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 September 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                     ̈Non-accelerated
      filer              ̈
            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).





Yes  o No  x




The
number of shares of the issuer’s common stock issued and outstanding as of
November 10, 2009 was 24,123,165 shares.







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.
                
                12Item
      4(T).  Controls and Procedures
                
                12PART
      II - OTHER INFORMATION
                
                12Item
      1. Legal Proceedings.
                
                12Item
      1A. Risk Factors.
                
                12Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                
                13Item
      3. Defaults Upon Senior Securities.
                
                13Item
      4. Submission of Matters to a Vote of Security Holders.
                
                13Item
      5. Other Information.
                
                13Item
      6. Exhibits.
                
                13SIGNATURE
                
                14


-ii-





PART
I - FINANCIAL INFORMATION


Item
1. Financial Statements





eROOMSYSTEM
TECHNOLOGIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)





September 30
                    
                    
                    December 31,2009
                    
                    
                    2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                    
                    $
                    2,322,514
                    
                    
                    $
                    2,135,814Accounts
      receivable, net of allowance for doubtful accounts of  $13,553
      and $22,040 at September 30, 2009 and December 31, 2008,
      respectively
                    
                    
                    76,795
                    
                    
                    
                    124,897Notes
      receivable
                    
                    
                    522,685
                    
                    
                    
                    512,603Inventory
                    
                    
                    34,373
                    
                    
                    
                    -Prepaid
      expenses
                    
                    
                    72,505
                    
                    
                    
                    114,512Total
      Current Assets
                    
                    
                    3,028,872
                    
                    
                    
                    2,887,826REFRESHMENT CENTERS IN
      SERVICE, net of accumulated depreciation of $801,427 and $1,015,582
      at September 30, 2009 and December 21, 2008, respectively
                    
                    
                    21,275
                    
                    
                    
                    98,389PROPERTY
      AND EQUIPMENTComputer
      and office equipment, net of accumulated depreciation of $12,600 and
      $9,214, at September 30, 2009 and December 31, 2008,
      respectively
                    
                    
                    9,237
                    
                    
                    
                    9,591INVESTMENT
      IN MARKETABLE SECURITIES
                    
                    
                    -
                    
                    
                    
                    14,075NOTE
      RECEIVABLE
                    
                    
                    -
                    
                    
                    
                    183,159DEPOSITS
                    
                    
                    5,350
                    
                    
                    
                    2,250Total
      Assets
                    
                    $
                    3,064,734
                    
                    
                    $
                    3,195,290LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                    
                    $
                    41,955
                    
                    
                    $
                    51,687Accrued
      liabilities
                    
                    
                    56,711
                    
                    
                    
                    52,534Customer
      deposits
                    
                    
                    2,004
                    
                    
                    
                    2,004Deferred
      maintenance revenue
                    
                    
                    794
                    
                    
                    
                    7,346Total
      Current Liabilities
                    
                    
                    101,464
                    
                    
                    
                    113,571Total
      Liabilities
                    
                    
                    101,464
                    
                    
                    
                    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 September 30, 2009 and
      December 31, 2008 respectively
                    
                    
                    24,123
                    
                    
                    
                    24,048Additional
      paid-in capital
                    
                    
                    34,073,497
                    
                    
                    
                    34,042,247Treasury
      stock at cost 290,300 shares at September 30, 2009 and December 31,
      2008
                    
                    
                    (38,453
                    )
                    
                    
                    (38,453
                    )Warrants
      and options outstanding
                    
                    
                    103,123
                    
                    
                    
                    114,273Accumulated
      deficit
                    
                    
                    (31,149,020
                    )
                    
                    
                    (31,010,396
                    )Accumulated
      other comprehensive loss
                    
                    
                    (50,000
                    )
                    
                    
                    (50,000
                    )Total
      Stockholders' Equity
                    
                    
                    2,963,270
                    
                    
                    
                    3,081,719Total
      Liabilities and Stockholders' Equity
                    
                    $
                    3,064,734
                    
                    
                    $
                    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 September 30,
                        
                        
                        For the Nine Months
                          Ended September 30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008REVENUERevenue-sharing
      arrangements
                        
                        $
                        45,559
                        
                        
                        $
                        114,294
                        
                        
                        $
                        194,374
                        
                        
                        $
                        450,099Maintenance
      fees
                        
                        
                        45,158
                        
                        
                        
                        58,590
                        
                        
                        
                        120,986
                        
                        
                        
                        170,088Product
      sales
                        
                        
                        115,277
                        
                        
                        
                        -
                        
                        
                        
                        155,383
                        
                        
                        
                        96,368Total
      Revenue
                        
                        
                        205,994
                        
                        
                        
                        172,884
                        
                        
                        
                        470,743
                        
                        
                        
                        716,555COST
      OF REVENUERevenue-sharing
      arrangements
                        
                        
                        8,691
                        
                        
                        
                        46,330
                        
                        
                        
                        55,642
                        
                        
                        
                        197,093Loss
      on impairment of refreshment centers
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        64,835Maintenance
                        
                        
                        23,533
                        
                        
                        
                        16,638
                        
                        
                        
                        31,156
                        
                        
                        
                        62,147Product
      sales
                        
                        
                        96,008
                        
                        
                        
                        -
                        
                        
                        
                        128,763
                        
                        
                        
                        26,098Total
      Cost of Revenue
                        
                        
                        128,232
                        
                        
                        
                        62,968
                        
                        
                        
                        215,561
                        
                        
                        
                        350,173GROSS
      MARGIN
                        
                        
                        77,762
                        
                        
                        
                        109,916
                        
                        
                        
                        255,182
                        
                        
                        
                        366,382OPERATING
      EXPENSESSelling,
      general and administrative expense, including non-cash compensation of
      $1,079, $0, $20,175, and $18,000, respectively
                        
                        
                        237,309
                        
                        
                        
                        79,158
                        
                        
                        
                        480,526
                        
                        
                        
                        333,125Research
      and development expense
                        
                        
                        2,031
                        
                        
                        
                        48,320
                        
                        
                        
                        7,116
                        
                        
                        
                        85,648Interest
      and other income
                        
                        
                        (20,101
                        )
                        
                        
                        (28,977
                        )
                        
                        
                        (93,836
                        )
                        
                        
                        (89,022
                        )Net
      Operating Expenses
                        
                        
                        219,239
                        
                        
                        
                        98,501
                        
                        
                        
                        393,806
                        
                        
                        
                        329,751Income/(Loss)
      from Operations
                        
                        
                        (141,477
                        )
                        
                        
                        11,415
                        
                        
                        
                        (138,624
                        )
                        
                        
                        36,631Net
      Income/(Loss)
                        
                        $
                        (141,477
                        )
                        
                        $
                        11,415
                        
                        
                        $
                        (138,624
                        )
                        
                        $
                        36,631Basic
      Earnings/(Loss) Per Common Share
                        
                        $
                        (0.01
                        )
                        
                        $
                        0.00
                        
                        
                        $
                        (0.01
                        )
                        
                        $
                        0.00Diluted
      Earnings/(Loss) Per Common Share
                        
                        $
                        (0.01
                        )
                        
                        $
                        0.00
                        
                        
                        $
                        (0.01
                        )
                        
                        $
                        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 Nine Months Ended September
      30
                          
                          2009
                          
                          
                          2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income/(loss)
                          
                          $
                          (138,624
                          )
                          
                          $
                          36,631Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                          
                          
                          59,027
                          
                          
                          
                          198,948Gain
      on sale of refreshment centers
                          
                          
                          (7,277
                          )
                          
                          
                          (71,615
                          )Loss
      on impairment of refreshment centers
                          
                          
                          -
                          
                          
                          
                          64,835Loss
      on investment
                          
                          
                          14,074
                          
                          
                          
                          -Interest
      income from other receivable
                          
                          
                          (10,082
                          )
                          
                          
                          (21,076
                          )Non-cash
      compensation expense
                          
                          
                          20,175
                          
                          
                          
                          18,000Changes
      in operating assets and liabilities:Accounts
      receivable
                          
                          
                          10,102
                          
                          
                          
                          66,735Inventory
                          
                          
                          (34,373
                          )
                          
                          
                          -Prepaid
      expenses
                          
                          
                          42,007
                          
                          
                          
                          1,140Accounts
      payable
                          
                          
                          (9,732
                          )
                          
                          
                          7,037Accrued
      liabilities
                          
                          
                          4,177
                          
                          
                          
                          (29,223
                          )Customer
      deposits and deferred maintenance revenue
                          
                          
                          (6,552
                          )
                          
                          
                          1,471Net
      Cash Provided/(Used) By Operating Activities
                          
                          
                          (57,078
                          )
                          
                          
                          272,883CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
                          
                          
                          (3,031
                          )
                          
                          
                          (2,863
                          )Proceeds
      from sale of refreshment centers
                          
                          
                          66,750
                          
                          
                          
                          96,368Purchase
      of note receivable
                          
                          
                          -
                          
                          
                          
                          (520,000
                          )Payment
      of note receivable
                          
                          
                          183,159
                          
                          
                          
                          -Purchase
      of investment
                          
                          
                          -
                          
                          
                          
                          (926,998
                          )Proceeds
      from sale of marketable securities
                          
                          
                          -
                          
                          
                          
                          2,425,000Change
      in long term deposits and restricted funds
                          
                          
                          (3,100
                          )
                          
                          
                          182Net Cash Provided by Investing
      Activities
                          
                          
                          243,778
                          
                          
                          
                          1,071,689CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      Cash Used in Financing Activities
                          
                          
                          -
                          
                          
                          
                          -Net
      Increase in Cash
                          
                          
                          186,700
                          
                          
                          
                          1,344,572Cash at Beginning of
      Period
                          
                          
                          2,135,814
                          
                          
                          
                          355,970Cash
      at End of Period
                          
                          $
                          2,322,514
                          
                          
                          $
                          1,700,542Supplemental
      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 nine
months ended September 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 nine months ended September 30, 2009 and
2008:





For The Three Months
                                            Ended September 30,
                                          
                                          
                                          For The Nine Months
                                            Ended September 30,2009
                                          
                                          
                                          2008
                                          
                                          
                                          2009
                                          
                                          
                                          2008Basic net income/(loss)
                                          
                                          $
                                          (141,477
                                          )
                                          
                                          $
                                          11,415
                                          
                                          
                                          $
                                          (138,624
                                          )
                                          
                                          $
                                          36,631Diluted
      net income/(loss)
                                          
                                          $
                                          (141,477
                                          )
                                          
                                          $
                                          11,415
                                          
                                          
                                          $
                                          (138,624
                                          )
                                          
                                          $
                                          36,631Basic
      weighted-average common shares outstanding
                                          
                                          
                                          24,123,165
                                          
                                          
                                          
                                          24,077,835
                                          
                                          
                                          
                                          24,092,121
                                          
                                          
                                          
                                          24,007,928Effect
      of dilutive securities Stock options and warrants
                                          
                                          
                                          -
                                          
                                          
                                          
                                          334,964
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          351,410Diluted
      weighted-average common shares outstanding
                                          
                                          
                                          24,123,165
                                          
                                          
                                          
                                          24,412,799
                                          
                                          
                                          
                                          24,092,121
                                          
                                          
                                          
                                          24,359,338Basic
      earnings/(loss) per share
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          0.00
                                          
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          0.00Diluted
      earnings/(loss) per share
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          0.00
                                          
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          0.00





During
the three and nine months ended September 30, 2009 and 2008, there were
potential common stock equivalents from options and warrants of 2,215,844,
2,799,657, 2,215,844 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 nine months ended September 30, 2009,
the Company realized a net gain of $72,231 and net loss of $(138,624),
respectively. During the year ended December 31, 2008 and the nine months ended
September 30, 2009, the Company's operations provided $240,326 and used $57,078
of cash, respectively. The Company had a cash balance of $2,322,514 as of
September 30, 2009. Up until the year ended December 31, 2004, the Company
suffered recurring losses. The Company realized a net loss in the nine months
ended September 30, 2009. Although the Company’s revenue has decreased as the
Company’s existing hotel revenue-sharing and maintenance contracts conclude, the
Company has additional contracts with Hotels due to the recent purchase of the
Kooltech refreshment centers which has increased our revenue for the third
quarter. 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. The
BlackBird note is currently up to date on its interest payments.





NOTE
4 – INVESTMENT IN AND NOTE RECEIVABLE FROM IDENTICA





On
September 25, 2009, RJA Opportunities, Inc. purchased the senior secure note
receivable from Identica Holdings Corporation (“Identica”) at face value plus
accrued interest in the amount of $196,915. Following which, RJA Opportunities
foreclosed on the assets of Identica. The Company has recorded a loss on
investment in the amount of $14,075 for the 1,666,667 shares the
Company had purchased from Identica for $10,000 and the 1,000,000 warrantsthe Company received from Identica which were valued at $4,075 using the
Black-Scholes option pricing model.





NOTE
5 – PURCHASE OF ASSETS





On June
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.





No
payments have been made to CPC as of yet, as eFridge has not shown a profit
during the three months ended September 30, 2009.





NOTE
6 - STOCKHOLDERS’ EQUITY





During
the nine months ended September 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 nine months ended September 30, 2009, the Company granted options to
purchase 85,000 shares of common stock to employees for services rendered. These
options, which vested immediately, have an exercise price ranging from $0.12 to
$0.16 per share and are exercisable through June 16, 2014. These options were
valued at $8,924 using the Black-Scholes option pricing model with the following
assumptions: risk free interest rate ranging from 1.39% to 2.70%, dividend yield
of 0.0%, volatility ranging from 117% to 119% and expected life ranging from 3
to 5 years.





On April
23, 2009, 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. In 2009, we purchased
Kooltech refreshment centers that were installed in various hotels from CPC. 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 June
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.





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.


-6-





Description
of Revenues




Although
historically, we have received most of our revenues from the sale or placement
under a revenue-sharing program of our products in hotels, presently a
significant portion of our revenues is derived from agreements with Hotels in
which we provide the equipment as well as product and labor for restocking. A
portion of revenue earned is paid to the Hotel. 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.




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 either
provide product and labor for restocking and pay the Hotel a small percentage in
the recurring revenues generated from sales of goods and services related to our
products or we receive a share in the recurring revenues generated from sales of
goods and services related to our products and the hotel takes care of the
product and labor. We retain the ownership of the refreshment centers and safes
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.





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. Recently
however, we have taken over the operation of Kooltech minibars located in
various Hotels. Additionally, in 2005 we commenced our diversification strategy
to invest in emerging growth companies. 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 third party companies, if applicable. The
timing and return on such investments, however, cannot be
assured.





We
anticipate that we will receive more than 95% of the recurring revenues from the
sale of goods and services generated by our currently installed refreshment
centers, safes and baskets solutions under revenue-sharing
agreements.





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 refreshment
centers and safes 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.





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




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





Description
of Expenses




Cost of
product sales consists primarily of cost of goods and labor as well as remaining
basis on sale of old refreshment centers. 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.


-7-





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 nine months ended September 30, 2009
were $7,116.




In
accordance with generally accepted accounting principles 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 September 30, 2009 and 2008




Revenues




Revenue
Sharing Arrangements — Our revenue from revenue sharing arrangements was $45,559
for the three months ended September 30, 2009, compared to $114,294 for the
three months ended September 30, 2008, representing a decrease of $68,735, or
60.1%. The decrease in revenue sharing revenue was due to the completion of a
number of revenue sharing contracts in 2008 and 2009.




Maintenance
Fee Revenues — Maintenance fee revenues were $45,158 for the three months ended
September 30, 2009, compared to $58,590 for the three months ended September 30,
2008, representing a decrease of $13,432, or 22.9%. 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 $115,277 for the three months ended
September 30, 2009, compared to $0 for the three months ended September 30,
2008, representing an increase of $115,277, or 100%. The increase in product
sales revenues was primarily due to the sale of product in our new Hotels in
agreements structured in the three months ended September 30, 2009 utilizing the
Kooltech refreshment centers as well as the sale of refreshment centers at the
termination of a revenue sharing agreement in the three months ended September
30, 2009.




Cost
of Revenue




Cost of
Revenue Sharing Revenue — Cost of revenue sharing revenue was $8,691 for the
three months ended September 30, 2009, compared to $46,330 for the three months
ended September 30, 2008 representing a decrease of $37,639 or 81.2%. The gross
margin percentage on revenue sharing revenue was 80.9% for the three months
ended September 30, 2009, compared to 59.5% for the three months ended September
30, 2008. The increase in gross margin relating to revenue sharing revenue is
due to the completion of some revenue sharing contracts in 2008.




Cost of
Maintenance Fee Revenue — Our cost of maintenance fee revenue was $23,533 for
the three months ended September 30, 2009, compared to $16,638 for the three
months ended September 30, 2008, representing an increase of $6,895, or 41.4%.
The gross margin percentage on maintenance fee revenues was 47.9% for the three
months ended September 30, 2009, compared to 71.6% for the three months ended
September 30, 2008. The increase in our cost of maintenance fee revenue was due
to the Kooltech equipment being serviced.




Cost of
Product Sales Revenue — Our cost of product sales revenue for the three months
ended September 30, 2009 was $96,008, compared to $0 for the three months ended
September 30, 2008, an increase of $96,008, or 100%. The gross margin percentage
on revenue from product sales revenue was 16.7% for the three months ended
September 30, 2009, compared to 0% for the three months ended September 30,
2008. The increase in cost of product sales revenue relates to the remaining
basis of the refreshment centers sold as well as the cost of the minibar product
sold and labor provided in the three months ended September 30, 2009 versus the
three months ended September 30, 2008. We are presently providing a complete
turnkey solution to the Hotels, which includes providing equipment labor and
product for the Kooltech equipment that we purchased in June.


-8-





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





For
      the Three MonthsEnded September 30,
                                
                                
                                
                                
                                
                                Percent2009
                                
                                
                                2008
                                
                                
                                Change
                                
                                
                                ChangeREVENUERevenue-sharing
      arrangements
                                
                                $
                                45,559
                                
                                
                                $
                                114,294
                                
                                
                                $
                                (68,735
                                )
                                
                                
                                -60.1
                                %Maintenance
      fees
                                
                                
                                45,158
                                
                                
                                
                                58,590
                                
                                
                                
                                (13,432
                                )
                                
                                
                                -22.9
                                %Product
      sales
                                
                                
                                115,277
                                
                                
                                
                                -
                                
                                
                                
                                115,277
                                
                                
                                
                                100.0
                                %Total
      Revenue
                                
                                
                                205,994
                                
                                
                                
                                172,884
                                
                                
                                
                                33,110
                                
                                
                                
                                19.2
                                %COST
      OF REVENUERevenue-sharing
      arrangements
                                
                                
                                8,691
                                
                                
                                
                                46,330
                                
                                
                                
                                (37,639
                                )
                                
                                
                                -81.2
                                %Maintenance
                                
                                
                                23,533
                                
                                
                                
                                16,638
                                
                                
                                
                                6,895
                                
                                
                                
                                41.4
                                %Product
      sales
                                
                                
                                96,008
                                
                                
                                
                                -
                                
                                
                                
                                96,008
                                
                                
                                
                                100.0
                                %Total
      Cost of Revenue
                                
                                $
                                128,232
                                
                                
                                $
                                62,968
                                
                                
                                $
                                65,264
                                
                                
                                
                                103.6
                                %GROSS
      MARGIN PERCENTAGERevenue-sharing
      arrangements
                                
                                
                                80.9
                                %
                                
                                
                                59.5
                                %Maintenance
                                
                                
                                47.9
                                %
                                
                                
                                71.6
                                %Product
      sales
                                
                                
                                16.7
                                %
                                
                                
                                0.0
                                %Total
      Gross Margin Percentage
                                
                                
                                37.7
                                %
                                
                                
                                63.6
                                %





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 September 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 $237,309 for the three months
ended September 30, 2009, compared to $79,158 for the three months ended
September 30, 2008, representing an increase of $158,151, or 199.8%. The
increase in our selling, general and administrative expenses was due to the
start-up costs for the Kooltech equipment as well as the write-off of an
uncollectible account.




Research
and Development—Research and development expenses were $2,031 for the three
months ended September 30, 2009, compared to $48,320 for the three months ended
September 30, 2008 representing a decrease of $46,289. The decrease in our
research and development expenses for the three months ended September 30, 2009
reflects a decrease in new product development in 2009.




Interest
and other income was $20,101 for the three months ended September 30, 2009 as
compared to $28,977 for the three months ended September 30, 2008 representing a
decrease of $8,876, or 30.6%. The decrease was due to the decrease in interest
rates on our cash and cash equivalents.





Net
Income/(Loss) Attributable to Common Stockholders




We
realized a net loss of $141,477 for the three months ended September 30, 2009,
compared to a net income of $11,415 during the three months ended September 30,
2008. The $152,892 decreasein net
income was primarily due to decreasing revenue sharing agreements and the many
costs involved in the equipment purchase from CPC. We may incur losses in the
future as existing revenue sharing agreements with our hotel clients continue
expire and as we continue to bring our recently purchased equipment up to par.
There is no assurance that we will be successful in bringing the equipment up to
par.





Comparison
of Nine months ended September 30, 2009 and 2008




Revenues




Revenue
Sharing Arrangements — Our revenue from revenue sharing arrangements was
$194,374 for the nine months ended September 30, 2009, compared to $450,099 for
the nine months ended September 30, 2008, representing a decrease of $255,725,
or 56.8%. The decrease in revenue sharing revenue was due to the completion of a
number of revenue sharing contracts in 2008 and 2009.


-9-





Maintenance
Fee Revenues — Maintenance fee revenues were $120,986 for the nine months ended
September 30, 2009, compared to $170,088 for the nine months ended September 30,
2008, representing a decrease of $49,102, or 28.9%. 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 $155,383 for the nine months ended
September 30, 2009, compared to $96,368 for the nine months ended September 30,
2008, representing an increase of $59,015, or 61.2%. The increase in product
sales revenues was primarily due to the sale of product in the Kooltech minibars
as well as sales of refreshment centers to hotels and sales of parts during the
nine months ended September 30, 2009.




Cost
of Revenue




Cost of
Revenue Sharing Revenue — Cost of revenue sharing revenue was $55,642 for the
nine months ended September 30, 2009, compared to $197,093 for the nine months
ended September 30, 2008 representing a decrease of $141,451 or 71.8%. The gross
margin percentage on revenue sharing revenue was 71.4% for the nine months ended
September 30, 2009, compared to 56.2% for the nine months ended September 30,
2008. The increase in gross margin relating to revenue sharing revenue is due to
the completion of some revenue sharing contracts in 2008 and 2009.




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 $31,156 for
the nine months ended September 30, 2009, compared to $62,147 for the nine
months ended September 30, 2008, representing an decrease of $30,991, or 49.9%.
The gross margin percentage on maintenance fee revenues was 74.2% for the nine
months ended September 30, 2009, compared to 63.5% for the nine months ended
September 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 nine months
ended September 30, 2009 was $128,763, compared to $26,098 for the nine months
ended September 30, 2008, an increase of $102,665, or 393.4%. The gross margin
percentage on revenue from product sales revenue was 17.1% for the nine months
ended September 30, 2009, compared to 72.9% for the nine months ended September
30, 2008. The increase in cost of product sales revenue relates to the cost of
product and labor for the recently purchased Kooltech minibar as well as to the
increase in parts sold and the remaining basis of the refreshment centers sold
in the nine months ended September 30, 2009 versus the nine months ended
September 30, 2008. We are presently providing a complete turnkey solution to
the Hotels, which includes providing equipment labor and product for the
Kooltech equipment that we purchased in June.


-10-





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




For
      the Nine MonthsEnded September 30,
                                      
                                      
                                      
                                      
                                      
                                      Percent2009
                                      
                                      
                                      2008
                                      
                                      
                                      Change
                                      
                                      
                                      ChangeREVENUERevenue-sharing
      arrangements
                                      
                                      $
                                      194,374
                                      
                                      
                                      $
                                      450,099
                                      
                                      
                                      $
                                      (255,725
                                      )
                                      
                                      
                                      -56.8
                                      %Maintenance
      fees
                                      
                                      
                                      120,986
                                      
                                      
                                      
                                      170,088
                                      
                                      
                                      
                                      (49,102
                                      )
                                      
                                      
                                      -28.9
                                      %Product
      sales
                                      
                                      
                                      155,383
                                      
                                      
                                      
                                      96,368
                                      
                                      
                                      
                                      59,015
                                      
                                      
                                      
                                      61.2
                                      %Total
      Revenue
                                      
                                      
                                      470,743
                                      
                                      
                                      
                                      716,555
                                      
                                      
                                      
                                      (245,812
                                      )
                                      
                                      
                                      -34.3
                                      %COST
      OF REVENUERevenue-sharing
      arrangements
                                      
                                      
                                      55,642
                                      
                                      
                                      
                                      197,093
                                      
                                      
                                      
                                      (141,451
                                      )
                                      
                                      
                                      -71.8
                                      %Loss
      on impairment of refreshment centers in serivice
                                      
                                      
                                      -
                                      
                                      
                                      
                                      64,835
                                      
                                      
                                      
                                      (64,835
                                      )
                                      
                                      
                                      100.0
                                      %Maintenance
                                      
                                      
                                      31,156
                                      
                                      
                                      
                                      62,147
                                      
                                      
                                      
                                      (30,991
                                      )
                                      
                                      
                                      -49.9
                                      %Product
      sales
                                      
                                      
                                      128,763
                                      
                                      
                                      
                                      26,098
                                      
                                      
                                      
                                      102,665
                                      
                                      
                                      
                                      393.4
                                      %Total
      Cost of Revenue
                                      
                                      $
                                      215,561
                                      
                                      
                                      $
                                      350,173
                                      
                                      
                                      $
                                      (134,612
                                      )
                                      
                                      
                                      -38.4
                                      %GROSS
      MARGIN PERCENTAGERevenue-sharing
      arrangements
                                      
                                      
                                      71.4
                                      %
                                      
                                      
                                      56.2
                                      %Maintenance
                                      
                                      
                                      74.2
                                      %
                                      
                                      
                                      63.5
                                      %Product
      sales
                                      
                                      
                                      17.1
                                      %
                                      
                                      
                                      72.9
                                      %Total
      Gross Margin Percentage
                                      
                                      
                                      54.2
                                      %
                                      
                                      
                                      51.1
                                      %





Although
the preceding table summarizes the net changes and percent changes with respect
to our revenues and our cost of revenue for the nine months ended September 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 $480,526 for the nine months ended
September 30, 2009, compared to $333,125 for the nine months ended September 30,
2008, representing a increase of $147,401, or 44.2%. The increase in our
selling, general and administrative expenses reflects primarily the expenses
involved in the purchase of the Kooltech equipment from CPC.




Research
and Development—Research and development expenses were $7,116 for the nine
months ended September 30, 2009, compared to $85,648 for the nine months ended
September 30, 2008 representing a decrease of $78,532. The decrease in our
research and development expenses for the nine months ended September 30, 2009
reflects the decrease in new product development in 2009.




Interest
and other income was $93,836 for the nine months ended September 30, 2009 as
compared to $89,022 for the nine months ended September 30, 2008 representing an
increase of $4,814, or 5.4%. The increase was due to the increase in interest
earned on our loan receivable.





Net
Income/(Loss) Attributable to Common Stockholders




We
realized net loss of $138,624 for the nine months ended September 30, 2009,
compared to a net income of $36,631 during the nine months ended September 30,
2008. The $175,255 decrease in net income was primarily due to decreasing
revenue sharing agreements and the many costs involved in the equipment purchase
from CPC. We may incur losses in the future as existing revenue sharing
agreements with our hotel clients continue expire and as we continue to bring
our recently purchased equipment up to par. In addition, there is no assurance
that we will be successful in bringing the equipment up to par.





Liquidity
and Capital Resources





At
September 30, 2009, our principal sources of liquidity consisted of $2,322,514
of cash and working capital of $2,927,408, 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 $2,963,270 at September 30, 2009, compared to
stockholders' equity of $3,081,719 at December 31, 2008, a decrease of $118,449.
The increase in cash reflects the payment of a note receivable.


-11-





Our
accumulated deficit increased from $31,010,396 at December 31, 2008 to
$31,149,020 at September 30, 2009. The $138,624 increase in accumulated deficit
resulted directly from the net loss realized for the nine months ended September
30, 2009. Our accumulated deficit may increase in the future as existing revenue
sharing and maintenance agreements with our hotel clients expire and if we don’t
succeed in bringing our new Kooltech equipment up to par.




Our
operations used net cash of $57,078 for the nine months ended September 30,
2009, compared to providing $272,883 during the nine months ended September 30,
2008.




Investing
activities for the nine months ended September 30, 2009 provided net cash of
$243,778, compared to $1,071,689 of net cash provided during the nine months
ended September 30, 2008. The change consisted primarily of the proceeds from
the sale of investment securities in 2008.




There
were no financing activities in the nine months ended September 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 September 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.





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.


-12-





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


-13-


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:
      November 16, 2009By:
                                /s/
      David A. GestetnerName:
                                David
      A. GestetnerTitle:
                                President,
      Chief Executive Officer, Secretary,and
      Chairman of the Board(Principal
      Executive, Financial,and
      Accounting
Officer)


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