ROOMLINX INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and the consolidated financial statements and related notes thereto included in our December 31, 2011 Annual Report on Form 10-K, filed with the SEC and with the unaudited interim financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q, as well as our reports on Form 8-K and other SEC filings.

FORWARD-LOOKING STATEMENTS This report contains or incorporates forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties. We develop forward-looking statements by combining currently available information with our beliefs and assumptions. These statements relate to future events, including the Company's future performance, and management's expectations, beliefs, intentions, plans or projections relating to the future and some of these statements can be identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "estimates," "projects," "intends," "seeks," "future," "continue," "contemplate," "would," "will," "may," "should," and the negative or other variations of those terms or comparable terminology or by discussion of strategy, plans, opportunities or intentions. As a result, actual results, performance or achievements may vary materially from those anticipated by the forward-looking statements. These statements include, among others: - Statements concerning the benefits that are expected to result from business activities and results of exploration that are contemplated or completed, such as increased revenues; and - Statements of the Company's expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.

Among the factors that could cause actual results, performance or achievements to differ materially from those indicated by such forward-looking statements are: the volume and timing of systems sales and installations, the length of sales cycles and the installation process and the possibility that the Company's products will not achieve or sustain market acceptance; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; competitive pressures including product offerings, pricing and promotional activities; errors or similar problems in its products; the outcome of any legal proceeding that has been or may be instituted against the Company and others; 14-------------------------------------------------------------------------------- the ability to attract and retain qualified personnel; maintaining intellectual property rights and successful litigation involving intellectual property rights; legislative, regulatory and economic developments; risks related to third-party suppliers and the ability to obtain, use or successfully integrate third-party licensed technology; breach of security by third parties; and those factors discussed in "Risk Factors" in the Company's periodic filings with the Securities and Exchange Commission (the "SEC").

Roomlinx makes these statements under the protection afforded by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Because forward-looking statements are subject to assumptions and uncertainties, actual results, performance or achievements may differ materially from those expressed or implied by such forward-looking statements. Stockholders are cautioned not to place undue reliance on such statements, which speak only as of the date such statements are made. Except to the extent required by applicable law or regulation, Roomlinx undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

GENERAL Overview Roomlinx, Inc., a Nevada corporation ("we," "us" or the "Company"), provides four core products and services: In-room media and entertainment Roomlinx provides a suite of in-room media and entertainment products and services for hotels, resorts, and time share properties. Products and services included within our in-room media and entertainment offering include our proprietary Interactive TV platform ("iTV") and on-demand movies.

The Company develops proprietary software and integrates hardware to facilitate the distribution of its Interactive TV platform. With Roomlinx iTV guests will have access to a robust feature set through the HDTV such as: Internet Apps including Netflix, Pandora, Hulu, YouTube, Facebook, and many more International and U.S. television programming on demand Click and Go TV program guide or Interactive Program Guide (dware) Web Games MP3 player and thumb drive access Ability to send directions from the iTV system to a mobile device Hotel guests can also easily order room service, interact with hotel associates, make restaurant reservations, edit and print documents as well as gain direct access to local dining, shopping, nightlife, cultural events or attractions all through a dynamic user interface on the TV. The Interactive TV platform integrates the TV and Internet experience.

The Company provides proprietary software, a media console, which may include a DVD player, and numerous input jacks for the hotel guest, a proprietary wireless keyboard with built-in mouse, and a proprietary remote control with a built in mouse. The Company installs and supports these components.

15 -------------------------------------------------------------------------------- The Company also supplies video-on-demand services to the hospitality industry. Roomlinx offers a full selection of video-on-demand services and technology; including first non-theatrical release Hollywood motion pictures, adult, and specialty content.

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

The Company generates revenue through: Ongoing connectivity service and support contracts Network design and installation services Delivery of content and advertising Delivery of business and entertainment applications E-commerce The customization of its software Software licensing Delivery of pay-per-view content Sale of video-on-demand systems Free-To-Guest Television Programming.

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

The Company generates revenue through: The design and installation of FTG systems Delivery of television programming fees and/or commissions Customers typically pay a one-time fee for the installation of the equipment and then pay monthly programming fees for delivery of a specific TV channel lineup.

Wired Networking Solutions and Wireless Fidelity Networking Solutions.

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

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

The Company generates revenue through: Ongoing connectivity service and support contracts Network design and installation services Customers typically pay a one-time fee for the installation of the network and then pay monthly maintenance fees for the upkeep and support of the network.

16 -------------------------------------------------------------------------------- Residential Media and Communications We provide residential and business customers telecommunication services including telephone, satellite television, and wired and wireless internet access. Telephone service is provided through traditional, analog "twisted pair" lines, as well as digital voice over internet protocol ("VoIP") Analog phone service is typically provided via an interconnection agreement with CenturyLink, Inc. (formerly Qwest Communications), which allows the Company to resell CenturyLink service through their wholesale and retail accounts with CenturyLink. VoIP service is provided at properties where the Company maintains a broadband internet service to the end customer, allowing the Company to provide digital phone service (VoIP) over the same lines as their internet service.

Television service is typically provided via the Company's agreements with DISH Network and DirecTV. Most television service to customers is provided via a head-end distribution system, or an L-Band digital distribution system. Television service is offered in high definition whenever possible.

Internet service is provided via both wired and wireless network design. The Company provisions and manages broadband access to the residential customers through both wholesale and resale methods. Wholesale methods exist when the Company owns and controls the internet circuit and resale methods exist when the Company uses an affiliated third party to provide the internet circuit.

The Company generates revenue through: Network design and installation services Delivery of telephone service (billed monthly) Delivery of Internet service (billed monthly) Delivery of television service (billed by the satellite provider with monthly commissions paid to the Company) Management fees for the management of affiliated communication systems Trends and Business Outlook Our goal is to be the leading provider of in-room entertainment, programming, and internet connectivity to the hospitality industry. Accordingly, we have developed a menu of product offerings that differentiate us from other market participants in terms of usability, technical innovation and breadth of offerings. Organizationally, we are building the scale, capacity, and reach to respond to our customers' needs quickly. Over the past year we have taken significant steps towards these goals, and in the first quarter of 2012 we signed a master service agreement with Hyatt Corporation. We anticipate installing up to 60,000 Hyatt hotel rooms through March 2014. As a result, management's focus has shifted to operations in order to execute on the Hyatt master service agreement.

Where and how people communicate and access content is continuously changing, and this change has been documented by hotels when reviewing their guests' habits. Hotel guests are accessing content from the internet or alternative mobile sources such as laptops and smartphones. Our Interactive TV ("iTV") platform was developed to embrace these changing habits and allow guests easy access to their content, work files, and the internet via the in-room flat panel LCD television screen. The majority of our business growth is the result of our development of platforms that meet the hotel guests' expectations for accessibility to content and the value that it brings to the hotel owner. Guest usage rates of iTV are higher at our current hotel installations than with traditional systems. Our objective is to monetize the greater usage by guests of our iTV services as we increase our base of installed hotel rooms. Consequently, we are investing in sales and marketing and customer support capabilities. In addition we will continue to invest in the development and enhancement of the iTV platform as a differentiation from competitors.

Although our results demonstrate the initial success of our efforts, general economic conditions and market uncertainty may negatively impact our financial results in future periods. We anticipate that the rate of new orders may vary significantly from quarter to quarter. In addition our ability to complete installations of our iTV system in a timely and efficient manner may be negatively impacted by our internal operating capabilities as we build the internal structure and capabilities necessary to meet customer demands. Consequently, if anticipated sales and shipments in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our operating results for that quarter and future quarters may be adversely affected. Further, given the lag between the incurrence of expenses in connection with sales "wins" and the resulting revenue stream, we anticipate that, while we will see organic growth that positions us for future profitability, our costs of sales and other operating expenses will exceed our revenues in the near term. We have incurred operating losses since our inception and the financial resources available to us may not be sufficient to exploit all sales opportunities or to allow us to continue to adequately invest in the efforts described above.

17 -------------------------------------------------------------------------------- CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management's Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts and property and equipment valuation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

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

The Company enters into contractual arrangements to provide multiple deliverables which may include some or all of the following - systems installations and a variety of services related to high speed internet access, free-to-guest programming, video on demand, and iTV as well as residential phone, internet and television. Each of these elements must be identified and individually evaluated for separation. The term "element" is used interchangeably with the term "deliverable" and the Company considers the facts and circumstances as it relates to its performance obligations in the arrangement and includes product and service elements, a license or right to use an asset, and other obligations negotiated for and assumed in the agreement. Analyzing an arrangement to identify all of the elements requires the use of judgment, however, once the deliverables have been identified, the Relative Fair Value of each Element was determined under the concept of Relative Selling Price (RSP) for which the Company applied the hierarchy of selling price under ASU Topic 650.

The effect of application of this standard may be to defer revenue recognition for installations across the service period of the contract and to re-allocate and/or defer revenue recognition across various service arrangements.

In order to promote the Interactive TV platform, Roomlinx has agreed to provide certain customers with direct sales-type lease financing to cover the cost of installation. These transactions result in the recognition of revenue and associated costs in full upon the customer's acceptance of the installation project and give rise to a lease receivable and unearned income.

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

Inventory includes materials on-hand at our warehouses as well as the cost of hardware, software, and labor which has been incurred by us for installation at our customer's property, but has not been accepted by the customer.

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

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

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

RESULTS OF OPERATIONS On March 12, 2012, Roomlinx and Hyatt Corporation entered into a Master Services and Equipment Purchase Agreement (hereinafter the "Hyatt MSA") pursuant to which Roomlinx agreed to provide in-room media and entertainment solutions, including its proprietary Interactive TV (or iTV) platform, high speed internet, free-to-guest, on-demand programming and related support services, to Hyatt-owned, managed or franchised hotels that are located in the United States, Canada and the Caribbean. Roomlinx's iTV system may be provided in the "full option" (Interactive TV), the "mid option" (SmartTV) or the "lite option" (Video on Demand).

THREE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2011 Revenues for the three months ended September 30, 2012 and 2011 were $2,387,214 and $1,183,882 respectively, an increase of $1,203,332 or 102%, resulting primarily from installation revenue associated with the Hyatt MSA.

Hospitality Hospitality revenue includes revenue from network and media system installations, support services, and recurring revenue from in-room media and entertainment services. Hospitality revenue and associated direct costs were $2,165,599 and $1,918,368 for the three months ended September 30, 2012, and $946,350 and $601,680 for the comparable year earlier period. The increase in direct costs as a percentage of hospitality revenue is primarily related to management's decision to increase monthly recurring revenue through the execution of agreements such as the Hyatt MSA. Additionally, the Company wrote-off approximately $51,000 to direct costs and operating expenses related to obsolete inventory.

Our Hospitality segment includes hotel and meeting rooms in the following geographic segments: United States, Canada, and Other Foreign. As of September 30, 2012 and 2011, Other Foreign included Mexico and Aruba. The products offered under our hospitality segment include the installation of, and the support and service of, high-speed internet access, interactive TV services, free to guest programming, and on-demand programming, as well as advertising and e-commerce products.

United States: US hospitality revenue for the three months ended September 30, 2012 and 2011 was $1,950,500 and $663,746 respectively, an increase of $1,286,754 or 194%. This increase is primarily due to the increase of installation revenue of $1,022,828 to $1,233,784 over same period in 2011, primarily the result of the Hyatt MSA. Recurring revenue increased $203,493 to $699,676 or 41%.

Canada: Canadian hospitality revenue for the three months ended September 30, 2012 and 2011was $189,334 and $233,272 respectively, a decrease of $43,938 or 19%. This revenue is primarily variable as it is dependent on hotel guest purchases of video on demand films.

Other Foreign: Other foreign hospitality revenue for the three months ended September 30, 2012 and 2011 was $25,765 and $49,332, respectively, a decrease of $23,567 or 48%.

Residential Our residential segment includes multi-dwelling unit and business customers in the United States. The products offered include the installation of, and the support and service of, telephone, internet, and television services.

Residential revenue for the three months ended September 30, 2012 and 2011 was $221,615 and $237,532 respectively, and a decrease of $15,917 or 7%.

19 -------------------------------------------------------------------------------- Operational Expenses Total operating expense for the three months ended September 30, 2012 and 2011 was $2,981,642 and $899,716 respectively, an increase of $2,081,926, or 231%. This increase is primarily due to (i) a one-time charge recognizing a loss attributable to the impairment of assets in the amount of $1,112,470 (more fully described below), (ii) an increase in personnel costs of $664,610 to support the execution of the installation of our products and their subsequent support in accordance with the Hyatt MSA dated March 12, 2012 and (iii) various operating expenses described below.

Our operations department expense increased $438,030 to $628,638 in the three months ended September 30, 2012 compared to the same period in 2011. This increase is primarily due to an increase of $405,069 in payroll and related expenses for increased staffing levels to support our commitments in regards to the Hyatt MSA and approximately $26,000 of office rent.

Our product development department expense increased $161,683 to $312,076 in the three months ended September 30, 2012 compared to same period in 2011. This increase is primarily due to an increase in payroll and related costs of $153,994 to further product enhancements.

Our selling, general and administrative expenses increased $354,167 to $737,066 in the three months ended September 30, 2012 compared to the same period in 2011. This increase is primarily attributable to an increase in payroll and related costs of $105,547, and approximate increases of $83,000 in professional fees, $47,000 in marketing costs, $65,000 of bad debt expense and $30,000 in various overhead expenses. Depreciation expense for the three months ended September 30, 2012 and 2011 was $191,389 and $175,816 respectively, an increase of $15,573 or 9%.

During the three months ended September 30, 2012 the Company recognized a $1,112,470 loss on the impairment of assets due to circumstances (See note 4) indicating the carrying value of Cardinal Hospitality, Ltd. ("CHL") assets would not be recoverable from the estimated future cash flows expected to result from their use and eventual disposition. This loss resulted in the write-down of approximately $920,000 of property and equipment, $146,000 of inventory and $46,000 of property receivables.

Our operating loss for the three months ended September 30, 2012 and 2011 was $2,658,468 and $488,346 respectively, an increase of $2,170,122 or 444%. This increase is due primarily to recognition of a loss on impairment of assets and personnel costs as more fully described above.

Non-Operating For the three months ended September 30, 2012 and 2011, our non-operating income was $268,241 and $61,460 respectively, an increase of $206,781. Non-operating income consists primarily of interest income earned on lease receivables and a gain on the settlement of royalty payable to a studio for VOD content in the amount of $179,834.

Our non-operating expenses for the three months ended September 30, 2012 and 2011 were $157,259 and $90,036 respectively, an increase of $67,223. This increase is primarily attributable to an increase in interest expense of $29,975 consistent with the increase in our line of credit and an increase in financing costs of $37,598 associated with debt discount expense on warrants issued pursuant to draws against our line of credit.

For the three months ended September 30, 2012, we reported a net loss of $2,547,486, compared to a net loss of $516,922 for the three months ended September 30, 2011. As discussed above, the one-time recognition of a loss on asset impairment and increased personnel costs attributable to the Hyatt MSA were the primary factors that contributed to the increased net loss.

NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2011 Revenues for the nine months ended September 30, 2012 and 2011 were $6,060,141 and $3,965,985 respectively, an increase of $2,094,156 or 53%, resulting from an increase in installation revenues primarily related to the Hyatt MSA.

20 -------------------------------------------------------------------------------- Hospitality Hospitality revenue includes revenue from network and media system installations, support services, and recurring revenue from in-room media and entertainment services. Hospitality revenue and associated direct costs were $5,368,757 and $4,862,279 for the nine months ended September 30, 2012, and $3,268,166 and $2,183,481 for the comparable year earlier period. The increase in direct costs as a percentage of hospitality revenue is primarily related to management's decision to increase monthly recurring revenue through the execution of agreements such as the Hyatt MSA. Additionally, the Company recorded a $51,000 charge to direct costs and operating expenses related to obsolete inventory.

Our Hospitality segment includes hotel and meeting rooms in the following geographic segments: United States, Canada, and Other Foreign. As of September 30, 2012 and 2011, Other Foreign included Mexico and Aruba. The products offered under our hospitality segment include the installation of, and the support and service of, high-speed internet access, interactive TV services, free to guest programming, and on-demand programming, as well as advertising and e-commerce products.

United States: US hospitality revenue for the nine months ended September 30, 2012 and 2011 was $4,771,142 and $2,383,418 respectively, an increase of $2,387,724 or 100%. This increase is primarily due to the increase of installation revenue of $1,885,798 to $2,849,911 over same period in 2011, primarily the result of the Hyatt MSA. Recurring revenue increased $379,725 to $1,894,014 or 25%.

Canada: Canadian hospitality revenue for the nine months ended September 30, 2012 and 2011 was $494,204 and $737,968 respectively, a decrease of $243,764 or 33%. This revenue is primarily variable as it is dependent on hotel guest purchases of video on demand films.

Other Foreign: Other foreign hospitality revenue for the nine months ended September 30, 2012 and 2011 was $103,411and $146,780, respectively, a decrease of $43,369 or 30%.

Residential Our residential segment includes multi-dwelling unit and business customers in the United States. The products offered include the installation of, and the support and service of, telephone, internet, and television services.

Residential revenue for the nine months ended September 30, 2012 and 2011 was $691,384 and $697,819 respectively, a decrease of $6,435 or 1%.

Operational Expenses Total operating expense for the nine months ended September 30, 2012 and 2011 was $6,055,166 and $3,092,433 respectively; an increase of $2,962,733 or 96%. This increase is primarily due to a one-time charge recognizing a loss attributable to the impairment of assets in the amount of $1,112,470 (more fully described below) and an increase in personnel costs of $1,393,852 to support the execution of the installation of our products and their subsequent support in accordance with the Hyatt MSA dated March 12, 2012.

Our operations department expense increased $923,023 to $1,550,403 in the nine months ended September 30, 2012 compared to the same period in 2011. This increase is primarily due to an increase of $868,923 in payroll and related expenses for increased staffing levels to support our commitments in regards to the Hyatt MSA and approximately $29,000 of office rent.

Our product development department expense increased $313,633 to $837,586 in the nine months ended September 30, 2012 compared to same period in 2011. This increase is primarily due to an increase in payroll and related costs of $334,040 and a decrease of approximately $21,000 in test equipment.

Our selling, general and administrative expenses increased $576,930 to $1,995,343 in the nine months ended September 30, 2012 compared to the same period in 2011. This increase is primarily attributable to an increase in payroll and related costs of $190,889, and approximate increases of $115,000 in professional fees, $65,000 in marketing costs, $90,000 in bad debt expense and $95,000 in various overhead expenses.

21 -------------------------------------------------------------------------------- Depreciation expense for the nine months ended September 30, 2012 and 2011 was $559,364 and $522,687 respectively, an increase of $36,677 or 7%.

On September 30, 2012 the Company recognized a $1,112,470 loss on the impairment of assets due to circumstances (See note 4) indicating the carrying value of Cardinal Hospitality, Ltd. ("CHL") assets would not be recoverable from the estimated future cash flows expected to result from their use and eventual disposition. This loss resulted in the write-down of approximately $920,000 of property and equipment, $146,000 of inventory and $46,000 of property receivables.

Our operating loss for the nine months ended September 30, 2012 and 2011 was $5,342,541 and $1,787,512 respectively, an increase of $3,555,029 or 199%. As discussed above, the one-time recognition of a loss on asset impairment and increased personnel costs attributable to the Hyatt MSA were the primary factors that contributed to the increased net loss.

Non-Operating For the nine months ended September 30, 2012 and 2011, our non-operating income was $406,150 and $195,780 respectively, and increase of $210,370. Non-operating income consists primarily of interest income earned on lease receivables and a gain on the settlement of royalty payable to a studio for VOD content in the amount of $179,834.

Our non-operating expenses for the nine months ended September 30, 2012 and 2011 were $450,455 and $222,107 respectively, an increase of $228,348. This increase is primarily attributable to an increase in interest expense of $98,325 consistent with the increase in our line of credit and an increase in financing costs of $135,340 associated with debt discount expense on warrants issued pursuant to draws against our line of credit.

For the nine months ended September 30, 2012, we reported a net loss of $5,386,846 compared to a net loss of $1,813,839 for the nine months ended September 30, 2011. This increase is due primarily to recognition of a loss on impairment of assets and personnel costs as more fully described above.

FINANCIAL CONDITION LIQUIDITY & CAPITAL RESOURCES As of September 30, 2012 we had $2,930,993 in cash and cash equivalents. That amount, in addition to the credit facility provided by Cenfin, LLC, is sufficient to fund operating activities, new product installations, and to continue investing in our new media and entertainment product through September 30, 2013. Working capital at September 30, 2012 was $2,895,728, an increase of approximately $1.2 million compared to December 31, 2011. The increase primarily reflects the proceeds from the sale of equity.

We minimize borrowings under the credit facility by requiring customers to pay a 50% deposit prior to commencement of installation activities. In addition we obtained trade credit from suppliers for a significant portion of installation materials presently held in inventory. Customer deposits and trade credit are significant sources of liquidity. Should the Company be unable to obtain sufficient amounts of trade credit to finance inventory or should delays in installations result in payments under trade lines occurring sooner than deployment of the underlying inventory, borrowings under the credit facility will increase.

Operating Activities Net cash used by operating activities was $1,823,677 and $1,593,086 for the nine months ended September 30, 2012 and 2011, respectively. The increase in cash used in operations of $230,591 was attributable to the increase in net loss of $3,573,007 less the increase cash provided by operations of $3,342,416. Cash provided by operations included (i) an increase of $1,195,170 in non-cash expenses due to a $1,112,470 loss on asset impairment and other recurring non-cash adjustments such as stock based compensation and the amortization of debt discount, and (ii) an increase of $2,147,246 from the fluctuation in changes in operating assets and liabilities resulting from the Company requiring a 50% deposit at the time of hotel agreement execution and obtaining favorable vendor terms related to significant equipment purchases.

22 -------------------------------------------------------------------------------- Investing Activities Net cash provided by investing activities was $395,071 for the nine months ended September 30, 2012, compared to $207,750 used in investing activities during the same period in 2011. The increase in cash provided by investing activities of $602,821 consists of (i) an increase in cash receipts against leases receivable of $185,724, and (ii) a savings of $469,168 resulting from a reduction in equipment installation lease financing provided to customers in 2012 versus 2011, less an increase in capital expenditures of $52,071.

Financing Activities Net cash provided by financing activities for the nine months ended September 30, 2012 and 2011 were $3,980,787 and $1,945,276 respectively. The increase in cash of $2,035,512 is primarily attributable to the sale of common stock as a result of the Company having entered into a Securities Purchase Agreement ("SPA") on May 4, 2012 with certain investors (collectively, the "Investors"), which resulted in proceeds of $2,993,311 after transaction costs, pursuant to which the Investors purchased Units from Roomlinx for a purchase price of $2.50 per Unit, defined as one share of common stock plus a warrant to purchase one-half share of common stock at an exercise price of $3.75. See Note 7 for further details. As a result of the SPA to fund operations, the Company was able to reduce its need to borrow against its line of credit over the same nine month period by $880,000.

Contractual Obligations We have operating and capital lease commitments, note payable commitments, and a line of credit commitment. The following table summarizes these commitments at September 30, 2012: Twelve Months Ended Line of Notes Lease Obligations Minimum September 30, Credit Payable Capital Operating Payments 2013 $ - $ 26,008 $ 14,143 $ 130,225 $ 170,376 2014 340,000 13,957 13,210 147,273 514,440 2015 1,106,000 13,957 6,605 152,085 1,278,647 2016 2,130,000 12,794 - - 2,142,794 2017 1,600,000 - - - 1,600,000 $ 5,176,000 $ 66,716 $ 33,958 $ 429,583 $ 5,706,257

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