------------------
                                         David A. Gestetner
                                Its:     Chief Executive Officer and President


                                     - 17 -