UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-Q





(Mark One)


x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


For the quarterly period ended September 30, 2010





o 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: 000-26213





ROOMLINX, INC.





(Exact name of registrant as specified in its charter)








Nevada                                                             83-0401552

(State or other jurisdiction of                               (I.R.S. Employer

incorporation or organization)                             Identification No.)



2150 W. 6th Ave., Unit H Broomfield, Colorado 80020

(Address of principal executive offices)



(303) 544-1111

(Issuer's telephone number)











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


Yes x No o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).





Yes o No o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer o                                                                                     Accelerated filer o


Non-accelerated filer o                                                                                      Smaller reporting company x





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


Yes o No x





The number of shares outstanding of the Issuer's common stock as of November 9, 2010, was 4,958,915.









ROOMLINX, INC.




INDEXPART I.  FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009
2Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 (unaudited)
3Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 (unaudited)
4Notes to Consolidated Financial Statements (unaudited)
5Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
12Forward-Looking Statements
12General
13Critical Accounting Policies
14Results of Operations
15Recent Accounting Pronouncements
18Financial Condition
18Item 3.  Quantitative and Qualitative Disclosures About Market Risk
19Item 4. Controls and Procedures
19PART II.  OTHER INFORMATION
20Item 1.  Legal Proceedings
21Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
21Item 3.  Defaults Upon Senior Securities
21Item 4.  (Removed and Reserved)
21Item 5.  Other Information
21Item 6.  Exhibits
21Signatures
22









PART I.  FINANCIAL INFORMATION









Roomlinx, Inc.CONSOLIDATED BALANCE SHEETSSeptember 30,2010


December 31,(Unaudited)


2009ASSETSCurrent assets:Cash and cash equivalents

$
961,121


$
656,080Accounts receivable, net


582,791



458,614Leases receivable, current portion


282,972



85,145Prepaid and other current assets


74,111



34,296Inventory


1,177,728



240,755Total current assets


3,078,723



1,474,890Property and equipment, net


420,158



267,378Leases receivable, non-current


1,077,933



341,620Total assets

$
4,576,814


$
2,083,888LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued expenses

$
467,468


$
337,796Accrued interest


7,187



3,437Capital lease, current portion


10,170



9,615Deferred revenue


204,203



200,477Total current liabilities


689,028



551,325Capital lease, non-current


8,142



15,840Line of credit, net of discount


1,009,320



464,000Stockholders' equity:Preferred stock - $0.20 par value, 5,000,000 shares authorized:Class A - 720,000 shares authorized, issued and outstanding


144,000



144,000Common stock - $0.001 par value, 200,000,000 shares authorized:4,613,915 and 3,871,903 shares issued and outstanding, respectively


4,614



3,872Additional paid-in capital


30,071,577



27,169,689Accumulated (deficit)


(27,349,867
)


(26,264,838
)Total stockholders' equity


2,870,324



1,052,723Total liabilities and stockholders' equity

$
4,576,814


$
2,083,888




















2





Roomlinx, Inc.CONSOLIDATED STATEMENTS OF OPERATIONSfor the Three and Nine Months Ended September 30, 2010 and 2009(Unaudited)For the Three Months Ended


For the Nine Months EndedSeptember 30,


September 30,2010


2009


2010


2009Revenues:Sales

$
1,282,180


$
553,957


$
2,656,455


$
1,662,656Cost of goods sold


1,045,453



380,952



1,994,639



1,147,179Gross profit


236,727



173,005



661,816



515,477Operating expenses:Operations


181,163



133,748



493,390



327,042Product development


91,438



65,511



260,404



237,965General and administrative


303,036



360,021



916,412



898,288Depreciation


35,816



15,890



83,062



44,978611,453



575,170



1,753,268



1,508,273Operating (loss)


(374,726
)


(402,165
)


(1,091,452
)


(992,796
)Non-operating income (expense):Interest expense


(15,322
)


(176,677
)


(36,912
)


(263,140
)Financing Expense


(10,052
)


(99
)


(10,052
)


(99
)Derivative expense


-



122,263



-



(1,409,356
)Foreign currency (loss)


(942
)


(210
)


(2,680
)


(5,594
)Other income


29,316



19,915



56,068



54,8913,000



(34,808
)


6,424



(1,623,298
)(Loss) before income taxes


(371,726
)


(436,973
)


(1,085,028
)


(2,616,094
)Provision for income taxes


-



-



-



-Net (loss)


(371,726
)


(436,973
)


(1,085,028
)


(2,616,094
)Series C Preferred dividend


-



-



-



29,032Net (loss) available to common shareholders

$
(371,726
)

$
(436,973
)

$
(1,085,028
)

$
(2,645,126
)Net (loss) per common share:Basic and diluted

$
(0.08
)

$
(0.14
)

$
(0.26
)

$
(1.07
)Weighted average shares outstanding:Basic and diluted


4,406,241



3,039,004



4,141,416



2,478,590




















3




Roomlinx, Inc.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Nine Months Ended September 30, 2010 and 2009(Unaudited)2010


2009Cash flows from operating activities:Net  (loss)

$
(1,085,028
)

$
(2,616,094
)Adjustments to reconcile net (loss) to net cash(used by) operating activities:Depreciation


83,062



44,978Derivative expense


-



1,409,356Derivative carrying value increase


-



15,868Common stock, warrants, and options issued as compensation


132,897



181,569Non-cash interest expense


10,052



104,574Series C preferred dividends paid in stock


-



91,532Provision for uncollectible accounts


3,515



39,179Changes in operating assets and liabilities:Accounts receivable


(127,692
)


(100,578
)Inventory


(948,973
)


21,032Prepaid and other current assets


(39,815
)


(13,172
)Accounts payable and accrued expenses


131,256



(193,698
)Deferred revenue


3,726



(193,226
)Total adjustments


(751,972
)


1,407,414Net cash (used by) operating activities


(1,837,000
)


(1,208,680
)Cash flows from investing activities:Leases receivable


(1,025,840
)


(234,391
)Payments received on leases receivable


91,700



29,174Purchase of property and equipment


(221,676
)


(163,329
)Net cash (used by) investing activities


(1,155,816
)


(368,546
)Cash flows from financing activities:Proceeds from sale of common stock and exercise of warrants


2,323,000



-Proceeds from line of credit


982,000



340,000Payments on capital lease payable


(7,143
)


(2,954
)Net cash provided by financing activities


3,297,857



337,046Net increase (decrease) in cash and equivalents


305,041



(1,240,180
)Cash and equivalents at beginning of period


656,080



1,941,215Cash and equivalents at end of period

$
961,121


$
701,035Supplemental Cash Flow InformationCash paid for interest

$
31,907


$
129,000Cash paid for income taxes

$
-


$
-Non-cash investing and financing activities:Purchase of property and equipment in exchange for capital lease

$
-


$
30,000Conversion of series C preferred stock to common stock

$
-


$
100,000Common stock issued for debentures

$
-


$
3,411,362Cashless exercise of warrants

$
18


$
-


















4




Roomlinx, Inc.


Notes to Consolidated Financial Statements


September 30, 2010


(Unaudited)





1.     Overview and Summary of Significant Accounting Policies





Description of Business:    Roomlinx, Inc. (the “Company”) is incorporated under the laws of the state of Nevada.  The Company sells, installs, and services in-room media and entertainment solutions for hotels, resorts, and time share properties.  The Company develops software and integrates hardware to facilitate the distribution of Hollywood, adult, and specialty content, business applications, national and local advertising, and concierge services.  The Company also sells, installs and services hardware for wired networking solutions and wireless fidelity networking solutions, also known as Wi-Fi, for high-speed internet access to hotels, resorts, and time share locations. The Company installs and creates services that address the productivity and communications needs of hotel, resort and time share guests. The Company may utilize third party contractors to install such hardware and software.





Basis of Presentation:The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information.  They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements.  Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.  For further information, refer to the financial statements and notes thereto, included in the Company's Form 10-K as of and for the year ended December 31, 2009.





Basis of Consolidation:The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, SuiteSpeed, Inc.  All significant intercompany accounts and transactions have been eliminated in consolidation.





Reclassification:Certain amounts in the 2009 financial statements have been reclassified to conform to the current year presentation.





Per Share Amounts:    The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's stock options and warrants.





All common shares and share prices reflected in the financial statements and in the discussions below reflect the effect of the 1-for-100 reverse stock split approved on May 28, 2010.





Use of Estimates:The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.





Derivative financial instruments:We do not use derivative instruments to hedge exposures to interest rate, cash flow, market, or foreign currency risks.





We review the terms of convertible debt instruments we issue to determine whether there are embedded derivative instruments, including the embedded conversion option, that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. Also, in connection with the sale of convertible debt, we may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. We may also issue options or warrants to non-employees in connection with consulting or other services they provide.




5





When the ability to physical or net-share settle the conversion option or the exercise of the freestanding options or warrants is deemed to be not within the control of the company or if the conversion option, options or warrants are not indexed only to the underlying common stock, the embedded conversion option or freestanding options or warrants may be required to be accounted for as a derivative financial instrument liability.





Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, we use the Cox-Ross-Rubinstein binomial model to value the derivative instruments.  To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value.





The discount from the face value of the convertible debt instruments resulting from allocating some or all of the proceeds to derivative instruments, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income, using the effective interest method.





Certain instruments, including convertible debt and freestanding options or warrants issued, may be subject to registration rights agreements, which may impose penalties for failure to register the underlying common stock by a defined date.  Any such penalties are accounted for in accordance with Codification ASC 450-10 and are accrued when they are deemed probable.





The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed periodically, including at the end of each reporting period. If re-classification is required, the fair value of the derivative instrument, as of the determination date, is re-classified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.





Recently Adopted Accounting Standards.The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the SEC, and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company.





ASU No. 2010-06 amended existing disclosure requirements about fair value measurements by adding required disclosures about items transferring into and out of levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchase, sales, issuances, and settlements relative to level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation.  The ASU was adopted during the period ended March 31, 2010, and its adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.





ASU No. 2009-17 revises the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. The ASU was adopted during the period ended March 31, 2010 and its adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.




Fair Value of Financial Instruments ASC 825, “Disclosures About Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments.  ASC 820, “Fair Value Measurements” (“ASC 820”) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as September 30, 2010.




The respective carrying value of certain on-balance-sheet financial instruments approximately their fair values.  These financial instruments include cash and cash equivalents, accounts payable and accrued liabilities.  Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value, or they are receivable or payable on demand.




6




ASU No. 2010-11 was issued in March 2010, and clarifies that the transfer of credit risk that is only in the form of subordination of one financial instrument to another is an embedded derivative feature that should not be subject to potential bifurcation and separate accounting.  This ASU was adopted during the period ended September 30, 2010.





Recently Issued Accounting Standards.The following accounting standards updates were recently issued and have not yet been adopted by the Company.  These standards are currently under review to determine their impact on the Company’s consolidated financial position, results of operations, or cash flows.





ASU No. 2009-13 was issued in September 2009, and provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The management is in the process of evaluating the impact of adopting this ASU update on the Company’s financial statements.




ASU No. 2010-13 was issued in April 2010, and will clarify the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which the underlying security trades.  This ASU will be effective for the first fiscal quarter beginning after December 15, 2010, with early adoption permitted.





ASU 2010-20 was issued in July 2010, and provides financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables.  This ASU will be effective for the first fiscal quarter beginning after December 15, 2010.





There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.





2.     Line of Credit





On June 5, 2009, the Company, entered into a Revolving Credit, Security and Warrant Purchase Agreement (the “Credit Agreement") with Cenfin LLC, a Delaware limited liability company (“Cenfin”), pursuant to which Cenfin agreed to make revolving loans to Roomlinx from time to time in a maximum outstanding amount of $5,000,000 and pursuant to which, upon the making of each such Revolving Loan, Roomlinx will issue to Cenfin a Revolving Credit Note evidencing such Revolving Loan and a Warrant to purchase a number of shares of Roomlinx Common Stock equal to 50% of the principal amount funded in respect of such Revolving Loan divided by $2.00 per share. Each Revolving Credit Note will bear interest at a rate of 9% per annum and mature on the fifth anniversary of its issuance. Each Warrant will be exercisable for a three year period from its issuance at an initial exercise price of $2.00 per share.





On March 10, 2010 the Credit Agreement was amended to increase the aggregate revolving credit commitment to $25,000,000 and expand the permitted use of proceeds to include certain capital expenditures.  The rest of the terms remained in accordance with the original agreement.





On July 30, 2010, with effect as of July 15, 2010, the Company and Cenfin LLC entered into a Second Amendment to Revolving Credit, Security and Warrant Purchase Agreement (the “Amendment”).  The Amendment changed (1) the interest rate under the Credit Agreement to the Federal Funds Rate plus 5% and (2) the strike price of warrants issued in connection with any draws of the line of credit after the first $5,000,000 of borrowings after July 15, 2010 from $2.00 per share to the fair market value of the Company’s common stock on the date of such draw.  The interest rate payable on amounts drawn under this Agreement will be set on July 15 of each year, but will be adjusted in the event the Federal Funds Rate increases by more than 1% in any six month period, but such an adjustment may only occur once per year.




7




At September 30, 2010, the Company had drawn $1,446,000 on the line of credit, with draws of $982,000 during the nine months ended September 30, 2010.  These advances will be repaid at various dates in 2014 and 2015.  At September 30, 2010, the balance on the line of credit is reduced by a discount in the amount of $436,680 (see Note 5).  The line of credit is subject to certain financial and non-financial covenants; the Company was in compliance with all covenants as of September 30, 2010.





3.     Convertible Debentures





On June 11, 2007 and June 13, 2007, the Company sold an aggregate of $2,350,000 principal amount of Convertible Debentures due May 2012 (the “Convertible Debentures”) to a number of investors pursuant to a Securities Purchase Agreement (the “June Purchase Agreement”).  $2,300,000 of the debentures were purchased with cash and $50,000 was converted from a note payable.  As detailed below, no Convertible Debentures remain outstanding.





The Convertible Debentures were initially convertible into Series B Preferred Stock, which Series B Preferred Stock would not have been convertible into Common Stock until such time as the Company had a sufficient number of shares of Common Stock authorized to permit the conversion of the Convertible Debentures into Common Stock, at which time the Convertible Debentures would automatically be convertible into Common Stock and not Series B Preferred Stock.  The conversion price into shares of Common Stock of the Convertible Debentures was $2.00 per share, subject to certain standard anti-dilution adjustments.  In the event that the Convertible Debentures were not repaid when due, the conversion price would have been reduced to $1.00 per share.  Because this potential reduction in the conversion price effectively indexed the return to the investors to a factor other than the underlying value of our common stock, the embedded conversion option was bifurcated and accounted for separately as a derivative instrument liability.





Pursuant to the June Purchase Agreement, each purchaser also received an option, exercisable for a six month period from the Closing under the Purchase Agreement, to purchase additional Convertible Debentures (“Additional Convertible Debentures”) in an amount up to 50% of the original amount of Convertible Debentures purchased.  This option has also been accounted for as a derivative instrument liability.  All such options expired unexercised.





The Convertible Debentures bore interest at an annual rate of 6%, payable quarterly, either in cash or, at the Company’s election, in shares of our capital stock at two dollars and fifty cents ($2.50) per share of common stock or a 10% discounted stock price from the average market price for the 20 business days preceding the interest payment date, whichever is greater.  All interest was settled in shares of common stock.





On May 14, 2009, $100,000 of the debentures were converted into 50,000 shares of Common Stock at a conversion price of $2.00 per share, the conversion price specified in the Debentures.





On July 7, 2009, $100,000 of the debentures were converted into 50,000 shares of Common Stock at a conversion price of $2.00 per share, the conversion price specified in the Debentures.





On September 9, 2009 $280,200 of the debentures were converted into 140,100 shares of common stock at a conversion price of $2.00 per share, the conversion price specified in the Debentures.





On September 9, 2009, the Company eliminated the majority of its outstanding debt and all convertible debentures by entering into a Debt Conversion Agreement (the “Conversion Agreement”) with Lewis Opportunity Fund, L.P., the holder of a majority of the then outstanding principal amount of Convertible Debentures issued by the Company on June 12, 2007 (the “Debentures”).  Pursuant to the Conversion Agreement, all then outstanding Debentures (in an aggregate principal amount of $1,869,800) were converted into an aggregate of 934,900 shares of Roomlinx common stock at a conversion price of $2.00 per share, the conversion price specified in the Debentures.  Pursuant to the Conversion Agreement, the Company agreed to pay to the converting Debenture holders an aggregate of $112,188, an amount equal to interest that would have accrued on the converted principal amount of Debentures over a one (1) year period if the Debentures would not have been converted.




8




4.    Derivative Financial Instruments





As discussed above, the embedded conversion option in our Convertible Debentures and options issued to the investors to acquire additional debentures have been accounted for as derivative instrument liabilities.





We use the Cox-Ross-Rubinstein binomial model to value warrants, and the embedded conversion option components of any bifurcated embedded derivative instruments that are recorded as derivative liabilities. See Note 5 related to embedded derivative instruments that have been bifurcated from our Convertible Debentures and the options to acquire additional Convertible Debentures held by the investors.  The options and conversion options can be exercised by the holders at any time.  The options held by the investors to acquire additional Convertible Debentures expired in December 2007.





In valuing the embedded conversion option components of the bifurcated embedded derivative instruments and the options, at the time they were issued and at September 30, 2009, we used the market price of our common stock on the date of valuation, an expected dividend yield of 0%, an estimated volatility of 250% based on a review of our historical volatility and the remaining period to the expiration date of the option or repayment date of the convertible debt instrument.  The risk-free rate of return used was 1.11%, based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the options.





On September 2009, upon the conversion of the convertible debentures, the derivative liabilities were terminated.





At December 31, 2009, and September 30, 2010, there were no derivative liabilities outstanding.





5.     Stockholders' Equity





All common shares and share prices reflected in the financial statements and in the discussions below reflect the effect of the 1-for-100 reverse stock split approved on May 28, 2010 and affected on July 29, 2010.





Preferred Stock:   The Company has authorized 5,000,000 preferred shares with a $0.20 par value, of which 720,000 shares have been designated as Class A Preferred Stock.  The Class A Preferred stock is entitled to receive cumulative annual dividends at the rate of 9%, payable in either cash or additional shares of Class A Preferred Stock, at the option of the Company.  As of September 30, 2010 and December 31, 2009, there were 720,000 shares of Class A Preferred Stock issued and outstanding.  Class A dividends accrued and unpaid as of September 30, 2010, were $156,000; these dividends have not been declared by the board of directors so they are not included in accrued expenses.





Common Stock:   Reverse Stock Split:    On May 28, 2010, shareholders approved a reverse stock split of the outstanding shares of common stock, pursuant to which each 100 shares of the Company’s pre-split common stock issued and outstanding was exchanged for one share of the Company’s post-split common stock.  After giving effect to the reverse stock split, there were 4,243,982 shares of common stock issued and outstanding.  All share and per share amounts presented in this report have been retroactively adjusted to reflect the reverse stock split.





As of September 30, 2010 the Company has authorized 200,000,000 shares of $0.001 par value common stock.  As of September 30, 2010, there were 4,613,915 shares of common stock issued and outstanding.





On August 17, 2010, the Company entered into a securities purchase agreement with investors for an aggregate of 187,500 shares of common stock.  The shares were purchased at $4.00 per share for an aggregate of $750,000.




Warrants:  On July 6, 2010, an investor exercised 19,625 warrants at $2.00 per share.  The exercise was cashless and resulted in 11,775 shares being issued.





On August 2, 2010, 170,500 warrants were granted to Cenfin, pursuant to the clauses outlined in the Credit Agreement dated June 5, 2009.  Such warrants were issued at an exercise price of $2.00 per share and vest immediately; the warrants expire 3 years from the date of issuance.





On August 30, 2010, Cenfin exercised 170,500 warrants at $2.00 per share, for an aggregate of $341,000, in accordance with the Credit Agreement entered into on June 5, 2009.





On September 30, 2010, 75,000 warrants were granted to Cenfin, pursuant to the clauses outlined in the Credit Agreement dated June 5, 2009.  Such warrants were issued at an exercise price of $2.00 per share and vest immediately; the warrants expire 3 years from the date of issuance.





9





On September 30, 2010, the Company had the following outstanding warrants:





Revised

Exercise Price
Revised

Number of

Shares
Remaining

Contractual

Life (in

years)
Exercise Price

times Number

of Shares
Weighted

Average

Exercise

Price
Aggregate

Intrinsic

Value$2.0000
75,000
2.00
$                150,000

$             187,500$2.3000
3,750
2.15
$                    8,625

$                 8,250$6.0000
200,000
0.81
$             1,200,000

$                        -$4.0000
200,000
0.81
$                800,000

$             100,000$3.0000
70,000
1.70
$                210,000

$             105,000$3.0000
39,000
1.24
$                117,000

$               58,500587,750

$           2,485,625
$               4.23
$           459,250




Warrants
Number of

Shares
Weighted

Average

Exercise

Price
Remaining

Contractual

Life (in

years)
Aggregate

Intrinsic

ValueOutstanding at January 1, 2010
824,258
$                   4.340Issued
245,500
2.000Exercised
316,125
2.000Expired/Cancelled
165,883
5.737Outstanding at September 30, 2010
587,750
$                   4.229
1.310
$                   459,250Exercisable at September 30, 2010
587,750
$                   4.229
1.310
$                   459,250








The fair value of the warrants granted August 2, 2010 was $540,616. The fair value of the warrant grant was estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions for grants: expected life of warrants of 3 years, expected volatility of 118%, risk-free interest rate of .85% and no dividend yield. The weighted average fair value at the date of grant for warrants granted August 2, 2010, averaged $3.17 per warrant.  In accordance with ASC Topic 815, “Derivatives and Hedging,” the Company recorded a debt discount of $301,567 in connection with this warrant grant.





The fair value of the warrants granted September 30, 2010 was $281,265. The fair value of the warrant grant was estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions for grants: expected life of warrants of 3 years, expected volatility of 129%, risk-free interest rate of .64% and no dividend yield. The weighted average fair value at the date of grant for warrants granted September 30, 2010, averaged $3.75 per warrant.  In accordance with ASC Topic 815, “Derivatives and Hedging,” the Company recorded a debt discount of $145,165 in connection with this warrant grant.





Options:   The Company adopted a long term incentive stock option plan (the "Stock Option Plan"). The Stock Option Plan provides for the issuance of up to 1,200,000 shares of common stock upon exercise of options which may be granted pursuant to the Stock Option Plan. As of September 30, 2010, options to purchase 322,253 shares were outstanding. The options vest as determined by the Board of Directors and are exercisable for a period of no more than 10 years.





On September 17, 2010, the Board of Directors granted 4,500 aggregate incentive stock options to employees of Roomlinx.  These options have an exercise price of $4.80, the average of the high and low market value on the day prior to the grant date, and vest in three equal annual installments on the grant anniversary date.  The options expire at the end of the business day on the 7th anniversary of the grant date.





10




On September 30, 2010, the Company had the following outstanding options:





Exercise

Price
Number of

Shares
Remaining

Contractual Life (in

years)
Exercise

Price times

Number of

Shares
Weighted

Average

Exercise

Price
Aggregate

Intrinsic

Value$4.8000
4,000
6.97
$                    19,200

$                         -$3.1000
21,755
6.54
$                    67,441

$                30,457$2.5000
3,500
5.78
$                      8,750

$                  7,000$3.3000
100,000
5.68
$                  330,000

$              120,000$1.0000
16,500
5.40
$                    16,500

$                57,750$1.7000
2,000
5.09
$                      3,400

$                  5,600$1.2000
8,000
4.89
$                      9,600

$                26,400$2.0000
7,000
4.81
$                    14,000

$                17,500$1.5000
9,500
4.11
$                    14,250

$                28,500$2.5000
10,000
3.59
$                    25,000

$                20,000$2.0000
130,000
3.14
$                  260,000

$              325,000$2.6000
10,000
1.86
$                    26,000

$                19,000322,255

$                794,141
$                       2.4643
$            657,207





Options
Number of

Shares
Weighted

Average

Exercise Price
Remaining

Contractual

Life (in

years)
Aggregate

Intrinsic

ValueOutstanding at January 1, 2010
306,500
$                    2.510Issued
33,755
6.620Exercised
-
-Expired/Cancelled
18,000
4.758Outstanding at September 30, 2010
322,255
$                    2.464
5.41
$                 657,207Vested at September 30, 2010
242,498
$                    2.203
4.42
$                 557,112Exercisable at September 30, 2010
242,498
$                    2.203
4.42
$                 557,112








The Company recorded deferred compensation expense of $20,178 in connection with options granted September 17, 2010. The fair value of the option grant was estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions for grants: expected life of options of 7 years, expected volatility of 136%, risk-free interest rate of 2.14% and no dividend yield. The weighted average fair value at the date of grant for options granted September 17, 2010, averaged $4.48 per option.





6.      Subsequent Events





On October 1, 2010, Cenfin exercised 75,000 warrants at $2.00 per share, for an aggregate of $150,000, in accordance with the Credit Agreement entered into on June 5, 2009.





On October 1, 2010, Roomlinx, Inc. acquired 100% of the membership interests of Canadian Communications, LLC for aggregate consideration of $500,000 in cash and the issuance of 270,000 shares of Roomlinx’s common stock, of which 79,000 are being held back as security for the sellers’ indemnification obligations.  Roomlinx, Canadian Communications, LLC, Peyton Communications, LLC, Garneau Alliance LLC, Peyton Holdings Corporation and Ed Garneau entered into a Unit Purchase Agreement providing for the above described transaction.




11




On October 1, 2010, Roomlinx entered into an Employment Agreement with Mr. Garneau to serve as Chief Financial Officer.   Effective with Mr. Garneau’s appointment as Chief Financial Officer, Mike Wasik, Roomlinx’s Chief Executive Officer no longer holds the title or responsibilities of Chief Financial Officer.





All material subsequent events from the balance sheet date through the date of issuance of this report have been disclosed above.





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





The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and the consolidated financial statements and related notes thereto included in our December 31, 2009 Annual Report on Form 10-K, filed with the SEC and with the unaudited interim financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q, as well as our reports on Form 8-K and other SEC filings.





CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS





This Quarterly Report on Form 10-Q contains or incorporates by reference “forward-looking statements,” as that term is used in federal securities laws, about our financial condition, results of operations and business.  Forward-looking statements may be identified by words such as “believes”, “expects”, “anticipates”, “estimates”, “projects”, “intends”, “should”, “seeks”, “future”, continue”, or the negative of such terms, or other comparable terminology. These statements include, among others:





- statements concerning the benefits that we expect will result from our business activities and results of exploration that we contemplate or have completed, such as increased revenues; and





- statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.





Forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are based on our beliefs as well as assumptions made by and information currently available to us.  Factors that could cause actual results to differ materially include, but are not limited to:





●
the volume and timing of systems sales and installations, the length of sales cycles and the installation process and the possibility that products will not achieve or sustain market acceptance;


●
the timing, cost and success or failure of new product and service introductions, development and product upgrade releases;


●
competitive pressures including product offerings, pricing and promotional activities;


●
our ability to establish and maintain strategic relationships;


●
the possibility of product-related liabilities;


●
risks related to third-party suppliers and our ability to obtain, use or successfully integrate third-party licensed technology;


●
our ability to attract and retain qualified personnel;


●
the ability to successfully acquire and integrate Canadian Communications LLC;


●
regulatory and economic developments; and


●
those factors discussed in “Risk Factors” in our periodic filings with the SEC.





These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements.





Because these statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied.  We caution you not to put undue reliance on these statements, which speak only as of the date of this report.  Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions.





12





GENERAL




Overview




Roomlinx, Inc., a Nevada corporation ("we," "us" or the "Company"), provides three core products and services:




Wired Networking Solutions and Wireless Fidelity Networking Solutions.




We provide wired networking solutions and wireless fidelity networking solutions, also known as Wi-Fi, for high speed internet access at hotels, resorts, and timeshare locations. The Company installs and creates services that address the productivity and communications needs of hotel guests, convention center exhibitors and corporate apartment customers. We specialize in providing advanced Wi-Fi wireless services such as the wireless standards known as 802.11a/b/g/n/i.




Hotel customers sign long-term service agreements, where we provide the maintenance for the networks, as well as the right to provide value added services over the network.




We derive revenues from the installation of the wired and wireless networks we provide to hotels, resorts, and timeshare properties. We derive additional revenue from the maintenance of these networks. Customers typically pay a one-time fee for the installation of the network and then pay monthly maintenance fees for the upkeep and support of the network. During 2008 we made a fundamental change in our business model pertaining to our on-site support. We are no longer including on-site support in the base price for maintenance; these services are either billed for at the time of service or the base price is increased.




In-room media and entertainment.




We provide in-room media and entertainment product and services for hotels, resorts, and time share properties.  The Company develops software and integrates hardware to facilitate the distribution of entertainment, business applications, national and local advertising, and on demand content.  The content consists of high definition and standard definition adult, Hollywood, and specialty programming, music, internet based television programming, digital global newspapers, global radio and television stations, business applications (allowing the guest to use Microsoft Office programs), and hotel-specific services and advice.




The Company provides proprietary software, an LCD television (optional), a media console (consisting of a DVD player, CD burner, and numerous input jacks for the hotel guest), a proprietary wireless keyboard with built-in mouse, and a proprietary remote control. The Company installs and supports these components.




Hotel customers sign long-term service agreements, where we provide the maintenance for the networks, as well as the right to provide value added services over the network.




We derive revenues primarily from selling our proprietary hardware and software to hotels, resorts and time share locations as well as delivering content and providing security and support of the media and entertainment product.  We derive additional revenue from the rental of movies, printing service, advertising and sale of products through our system.  We began marketing this product in September 2007.  Since June 2007, we have invested significant capital to develop our software, integrate our hardware, and develop significant product and content partnerships.




Television Programming.




Our products provide for delivery and viewing of high definition and standard definition television programming for hotels, resorts, and time share properties.  The Company installs and provides services that address the entertainment and information needs of hotel guests and resort guests. We specialize in providing advanced high definition equipment for delivering digital television programming such as ESPN, HBO, Starz, and other specialty and local channels.




13




We derive revenues from the installation of the programming equipment we provide to hotels, resorts, and timeshare properties. We derive additional revenue from the television programming fees we provide to hotels, resorts, and timeshare properties. Customers typically pay a one-time fee for the installation of the equipment and then pay monthly programming fees for delivery of a specific TV channel lineup.




Trends and Business Outlook




Our goal is to be the leading provider of all facets of in-room hotel, resort and timeshare entertainment, programming and internet connectivity.  We believe that we are developing the scale, capacity, and reach to respond to customers’ needs quickly and that our product offerings differentiate us from other market participants in terms of usability, technical innovation and breadth of offerings. Over the past year, we have taken significant steps towards these goals and in the second quarter of 2010, we began to see the benefits of many of these decisions and investments, such as our success in being selected by a major hotel chain from among other industry participants.




Although our current quarter results demonstrate the initial success of our efforts, general economic conditions and market uncertainty may still negatively affect our financial results in future periods.  We anticipate that the rate of new orders may vary significantly from quarter to quarter. Consequently, if anticipated sales and shipments in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our operating results for that quarter and future quarters may be adversely affected.  Further, given the lag between the incurrence of expenses in connection with sales “wins” and the resulting revenue stream, we anticipate that, while we will see organic growth that positions us for future profitability, our costs of sales and other operating expenses will exceed our revenues in the near term.  We have incurred operating losses since our inception.




Our acquisition of Canadian Communications, LLC will be a further driver of sales growth and fill out the Company’s product and service offerings.




CRITICAL ACCOUNTING POLICIES AND ESTIMATES




Management's Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts and property and equipment valuation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.




Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.




Our system sales and installation revenue primarily consists of wired and wireless network equipment and installation fees associated with the network and is recognized as revenue when the installation is completed and the customer has accepted such installation.





Our service, maintenance and usage revenue, which primarily consists of monthly maintenance fees related to the upkeep of the network, is recognized on a monthly basis as services are provided.





Media and Entertainment product revenue primarily consists of media and entertainment equipment purchases, installation of that equipment, software and content license fees, and maintenance fees related to the upkeep of the system.  Revenue on the equipment and installations is recognized when the installation is complete and the customer has accepted such installation.  Revenue on the service and maintenance is recognized as invoiced per the individual contracts.




14




We estimate the collectability of our trade receivables. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including analysis of historical collection rates and the current credit-worthiness of significant customers.




Inventory includes the cost of hardware, software, and labor which has been incurred by us for installation at our customers’ facilities, but has not been accepted by the customer.




We capitalize and subsequently depreciate our property and equipment over the estimated useful life of the asset. In assessing the recoverability of our long-lived assets, including goodwill, we must make certain assumptions regarding the useful life and contribution to the estimated future cash flows. If such assumptions change in the future, we may be required to record impairment charges for these assets not previously recorded.




Since inception, we have accumulated substantial net operating loss carry forwards for tax purposes.  There are statutory limitations on our ability to realize any future benefit from these potential tax assets and we are uncertain as to whether we will ever utilize the tax loss carry forwards.  Accordingly, we have recorded a valuation allowance to offset the deferred tax asset.




The Company provides compensation costs for our stock option plans determined in accordance with the fair value based method prescribed in ASC 718.  We estimate the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model and provide for expense recognition over the service period, if any, of the stock option.




In connection with the sale of debt or equity instruments, we may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.




The identification of, and accounting for, derivative instruments is complex. Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For options, warrants and bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Cox-Ross-Rubinstein binomial option pricing model. That model requires assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the instruments.  The identification of, and accounting for, derivative instruments and the assumptions used to value them can significantly affect our financial statements.








RESULTS OF OPERATIONS





Three months ended September 30, 2010 compared to three months ended September 30, 2009:




Our revenues for the three months ended September 30, 2010 were $1,282,180, an increase of $728,223 or 131% over our $553,957 in revenues for the three months ended September 30, 2009.  This increase is primarily due to a large hardware sale as well as increased recurring revenue streams of our media and entertainment products.




Our cost of goods sold for the three months ended September 30, 2010 was $1,045,453 an increase of $664,501 or 174% over our $380,952 cost of goods sold for the three months ended September 30, 2009.  These results are primarily attributable to costs associated with the higher sales as outlined above.  The cost of goods associated with the sale of hardware referenced above made up $846.817 or 81% of our cost of goods number for the quarter.




Our gross profit for the three months ended September 30, 2010 was $236,727, an increase of $63,722 or 37% over the $173,005 gross profit for the three months ended September 30, 2009.  This increase in gross profits is primarily due to revenue resulting from increased sales of goods and services.  Our margins have decreased from the same period in 2009 due to the large hardware sale where we realized a margin of 5%.




15




Our operating expenses for the three months ended September 30, 2010 were $611,453 compared to $575,170 for the three months ended September 30, 2009, an increase of 6%.  This increase was primarily due to the growth of our company throughout 2009 and 2010, including personnel and office expenses, in order to support and maintain our products and provide customer service.




Our operations department expenses increased $47,415 to $181,163 in the three months ended September 30, 2010 compared to the same period in 2009.  This increase is primarily due to the increased personnel and office expenses.  Personnel expenses increased $37,291 and office expenses increased $27,868.  These increases were offset by a decrease in travel expense of $17,744.




Our product development department expenses increased $25,927 to $91,438 in the three months ended September 30, 2010 compared to the same period in 2009.  This increase is primarily due to increased personnel, office, and travel expenses.  Personnel expenses increased $14,504, office expenses increased $10,320, and travel expenses increased $1,103.




Our general and administrative expenses decreased by $56,985 to $303,036 in the three months ended September 30, 2010 compared to the same period in 2009. This decrease is primarily attributable to a decrease in bad debt expense of $65,140, a decrease in office expense of $30,611, a decrease in travel expense of $3,973, and a decrease in finance expense of $3,872.  These decreases were partially offset by an increase in personnel expense of $32,141, an increase in advertising expense of $11,399, and an increase in professional services of $3,071.




Depreciation expense increased by $19,926 to $35,816 in the three months ended September 30, 2010 compared to the same period in 2009.  This increase is due to an increase in equipment used for our resort model and pilot properties which is subject to depreciation.




Our operating loss decreased to $374,726 during the three months ended September 30, 2010 compared to an operating loss of $402,165 during the three months ended September 30, 2009. This 7% decrease is primarily the result of operating expense reductions noted above.





For the three months ended September 30, 2010, our non-operating income increased to $29,316 compared to $19,915 during the three months ended September 30, 2009.  This increase is primarily due to an increase in interest income.





Our non-operating expenses for the three months ended September 30, 2010 decreased to $26,316 from $176,986 during the three months ended September 30, 2009.  This decrease is primarily due to a decrease in interest expense, of $161,355, partially offset by an increase in financing expense of $9,953 and an increase in foreign exchange expense of $732.





During 2009, the Company was subject to the non-cash effects of derivatives.  For the three months ended September 30, 2009, there was a derivative gain of $122,263.  Due to our conversion of the convertible debentures, we no longer incur the non-cash derivative gains or expenses.




For the three months ended September 30, 2010, we reported a net loss of $371,726, compared to a net loss of $436,973 for the three months ended September 30, 2009.  The decrease in our net loss is primarily attributable to the decrease in our operating and non-operating losses, offset by increased non-operating income.




Nine months ended September 30, 2010 compared to nine months ended September 30, 2009:




Our revenues for the nine months ended September 30, 2010 were $2,656,455, an increase of $993,799 or 60% over our $1,662,656 in revenues for the nine months ended September 30, 2009.  This increase is primarily due to increased installations, hardware sales, and recurring revenue streams of our media and entertainment products.




Our cost of goods sold for the nine months ended September 30, 2010 was $1,994,639 an increase of $847,460 or 74% over our $1,147,179 cost of goods sold for the nine months ended September 30, 2009.  The cost of goods associated with the large hardware sale, mentioned in the quarterly numbers, represents $846,817 or 42% of this number.  The remaining results are primarily attributable to costs associated with the increased support and installation sales.




16




Our gross profit for the nine months ended September 30, 2010 was $661,816, an increase of $146,339 or 28% over the $515,477 gross profit for the nine months ended September 30, 2009.  These results are also primarily due to the revenue from increased sales of goods and services as detailed above, partially offset by increased cost of goods sold. Our margins have decreased from the same period in 2009 due to the large hardware sale where we realized a margin of 5%.




Our operating expenses for the nine months ended September 30, 2010 were $1,753,268 compared to $1,508,273 for the nine months ended September 30, 2009, an increase of 16%.  This increase was primarily due to the growth of our company throughout 2009 and 2010, including personnel and office expenses, in order to support and maintain our products and provide customer service.




Our operations department expenses increased $166,348 to $493,390 in the nine months ended September 30, 2010 compared to the same period in 2009.  This increase is primarily due to the increased personnel and office expenses.  Personnel expenses increased $140,543 and office expenses increased $54,552.  These increases were offset by a decrease in travel expense of $28,747.




Our product development department expenses increased $22,439 to $260,404 in the nine months ended September 30, 2010 compared to the same period in 2009.  This decrease is primarily due to increased personnel office, and travel expenses.  Personnel expenses increased $1,578, office expenses increased $20,282, and travel expenses increased $579.




Our general and administrative expenses increased by $18,124 to $916,412 in the nine months ended September 30, 2010 compared to the same period in 2009. This increase is primarily attributable an increase in personnel expense of $92,894, an increase in advertising expense of $39,275, an increase in travel expenses of $8,853, and an increase in professional services of $8,629.  These increases were partially offset by a decrease in office expense of $54,494, a decrease in finance expense of $48,841, and a decrease in bad debt expense of $28,192.




Depreciation expense increased $38,084 to $83,062 in the nine months ended September 30, 2010 compared to the same period in 2009.  This increase is due an increase in the equipment used for our resort model and pilot properties, which is subject to depreciation.




Our operating loss increased to $1,091,452 during the nine months ended September 30, 2010 compared to an operating loss of $992,796 during the nine months ended September 30, 2009. This 10% increase is primarily a result of the increase in our operating expenses noted above.





For the nine months ended September 30, 2010, our non-operating income increased to $56,068 compared to $54,891 during the nine months ended September 30, 2009.  This increase is primarily due to an increase in interest income.





Our non-operating expenses for the nine months ended September 30, 2010 decreased to $49,644 from $268,833 during the nine months ended September 30, 2009.  Our interest expense decreased $226,228: this decrease is primarily due to the conversion of our convertible debentures in 2009, partially offset by interest accruing under our line of credit of $37,168 in the nine months ended September 30, 2010.  Our financing expense increased 9,953; this increase is primarily due to the debt discount expense associated with our line of credit.  Our foreign currency loss improved to $2,680 for the nine months ended September 30, 2010 as compared to $5,594 for the nine months ended September 30, 2009; this decrease is due to the fluctuations in the value of the foreign currency.





During 2009, the Company was subject to the non-cash effects of derivatives.  During the nine months ended September 30, 2009, there was a derivative loss of $1,409,356.  Due to our conversion of the convertible debentures, we no longer incur the non-cash derivative gains or expenses.




For the nine months ended September 30, 2010, we reported a net loss of $1,085,028, compared to a net loss of $2,645,126 for the nine months ended September 30, 2009.  The decrease in our net loss is primarily attributable to the non-recurring nature of the non-cash derivative losses of $1,409,356 as well as the improvement in our non-operating income and expenses which occurred in the nine months ended September 30, 2009.




17




FINANCIAL CONDITION




LIQUIDITY & CAPITAL RESOURCES




As of September 30, 2010 we had $961,121 in cash and cash equivalents.  We believe that our cash, cash equivalents, future cash flows from operations, financing obtained to fund our interactive TV installations from third parties, and our borrowing capacity under our line of credit with Cenfin, taken together, provide adequate resources to fund ongoing operating cash requirements through 2010 and 2011.  We cannot provide assurance that our actual cash requirements will not be greater than we expect as of the date of this report.  We will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, which might impact our liquidity requirements or cause us to issue additional equity or debt securities.  Working capital at September 30, 2010 was $2,389,695.





If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations during the next twelve months, we might be required to obtain additional sources of funds through additional operating improvements, capital market transactions, asset sales or financing from third parties, a combination thereof or otherwise. We cannot provide assurance that these additional sources of funds will be available or, if available, would have reasonable terms.





Operating Activities





Net cash used by operating activities was $1,837,000 for the nine months ended September 30, 2010 as compared to $1,208,680 used for the nine months ended September 30, 2009. The change was primarily due to the effect of derivative expense, stock compensation expense, and changes in operating assets.





Investing Activities





Net cash used by investing activities was $1,155,816 for the nine months ended September 30, 2010 as compared to $368,546 used by investing activities for the nine months ended September 30, 2009.  During the nine months ended September 30, 2010, $91,700 in leases receivable payments were received and $1,025,840 in new leases were entered into, compared to leases payments of $29,174 and $234,391 in leases entered into in 2009.  During the nine months ended September 30, 2010, there were $221,676 purchases of property and equipment, compared to $163,329 in the same period in 2009.





Financing Activities





Net cash provided by financing activities was $3,297,857 for the nine months ended September 30, 2010, compared to $337,046 net cash provided by financing for the nine months ended September 30, 2009. In 2010 we had equity sales that provided a net $1,750,000, and warrant conversions that provided a net $573,000; this was offset by lease payments on software of $7,143 compared to lease payments of $2,954 during the same period in 2009.  We had $982,000 provided by two draws on our line of credit during the nine months ended September 30, 2010 compared to $340,000 provided in the same period in 2009.




Contractual Obligations




We have operating and capital lease commitments. The following table summarizes these commitments at September 30, 2010:





Total
Less than 1 year
1-3 years
3-5 yearsOperating lease obligations
$208,252
$  56,796
$ 151,456
-Capital lease obligations
18,312
10,170
8,142
-Total
$226,564
$  66,966
$ 159,598
-





18




Item 3. Quantitative and Qualitative Disclosures about Market Risk




We are exposed to risk from potential changes in the U.S./Canadian currency exchange rates as they relate to our services and purchases for our Canadian customers.  As a result of the Second Amendment to Revolving Credit, Security and Warrant Purchase Agreement discussed in Part II, Item 5 below, starting in the quarter ending September 30, 2010, we will be exposed to market risks associated with changes in interest rates on amounts borrowed under our Revolving Credit, Security and Warrant Purchase Agreement with Cenfin LLC (the “Credit Agreement”).  As of July 15, 2010, the interest rate under the Credit Agreement was 6.13% versus 9% prior to the Second Amendment.




Foreign exchange gain / (loss)




Foreign transactions resulted in a loss of $2,680 for the nine months ended September 30, 2010 compared to a loss of $5,594 for the nine months ended September 30, 2009. The amount of gain (loss) will vary based upon the volume of foreign currency denominated transactions and fluctuations in the value of the Canadian dollar versus the US dollar.




Translation of Financial Results




Because we translate a portion of our financial results from Canadian dollars to U.S. dollars, fluctuations in the value of the Canadian dollar have a direct effect on our reported consolidated results.  We do not hedge against the possible impact of this risk.  A 10 percent adverse change in the foreign currency exchange rate would not have a significant impact on our consolidated results of operations or financial position.




Item 4.  Controls and Procedures





Management’s Evaluation of Disclosure Controls and Procedures





As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based upon this evaluation, our Chief Executive Officer have concluded that, as of September 30, 2010, our disclosure controls and procedures were effective at providing reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer, to allow for timely decisions regarding required disclosure of material information required to be disclosed in the reports that we file or submit under the Exchange Act. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.








Changes in Internal Control over Financial Reporting





There were no changes in our internal control over financial reporting during our fiscal quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





19




PART II - OTHER INFORMATION





20





Item 1. Legal Proceedings





None.





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





On August 17, 2010, Roomlinx entered into a securities purchase agreement with investors for an aggregate of 187,500 shares of common stock.  The shares were purchased at $4.00 per share for an aggregate of $750,000.





On July 6, 2010, an investor exercised 19,625 warrants at $2.00 per share.  The exercise was cashless and resulted in 11,775 shares being issued.





On August 30, 2010, Cenfin exercised 170,500 warrants at $2.00 per share, for an aggregate of $341,000, in accordance with the Credit Agreement entered into on June 5, 2009.





Item 3. Defaults Upon Senior Securities





None.





Item 4. (Removed and Reserved)





Item 5. Other Information





None





Item 6. Exhibits





2.1 Unit Purchase Agreement, dated October 1, 2010, by and among Roomlinx, Inc., Canadian Communications LLC, Peyton Communications LLC, Garneau Alliance, LLC, Peyton Holdings Corporation and Ed Garneau (incorporated by reference to Exhibit 2.1 of the registrant’s Current Report on Form 8-K filed on October 1, 2010).



10.1 Employment Agreement dated October 1, 2010 between Roomlinx, Inc. and Edouard Garneau (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed on October 1, 2010).



10.2 Securities Purchase Agreement, dated August 18, 2010, among Roomlinx, Inc., Verition Multi-Strategy Master Fund Ltd., Wilmot Advisors LLC, Arceus Partnership, Ted Hagan and Josh Goldstein (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed on October 1, 2010).



10.3 Registration Rights Agreement, dated August 18, 2010, among Roomlinx, Inc., Verition Multi-Strategy Master Fund Ltd., Wilmot Advisors LLC, Arceus Partnership, Ted Hagan and Josh Goldstein (incorporated by reference to Exhibit 10.2 of the registrant’s Current Report on Form 8-K filed on October 1, 2010).



10.4 Second Amendment to Revolving Credit, Security and Warrant Purchase Agreement, dated July 30, 2010, between Roomlinx, Inc. and Cenfin LLC (incorporated by reference to Exhibit 10.3 of the registrant’s Current Report on Form 8-K filed on October 1, 2010).



10.5 Form of Director Indemnification Agreement, dated July 30, 2010 effective as of May 28, 2010, between Roomlinx, Inc. and each of its directors (incorporated by reference to Exhibit 10.4 of the registrant’s Current Report on Form 8-K filed on October 1, 2010).



31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Chief Executive and Chief Financial Officers.



32.1 Certification of the Chief Executive and Chief Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





21
 
  Signature




Roomlinx, Inc.By:
/s/ Michael S. WasikMichael S. WasikChief Executive OfficerDate:
November 15, 2010By:
/s/ Edouard GarneauEdouard GarneauChief Financial OfficerDate:
November 15, 2010




Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.




By:
/s/ Michael S. WasikMichael S. WasikChief Executive OfficerDate:
November 15, 2010By:
/s/ Edouard GarneauEdouard GarneauChief Financial OfficerDate:
November 15, 2010