UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended June 30, 2009





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





For the
transition period from _____________   To __________





Commission
file number 000-31037





eRoomSystem
Technologies, Inc.


(Name of
small business issuer in its charter)




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





1072
      Madison Ave., Lakewood, NJ
                
                08701(Address
      and telephone number of principal executive offices)
                
                (Zip
      Code)Issuer’s
      telephone number: (732) 730-0116





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





Title
      of each class
              
              Name
      of each exchange on which
registered





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


Common
Stock, $.001 par value


(Title of
each class)


(Title
      of each
class)





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 proceeding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).  Yes x
     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
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer         
       o
            Accelerated
      filer                    oNon-accelerated
      filer            o
            Smaller
      reporting company   x(Do
      not check if a smaller reporting company)




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





Yeso Nox




The
number of shares of the issuer’s common stock issued and outstanding as of July
31, 2009 was 24,123,165 shares.








FORM
10-Q





TABLE
OF CONTENTS





PART
      I - FINANCIAL INFORMATION
                  
                  1Item
      1. Financial Statements
                  
                  1Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations.
                  
                  6Item 3. Quantitative and Qualitative
      Disclosures About Market Risk.
                  
                  11Item
      4(T).  Controls and Procedures
                  
                  11PART
      II - OTHER INFORMATION
                  
                  12Item
      1. Legal Proceedings.
                  
                  12Item
      1A. Risk Factors.
                  
                  12Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                  
                  12Item
      3. Defaults Upon Senior Securities.
                  
                  12Item
      4. Submission of Matters to a Vote of Security Holders.
                  
                  12Item
      5. Other Information.
                  
                  12Item
      6. Exhibits.
                  
                  12SIGNATURE
                  
                  13


-iii-





PART
I - FINANCIAL INFORMATION





Item
1. Financial Statements





eROOMSYSTEM
TECHNOLOGIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)





June 30,
                    
                    
                    December 31,2009
                    
                    
                    2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                    
                    $
                    2,219,947
                    
                    
                    $
                    2,135,814Accounts
      receivable, net of allowance for doubtful accounts of  $17,431
      and $22,040at June 30, 2009 and December 31, 2008,
      respectively
                    
                    
                    98,777
                    
                    
                    
                    124,897Notes
      receivable
                    
                    
                    522,438
                    
                    
                    
                    512,603Prepaid
      expenses
                    
                    
                    85,416
                    
                    
                    
                    114,512Total
      Current Assets
                    
                    
                    2,926,578
                    
                    
                    
                    2,887,826REFRESHMENT
      CENTERS IN SERVICE, net of accumulated depreciation
      of $1,027,976 and $1,015,582 at June 30, 2009 and December 21, 2008,
      respectively
                    
                    
                    51,438
                    
                    
                    
                    98,389PROPERTY
      AND EQUIPMENTComputer
      and office equipment, net of accumulated depreciation of $11,359 and
      $9,214, at June 30, 2009 and December 31, 2008,
    respectively
                    
                    
                    10,094
                    
                    
                    
                    9,591INVESTMENT
      IN MARKETABLE SECURITIES
                    
                    
                    14,075
                    
                    
                    
                    14,075NOTE
      RECEIVABLE
                    
                    
                    185,667
                    
                    
                    
                    183,159DEPOSITS
                    
                    
                    3,150
                    
                    
                    
                    2,250Total
      Assets
                    
                    $
                    3,191,002
                    
                    
                    $
                    3,195,290LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                    
                    
                    33,507
                    
                    
                    $
                    51,687Accrued
      liabilities
                    
                    
                    46,769
                    
                    
                    
                    52,534Customer
      deposits
                    
                    
                    2,004
                    
                    
                    
                    2,004Deferred
      maintenance revenue
                    
                    
                    5,054
                    
                    
                    
                    7,346Total
      Current Liabilities
                    
                    
                    87,334
                    
                    
                    
                    113,571Total
      Liabilities
                    
                    
                    87,334
                    
                    
                    
                    113,571COMMITMENTS
      AND CONTINGENCIES
                    
                    
                    -
                    
                    
                    
                    -STOCKHOLDERS'
      EQUITYPreferred
      stock, $0.001 par value; 5,000,000 shares authorized; none
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $0.001 par value; 50,000,000 shares authorized: shares 24,123,165
      and 24,048,165  shares outstanding at June 30, 2009 and
      December 31, 2008 respectively
                    
                    
                    24,123
                    
                    
                    
                    24,048Additional
      paid-in capital
                    
                    
                    34,072,418
                    
                    
                    
                    34,042,247Treasury
      stock at cost 290,300 at June 30, 2009 and December 31,
    2008
                    
                    
                    (38,453
                    )
                    
                    
                    (38,453
                    )Warrants
      and options outstanding
                    
                    
                    103,123
                    
                    
                    
                    114,273Accumulated
      deficit
                    
                    
                    (31,007,543
                    )
                    
                    
                    (31,010,396
                    )Accumulated
      other comprehensive loss
                    
                    
                    (50,000
                    )
                    
                    
                    (50,000
                    )Total
      Stockholders' Equity
                    
                    
                    3,103,668
                    
                    
                    
                    3,081,719Total
      Liabilities and Stockholders' Equity
                    
                    $
                    3,191,002
                    
                    
                    $
                    3,195,290





See
accompanying notes to unaudited condensed consolidated financial
statements


-1-





eROOMSYSTEM
TECHNOLOGIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)





For the Three Months
                  Ended June 30,
                
                
                For the
      Six Months
                  Ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008REVENUERevenue-sharing
      arrangements
                
                $
                67,199
                
                
                $
                148,324
                
                
                $
                148,815
                
                
                $
                335,805Maintenance
      fees
                
                
                33,372
                
                
                
                56,193
                
                
                
                75,828
                
                
                
                111,498Product
      sales
                
                
                23,073
                
                
                
                79,920
                
                
                
                40,106
                
                
                
                96,368Total
      Revenue
                
                
                123,644
                
                
                
                284,437
                
                
                
                264,749
                
                
                
                543,671COST
      OF REVENUERevenue-sharing
      arrangements
                
                
                21,449
                
                
                
                65,162
                
                
                
                46,951
                
                
                
                150,763Loss
      on impairment of refreshment centers
                
                
                -
                
                
                
                64,835
                
                
                
                -
                
                
                
                64,835Maintenance
                
                
                -
                
                
                
                25,502
                
                
                
                7,623
                
                
                
                45,509Product
      sales
                
                
                17,361
                
                
                
                13,958
                
                
                
                32,755
                
                
                
                26,098Total
      Cost of Revenue
                
                
                38,810
                
                
                
                169,457
                
                
                
                87,329
                
                
                
                287,205GROSS
      MARGIN
                
                
                84,834
                
                
                
                114,980
                
                
                
                177,420
                
                
                
                256,466OPERATING
      EXPENSESSelling,
      general and administrative expense, including non-cash compensation of
      $16,207, $18,000, $19,096 and $18,000, respectively
                
                
                114,628
                
                
                
                110,532
                
                
                
                243,217
                
                
                
                253,967Research
      and development expense
                
                
                5,085
                
                
                
                10,112
                
                
                
                5,085
                
                
                
                37,328Interest
      and other income
                
                
                (35,942
                )
                
                
                (26,355
                )
                
                
                (73,735
                )
                
                
                (60,045
                )Net
      Operating Expenses
                
                
                83,771
                
                
                
                94,289
                
                
                
                174,567
                
                
                
                231,250Income
      from Operations
                
                
                1,063
                
                
                
                20,691
                
                
                
                2,853
                
                
                
                25,216Net
      Income
                
                $
                1,063
                
                
                $
                20,691
                
                
                $
                2,853
                
                
                $
                25,216Basic
      Earnings Per Common Share
                
                $
                0.00
                
                
                $
                0.00
                
                
                $
                0.00
                
                
                $
                0.00Diluted
      Earnings Per Common Share
                
                $
                0.00
                
                
                $
                0.00
                
                
                $
                0.00
                
                
                $
                0.00





See
accompanying notes to unaudited condensed consolidated financial
statements


-2-





eROOMSYSTEM
TECHNOLOGIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)





For the Six Months Ended June
      30
                
                2009
                
                
                2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                
                $
                2,853
                
                
                $
                25,216Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                
                
                49,096
                
                
                
                151,893Gain
      on sale of refreshment centers
                
                
                (1,250
                )
                
                
                (71,615
                )Loss
      on impairment of refreshment centers
                
                
                -
                
                
                
                64,835Interest
      income from other receivable
                
                
                (12,343
                )
                
                
                (7,546
                )Non-cash
      compensation expense
                
                
                19,096
                
                
                
                18,000Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                (11,880
                )
                
                
                37,185Prepaid
      expenses
                
                
                29,096
                
                
                
                (480
                )Accounts
      payable
                
                
                (18,180
                )
                
                
                (5,846
                )Accrued
      liabilities
                
                
                (5,765
                )
                
                
                (23,435
                )Customer
      deposits and deferred maintenance revenue
                
                
                (2,292
                )
                
                
                2,477Net
      Cash Provided By Operating Activities
                
                
                48,431
                
                
                
                190,684CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
                
                
                (2,648
                )
                
                
                (1,032
                )Proceeds
      from sale of refreshment centers
                
                
                39,250
                
                
                
                65,948Purchase
      of investment
                
                
                -
                
                
                
                (926,998
                )Sale
      of investment
                
                
                -
                
                
                
                2,375,000Change
      in long term deposits and restricted funds
                
                
                (900
                )
                
                
                182Net Cash Provided by Investing
      Activities
                
                
                35,702
                
                
                
                1,513,100CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      Cash Used in Financing Activities
                
                
                -
                
                
                
                -Net
      Increase in Cash
                
                
                84,133
                
                
                
                1,703,784Cash at Beginning of
      Period
                
                
                2,135,814
                
                
                
                355,970Cash
      at End of Period
                
                $
                2,219,947
                
                
                $
                2,059,754Supplemental
      Cash Flows InformationCash
      paid for interest
                
                $
                -
                
                
                $
                -





See
accompanying notes to unaudited condensed consolidated financial
statements


-3-


eROOMSYSTEM
TECHNOLOGIES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




NOTE
1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES




Condensed
Financial Statements - The accompanying unaudited condensed consolidated
financial statements include the accounts of eRoomSystem Technologies, Inc. and
its subsidiaries (the "Company"). These financial statements are condensed and,
therefore, do not include all disclosures normally required by generally
accepted accounting principles. These statements should be read in conjunction
with the Company's audited financial statements for the fiscal year ended
December 31, 2008 included in the Company's Annual Report on Form 10-K. In
particular, the Company's organization, nature of operations and significant
accounting principles were presented in Note 1 to the consolidated financial
statements in that annual report. In the opinion of management, all adjustments
necessary for a fair presentation have been included in the accompanying
unaudited condensed consolidated financial statements and consist of only normal
recurring adjustments. The results of operations presented in the accompanying
unaudited condensed consolidated financial statements for the three and six
months ended June 30, 2009 are not necessarily indicative of the results that
may be expected for the full year ending December 31, 2009.




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




Net Earnings Per
Share of Common Stock - Basic earnings per share of common stock is
computed by dividing net income by the weighted-average number of shares of
common stock outstanding. Unvested shares of common stock are considered to be
stock options for purposes of computing earnings per share. Diluted earnings per
share of common stock are computed by dividing net income by the
weighted-average number of shares of common stock and dilutive potential common
stock equivalents outstanding. Potential common stock equivalents consist of
shares issuable upon the exercise of stock options and warrants, and shares
issuable upon the conversion of debt.




The
following table is a reconciliation of the numerators and denominators used in
the calculation of basic and diluted weighted-average common shares outstanding
for the three and six months ended June 30, 2009 and
2008:





ForTheThreeMonths
                                  EndedJune30,
                                
                                
                                ForTheSixMonths
                                  EndedJune30,2009
                                
                                
                                2008
                                
                                
                                2009
                                
                                
                                2008Basic
      net income
                                
                                $
                                1,063
                                
                                
                                $
                                20,691
                                
                                
                                $
                                2,853
                                
                                
                                $
                                25,216Diluted
      net income
                                
                                $
                                1,063
                                
                                
                                $
                                20,691
                                
                                
                                $
                                2,853
                                
                                
                                $
                                25,216Basic
      weighted-average common shares outstanding
                                
                                
                                24,104,209
                                
                                
                                
                                24,002,011
                                
                                
                                
                                24,076,342
                                
                                
                                
                                23,987,668Effect
      of dilutive securities Stock options and warrants
                                
                                
                                3,333
                                
                                
                                
                                366,426
                                
                                
                                
                                3,333
                                
                                
                                
                                351,410Diluted
      weighted-average common shares outstanding
                                
                                
                                24,107,542
                                
                                
                                
                                24,368,437
                                
                                
                                
                                24,079,675
                                
                                
                                
                                24,339,078Basic
      earnings per share
                                
                                $
                                0.00
                                
                                
                                $
                                0.00
                                
                                
                                $
                                0.00
                                
                                
                                $
                                0.00Diluted
      earnings per share
                                
                                $
                                0.00
                                
                                
                                $
                                0.00
                                
                                
                                $
                                0.00
                                
                                
                                $
                                0.00




During
the three and six months ended June 30, 2009 and 2008, there were potential
common stock equivalents from options and warrants of 2,202,511, 2,768,195,
2,202,511 and 2,783,211, respectively, which were not included in the
computation of diluted earnings per share because their effect would have been
anti-dilutive.




NOTE
2 - BUSINESS CONDITION




During
the year ended December 31, 2008 and the six months ended June 30, 2009, the
Company realized a net gain of $72,231 and $2,853, respectively. During the year
ended December 31, 2008 and the six months ended June 30, 2009, the Company's
operations provided $240,326 and $48,431 of cash, respectively. The Company had
a cash balance of $2,219,947 as of June 30, 2009. Up until the year ended
December 31, 2004, the Company suffered recurring losses. Although the Company
realized net income in the past five years, the Company revenue has been
decreasing as the Company’s existing hotel revenue-sharing and maintenance
contracts conclude. Realization of continued profitable operations is not
assured. The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern. Management would like to
acquire an existing operating company to enable the Company to increase revenues
and long-term viability, and is continuously performing due diligence on third
party companies for this purpose. The Company has also been performing research
regarding potential further investments in either privately-held or publicly
traded emerging growth stage companies.


-4-





NOTE
3 – NOTE RECEIVABLE




On July
7, 2008, the Company funded an escrow account in the amount of $500,000 and
signed an agreement to provide a secure loan to BlackBird Corporation, a Florida
corporation (“BlackBird”), an unrelated entity. The funding of the loan was
contingent on completion of a transaction by BlackBird to acquire an unrelated
company, USA Datanet Corporation. The acquisition took place on July 24,
2008.





The loan
is evidenced by a 18% senior secured convertible promissory note, made by
BlackBird in favor of the Company (the “Secured Note”). The Secured Note was
extended to December 31, 2009 and bears interest at an annual rate of 18% with
interest payable quarterly on the last business day of each
quarter.





NOTE
4 – PURCHASE OF ASSETS





On Jun
17, 2009, the Company purchased the assets of Kooltech SPE which had been
acquired by Cardinal Pointe Capital (“CPC”). CPC sold the minibars, baskets and
stock owned by Kooltech SPE to the Company. The Company has formed a subsidiary,
eFridge, LLC (“eFridge”) for the purposes of this purchase. The purchase price
is an amount equal to thirty percent (30%) of eFridge’s EBITDA and an amount
equal to thirty percent (30%) of New Equipment Cash Flow (as hereinafter
defined).  Payment of the Purchase Price shall be made by eFridge to
CPC on a monthly basis within twenty days after the end of each month, based on
the eFridge’s EBITDA and the New Equipment Cash Flow for the month then
ended.





Because
payment of the purchase price is dependent on a future unknown EBITDA, it is not
assured. Therefore, no carrying value has been assigned to these
assets.





New
Equipment Cash Flow: To the extent new equipment is purchased by eFridge with
the monies earned from the equipment currently placed in Hotels and not paid out
to CPC, CPC shall receive, in addition to its 30% share of eFridge’s EBITDA, 30%
of eFridge’s cash flow related to the New Equipment.





In
addition, the Company agreed that in the event eFridge or any other subsidiary
of the Company purchase any new Kooltech equipment from the manufacturers
thereof or broker the sale of new Kooltech equipment or equipment materially
similar to Kooltech’s to third parties, they will pay to CPC an amount equal to
$30 per mini-bar and $15 per automated basket so purchased or
brokered.





NOTE
5 - STOCKHOLDERS’ EQUITY





During
the six months ended June 30, 2009, options to purchase 60,000 shares of common
stock expired. The Company recognized the carrying value of these options in the
amount of $11,150 as additional paid in capital.





During
the six months ended June 30, 2008, the Company granted options to purchase
75,000 shares of common stock to an employee for services rendered. These
options, which vested immediately, have an exercise price ranging from $0.12 to
$0.14 per share and are exercisable through June 16, 2014. These options were
valued at $7,846 using the Black-Scholes option pricing model with the following
assumptions: risk free interest rate ranging from 1.87% to 2.70%, dividend yield
of 0.0%, volatility ranging from 118% to 119% and expected life of 5
years.




On April
23, 2008, the Company issued 75,000 shares of common stock to its Board of
Directors in recognition of services rendered. These shares were valued at
$11,250 ($0.15 per share based on closing value).


-5-





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




As used
in this Form 10-Q, references to the "Company," "we," “our” or "us" refer to
eRoomSystem Technologies, Inc., unless the context otherwise
indicates.





This
Management’s Discussion and Analysis or Plan of Operations (“MD&A”) section
of our Quarterly Report on Form 10-Q discusses our results of operations,
liquidity and financial condition, and certain factors that may affect our
future results. You should read this MD&A in conjunction with our
consolidated financial statements and accompanying notes included in this
Quarterly Report.





Forward-Looking
Statements





This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors discussed
elsewhere in this report.




Certain
information included herein contains statements that may be considered
forward-looking statements, such as statements relating to our anticipated
revenues, gross margin and operating results, future performance and operations,
plans for future expansion, capital spending, sources of liquidity and financing
sources. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future,
and accordingly, such results may differ from those expressed in any
forward-looking statements made herein. These risks and uncertainties include,
but are not limited to, those relating to our liquidity requirements, the
continued growth of the lodging industry, the success of our
product-development, marketing and sales activities, vigorous competition in the
lodging industry, dependence on existing management, leverage and debt service
(including sensitivity to fluctuations in interest rates), domestic or global
economic conditions, the inherent uncertainty and costs of prolonged arbitration
or litigation, and changes in federal or state tax laws or the administration of
such laws. A complete discussion of these risks and uncertainties are contained
in our Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission on March 12, 2009.




Overview




Our core
business is the development and installation of an intelligent, in-room computer
platform and communications network, or the eRoomSystem, for the lodging
industry. The eRoomSystem is a computerized platform and processor-based system
designed to collect and control data. The eRoomSystem supports our fully
automated and interactive eRoomServ refreshment centers, eRoomSafes, eRoomEnergy
products, and the eRoomTray. In 2005, we commenced our diversification strategy
of investing in third party emerging growth companies. To this end, we have an
investment totaling $10,000 in Identica Holdings Corporation (“Identica”). In
addition, we have loaned Identica $150,000 in cash. The loan is secured by a
security interest in all the assets of Identica and is evidenced by a promissory
note. The loan has been continuously extended and is presently due on August 20,
2009. In consideration for making the loan, Identica issued a warrant to us to
purchase one million (1,000,000) shares of common stock of Identica, exercisable
at $0.15 per share at any time through May 20, 2010. In consideration for an
extension of the note, the warrant expiration has been extended to five years
after the date the Identica shares are quoted saleable to the public. We may
make additional investments in promising emerging growth companies, and
potentially acquire an operating company if the opportunity
arises.





On July
24, 2008, we provided a secured loan to BlackBird Corporation, a Florida
corporation (“BlackBird”), an unrelated entity. The funding of the loan took
place on completion of a transaction by BlackBird to acquire an unrelated
company, USA Datanet Corporation. The acquisition took place on July 24, 2008.
The loan is evidenced by a 10% senior secured convertible promissory note, made
by BlackBird (the “Secured Note”). The Secured Note matured on June 30, 2009 and
the interest rate increased to 18% annually as of January 1, 2009, with interest
payable quarterly on the last business day of each quarter. An extension to the
note was provided through December 31, 2009 at an interest rate of
18%.





On Jun
17, 2009, the Company purchased the assets of Kooltech SPE which had been
acquired by Cardinal Pointe Capital (“CPC”). CPC sold the minibars, baskets and
stock owned by Kooltech SPE to the Company. The Company has formed a subsidiary,
eFridge, LLC (“eFridge”) for the purposes of this purchase. The purchase price
is an amount equal to thirty percent (30%) of eFridge’s EBITDA and an amount
equal to thirty percent (30%) of New Equipment Cash Flow.  Payment of
the Purchase Price shall be made by eFridge to CPC on a monthly basis within
twenty days after the end of each month, based on the eFridge’s EBITDA for the
month then ended.





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





-6-




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




Description
of Revenues




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





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




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





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





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





Revenue
Recognition




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





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




Our
installation, maintenance and license agreements stipulate that we collect a
maintenance fee per eRoomServ refreshment center per day, payable on a monthly
basis. Our objective is to generate gross profit margins of approximately 40%
from our maintenance-related revenues. We base this expectation on our
historical cost of maintenance of approximately $0.04 per unit per day and,
pursuant to our maintenance agreements, our projected receipt of generally not
less than $0.08 per unit per day.


-7-




Description
of Expenses




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




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





Research
and development expenses consist of payroll and related costs for hardware and
software engineers, quality assurance specialists, management personnel, and the
costs of materials used by our consultants in the maintenance of our existing
installed products as well as research and development for new products.
Research and development expenses in the six months ended June 30, 2009 were
$5,085.




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




Results
of Operations




Comparison
of Three Months Ended June 30, 2009 and 2008




Revenues




Revenue
Sharing Arrangements — Our revenue from revenue sharing arrangements was $67,199
for the three months ended June 30, 2009, compared to $148,324 for the three
months ended June 30, 2008, representing a decrease of $81,125, or 54.7%. The
decrease in revenue sharing revenue was due to the completion of a number of
revenue sharing contracts in 2008.




Maintenance
Fee Revenues — Maintenance fee revenues were $33,372 for the three months ended
June 30, 2009, compared to $56,193 for the three months ended June 30, 2008,
representing a decrease of $22,821, or 40.6%. The decrease in maintenance fee
revenue was due to the completion of a number of revenue sharing and maintenance
contracts in 2008.




Product
Sales — Revenue from product sales was $23,073 for the three months ended June
30, 2009, compared to $79,920 for the three months ended June 30, 2008,
representing a decrease of $56,847, or 71.1%. The decrease in product sales
revenues was primarily due to the decrease in sales of refreshment centers to
hotels in the three months ended June 30, 2009.




Cost
of Revenue




Cost of
Revenue Sharing Revenue — Cost of revenue sharing revenue was $21,449 for the
three months ended June 30, 2009, compared to $65,162 for the three months ended
June 30, 2008 representing a decrease of $43,713 or 67.1%. The gross margin
percentage on revenue sharing revenue was 68.1% for the three months ended June
30, 2009, compared to 56.1% for the three months ended June 30, 2008. The
increase in gross margin relating to revenue sharing revenue is due to the
completion of some revenue sharing contracts in 2008.




Loss on
Impairment of Refreshment Centers — During 2008, the Company assessed the
carrying value of certain refreshment centers that had been used by a Hotel and
taken out of service and recorded a loss due to impairment of $64,835.




Cost of
Maintenance Fee Revenue — Our cost of maintenance fee revenue was $0 for the
three months ended June 30, 2009, compared to $25,502 for the three months ended
June 30, 2008, representing an decrease of $25,502, or 100%. The gross margin
percentage on maintenance fee revenues was 100% for the three months ended June
30, 2009, compared to 54.6% for the three months ended June 30, 2008. The
decrease in our cost of maintenance fee revenue was due to the decrease in the
equipment being serviced.




Cost of
Product Sales Revenue — Our cost of product sales revenue for the three months
ended June 30, 2009 was $17,361, compared to $13,958 for the three months ended
June 30, 2008, an increase of $3,403, or 24.4%. The gross margin percentage on
revenue from product sales revenue was 24.8% for the three months ended June 30,
2009, compared to 82.5% for the three months ended June 30, 2008. The increase
in cost of product sales revenue relates to the remaining basis of the
refreshment centers sold as well as the basis on the parts sold in the three
months ended June 30, 2009 versus the three months ended June 30,
2008.





The
changes and percent changes with respect to our revenues and our cost of revenue
for the three months ended June 30, 2009 and 2008 are summarized as
follows:


-8-





For the Three MonthsEndedJune30,2009
                              
                              
                              2008
                              
                              
                              Change
                              
                              
                              Percent
                                ChangeREVENUERevenue-sharing
      arrangements
                              
                              $
                              67,199
                              
                              
                              $
                              148,324
                              
                              
                              $
                              (81,125
                              )
                              
                              
                              -54.7
                              %Maintenance
      fees
                              
                              
                              33,372
                              
                              
                              
                              56,193
                              
                              
                              
                              (22,821
                              )
                              
                              
                              -40.6
                              %Product
      sales
                              
                              
                              23,073
                              
                              
                              
                              79,920
                              
                              
                              
                              (56,847
                              )
                              
                              
                              -71.1
                              %Total
      Revenue
                              
                              
                              123,644
                              
                              
                              
                              284,437
                              
                              
                              
                              (160,793
                              )
                              
                              
                              -56.5
                              %COST
      OF REVENUERevenue-sharing
      arrangements
                              
                              
                              21,449
                              
                              
                              
                              65,162
                              
                              
                              
                              (43,713
                              )
                              
                              
                              -67.1
                              %Loss
      on impairment of refreshment centers in serivice
                              
                              
                              -
                              
                              
                              
                              64,835
                              
                              
                              
                              (64,835
                              )
                              
                              
                              100.0
                              %Maintenance
                              
                              
                              -
                              
                              
                              
                              25,502
                              
                              
                              
                              (25,502
                              )
                              
                              
                              -100.0
                              %Product
      sales
                              
                              
                              17,361
                              
                              
                              
                              13,958
                              
                              
                              
                              3,403
                              
                              
                              
                              24.4
                              %Total Cost of
      Revenue
                              
                              $
                              38,810
                              
                              
                              $
                              169,457
                              
                              
                              $
                              (130,647
                              )
                              
                              
                              -77.1
                              %GROSS
      MARGIN PERCENTAGERevenue-sharing
      arrangements
                              
                              
                              68.1
                              %
                              
                              
                              56.1
                              %Maintenance
                              
                              
                              100.0
                              %
                              
                              
                              54.6
                              %Product
      sales
                              
                              
                              24.8
                              %
                              
                              
                              82.5
                              %Total Gross Margin
      Percentage
                              
                              
                              68.6
                              %
                              
                              
                              40.4
                              %





Although
the preceding table summarizes the net changes and percent changes with respect
to our revenues and our cost of revenue for the three months ended June 30, 2009
and 2008, the trends contained therein are limited and should not be viewed as a
definitive indication of our future results.




Operating
Expenses




Selling,
General and Administrative — Selling, general and administrative expenses,
including non-cash compensation expense, were $114,628 for the three months
ended June 30, 2009, compared to $110,532 for the three months ended June 30,
2008, representing an increase of $4,096, or 3.7%. The increase in our selling,
general and administrative expenses was immaterial.




Research
and Development—Research and development expenses were $5,085 for the three
months ended June 30, 2009, compared to $10,112 for the three months ended June
30, 2008 representing a decrease of $5,027. The decrease in our research and
development expenses for the three months ended June 30, 2009 reflects a
decrease in new product development in 2009.




Interest
and other income was $35,942 for the three months ended June 30, 2009 as
compared to $26,355 for the three months ended June 30, 2008 representing an
increase of $9,587, or 36.4%. The increase was due to the interest earned on our
increasing balance of cash and cash equivalents.





Net
Income Attributable to Common Stockholders




We
realized net income of $1,063 for the three months ended June 30, 2009, compared
to $20,691 during the three months ended June 30, 2008. The $19,628 decrease in
net income was primarily due to decreasing revenue sharing agreements. We may
incur losses in the future as existing revenue sharing agreements with our hotel
clients continue expire.





Comparison
of Six Months Ended June 30, 2009 and 2008




Revenues




Revenue
Sharing Arrangements — Our revenue from revenue sharing arrangements was
$148,815 for the six months ended June 30, 2009, compared to $335,805 for the
six months ended June 30, 2008, representing a decrease of $186,990, or 55.7%.
The decrease in revenue sharing revenue was due to the completion of a number of
revenue sharing contracts in 2008.


-9-




Maintenance
Fee Revenues — Maintenance fee revenues were $75,828 for the six months ended
June 30, 2009, compared to $111,498 for the six months ended June 30, 2008,
representing a decrease of $35,670, or 32%. The decrease in maintenance fee
revenue was due to the completion of a number of revenue sharing and maintenance
contracts in 2008 and 2009.





Product
Sales — Revenue from product sales was $40,106 for the six months ended June 30,
2009, compared to $96,368 for the six months ended June 30, 2008, representing a
decrease of $56,262, or 58.4%. The decrease in product sales revenues was
primarily due to the decrease in sales of refreshment centers to hotels in the
six months ended June 30, 2009.




Cost
of Revenue




Cost of
Revenue Sharing Revenue — Cost of revenue sharing revenue was $46,951 for the
six months ended June 30, 2009, compared to $150,763 for the six months ended
June 30, 2008 representing a decrease of $103,812 or 68.9%. The gross margin
percentage on revenue sharing revenue was 68.5% for the six months ended June
30, 2009, compared to 55.1% for the six months ended June 30, 2008. The increase
in gross margin relating to revenue sharing revenue is due to the completion of
some revenue sharing contracts in 2008.




Loss on
Impairment of Refreshment Centers — During 2008, the Company assessed the
carrying value of certain refreshment centers that had been used by a Hotel and
taken out of service and recorded a loss due to impairment of $64,835.





Cost of
Maintenance Fee Revenue — Our cost of maintenance fee revenue was $7,623 for the
six months ended June 30, 2009, compared to $45,509 for the six months ended
June 30, 2008, representing an decrease of $37,886, or 83.2%. The gross margin
percentage on maintenance fee revenues was 89.9% for the six months ended June
30, 2009, compared to 59.2% for the six months ended June 30, 2008. The decrease
in our cost of maintenance fee revenue was due to the decreased amount of
equipment being serviced.




Cost of
Product Sales Revenue — Our cost of product sales revenue for the six months
ended June 30, 2009 was $32,755, compared to $26,098 for the six months ended
June 30, 2008, an increase of $6,657, or 25.5%. The gross margin percentage on
revenue from product sales revenue was 18.3% for the six months ended June 30,
2009, compared to 72.9% for the six months ended June 30, 2008. The increase in
cost of product sales revenue relates to the increase in parts sold as well as
the remaining basis of the refreshment centers sold in the six months ended June
30, 2009 versus the six months ended June 30, 2008.





The
changes and percent changes with respect to our revenues and our cost of revenue
for the six months ended June 30, 2009 and 2008 are summarized as
follows:





For the Six MonthsEndedJune30,2009
                              
                              
                              2008
                              
                              
                              Change
                              
                              
                              Percent
                                ChangeREVENUERevenue-sharing
      arrangements
                              
                              $
                              148,815
                              
                              
                              $
                              335,805
                              
                              
                              $
                              (186,990
                              )
                              
                              
                              -55.7
                              %Maintenance
      fees
                              
                              
                              75,828
                              
                              
                              
                              111,498
                              
                              
                              
                              (35,670
                              )
                              
                              
                              -32.0
                              %Product
      sales
                              
                              
                              40,106
                              
                              
                              
                              96,368
                              
                              
                              
                              (56,262
                              )
                              
                              
                              -58.4
                              %Total
      Revenue
                              
                              
                              264,749
                              
                              
                              
                              543,671
                              
                              
                              
                              (278,922
                              )
                              
                              
                              -51.3
                              %COST
      OF REVENUERevenue-sharing
      arrangements
                              
                              
                              46,951
                              
                              
                              
                              150,763
                              
                              
                              
                              (103,812
                              )
                              
                              
                              -68.9
                              %Loss
      on impairment of refreshment centers in serivice
                              
                              
                              -
                              
                              
                              
                              64,835
                              
                              
                              
                              (64,835
                              )
                              
                              
                              100.0
                              %Maintenance
                              
                              
                              7,623
                              
                              
                              
                              45,509
                              
                              
                              
                              (37,886
                              )
                              
                              
                              -83.2
                              %Product
      sales
                              
                              
                              32,755
                              
                              
                              
                              26,098
                              
                              
                              
                              6,657
                              
                              
                              
                              25.5
                              %Total Cost of
      Revenue
                              
                              $
                              87,329
                              
                              
                              $
                              287,205
                              
                              
                              $
                              (199,876
                              )
                              
                              
                              -69.6
                              %GROSS
      MARGIN PERCENTAGERevenue-sharing
      arrangements
                              
                              
                              68.5
                              %
                              
                              
                              55.1
                              %Maintenance
                              
                              
                              89.9
                              %
                              
                              
                              59.2
                              %Product
      sales
                              
                              
                              18.3
                              %
                              
                              
                              72.9
                              %Total Gross Margin
      Percentage
                              
                              
                              67.0
                              %
                              
                              
                              47.2
                              %





Although
the preceding table summarizes the net changes and percent changes with respect
to our revenues and our cost of revenue for the six months ended June 30, 2009
and 2008, the trends contained therein are limited and should not be viewed as a
definitive indication of our future results.


-10-





Operating
Expenses




Selling,
General and Administrative — Selling, general and administrative expenses,
including non-cash compensation expense, were $243,217 for the six months ended
June 30, 2009, compared to $253,967 for the six months ended June 30, 2008,
representing a decrease of $10,750, or 4.2%. The decrease in our selling,
general and administrative expenses reflects the write-off of an uncollectible
account in 2008.




Research
and Development—Research and development expenses were $5,085 for the six months
ended June 30, 2009, compared to $37,328 for the six months ended June 30, 2008
representing a decrease of $32,243. The decrease in our research and development
expenses for the six months ended June 30, 2009 reflects the decrease in new
product development in 2009.




Interest
and other income was $73,735 for the six months ended June 30, 2009 as compared
to $60,045 for the six months ended June 30, 2008 representing an increase of
$13,690, or 22.8%. The increase was due to the interest earned on our increasing
balance of cash and cash equivalents as well as the interest earned on our loan
receivable.





Net
Income Attributable to Common Stockholders




We
realized net income of $2,853 for the six months ended June 30, 2009, compared
to $25,216 during the six months ended June 30, 2008. The $22,363 decrease in
net income was primarily due to decreasing revenue sharing agreements. We may
incur losses in the future as existing revenue sharing agreements with our hotel
clients expire.





Liquidity
and Capital Resources





At June
30, 2009, our principal sources of liquidity consisted of $2,219,947 of cash and
working capital of $2,839,244, as compared to $2,135,814 of cash and working
capital of $2,774,255 at December 31, 2008. In addition, our stockholders'
equity was $3,103,668 at June 30, 2009, compared to stockholders' equity of
$3,081,719 at December 31, 2008, an increase of $21,949. The increase in cash
reflects the increase in working capital, and increase in stockholders'
equity.




Our
accumulated deficit decreased from $31,010,396 at December 31, 2008 to
$31,007,543 at June 30, 2009. The $2,853 decrease in accumulated deficit
resulted directly from the net income realized for the six months ended June 30,
2009. Our accumulated deficit may increase in the future as existing revenue
sharing agreements with our hotel clients expire.




Our
operations provided net cash of $48,431 for the six months ended June 30, 2009,
compared to $190,684 during the six months ended June 30, 2008.




Investing
activities for the six months ended June 30, 2009 provided net cash of $35,702,
compared to $1,513,100 of net cash provided during the six months ended June 30,
2008. The change consisted primarily of the proceeds from the sale of investment
securities in 2008.




There
were no financing activities in the six months ended June 30, 2009 and
2008.





Contractual
Cash Obligations and Commercial Commitments




There
were no significant contractual cash obligations or commercial commitments
either on or off balance sheet as of June 30, 2009.





Off
Balance Sheet Arrangements





We have
no off-balance sheet arrangements.





Item 3. Quantitative and Qualitative
Disclosures About Market Risk.





A smaller
reporting company, as defined by Item 10 of Regulation S-K, is not required to
provide the information required by this item.




Item
4(T).  Controls and Procedures




Evaluation
of Disclosure Controls and Procedures





Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the United States Securities
and Exchange Commission. Our Chief Executive Officer and Chief Financial Officer
has reviewed the effectiveness of our "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and
15d-15(e)) as of the end of the period covered by this Quarterly Report on Form
10-Q and have concluded that the disclosure controls and procedures are
effective to ensure that material information relating to the Company is
recorded, processed, summarized, and reported in a timely
manner.


-11-





Changes
in Internal Controls over Financial Reporting





There
have been no changes  in
the  Company’s  internal  control  over  financial
reporting identified in connection with the evaluation required by paragraph (d)
of Rule  240.15d-15  that occurred during the Company’s last
fiscal quarter that has  materially  affected,  or
is reasonable  likely to materially  affect,  the
Company internal control over financial reporting.





PART
II - OTHER INFORMATION




Item
1. Legal Proceedings.




There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.




Item
1A. Risk Factors.





A smaller
reporting company, as defined by Item 10 of Regulation S-K, is not required to
provide the information required by this item.





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




None




Item
3. Defaults Upon Senior Securities.




Not
applicable.





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




Not
applicable.




Item
5. Other Information.




Not
applicable.





Item
6. Exhibits.




Exhibit
      No.
              
              Description31.1
              
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232.1
              
              Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002


-12-





SIGNATURE




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this quarterly report on Form 10-Q to be signed on its behalf by the
undersigned thereunto duly authorized.




eRoomSystem
      Technologies, Inc.(Registrant)Date:
      August 12, 2009By:
              /s/
      David A. GestetnerName:
              David
      A. GestetnerTitle:
              President,
      Chief Executive Officer, Secretary,and
      Chairman of the Board(Principal
      Executive, Financial,and
      Accounting Officer)


-13-