ITEM 1:
DESCRIPTION OF BUSINESS
General
Hotel Outsource Management International, Inc. is a multi-national service provider in the hospitality industry, supplying a range of services in relation to computerized minibars that are primarily intended for in-room refreshments. In addition, we manufacture and install our own proprietary computerized minibar, the HOMI ® 330 and the HOMI ® 226.
Hotel Outsource Management International, Inc. is a holding company for several subsidiaries which market, and operate computerized minibars in hotels located in the United States, Europe and Israel. Hotel Outsource Management International, Inc. and its subsidiaries may collectively be referred to as "we", "us", "our" or" HOMI." HOMI was incorporated in Delaware on November 9, 2000 under the name Benjamin Acquisitions, Inc.
Our core activities focus primarily on manufacturing, operating, servicing and marketing computerized minibars installed in upscale hotels throughout the world.
We believe that by using the appropriate equipment, including technologically advanced computerized minibars, we are able to materially improve the performance of the minibar departments, thereby improving the hotel’s bottom line.
For some years now, the hotel industry has been focusing on outsourcing many of the functions related to its key activities, in order to increase efficiency and lower fixed costs. In periods of economic slow-down, the interest in outsourcing solution may actually increase. We offer our customers a number of solutions that are designed to meet this need, in relation to the minibar departments, ranging from consultation and supervision services, all the way to full outsource installation and operation arrangements.
Whether we are consulting to the hotel, or managing the entire minibar department, we focus on hands-on, expert and dedicated management, on-site supervision, and disciplined implementation of specialized procedures which we have developed, in order to achieve our goals and improve the department’s performance.
Using these methods, we already manage many thousands of minibars for our customers, who are spread over four continents around the world.
We have been doing business since 1997 through various subsidiaries. The current corporate structure, in which we are a holding company for various wholly owned subsidiaries around the world, has been in place since 2001. Our common stock was listed on the Over-the-Counter Bulletin Board, or "OTC Bulletin Board" from February 2004 until February 2011. It now trades on the OTCQB under the symbol "HOUM".
Our Growth Strategy
It is our objective to continue to increase the number of minibars which we manage in hotels, using the various business models which we have developed, in accordance with each customer’s needs, as well as to engage in rental, sale and installation and outsource programs using the HOMI ® 330 , HOMI ® 226 and additional minibar models. HOMI intends to design and manufacture peripheral products and/or accessories for the HOMI 330® and HOMI ® 226.
During 2010, HOMI and Best Bar Services Ltd. ("Best Bar"), a third party company, began their cooperation regarding Best Bar’s Open Display - Open Access Computerized minibars. HOMI purchased minibars from Best Bar and marketed them as the HOMI ® 232 minibar. HOMI has already signed agreements with several hotels to install and operate the HOMI ® 232. During 2011 HOMI installed the HOMI® 232 Minibar in 3 hotels in Israel and one hotel in the United States. However, after careful review, HOMI decided to replace all HOMI® 232 Minibars with the new HOMI® 226 minibars, which it believes are more efficient. As of the date of this report, HOMI has removed the HOMI® 232 Minibars from two of the hotels in which they were installed in Israel, and one hotel in which they were installed in the USA, replaced them with the new HOMI® 226 Minibars. Best Bar purchased these minibars back at a reduced price. Only one hotel in Israel is still operating the ® 232 minibars.
Our activities currently focus on North America, Europe and Israel. We intend to consolidate and increase our business in the regions in which we are already active. We also believe that there are growth opportunities in new markets, and that by implementing the same models that have been successful for us in our current markets, we will be able to replicate our success in these other regions also.
Our services have to date been directed primarily at upscale and luxury hotels. An integral part of this strategy involves the sale, rental, installation and outsources programs of the HOMI ® 330 and HOMI ® 226. Features of the HOMI® 330 and HOMI ® 226 include:
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Mechanism against mistaken charges. This has been designed to increase the accuracy of the automatic billing.
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Substantially lower operating costs. This should improve profit margins
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No need for infrastructure at hotel. A standard electrical outlet is the only infrastructure required. Minibar data is transferred automatically via an integral, dedicated wireless system. This makes installation easier, and more attractive to hotels.
Operations
To date our activities have focused primarily on managing the minibar departments in upscale hotels. We offer our customers a number of solutions ranging from consultation and supervision services, all the way to full outsource installation and operation services. We currently implement several general types of business models, further detailed below.
Complete Outsource Solution. This is currently the most prominent of the business models that we employ. Many hotels do not want to pay upfront for their minibars, and many do not want to allocate resources to operate the minibars either.
Accordingly, we manufacture our own minibars, or purchase other manufacturers’ new minibars, and install them at the hotel’s premises, at no immediate cost to the hotel. In the case of computerized minibars, the installation also includes software designed to interface between the minibars and the customer’s existing management software, so that various actions relating to usage of the minibars such as, consumption of products from the minibars, and the locking/unlocking of the minibars, can be logged or controlled by the customer and by us. We then manage and operate the minibar department for the customer. We also supply full maintenance services for the minibars. We carry the operating expenses of the minibar department, and net revenues (after rebates and other discounts, if any) from the minibar department are shared, with us receiving the majority of the revenue and the hotel retaining the balance of the revenues. Generally, we offer incentives to the hotel so that the customer’s relative share increases as the net revenue per minibar rises.
In this model, the initial term of our agreement with the hotel is several years, and the customer typically has an option to extend the agreement and/or to purchase the turnkey system from us at one or more points in time during the term of the agreement. Our objective is to provide our services to the customer for the full term of the agreement, but this business model remains profitable even if the customer decides, at any stage, to exercise its option to purchase the system from us.
We offer this kind of model for the HOMI® 330 and the HOMI ® 226, but have made some adjustments, so that the agreements are typically for a shorter period, and the division of revenues is often based on a threshold, where HOMI is guaranteed all revenue up to the threshold, and anything above the threshold is divided between HOMI and the hotel at a fixed rate, with the majority going to HOMI.
We believe that this type of model offers the customer many advantages in relation to its minibar department, including the following:
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No capital expenditure on the minibars
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A new revenue stream, if no minibars were previously installed and operational
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No labor expenses and no operating costs
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No purchase of goods and no inventory management
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Added service to guests, thereby improving the customer’s competitive edge
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No downside: hotel is minimizing its risks, both financial and other
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Added flexibility, via the customer’s option to purchase the system
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Outsourcing allows the hotel to focus on major revenue sources
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Quality of service: we specialize in the field
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Increased control and management, extensive reporting
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No maintenance by customer
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Periodic technical and technological upgrades
Management & Operation of Installed Base
For customers who already have an installed, operational minibar system, we provide partial maintenance services, and full operation and management services. Essentially, the services which we provide in this case are the same as in the Outsource Solution for Leased Base model.
New Business Model
In 2009 we introduced a new business model, pursuant to which we sell to third parties minibars scheduled to be installed at specific hotels with which we have outsourcing agreements. The minibars, once installed and operational, remain in place at the hotel and we operate and maintain these minibars in accordance with our outsource operation agreement; the only difference is that title to the minibars now rests with the third party. The agreements with the third parties are to be in effect for most of the useful lives of the minibars.
According to this business model, we continue to invoice each hotel for the full amount of the net revenues from its outsource operation (“Net Revenues”). From this amount, we deduct operational payments (cost of goods, labor, $0.06 (in dollars) per minibar maintenance, 8% management fee) (“Operational Payments”). As long as Net Revenues exceeds Operational Payments ("Operating Cash Flow"), such Operating Cash Flow shall be divided between us and the third party in accordance with the terms of the agreement.
In other cases, instead of selling the minibars to a third party, we receive a loan from a third party in an amount equivalent to our turnkey installed cost price,$450 - $500 per HOMI® 330 and HOMI ® 226 minibar to be installed at a specific hotel(s) with which we have an outsourcing agreement. The loan repayment schedule and interest payments are made according to a calculation of the operational results of the minibars.
Other
The models discussed above are the primary types of arrangement that we offer our customers, but we approach each case with a certain amount of flexibility, which enables us to adjust a particular model so that it is tailor-made for the customer, but is still in line with the principles outlined above. Also, each model may be sub-divided into arrangements whereby we receive a fixed service charge, or a fixed percentage of gross revenues, instead of net revenues, and other similar adjustments. The models will also vary depending on the nature of the customer: upscale hotel, airport hotel or other hotel; and whether the minibars are computerized or manual. Sometimes, the existence of specific union rules in certain territories also require us to be flexible and adapt an arrangement so that it is workable for the customer, while still enabling us to manage and/or operate the minibar department in a way which is designed to be profitable for us, as well as for the customer. We may also be prepared to lease / rent minibars to customers, or enter into a revenue share agreements, and /or other financing arrangements, where circumstances so require. This may be applicable to the HOMI® 330, the HOMI ® 226
Competition
We have over a decade of hands-on experience in providing services to the hotel industry. Whether we are consulting to a hotel, or managing the entire minibar department, we focus on hands-on, expert and dedicated management, on-site supervision, and disciplined implementation of specialized procedures which we have developed, in order to achieve our goals and improve the department’s performance.
Many of our competitors have experience in revenue-sharing business models, while others provide systems that are supposed to improve the efficiency of a hotel’s minibar department.
We believe that our ability to provide a range of services, up to a complete outsource solution, including a comprehensive financing solution as well as the full management and operation of the minibar department, places us in a favorable position, compared with some of our competitors.
Our hands-on management strategy, combined with on-site supervision, allows us to assume responsibility for the following matters, thereby enabling our customers to concentrate their efforts in other areas:
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Implementation of our exclusive operating procedures
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Procurement of the consumables that are offered in the minibars
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Management of inventory control and monitoring of expiry dates of consumables
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Implementation of procedures to handle and reduce rebates
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Periodic reconciliation of accounts
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Training of minibar attendants and front office employees
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Maintenance and support
Our objective is to enable our customers to increase the net revenues that are generated by their minibar departments, including by the following means:
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Taking active involvement in the selection and pricing of consumables
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Implementing innovative and attractive product mixes for different room categories
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Producing attractive, creative and novel menus
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Improving minibar visibility
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Proposing and implementing effective promotional activities
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Reducing rebates & manual emptying of minibars by guests
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In-depth and real-time data logging and reporting, thereby creating extensive sales statistics and enabling effective data-mining, designed to adapt the system to improve performance
A large number of hotels still manage and operate their minibar departments in-house, and the concept of outsourcing this to a company that specializes in this kind of activity is still relatively new. In some cases, there is a general lack of awareness on the part of the hotel, either of the existence of the kind of services which we offer, or of the advantages that can be gained by making use of them. Our marketing activities are directed at increasing awareness and painting a full picture for the hotels, so that they can make an educated decision, based on the relative pros and cons. We believe that our services can be of substantial benefit to our customers, but outsourcing of this type of services still accounts for a relatively small segment of the hotel industry market.
In addition, there are also other companies which offer some or all of the services which we offer. Presently, our main competitors are Minibar Systems, Bartech Systems International, Inc. and Domestic Holding AB which offer outsourcing or revenue sharing programs at prices that are competitive with ours. Other companies, such as Club Minibar, offer outsourcing programs utilizing manual minibars. In respect of the financing aspects of the solutions we offer to our clients, we are also in competition with certain manufacturers of the minibars themselves.
Whether in the regions in which we are currently active, or in territories into which we will expand our activities in the future, the arrival of other companies offering similar services may force down our profit margins if we are to remain competitive.
Customers and Markets
We currently market and provide our products and services primarily to upscale and luxury hotels.
As of December 31, 2013, we provide operation and/or management services to the minibar departments of 42 hotels, most of which are affiliated with prominent international hotel chains such as Hilton, Sheraton, Hyatt and others.
There seems to be a direct correlation between a hotel's occupancy level and average room rate and the quantity of purchases made by guests from a hotel's minibars. As a result, in the majority of our current projects, where our revenues are based on the net revenues of the minibar departments which we operate and/or manage, our revenues are dependent on hotel occupancy levels and average room rate. Decreases in hotel occupancy levels and its average room rate could result in corresponding decreases in our revenues.
Governmental Regulation
In accordance with regulations related to the sale of alcoholic beverages in various countries in which we provide our services, there are instances where we operate under a hotel's license to sell alcohol. In such cases, although we do not incur costs of meeting regulatory compliance, we cannot guarantee a hotel's compliance with applicable regulations. Failure of a hotel to comply with these regulations could result in our inability to sell alcoholic beverages in the minibars being operated and/or managed by us, which would probably result in a decrease in our revenues.
Intellectual Property
We own the trademark “HOMI” in respect of products and services which we supply. In numerous countries around the world, we have registered, and/or are in the process of registering, this trademark in our name. In 2006, we filed for patent protection with regard to certain features of the HOMI® 336 and the HOMI® 330 and this patent has been registered and issued in the United States and Europe and an application is pending in Taiwan. In 2008, a further patent application was filed in the U.S., with regard to certain additional features of our products, and this application is pending. In 2009, a further patent application was filed in the U.S., with regard to certain additional features of our New Range of Products, and this application is pending. We hold no other registered patents, trademarks, service marks or other registered intellectual property relating to our operations.
Employees
As of December 31, 2013, HOMI and its subsidiaries had 45 full time employees.
Corporate Structure
We have a fully owned United States subsidiary, HOMI USA, Inc. (“HOMI USA”), formerly known as Hotel Outsource Services, Inc., through which we conduct business in the United States.
Outside the United States, we carry on our business activities through regional subsidiaries, each of which is responsible for one or more territories in which we market and/or provide our services. These subsidiaries receive management services from us, and some of them also have staff of their own, retained either as employees or under management agreements or service agreements.
Our operating subsidiaries can, as of December 31, 2013, be summarized as follows:
HOMI USA, Inc. (“ HOMI USA ”)
HOMI Israel Ltd. (“HOMI Israel”)
HOMI Industries Ltd. (“HOMI Industries”)
HOMI UK Limited.
HOMI Canada, Inc.
HOMI Florida LLC
HOMI Australia Pty. Ltd.
All of our subsidiaries are currently wholly owned by us, directly or indirectly.
ITEM 1A:
ITEM 1A:
RISK FACTORS
1. We are dependent on a small number of customers for a large percentage of our business.
In 2013, our three largest customers provided 23.05 % of our sales revenues, and in 2012, our three largest customers provided 26.3 % of our sales revenues. The loss of any of these customers would cause a large decrease in our sales revenues and negatively affect our ability to operate.
2. We depend on key personnel, the loss of whom could adversely affect our ability to perform, market our company and obtain contracts with major hotels.
Our success is substantially dependent on the performance of our president, Daniel Cohen. The loss of the services of Mr. Ronnel could have a material adverse effect on our business, results of operations and financial condition. In addition to being an executive officer of HOMI, Mr. Cohen is an executive officer of most of our subsidiaries.. Competition for senior management, marketing personnel and other employees is intense, and there can be no assurance that we will be successful in attracting and retaining such personnel. Failure to successfully manage our personnel requirements could cause a decrease in sales and revenues. While we intend to purchase key person life insurance for our executive officers, currently we do not have any such insurance .
3. The economy of the hospitality industry is uncertain; a downturn could decrease our opportunities for contracting with new hotels.
HOMI's revenues are dependent in large part on the continued growth and profitability of the lodging industry, which, in turn, is dependent on levels on travel, tourism and business entertaining. There can be no assurance that profitability and growth will be achieved.
The current global economic crisis that began during 2008, had an adverse effect on the hospitality industry, and could continue to adversely affect this industry through the foreseeable future. A weak U.S. dollar and high rates of unemployment could result in the failure of many Americans to travel abroad, thereby resulting in decreased tourism. The ongoing crisis in the Middle East, likewise, has had a negative impact on the hospitality industry in that region, which may continue into the foreseeable future. Any or all of these events could result in hoteliers' decision to not install our minibars, which could have a materially adversely affect HOMI's business, operating results and financial condition.
4. In our outsource operations, we depend on the hotels' timely payment of our share of the minibar revenues, the failure of which could harm our credit, cash flow and corporate growth.
An integral part of our outsource operation program is in the collection of revenues from our minibars by the host hotel, and then the allocation of such revenues between HOMI and the hotel. As a result, we depend on each hotel's timely and accurate collection of revenues. To the extent we depend on our revenues to pay our expenses and/or fund our growth, hotels' failure to timely and/or accurately remit payment could adversely affect our credit, cash flow and expansion opportunities.
5. We will need, and may be unable to obtain, additional financing which could force us to slow down or suspend our operations.
HOMI needs to continue to market its products and services in order to expand its operations. We expect that our new business models wherein we sell new outsource installations to third parties and in other times receive a similar amount in loans for installations, will enable us to finance our operations and projected growth in 2013.We believe that by implementing our new business models, and by receiving certain shareholder loans in 2011, 2012 and 2013 we will have sufficient funds to meet our needs for working capital for the next 12 months. However, there is no guarantee that our new business model will supply us with sufficient working capital, in which case we may need to obtain funding from other sources. There can be no assurance that additional capital will be available on acceptable terms. As such, we may not be able to fund our future operations, adequately promote our products, develop or enhance services or respond to competitive pressures. Any such inability could adversely affect our ability to enter into new contracts which would prevent us from growing the company.
6. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting; this would harm our business and the trading price of our stock.
Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our business and operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement.
In evaluating the effectiveness of our internal controls over financial reporting as of December 31, 2008, we identified two material weaknesses: entity control level; and segregation of duties in the finance department. As a result, management implemented a comprehensive program designed to strengthen our internal controls over financial reporting. Among other things, the program provided for (i) the addition of staff to our finance department as well as to the operational department, (ii) the integration of updated financial software, (iii) the creation of a new mechanisms for the review and approval of invoices to customers and/or from suppliers, (iv) increased level of discussion and documentation by senior financial management, (v) increased frequency of sudden checks; and (vi) the establishment of additional controls over financial reporting.
During the years ended December 31, 2012 and December 31, 2013, management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such an evaluation requires the check and testing of the existence of the required controls. Based on this examination, as of December 31, 2013, management has concluded that its disclosure controls and procedures are effective.
8. We have suffered recurring losses from operations and may not be able to continue as a going concern.
We have suffered recurring losses from operations. The continuation of HOMI as a going concern is dependent upon implementation of management's plans, as well as raising additional funds from shareholders or others. Our auditors have, in their opinion, stated the possibility that we may not be able to continue as a going concern. In the event we are unable to successfully implement our plans and raise additional funds, we may not be able to continue to operate our business.
9. We face competition from other companies which offer the same services we offer and from companies which manufacture minibars, many of which companies are better established and/or funded than HOMI.
There are other companies which offer some or all of the services which we offer. Presently, our main competitors are Minibar Systems, Bartech Systems International, Inc. and Domestic Holding AB which offer outsourcing or revenue sharing programs at prices that are competitive with ours. Other companies, such as Club Minibar, offer outsourcing programs utilizing manual minibars. In respect of the financing aspects of the solutions we offer to our clients, we are also in competition with certain manufacturers of the minibars themselves.
10. Whether in the regions in which we are currently active, or in territories into which we will expand our activities in the future, the arrival of other companies offering similar services may force down our profit margins if we are to remain competitive
In addition, a large number of hotels still manage and operate their minibar departments in-house, and the concept of outsourcing this to a company that specializes in this kind of activity is still relatively new. In some cases, there is a general lack of awareness on the part of the hotel, either of the existence of the kind of services which we offer, or of the advantages that can be gained by making use of them. Although we try to market our services to hotel which we believe will be well served by our products and services, it can be difficult the type of outsourcing services that we offer still accounts for a relatively small segment of the hotel industry market.
11. We are exposed to currency rate changes which have resulted in significant losses in the past.
For the year ended December 31, 2012 we had $218,000 of financial expenses, and in the year ended December 31, 2013, we had $222,000 in expenses, an increase of $4,000. These amounts include interest expense (net) of approximately $261,000 and $169,000, respectively. The remaining amounts are due primarily to currency rates change on US$ dominated intercompany balances.
The majority of our sales are in U.S. dollars or in dollar linked currencies. In addition, the majority of our financing is received in U.S. dollars. Accordingly, we have determined the U.S. dollar as the currency of its primary economic environment and thus, its functional and reporting currency. Non-dollar transactions and balances have been remeasured into U.S. dollars in accordance with Statement of Financial Accounting Standard No. 52 "Foreign Currency Translation" ("SFAS No. 52"). All transaction gains and losses from the remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of operations as financial income or expenses, as appropriate.
The financial statements of foreign subsidiaries, whose functional currency is not the U.S. dollar, have been translated into US dollars. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statements of operations amounts have been translated using the average exchange rate for the period. Currency rate changes on US$ dominated intercompany balances have often resulted in financial expenses. Because we have subsidiaries whose functional currency is not the US $, we will continue to run the risk of currency exchange rate changes having a negative effect on our financial situation.
ITEM 1B:
ITEM 1B:
UNRESOLVED STAFF COMMENTS
Not applicable
ITEM 2:
ITEM 2:
PROPERTIES
Our operations are based primarily at hotels in which we conduct our outsource operations. Most of these hotels allow us to utilize office space free of charge. We also make use of a small amount of office space in Hertzeliya, San Francisco, and New York.
Our facilities are as follows:
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Our corporate headquarters are located at 80 Wall Street, Suite 815, New York, New York, in the offices of Schonfeld & Weinstein, L.L.P., at no additional cost to us. Schonfeld & Weinstein, L.L.P. serves as our US Counsel and also owns shares in our company.
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HOMI Israel’s and HOMI Industry's corporate headquarters are currently located at : 20 Galgalei Haplada Hetrzeliya Pituach 47625, Israel. We signed a one year lease with an unrelated third party for $2,800 per month.
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HOMI USA has its corporate headquarters at 1 Embarcadero Center, Suite 500, San Francisco, California 94111. The monthly rent is $500.
The office space provided us by the hotels in which we operate are also usually used to store goods to be placed in the minibars and spare parts for the minibars. Generally, we do not keep a significant number of minibars in stock. Instead, we order them on an as needed basis. Typically, they are then shipped directly from the manufacturer to the customer. As we enter into additional outsource agreements with customers, we will expect to receive office space within the premises of these customers, from which we will conduct our operations.
ITEM 3:
ITEM 3:
LEGAL PROCEEDINGS
To the best of our knowledge, there are no legal proceedings pending or threatened against us.
ITEM 4:
ITEM 4:
[REMOVED AND RESERVED]
PART II
ITEM 5:
ITEM 5:
MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market For Common Stock
As of December 31, 2013, HOMI has 2,949,484 shares of common stock outstanding held by a total of 108 shareholders. No dividends have been declared as of December 31, 2013.
Our common stock is listed on the OTC QB under the symbol "HOUM.PK."
* Reflects 100:1 Reverse Stock Split effective January 2013
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
None.
ITEM 6:
ITEM 6:
SELECTED FINANCIAL DATA
Not applicable.
ITEM 7:
ITEM 7:
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations and financial condition for the year ended December 31, 2013. The following discussion should be read in conjunction with the financial statements for the year ended December 31, 2013.
Forward-Looking Statements
This annual report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or out industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with accounting principles generally accepted in the United States of America. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars.
As used in this annual report, the terms "we", "us", "our", and "HOMI" mean Hotel Outsource Management International, Inc. and its subsidiaries, unless otherwise indicated.
Critical Accounting Policies
In connection with the issuance of Securities and Exchange Commission FR-60, the following disclosure is provided to supplement the Company’s accounting policies in regard to significant areas of judgment. Management of the Company is required to make certain estimates and assumptions during the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. These estimates also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on our financial statements than others.
Revenue recognition, Accounts Receivable and Allowance for Doubtful Accounts
Revenues from minibars operation and product sales derived from outsource activity under the exclusive long-term revenue sharing agreements with hotels, net of the hotel’s portion, and revenues from disposal of minibars are recognized in accordance with Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB No. 101") and SAB No. 104 when delivery has occurred, persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable and collectibles is probable.
Sales of minibars that are classified as refinancing arrangements are shown as a long-term loan to be repaid in accordance with terms of the agreement as required in FAS 13 "Accounting for Leases".
Our payment terms are normally net 15 days from invoicing. We evaluate our allowance for doubtful accounts on a regular basis through periodic reviews of the collectability of the receivables in light of historical experience, adverse situations that may affect our customers’ ability to repay, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. We perform ongoing credit evaluations of our customers and generally do not require collateral because (1) we believe we have certain collection measures in-place to limit the potential for significant losses, and (2) because of the nature of customers comprising our customer base. Accounts receivable are determined to be past due based on how recently payments have been received and bad debts are charged in the form of an allowance account in the period the receivables are deemed uncollectible. Receivables are written off when we abandon our collection efforts. To date, we have not experienced any material losses. An allowance for doubtful accounts is provided with respect to those amounts that we have determined to be doubtful of collection. No allowance was deemed necessary as of December 31, 2012 and 2011.
Long-Lived Assets
We assess the recoverability of the carrying value of long-lived assets periodically. If circumstances suggest that long-lived assets may be impaired, and a review indicates that the carrying value will not be recoverable, as determined based on the projected undiscounted future cash flow, the carrying value is reduced to its estimated fair value. The determination of cash flow is based upon assumptions and forecasts that may not occur. As of December 31, 2012 the Company’s balance sheet includes $ 3,879,000 of fixed assets, net. The Company has completed its impairment test for 2012 and has concluded that no impairment write-off is necessary.
Financial statements in US dollars:
The majority of the Company's sales are in U.S. dollars or in dollar linked currencies. In addition, the majority of the Company's financing is received in U.S. dollars. Accordingly, the Company has determined the U.S. dollar as the currency of its primary economic environment and thus, its functional and reporting currency. Non-dollar transactions and balances have been remeasured into U.S. dollars in accordance with Statement of Financial Accounting Standard No. 52 "Foreign Currency Translation" ("SFAS No. 52"). All transaction gains and losses from the remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of operations as financial income or expenses, as appropriate.
The financial statements of foreign subsidiaries, whose functional currency is not the U.S. dollar, have been translated into US dollars. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statements of operations amounts have been translated using the average exchange rate for the period. The resulting translation adjustments are not included in determining net loss but are reported in a separate component of accumulated other comprehensive income (loss) in shareholders’ equity.
Overview
Hotel Outsource Management International, Inc. is a multi-national service provider in the hospitality industry, supplying a range of services in relation to computerized minibars that are primarily intended for in-room refreshments. In addition, we manufacture and install our own proprietary computerized minibar, the HOMI® 330 and the HOMI® 226, which are both designed and manufactured by HOMI. In 2012, we discontinued the HOMI® 336.
HOMI is a holding company for several subsidiaries which market and operate computerized minibars in hotels located in the United States, Europe, Australia and Israel. HOMI was incorporated in Delaware on November 9, 2000 under the name Benjamin Acquisitions, Inc.
Our core activities focus primarily on manufacturing, operating, servicing and marketing computerized minibars installed in upscale hotels throughout the world.
We believe that by using the appropriate equipment, including technologically advanced computerized minibars, we are able to materially improve the performance of the minibar departments, thereby improving the hotel’s bottom line.
For some years now, the hotel industry has been focusing on outsourcing many of the functions related to its key activities, in order to increase efficiency and lower fixed costs. In periods of economic slow-down, the interest in outsourcing solution may actually increase. We offer our customers a number of solutions that are designed to meet this need, in relation to the minibar departments, ranging from consultation and supervision services, all the way to full outsource installation and operation arrangements.
Whether we are consulting to the hotel, or managing the entire minibar department, we focus on hands-on, expert and dedicated management, on-site supervision, and disciplined implementation of specialized procedures which we have developed, in order to achieve our goals and improve the department’s performance. Using these methods, we already manage many thousands of minibars for our customers, who are spread over four continents around the world.
We have been doing business since 1997 through various subsidiaries. The current corporate structure, in which we are a holding Company for various subsidiaries around the world, has been in place since 2001. Our common stock was listed on the Over-the-Counter Bulletin Board, or "OTC Bulletin Board" from February 2004 to February 2011 under the symbol "HOUM.OB." It is currently listed on the OTCQB under the symbol HOUM.PK.
Costs and Expenses
Costs and expenses incurred in our outsource operations are generally as follows, but can vary depending on the circumstances and the nature and terms of specific agreements with customers:
(1)
The purchase of the minibars system to be installed in hotels; this capital expense is charged to property and equipment and depreciated over a period of ten years;
(2)
The purchase of the consumables to be placed in the minibars; we purchase these products from various vendors; sometimes the customer will purchase the alcoholic beverages to be placed in the minibars and we reimburse the customer for such purchases;
(3)
Labor costs of the minibar attendants;
(4)
General and Administrative, and marketing expenses;
(5)
Maintenance of the minibar systems;
(6)
Finance expenses.
RESULTS OF OPERATIONS FOR HOMI
YEAR ENDED DECEMBER 31, 2013 COMPARED TO YEAR ENDED DECEMBER 31, 2012.
Revenues
For the years ended December 31, 2012 and 2013, HOMI had revenues of $ 3,315,000 and $ 3,338,000, respectively, an increase of $23,000 or 0.7%. These revenues come mainly from the sale of products in the minibars. According to our agreements with hotels in which we conduct our outsource programs, the hotels, which collect the revenues generated from our minibars, deduct their portion of the revenues before distributing the remainder to us.
For the year ended December 31, 2013, our three largest customers accounted for 23.1% of our total revenues, as compared to 26.3 % in 2012.
As of December 31, 2013 and 2012, HOMI, through its operating subsidiaries had outsource operation programs to provide and operate minibars as follows:
Gross Profit
Gross profit decreased from $541,000 to $540,000, a decrease of $1,000 or by 0. 2% for the years ended December 31, 2012 and 2013, respectively.
As a percentage of revenues, gross profit for the years mentioned above was 16.3 % and 16.2 % for the years ended December 31, 2012 and 2013, respectively.
Cost of Revenues
Cost of Revenues, before consideration of depreciation expense, for the years ended December 31, 2012 and 2013 were $2,187,000 and $2,270,000 respectively, an increase of $83,000 or 3.8%. As a percentage of gross revenues, costs of revenues, before consideration of depreciation expense, increased, from 66.0 % in 2011 to 68.0% in 2013. This increase in cost of revenues is mainly due to the current economic situation which does not allow us to increase the prices of the products offered in the minibars, although there was an increase in the purchase price of such products
Depreciation expense for the years ended December 31, 2012 and 2013 was $587,000 and $528,000, respectively, a decrease of $59,000, or 10.0%. A quantity of our old minibars installed has already reached the end of their depreciation period.
Operating Expenses
General and administrative expenses increased from $1,279,000 to $1,392,000, an increase of $113,000, or 8.8% for the years ended December 2012 and 2013. As a percentage of revenues, general and administrative expenses increase from 38.6% to 41.7% . This increase in expenses is mainly due to a slight increase in administrative expenses.
Selling and Marketing expenses increased from $273,000 to $387,000 an increase $114,000, or 41.8 %, primarily as a result of our marketing efforts in Europe and USA during 2013.
Research and Development
During 2006, HOMI commenced its own research and development program aimed at the development of a new range of products. The HOMI® 336, a novel, computerized minibar system designed to increase the accuracy of automatic billing, was the first of the new range of products, the research and development of which, was completed in 2007. The HOMI ® 336 was discontinued and replaced by the HOMI® 330 in 2009. The research and development of an additional product, the HOMI® 226 Minibar, was completed in 2012. In 2013 we incurred additional expenses to improve the production and functionality of the minibars. Total research and development expenses for the year ended December 31, 2012 were $137,000 and $75,000 for the year ended December 31, 2013.
Financial Income (Expenses)
For the year ended December 31, 2012 we had $218,000 of financial expenses, and in the year ended December 31, 2013, we had $222,000 in expenses, an increase of $4,000. These amounts include interest expense (net) of approximately $270,000 and $169,000, respectively. The remaining amounts are due primarily to currency rates change on US$ dominated intercompany balances.
Other Income (Expenses)
For the year ended December 31, 2012 we had other expenses of $167,000, and for the year ended December 31, 2013, we had other expenses of $189,000. Out of the other expenses incurred in 2013, $ 154,000 was a result of the dismantling and disposal of old minibars from two hotels in the US in which we discontinued operations. In addition, $30,000 represents a loss incurred from a contract termination with Best Bar.
Benefit Reduction from Loan
For the year ended December 31, 2013 we had benefit reduction from loan expenses in the amount of $ 56,000. On June 29, 2012, a loan in the amount of $2,000,000, with a conversion at a price of $ 0.06,was converted by Tomwood Ltd., the holder of the loan, into shares of HOMI common stock at a rate of $.0181 per share for a total of 110,497,238 shares. As a result of the conversion, Tomwood now holds approximately 55% of our issued share capital. The value of the costed benefit component of this transaction in the amount of approximately $ 1,296,000 was charged to capital and offset against benefit reduction expenses.
Net Income (Loss)
As a result of the above, we finished 2013 with a net loss of $1,781,000 compared to a net loss of $ 2,890,000 in 2012.
Liquidity and Capital Resources
Since our inception, we have been dependent on investment capital as our primary source of liquidity. We had an accumulated deficit at December 31, 2012 of $12,350,000 and $14,131,000 as of December 31, 2013. During the year ended December 31, 2012, we incurred a net loss of $2,890,000. During the year ended December 31, 2013, we incurred a net loss of $1,781,000.
Investing and operating activities have historically been funded through our financing activities, which provided cash of approximately $1,002,000 in 2013. In 2013 HOMI used $761,000 for operating activities and $ 355,000 for investing.
On December 31, 2013 HOMI had long term debt of $ 2,815,000 including $ 546,000 in current maturities.
In March and June, 2005, HOMI and the subsidiary in the U.S. received from Horizon Challenges Investment Company Ltd. (“Horizon”) loans in the total amount of $ 1.1 million, which Horizon undertook to provide to the Company (“the Financing”), pursuant to a Financing Agreement, dated as of March 1, 2005, as amended on May 17, 2005. The loans bear interest at the rate of 11.67% and are to be repaid in monthly installments for nine years. The loans are secured by a lien on all minibars in respect of which the loan was received, and a security interest and assignment of a portion of HOMI and its subsidiaries’ monthly revenues from those minibars, in the amount required to pay each month’s repayments on all outstanding loans, principal plus interest. Total liabilities for the years ended December 31, 2013 and 2012 amounted to approximately $ 129 and $ 257, respectively.
(2)
HOMI Industries entered into loans as detailed below.
As security and collateral for repayment of the loans, HOMI Industries encumbered in lender's favor the computerized minibar system, including HOMI® computerized minibars, a central unit and a license to HOMI® software, which HOMI’s affiliate installed at the hotels and operates for the hotels under an outsource operation agreement which HOMI’s affiliate signed with the hotel.
Subsequent Events
On February 5, 2014, Hotel Outsource Management International, Inc. (“HOMI”) and its subsidiary - HOMI Industries Ltd (“Industries”) entered into a new loan agreement with Daniel Cohen, who is a director of Industries and a shareholder and director of HOMI, as well as its President. Pursuant to this loan agreement, Mr. Cohen agreed to loan to HOMI the sum of $300,000, bearing 8% annual interest. Some of the funds were wired to HOMI in January 2014 and the balance will be wired during February 2014. The principal and all accrued interest shall be repaid in a single payment, on or before July 14, 2014.
On February 5, 2014, HOMI and Industries entered into a new loan agreement with Moise Laurent Elkrief. Pursuant to this loan agreement, Mr. Elkrief agreed to loan to HOMI the sum of $200,000, bearing 8% annual interest. Some of the funds were wired to HOMI in January 2014 and the balance will be wired during February 2014. The principal and all accrued interest shall be repaid in a single payment, on or before July 14, 2014. Mr Elkrief is the beneficial owner of a majority of HOMI’s issued and outstanding shares.
On March 25, 2014, Hotel Outsource Management International, Inc. (“HOMI”) entered into an agreement (the “Agreement”) with HOMI Industries Ltd. (“Industries”), Daniel Cohen (“Cohen”) and Moise Laurent Elkrief (“Ekrief”). Cohen is the President, a Director and a shareholder of HOMI. Elkrief is the beneficial owner of the HOMI shares which are held in the name of Tomwood Limited, which is the majority shareholder of HOMI.
The Agreement had been approved by HOMI’s Board on March 20, 2014. The effectiveness of this Agreement is contingent upon receipt of the approval by the holders of a majority of HOMI’s issued and outstanding shares that are not held by Cohen or Tomwood.
Pursuant to the Agreement, all of HOMI’s debt, in an amount of approximately $900,000, will be assigned from HOMI to Industries, and there will be a restructuring of HOMI’s subsidiaries such that all of its operations subsidiaries, namely, Industries, HOMI Israel Ltd., HOMI UK Limited, HOMI USA, Inc., HOMI Canada Inc. and HOMI Florida, LLC, will be wholly owned subsidiaries of Industries. Upon such assignment and restructuring, the total amount of debt in Industries and such subsidiaries will be approximately $4,100,000. Cohen and Elkrief will then acquire Industries, including all of such debt and all of such subsidiaries and all of their debt, in consideration for the payment of $1 (one US dollar). Cohen and Elkrief have also agreed to indemnify HOMI in respect of certain liabilities.
HOMI’s Board of Directors is now considering other possible business opportunities.
Off Balance Sheet Arrangements
HOMI has no significant off balance sheet arrangements.
Inflation
We do not believe that inflation has had a significant impact on our consolidated results of operations or financial condition.
International Tax Implications
Taxable income of Israeli companies is subject to tax at the rate of 25% in 2012 and thereafter. HOMI’s United States subsidiary is subject to a 15% -35% corporate tax rate. Subsidiaries in Europe are subject to 35% - 45% corporate tax rate. The Australia subsidiary is subject to 30% corporate tax rate.
As of December 31, 2013 HOMI Inc. had approximately $ 714,000 net operating loss carryforwards
As of December 31, 2013 HOMI Israel Ltd., a subsidiary in Israel, had approximately $1,834,000 net operating loss carry forwards. The loss carryforwards in Israel have no expiration date.
As of December 31, 2013 HOMI Industries Ltd., a subsidiary in Israel, had approximately $2,206,000net operating loss carry forwards. The loss carryforwards in Israel have no expiration date.
As of December 31, 2013, HOMI USA had approximately $ 3,198,000 net operating loss carryforwards. Utilization of US net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses before utilization.
As of December 31, 2013 the subsidiary in the United Kingdom had net operating loss carry forwards of $866,000.
As of December 31, 2013 the subsidiary in Europe (HOMI Europe Sarl) had net operating loss carry forwards of $ 1,288,000.
ITEM 7A:
ITEM 7A:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8:
ITEM 8:
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2013 AND 2012
INDEX
- - - - - - - - - - - - - - - - -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Hotel Outsource Management International, Inc.:
We have audited the accompanying consolidated balance sheets of Hotel Outsource Management International, Inc. (the “Company”) as of December 31, 2013 and 2012 and the related consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the consolidated results of its operations, changes in shareholders' equity and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a "going concern". As discussed in Note 1f to the financial statements, the Company has suffered recurring losses from operations and has a net working capital deficiency that raise substantial doubt about its ability to continue as "going concern". Management's plans in regard to these matters are also described in Note 1f. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Barzily & Co.
Jerusalem, Israel
March ,2014
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
US Dollars in thousands
The accompanying notes are an integral part of the consolidated financial statements.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
US Dollars in thousands (except share data)
*Reclassified
The accompanying notes are an integral part of the consolidated financial statements.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
US Dollars in thousands (except share and per share data)
The accompanying notes are an integral part of the consolidated financial statements.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
US Dollars in thousands (except shares data)
The accompanying notes are an integral part of the consolidated financial statements.
* See Note 6c.
** See Note 10b.
*** See Note 10d.
**** See Note 1d
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
US Dollars in thousands
The accompanying notes are an integral part of the consolidated financial statements.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
US Dollars in thousands
The accompanying notes are an integral part of the consolidated financial statements.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 1:- GENERAL
a.
Hotel Outsource Management International, Inc. ("HOMI") was incorporated in Delaware on November 9, 2000. HOMI and its subsidiaries are engaged in the distribution, marketing and operation of computerized minibars in hotels located in the United States, Europe, Israel and Canada.
Hereinafter, HOMI and its subsidiaries will be referred to as the "Company."
The Company has been doing business since 1997 through various subsidiaries. The current corporate structure, in which it is holding company for various wholly owned subsidiaries around the world, has been in place since 2001. The Company common stock was listed on the Over-the-Counter Bulletin Board, or "OTC Bulletin Board" from February 2004 until February 2011. It now trades on the OTCQB under the symbol "HOUM”.
b.
During 2006, the Company commenced its own research and development program aimed at the development of a new range of products.
Currently the HOMI® 330, a "sealed-access" type wireless Computerized Minibar system and the newer HOMI® 226, an "Open-Access" type wireless Computerized Minibar system, are both being produced and installed.
c.
Commencing 2009, HOMI has begun to implement a new business model. Under the new business model, the Company sells or receives loans against HOMI minibars, installed or to be installed in various hotels. Under this model, HOMI shall continue to manage and operate these minibars in return for a management fee and profit sharing arrangements.
d.
As of 21 August 2013, HOMI France S.A.S., which had been a fully, indirectly owned subsidiary of HOMI was dissolved, with voluntary liquidation procedures having been completed as of 25 June 2013. Operations previously handled by HOMI France were transferred to HOMI UK Limited, which is another fully, indirectly owned subsidiary of HOMI.
HOMI Australia, a subsidiary of HOMI, began the process of deregistration to close down the company, which process was completed as of 6 February 2014.
e.
See also Note 16b.
f.
As of December 31, 2013, the Company had $ 128 in cash, including short term deposits. The Company continues to incur losses ($ 1,781 in 2013) and has a negative cash flow from operations amounting to approximately $ 761 in 2013.
In order to implement the Company's basic business plan for completion of the installation of additional minibars and it’s activity, the Company will need additional funds from shareholders or others.
The financial statements have been prepared assuming that the Company will continue as a "going concern". The Company has suffered recurring losses from operations and has a net working capital deficiency that raises substantial doubt about its ability to continue as "going concern" .The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The continuation of the company as a going concern is dependent upon implementation of management's plans as well as raising additional funds from shareholders or other. The Company's preferred method is the new business model, described in item c. above.
On February 5, 2014 HOMI entered into two loan agreements with related parties. The related parties lent HOMI $ 300 and $ 200, respectively, See also Note 16a.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP").
a.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions management is required to make. Estimates that are critical to the accompanying consolidated financial statements relate principally to depreciation and recoverability of long lived assets. The markets for the Company’s products are characterized by intense price competition, rapid technological development, evolving standards and short product life cycles; all of which could impact the future realization of its assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. It is at least reasonably possible that management’s estimates could change in the near term with respect to these matters.
b.
Financial statements in U.S. dollars:
The currency of the primary economic environment in which the operations of the Company are conducted is the U.S. dollar (hereinafter: "dollar"); thus, the dollar is the functional currency of the Company.
The Company's transactions and balances denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been remeasured to dollars. All transaction gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of operations as financial income or expenses, as appropriate.
c.
Consolidation:
Inter-company transactions and balances, including profits from inter-company sales not yet realized outside the group, have been eliminated in consolidation.
d.
Cash and cash equivalents:
The Company considers all highly liquid investments originally purchased with maturities of three months or less at the date acquired to be cash equivalents.
e.
Short-term bank deposits:
The Company classifies bank deposits with maturities of more than three months and less than one year as short-term deposits. Short-term deposits are presented at cost, including accrued interest.
f. Inventory:
Inventories are stated at the lower of cost or market value. Inventory write-offs are provided to cover risks arising from slow moving items. Cost is determined using the "first-in, first-out" method. Inventories are composed of the food products.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
g.
Property and equipment:
Property and equipment are stated at cost net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, at the following annual rates:
h.
Other assets:
1.
Intangible assets -
Intellectual properties registered in several countries worldwide are capitalized and are amortized over the life span of the asset (twenty years).
2.
Deferred expenses represent loan acquisition costs arising from the long-term loan originated in 2005 and convertible notes payable issued in 2007 and 2006.
See Note 7c (1).
i.
Impairment of long-lived assets:
The Company's long-lived assets and certain identifiable intangibles are reviewed and evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of December 31, 2013, management believes that all of the Company’s long-lived assets are recoverable.
j.
Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts:
Revenues from minibars operation and product sales derived from outsource activity (minibar's content) under the exclusive long-term revenue sharing agreements with hotels, net of the hotel’s portion and/or other participation of, or payments due from the hotel, are recognized when delivery has occurred, persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable and collectability is probable.
Revenues from rental of minibars are recognized over the lease term.
Revenues from sales of minibars are recognized in accordance with compliance with the conditions as abovementioned.
Sales of minibars that are classified as refinancing arrangements are shown as a long-term loan to be repaid.
The Company’s payment terms are normally net 15 to 30 days from invoicing.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
j.
Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts (cont.):
The Company evaluates its allowance for doubtful accounts on a regular basis through periodic reviews of the collectability of the receivables in light of historical experience, adverse situations that may affect its customers’ ability to repay, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.
The Company performs ongoing credit evaluations of its customers and generally does not require collateral because (1) management believes it has certain collection measures in-place to limit the potential for significant losses, and (2) the nature of customers comprising the Company’s customer base. Accounts receivable are determined to be past due based on how recently payments have been received and bad debts are charged in the form of an allowance account in the period the receivables are deemed uncollectible. Receivables are written off when the Company abandons its collection efforts.
To date, the Company has not experienced any material losses. An allowance for doubtful accounts is provided with respect to those amounts that the Company has determined to be doubtful of collection. No allowance was deemed necessary as of December 31, 2013 and 2012.
k.
Research and Development costs:
Research and Development costs are charged to the statement of operations as incurred. Costs and acquisitions related to pre-production, production support, tools and molds are charged to property and equipment.
l.
Income taxes:
The Company accounts for income taxes using the asset and liability method whereby deferred tax assets and liability account balances are determined based on differences between financial statement carrying values of existing assets and liabilities and their respective income tax bases. Deferred tax assets (temporary differences), liabilities and losses carried forward are measured using the enacted tax rates and laws that will be in effect when the temporary differences are expected to reverse. The Company provides a valuation allowance, if necessary to reduce the amount of deferred tax assets to their estimated realizable value.
m.
Severance pay:
The Company's liability for severance pay is calculated pursuant to the local law applicable in certain countries where the Company operates.
n.
Concentrations of Credit Risk and Fair Value of Financial Instruments:
The financial instruments of the Company consist mainly of cash and cash equivalents, short-term bank deposits, trade receivables, other accounts receivable, trade payables, other accounts payable and notes payable to shareholders and others.
In view of their short term nature, the fair value of the financial instruments included in working capital of the Company is usually identical, or close, to their carrying values. The fair values of long-term notes payable also approximates their carrying values, since such notes bear interest at rates that management believes is approximately the same as prevailing market rates.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
n.
Concentrations of Credit Risk and Fair Value of Financial Instruments (cont.):
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, and trade receivables. The majority of the Company's cash and cash equivalents are invested in interest bearing NIS and U.S. dollar-linked instruments with major Israeli, U.S. bank.
Management believes that minimal credit risk exists with respect to these investments. Trade receivables potentially expose the company to credit risk.
The Company has no off-balance sheet concentration of credit risk, such as foreign exchange contracts or other foreign currency hedging arrangements.
The Company monitors the amount of credit it allows each of its customers' using the customers prior payment history to determine how much credit it will aloe or whether any credit should be given at all. As a result of its monitoring of the outstanding credit allowed for each customer, as well as the fact that the majority of the Company's sales are to customers whose satisfactory credit and payment record has been established over a long period of time, the company believes that its account receivable credit risk has been reduced. However the company acknowledges that as of the date these financial statements the poor economic climate globally, has increased the chances of customers and financial institutions defaulting on their obligations.
o.
Basic and Diluted Net Income (Loss) per Share:
Basic net income (loss) per share is computed based on the weighted average number of common shares outstanding during each year. Diluted loss per share is computed based on the weighted average number of common shares outstanding during each year and include the dilutive potential common shares considered outstanding during the year.
p.
Exchange rates:
Exchange and linkage differences are charged or credited to operations as incurred.
Exchange rates and the Consumer Price Index ("CPI"):
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
q.
Selling and Marketing Costs:
Selling and marketing costs are charged to the statements of operations as incurred.
r.
Implementation of new accounting Standards:
In June 2011, the FASB issued guidance on presentation of "other comprehensive income". The new guidance require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of change shareholders' equity. The standard does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for the Company as of January 1, 2012. Because this ASU impacts presentation only, it has no effect on the Company's financial condition, results of operation, or cashflows.
NOTE 3:- OTHER ACCOUNTS RECEIVABLE
*
In 2010 Homi Australia ceased the operating of the Minibars in Hilton Sydney, the only hotel operated in Australia, and transferred the operation and the Minibars installed to the Hilton, for up to AU$ 435 (approx. $ 396). The amount was repaid over maximum of 50 monthly payments which were based on the monthly performance of the hotel as detailed in the agreement. Title of the System passed to Hilton, after those repayments, for the nominal price of one AU$.
NOTE 4:- PROPERTY AND EQUIPMENT, NET
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
(1)
A quantity of minibars are owned by HOMI Industries and rented to the subsidiaries.
As of December 31, 2013 the minibars are located as follows:
(2)
Through subsidiaries in France and the U.K (including a branch in Spain).
(3) Including 333 HOMI® 232 shared operated minibars. As of December 31, 2013 located in Israel.
NOTE 5:- OTHER ASSETS
(1)
See Note 2h(1).
(2)
Deferred expenses in regard to loans received are amortized over the loan period of nine years (see Note 7 c (1)).
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 6:- LOANS FROM RELATED PARTIES
a.
Composed as follows:
b.
Aggregate maturities of long-term loans for years subsequent to December 31, 2013 are as follows:
c.
Additional Information:
HOMI entered into a loan agreement with a related company dated January 8, 2012. The related company loaned HOMI NIS 850,000 (approximately $ 220 when received), index linked to Israel’s Consumer Price Index and bearing interest at a rate of 6% per annum.
On September 1, 2012, the related company agreed to HOMI’s request to recycle a previous loan agreement with the related company for NIS 1,125,000 and NIS 850,000, respectively, as follows:
1.
An amount of approximately NIS 1,660,000 ($ 412) out of the above mentioned loans ,was recycled into 3 loan agreements with HOMI Industries Ltd, pursuant to which the related party shall receive a portion of the revenue from minibar systems operated by HOMI subsidiaries in three hotels as detailed below.
2.
An amount of approximately NIS 315,000 ($ 78) of principal remains outstanding and payable under the December 15, 2011 loan, in accordance with its terms.
Of the NIS 850,000, January 8, 2012 loan, NIS 809,000 ($201) was recycled into a loan agreement with HOMI Industries Ltd, pursuant to which the lender shall receive a portion of the revenue from a minibar system operated by a HOMI subsidiary in the Hilton Olympia Hotel in London (the “Hilton Agreement”). In 2013 the loan was assigned to a non related party.
NIS 41,000 ($10) was recycled into a loan agreement between the lender and HOMI Industries Ltd, pursuant to which the lender shall receive a portion of the revenues generated by a minibar system operated by a HOMI subsidiary in the Leonardo Rehovot Hotel (the “Leonardo Agreement”).
Of the NIS 1,125,000 December 12, 2011 loan, NIS 178,836 ($44) was recycled under the Leonardo Agreement.
NIS 631,643 ($156.8) was recycled into a loan agreement between lender and HOMI Industries Ltd, pursuant to which lender shall receive a portion of the revenues generated by a minibar system operated by a HOMI subsidiary in the Sheraton Salobre Grand Canary Islands Hotel (the “Sheraton Agreement”).
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 6:- LOANS FROM RELATED PARTIES (cont.)
In respect of the above mentioned loans recycling, during 2012, an amount of $ 182 was charged to capital.
d.
Information in regard to loans with operation agreements:
HOMI entered into loans as detailed below.
As security and collateral for repayment of the loans, HOMI encumbered in lender's favor the computerized minibar system, including HOMI® computerized minibars, a central unit and a license to HOMI® software, which HOMI’s affiliate installed at the hotels and operates for the hotels under an outsource operation agreement which HOMI’s affiliate signed with the hotel.
Repayments of these loans are computed on the basis of the specified minibar system’s revenues net of operational payments, allocated amongst the parties, in accordance with the terms detailed in the loan agreements.
e.
Information in regard to loans converted during 2013:
1.
On January 28, 2010, HOMI’s President loaned HOMI $ 100, at an agreed interest rate of 8% per annum. During the years 2011 and 2012, HOMI paid interest on this loan, but no principal. According to the terms of the agreement, HOMI was to commence payment of principal at the end of the first quarter of 2012.
2.
In December 2011, HOMI received three additional loans from shareholders and directors, amounting to $ 80 in total. Each loan is for a period of four years, with quarterly repayments, including two years’ grace on the principal.
3.
On July 12, 2012, HOMI entered into an additional loan agreement with HOMI's President, pursuant to which HOMI’s President loaned HOMI the sum of $50 bearing 8% annual interest. The loan is for a period of four years, including two years’ grace on the principal. Pursuant to the loan agreement, HOMI stated its intention to perform a rights offering. In the event of such rights offering, HOMI will have the right to repay all or part of the loan by issuing shares of HOMI’s common stock to its president at the same price per share as in the rights offering.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 6:- LOANS FROM RELATED PARTIES (cont.)
4.
On July 12, October 15, January 1, 2013, HOMI entered into three new loan agreements with the majority shareholder in HOMI. Pursuant to these loan agreements, the shareholder agreed to loan HOMI the sums of $ 250, $ 200 and $ 70, respectively, bearing 8% annual interest. The loans are for a period of four years, including two years’ grace on the principal.
5.
On January 10, 2013, HOMI Industries entered into a loan agreement with a related party owned and operated by the President of HOMI. Pursuant to this loan agreement the related party agreed to loan HOMI Industries the sum of $45.5.
6.
On April 5, 2013, HOMI entered into a new loan agreement with the majority shareholder in HOMI. Pursuant to this loan agreement, the shareholder agreed to loan HOMI the sum of $ 100, bearing 8% annual interest. The loan is for a period of four years, including two years’ grace on the principal. Pursuant to the loan agreement, HOMI stated its intention to perform a rights offering. In the event of such rights offering, HOMI will have the right to repay all or part of the loan by issuing shares of HOMI’s common stock to the shareholder at the same price per share as in the rights offering.
On September 2013 the loans detailed in 1-6 above were converted, in the rights offering, to shares at the price of one dollar per share. See also Note 10d.
f.
On October 9, 2013 and December 7,2013 HOMI entered into two new loan agreements, with the President and with the majority shareholder of HOMI, respectively, pursuant to which they agreed to loan HOMI the total amounts of $ 100 and $200 respectively, bearing 8% annual interest. The loans are for a period of four years, including two years grace on the principal. Pursuant to these loan agreements, within thirty days of closing an equity investment of $600 or more, HOMI may elect to repay all or any portion of the outstanding loans and/or accrued interest in shares of HOMI common stock which shares shall be valued at the same price per share as in the corresponding equity investment.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 7:- LONG-TERM LOANS FROM OTHERS
a.
Composed as follows:
*Reclassified.
b.
Aggregate maturities of long-term loans for years subsequent to December 31, 2013 are as follows:
c.
Additional information:
(1)
In March and June, 2005, HOMI and the subsidiary in the U.S. received from Horizon Challenges Investment Company Ltd. (“Horizon”) loans in the total amount of $ 1.1 million, which Horizon undertook to provide to the Company (“the Financing”), pursuant to a Financing Agreement, dated as of March 1, 2005, as amended on May 17, 2005. The loans bear interest at the rate of 11.67% and are to be repaid in monthly installments for nine years. The loans are secured by a lien on all minibars in respect of which the loan was received, and a security interest and assignment of a portion of HOMI and its subsidiaries’ monthly revenues from those minibars, in the amount required to pay each month’s repayments on all outstanding loans, principal plus interest. Total liabilities for the years ended December 31, 2013 and 2012 amounted to approximately $ 129 and $ 257, respectively.
(2)
HOMI Industries entered into loans as detailed below.
As security and collateral for repayment of the loans, HOMI Industries encumbered in lender's favor the computerized minibar system, including HOMI® computerized minibars, a central unit and a license to HOMI® software, which HOMI’s affiliate installed at the hotels and operates for the hotels under an outsource operation agreement which HOMI’s affiliate signed with the hotel.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 7:-
LONG-TERM LOANS FROM OTHERS (cont.)
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 8:-
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
NOTE 9:-
COMMITMENTS, CONTINGENT LIABILITIES, LIENS AND COVENANTS
a.
HOMI and its affiliates have contractual obligations towards hotels with regard to the operation of minibars in hotel rooms.
HOMI and its affiliates own most of these minibars. Several hotels have a contractual purchase option granted which enables them to purchase the minibars at a price which results in a profit for the Company, and the agreement with the hotel is then terminated. To date, no hotel has exercised such an option.
b.
HOMI Industries has registered fixed charges over certain of its assets, including certain minibars and the rights to receivables generated by such minibars , in favor of third parties, as security for loans which were given to HOMI by such related parties and third parties, or to secure profit sharing payments which HOMI undertook to pay to such parties. Total liabilities secured by these fixed charges as of December 31, 2013 are in the amount of approximately $ 2,200. See also Notes, 7c (2) and 6d.
c.
Rent expenses -
The Company’s operations are based primarily at hotels where its outsource operations are conducted. Most of the hotels allow the Company to utilize office space free of charge.
In addition, the Company’s U.S. counsel (who is also a shareholder) allows the Company to use its office as their corporate headquarters at no charge. No amounts have been reflected as rent expense in the accompanying consolidated statements of operations for the value of this rent due to its insignificance
In addition, the Company rents space under various month to month arrangements for certain facilities. The Company rents office space in Herzliya, Israel, primarily for HOMI’s finance department, its technical support and as the headquarters of HOMI Israel and HOMI Industries. During the years ended December 31, 2013 and 2012, rent expenses amounted to $ 48 and $ 45, respectively.
Rent commitments:
Future minimum lease commitments under non-cancelable operating leases are as follows:
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 9:-
COMMITMENTS, CONTINGENT LIABILITIES, LIENS AND COVENANTS (cont.)
d.
The Company received notice that the US Internal Revenue Service imposed on the Company automated late filing penalties for delay in filing a certain information schedule on foreign holdings. The Company has filed an appeal for full abatement of the penalties according to procedures of the IRS. Based on common practice and the nature of reasoning for the delay. Company management believes there is a good reason to believe that the abatement would be approved. Accordingly, no provision was recorded on the Company books of account.
e.
HOMI Industries subsequently entered into exclusive license agreements with HOMI Europe S.A.R.L. (for the territory of Europe), HOMI USA, Inc. (for the United States and Canada) and HOMI Israel Ltd. (for Israel). HOMI Europe (S.A.R.L.) granted a sub-license to HOMI UK Limited (for the United Kingdom, Spain and France), and HOMI USA, Inc. granted a sub-license to HOMI Canada, Inc. (for Canada). All of the aforementioned companies are subsidiaries of HOMI.
f.
During March to June, 2010, HOMI Industries and Best Bar Services Ltd. ("Best Bar"), began to implement the cooperation pursuant to the Memorandum of Understanding they entered into as of 23 September 2009 ("the MOU”), in relation to Best Bar’s Open Display, Open Access Computerized Minibars. HOMI has included the Best Bar minibar in its catalogue of minibars, represented as the “HOMI® 232” model. During 2011 HOMI installed the HOMI® 232 Minibar in 3 hotels in Israel and one hotel in the USA.
Pursuant to the MOU, the agreed price of each HOMI® 232 is $ 350, but HOMI will purchase the HOMI® 232 from Best Bar for half that price, namely, $ 175. HOMI then shares its operating profits from HOMI® 232 installations, with Best Bar (operating profits are computed as HOMI’s collection from the hotels, less cost of goods, labor and 8% of the collection as a HOMI management fee), with 60% being retained by HOMI and 40% being paid to Best Bar.
However, HOMI is not satisfied with the performance of the HOM®I232 and decided to replace them with the new HOM®I226 minibars.
HOMI already removed the HOMI®232 minibars from 2 Hotels in Israel in 2012 and from one hotel in the USA, in 2013 and replaced them with the new HOM®I226.
Best Bar purchased these minibars back from HOMI Industries at a reduced price. During 2013, this transaction created a loss of $30 ($40 during 2012).
NOTE 10:-
SHAREHOLDERS’ EQUITY
a.
Shareholders’ Rights:
The common shares confer upon the holders the right to receive a notice to participate and vote in the general meetings of the Company and to receive dividends, if and when declared. Preferred share rights are yet to be determined. No preferred shares are issued and outstanding.
b.
On June 29, 2012, a loan in the amount of $2,000 received from Tomwood with a conversion right at a price per share of $ 0.06 was converted and Tomwood received an allocation of 110,497,238 Company shares in the price of $ 0.0181 per share.
As a result of the conversion, Tomwood is now the major shareholder of the Company's issued share capital.
Value of the costed benefit component of this transaction in the amount of approximately $ 1,296 was charged to capital and offset against benefit reduction expenses. Any and all liens on HOMI assets used as security for the Tomwood loan were removed.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 10:-
SHAREHOLDERS’ EQUITY (cont.)
c.
On January 28, 2013 the Company executed a reverse split of one -for- hundred of all of HOMI’s shares of common stock. Following the reverse split, the number of outstanding shares of common stock decreased from approximately 200,000,000 to 2,000,000. The corporation issued no fractional shares of common stock and fractional shares resulting from the reverse split were rounded up to the nearest whole share.
d.
On September 9, 2013, HOMI closed a rights offering, pursuant to which HOMI converted shareholders loans in an amount of approximately $ 950. In consideration, HOMI issued 949,978 shares of its common stock at a price of $ 1.00 per share ,see also Note 6e.
NOTE 11:-
CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company manages its business on a basis of one reportable segment (see Note 1 for a brief description of the Company’s business).
a.
Major customers’ data as a percentage of total sales to unaffiliated customers:
b.
Breakdown of Consolidated Sales to unaffiliated Customers according to Geographic Regions:
c.
As of December 31, 2013, $ 2,743 of the consolidated long-lived assets were located in Israel, $ 549 in the USA and $ 555 in ROW. As of December 31, 2012, $ 2,444 of the consolidated long-lived assets were located in Israel; $ 838 in the USA; and $ 597 in ROW.
NOTE 12:-
FINANCIAL AND FOREIGN CURRENCY TRANSLATION EXPENSES, NET
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 13:-
OTHER EXPENSES
NOTE 14:-
TAXES ON INCOME
a.
Corporate tax structure:
Taxable income of Israeli companies is subject to tax at the rate of 25% for the years 2013 and 2012 and 26.5% for the year 2014.
The subsidiary in the USA is subject to a 15% -35% corporate tax rate. Subsidiaries in Europe are subject to 20% - 35% corporate tax rate.
b.
The subsidiary in the USA is subject to both federal and state tax. The federal tax is determined according to taxable income, for the first $ 50 taxable income the rate is 15%. In addition, a 8.84% California state tax is applicable.
c.
As of December 31, 2013, loss carry forwards are approximately:
*
Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses before utilization
d.
Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 14:-
TAXES ON INCOME (cont.)
As of December 31, 2013, the Company had provided valuation allowances of $ 2,508 in respect of deferred tax assets resulting from tax loss and temporary differences. Management currently believes that it is more likely than not that the deferred tax regarding the loss carryforwards and other temporary differences will not be realized in the foreseeable future. The valuation allowance decrease by approximately $ 230 during the year ended December 31, 2013 and increased by approximately $ 539 during the year ended December 31, 2012.
e.
Breakdown of losses (profits) before taxes:
f.
The main items for reconciliation between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating losses carry forward among the various subsidiaries worldwide due to uncertainty of the realization of such tax benefits.
NOTE 15:-
RELATED PARTY TRANSACTIONS
a.
The following transactions with related parties are included in the financial statements:
b.
As for balances and loans as of December 31, 2013 and 2012 - see Note 6.
c.
As for Benefit on conversion - see Note 10b.
d.
On October 2, 2013, a director of HOMI tendered his resignation as a director, effective November 8, 2013, and notified HOMI, that he will not stand for re-election as a director. In addition, this director has resigned from his position as a director of HOMI USA, Inc., a wholly owned subsidiary of HOMI, and all other HOMI subsidiaries, effective immediately. By mutual consent of that director the HOMI subsidiaries, his management position as Chief Executive Officer of HOMI USA, Inc., and his management positions in all HOMI subsidiaries will terminate, as of December 31, 2013.
e.
On October 2, 2013, by mutual consent of the Chief Executive Officer and HOMI and its subsidiaries, it was agreed that his management position as Chief Executive Officer and Chief Financial Officer of HOMI, and his management positions in all HOMI subsidiaries, will terminate, as of December 31, 2013. In addition, he will resign from all director positions he currently holds with HOMI subsidiaries effective December 31, 2013. He shall remain a director of HOMI.
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
US Dollars in thousands
NOTE 16:-
EVENTS SUBSEQUENT TO BALANCE SHEET DATE
a.
On February 5, 2014, HOMI Industries Ltd entered into two new loan agreements, with, the President of HOMI and the beneficial owner of a majority of HOMI’s shares. Pursuant to which they agreed to loan HOMI $ 300 and $ 200 respectively, bearing 8% annual interest. Some of the funds were wired to HOMI in January 2014 and the balance during February 2014. The principal and all accrued interest shall be repaid in a single payment, on or before July 14, 2014.
b.
On March 25, 2014, HOMI entered into an agreement with HOMI Industries, the President, and the beneficial owner of the HOMI shares held by the majority shareholder of HOMI. The agreement is contingent upon receipt of the approval by the holders of a majority of HOMI’s issued and outstanding shares that are not held directly or beneficially by the purchasers.
Pursuant to the agreement, there will be a restructuring of HOMI’s subsidiaries such that all of its operations subsidiaries, namely, Industries, HOMI Israel Ltd., HOMI UK Limited, HOMI USA, Inc., HOMI Canada Inc. and HOMI Florida, LLC, will be wholly owned subsidiaries of HOMI Industries. In return for payment of $1.00 (one US Dollar) and in return for assuming (via HOMI Industries) approximately $900 thousand of HOMI's debts and approximately $3,200 of the subsidiaries’ debts, the purchasers will acquire HOMI Industries, with all of such subsidiaries and debt.
The impact of the abovementioned transaction shall be a capital loss amounting to $4.2 million The purchasers have also agreed to indemnify HOMI in respect of certain liabilities.
HOMI’s Board of Directors is now considering other possible business opportunities.
c.
See Note 1d.
ITEM 9:
ITEM 9:
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A
ITEM 9A
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management is required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 to evaluate, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.
During the year ending December 31, 2013, management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such an evaluation requires the check and testing of the existence of the required controls. As of December 31, 2013, management had performed the examination with regard to all of HOMI’s material subsidiaries. As a result, management has concluded that its disclosure controls and procedures are currently effective.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting refers to a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by the board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
●
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
●
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our board of directors; and
●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence, compliance and is subject to lapses in judgment and breakdowns resulting from improper segregation of duties and human failures. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2012 using the framework set forth in the report of the Treadway Commission’s Committee of Sponsoring Organizations (COSO), “Internal Control - Integrated Framework.” The Public Company Accounting Oversight Board’s Auditing Standard No. 2 defines a material weakness as a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of December 31, 2012, management has examined all of HOMI’s material subsidiaries, and has concluded that internal control over financial reporting is effective.
This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
ITEM 9B:
ITEM 9B:
OTHER INFORMATION
None
PART III
ITEM 10:
ITEM 10:
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Our Board of Directors and executive officers and their respective ages as of December 31, 2013 are set forth in the table below. Each of the directors of HOMI will serve until the next annual meeting of shareholders or until his successor is elected and qualified.
Also provided is a brief description of the business experience of each director and executive officer and the key personnel during the past three years and an indication of directorships (if any) held by each director in other companies subject to the reporting requirements under the Federal securities laws.
(1)
Mr. Ronnel resigned as CEO and CFO of HOMI effective December 31, 2013. He remains a director of the company.
(2)
Mr. Almog resigned as director of HOMI effective November 8, 2013.
Biographies
Avraham Bahry, 67 has been a director of HOMI since December 2004 and its Chairman from December 2004 to 2011. Mr. Bahry established Mul-T-Lock Ltd., an Israeli corporation, in 1973, which he grew into a multi-national holding company in the business of products and services for the protection of life and property. Mr. Bahry sold Mul-T-Lock Ltd. in 1999 and has worked as a consultant since then.
Daniel Cohen, 57, was appointed President of HOMI in August 2008 and was elected to the Board of Directors on November 20, 2008. Mr. Cohen has been a consultant to HOMI since September 2007... Mr. Cohen created a number of highly successful businesses including DAC Systemes (exclusive distributor in France Lebanon, Mauritius and Israel) for Micros Systems - world leaders in hospitality management, and eventually selling to Micros in 1995 From 1997 to 2005, Mr. Cohen served as Chairman, President and Chief Executive Officer of Bartech Systems International, Inc., a U.S. corporation which creates automated mini-bar solutions for the hotel industry. Mr. Cohen is a director of several small companies. From 1991 to 2000 ($40m to $300m), he was a director at Micros Systems Inc, like HOMI, a NASDAQ listed company. Mr. Cohen is a graduate of Ecole Hoteliere de Lausanne (International Institute of Hospitality Management) and is a graduate of the Advanced Management Program, INSEAD.
Jacob Ronnel, 56, served as Chief Executive Officer and a director of HOMI from since December 28, 2001, and a director of HOMI Israel Ltd. (formerly Bartech Mediterranean Ltd.) from May 1997. Mr. Ronnel served as President of HOMI from December 2001 to August 2008. Mr. Ronnel was appointed HOMI's CFO on March 26, 2009. In addition, he serves as a director and Chief Executive Officer of subsidiaries of HOMI. From July 1997 to September 1997, Mr. Ronnel was a consultant to and provisional manager of Brookside Investments, Ltd. From 1996 to 2002, he was a consultant for Kassel Financial Consultants, located in Israel. Mr. Ronnel obtained a degree in International Hotel Administration from Ecole Hoteliere de Lausanne, Switzerland. Mr. Ronnel resigned as Chief Executive Officer and Chief Financial Officer of HOMI, and from all managerial and director positions with HOMI subsidiaries, effective December 31, 2013.
Ariel Almog, 45, served as a director of HOMI and its Chief Operating Officer from December 28, 2001 to November 8, 2013. He served as Chief Operating Officer and a director of HOMI Israel, Ltd. (formerly Bartech Mediterranean Ltd.) from May 1997 to October 2013. In October 2013, Mr. Almog resigned from all managerial and director positions with HOMI subsidiaries. From 1996 to 1998, Mr. Almog was an owner of a franchise Apropo Cafe restaurant in Israel. He received a Bachelor of Business Administration and Marketing from Schiller International University (American University, Paris, France).
Kalman Huber- 67, was elected to HOMI's board of directors as of April 2009 and became its Chair in 2011. Mr. Huber has many years of experience in the hotel industry .Mr Huber served as Senior Vice President and CFO of the Sheraton Moriah chain in Israel, a chain comprised of the Sheraton hotels in Israel and the Moriah hotels, from 1999 to 2007. Since 2007, Mr. Huber has been Senior Vice President and CFO of Azorim Tourism, which, in addition to the Sheraton Moriah hotels, included the Accor hotels in Israel. Before joining Sheraton Moriah, Mr Huber worked for many years at IBM where he served as Assistant General Manager and CFO, and Assistant General Manager Marketing and Sales in IBM Israel, as well as holding senior positions in finance at IBM’s European headquarters.
Section 16(a) Beneficial Ownership Reporting Compliance
No officers, directors and/or beneficial owners of 10% or more of HOMI’s common stock who were required by Section 16(a) of the Securities Exchange Act of 1934, to file certain reports during the period covered by this annual report.
Code of Ethics
HOMI has adopted a code of ethics that applies to its principal executive officers, principal financial officer and principal accounting officer. HOMI will provide any person without charge, upon request, a copy of such code of ethics and explain the manner in which such request may be made.
Corporate Governance
There have been no material changes to the procedures by which security holders may recommend nominees to HOMI's board of directors.
Audit Committee Financial Expert
HOMI has a separately designated standing audit committee established in accordance with Section 3(a)(58)(a) of the Exchange Act. HOMI’s board of directors has determined that HOMI has one financial expert serving on its audit committee: Kalman Huber.
ITEM 11:
ITEM 11:
EXECUTIVE COMPENSATION
The following is a chart of compensation paid to all executive officers of the Company.
(1) Mr. Almog's entire salary was paid by HOMI USA, Inc. Mr. Almog resigned from all positions with HOMI and its subsidiaries in October 2013 and November 2013.
(2) Mr. Ronnel resigned as an officer of HOMI and from all positions with HOMI subsidiaries effective December 31, 2013. He remains a director of HOMI.
Directors Compensation
Directors are reimbursed for the expenses they actually incur in attending board meetings. In addition, Directors are paid a fee of $700 per directors meeting, and $350 per committee meeting. The following is a chart of compensation paid to HOMI directors in 2013.
* Compensation for services as a director is fully reflected in the Executive Officer Compensation Table.
Compensation Committee
Currently, HOMI does not have a compensation committee. All directors participate in deliberations concerning executive officer compensation.
ITEM 12:
ITEM 12:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Principal Stockholders
The following table sets forth certain information known to HOMI with respect to beneficial ownership of HOMI common stock as of March 15, 2014, the number and percentage of outstanding shares of common stock beneficially owned by each person who beneficially owns:
·
More than 5% of the outstanding shares of our common stock;
·
Each of our officers and directors;
·
All of our officers and directors as a group.
Except as otherwise noted, the persons named in this table, based upon information provided by these persons, have sole voting and investment power with respect to all shares of common stock owned by them.
(1) Based on total of 2,949,484 shares outstanding as of March 15, 2014.
(2) Mr. Almog resigned from his positions with HOMI effective November 2013.
ITEM 13:
ITEM 13:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
Other than as disclosed below, there have been no transactions or proposed transactions which have materially affected or will materially affect us in which all director, executive officer or beneficial holder of more than 5% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.
On December 31, 2013 HOMI had long term debt of $ 2,815,000 including $ 546,000 in current maturities.
HOMI entered into a loan agreement with a related company dated January 8, 2012. The related company loaned HOMI NIS 850,000 (approximately $ 220 when received), index linked to Israel’s Consumer Price Index and bearing interest at a rate of 6% per annum.
On September 1, 2012, the related company agreed to HOMI’s request to recycle a previous loan agreement with the related company for NIS 1,125,000 and NIS 850,000, respectively, as follows:
a.
An amount of approximately NIS 1,660,000 ($ 412,000) out of the above mentioned loans ,was recycled into 3 loan agreements with HOMI Industries Ltd, pursuant to which the related party shall receive a portion of the revenue from minibar systems operated by HOMI subsidiaries in three hotels as detailed below.
b.
An amount of approximately NIS 315,000 ($ 78,000) of principal remains outstanding and payable under the December 15, 2011 loan, in accordance with its terms.
Of the NIS 850,000, January 8, 2012 loan, NIS 809,000 ($201,000) was recycled into a loan agreement with HOMI Industries Ltd, pursuant to which the lender shall receive a portion of the revenue from a minibar system operated by a HOMI subsidiary in the Hilton Olympia Hotel in London (the “Hilton Agreement”). In 2013 the loan was assigned to a non related party.
NIS 41,000 ($10,000) was recycled into a loan agreement between the lender and HOMI Industries Ltd, pursuant to which the lender shall receive a portion of the revenues generated by a minibar system operated by a HOMI subsidiary in the Leonardo Rehovot Hotel (the “Leonardo Agreement”).
Of the NIS 1,125,000 December 12, 2011 loan, NIS 178,836 ($44,000) was recycled under the Leonardo Agreement.
NIS 631,643 ($156,800) was recycled into a loan agreement between lender and HOMI Industries Ltd, pursuant to which lender shall receive a portion of the revenues generated by a minibar system operated by a HOMI subsidiary in the Sheraton Salobre Grand Canary Islands Hotel (the “Sheraton Agreement”).
In respect of the above mentioned loans recycling, during 2012, an amount of $ 182,000 was charged to capital.
a.
Information in regard to loans with operation agreements:
HOMI entered into loans as detailed below.
As security and collateral for repayment of the loans, HOMI encumbered in lender's favor the computerized minibar system, including HOMI® computerized minibars, a central unit and a license to HOMI® software, which HOMI’s affiliate installed at the hotels and operates for the hotels under an outsource operation agreement which HOMI’s affiliate signed with the hotel.
Repayments of these loans are computed on the basis of the specified minibar system’s revenues net of operational payments, allocated amongst the parties, in accordance with the terms detailed in the loan agreements.
b.
Information in regard to loans converted during 2013:
1.
On January 28, 2010, HOMI’s President loaned HOMI $ 100,000, at an agreed interest rate of 8% per annum. During the years 2011 and 2012, HOMI paid interest on this loan, but no principal. According to the terms of the agreement, HOMI was to commence payment of principal at the end of the first quarter of 2012.
2.
In December 2011, HOMI received three additional loans from shareholders and directors, amounting to $ 80,000 in total. Each loan is for a period of four years, with quarterly repayments, including two years’ grace on the principal.
3.
On July 12, 2012, HOMI entered into an additional loan agreement with HOMI's President, pursuant to which HOMI’s President loaned HOMI the sum of $50,000 bearing 8% annual interest. The loan is for a period of four years, including two years’ grace on the principal. Pursuant to the loan agreement, HOMI stated its intention to perform a rights offering. In the event of such rights offering, HOMI will have the right to repay all or part of the loan by issuing shares of HOMI’s common stock to its president at the same price per share as in the rights offering.
4.
On July 12, October 15, January 1, 2013, HOMI entered into three new loan agreements with the majority shareholder in HOMI. Pursuant to these loan agreements, the shareholder agreed to loan HOMI the sums of $ 250,000, $ 200,000 and $ 70,000, respectively, bearing 8% annual interest. The loans are for a period of four years, including two years’ grace on the principal.
5.
On January 10, 2013, HOMI Industries entered into a loan agreement with a related party owned and operated by the President of HOMI. Pursuant to this loan agreement the related party agreed to loan HOMI Industries the sum of $45,500.
6.
On April 5, 2013, HOMI entered into a new loan agreement with the majority shareholder in HOMI. Pursuant to this loan agreement, the shareholder agreed to loan HOMI the sum of $ 100,000, bearing 8% annual interest. The loan is for a period of four years, including two years’ grace on the principal. Pursuant to the loan agreement, HOMI stated its intention to perform a rights offering. In the event of such rights offering, HOMI will have the right to repay all or part of the loan by issuing shares of HOMI’s common stock to the shareholder at the same price per share as in the rights offering.
On September 2013 the loans detailed in 1-6 above were converted, in the rights offering, to shares at the price of one dollar per share. See also Note 10d.
c.
On October 9, 2013 and December 7, 2013 HOMI entered into two new loan agreements, with the President and with the majority shareholder of HOMI, respectively, pursuant to which they agreed to loan HOMI the total amounts of $ 100,000 and $200,000 respectively, bearing 8% annual interest. The loans are for a period of four years, including two years grace on the principal. Pursuant to these loan agreements, within thirty days of closing an equity investment of $600,000 or more, HOMI may elect to repay all or any portion of the outstanding loans and/or accrued interest in shares of HOMI common stock which shares shall be valued at the same price per share as in the corresponding equity investment.
During the years ended December 31, 2013, HOMI incurred various related party expenses for the following:
Director Independence
Our current Board members consist of Daniel Cohen, Avraham Bahry, Jacob Ronnel, and Kalman Huber. The Board has determined that Messrs. Ronen and Huber are independent applying the definition of independence under the listing standards of the American Stock Exchange. Messrs. Cohen, Bahry, and Ronnel are not independent.
ITEM 14:
ITEM 14:
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
The aggregate fees billed for the year ended December 31, 2012 for professional services rendered by Barzily & Company for the audit of the December 31, 2012 and 2013 financial statements approximated $ 50,000 and $31,500, respectively.
All services provided by independent accountants were approved by the audit committee of HOMI. Other than income tax preparation, Barzily and Company does not provide any non-audit services to the Company.
Audit Related Fees
In 2012 and 2013, we paid $ 9,000 and $9,000 respectively, for assurance and related services reasonably related to the performance of the audit.
Tax Fees
In 2012 and 2013 we paid, $0 for professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees
In 2012 and 2013, we paid $0, for other products and services.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee is directly and solely responsible for oversight, engagement and termination of any independent auditor employed by the company for the purpose of preparing or issuing an audit report or related work.
The Committee discusses the planning and staffing of the audit and approves in advance the engagement of the independent auditor for all audit services and non-audit services and approve the fees and other terms of any such engagement and obtains periodically from the independent auditor communications of various matters required to be discussed by various Statements on Auditing Standards, Sarbanes Oxley and other standards. The communications include a description of all relationships between the auditor and the Company that may impact auditor objectivity and independence.
PART IV
ITEM 15:
ITEM 15:
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (3)
(a)
Exhibits required by Item 601 of Regulation S-K
(1)
Incorporated by reference.
(2)
Incorporated by reference from initial filing of registration statement on Form SB-2 filed July 7, 2002.
(3)
Incorporated by reference from Amendment No. 1 to registration statement on Form SB-2 filed October 15, 2002.
(4)
Incorporated by reference from Amendment No. 2 to registration statement on Form SB-2 filed January 21, 2003.
(5)
Incorporated by reference from Amendment No. 3 to registration statement on Form SB-2 filed July 3, 2003.
(6)
Incorporated by reference from Amendment No. 4 to registration statement on Form SB-2 filed August 6, 2003.
(7)
Incorporated by reference from Form 8-K filed April 8, 2004.
(8)
Incorporated by reference from Form 10-KSB filed on April 16, 2004.
(9)
Incorporated by reference from Form 8-k filed March 1, 2005
(10)
Incorporated by reference from Form 8-k filed May 19, 2005
(11)
Incorporated by reference from Form 8-K filed November 12, 2008.
(12)
Incorporated by reference from Form 8-K filed December 12, 2008
(13)
Incorporated by reference from Form 8-K filed January 28, 2009
(14)
Incorporated by reference from Form 8-K filed February 5, 2009
(15)
Incorporated by reference from Form 8-K filed April 21, 2009
(16)
Incorporated by reference from Form 8-K filed May 15, 2009
(17)
Incorporated by reference from Form 8-K filed June 25, 2009
(18)
Incorporated by reference from Form 8-K filed June 7, 2009
(19)
Incorporated by reference from Form 8-K filed July 29, 2009
(20)
Incorporated by reference from Form 8-K filed August 7, 2009
(21)
Incorporated by reference from Form 8-K filed October 14, 2009
(22)
Incorporated by reference from Form 8-K filed November 17, 2009
(23)
Incorporated by reference from Form 8-K filed February 2, 2010
(24)
Incorporated by reference from Form 8-K filed February 26, 2010
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
In accordance with the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
/s/ Daniel Cohen
/s/ Jacob Ronnel
Daniel Cohen, President, Principal Executive Officer, Director
Jacob Ronnel, Director
Dated:
March 31, 2014
Dated:
March 31, 2014
/s/ Avraham Bahry
Avraham Bahry, Director
Dated:
March 31, 2014
/s/ Kalman Huber
Kalman Huber, Director
Dated:
March 31, 2014