Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - SKY RESORT INTERNATIONAL LtdFinancial_Report.xls
EX-31.2 - CERTIFICATION OF HOMI?S CFO PURSUANT TO RULE13A- 14(A) - SKY RESORT INTERNATIONAL Ltdexhibit31_2.htm
EX-31.1 - CERTIFICATION OF HOMI?S CEO PURSUANT TO RULE13A- 14(A) - SKY RESORT INTERNATIONAL Ltdexhibit31_1.htm
EX-32.1 - CERTIFICATION OF HOMI?S CEO AND CFO REQUIRED BY RULE 13A-14(B) - SKY RESORT INTERNATIONAL Ltdexhibit32_1.htm


U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(X)  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 
For the quarterly period ended September 30, 2011
 
( )  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 
Commission File No.  000-50306
 
HOTEL OUTSOURCE MANAGEMENT INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
13-4167393
(State of Incorporation)
(IRS Identification Number)
 
80 Wall Street, Suite 815
New York, New York 10005
(Address of Principal Executive Offices)
 
Registrant's telephone number, including area code (212) 344-1600
 
Indicate by a check mark whether the issuer has (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
(1) Yes  X           No [    ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
 
Yes [    ]                        No  [    ]
  
Indicate by a check mark whether the issuer is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer    
[   ]      
Non-Accelerated Filer    
[   ]      
Accelerated Filer    
[   ]      
Smaller Reporting Company    
[X]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.  Yes [   ] No [X]
 
State the number of shares outstanding of each of the Registrant's classes of common equity, as of the latest applicable date:  89,453,364 as of September 30, 2011.
 

 
 

 

Item 1.
FINANCIAL STATEMENT (UNAUDITED)
 




 
 

HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF

September 30, 2011

UNAUDITED


INDEX


PART I - FINANCIAL INFORMATION
PAGE
   
Item 1 – INTERIM  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
   
 
Balance Sheets -
 
 
  September 30, 2011 and December 31, 2010
2-3
     
 
Statements of Operations -
 
 
  Nine and three months ended September 30, 2011 and 2010
4
     
 
Statements of Cash Flows -
 
 
  Nine months ended September 30, 2011 and 2010
5-6
     
 
Notes to Financial Statements
7-13
     
 
 
- - - - - - - - - - - - - - - - -

 
F-1 

 

HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

US Dollars in thousands
 
 
     
As of
September 30,
 
As of December 31,
 
     
2011
 
2010
     
(Unaudited)
 
(Audited)
 ASSETS
         
           
CURRENT ASSETS:
         
           
Cash and cash equivalents
   
 409
 
708
Short-term bank deposits
   
 59
 
64
Trade receivables (net of allowance for doubtful accounts of $ zero as of September 30, 2011 and December 31, 2010)
   
  551
 
448
Other accounts receivable
   
 254
 
306
Inventories
   
 383
 
299
           
TOTAL CURRENT ASSETS
   
 1,656
 
1,825
           
LONG- TERM RECEIVABLES
   
34
 
139
           
           
PROPERTY AND EQUIPMENT, NET:
         
           
Minibars and related equipment
   
 4,071
 
4,122
Other property and equipment
   
 25
 
47
           
TOTAL PROPERTY AND EQUIPMENT
   
 4,096
 
4,169
           
OTHER ASSETS:
         
           
Deferred expenses, net
   
 19
 
27
Intangible assets
   
 48
 
50
           
TOTAL OTHER ASSETS
   
  67
 
 77
           
TOTAL
   
 5,853
 
6,210
 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 

 
F-2 

 

HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

US Dollars in thousands (except share data)
 
     
 
As of
September 30,
 
 
As of December 31,
     
2011
 
2010
 LIABILITIES AND SHAREHOLDERS' EQUITY
   
(Unaudited)
 
(Audited)
           
CURRENT LIABILITIES:
         
           
Current maturities of loans from related parties
   
99
 
93
Current maturities of convertible notes
   
 -
 
74
Current maturities of long-term loans from others
   
 212
 
184
Trade payables
   
     641
 
508
Accrued expenses and other current liabilities
   
 442
 
351
           
TOTAL CURRENT LIABILITIES
   
 1,394
 
1,210
           
LONG-TERM LIABILITIES:
         
           
Long-term loans from related parties, net of current maturities
   
730
 
811
Long-term loans from others, net of current maturities
   
2,392
 
1,518
Accrued severance pay, net
   
 55
 
49
           
TOTAL LONG-TERM LIABILITIES
   
  3,177
 
2,378
           
           
SHAREHOLDERS' EQUITY:
         
           
Share capital -
         
 Preferred stock of $ 0.001 par value –
 5,000,000 shares  authorized; zero shares  issued and outstanding as of  September 30, 2011 and December 31, 2010;
   
-
 
-
 Common stock of $ 0.001 par value –
205,000,000 shares authorized; 89,453,364 shares issued and   outstanding as of  September 30, 2011 and as of December 31, 2010;
   
89
 
89
Additional paid-in capital
   
10,185
 
10,185
Accumulated other comprehensive income
   
 82
 
63
Accumulated deficit
   
(9,074)
 
(7,715)
           
TOTAL SHAREHOLDERS' EQUITY
   
 1,282
 
2,622
           
TOTAL
   
 5,853
 
6,210
 
 
The accompanying notes are an integral part of the consolidated financial statements.
 

 
F-3 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

US Dollars in thousands (except share and per share data)
 
 
   
For the Three
 
For the Nine
   
Months Ended September  30,
 
Months Ended September 30,
   
2011
 
2010
 
2011
 
2010
   
(Unaudited)
                 
Revenues
 
 885
 
 *793
 
 2,458
 
* 2,320
                 
Costs of revenues:
               
Depreciation
 
(163)
 
*(162)
 
(493)
 
*(524)
Other
 
(599)
 
(418)
 
(1,568)
 
(1,277)
                 
Gross profit
 
 123
 
 213
 
  397
 
  519
                 
Operating expenses:
               
                 
Research and development
 
(25)
 
(26)
 
(75)
 
(80)
                 
Selling and marketing
 
(92)
 
**(86)
 
(268)
 
**(267)
                 
General and administrative
 
(345)
 
**(365)
 
(1,078)
 
**(1,193)
                 
Operating loss
 
(339)
 
(264)
 
(1,024)
 
(1,021)
                 
Financing income (expenses) and foreign currency translation, net
 
(149)
 
2
 
(332)
 
(144)
                 
Other expenses, net
 
(1)
 
*(76)
 
(2)
 
*(253)
                 
Loss before taxes on income
 
(489)
 
(338)
 
(1,358)
 
(1,418)
                 
Provision for income taxes
 
(1)
 
-
 
(1)
 
-
                 
Net loss
 
(490)
 
(338)
 
(1,359)
 
(1,418)
                 
Basic and diluted net loss per share
 
(0.005)
 
(0.004)
 
(0.015)
 
(0.016)
                 
Number of shares used in
  computing basic and diluted net loss per share
 
89,453,364
 
89,453,364
 
 89,453,364
 
 89,453,364
 
 
*      Restated
**    Reclassified
 
 
F-4

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

US Dollars in thousands
 
     
For the Nine Months Ended
 September 30,
     
2011
 
2010
     
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
         
Net loss
   
(1,359)
 
(1,418)
Adjustments to reconcile net loss to net cash used in operating activities:
     
Other expenses
   
                     -
 
163
Depreciation and amortization
   
517
 
560
Increase in accrued severance pay, net
   
6
 
15
Interest and linkage differences in regard to related parties and subsidiaries
   
(19)
 
38
Loss from sale of  previously consolidated subsidiaries
   
                     -
 
                   83
Changes in assets and liabilities:
         
Increase in inventories
   
(84)
 
(41)
Decrease (Increase ) in trade receivables
   
(101)
 
25
Decrease in related parties
   
(1)
 
(3)
Decrease (Increase) in other accounts receivable
   
69
 
(26)
Increase (Decrease) in trade payables
   
184
 
(87)
Increase in accounts payable and accrued expenses
   
    72
 
    43
           
Net cash used in operating activities
   
(716)
 
(648)
           
CASH FLOWS FROM INVESTING ACTIVITIES:
         
Proceeds from sale of previously consolidated subsidiaries (Appendix B)
   
-
 
511
Purchases and production of property and equipment
   
(470)
 
(413)
Short-term bank deposits, net
   
5
 
(5)
Proceeds from sale of fixed assets
   
80
 
53
           
Net cash provided by (used in) investing activities
   
(385)
 
146
           
CASH FLOWS FROM FINANCING ACTIVITIES:
         
Proceeds from (payments to) related parties, net
   
(59)
 
674
Proceeds from (payments of) long term loans from others, net
   
828
 
(236)
Short-term bank credits
   
-
 
                  (5)
           
Net cash provided by financing activities
   
            769
 
433
           
Effect of exchange rate changes on cash and cash equivalents
   
32
 
 (5)
Decrease in cash and cash equivalents
   
(300)
 
(74)
Cash and cash equivalents at the beginning of the period
   
       709
 
       194
Cash and cash equivalents at the end of the period
   
         409
 
         120
 
The accompanying notes are an integral part of the consolidated financial statements.

 
F-5 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

US Dollars in thousands
 
Appendix A -
 
Supplemental disclosure of non-cash investing and financing activities and cash flow information:
For the Nine Months Ended September 30,
       
2011
 
2010
     
(Unaudited)
 
Non-cash investing and financing activities:
         
             
Acquisition of property and equipment on short-term credit
   
118
 
85
             
Receivables  in regard to property and equipment
   
192
 
287
             
Cash paid during the period for interest
   
270
 
91
             
 
Appendix B -
         
Proceeds from sale of previously consolidated subsidiaries:
         
Working Capital (except for cash and cash equivalents)
   
-
 
129
Property and equipment
   
-
 
550
Intangible assets
   
-
 
-
Capital Reserve
   
-
 
-
Receivables from sale of previously consolidated subsidiaries
   
-
 
(85)
Capital loss from sale of previously consolidated subsidiaries
   
-
 
(83)
     
-
 
511
 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 

 
F-6 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands
 
NOTE 1:-                 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
 
 
a.
Hotel Outsource Management International, Inc. ("HOMI") was incorporated in Delaware on November 9, 2000. HOMI and its subsidiaries, as detailed in Note 2d below, 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" or "HOMI".
 
 
   HOMI's common stock has been listed on the Over-the-Counter Bulletin Board since February 2004 under the symbol "HOUM.OB." As of February 17, 2011, HOMI’s common stock has been listed on the OTCQB.
 
 
b.
Commencing 2009, HOMI began 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 continues to manage and operate these minibars in return for a management fee and profit sharing arrangements.
 
 
c.   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”), with a partial test installation of Best Bar’s Open Display, Open Access Computerized Minibars, in one Hotel in Israel. Following this test, HOMI has included the Best Bar minibar in its catalogue of minibars, represented as the “HOMI® 232” model. Since then, HOMI has signed agreements with several Hotels for installation of the HOMI® 232.
 
Pursuant to the MOU, the agreed price of each HOMI® 232 is $ 350, but HOMI purchases 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.
 
In the event of a direct sale of HOMI® 232 Minibars, by HOMI, to hotels or distributers, $350 from the revenues of such sale will be paid to Best Bar as the purchase price of the minibar and the remaining margin will be split 60% to HOMI and 40% to Best Bar.
 
Pursuant to the MOU, HOMI Industries agreed to cooperate with Best Bar in order to register a fixed charge, in Best Bar’s favor, over HOMI® 232 minibars that will be operated by HOMI, to secure HOMI obligations to Best Bar up to an amount of $ 175 per minibar.
 
 
The Company includes Best Bar's portion of the operating profit in its cost of revenues. See also Note 2d.
 
 
d.
On April 19, 2010, HOMI Europe S.A.R.L. (“HOMI Europe”), which is an indirectly held,  wholly owned subsidiary of HOMI, entered into a share sale agreement with Clevo Corporation S.A. (“Clevo”), which is a third party under the control of Mr. Geoffrey Wolf, who was one of the registered and beneficial owners of the HOMI shares. Pursuant to this share sale agreement, HOMI Europe sold to Clevo 100% of the outstanding shares in HOMI - Hotel Outsource Management International (Deutschland) GmbH and 100% of the outstanding shares in HOMI Italia S.R.L., and also assigned to Clevo all of its rights to the shareholder loans which it had previously made to HOMI Italia S.R.L. The effective date for these transactions was April 30, 2010.
 
The total purchase price for the shares and for the assignment of the shareholder loans, was $525, on a "no cash, no debt" basis. In the context of this transaction, HOMI – Hotel Outsource Management International (Deutschland) GmbH and HOMI Italia S.R.L. ceased to be affiliated to HOMI.

 
F-7 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands
 
NOTE 1:-                 NATURE OF OPERATIONS AND BASIS OF PRESENTATION (cont.)
 
 
 
e.
HOMI Australia, a subsidiary of HOMI, ceased operating the minibars in Hilton Sydney, the only  hotel operated in Australia, and transferred the operation and the minibars installed to the hotel, for up to AUD 435. The amount will be repaid over maximum of 50 monthly payments which will be based on the monthly performance of the hotel as detailed in the agreement. Title in the System shall immediately pass to Hilton, after those repayments, for the nominal price of one AUD.
 
The balance of the debt is presented in the financial statements part at other accounts receivable and part at long term receivables.
 
 
f.
At September 30, 2011, the Company had $ 468 in cash, including short term deposits.
 
The Company continues to incur losses ($ 1,359 in the nine months ended September 30, 2011).
 
In order to implement the Company's basic business plan for completion of the installation of additional minibars, the Company will need additional funds.
 
The Company's preferred method is the new business model, described in item b. above.
On October 5, 2010, HOMI Industries Ltd, which is a wholly owned subsidiary of HOMI, entered into a loan agreement with Tomwood Limited, which is a BVI company. Pursuant to this agreement, Tomwood undertook to loan to HOMI Industries the total amount of $ 2,000, in installments.
As of 30 September 2011, the company has received the total amount.
 
Management believes that the unused portion of the above mentioned loan ,the Company's  new business model commenced in 2010 in which it sells or receives loans against installed minibar systems and continues to operate them, and continued efforts to reduce corporate expenses will provide sufficient cash for the ongoing operations of the Company for the next twelve months, also see Note 4.

 
F-8 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands
 
NOTE 2:-                 SIGNIFICANT ACCOUNTING POLICIES
 
 
a.  Basis of Presentation
The accompanying consolidated financial statements are presented in accordance with Form 10-Q and item 310 under subpart A of Regulation S-B.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. The accompanying consolidated financial statements and the notes thereto should be read in conjunction with the Company's audited consolidated financial statements as of and for the year ended December 31, 2010 included in the Company's Form 10-KSB filed March 30, 2011.
 
 
b.  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.
 
 
c.
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 US dollars in accordance with Statement of Financial Accounting Standard No. 52 "Foreign Currency Translation" ("SFAS No. 52"). All transaction gains and losses from the re-measurement 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 U.S. dollars in accordance with FAS No. 52. 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.

 
F-9 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands
 
 
NOTE 2:-                 SIGNIFICANT ACCOUNTING POLICIES (con.)
 
 
  d. Principles of Consolidation and number of minibars
 
The consolidated financial statements include the accounts of HOMI and its active subsidiaries listed below, which are fully owned by HOMI:
   
Number of Minibars Operated
 
Subsidiary Name
 
Area
 
30.09.2011
 
 
30.09.2010
HOMI Industries Ltd.
Israel
     
HOMI Israel Ltd. (3)
Israel
5,436
 
4,876
HOMI USA, Inc. and
HOMI Canada, Inc. (3)
U.S.A. and Canada
 
4,187
 
 
3,941
HOMI Europe S.a.r.l (2)
Europe
1,499
 
*776
   
11,122
 
  9,593
*restated
       
 
(1)
A quantity of minibars are owned by HOMI Industries and rented to the subsidiaries.
As of September 30, 2011 the minibars are located as follows:
 
 
HOMI U.S.A.
 
HOMI
Israel Ltd.
 
 
Europe
 
 
Total
Number of minibars
1,244
 
1,590*
 
1,499
 
4,333
* Not including 547 units not yet operated
 
(2)  
Through subsidiaries in France and the U.K (including a Branch in Spain).
 
(3)  
Including HOMI® 232 shared operated minibars. As of September 30, 2011 located as follows:
 
 
HOMI U.S.A.
 
HOMI
Israel Ltd.
 
 
Europe
 
 
Total
Number of minibars
246
 
444
 
0
 
690
 
 
Inter-company transactions and balances, including profits from inter-company sales not yet realized outside the group, have been eliminated in consolidation.
 
 
e.  Concentrations of Credit Risk and Fair Value of Financial Instruments
 
The financial instruments of the Company consist of cash and cash equivalents, short-term bank deposits, trade receivables, other accounts receivable, short-term bank credit, trade payables, other accounts payable, convertible notes 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.
 

 
F-10 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

US Dollars in thousands
 
 
NOTE 2:-                 SIGNIFICANT ACCOUNTING POLICIES (con.)
 
 
e.  Concentrations of Credit Risk and Fair Value of Financial Instruments (con.)
 
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 U.S. dollar and U.S. dollar-linked instruments or in NIS and Euro interest bearing deposits with major Israeli, U.S. and European banks. Such deposits in the United States may be in excess of insured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company's investments are financially sound, and accordingly, minimal credit risk exists with respect to these investments.
 
 
f.  Exchange rates
 
 
Exchange and linkage differences are charged or credited to operations as incurred.
 
 
Exchange rates:
 
   
 
September 30,
 
December 31,
   
2011
 
2010
New Israeli Shekel (NIS)
 
$  0.269
 
   $ 0.282
Euro (EU)
 
$  1.359
 
   $ 1.335
Australian Dollar (AU$)
 
$  0.993
 
   $ 1.018
Pound Sterling (GBP)
 
$  1.562
 
   $ 1.548
Canadian Dollar (CAN$)
 
$  0.981
 
                  $ 1.007
         
   
Nine  Months Ended
September 30,
Increase (Decrease) in Rate of Exchange:
 
2011
 
2010
NIS
 
 (4.6) %
 
3.0 %
EU
 
1.8 %
 
(4.9) %
AU$
 
 (2.5) %
 
7.8 %
GBP
 
0.9 %
 
(2.4) %
CAN$
 
(2.6) %
 
1.9 %

 
 F-11

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands
 
NOTE 2:-                 SIGNIFICANT ACCOUNTING POLICIES (con.)
 
g.  Implementation of new accounting Standards
 
In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (the “Update”), which provides amendments to Accounting Standards Codification 820-10 (Fair Value Measurements and Disclosures – Overall Subtopic) of the Codification.  The Update requires improved disclosures about fair value measurements.  Separate disclosures need to be made of the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements along with a description of the reasons for the transfers.  Also, disclosure of activity in Level 3 fair value measurements needs to be made on a gross basis rather than as one net number.  The Update also requires: (1) fair value measurement disclosures for each class of assets and liabilities, and (2) disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements, which are required for fair value measurements that fall in either Level 2 or Level 3.  The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The enhanced disclosure requirements have not had a material impact on the Company’s financial reporting.
 
h. Restatement
 
 
The Company restated its financial statements for the nine and three months ended September 30, 2010 ,in order to more accurately reflect the consequences of an agreement signed in Australia.
 
 
 
 
As follow for the nine months ended September 30, 2010:
 
   
Prior to Restatement
 
 
Change
 
After Restatement
             
Revenues
 
2,408
 
(88)
 
2,320
             
Cost of revenues (Depreciation)
 
582
 
 (58)
 
524
             
Other expenses
 
(129)
 
(124)
 
(253)
 
 
 
 
As follow for the three months ended September 30, 2010:
 
   
Prior to Restatement
 
 
Change
 
After Restatement
             
Revenues
 
821
 
(28)
 
793
             
Cost of revenues (Depreciation)
 
176
 
(14)
 
162
             
Other expenses
 
(77)
 
1
 
(76)
 

 
F-12 

 
HOTEL OUTSOURCE MANAGEMENT
INTERNATIONAL, INC. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands
 
 
NOTE 3:-                 RELATED PARTIES TRANSACTIONS
 
During the nine months ended September 30, 2011 and 2010, the Company incurred various related parties expenses as follows:
   
Nine  Months Ended September 30,
Composition
 
2011
 
2010
Directors' Fees and Liability Insurance
 
28
 
32
Consulting and Management Fees
 
435
 
406
Financial Expenses
 
54
 
36
         
   
517
 
474
 
 
During the three months ended September 30, 2011 and 2010, the Company incurred various related parties expenses as follows:
 
   
Three  Months Ended September 30,
Composition
 
2011
 
2010
Directors' Fees and Liability Insurance
 
8
 
11
Consulting and Management Fees
 
141
 
138
Financial Expenses
 
18
 
16
         
   
167
 
165
 
 
NOTE 4:-                 EVENTS SUBSEQUENT TO BALANCE SHEET DATE
 
 
On October 26, 2011, HOMI Industries Ltd, ("HOMI industries") a wholly owned subsidiary of HOMI, entered into a loan agreement with a related party pursuant to which HOMI Industries received a loan of  $ 108, in accordance with the new business model described in Note 1b above.
 
As security and collateral for repayment of the Loan, HOMI Industries will encumber in lender’s favor a computerized minibar systems, including 270 HOMI® computerized minibars, 19 HOMI® External Dry Sections, a central unit and a license to HOMI® software, which HOMI Israel Ltd (“HOMI’s Affiliate”) has installed at the Leonardo Plaza Hotel (the “Hotel”), located in Jerusalem, Israel (the “Minibar System”) and which HOMI’s Affiliate will operate for the Hotel under an outsource operation agreement which HOMI’s Affiliate signed with the Hotel (the “Outsource Operation”).
 
Loan repayments will be computed on the basis of Outsource Operation revenues net of operational payments, allocated amongst the parties in accordance with the terms detailed in the loan agreement.
 

 
F-13 

 
 
ITEM 2.
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our financial condition as of September 30, 2011 and our results of operations for the three months ended September 30, 2010 and 2011. The following discussion should be read in conjunction with the financial statements for such periods as well as our financial statements included in our December 31, 2010 10-K filed with the Securities and Exchange Commission on March 30, 2011.
 
FORWARD-LOOKING STATEMENTS
 
This 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 and prepared in US Dollars and are prepared in accordance with accounting principles generally accepted in the United States of America.
 
As used in this quarterly report, the term "HOMI" means Hotel Outsource Management International, Inc. The terms, the “Company”, “we”, “us”, “our” means Hotel Outsource Management International, Inc and its subsidiaries, unless otherwise indicated.
 
Critical Accounting Policies and Estimates
 
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 (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, 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 collectability is probable. Revenues from sales of minibars are recognized in accordance with compliance with the conditions designated in SAB No. 104, as abovementioned. 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".
 

 
15 

 

Our payment terms are normally net 15 to 30 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 June 30, 2011 and 2010.
 
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, 2010 the Company’s balance sheet includes $4,169,000 of fixed assets, net.  As of September 30, 2011, our balance sheet included $4,096,000 of fixed assets net. The Company has completed its impairment test for the nine months ended September 30, 2011 and has concluded that no impairment write-off is necessary.
 
Financial Statements in US dollars:
 
The majority of HOMI's 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 specific exchange rates or the average exchange rate for the period. The resulting translation adjustments are not included in determining net income (loss) but are reported in a separate component of accumulated other comprehensive income (loss) in shareholders’ equity.
 
Investments in Affiliates:
 
The investment in companies over which the Company can exercise significant influence is presented using the equity method of accounting. The Company generally discontinues applying the equity method when its investment (including advances and loans) is reduced to zero and it has not guaranteed obligations of the affiliate or otherwise committed to provide further financial support to the affiliate. Where the Company’s share of an affiliate’s losses is greater than the investment in such an affiliate and in which the Company has guaranteed obligations of the affiliate, the excess amount is presented as a liability.
 

 
16 

 

OVERVIEW
 
Hotel Outsource Management International, Inc. (“HOMI”) 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® 336 and HOMI® 330.
 
HOMI is a holding company for several subsidiaries which market and operate computerized minibars in hotels located in the United States, Canada, Europe, Israel and Australia. HOMI was incorporated in Delaware on November 9, 2000 under the name Benjamin Acquisitions, Inc.
 
 
Our core activities focus on operating, servicing and marketing computerized minibars located 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. 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 for a hotel, or managing its 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 thousands of minibars for our customers, who are spread over five 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 has been listed on the Over-the-Counter Bulletin Board or "OTC Bulletin Board" since February 2004 under the symbol "HOUM.OB."  It is currently listed on the OTCQB.
 
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 and / or manufacturing of the minibar systems 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;
 

 
17 

 
 
 
(3)
Labor costs relating to the minibar attendants;
 
 
(4)
General and Administrative, and Marketing expenses;
 
 
(5)
Maintenance costs relating to the minibar systems;
 
 
(6)
Finance expenses.
 
      RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO SEPTEMBER 30, 2010.
 
REVENUES
 
For the three months ended September 30, 2010 and 2011, HOMI had revenues of $793,000* and $885,000, respectively, an increase of $92,000 or 11.6 %. These revenues arise primarily from the sale of refreshments in the minibars. This increase is mainly due to the additional minibars and computerized trays installed during this period.
For the three months ended September 30, 2011, our three largest customers accounted for approximately 29.56 % of our total revenues. During the same period of 2010, our three largest customers collectively accounted for 30.63 % of our total revenues.
*restated, see note 2H to the financial reports.
 
GROSS PROFIT
 
Gross profit, before consideration of depreciation expenses, decreased from $ 375,000* for the three months ended September 30, 2010 to $286,000 for the three months ended September 30, 2011,  a decrease of $89,000. Comparing the three month periods ended September 30 2010 and 2011, gross profit margin, before consideration of depreciation expense, decreased from 47.3 % to 32.3 %.
The installations of the HOMI232 mini bar during the three months ended September 30, 2011 required additional costs that reduced the gross profit margin.
 
Gross profit, after consideration of depreciation expense, decreased from $ 213,000* for the three months ended September 30, 2010 to $123,000, a decrease of $ 90,000. Gross profit margin decreased from 26.9 % to 13.9%.  The installations of the HOMI232 mini bar during the three months ended September 30, 2011 required additional costs that reduced the gross profit margin.
 
*restated, see note 2H to the financial reports.
 
COSTS OF REVENUES
 
Cost of Revenues, before consideration of depreciation expense, for the three months ended September 30, 2010 and 2011 were $ 418,000 and $599,000, respectively, an increase of $181,000 or 43.3 %.  This increase in cost of revenues is due primarily to the increase of revenues.  In addition, the installations of the HOMI232 minibar during the three months ended September 30 2011, required additional costs that increased the cost of revenues.

 
18 

 

Depreciation expense for the three months ended September 30, 2010 and 2011 approximated $162,000* and $163,000, respectively, a minor increase of $1,000. As a percentage of revenues, depreciation expense decreased from 20.4 % to 18.4%.
 
*restated, see note 2H to the financial reports.
 
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, is the first of the new range of products, the research and development of which, was completed in 2007. The research and development of an additional product, the HOMI® 330, was completed in the first quarter of 2009. In 2010 and 2011, we incurred additional expenses to improve the production and functionality of the minibars. Total research and development expenses for the three months ended September 30, 2010 were $26,000, and $ 25,000 for the three months ended September 30, 2011.
 
OPERATING EXPENSES
 
General and Administrative expenses decreased from $ 365,000* for the three months ended September 30, 2010 to $345,000 for the three months ended September 30, 2011, or by 5.5 % .
 As a percentage of revenues, general and administrative expenses decreased from 46.0 % to
 39.0 %. This decrease is due to cost reduction and ongoing saving efforts in general and administrative expenses.
 
Selling and Marketing expenses increased from $ 86,000* for the three months ended September 30, 2010 to $92,000 for the three months ended September 30, 2011, or by 7.0 %.
FINANCIAL INCOME (EXPENSES)
For the three months ended September 30, 2010 we had financial income (net), of $ 2,000, and for the three months ending September 30, 2011, we had financial expense (net), of $ 149,000, an increase in expenses of $ 151,000.
 
The increase is mainly due to the interest of the long term loans the company received.
 
OTHER INCOME (EXPENSES)
 
For the three months ended September 30, 2010 and 2011 we had other expense (net) of $76,000* and other expenses (net) of $1,000, respectively.
 
*restated, see note 2H to the financial reports.
 
NET INCOME (LOSS)
 
For the three months ended September 30, 2010 and 2011 we had net loss of $338,000* and  $490,000, respectively.
 
*restated, see note 2H to the financial reports.

 
19 

 

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO SEPTEMBER 30, 2010.
 
REVENUES
 
For the nine months ended September 30, 2011 and 2010, HOMI had revenues of $ 2,458,000 and $2,320,000*, respectively, an increase of $ 138,000 or 5.9%.
This increase is mainly due to the additional minibars and computerized trays installed during this period.
 
For the nine months ended September 30, 2011, our three largest customers accounted for approximately 29.6 % of our total revenues. For the nine months ended September 30, 2010, our three largest customers accounted for approximately 29.6 % of our total revenues.
 
*restated, see note 2H to the financial reports.
 
GROSS PROFIT
 
Gross profit, before consideration of depreciation expense, decreased from $1,043,000* for the nine months ended September 30, 2010 to $890,000, for the nine months ended September 30, 2011, a decrease of $ 153,000. Gross profit margin, before consideration of depreciation expense, increased from 44.9 % to 36.2 %.
 
The installations of the HOMI232 mini bars and the associated computerized trays during the nine months ended on September 30, 2011 required additional costs that reduced the gross profit margin.
 
Gross profit, after consideration of depreciation expense, decreased from $ 519,000* for the nine months ended September 30, 2010 to $ 397,000, for the nine months ended September 30, 2010, a decrease of $ 122,000. Gross profit margin decreased from 22.4 % to 16.2 %.
 
*restated, see note 2H to the financial reports.
 
COSTS OF REVENUES
 
Cost of Revenues, before consideration of depreciation expense, for the nine months ended September 30, 2010 and 2011 were $1,277,000* and $1,568,000, respectively, an increase of $291,000 or 22.8 %.
 
Depreciation expense for the nine months ended September 30, 2010 and 2011 increased from $524,000* to $493,000, respectively, a decrease of $31,000, or 5.9 %. As a percentage of revenues, depreciation expense decreased from 22.6 % to 20.0 %.
 
*restated, see note 2H to the financial reports.
 

 
20 

 

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, is the first of the new range of products, the research and development of which was completed in 2007. The research and development of an additional product, HOMI® 330, was completed in 2009.  In 2010 and 2011, we incurred additional expenses to improve the production of the minibars. Total research and development expenses for the nine months ended September 30, 2010 were $ 80,000 and $ 75,000 for the nine months ended September 30, 2011.
 
OPERATING EXPENSES
 
General and Administrative expenses decreased from $ 1,193,000* for the nine months ended September 30, 2010 to $ 1,078,000 for the nine months ended September 30, 2011, a decrease of $ 115,000 or 9.6 %.  As a percentage of revenues, general and administrative expenses decreased from 51.4% to 43.9 %.
 
This decrease is mainly due to the sale of two of HOMI's subsidiaries in Europe in April 2010, as well as our continued efforts to reduce expenses.
 
Selling and Marketing expenses increased from $267,000* for the nine months ended September 30, 2010 to $268,000 for the nine months ended September 30, 2010, a minor increase of $ 1,000.
 
FINANCIAL INCOME (EXPENSES)
 
For the nine months ended September 30, 2010 and 2011 we had financial expenses (net) of $144,000 and $ 332,000 of financial expenses (net), respectively, an increase in expenses of $188,000. These amounts include interest expense (net) of approximately $ 308,000 and $120,000, respectively. The remaining amounts are due primarily to currency exchange differences on US$ dominated intercompany balances.
 
Thos increase is mainly due to the interest and other costs related to the long term loans the company received.
 
OTHER INCOME (EXPENSES)
 
For the nine months ended September 30, 2010 we had other expenses (net) of $ 253,000* and for the nine months ended September 30, 2011, we had other expenses (net) of $2,000.
 
The expenses in 2010 were mainly due to the loss from the sale of our interests in our subsidiaries in Italy and Germany and since HOMI Australia, a subsidiary of HOMI, ceased operating the minibars in Hilton Sydney, the only hotel operated in Australia and transferred the operation and the minibars installed to that hotel.
 
*restated, see note 2H to the financial reports.
 

 
21 

 

NET INCOME (LOSS)
 
As a result of the above, for the nine months ended September 30, 2010 we had a net loss of $1,418,000 and for the nine months ended September 30, 2011, we had a net loss of $1,359,000.
 
*restated, see note 2H to the financial reports.
 
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 September 30, 2011 of $ 9,074,000. During the nine months ended September 30, 2011, we had net loss of $ 1,359,000
 
Our financing activities resulted in cash of approximately $ 768,000 during the nine months ended September 30, 2011, and during the nine months ended September 30, 2011 we used cash in the amount of $ 716,000. On September 30, 2011, we had long term liabilities of approximately $3,177,000 which are mainly comprised of loans from related parties and others.
 
At September 30, 2011, the Company had $468,000 in cash, including short term deposits
 
In order to implement our basic business plan for completion of the installation of additional minibars, we will need additional funds. Our preferred method is the new business model in which we sell or receive loans against installed minibar systems and continue to operate them.  We began using this new business model in 2010.
 
On October 5, 2010, HOMI Industries Ltd, which is a wholly owned subsidiary of HOMI, entered into a loan agreement with Tomwood Limited, a BVI company.  Pursuant to this agreement, HOMI Industries will receive $ 2,000,000.  As of September 30, 2011, HOMI Industries Ltd. had received the total amount of this loan.
 
Management believes that the unused portion of the above- mentioned loan ,our  new business model commenced in 2010in which we sell or receive loans against installed minibar systems and continue to operate them, and continued efforts to reduce corporate expenses, will provide sufficient cash for the ongoing operations of the company for the next twelve months.
 
OFF BALANCE SHEET ARRANGEMENTS
 
HOMI has no 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.
 
Item 3.
QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
N/A     

 
22 

 

Item 4.
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.
 
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Form 10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective.
 
Changes in Internal Control over Financial Reporting
 
There have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II.
OTHER INFORMATION
 
Item 1.
LEGAL PROCEEDINGS
 
To the best of our knowledge, as of the date hereof, there are no material pending or threatened legal proceedings to which HOMI or any of its subsidiaries is a party, or of which any of our property is subject.
 
As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings.
 
Item 1A.
RISK FACTORS
 
There have been no material changes in the risk factors described in “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2010.
 
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND PROCEEDS
 
During the nine months ended September 30, 2011, there were no sales of unregistered equity securities.
 

 
23 

 

Item 3.
DEFAULTS UPON SENIOR SECURITIES
 
None.
 
Item 4.
[Removed and Reserved]
 
 
Item 5.
OTHER INFORMATION
 
Item 6.
EXHIBITS
 
The following exhibits are filed as part of this Form 10-Q.
 
(a)  
Exhibits required by Item 601 of Regulation S-K:
 
Exhibit No.
Description
 
31. 1
Certification of HOMI’s President pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934
 
31.2
Certification of HOMI’s Chief Financial Officer pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934
 
32.1
Certification of HOMI’s President and HOMI’s Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 the United States Code (18 U.S.C. 1350)

 
24 

 

 
 
SIGNATURE
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
HOTEL OUTSOURCE MANAGEMENT INTERNATIONAL, INC.
     
Dated: November 14, 2011
 By:
/s/ Daniel Cohen
 
 Name:
Daniel Cohen
 
 Title:
President
   
(Principal Executive Officer)
     
     
Dated :November  14, 2011
 By:
/s/ Jacob Ronnel
 
 Name:
Jacob Ronnel
 
 Title:
Chief Financial Officer
   
(Principal Accounting Officer)
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
25