----

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**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**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, 2005 |
|--------------------------------------------------|--------------------------------|

|   | o | **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.**

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

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

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

**Applicable        Only to Corporate Issuers**

**Transitional        Small Business Disclosure Format (check one): **

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**FORM        10-QSB**

**TABLE        OF CONTENTS **

|                                                |                       |                                                                                                                           |                                                                              | **Page** |
|-----------------------------------------------------|----------------------------|--------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|----------|
| **PART                  I - FINANCIAL INFORMATION** | 2                          |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  1.   | Financial                  Statements.                                                                                         | 2                                                                                 |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                |                       |                                                                                                                           | Condensed                  Consolidated Balance Sheets (Unaudited)                | 2        |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                |                       |                                                                                                                           | Condensed                  Consolidated Statements of Operations (Unaudited)      | 3        |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                |                       |                                                                                                                           | Condensed                  Consolidated Statements of Cash Flows (Unaudited)      | 4        |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                |                       |                                                                                                                           | Notes                  to Condensed Consolidated Financial Statements (Unaudited) | 5        |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  2.   | Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations. | 9                                                                                 |
|                                                |                       |                                                                                                                           |                                                                              |     |
| **PART                  II - OTHER INFORMATION**    | 17                         |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  1.   | Legal                  Proceedings.                                                                                            | 17                                                                                |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  2.   | Changes                  in Securities and Use of Proceeds.                                                                    | 17                                                                                |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  3. . | Defaults                  Upon Senior Securities                                                                               | 17                                                                                |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  4. . | Submission                  of Matters to a Vote of Security Holders                                                           | 17                                                                                |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  5.   | Other                  Information.                                                                                            | 17                                                                                |
|                                                |                       |                                                                                                                           |                                                                              |     |
|                                                | Item                  6.   | Exhibits                  and Reports on Form 8-K.                                                                             | 17                                                                                |
|                                                |                       |                                                                                                                           |                                                                              |     |
| **SIGNATURE**                                       | 18                         |

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| **eROOMSYSTEM                  TECHNOLOGIES, INC. AND SUBSIDIARIES**                                                                                                                                                |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **CONDENSED                  CONSOLIDATED BALANCE SHEETS (UNAUDITED)**                                                                                                                                              |   |
|                                                                                                                                                                                                                |   |   |   |   |   |
|                                                                                                                                                                                                                |   | **June                  30,** |   | **December                  31,** |   |
|                                                                                                                                                                                                                |   | **2005** |   | **2004** |   |
| **ASSETS**                                                                                                                                                                                                          |   |
| **CURRENT                  ASSETS**                                                                                                                                                                                 |   |   |   |   |   |
| Cash                                                                                                                                                                                                                |   | $ | 834,154 |   | $ | 646,386 |   |
| Cash                  held in escrow                                                                                                                                                                                |   |   | - |   |   | 225,000 |   |
| Accounts                    receivable, net of allowance for doubtful accounts of $35,287                    and                    $29,045 at June 30, 2005 and December 31, 2004,                    respectively |   |   | 218,712 |   |   | 164,586 |   |
| Prepaid                  expenses                                                                                                                                                                                   |   |   | 20,668 |   |   | 16,317 |   |
| **Total                  Current Assets**                                                                                                                                                                           |   |   | 1,073,534 |   |   | 1,052,289 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **REFRESHMENT                  CENTERS IN SERVICE**,                  net of accumulated depreciation of                                                                                                            |   |   |   |   |   |   |   |
| $2,034,710                  and $1,777,378 at June 30, 2005 and December 31, 2004,                  respectively                                                                                                    |   |   | 1,612,810 |   |   | 1,870,143 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **PROPERTY                  AND EQUIPMENT**                                                                                                                                                                         |   |   |   |   |   |   |   |
| Production                  equipment                                                                                                                                                                               |   |   | 22,210 |   |   | 22,210 |   |
| Computer                  equipment                                                                                                                                                                                 |   |   | 77,069 |   |   | 76,031 |   |
| Vehicles                  and other                                                                                                                                                                                 |   |   | 44,153 |   |   | 44,153 |   |
|                                                                                                                                                                                                                |   |   | 143,432 |   |   | 142,394 |   |
| Less                  accumulated depreciation and amortization                                                                                                                                                     |   |   | (132,267 | ) |   | (129,481 | ) |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **Net                  Property and Equipment**                                                                                                                                                                     |   |   | 11,165 |   |   | 12,913 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **INVESTMENT                  IN MARKETABLE SECURITIES**                                                                                                                                                            |   |   | 14,075 |   |   | - |   |
| **NOTE                  RECEIVABLE,**net                  of unamortized discount of $3,831 and $0 at June 30, 2005 and                                                                                             |   |   |   |   |   |   |   |
| December                  31, 2004, respectively                                                                                                                                                                    |   |   | 146,169 |   |   | - |   |
| **DEPOSITS**                                                                                                                                                                                                        |   |   | 75,300 |   |   | 95,300 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **Total                  Assets**                                                                                                                                                                                   |   | $ | 2,933,053 |   | $ | 3,030,645 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                                                                                                           |
| **CURRENT                  LIABILITIES**                                                                                                                                                                            |   |   |
| Notes                  payable and current portion of long-term debt                                                                                                                                                |   | $ | 238,177 |   | $ | 228,337 |   |
| Accounts                  payable                                                                                                                                                                                   |   |   | 71,135 |   |   | 109,089 |   |
| Accrued                  liabilities                                                                                                                                                                                |   |   | 72,997 |   |   | 137,492 |   |
| Accrued                  interest                                                                                                                                                                                   |   |   | 105,319 |   |   | 81,615 |   |
| Customer                  deposits                                                                                                                                                                                  |   |   | 11,758 |   |   | 11,758 |   |
| Deferred                  maintenance revenue                                                                                                                                                                       |   |   | 32,420 |   |   | 38,516 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **Total                  Current Liabilities**                                                                                                                                                                      |   |   | 531,806 |   |   | 606,807 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **LONG-TERM                  DEBT, net of current portion**                                                                                                                                                         |   |   | 989,028 |   |   | 1,111,181 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **Total                  Liabilities**                                                                                                                                                                              |   |   | 1,520,834 |   |   | 1,717,988 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **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; 10,587,433                  shares                                                                                                   |   |   |   |   |   |   |   |
| and                  10,465,433 shares outstanding at June 30, 2005 and December 31,                  2004,                  respectively                                                                           |   |   | 10,587 |   |   | 10,465 |   |
| Additional                  paid-in capital                                                                                                                                                                         |   |   | 32,113,394 |   |   | 32,074,454 |   |
| Warrants                  and options outstanding                                                                                                                                                                   |   |   | 1,094,824 |   |   | 1,109,930 |   |
| Note                  receivable from shareholder                                                                                                                                                                   |   |   | (76,388 | ) |   | (74,759 | ) |
| Accumulated                  deficit                                                                                                                                                                                |   |   | (31,730,198 | ) |   | (31,807,433 | ) |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **Total                  Stockholders' Equity**                                                                                                                                                                     |   |   | 1,412,219 |   |   | 1,312,657 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| **Total                  Liabilities and Stockholders' Equity**                                                                                                                                                     |   | $ | 2,933,053 |   | $ | 3,030,645 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| See                  accompanying notes to unaudited condensed consolidated financial                  statements                                                                                                   |

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**eROOMSYSTEM        TECHNOLOGIES, INC. AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------|--------|----------|--------|----------|---------|
|                                                                                                                                                                                 |   | **For                  the Three Months****Ended                  June 30,** |    | **For                  the Six Months****Ended                  June 30,** |   |
|                                                                                                                                                                                 |   | **2005**                                                                     |    | **2004**                                                                   |   | **2005** |   | **2004** |    |
| **REVENUE**                                                                                                                                                                          |   |                                                                         |    |                                                                       |   |     |   |     |    |
| Revenue-sharing                  arrangements                                                                                                                                        |   | $                                                                            | 306,407 |                                                                       | $      | 268,160  |   | $        | 577,446 |   | $ | 539,177 |   |
| Maintenance                  fees                                                                                                                                                    |   |                                                                         | 81,756  |                                                                       |   | 91,105   |   |     | 167,489 |   |   | 178,089 |   |
| Product                  sales                                                                                                                                                       |   |                                                                         | 2,336   |                                                                       |   | 7,390    |   |     | 4,943   |   |   | 7,698 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **Total                  Revenue**                                                                                                                                                   |   |                                                                         | 390,499 |                                                                       |   | 366,655  |   |     | 749,878 |   |   | 724,964 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **COST                  OF REVENUE**                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| Revenue-sharing                  arrangements                                                                                                                                        |   |                                                                         | 128,667 |                                                                       |   | 129,126  |   |     | 257,333 |   |   | 257,792 |   |
| Maintenance                                                                                                                                                                          |   |                                                                         | 17,533  |                                                                       |   | 20,076   |   |     | 31,818  |   |   | 36,825 |   |
| Product                  sales                                                                                                                                                       |   |                                                                         | 1,254   |                                                                       |   | 2,940    |   |     | 1,261   |   |   | 2,940 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **Total                  Cost of Revenue**                                                                                                                                           |   |                                                                         | 147,454 |                                                                       |   | 152,142  |   |     | 290,412 |   |   | 297,557 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **GROSS                  MARGIN**                                                                                                                                                    |   |                                                                         | 243,045 |                                                                       |   | 214,513  |   |     | 459,466 |   |   | 427,407 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **OPERATING                  EXPENSES**                                                                                                                                              |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| Selling,                  general and administrative expense, including non-cash compensation                  of                  $11,034, $1,067, $9,366 and $28,601, respectively |   |                                                                         | 135,392 |                                                                       |   | 192,306  |   |     | 298,556 |   |   | 449,059 |   |
| Research                  and development expense                                                                                                                                    |   |                                                                         | 383     |                                                                       |   | 10,500   |   |     | 1,959   |   |   | 10,500 |   |
| Interest                  expense                                                                                                                                                    |   |                                                                         | 47,289  |                                                                       |   | 55,851   |   |     | 95,715  |   |   | 110,045 |   |
| Gain                  on collection of previously written off receivable                                                                                                             |   |                                                                         | -       |                                                                       |   | (200,000 | )      |     | -       |   |   | (200,000 | ) |
| Interest                  and other income                                                                                                                                           |   |                                                                         | (9,931  | )                                                                          |   | (1,263   | )      |     | (13,999 | ) |   | (2,971 | ) |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **Net                  Operating Expenses**                                                                                                                                          |   |                                                                         | 173,133 |                                                                       |   | 57,394   |   |     | 382,231 |   |   | 366,633 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **Income                  from Operations**                                                                                                                                          |   |                                                                         | 69,912  |                                                                       |   | 157,119  |   |     | 77,235  |   |   | 60,774 |   |
| Gain                  on forgiveness of liabilities and debt                                                                                                                         |   |                                                                         | -       |                                                                       |   | 91,990   |   |     | -       |   |   | 595,465 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **Net                  Income**                                                                                                                                                      |   | $                                                                            | 69,912  |                                                                       | $      | 249,109  |   | $        | 77,235  |   | $ | 656,239 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **Basic                  Earnings Per Common Share**                                                                                                                                 |   | $                                                                            | 0.01    |                                                                       | $      | 0.02     |   | $        | 0.01    |   | $ | 0.06 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |
| **Diluted                  Earnings Per Common Share**                                                                                                                               |   | $                                                                            | 0.00    |                                                                       | $      | 0.01     |   | $        | 0.01    |   | $ | 0.03 |   |
|                                                                                                                                                                                 |   |                                                                         |    |                                                                       |   |     |   |     |    |   |   |   |   |

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**eROOMSYSTEM        TECHNOLOGIES, INC. AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

| ***For                  the Six Months Ended June 30,***                                                            |   | **2005** |     | **2004** |   |
|---------------------------------------------------------------------------------------------------------------------|--------|----------|----------|----------|--------|
|                                                                                                                |   |     |     |     |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES**                                                           |   |     |     |     |   |
| Net                  income                                                                                         |   | $        | 77,235   |     | $      | 656,239 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities: |   |     |     |     |   |   |   |
| Depreciation                                                                                                        |   |     | 260,119  |     |   | 263,859 |   |
| Gain                  on forgiveness of debt and liabilities                                                        |   |     | -        |     |   | (595,465 | ) |
| Interest                  income from shareholder receivables                                                       |   |     | (1,629   | )        |   | (1,621 | ) |
| Accretion                  of debt discount                                                                         |   |     | 33,553   |     |   | 33,553 |   |
| Amortization                  of discount on note receivable                                                        |   |     | (244     | )        |   | - |   |
| Non-cash                  compensation expense                                                                      |   |     | 9,336    |     |   | 28,601 |   |
| Changes                  in operating assets and liabilities:                                                       |   |     |     |     |   |   |   |
|  Cash                  held in escrow                                                                          |   |     | 225,000  |     |   | (200,000 | ) |
|  Accounts                  receivable                                                                          |   |     | (54,126  | )        |   | 20,536 |   |
|  Prepaid                  expenses                                                                             |   |     | (4,351   | )        |   | 1,278 |   |
|  Accounts                  payable                                                                             |   |     | (37,954  | )        |   | (41,620 | ) |
|  Accrued                  liabilities                                                                          |   |     | (40,791  | )        |   | 16,186 |   |
|  Customer                  deposits and deferred maintenance revenue                                           |   |     | (6,096   | )        |   | (7 | ) |
|                                                                                                                |   |     |     |     |   |   |   |
|  **Net                  Cash Provided By Operating Activities**                                                |   |     | 460,052  |     |   | 181,539 |   |
|                                                                                                                |   |     |     |     |   |   |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES**                                                           |   |     |     |     |   |   |   |
| Change                  in long term deposits and restricted funds                                                  |   |     | 20,000   |     |   | (19,000 | ) |
| Purchase                  of fixed assets                                                                           |   |     | (1,038   | )        |   | - |   |
| Purchase                  of investment and note receivable                                                         |   |     | (160,000 | )        |   | - |   |
|                                                                                                                |   |     |     |     |   |   |   |
|  **Net                  Cash Used in Investing Activities**                                                    |   |     | (141,038 | )        |   | (19,000 | ) |
|                                                                                                                |   |     |     |     |   |   |   |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES**                                                           |   |     |     |     |   |   |   |
| Proceeds                  from exercise of options                                                                  |   |     | 14,620   |     |   | - |   |
| Principal                  payments on long-term debt                                                               |   |     | (145,866 | )        |   | (309,440 | ) |
|                                                                                                                |   |     |     |     |   |   |   |
|  **Net                  Cash Used in Financing Activities**                                                    |   |     | (131,246 | )        |   | (309,440 | ) |
|                                                                                                                |   |     |     |     |   |   |   |
| **Net                  Increase (Decrease) in Cash**                                                                |   |     | 187,768  |     |   | (146,901 | ) |
|                                                                                                                |   |     |     |     |   |   |   |
| **Cash                  at Beginning of Period**                                                               |   |     | 646,386  |     |   | 381,985 |   |
|                                                                                                                |   |     |     |     |   |   |   |
| **Cash                  at End of Period**                                                                          |   | $        | 834,154  |     | $      | 235,084 |   |
|                                                                                                                |   |     |     |     |   |   |   |
| **Supplemental                  Cash Flows Information**                                                            |   |     |     |     |   |   |   |
| Cash                  paid for interest                                                                             |   | $        | 38,457   |     | $      | 54,400 |   |
| **Supplemental                  Disclosure of Noncash Investing and Financing                  Activities**         |   |     |     |     |   |   |   |
| Stock                  options issued in settlement of accounts payable                                             |   | $        | -        |     | $      | 31,688 |   |
|                                                                                                                |   |     |     |     |   |   |   |

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**eROOMSYSTEM        TECHNOLOGIES, INC. AND SUBSIDIARIES **

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**NOTE        1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**

***Condensed        Financial Statements***

***Principles        of Consolidation***

***Cash        Equivalents***

***Stock-Based        Compensation***

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**eROOMSYSTEM          TECHNOLOGIES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**(CONTINUED)**

|                                                                                                                                                                              |   | ***For                  the Three Months******Ended                  June 30,*** |    | ***For                  the Six Months******Ended                  June 30,*** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------|--------|
|                                                                                                                                                                              |   |
|                                                                                                                                                                              |   | **2005**                                                                         |    | **2004**                                                                       |   | **2005** |   | **2004** |   |
|                                                                                                                                                                              |   |                                                                             |    |                                                                           |   |   |   |   |   |
|                                                                                                                                                                              |   |                                                                             |    |                                                                           |   |   |   |   |   |
| Net                  income, as reported                                                                                                                                          |   | $                                                                                | 69,912  |                                                                           | $      | 249,109 |   | $ | 77,235 |   | $ | 656,239 |   |
|                                                                                                                                                                              |   |                                                                             |    |                                                                           |   |   |   |   |   |   |   |   |   |
| Add:                  Stock-based employee and consultant compensation expenses included                  in net                  income                                          |   |                                                                             | 11,034  |                                                                           |   | 1,067 |   |   | 9,336 |   |   | 28,601 |   |
|                                                                                                                                                                              |   |                                                                             |    |                                                                           |   |   |   |   |   |   |   |   |   |
| Deduct:                  Total stock-based employee and consultant compensation expense                  determined                  under fair value based method for all awards |   |                                                                             | (12,768 | )                                                                              |   | (29,696 | ) |   | (12,025 | ) |   | (48,965 | ) |
|                                                                                                                                                                              |   |                                                                             |    |                                                                           |   |   |   |   |   |   |   |   |   |
| Pro                  forma net earnings                                                                                                                                           |   | $                                                                                | 68,178  |                                                                           | $      | 220,480 |   | $ | 74,546 |   | $ | 635,875 |   |
|                                                                                                                                                                              |   |                                                                             |    |                                                                           |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share:                                                                                                                                       |   |                                                                             |    |                                                                           |   |   |   |   |   |   |   |   |   |
| Basic                  as reported                                                                                                                                                |   | $                                                                                | 0.01    |                                                                           | $      | 0.02 |   | $ | 0.01 |   | $ | 0.06 |   |
| Basic                  pro forma                                                                                                                                                  |   | $                                                                                | 0.01    |                                                                           | $      | 0.02 |   | $ | 0.01 |   | $ | 0.06 |   |
| Diluted                  as reported                                                                                                                                              |   | $                                                                                | 0.00    |                                                                           | $      | 0.01 |   | $ | 0.01 |   | $ | 0.03 |   |
| Diluted                  pro forma                                                                                                                                                |   | $                                                                                | 0.00    |                                                                           | $      | 0.01 |   | $ | 0.01 |   | $ | 0.03 |   |

***Net        Earnings Per Common Share***

|                                                                |   | ***For                  The Three Months******Ended                  June 30,*** |       | ***For                  The Six Months******Ended                  June 30,*** |   |
|---------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|--------|
|                                                                |   |                                                                             |       |                                                                           |   |   |   |   |   |
|                                                                |   | **2005**                                                                         |       | **2004**                                                                       |   | **2005** |   | **2004** |   |
| Basic                  net income                                   |   | $                                                                                | 69,912     |                                                                           | $      | 249,109 |   | $ | 77,235 |   | $ | 656,239 |   |
| Interest                  expense from convertible debt             |   |                                                                             | 24,515     |                                                                           |   | 24,515 |   |   | 48,608 |   |   | 48,608 |   |
| Diluted                  net income                                 |   | $                                                                                | 94,427     |                                                                           | $      | 273,624 |   | $ | 125,843 |   | $ | 704,847 |   |
| Basic                  weighted-average common shares outstanding   |   |                                                                             | 10,565,899 |                                                                           |   | 10,443,933 |   |   | 10,517,889 |   |   | 10,414,922 |   |
| Effect                  of dilutive securities                      |   |                                                                             |       |                                                                           |   |   |   |   |   |   |   |   |   |
| Stock                  options and warrants                         |   |                                                                             | 4,851,404  |                                                                           |   | 4,725,761 |   |   | 4,851,113 |   |   | 4,503,367 |   |
| Convertible                  debt                                   |   |                                                                             | 7,316,667  |                                                                           |   | 7,316,667 |   |   | 7,316,667 |   |   | 7,316,667 |   |
|                                                                |   |                                                                             |       |                                                                           |   |   |   |   |   |   |   |   |   |
| Diluted                  weighted-average common shares outstanding |   |                                                                             | 22,733,970 |                                                                           |   | 22,486,361 |   |   | 22,685,669 |   |   | 22,234,956 |   |
| Basic                  earnings per share                           |   | $                                                                                | 0.01       |                                                                           | $      | 0.02 |   | $ | 0.01 |   | $ | 0.06 |   |
| Diluted                  earnings per share                         |   | $                                                                                | 0.00       |                                                                           | $      | 0.01 |   | $ | 0.01 |   | $ | 0.03 |   |

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**eROOMSYSTEM        TECHNOLOGIES, INC. AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**(CONTINUED)**

**NOTE        2 - BUSINESS CONDITION **

**NOTE        3 - INVESTMENT IN IDENTICA**

**NOTE        4 - NET INVESTMENT IN SALES-TYPE LEASE **

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**eROOMSYSTEM        TECHNOLOGIES, INC. AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**(CONTINUED)**

| Total                  minimum lease payments to be received |   | $      | 302,400  |   |
|--------------------------------------------------------------|--------|--------|----------|--------|
|                                                         |   |   |     |   |
| Less:                  Allowance for uncollectibles          |   |   | (254,320 | )      |
|                                                         |   |   |     |   |
| Net                  minimum lease payments receivable       |   |   | 48,080   |   |
|                                                         |   |   |     |   |
| Less:                  Unearned income                       |   |   | (48,080  | )      |
|                                                         |   |   |     |   |
| Net                  investment in sales-type lease          |   | $      | --       |   |

**NOTE        5 - STOCKHOLDERS' EQUITY **

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

**Overview        **

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**Accounting        Policies**

**DESCRIPTION        OF REVENUES**

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**REVENUE        RECOGNITION**

**DESCRIPTION        OF EXPENSES **

----

**Results        of Operations **

**Comparison        of Three Months Ended June 30, 2005 and 2004**

**Revenues**

**Cost        of Revenue**

----

|                                                               |   |   | **For                      the Three Months****Ended                      June 30,**  |   |   |     |   |   | **Percent** |   |
|--------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|-------------|--------|
|                                                               |   |   | **2005**                                                                                   |   |   | **2004** |   |   | **Change**  |   |   | **Change** |   |
| **REVENUE**                                                        |   |   |                                                                                       |   |   |     |   |   |        |   |   |   |   |
| Revenue-sharing                      arrangements                  |   | $      | 306,407                                                                                    |   | $      | 268,160  |   | $      | 38,247      |   |   | 14.3 | % |
| Maintenance                      fees                              |   |   | 81,756                                                                                     |   |   | 91,105   |   |   | 9,349       |   |   | (10.3 | )% |
| Product                      sales                                 |   |   | 2,336                                                                                      |   |   | 7,390    |   |   | 5,054       |   |   | (68.4 | )% |
| **Total                      Revenue**                        |   | $      | 390,499                                                                                    |   | $      | 366,655  |   | $      | 23,844      |   |   | 6.5 | % |
|                                                               |   |   |                                                                                       |   |   |     |   |   |        |   |   |   |   |
| **COST                      OF REVENUE**                           |   |   |                                                                                       |   |   |     |   |   |        |   |   |   |   |
| Revenue-sharing                      arrangements                  |   |   | 128,667                                                                                    |   |   | 129,126  |   |   | 459         |   |   | (0.4 | )% |
| Maintenance                                                        |   |   | 17,533                                                                                     |   |   | 20,076   |   |   | 2,543       |   |   | (12.7 | )% |
| Product                      sales                                 |   |   | 1,254                                                                                      |   |   | 2,940    |   |   | 1,686       |   |   | (57.3 | )% |
|  **Total                      Cost of Revenue**          |   | $      | 147,454                                                                                    |   | $      | 152,142  |   | $      | 4,688       |   |   | (3.1 | )% |
|                                                               |   |   |                                                                                       |   |   |     |   |   |        |   |   |   |   |
| **GROSS                      MARGIN PERCENTAGE**                   |   |   |                                                                                       |   |   |     |   |   |        |   |   |   |   |
| Revenue-sharing                      arrangements                  |   |   | 58.0                                                                                       | %      |   | 51.8     | %      |   |        |   |   |   |   |
| Maintenance                                                        |   |   | 78.6                                                                                       | %      |   | 78.0     | %      |   |        |   |   |   |   |
| Product                      sales                                 |   |   | 46.3                                                                                       | %      |   | 60.2     | %      |   |        |   |   |   |   |
|  **Total                      Gross Margin Percentage**  |   |   | 62.2                                                                                       | %      |   | 58.5     | %      |   |        |   |   |   |   |

**Expenses        and Other Income **

----

**Net        Income Attributable to Common Stockholders **

**Comparison        of Six Months Ended June 30, 2005 and 2004**

**Revenues**

**Cost        of Revenue**

----

|                                                           |   |                  **For                  the Six Months****Ended                  June 30,** |    |     |   |  **Percent** |   |
|----------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|---------|----------|--------|-------------------|--------|
|                                                           |   | **2005**                                                                                         |    | **2004** |   | **Change**        |   | ** Change** |   |
| **REVENUE**                                                    |   |                                                                                             |    |     |   |              |   |   |   |   |   |   |   |
| Revenue-sharing                  arrangements                  |   | $                                                                                                | 577,446 |     | $      | 539,177           |   | $ | 38,269 |   |   | 7.1 | % |
| Maintenance                  fees                              |   |                                                                                             | 167,489 |     |   | 178,089           |   |   | 10,600 |   |   | (6.0 | )% |
| Product                  sales                                 |   |                                                                                             | 4,943   |     |   | 7,698             |   |   | 2,755 |   |   | (35.8 | )% |
| **Total                  Revenue**                        |   | $                                                                                                | 749,878 |     | $      | 724,964           |   | $ | 24,914 |   |   | 3.4 | % |
|                                                           |   |                                                                                             |    |     |   |              |   |   |   |   |   |   |   |
| **COST                  OF REVENUE**                           |   |                                                                                             |    |     |   |              |   |   |   |   |   |   |   |
| Revenue-sharing                  arrangements                  |   |                                                                                             | 257,333 |     |   | 257,792           |   |   | 459 |   |   | (0.2 | )% |
| Maintenance                                                    |   |                                                                                             | 31,818  |     |   | 36,825            |   |   | 5,007 |   |   | (13.6 | )% |
| Product                  sales                                 |   |                                                                                             | 1,261   |     |   | 2,940             |   |   | 1,679 |   |   | (57.1 | )% |
|  **Total                  Cost of Revenue**          |   | $                                                                                                | 290,412 |     | $      | 297,557           |   | $ | 7,145 |   |   | (2.4 | )% |
|                                                           |   |                                                                                             |    |     |   |              |   |   |   |   |   |   |   |
| **GROSS                  MARGIN PERCENTAGE**                   |   |                                                                                             |    |     |   |              |   |   |   |   |   |   |   |
| Revenue-sharing                  arrangements                  |   |                                                                                             | 55.4    | %        |   | 52.2              | %      |   |   |   |   |   |   |
| Maintenance                                                    |   |                                                                                             | 81.0    | %        |   | 79.3              | %      |   |   |   |   |   |   |
| Product                  sales                                 |   |                                                                                             | 74.5    | %        |   | 61.8              | %      |   |   |   |   |   |   |
|  **Total                  Gross Margin Percentage**  |   |                                                                                             | 61.3    | %        |   | 59.0              | %      |   |   |   |   |   |   |

**Expenses        and Other Income **

----

**Net        Income Attributable to Common Stockholders **

**Liquidity        and Capital Resources**

----

**Contractual        Cash Obligations and Commercial Commitments**

| **Contractual                  Cash**      |   | **Payments                  Due by Period** |      |
|--------------------------------------------|--------|---------------------------------------------|-----------|
| **Obligations**                            |   | **Total**                                   |      | **<                  1 Year** |   | **1-3                  Years** |   | **4-5                  Years** |   | **>                  5 Years** |   |
| Long-term                  Debt            |   | $                                           | 1,599,698 |   | $ | 373,766 |   | $ | 901,826 |   | $ | 324,106 |   |   | - |   |
| Capital                  Lease Obligations |   |                                        | 1,341     |   |   | 1,341 |   |   | - |   |   | - |   |   | - |   |
| **Total**                                  |   | $                                           | 1,601,039 |   | $ | 375,107 |   | $ | 901,826 |   | $ | 324,106 |   |   | - |   |

**PART        II - OTHER INFORMATION**

**Item        1. Legal Proceedings.**

**Item        2. Changes in Securities and Use of Proceeds.**

**Item        3. Defaults Upon Senior Securities.**

**Item        4. Submission of Matters to a Vote of Security Holders.**

**Item        5. Other Information.**

**Item        6. Exhibits and Reports on Form 8-K.**

|  | 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). |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**SIGNATURE**

|   |                             | **e****RoomSystem                  Technologies, Inc.** |
|--------|----------------------------------|---------------------------------------------------------|
|   |                             | (Registrant)                                            |
|   |                             |                                                    |   |   |
| Date:  | August                  15, 2005 | By:                                                     | /s/                  David A.                  Gestetner                                           |   |
|   |                             |                                                    | David                  A. Gestetner |   |
|   |                             | Its:                                                    | Chief                  Executive Officer and President |   |

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