FORM 10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


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

For  the  quarterly  period  ended  July  5,  2006

                                       OR

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

For the transition period from              to

Commission file number 0-20022

                           POMEROY IT SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)

DELAWARE                                                       31-1227808
(State or other jurisdiction of incorporation               (IRS Employer
 or organization)                                           Identification No.)

                     1020 Petersburg Road, Hebron, KY 41048
                    (Address of principal executive offices)

                                 (859) 586-0600
              (Registrant's telephone number, including area code)

     Indicate  by  check  mark  whether the registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
requirements  for  the  past  90  days.

YES  X   NO
    ---     ---

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer or a non-accelerated filer.  See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.  (Check
one):

Large accelerated filer       Accelerated filer  X     Non-accelerated filer
                        ---                     ---                          ---

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

     Yes       No  X
         ---      ---

The number of shares of common stock outstanding as of August 5, 2006 was
12,633,912


<PAGE>
<TABLE>
<CAPTION>
                               POMEROY IT SOLUTIONS, INC.
                                   TABLE OF CONTENTS

Part I.     Financial Information
<S>         <C>                    <C>                                             <C>
            Item 1.                Financial Statements:                           Page

                                   Consolidated Balance Sheets as of July 5,
                                   2006 (Unaudited) and January 5, 2006               1

                                   Consolidated Statements of Income for the
                                   Three Months Ended July 5, 2006 and 2005           3
                                   (Unaudited)

                                   Consolidated Statements of Comprehensive
                                   Income for the Three Months Ended July 5,          4
                                   2006 and 2005 (Unaudited)

                                   Consolidated Statements of Income for the Six
                                   Months Ended July 5, 2006 and 2005                 5
                                   (Unaudited)

                                   Consolidated Statements of Comprehensive
                                   Income for the Six Months Ended July 5,            6
                                   2006 and 2005 (Unaudited)

                                   Consolidated Statements of Cash Flows for
                                   the Six Months Ended July 5, 2006 and 2005         7
                                   (Unaudited)

                                   Notes to Consolidated Financial Statements
                                   (Unaudited)                                        8

            Item 2.                Management's Discussion and Analysis of
                                   Financial Condition and Results of Operations     16

            Item 3.                Quantitative and Qualitative Disclosure about
                                   Market Risk                                       22

            Item 4.                Controls and Procedures                           22

Part II.    Other Information

            Item 1.                Legal Proceedings                                 24

            Item 1A.               Risk Factors                                      24

            Item 2.                Unregistered Sales of Equity Securities and
                                   Use of Proceeds                                   24

            Item 3.                Defaults Upon Senior Securities                   24

            Item 4.                Submission of Matters to a Vote of Security
                                   Holders                                           24

            Item 5.                Other Information                                 25

            Item 6.                Exhibits                                          25

SIGNATURES                                                                           26
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                             POMEROY IT SOLUTIONS, INC.
                             CONSOLIDATED BALANCE SHEETS

(in thousands)                                              July 5,      January 5,
                                                             2006           2006
                                                         -------------  ------------
                                                          (Unaudited)
<S>                                                      <C>            <C>
ASSETS

Current Assets:
Cash and cash equivalents                                $          85  $        447
Certificates of deposit                                          4,227         4,668

Accounts receivable:
  Trade, less allowance of  $4,112 at July 5, 2006 and
    $4,355 at January 5, 2006                                  133,239       130,814
  Vendor receivables, less allowance of $100 at
    July 5, 2006 and January 5, 2006                             5,974         4,952
  Net investment in leases                                       2,334         1,998
  Other                                                          1,984         2,894
                                                         -------------  ------------
      Total receivables                                        143,531       140,658
                                                         -------------  ------------

Inventories                                                     14,941        13,665
Other                                                           11,351        11,730
                                                         -------------  ------------
      Total current assets                                     174,135       171,168
                                                         -------------  ------------

Equipment and leasehold improvements:
  Furniture, fixtures and equipment                             31,481        32,655
  Leasehold improvements                                         8,768         6,796
                                                         -------------  ------------
      Total                                                     40,249        39,451

  Less accumulated depreciation                                 26,629        24,656
                                                         -------------  ------------
      Net equipment and leasehold improvements                  13,620        14,795
                                                         -------------  ------------

Net investment in leases, net of current portion                   187           995
Goodwill                                                       101,786       101,048
Intangible assets, net                                           2,963         3,007
Other assets                                                     3,645         4,132
                                                         -------------  ------------
      Total assets                                       $     296,336  $    295,145
                                                         =============  ============
<FN>
                   See notes to consolidated financial statements.
</TABLE>


                                        1
<PAGE>
<TABLE>
<CAPTION>
                               POMEROY IT SOLUTIONS, INC.
                               CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)                           July 5,      January 5,
                                                                  2006          2006
                                                              ------------  ------------
                                                              (Unaudited)
<S>                                                           <C>           <C>
LIABILITIES AND EQUITY

Current Liabilities:
Short-term borrowings                                         $          -  $    15,304
Cash overdraft                                                       1,992            -
Accounts payable                                                    65,873       46,638
Deferred revenue                                                     2,822        3,444
Employee compensation and benefits                                   8,326        8,039
Accrued restructuring and severance charges                          4,655        5,791
Other current liabilities                                            6,468       11,443
                                                              ------------  ------------
      Total current liabilities                                     90,136       90,659
                                                              ------------  ------------

Commitments and contingencies

Equity:
  Preferred stock,  $.01 par value; authorized 2,000 shares
    (no shares issued or outstanding)                                    -            -
  Common stock, $.01 par value; authorized 20,000 shares
    (13,453 and 13,400 shares issued at July 5, 2006
    and January 5, 2006, respectively)                                 135          135
  Paid-in capital                                                   89,179       89,126
  Unearned compensation                                                          (1,198)
  Accumulated other comprehensive income                                20           24
  Retained earnings                                                126,133      125,521
                                                              ------------  ------------
                                                                   215,467      213,608
  Less treasury stock, at cost ( 830 and 810 shares at
    July 5, 2006 and January 5, 2006)                                9,267        9,122
                                                              ------------  ------------
      Total equity                                                 206,200      204,486
                                                              ------------  ------------
      Total liabilities and equity                            $    296,336  $   295,145
                                                              ============  ============
<FN>
                     See notes to consolidated financial statements.
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)        Three Months Ended
                                        --------------------------
                                          July 5,       July 5,
                                            2006          2005
                                        ------------  ------------
                                        (Unaudited)   (Unaudited)
<S>                                     <C>           <C>
Product and service revenues:
  Product                               $     92,081  $    135,093
  Service                                     72,037        56,932
                                        ------------  ------------
    Total revenues                           164,118       192,025
                                        ------------  ------------

Cost of product and service revenues:
  Product                                     84,322       124,956
  Service                                     55,013        41,922
                                        ------------  ------------
    Total cost of revenues                   139,335       166,878
                                        ------------  ------------

    Gross profit                              24,783        25,147
                                        ------------  ------------

Operating expenses:
  Selling, general and administrative         20,151        19,538
  Depreciation and amortization                1,235         1,428
  Other                                            6             -
                                        ------------  ------------
    Total operating expenses                  21,392        20,966
                                        ------------  ------------

Income from operations                         3,391         4,181

Interest expense, net                            162           206
                                        ------------  ------------

Income before income tax                       3,229         3,975
Income tax expense                             1,198         1,610
                                        ------------  ------------
Net income                              $      2,031  $      2,365
                                        ============  ============

Weighted average shares outstanding:
  Basic                                       12,629        12,573
                                        ============  ============
  Diluted                                     12,637        12,656
                                        ============  ============

Earnings per common share:
  Basic                                 $       0.16  $       0.19
                                        ============  ============
  Diluted                               $       0.16  $       0.19
                                        ============  ============
<FN>
                 See notes to consolidated financial statements.
</TABLE>


                                        3
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)                                  Three Months Ended
                                            --------------------------
                                              July 5,       July 5,
                                                2006          2005
                                            ------------  ------------
                                            (Unaudited)   (Unaudited)
<S>                                         <C>           <C>
Net income                                  $     2,031   $      2,365
Other comprehensive income:
  Foreign currency translation adjustment            (4)             -

                                            ------------  ------------
Comprehensive income                        $     2,027   $      2,365
                                            ============  ============
</TABLE>


                                        4
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)        Six Months Ended
                                        --------------------------
                                          July 5,       July 5,
                                            2006          2005
                                        ------------  ------------
                                        (Unaudited)   (Unaudited)
<S>                                     <C>           <C>
Product and service revenues:
  Product                               $    180,958  $    246,336
  Service                                    133,852       111,521
                                        ------------  ------------
    Total revenues                           314,810       357,857
                                        ------------  ------------

Cost of product and service revenues:
  Product                                    166,307       227,380
  Service                                    102,684        82,514
                                        ------------  ------------
    Total cost of revenues                   268,991       309,894
                                        ------------  ------------

    Gross profit                              45,819        47,963
                                        ------------  ------------

Operating expenses:
  Selling, general and administrative         41,632        39,582
  Depreciation and amortization                2,569         2,897
  Restructuring and severance charges            133           132
  Other                                           11             1
                                        ------------  ------------
    Total operating expenses                  44,345        42,612
                                        ------------  ------------

Income from operations                         1,474         5,351

Interest expense, net                            471           427
                                        ------------  ------------

Income before income tax                       1,003         4,924
Income tax expense                               391         1,994
                                        ------------  ------------
Net income                              $        612  $      2,930
                                        ============  ============

Weighted average shares outstanding:
  Basic                                       12,622        12,521
                                        ============  ============
  Diluted                                     12,639        12,661
                                        ============  ============

Earnings per common share:
  Basic                                 $       0.05  $       0.23
                                        ============  ============
  Diluted                               $       0.05  $       0.23
                                        ============  ============
<FN>
                 See notes to consolidated financial statements.
</TABLE>


                                        5
<PAGE>
<TABLE>
<CAPTION>
                           POMEROY IT SOLUTIONS, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)                                   Six Months Ended
                                            --------------------------
                                              July 5,       July 5,
                                                2006          2005
                                            ------------  ------------
                                            (Unaudited)   (Unaudited)
<S>                                         <C>           <C>
Net income                                  $       612   $      2,930
Other comprehensive income:
  Foreign currency translation adjustment            (4)           102

                                            ------------  ------------
Comprehensive income                        $       608   $      3,032
                                            ============  ============
<FN>
                 See notes to consolidated financial statements.
</TABLE>


                                        6
<PAGE>
<TABLE>
<CAPTION>
                                POMEROY IT SOLUTIONS, INC.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)                                                      Six Months Ended
                                                               --------------------------
                                                                 July 5,       July 5,
                                                                   2006          2005
                                                               (Unaudited)   (Unaudited)
                                                               ------------  ------------
<S>                                                            <C>           <C>
Cash flows from operating activities:
  Net income                                                   $       612   $     2,930
  Adjustments to reconcile net income to net cash
    from operating activities:
    Depreciation                                                     2,240         2,437
    Amortization                                                       329           460
    Stock option and restricted stock compensation                     896             -
    Restructuring and severance charges                                133           132
    Deferred income taxes                                              605         2,641
    Loss on disposal of fixed assets                                    11             8
  Changes in working capital accounts, net of
    effects of acquisitions:
    Accounts receivable                                             (2,585)       (1,765)
    Inventories                                                     (1,558)       (1,841)
    Other current assets                                                62           489
    Net investment in leases                                           520         2,413
    Cash overdraft                                                   1,992             -
    Accounts payable                                                19,235        (4,065)
    Deferred revenue                                                  (622)         (387)
    Income tax payable                                                 (58)           18
    Employee compensation and benefits                                 287        (3,982)
    Other, net                                                      (5,988)       (5,068)
                                                               ------------  ------------
  Net operating activities                                          16,111        (5,580)
                                                               ------------  ------------
Cash flows from investing activities:
  Capital expenditures                                                (793)       (1,033)
  Proceeds from sale of fixed assets                                     -             6
  Proceeds from redemption of certificates of deposit                  531             -
  Purchases of certificates of deposit                                 (91)          (34)
  Payment for covenant not-to-compete                                 (285)            -
  Acquisition of businesses                                           (738)       (1,139)
                                                               ------------  ------------
  Net investing activities                                          (1,376)       (2,200)
                                                               ------------  ------------
Cash flows from financing activities:
  Net payments of  short-term borrowings                           (15,304)       (2,501)
  Payments of acquisition notes payable                                  -          (662)
  Proceeds from exercise of stock options
    and related tax benefit                                            192         2,327
  Purchase of treasury stock                                          (144)         (376)
  Proceeds from employee stock purchase plan                           163             -
                                                               ------------  ------------
    Net financing activities                                       (15,093)       (1,212)
                                                               ------------  ------------
Effect of exchange rate changes on cash and cash equivalents            (4)          102
                                                               ------------  ------------
Change in cash and cash equivalents                                   (362)       (8,890)
Cash and cash equivalents:
  Beginning of period                                                  447        13,108
                                                               ------------  ------------
  End of period                                                $        85   $     4,218
                                                               ------------  ------------
<FN>
                     See notes to consolidated financial statements.
</TABLE>


                                        7
<PAGE>
                           POMEROY IT SOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.   Basis of  Presentation

The  consolidated  financial  statements  have  been prepared in accordance with
accounting  principles  generally  accepted in the United States of America ("US
GAAP")  for interim financial information and with the instructions to Form 10-Q
and  Rule 10-01 of Regulation S-X.   Accordingly, they do not include all of the
information and footnotes required by US GAAP for complete financial statements.
Except as disclosed herein, there has been no material change in the information
disclosed  in  the  notes  to  consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended January 5, 2006.  In the
opinion of management, all adjustments (consisting of normal recurring accruals)
necessary  for  a  fair  presentation of the interim periods have been made. The
results  of operations for the three and six-month period ended July 5, 2006 are
not  necessarily  indicative  of  the  results  that  may be expected for future
interim  periods  or  for  the  year  ending  January  5,  2007.

2.   Recent  Accounting  Pronouncements

In  July  2006,  the  Financial  Accounting Standards Board ("FASB") issued FASB
Interpretation  No.  48,  Accounting  for  Uncertainty  in  Income  Taxes,  an
interpretation  of  FASB  Statement  No.  109  ("FIN 48").  FIN 48 clarifies the
accounting  for  income taxes by prescribing the minimum recognition threshold a
tax  position  is  required  to  meet  before  being recognized in the financial
statements.  FIN  48  also  provides  guidance  on  derecognition,  measurement,
classification,  interest  and  penalties,  accounting  in  interim  periods,
disclosure and transition. FIN 48 applies to all tax positions related to income
taxes  subject  to  FASB Statement No. 109, "Accounting for Income Taxes" ("FASB
No.  109").  FIN  48  is effective for fiscal years beginning after December 15,
2006.  Differences between the amounts recognized in the statements of financial
position prior to the adoption of FIN 48 and the amounts reported after adoption
should  be  accounted  for  as  a  cumulative-effect  adjustment recorded to the
beginning  balance of retained earnings. The Company is currently in the process
of  determining the impact, if any, that the adoption of FIN 48 will have on the
consolidated  financial  statements.

3.   Cash and  Short-Term  Borrowings

The  Company  has  a $165.0 million Syndicated Credit Facility Agreement with GE
Commercial Distribution Finance.   The credit facility has a three-year term and
its  components include a maximum of $75.0 million for inventory financing and a
revolver,  collateralized  primarily  by  accounts  receivable,  of up to $110.0
million.  The  credit facility also provides a letter of credit facility of $5.0
million.  Interest  on  outstanding  borrowings  under  the  credit  facility is
payable monthly based on the LIBOR rate and a pricing grid.  As of July 5, 2006,
the  adjusted LIBOR rate was 7.58%.  This credit facility expires June 28, 2007.

The  Company maintains a sweep account with its bank whereby daily cash receipts
are  automatically transferred as payment towards balances outstanding under the
Company's  credit  facility.  As of July 5, 2006, the Company had no outstanding
balance under the Company's credit facility.  As of January 5, 2006, the Company
had an outstanding balance under the Company's credit facility of $15.3 million.

Under  the  terms  of  the  credit  facility,  the Company is subject to various
financial  covenants  including  maintenance  of a minimum level of tangible net
worth,  a  minimum  fixed charge coverage ratio, a maximum ratio of total funded
indebtedness  to  EBITDA, and a maximum net loss after tax.  As of July 5, 2006,
Pomeroy  was  in  compliance  with  those  financial  covenants.

4.   Stock-Based  Compensation

Prior  to  January  6,  2006, the Company accounted for stock-based compensation
using  the  intrinsic  value  method  prescribed  in Accounting Principles Board
Opinion  No.  25  (APB  25),  "Accounting  for  Stock  Issued  to  Employees".
Accordingly,  compensation cost for stock options was measured as the excess, if
any,  of  the  quoted  market price of the Company's common stock at the date of
grant  over  the  amount an employee must pay to acquire the stock.  The Company
previously  adopted  SFAS  No.  123 for disclosure purposes and for non-employee
stock  options.


                                        8
<PAGE>
The Company adopted Statement of Financial Accounting Standards No. 123(R) (SFAS
123R)  effective January 6, 2006.  SFAS 123R requires the Company to measure the
cost  of  employee  services  received  in  exchange  for  an  award  of  equity
instruments and recognize this cost over the period during which the employee is
required  to  provide the services.  The Company has adopted SFAS 123R using the
modified prospective method and, therefore, results for periods prior to January
6,  2006  have  not  been  restated.

The  table  below  illustrates  the  effect of stock compensation expense on the
periods  presented  as  if the Company had always applied the fair value method:

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                            July 5,
(In thousands, except per share data)                         2005
                                                      --------------------
<S>                                                   <C>
Income before stock compensation expense              $             2,365
Stock compensation expense                                           (266)

                                                      --------------------
Proforma net income                                   $             2,099
                                                      ====================

Basic earnings per common share:
  Income before stock compensation expense            $              0.19
  Stock compensation expense                                        (0.02)

                                                      --------------------
Proforma net income                                   $              0.17
                                                      ====================

Diluted earnings per common share:
  Income before stock compensation expense            $              0.19
  Stock compensation expense included in net income                 (0.02)

                                                      --------------------
Proforma net income                                   $              0.17
                                                      ====================
</TABLE>

<TABLE>
<CAPTION>
                                                         Six Months Ended
                                                             July 5,
(In thousands, except per share data)                          2005
                                                        ------------------
<S>                                                     <C>
Income before stock compensation expense                $           2,930
Stock compensation expense                                         (1,358)

                                                        ------------------
Pro forma net income                                    $           1,572
                                                        ==================

Basic earnings  per common share:
  Income  before stock compensation expense             $            0.23
  Stock compensation expense                                        (0.10)

                                                        ------------------
Pro forma net income                                    $            0.13
                                                        ==================

Diluted earnings  per common share:
  Income  before stock compensation expense             $            0.23
  Stock compensation expense                                        (0.11)

                                                        ------------------
Pro forma net income                                    $            0.12
                                                        ==================
</TABLE>


                                        9
<PAGE>
No stock-based compensation was capitalized into inventory or fixed assets.  The
approximate  unvested  stock  option  expense  as of July 5, 2006, which will be
recorded  as  expense  in  future periods, is $1,038.  The weighted average time
over which this expense will be recorded is approximately 26.2 months.   Expense
for  the  quarter  and  six  months ended July 5, 2006 and estimated expense for
future  periods  is  net  of  the  effect  of  estimated  forfeitures  of 18.5%.

The  Company  estimates the fair value of each option on the date of grant using
the  Black-Scholes option pricing model.  The Company has elected the simplified
method  to  calculate  the expected life of stock awards as permitted under SFAS
123R.  This method calculates an expected term based on the midpoint between the
vesting  date  and  the  end  of  the  contractual term of the stock award.  The
weighted-average  assumptions  listed below were used for grants made in the six
months  ended  July  5,  2006  and  2005:

<TABLE>
<CAPTION>
                               Three months ended   Three months ended
                                  July 5, 2006         July 5, 2005
<S>                            <C>                  <C>
     Expected volatility             48.44%               59.51%
     Risk-free interest rate          5.00%                3.69%
     Expected life (years)            3.50                 3.00
     Dividend yield                   0.00%                0.00%
</TABLE>

<TABLE>
<CAPTION>
                               Six months ended   Six months ended
                                 July 5, 2006       July 5, 2005
<S>                            <C>                <C>
     Expected volatility            52.48%             44.74%
     Risk-free interest rate         4.73%              3.73%
     Expected life (years)           2.46               3.66
     Dividend yield                  0.00%              0.00%
</TABLE>

Information  related  to all stock options for the six months ended July 5, 2006
is  shown  in  the  table  below:

<TABLE>
<CAPTION>
                                                   Weighted-        Weighted-Average
                                               Average Exercise   Remaining Contractual
                                     Shares          Price                Term
<S>                                <C>         <C>                <C>
     Outstanding at January 5,
     2006                          2,926,503   $           13.31
     Granted                         241,250   $            9.33
     Forfeitures                    (591,086)  $           13.77
     Exercised                       (29,167)  $            5.98
                                   ----------
     Outstanding at July 5, 2006   2,547,500   $           12.92             2.76 years
                                   ==========

     Exercisable at  July 5, 2006  2,209,251   $           13.08             2.57 years
                                   ==========
</TABLE>

Information related to unvested stock options for the six months ended July 5,
2006 is shown in the table below:

<TABLE>
<CAPTION>
                                          Weighted-Average     Weighted-Average
                                           Grant-Date Fair   Remaining Contractual
                                Shares          Value                Term
<S>                            <C>        <C>                <C>
     Outstanding unvested
     stock options at
     January 5, 2006            416,794   $            4.63

     Granted                    241,250   $            3.41
     Vested                    (265,433)  $            3.72
     Forfeitures                (54,362)  $            4.89
                               ---------

     Outstanding unvested
     stock options at July 5,
     2006                       338,249   $            4.44             3.98 years
                               =========
</TABLE>

The  Company did not issue any restricted shares in the six months ended July 5,
2006.  Such  shares  are valued based on the quoted price of the Company's stock
on  the  date  of  grant  and  recorded  as  compensation


                                       10
<PAGE>
expense  over  the  related  vesting  period,  which  is  generally  four years.
Compensation  cost,  net  of  an  estimated forfeiture rate of 18.5%, related to
previously-issued restricted shares totaled $64 thousand during the three months
ended  July 5, 2006 and  $116 thousand during the six months ended July 5, 2006.
No similar expense was recorded during the three months or six months ended July
5,  2005.  In  connection  with  the adoption of SFAS123R, unearned compensation
aggregating  $1,081 associated with previously-issued restricted shares has been
reclassified  to  paid-in capital in the accompanying consolidated balance sheet
as  of  July  5,  2006.

5.   Earnings  per  Common  Share

The  following is a reconciliation of the number of shares used in the basic EPS
and  diluted  EPS  computations:

<TABLE>
<CAPTION>
                               Three Months Ended July 5,
                    ------------------------------------------------
                             2006                     2005
                    -----------------------  -----------------------
                                 Per Share                Per Share
                      Shares       Amount      Shares       Amount
                    ----------  -----------  ----------  -----------
<S>                 <C>         <C>          <C>         <C>
Basic EPS               12,629  $      0.16      12,573  $      0.19
Effect of dilutive
  stock options              8            -          83            -
                    ----------  -----------  ----------  -----------
Diluted EPS             12,637  $      0.16      12,656  $      0.19
                    ==========  ===========  ==========  ===========
</TABLE>

<TABLE>
<CAPTION>
                                Six Months Ended July 5,
                    ------------------------------------------------
                             2006                     2005
                    -----------------------  -----------------------
                                 Per Share                Per Share
                      Shares       Amount      Shares       Amount
                    ----------  -----------  ----------  -----------
<S>                 <C>         <C>          <C>         <C>
Basic EPS               12,622  $      0.05      12,521  $      0.23
Effect of dilutive
  stock options             17            -         140            -
                    ----------  -----------  ----------  -----------
Diluted EPS             12,639  $      0.05      12,661  $      0.23
                    ==========  ===========  ==========  ===========
</TABLE>

6.   Treasury  Stock

On March 31, 2006, the Board of Directors of the Company authorized a program to
repurchase  up  to  500,000  shares,  at an aggregate price of no more than $5.0
million. The Company intends to effect such repurchases, in compliance with Rule
10b-18  under  the Securities Exchange Act of 1934.  The acquired shares will be
held in treasury or cancelled.  The Company anticipates financing the repurchase
program  out  of  working capital. This stock redemption program was approved to
remain in place and in full force/effect for a period of 18 months.  The Company
purchased 20,000 shares at an average price per share of $7.17 during the fiscal
quarter  ended  July  5,  2006.


                                       11
<PAGE>
7.   Goodwill  and  Long-Lived  Assets

Intangible  assets with definite lives are amortized over their estimated useful
lives.  The  following  table  provides  a  summary  of the Company's intangible
assets  with  definite  lives  as  of  July  5,  2006  and  January  5,  2006:

<TABLE>
<CAPTION>
(in thousands)
                                   Gross                                       Gross                         Net
                                  Carrying     Accumulated   Net Carrying     Carrying     Accumulated     Carrying
                                   Amount     Amortization      Amount         Amount     Amortization      Amount
                                  7/5/2006      7/5/2006       7/5/2006       1/5/2006      1/5/2006       1/5/2006
                                ------------------------------------------  -----------------------------------------
<S>                             <C>           <C>            <C>            <C>           <C>            <C>
Amortized intangible assets:
  Covenants not-to-compete      $      2,309  $       1,907  $         402  $      2,024  $       1,859  $        165
  Customer lists                       2,877          1,248          1,629         2,877          1,061         1,816
  Other intangibles                    1,268            336            932         1,268            242         1,026
                                ------------  -------------  -------------  ------------  -------------  ------------
  Total amortized intangibles   $      6,454  $       3,491  $       2,963  $      6,169  $       3,162  $      3,007
                                ============  =============  =============  ============  =============  ============
</TABLE>

Amortized intangible assets are being amortized over periods ranging from 1.5 to
15  years  for covenants not-to-compete, 10 to 15 years for customer lists and 4
to  7  years  for  other  intangibles.  For  the  quarter  ended  July  5, 2006,
amortization  expense  related  to  intangible assets was $173 thousand. For the
quarter  ended  July  5, 2005, amortization expense related to intangible assets
was  $192  thousand. For the six months ended July 5, 2006, amortization expense
related  to intangible assets with definite lives was $329 thousand. For the six
months  ended  July  5,  2005, amortization expense related to intangible assets
with  definite  lives  was  $460  thousand.

Projected future amortization expense related to intangible assets with definite
lives  is  as  follows:

<TABLE>
<CAPTION>
(in thousands)
Fiscal Years:
<S>             <C>     <C>
2006            $  344  July 6, 2006 thru January 5, 2007
2007               674
2008               651
2009               587
2010               408
2011+              299
                ------
         Total  $2,963
                ======
</TABLE>

The  change of the net carrying amount of goodwill for the six months ended July
5,  2005  is  as  follows:

<TABLE>
<CAPTION>
(in thousands)
<S>                                       <C>
Net carrying amount as of 1/5/06          $101,048
Goodwill recorded during first quarter         250
                                          --------
Net carrying amount as of 4/5/06           101,298
                                          --------
Goodwill recorded during second quarter        488
                                          --------
Net carrying amount as of 7/5/06          $101,786
                                          ========
</TABLE>

As part of its goodwill impairment testing, the Company reviews various factors,
such  as  the  market price of the Company's common stock, discounted cash flows
from projected earnings and values for comparable companies to determine whether
impairment  exists.  The  Company  has  worked  with  a valuation firm to assess
goodwill  impairment  and has determined there is impairment.    The second step
of  the  goodwill  impairment


                                       12
<PAGE>
test is not yet complete.  The Company recognized a charge of $16.0 million as a
reasonable  estimate  of  the  impairment  loss  in  its  fiscal  2005 financial
statements.  The  actual  impairment  loss,  once determined by the Company, may
differ  significantly  from  this  estimate.  Any  adjustment  to this estimated
impairment  loss  based  on  the completion of the measurement of the impairment
loss  will  be  recognized  in  the  subsequent  reporting period as a change in
estimate.

During  the  six  months  ended July 5, 2006, the Company recorded a net of $738
thousand  of  goodwill.  The amounts recorded consisted of $825 thousand and $10
thousand  for  payments  under  earn-out  agreements and a miscellaneous charge,
related  to  prior  acquisitions,  respectively,  offset  by  $97  thousand  in
collections  of  overpayments.

8.   Supplemental  Cash  Flow  Disclosures

Supplemental  disclosures  with  respect  to  cash flow information and non-cash
investing  and  financing  activities  are  as  follows:

<TABLE>
<CAPTION>
(in thousands)
                                              Six Months Ended July 5,
                                           -----------------------------
                                               2006            2005
                                           -------------  --------------
<S>                                        <C>            <C>
     Interest paid                         $         671  $         520
                                           =============  ==============
     Income taxes paid                     $          89  $       1,088
                                           =============  ==============
     Adjustment to purchase price
       of acquired assets and goodwill     $           -  $        (538)
                                           =============  ==============

     Business combinations accounted for
     as purchases:
       Assets acquired                     $         738  $       1,139
       Liabilities (assumed)/paid                      -              -
                                           -------------  --------------
       Net cash paid                       $         738  $       1,139
                                           =============  ==============
</TABLE>

9.   Litigation

There  are  various  legal actions arising in the normal course of business that
have  been  brought  against the Company. Management believes these matters will
not  have  a  material  adverse  effect  on  the Company's financial position or
results  of  operations.

10.  Segment  Information

Effective  in  the  fourth  quarter of 2005, the Company re-aligned its business
segments  and  operating segments into one business segment, which includes both
product  and  service offerings.  The Company follows the provisions of SFAS No.
131,  "Disclosures  about  Segments  of  an Enterprise and Related Information."
This  statement  establishes  standards  for  the reporting of information about
operating  segments  in  annual  and  interim  financial  statements.  Operating
segments are defined as components of an enterprise for which separate financial
information  is  available  that  is  evaluated regularly by the chief operating
decision  maker(s)  in  deciding  how  to  allocate  resources  and in assessing
performance.  The  Company's  operating  segments  have  similar  economic
characteristics and therefore can be aggregated into one reporting segment.  Two
or  more operating segments may be aggregated into a single operating segment if
the  segments  are similar in each of the following areas: (1) the nature of the
products and services (2) the nature of the production processes (3) the type of
class  of  customer  for  the  products  and  service  and (4) the nature of the
regulatory  environment.

Prior  to  fiscal  year  2005,  the  Company disclosed three reporting segments:
products,  services  and  leasing.  Monthly income statements were generated and
reviewed by management for both the products and service businesses for decision
making  purposes.  The  segment  reporting  (product and services) are no longer
reviewed  by  management on a regular basis and required significant manual work
to  develop  the  information  solely for quarterly external financial statement
reporting  purposes.


                                       13
<PAGE>
During  the  fourth  quarter  of  2005, the Company realigned its management and
reporting  responsibilities  into  functional  lines: Sales, Service Operations,
Finance and Administrative.  The Company also aligned sales and service delivery
into  five  domestic  geographic  regions  and  finance  and  administration  is
centralized.  Each of the geographic regions sell both products and services and
each  geographic  region  has similar economic characteristics.  As a result the
Company  now  reports  one reportable segment and the information in this report
has  been  revised  to  reflect  the  Company's  current  segment  reporting.

11.  Reclassifications

Certain  reclassifications  of prior period amounts have been made to conform to
the  current  period  presentation.

12.  Restructuring  and  Severance  Charges

During  the  first six months of fiscal 2006 and during fiscal 2005, the Company
recorded  severance charges totaling $0.1 million and $0.9 million respectively,
resulting  primarily  from  a  re-alignment  of  the  structure of the Company's
organization.

During  fiscal  2004,  in  connection  with  certain  strategic initiatives, the
Company  recorded  restructuring and severance charges aggregating $1.0 million.
The  restructuring  and  severance  charges  were associated with legacy Pomeroy
costs  of  facilities  and processes that had become duplicative or redundant as
Alternative  Resources  Corporation  ("ARC") operations were integrated into the
Company.  These  costs  consisted  of  facility closing and involuntary employee
reduction  severance  costs  of  $576  thousand and $400 thousand, respectively.
These  costs  were accounted for under FAS 146, "Accounting for Costs Associated
with  Exit or Disposal Activities," and were included as a charge to the results
of operations for the year ended January 5, 2005.  Any subsequent changes to the
estimates  of  executing  the  currently approved plans of restructuring will be
reflected  in  current  results  of  operations.

The  Company  also  recorded during fiscal 2004 a non-recurring, one-time charge
for  severance  in  the  amount  of $1.447 million related to the resignation of
David B. Pomeroy II as CEO of the Company. Mr. Pomeroy will continue to serve as
Chairman  of  the  Board  of  the  Company. Mr. Pomeroy will continue to receive
severance  payments  thru  January  2009.

As of July 5, 2006, the restructuring and severance charge accrual, consisted of
the  following:

<TABLE>
<CAPTION>
(in thousands)                                           Facility
                                        Severance      consolidation        Total
                                     -------------------------------------------------
<S>                                  <C>              <C>              <C>
Accrual balance at January 5, 2006   $          876   $          125   $        1,001
Charges accrued                                 133                -              133
Cash payments                                  (322)             (51)            (373)
                                     -------------------------------------------------
Accrual balance at April 5, 2006                687               74              761
Charges accrued                                   -                                 -
Cash payments                                  (221)             (74)            (295)
                                     -------------------------------------------------
Accrual balance at July 5, 2006      $          466   $            -   $          466
                                     =================================================
</TABLE>

Also,  the  Company's  management  recorded  a restructuring charge liability in
connection  with the ARC acquisition to eliminate certain duplicative activities
and  reduced  facility requirements.  As a result, approximately $6.4 million of
costs were recorded as part of the liabilities assumed in the ARC acquisition in
October  2004.  The  restructuring  charge  consisted  of  costs  of  vacating
duplicative leased facilities of ARC and severance costs associated with exiting
activities.  These  costs  are  accounted  for  under EITF 95-3, "Recognition of
Liabilities in Connection with Purchase Business Combinations." These costs were
recognized  as  a  liability  assumed  in  the purchase business combination and
included  in the allocation of the cost to acquire ARC. Changes to the estimates
primarily  for  acquired  leases  included  in  the  currently approved plans of
restructuring  through July 23, 2005 were recorded as an increase or decrease in
goodwill,  with  any  increases  in  estimates thereafter charged to operations.


                                       14
<PAGE>
<TABLE>
<CAPTION>
                                          Facility
(in thousands)                          consolidation
                                       ---------------
<S>                                    <C>
Total initial liability                $        3,715
Adjustments of initial liability                2,165
Cash payments                                  (1,159)
                                       ---------------
Liability balance at January 5, 2006            4,721
Cash payments                                    (278)
                                       ---------------
Liability balance at April 5, 2006              4,443
Cash payments                                    (273)
                                       ---------------
Liability balance at July 5, 2006      $        4,170
                                       ===============
</TABLE>

Additionally,  as  part  of  the  acquisition  of  ARC, the Company acquired the
remaining  obligations of ARC's existing restructuring plan, which was initially
recorded by ARC in fiscal 2002. The total obligations assumed in connection with
this  restructuring  plan  was  $1.5  million  at  July  23,  2004.

As  of  July  5,  2006, the balance of the ARC fiscal 2002 accrued restructuring
costs  recorded  consisted  of  the  following:

<TABLE>
<CAPTION>
                                         Facility           Other
                                      consolidations       charges            Total
                                     ----------------------------------------------------
<S>                                  <C>               <C>               <C>
Total liability as of July 23, 2004  $           756   $           696   $         1,452
Adjustment of initial liability                  100                 -               100
Cash payments                                   (812)             (671)           (1,483)
                                     ----------------------------------------------------
Balance at January 5, 2006                        44                25                69
Cash payments                                    (33)               (3)              (36)
                                     ----------------------------------------------------
Balance at April 5, 2006                          11                22                33
Cash payments                                    (11)               (3)              (14)
                                     ----------------------------------------------------
Balance at July 5, 2006              $             -   $            19   $            19
                                     ====================================================
</TABLE>


                                       15
<PAGE>
ITEM  2-MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

         Special Cautionary Notice Regarding Forward-Looking Statements
         --------------------------------------------------------------

Certain  of the matters discussed under the caption "Management's Discussion and
Analysis  of  Financial  Condition  and  Results  of Operations" contain certain
forward  looking  statements  regarding future financial results of the Company.
The words "expect," "estimate," "anticipate," "predict," and similar expressions
are  intended  to  identify  forward-looking  statements.  Such  statements  are
forward-looking  statements  for  purposes of the Securities Act of 1933 and the
Securities  Exchange  Act of 1934, as amended, and as such may involve known and
unknown  risks,  uncertainties  and  other  factors  which  may cause the actual
results,  performance  or achievements of the Company to be materially different
from  future  results,  performance or achievements expressed or implied by such
forward-looking  statements.  Important  factors  that  could  cause  the actual
results,  performance  or  achievements of the Company to differ materially from
the  Company's  expectations  are  disclosed in this document including, without
limitation,  those  statements  made  in  conjunction  with  the forward-looking
statements  under  "Management's  Discussion and Analysis of Financial Condition
and  Results  of  Operations".  All  written  or oral forward-looking statements
attributable  to  the  Company are expressly qualified in their entirety by such
factors.


                                       16
<PAGE>
RESULTS  OF  OPERATIONS
The  following  table  sets  forth for the periods presented information derived
from  our  consolidated  statements  of  operations expressed as a percentage of
product  and  service  revenues:

<TABLE>
<CAPTION>
                                          Three Months Ended         Six Months Ended
                                       ------------------------  ------------------------
                                               July 5,                   July 5,
                                          2006         2005         2006         2005
                                       ------------------------  ------------------------
                                       (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
<S>                                    <C>          <C>          <C>          <C>
Product and service revenues:
  Product                                    56.1%        70.4%        57.5%        68.8%
  Service                                    43.9%        29.6%        42.5%        31.2%
                                       -----------  -----------  -----------  -----------
    Total revenues                          100.0%       100.0%       100.0%       100.0%
                                       -----------  -----------  -----------  -----------

Cost of sales and service:
  Product                                    51.4%        65.1%        52.8%        63.5%
  Service                                    33.5%        21.8%        32.6%        23.1%
                                       -----------  -----------  -----------  -----------
    Total cost of revenues                   84.9%        86.9%        85.4%        86.6%
                                       -----------  -----------  -----------  -----------

  Gross profit                               15.1%        13.1%        14.6%        13.4%
                                       -----------  -----------  -----------  -----------

Operating expenses:
  Selling, general and administrative        12.3%        10.2%        13.3%        11.1%
  Depreciation and amortization               0.7%         0.7%         0.8%         0.8%
  Restructuring and severance charges         0.0%         0.0%         0.0%         0.0%
  Other                                       0.0%         0.0%         0.0%         0.0%
                                       -----------  -----------  -----------  -----------
    Total operating expenses                 13.0%        10.9%        14.1%        11.9%
                                       -----------  -----------  -----------  -----------

Income from operations                        2.1%         2.2%         0.5%         1.5%

Interest expense, net                         0.1%         0.1%         0.2%         0.1%

                                       -----------  -----------  -----------  -----------
Income before income tax                      2.0%         2.1%         0.3%         1.4%
Income tax expense                            0.7%         0.9%         0.1%         0.6%

                                       -----------  -----------  -----------  -----------
Net income                                    1.3%         1.2%         0.2%         0.8%
                                       ===========  ===========  ===========  ===========
</TABLE>


                                       17
<PAGE>
                           POMEROY IT SOLUTIONS, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TOTAL  PRODUCT  AND  SERVICE  REVENUES.

QUARTER-TO-DATE.  Total product and service revenues decreased $27.9 million, or
14.5%,  to  $164.1  million  in  the  second  quarter of fiscal 2006 from $192.0
million  in  the  second  quarter  of  fiscal  2005.

Product  sales decreased $43.0 million, or 31.8%, to $92.1 million in the second
quarter of fiscal 2006 from $135.1 million in the second quarter of fiscal 2005.
The  decrease  in  product  sales  is primarily attributable to several factors:
continuing  competitive pressure in the marketplace; reduction in IT spending by
our  customers;  and  delays  in  IT  project deployments by our customers.  The
product  margins,  however,  have  increased  due  to  the mix of product sales.

Service  revenues  increased  $15.1  million,  or 26.5%, to $72.0 million in the
second quarter of fiscal 2006 from $56.9 million in the second quarter of fiscal
year 2005. The increase in service revenues relates primarily to the growth from
new service agreements. Although service margins declined compared to the second
quarter  of  2005,  service  margins did increase 75 basis points over the first
quarter  of  2006,  as  the  Company  has taken steps to improve utilization and
margins.

YEAR-TO-DATE.  Total  product  and  service revenues decreased $43.1 million, or
12.0%,  to  $314.8  million  in  the first six months of fiscal 2006 from $357.9
million  in  the  first  six  months  of  fiscal  2005.

Product  sales decreased $65.3 million, or 26.5%, to $181.0 million in the first
six  months of fiscal 2006 from $246.3 million in the first six months of fiscal
2005.  The  decrease  in  product  sales  is  primarily  attributable to several
factors:  continuing  competitive  pressure  in the marketplace; reduction in IT
spending  by  our  customers;  and  delays  in  IT  project  deployments  by our
customers.  The  product  margins,  however,  have  increased  due to the mix of
product  sales.

Service  revenues  increased  $22.4  million, or 20.1%, to $133.9 million in the
first  six  months of fiscal 2006 from $111.5 million in the first six months of
fiscal  year  2005.  This  increase in service revenues relates primarily to the
growth  from  new  service agreements. Service margins declined compared to 2005
due  to  lower  profitability  on the start up on several newer engagements. The
Company  has  taken  steps  to  improve  utilization  and margins have increased
subsequently  in  both  the  first  and  second  quarter.

GROSS  PROFIT.

QUARTER-TO-DATE.  Gross profit decreased $0.3 million, or 1.2%, to $24.8 million
in the second quarter of fiscal 2006 from $25.1 million in the second quarter of
fiscal 2005. The decrease resulted primarily from the decrease in product sales.
Gross  profit,  as  a  percentage  of  revenue, increased to 15.1% in the second
quarter  of  fiscal  2006  as  compared to 13.1% in the second quarter of fiscal
2005.  This  increase  in  gross  margin  is  primarily  due  to a change in the
product/service  sales mix, with a greater percentage from higher margin service
revenue  that  produced  higher  gross  margins.

YEAR-TO-DATE.  Gross profit decreased $2.2 million, or 4.6%, to $45.8 million in
the  first  six months of fiscal 2006 from $48.0 million in the first six months
of  fiscal  2005.  The  decrease resulted primarily from the decrease in product
sales. Gross profit, as a percentage of revenue, increased to 14.6% in the first
six months of fiscal 2006 as compared to 13.4% in the first six months of fiscal
2005.  This  increase  in  gross  margin  is  primarily  due  to a change in the
product/service  sales mix, with a greater percentage from higher margin service
revenue  that  produced  higher  gross  margins.


                                       18
<PAGE>
OPERATING  EXPENSES.

QUARTER-TO-DATE.  Operating  expenses  increased  to $21.4 million in the second
quarter  of  fiscal  2006,  compared  to  $21.0 million in the second quarter of
fiscal  2005. Operating expenses increased as a result of increased professional
fees,  medical claims and equity compensation expense. No comparable expense was
recognized  in  the  second  quarter  of  fiscal  2005  for  equity compensation
expenses. Expressed as a percentage of total product and service revenues, these
expenses  were  13.0%  in the second quarter of fiscal 2006 compared to 10.9% in
the  second  quarter  of  fiscal  2005.

YEAR-TO-DATE.  Operating  expenses  increased  $1.7  million,  or 4.0%, to $44.3
million  in  the first six months of fiscal 2006 from $42.6 million in the first
six  months  of fiscal 2005. The increase is primarily attributable to increased
medical  claims,  professional  fees,  and  equity  compensation  expense.  No
comparable  expense  was  recognized  in the first six months of fiscal 2005 for
equity  compensation  expenses.  Expressed  as a percentage of total product and
service  revenues,  these  expenses were 14.1% in the first six months of fiscal
2006  compared  to  11.9%  in  the  first  six  months  of  fiscal  2005.

INCOME  FROM  OPERATIONS.

QUARTER-TO-DATE.  Income  from  operations  decreased $0.8 million, or 19.1%, to
$3.4  million  in  the  second  quarter  of fiscal 2006 from $4.2 million in the
second  quarter  of  fiscal 2005. The Company's operating margin was 2.1% in the
second  quarter  of  fiscal  2006  as  compared to 2.2% in the second quarter of
fiscal  2005.  This  decrease  is  the  result  of increased operating expenses,
partially  offset  by  an  increase  in  gross  profit.

YEAR-TO-DATE.  Income  from operations decreased $3.9 million, or 72.2%, to $1.5
million  in  the  first six months of fiscal 2006 from $5.4 million in the first
six  months of fiscal 2005. The Company's operating margin was 0.5% in the first
six  months of fiscal 2006 as compared to 1.5% in the first six months of fiscal
2005.  This  decrease  is  the result of increased operating expenses, partially
offset  by  an  increase  in  gross  profit.

INTEREST  EXPENSE.

QUARTER-TO-DATE.  Net  interest  expense  was  $162  thousand  during the second
quarter  of  fiscal  2006  as  compared to net interest expense of $206 thousand
during  second quarter of fiscal 2005. This decrease in net interest expense was
a  result  of decreased borrowings under the Company's credit facility offset by
an increase due to the accretion of interest of future rental payments that were
accrued  for  a  leased  facility  that  was  part  of  the  ARC  acquisition.

YEAR-TO-DATE.  Net interest expense was $471 thousand in the first six months of
fiscal  2006  compared to net interest expense of $427 thousand in the first six
months  of  fiscal  2005.  This  increase in net interest expense was due to the
accretion  of  interest on future rental payments that were accrued for a leased
facility  that  was  part  of  the  ARC  acquisition.

INCOME  TAXES.

QUARTER-TO-DATE.  The  Company's  effective  income  tax  rate  was 37.1% in the
second  quarter of fiscal 2006 compared to 40.5% in the second quarter of fiscal
2005.  This  fluctuation  was  principally  related  to  the  fluctuation in the
calculation  of  state  and  local  income  taxes.

YEAR-TO-DATE.  The  Company's  effective  tax  rate  was  39.0% in the first six
months  of fiscal 2006 compared to 40.5% in the first six months of fiscal 2005.
This  fluctuation  was principally related to the fluctuation in the calculation
of  state  and  local  income  taxes.

NET  INCOME.

QUARTER-TO-DATE.  Net  income  was  $2.0 million in the second quarter of fiscal
2006  compared  to  $2.4 million in the second quarter of fiscal 2005 due to the
factors  described  above.

YEAR-TO-DATE. Net income was $0.6 million in the first six months of fiscal 2006
compared  to  $2.9  million  in  the  first six months of fiscal 2005 due to the
factors  described  above.


                                       19
<PAGE>
                         LIQUIDITY AND CAPITAL RESOURCES

Cash  provided by operating activities was $16.1 million in the first six months
of  fiscal  2006.  Cash  used  in  investing  activities was $1.4 million, which
included  $0.7  million for prior year acquisitions and $0.8 million for capital
expenditures.  Net  cash  used  in financing activities was $15.1 million, which
included $15.3 million for net repayments of short-term borrowings, $0.1 million
for  the  purchase  of  treasury  stock, offset by $0.3 million of proceeds from
exercise  of  stock  options  and  employee  stock  purchase  plan.

The amount of cash derived from operating activities will vary based on a number
of  business  factors  which  may  change  from time to time, including terms of
available  financing  from  vendors,  downturns in the Company's business and/or
downturns  in  the  businesses of the Company's customers.  However, a growth or
decline  in  service  revenue  in conjunction with a change in the proportion of
service  revenue to total revenue is an underlying driver of operating cash flow
during  the period of growth because a majority of the Company's service revenue
is  generated  based  upon  the billings of the Company's technicians.  The cash
outlay for these labor/payroll costs is incurred bi-weekly with each pay period.
The invoicing for the service is generated on various billing cycles as dictated
by  the customers, and the respective cash inflow typically follows within 30 to
60  days  of  invoice date, which may be as long as 60 to 120 days from the time
the services are performed.   This differs from product revenue in that the time
period  between  the  time  that  the  Company  incurs  the cost to purchase the
products  and  collects  the  revenue  from  its  customer is typically shorter,
usually  from  0  to  60  days, and the Company primarily orders inventory for a
particular  customer  rather  than  stocking  large  amounts  of inventory.  The
Company  anticipates  an  increase  in  service revenue and in the proportion of
service  revenue  to  total  revenue  which,  if  it  occurs,  may  result  in a
significant  decrease  in cash flows from operating activities during periods of
significant  growth  or  periods  of  excess  technical  capacity.  In addition,
certain  services,  primarily outsourcing contracts for the Company's Life Cycle
Services,  require  that  the  Company  maintain  a specific parts inventory for
servicing  the  customer;  thus, an increase or decrease in the type of services
provided  can  impact  inventory  levels  and  operating  cash  flows.

Cash flows provided by operating activities in the six months ended July 5, 2006
were  $16.1  million  as  compared to cash flows used by operating activities of
$5.6  million for the corresponding period of fiscal 2005.  The increase in cash
flows  from operating activities in the first six months of 2006 compared to the
first  six  months  of  2005  resulted  primarily from the timing of payments on
accounts  payable,  offset  by  timing  of receipts on accounts netting to $22.5
million  increase  in cash provided over the corresponding period in 2005. Other
major  factors  impacting  net  cash  flows  from  operating  activities  are
fluctuations  in  net  income,  deferred income taxes, net investment in leases,
employee  compensation  and benefits as well as from changes in items classified
as  other,  net.

A  significant  part  of  Pomeroy's  inventories  are  financed  by  floor  plan
arrangements  with third parties. At July 5, 2006, these lines of credit totaled
$78.5  million,  including $75.0 million with GE Commercial Distribution Finance
("GECDF") and $3.5 million with IBM Credit Corporation ("ICC"). Borrowings under
the  GECDF  floor  plan  arrangements  are made on thirty-day notes.  Borrowings
under  the  ICC  floor plan arrangements are made on fifteen-day notes. All such
borrowings  are secured by the related inventory. Financing on substantially all
of the arrangements is interest free due to subsidies by manufacturers. Overall,
the  average  interest rate on these arrangements is less than 1.0%. The Company
classifies  amounts  outstanding  under  the floor plan arrangements as accounts
payable.

The  Company  has  a  $165.0  million  Syndicated Credit Facility Agreement with
GECDF.   The  credit facility has a three-year term and its components include a
maximum  of  $75.0  million  for  inventory  financing  as described above and a
revolving line of credit, collateralized primarily by accounts receivable, of up
to  $110.0 million; provided that the total amount outstanding at any time under
the inventory financing facility and the revolving line of credit may not exceed
$165.0  million.  The  credit facility also provides a letter of credit facility
of  $5.0  million.   The interest rate under the credit facility is based on the
London  InterBank  Offering  Rate  ("LIBOR")  and a pricing grid.  As of July 5,
2006,  the adjusted LIBOR rate was 7.58%.  This credit facility expires June 28,
2007.

As  of  July 5, 2006, the Company had no outstanding balance under the Company's
credit  facility.  As of January 5, 2006, the Company had an outstanding balance
under  the  Company's  credit facility of $15.3 million.  The credit facility is
collateralized  by  substantially  all  of  the  assets of Pomeroy, except those
assets  that collateralize certain other financing arrangements. Under the terms
of  the  credit facility, Pomeroy is subject to various financial covenants.  As
of  July  5,  2006,  Pomeroy  was  in compliance with those financial covenants.

Pomeroy  believes  that  the  anticipated  cash flow from operations and current
financing  arrangements  will  be  sufficient  to  satisfy  Pomeroy's  capital
requirements  for  the  next  twelve  months.


                                       20
<PAGE>
On March 31, 2006, the Board of Directors of the Company authorized a program to
repurchase  up  to  500,000  shares,  but no more than $5.0 million. The Company
intends  to  effect  such  repurchases, in compliance with Rule 10b-18 under the
Securities  Exchange  Act of 1934.  The acquired shares will be held in treasury
or  cancelled.  The  Company anticipates financing the repurchase program out of
current  cash  and  investments  or working capital.  As of July 5, 2006, 20,000
shares  have  been  repurchased.  This  stock repurchase program was approved to
remain  in  place  and  in  full  force/effect  for  a  period  of  18  months.


                                       21
<PAGE>
ITEM  3-QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

The  Company  is  exposed  to  interest  rate  risk primarily through its credit
facility  with  GECDF.  Due  to the Company's current debt position, the Company
did  not  experience  a  material  impact from interest rate risk for the second
quarter  of  fiscal  2006.

Currently,  the  Company does not have any significant financial investments for
trading  or  other  speculative  purposes  or  to manage interest rate exposure.

ITEM 4-CONTROLS AND PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

The  Company  maintains  disclosure  controls  and  procedures  (as  defined  in
Rules13(a)-15(e)  and  15(d)-15(e)  of  the  Securities Exchange Act of 1934, as
amended  (the "Exchange Act")) designed to provide reasonable assurance that the
information  required  to  be  reported in its Exchange Act filings is recorded,
processed,  summarized  and  reported  within  the  time  periods  specified and
pursuant to the regulations of the Securities and Exchange Commission, including
controls  and procedures designed to ensure that this information is accumulated
and  communicated  to  the  Company's  management, including its Chief Executive
Officer  and  Chief Financial Officer, as appropriate, to allow timely decisions
regarding  required  disclosure.  It  should  be noted that, because of inherent
limitations,  the  Company's  disclosure  controls  and procedures, however well
designed  and operated, can provide only reasonable, and not absolute, assurance
that  the  objectives  of  the  disclosure  controls  and  procedures  are  met.

As described in Item 9A of the Company's Annual Report on Form 10-K for the year
ended  January  5,  2006,  the Company reported that it identified four material
weaknesses  in  its  internal control over financial reporting. As a result, the
Company's  management, including its Chief Executive Officer and Chief Financial
Officer, concluded that as of January 5, 2006, the Company's disclosure controls
and  procedures  were not effective at a reasonable level of assurance, based on
the  evaluation  of these controls and procedures required by Exchange Act Rules
13(a)-15(e)  or  15(d)-15(e).

As  of  July  5,  2006,  the  four material weaknesses have not been remediated.
Accordingly,  the  Company's Chief Executive Officer and Chief Financial Officer
concluded  that,  as  of  July  5,  2006,  the Company's disclosure controls and
procedures were not effective in providing reasonable assurance that information
required  to  be disclosed by us in reports we file or submit under the Exchange
Act  is  recorded,  processed,  summarized  and reported within the time periods
specified  in the SEC's forms and rules.  Despite these material weaknesses, the
financial  statements reported on Form 10-Q for the fiscal quarter ended July 5,
2006  ,  fairly  present,  in  all material respects, the consolidated financial
condition  and  results  of  operations  of  the  Company.

MATERIAL WEAKNESSES REMEDIATION PLANS:

Management  is  committed  to the remediation of the four material weaknesses as
well  as  the  continued  improvement of the Company's overall internal controls
over  financial  reporting.  Management has developed remediation plans for each
of  the four identified material weaknesses.  The Company currently is executing
a  remediation  plan  for  each  of the material weaknesses set forth below that
includes  the  following:

Actions  Relating  to  Maintaining Effective Control Over The Accrual of Service
--------------------------------------------------------------------------------
Billing  Calculations  and  Service  Revenue  Recognition.
----------------------------------------------------------
We  have  assessed  our  service  revenue  and expense recognition processes and
procedures.  We  have  developed  and  will  be  implementing a remediation plan
during  the  third quarter of 2006.  Our remediation work is focusing on service
parts,  service  contracts,  service  invoicing  and subcontracting processes to
improve their internal controls over financial reporting.  The Company's goal is
to  have  the  remediation completed during the early part of the fourth quarter
with  remediation  testing  commencing  during  November  2006.

Actions  Relating  to  Maintaining  Effective  Control  Over Financial Close and
--------------------------------------------------------------------------------
Reporting  Process.
-------------------
During  the  second  quarter  we  have  developed  and  implemented  several new
accounting policies and procedures. During the third and fourth quarters of 2006
we  will  continue  to  develop  and implement more accounting policies. We have
developed  and implemented more structured and meaningful general ledger account
reconciliations that now reflect reconciling items that will lead to more timely
resolution  and  proper  account  classifications.  A  detailed  finance


                                       22
<PAGE>
organization  training  plan  on  financial  controls,  policies and procedures,
account reconciliations, GAAP and SEC disclosure checklists has been implemented
during  the  second  quarter of 2006. These training plans will begin during the
third  quarter  of  2006.  In  the  second quarter the Company has replaced five
accounting  positions  with  qualified  individuals. During the third quarter of
2006  remediation  testing  will  be  conducted  over  these  controls.

Actions Related to Maintaining Effective Control Over Computer Applications Used
--------------------------------------------------------------------------------
in  Financial  Reporting.
-------------------------
The  Company  has  developed  and  implemented  controls over system changes and
upgrades  that will be tested during October 2006.  In addition, the Company has
addressed  the  necessary  changes  to resolve the application issues associated
with improper system access rights by developing and implementing an IT Security
Access  Policy.  Our  remediation  testing  of  this  control  weakness  will be
performed  during  the  fourth  quarter  of  2006  or  earlier.

Actions  Related  to  Maintaining  Effective  Controls Over the Payroll Process.
--------------------------------------------------------------------------------
We  have implemented new payroll policies and procedures for timely notification
of  terminated  employees.  The  Company  will  continue to improve the internal
controls  over  payroll  during  2006 by implementing additional procedures that
will  hold  one-up managers accountable and responsible for timely notifications
of  terminated  employees.  The  Company  will be performing payroll remediation
testing  during  the  third  quarter  of  2006.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company's remediation plan for three of the four material weaknesses has not
been  in place long enough to show meaningful results.  It is expected, however,
that  the  remediation  of  these  four  material  weaknesses will significantly
improve  the  Company's  internal  controls  over financial reporting during the
latter  part  of  2006  and  beyond.


                                       23
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1-LEGAL PROCEEDINGS

There  are  various  legal actions arising in the normal course of business that
have  been  brought  against the Company. Management believes these matters will
not  have  a  material  adverse  effect  on  the Company's financial position or
results  of  operations.

ITEM 1A-RISK FACTORS

NONE

ITEM 2-UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 31, 2006, the Board of Directors of the Company authorized a program to
repurchase  up  to  500,000  shares,  but no more than $5.0 million. The Company
intends  to  effect  such  repurchases, in compliance with Rule 10b-18 under the
Securities  Exchange  Act of 1934.  The acquired shares will be held in treasury
or  cancelled.  The  Company anticipates financing the repurchase program out of
working  capital.  This stock redemption program was approved to remain in place
and  in  full  force/effect  for  a  period  of  18  months.

<TABLE>
<CAPTION>
                              Issuer Purchases of Equity Securities
                                                       (c) Total number
                                                       of shares          (d) Maximum number
                                      (b) Average      purchased as part  of shares that may yet
                (a) Total number of   price paid per   of publicly        be purchased under the
Period           shares purchased     share            announced plan     plan
<S>              <C>                  <C>              <C>                <C>
4/6/06 - 5/5/06                    -  $             -                  -                 500,000
5/6/06 - 6/5/06                    -  $             -                  -                 500,000
6/6/06 - 7/5/06               20,000  $          7.17             20,000                 480,000

                 -------------------                   -----------------------------------------
Total                         20,000                              20,000                 480,000
                 ===================                   =========================================
</TABLE>

During the six months ended July 5, 2006, the Company did not pay any cash
dividends.  Pomeroy has no plans to pay cash dividends in the foreseeable
future, and the payment of such dividends is restricted under Pomeroy's current
credit facility.  Under such credit facility, cash dividends and stock
redemptions are limited to $5 million annually.

ITEM 3-DEFAULTS UPON SENIOR SECURITIES
None

ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 20, 2006, the Company held its annual meeting of stockholders for the
following purposes:

          1. To elect ten directors; and

          2. To approve certain amendments to the 2002 Amended and Restated
          Outside Directors' Stock Incentive Plan.

     The voting on the above matters by the stockholders was as follows:


                                       24
<PAGE>
     Matter:
     -------

<TABLE>
<CAPTION>
               Election of Directors:     For     Withheld
               ----------------------  ---------  ---------
<S>                                    <C>        <C>
               David B. Pomeroy, II    9,014,920  1,787,225
               Stephen E. Pomeroy      8,997,750  1,804,395
               Kevin G. Gregory        8,994,646  1,807,499
               James H. Smith III      8,974,995  1,827,150
               William H. Lomicka      8,886,738  1,915,407
               Vincent D. Rinaldi      4,562,525  6,239,620
               Debra E. Tibey          8,732,542  2,069,603
               Kenneth R. Waters       9,037,376  1,764,769
               David G. Boucher        9,037,613  1,764,532
               Ronald E. Krieg         8,815,302  1,986,843
</TABLE>

               Approve the Amendment to the Company's 2002 Amended and Restated
               ----------------------------------------------------------------
               Outside Directors' Stock Incentive Plan:
               ----------------------------------------

               With  regards  to  the  vote,  6,963,390  shares  were  voted  in
               favor  of  the  forgoing proposal and 1,744,411 shares were voted
               against  the  forgoing  proposal.  There  were  1,814,137  broker
               nonvotes  and stockholders holding 280,207, shares abstained from
               voting  on  this proposal. The number of shares voted in favor of
               the  proposal  was  sufficient  for  its  passage.

ITEM 5-OTHER INFORMATION
None

ITEM 6-EXHIBITS

(a)  Exhibits

          10(i)(mm)  Amendment No.3 (With Waiver) to Amended and Restated Credit
          (16)       Facilities Agreement

          31.1       Section 302 CEO Certification

          31.2       Section 302 CFO Certification

          32.1       Section 906 CEO Certification

          32.2       Section 906 CFO Certification


                                       25
<PAGE>
                                    SIGNATURE

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.

                                        POMEROY IT SOLUTIONS, INC.
                                        --------------------------
                                        (Registrant)

Date: August 14, 2006                   By:   /s/ Kevin G. Gregory

                                      ------------------------------------------
                                        Kevin G. Gregory
                                        Senior Vice President and
                                        Chief Financial Officer


                                       26