BTCS Inc. - Quarter Report: 2009 July (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended July 31, 2009

[ ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period __________ to __________

	Commission File Number: 333-151252

Hotel Management Systems, Inc.

(Exact name of small business issuer as specified in its charter)

Nevada	26-2477977
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

440 Waterwheel Falls Dr., Henderson, NV 89015

(Address of principal executive offices)

(702) 335-4531

(Issuer’s telephone number)

_____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

[ ] Large accelerated filer [ ] Accelerated filer

[ ] Non-accelerated filer [X] Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 7,000,000 common shares as of September 11, 2009.

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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

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	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	9
Item 4T:	Controls and Procedures	9
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	10
Item 1A:	Risk Factors	10
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3:	Defaults Upon Senior Securities	10
Item 4:	Submission of Matters to a Vote of Security Holders	10
Item 5:	Other Information	10
Item 6:	Exhibits	10

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:
F-1	Balance Sheets as of July 31, 2009 (unaudited) and April 30, 2009 (audited);
F-2	Statements of Operations for the three months ended July 31, 2009 and July 31, 2008 and from Inception on April 15, 2008 through July 31, 2009 (unaudited);
F-3	Statement of Stockholders’ Deficit from inception on April 15, 2008 through July 31, 2009 (unaudited);
F-4	Statements of Cash Flows for the three months ended July 31, 2009 and July 31, 2008 and from Inception on April 15, 2008 through July 31, 2009 (unaudited);
F-5	Notes to Financial Statements;

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended July 31, 2009 are not necessarily indicative of the results that can be expected for the full year.

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HOTEL MANAGEMENT SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

As at July 31, 2009 and April 30, 2009

ASSETS	July 31, 2009		April 30, 2009
	(unaudited)		(audited)
Current assets
Cash	$	13,696	$	19,281
Total current assets		13,696		19,281


TOTAL ASSETS	$	13,696	$	19,281

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities	$	32,576	$	35,826
TOTAL CURRENT LIABILITIES		32,576		35,826

TOTAL LIABILITIES		32,576		35,826

STOCKHOLDERS’ DEFICIT
Preferred stock: $ .001 par value; 10,000,000 shares authorized, no shares issued and outstanding
Common stock, $.001 par value, 90,000,000 shares authorized, 7,000,000 shares issued and outstanding		7,000		7,000
Additional paid in capital		19,229		19,229
Deficit accumulated during the development stage		(45,109)		(42,774)
Total stockholders’ deficit		(18,880)		(16,545)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	13,696	$	19,281

See accompanying notes to financial statements.

F-1

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HOTEL MANAGEMENT SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED STATEMENTS OF OPERATIONS

Three months ended July 31, 2009 and July 31, 2008

Period from April 15, 2008 (Inception) to July 31, 2009

	Three months ended July 31, 2009		Three months ended July 31, 2008		Period from April 15, 2008 (Inception) to July 31, 2009


Revenue	$	-0-	$	-0-	$	-0-

Operating expenses
General and administrative expenses		2,335		3,759		45,109
Total operating expenses		2,335		3,759		45,109

Net loss	$	(2,335)	$	(3,759)	$	(45,109)

Net loss per share:
Basic and diluted	$	(0 .00)	$	(0 .00)

Weighted average shares outstanding:
Basic and diluted		7,000,000		6,103,261

See accompanying notes to financial statements.

F-2

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HOTEL MANAGEMENT SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED STATEMENT OF STOCKHOLDERS’ DEFICIT

Period from April 15, 2008 (Inception) to July 31, 2009

	Common stock				Additional paid-in		Deficit accumulated during the Development
	Shares		Amount		capital		stage		Total
Issuance of common stock for cash to founders at $.001 per share		5,500,000	$	5,500	$	-0-	$	-0-	$	5,500
Net loss for the period		-		-		-		-		-
Balance, April 30, 2008		5,500,000		5,500		-0-		-0-		5,500
Issuance of common stock for cash at $.01 per share		1,500,000		1,500		13,500		-		-
Contributed capital		-		-		5,729		-		-
Net loss for the period		-		-		-		(42,774)		(42,774)
Balance, April 30, 2009		7,000,000		7,000		19,229		(42,774)		(16,545)
Net loss for the period		-		-		-		(2,335		(2,335)
Balance, July 31, 2009		7,000,000	$	7,000	$	19,229	$	(45,109)	$	(18,880)

See accompanying notes to financial statements.

F-3

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HOTEL MANAGEMENT SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED STATEMENTS OF CASH FLOWS

Three months ended July 31, 2009 and July 31, 2008

Period from April 15, 2008 (Inception) to July 31, 2009

	Three months ended July 31, 2009		Three months ended July 31, 2008		Period from April 15, 2008 (Inception) to July 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,335)	$	(3,759)	$	(45,109)
Change in non-cash working capital items
Accounts payable and accrued liabilities		( 3,250)		3,250		32,576
CASH FLOWS USED IN OPERATING ACTIVITIES		(5,585)		(509)		(12,533)

CASH FLOWS USED IN INVESTING ACTIVITIES		-0-		-0-		-0-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sales of common stock		-0-		15,000		20,500
Contributed capital		-0-		-0-		5,729

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		-0-		15,000		26,229

NET INCREASE (DECREASE) IN CASH		(5,585)		14,491		13,696
Cash, beginning of period		19,281		5,500		-0-
Cash, end of period	$	13,696	$	19,991	$	13,696

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	$	-	$	-
Income taxes paid	$	-	$	-

See accompanying notes to financial statements.

F-4

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HOTEL MANAGEMENT SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

July 31, 2009

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Hotel Management Systems, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s registration statement filed with the SEC on Form 10-K. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2009 as reported in Form 10-K, have been omitted.

NOTE 2 – SUMMARY OF ACCOUNTING POLICIES

Nature of Business

Hotel Management Systems, Inc. (“Hotel Management” and the “Company”) was incorporated in Nevada on April 15, 2008. The Company is engaged in the principal business activity of providing hotel management. Hotel Management is a development stage company and has not yet realized any revenues from its planned operations.

Cash and Cash Equivalents

For the purposes of presenting cash flows, Hotel Management considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities, and advances from a director. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Comprehensive Income

The Company has adopted SFAS 130 “Reporting Comprehensive Income” which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.

F-5

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HOTEL MANAGEMENT SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

July 31, 2009

NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (continued)

Income Tax

Hotel Management follows SFAS 109, “Accounting for Income Taxes.” Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed likely to be realized.

Use of Estimates

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

Basic loss per share

Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period.

Recent accounting pronouncements

Hotel Management does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

NOTE 3 - GOING CONCERN

The Compay has recurring losses and has a deficit accumulated during the Development stage of $45,109 as of July 31, 2009. Hotel Management's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, Hotel Management has no current source of revenue. Without realization of additional capital, it would be unlikely for Hotel Management to continue as a going concern. Hotel Management's management plans on raising cash from public or private debt or equity financing, on an as needed basis and in the longer term, revenues from the opearations of its hotel management business. Hotel Management's ability to continue as a going concern is dependent on these additional cash financings, and, ultimately, upon achieving profitable operations.

F-6

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HOTEL MANAGEMENT SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

July 31, 2009

NOTE 4 – INCOME TAXES

For the periods ended July 31, 2009, Hotel Management has incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $45,000 at July 31, 2009, and will begin to expire in the year 2028.

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:

	2009
Deferred tax asset attributable to:
Net operating loss carryover	$	15,300
Valuation allowance		(15,300)
Net deferred tax asset	$	-

NOTE 5 – COMMON STOCK

At inception, Hotel Management issued 5,500,000 shares of stock for $5,500 cash.

On June 23, 2008, Hotel Management issued 1,500,000 shares of stock for $15,000 cash. During the year ended April 30, 2009, $5,729 of the Company’s accounts payable were paid by a related part and the payment was recorded as contributed capital.

NOTE 6 – COMMITMENTS

Hotel Management neither owns nor leases any real or personal property, an officer has provided office services without charge. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

On April 24, 2008, the Company entered into a software license for hotel management software known as “Hotel Management Tool”. The software is non royalty paying and can be cancelled by either party at any time.

F-7

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

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Company Overview and Plan of Operation

We were incorporated as Hotel Management Systems, Inc. on April 15, 2008 in the State of Nevada for the purpose of developing, perfecting, and marketing a proprietary hotel management software known as “Hotel Management Tool.”

The “Hotel Management Tool” software offers hotel operators a single software platform which integrates all major aspects of the day-to-day management of their enterprise. Although the HMT is fully customizable and able to incorporate additional modules, our standard version will feature three basic modules that deal with those hotel operating functions which can be most easily improved by the use of our software platform: Product and Supplies Management, Employee Data, and Employment Counseling and Reporting.

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Product and Supplies Management

This module of the HMT software will allow hotel management to track and manage its inventory of supplies and in-room products like shampoo, soap, and similar items. All of the supplies and in-room products commonly used by the hotel can be input into a database which will contain any necessary item or catalog numbers for each individual product. The hotel’s management will also input unit cost and a desired minimum and maximum quantity of hand for each product. On a daily or other periodic basis, the hotel’s employees will then record inventory through the use of a count worksheet. The hotel’s quantity on hand is then updated in a separate screen. As the minimum quantity on hand is approached, the HMT will know which products to re-order and in what quantity to order them and will produce the appropriate product order.\

Employee Data Management

This module of the HMT software will allow for easy maintenance of a complete and user-friendly employee database. Through a series of screens, the employee’s personal information, contact and emergency information, and work-related information can be easily input and maintained by management.

Employment Counseling and Reporting

The third standard module to be included in the HMT software will allow hotel management to accurately record and track employee disciplinary incidents and any related counseling sessions with employees through a user-friendly data screen. In the event that an employee must be terminated, a full record and evaluation of the employee’s attendance, cooperation, initiative, job knowledge, and over work quality can be easily input by management. The HMT will then generate a written report that can be given to the employee. The employee will sign a receipt of the report, which can be stored in the hotel’s permanent records.

Additional Standard Features

Together with the standard set of functions summarized above, the HMT offers some important standard features:

·	Self-updating: The HMT automatically checks for newer versions of the software, available upgrades, and software updates. The software is updated automatically on a continuous basis, ensuring maximum performance and user satisfaction.

Tiered Security: The HMT features a tiered security system with a separate login and set of security credentials for each employee of the hotel who will be using the program. Management can easily structure these security credentials to allow different levels and types of access to the HMT’s different functions depending upon the level of each employee’s security credentials.

Fully Scalable: The HMT is fully scalable, which means that its capacity can grow and expand with the customer’s business. The software can easily add additional capacity and new features and can accommodate more robust database systems as the customer’s business operations become larger and more complex.

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Customization and Additional Modules Available

In addition to the 3 standard modules described above, the HMT can easily accommodate additional segments dealing with different aspects of the hotel and motel business. The core of the program is designed to operate as hub, with different sets of functions that can be added or subtracted to the core system like spokes on a wheel. Nearly every operating hotel already uses some type of reservation software and some type of employee timekeeping software. Once they have begun using our standard product, however, many customers may desire a more total and cost-effective integration of their operations. Additional modules that are ready to add-on to the HMT at the customer’s request include the following:

·	Room inventory and reservations system

·	Employee scheduling

·	Employee timekeeping and payroll

·	Online product ordering from key suppliers

Pricing and Revenue Model

Our intended pricing structure will feature a base purchase price for the standard version of the HMT software, with an extra charge for each additional module requested by the customer. We will also charge a small monthly license fee for all maintenance and updates of the software and for storage of the customer’s data:

Standard version:	$1,500
Each additional module:	$500-$1,000 depending on specifications
Monthly fee Including data storage:	$20 per month per site
Monthly fee if Customer stores own data:	$8 per month per site

The customer’s ongoing contract for maintenance, updates, and data storage will be renewable annually at the option of the customer. Larger customers will substantial data storage needs or complex customizations may be charged higher fees. We believe this pricing model will position us well to compete for the business of smaller hotel and motel operators (i.e.: those with ten or fewer sites) who may be looking for a flexible and effective management software solution at lower price than that typically charged by larger competitors in the field.

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Competition

The field of hotel management software is flooded with an array of options which focus primarily on room reservations and room inventory management. We will face several larger and more established competitors. In addition, many larger hotel and motel chains use proprietary systems built-for-hire to suit their particular operations. We intend to focus our efforts on small independent hotels, motels, inns, and bed-and-breakfast properties. We believe or HMT software will be well-positioned to compete for the business of these operators because of the following advantages:

·	Our software is fully scalable. A hotel or motel owner can purchase a basic product for relatively low cost that will be able to grow with the enterprise if and when it expands.

Our software is able to integrate all functions of the enterprise, not just reservations and room inventory management. We believe this all-in-one capability will appeal to smaller customers with limited staff and resources for managing and integrating different functions of the enterprise by hand or through the use of multiple software products.

·	We are a small company that will be focused on responsive and timely customer service.

Plan of Operations

The HMT software has been in development for over a year and has been extensively used and tested at a medium-sized motel in Las Vegas, Nevada. Following exposure of the product to the challenges of real-world use in an active environment, we made certain changes and improvements and development of the product is essentially complete at this time.

Our initial marketing plan is to launch a direct mail-based marketing campaign focused on independent hotel and motel operators with small to medium-sized properties and fewer than 10 locations, as well as bed-and-breakfast inns and similar small independent operations. Our planned mailer will feature a complete graphical description of the HMT software as well as a demonstration CD that will show the potential customer how the software will function. The planned mailer will be followed-up with a phone call and on-site demonstrations for those customers who are interested. We have been conducting market research and building a database of properties to target with our mailer. Although we had originally planned to launch our direct mail campaign in the third quarter of our current fiscal year, certain unexpected demands on the time of our sole officer and director, John Baumbauer, have cause us to delay our plans. Our planned mailer remains under development. Our current hope is that we may begin our marketing campaign by the end of 2009 and that we may begin experience revenues by early 2010.

As we pursue our planned operations, our sole officer and director, John Baumbauer, will provide his time to the business at no charge. Mr. Baumbauer will be responsible for all administrative duties as well as overseeing the final development and perfection of the HMT software, developing our sales and marketing information material, researching potential customers, and performing on-site product demonstrations and follow-up customer relations. As we have limited financial resources, Mr. Baumbauer can only dedicate a portion of his time to attending the needs of the business.

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To the extent that Mr. Baumbauer’s outside professional duties not related to the company continue to make extraordinary demands on his time, our pace of operational development may continue to be adversely affected.

We do not have plans to purchase any significant equipment or change the number of our employees during the next twelve months.

We have no employees other than our president and CEO, Mr. Baumbauer.

Results of Operations for the three months ended July 31, 2009

We did not earn any revenues from inception on April 15, 2008 through the period ending July 31, 2009. We are presently in the development stage of our business and we can provide no assurance that we will produce significant revenues or, if revenues are earned, that we will be profitable.

We incurred operating expenses and net losses in the amount of $2,335 during the three months ended July 31, 2009, compared to operating expenses and net losses in the amount of $3,759 during the three months ended July 31, 2008. We have incurred total operating expenses and net losses of $45,109 from our inception on April 15, 2008 through the period ending July 31, 2009. Our operating expenses from inception through July 31, 2009 consisted of general and administrative expenses. Our losses are attributable to our operating expenses combined with a lack of any revenues during our current stage of development. We anticipate our operating expenses will increase as we continue with our plan of operations.

Liquidity and Capital Resources

As of July 31, 2009, we had cash of $13,696 and a working capital deficit of $18,880. Our cash on hand wshould allow us to cover our anticipated expenses for the fiscal year beginning May 1, 2009, but may not be sufficient to fund operations beyond the current fiscal year and will not be sufficient to pay any significant unanticipated expenses. We currently do not have any operations and we have no income. We will require additional financing to sustain our business operations for any significant period of time beyond the fiscal year beginning May 1, 2009. We currently do not have any arrangements for financing and we may not be able to obtain financing when required.

We have not attained profitable operations and may be dependent upon obtaining financing to pursue our long-term business plan. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.

Off Balance Sheet Arrangements

As of July 31, 2009, there were no off balance sheet arrangements.

Going Concern

Our financial statements have been prepared on a going concern basis. We have a working capital deficit of $18,880 as of July 31, 2009 and have accumulated a deficit of $45,109 since inception. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. These factors raise substantial doubt that we will be able to continue as a going concern. Management plans to continue to provide for our capital needs by the issuance of common stock and related party advances.

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Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There are no critical accounting policies for the company as this time.

Recently Issued Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on the our results of operations, financial position or cash flow.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4T. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of July 31, 2009. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, Mr. John Baumbauer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of July 31, 2009, our disclosure controls and procedures are effective. There have been no changes in our internal controls over financial reporting during the quarter ended July 31, 2009.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

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

None

Item 3. Defaults upon Senior Securities

None

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

No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended July 31, 2009.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation (1)
3.2	ByLaws (1)
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Previously included as an exhibit to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on May 29, 2008.

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Hotel Management Systems, Inc.

Date:	September 14, 2009

	By: /s/ John Baumbauer John Baumbauer Title: Chief Executive Officer and Director