Unassociated Document

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 March 31, 2014

o 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.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.

Yes o No o

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 o	Accelerated Filer o	Non-Accelerated Filer o

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 o No x

State the number of shares outstanding of each of the Registrant's classes of common equity, as of the latest applicable date: 2,949,484 as of March 31, 2014.

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

HOTEL OUTSOURCE MANAGEMENT

INTERNATIONAL, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF

March 31, 2014

UNAUDITED

INDEX

	PAGE
PART I - FINANCIAL INFORMATION

Item 1 – CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Balance Sheets -
March 31, 2014 and December 31, 2013		2-3

Statements of Comprehensive Loss -
Three months ended March 31, 2014 and 2013		4

Statements of Cash Flows -
Three months ended March 31, 2014 and 2013		5-6

Notes to Financial Statements		7-10

- - - - - - - - - - - - - - - - -

HOTEL OUTSOURCE MANAGEMENT

INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

US Dollars in thousands

	As of March 31, 2014		As of December 31, 2013
	Unaudited		Audited
ASSETS

CURRENT ASSETS:

Cash and cash equivalents		144		81
Short-term bank deposits		47		47
Trade receivables (net of allowance for doubtful accounts of $ zero as of March 31, 2014 and December 31, 2013)		324		444
Other accounts receivable		115		66
Inventories		266		283

TOTAL CURRENT ASSETS		896		921

PROPERTY AND EQUIPMENT, NET:

Minibars and related equipment		3,703		3,817
Other property and equipment		30		30

TOTAL PROPERTY AND EQUIPMENT		3,733		3,847

OTHER ASSETS:

Deferred expenses, net		3		3
Intangible assets		41		41

TOTAL OTHER ASSETS		44		44

TOTAL		4,673		4,812

The accompanying notes are an integral part of the consolidated financial statements.

HOTEL OUTSOURCE MANAGEMENT

INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

US Dollars in thousands (except share data)

	As of March 31,			As of December 31,
	2014			2013
LIABILITIES AND SHAREHOLDERS' EQUITY	Unaudited			Audited

CURRENT LIABILITIES:
Short-term loans from related parties		600			-
Current maturities of long term loans from related parties		96			100
Current maturities of long-term loans from others		409			446
Trade payables		613			818
Accrued expenses and other current liabilities		562			598

TOTAL CURRENT LIABILITIES		2,280			1,962

LONG-TERM LIABILITIES:

Long-term loans from related parties, net of current maturities		653			675
Long-term loans from others ,net of current maturities		1,470			1,516
Accrued severance pay, net		76			78

TOTAL LONG-TERM LIABILITIES		2,199			2,269

SHAREHOLDERS' EQUITY:

Share capital -
Preferred stock of $ 0.001 par value – 5,000,000 shares authorized; zero shares issued and outstanding as of March 31, 2014 and as of December 31, 2013.		-			-
Common stock of $ 0.001 par value – 200,000,000 shares authorized; 2,949,484 shares issued and outstanding as of March 31, 2014 and as of December 31, 2013.		3			3
Additional paid-in capital		13,221			13,221
Capital Reserve		1,414			1,414
Accumulated other comprehensive income		72			74
Accumulated deficit		(14,516	)		(14,131	)

TOTAL SHAREHOLDERS' EQUITY		194			581

TOTAL		4,673			4,812

The accompanying notes are an integral part of the consolidated financial statements.

HOTEL OUTSOURCE MANAGEMENT

INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

US Dollars in thousands (except share and per share data)

	For the Three Months Ended March 31,
	2014			2013
	Unaudited

Revenues		642			982

Cost of revenues:

Depreciation		(114	)		(156	)

Other		(427	)		(646	)

Gross profit		101			180

Operating expenses:

Research and development		(11	)		(15	)

Selling and marketing		(41	)		(68	)

General and administrative		(375	)		(323	)

Operating loss		(326	)		(226	)

Financing expenses and foreign currency translation, net		(59	)		(107	)

Other expenses, net		-			(74	)

Benefit reduction for Loans		-			(5	)

Net loss		(385	)		(412	)

Basic and diluted net loss per share		(0.13	)		(0.21	)

Weighted average number of shares used in computing basic and diluted loss per share		2,949,484			1,999,506

Other Comprehensive Loss:

Net Loss		(385	)		(412	)

Foreign currency translation adjustments		(2	)		(39	)

Comprehensive Loss		(387	)		(451	)

The accompanying notes are an integral part of the consolidated financial statements.

HOTEL OUTSOURCE MANAGEMENT

INTERNATIONAL, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

US Dollars in thousands

	For the Three Months Ended March 31,
	2014			2013
	Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		(385	)		(412	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		116			159
Capital loss		-			74
Decrease in accrued severance pay, net		(2	)		(13	)
Interest and linkage differences in regard to shareholders and subsidiaries		(5	)		34
Benefit component		-			5
Changes in assets and liabilities:
Decrease in inventories		17			17
Decrease (Increase) in trade receivables		120			(75	)
Increase in related parties		13			18
Increase in other accounts receivable		(47	)		(36	)
Increase (Decrease) in trade payables		-			74
Decrease in accounts payable and accrued expenses		(48	)		(91	)

Net cash used in operating activities		(221	)		(246	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment		7			223
Purchases and production of property and equipment		(214	)		(140	)
Short-term bank deposits, net		-			5

Net cash provided from (used in) investing activities		(207	)		88

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related parties		600			178
Payments of long- term loans to related parties		(26	)		(29	)
Payments of long-term loans to others		(83	)		(56	)
Proceeds from others		-			32

Net cash provided by financing activities		491			125

Effect of exchange rate changes on cash and cash equivalents		-			(2	)
Increase (Decrease) in cash and cash equivalents		63			(35	)
Cash and cash equivalents at the beginning of the period		81			195
Cash and cash equivalents at the end of the period		144			160

The accompanying notes are an integral part of the consolidated financial statements.

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 Three Months Ended March 31,
	2014		2013
	Unaudited
Non-cash investing and financing activities:

Acquisition of property and equipment on short-term credit		-		118

Receivables in regard to property and equipment		-		34

Cash paid during the period for interest		8		38

The accompanying notes are an integral part of the consolidated financial statements.

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

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”.

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.

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.

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.

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 was approved 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 shareholder resolutions dated April 1, 2014. On April 9, 2014, a preliminary information statement was submitted to SEC. The agreement will enter into force on the 21st day after a definitive information statement becomes effective.

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 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.

As of March 31, 2014, the Company had $191 in cash, including short term deposits.

The Company continues to incur losses ($385 in the three months ended March 31, 2014) and has a negative cash flow from operations amounting to approximately $221 for this period. In order to implement the Company's basic business plan for completion of the installation of additional minibars, the Company will need additional funds.

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 (con.)

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.

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. 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 three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. The accompanying interim 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, 2013 included in the Company's Form 10-K filed March 31, 2014.

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.

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. 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.

HOTEL OUTSOURCE MANAGEMENT

INTERNATIONAL, INC. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (con.)

The financial statements of foreign subsidiaries, whose functional currency is not the U.S. dollar, have been translated into U.S. 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 translation differences are attributed to the capital reserve from translation differences.

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, short-term bank credit, 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.

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.

Exchange rates

Exchange and linkage differences are charged or credited to operations as incurred.

Exchange rates and the Consumer Price Index ("CPI") in Israel:

Exchange rates:

	March 31,			December 31,
	2014			2013
New Israeli Shekel (NIS)	$	0.287		$	0.288
Euro (EU)	$	1.380		$	1.377
Australian Dollar (AU$)	$	0.923		$	0.894
Pound Sterling (GBP)	$	1.665		$	1.654
Canadian Dollar (CAN$)	$	0.906		$	0.940
Consumer Price Index ("CPI")		123.60			124.45

	Three Months Ended March 31,
	2014			2013
Increase (Decrease) in Rate of Exchange:
NIS		(0.35	)%		2.24	%
EU		0.20	%		(3.03	)%
AU$		3.20	%		0.58	%
GBP		0.67	%		(6.18	)%
CAN$		(3.60	)%		4.1	%
Consumer Price Index ("CPI")*		(0.68	)%		0.0	%

*Based on the year 2002 average rate.

HOTEL OUTSOURCE MANAGEMENT

INTERNATIONAL, INC. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars in thousands

NOTE 3:-

FIXED ASSETS

Number of minibars

The consolidated financial statements include the accounts of HOMI and its active subsidiaries listed below, which are owned by HOMI:

		Number of Minibars Operated
Subsidiary Name	Area	31.03.2014		31.03.2013
HOMI Industries Ltd. (1)	Israel
HOMI Israel Ltd. (1), (3)	Israel		5,099		4,780
HOMI USA, Inc. and HOMI Canada, Inc. (1)	U.S.A. and Canada		1,620		2,865
HOMI Europe S.A.R.L. (1), (2)	Europe		1,596		1,499
			8,315		9,144

(1)

A quantity of minibars are owned by HOMI Industries and rented to the subsidiaries.

As of March 31, 2014 the minibars are located as follows:

		U.S.A.				Israel				Europe				Total
Number of minibars			1,620				3,359				1,499				6,478

(2)

Through subsidiary in the U.K (including a branch in Spain and activity in France).

(3)

Including 333 HOMI® 232 shared operated minibars. As of March 31, 2014 located in Israel.

NOTE 4:-

RELATED PARTIES TRANSACTIONS

During three months ended March 31, 2014 and 2013, the Company incurred various related parties expenses as follows:

	For the Three Months Ended March 31,
	2014		2013
	Unaudited
Directors' fees and liability Insurance		10		9
Consulting and management Fees		56		104
Financial expenses		26		31
Benefit reduction for loan		-		5
		92		149

NOTE 5:-

SIGNIFICANT EVENTS DURING THE PERIOD

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. An additional amount of $100 was wired during March 2014, an agreement was not yet signed.

See also Notes 1d, 1e.

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 March 31, 2014 and our results of operations for the three months ended March 31, 2013 and March 31, 2014. The following discussion should be read in conjunction with the financial statements for such periods as well as our financial statements included in our 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2014.

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 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. Revenues from sales of minibars are recognized in compliance with the conditions designated in SAB No. 104, as mentioned above. Sales of minibars that are classified as refinancing arrangements are shown as long-term loans 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 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 March 31, 2014 or March 31, 2013.

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, 2013 the Company’s balance sheet includes $3,847,000 of fixed assets, net. As of March 31, 2014, our balance sheet included $ 3,733,000 of fixed assets, net. The Company has completed its impairment test for the three months ended March 31, 2014 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.

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 minibars, the HOMI® 330 and HOMI® 226.

HOMI is a holding company for several subsidiaries which market and operate computerized minibars in hotels located in the United States, Canada, Europe and Israel. 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 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.

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;

(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 MARCH 31, 2014 COMPARED TO MARCH 31, 2013.

REVENUES

For the three months ended March 31, 2014 and 2013, HOMI had revenues of $642,000 and $982,000, respectively, a decrease of $340,000 or 34.6 %. These revenues arise primarily from the sale of refreshments in the minibars, as well as the direct sale of HOMI minibars. The decrease is mainly due to a decrease in the quantity of minibars operated, as agreements with some hotels in the United States reached the end of their terms and due to substantial sales of minibars last year that did not occur this period.

For the three months ended March 31, 2014, our three largest customers accounted for approximately 25.80 % of our total revenues. During the same period of 2013, our three largest customers collectively accounted for 25.01 % of our total revenues.

GROSS PROFIT

Gross profit, before consideration of depreciation expense, decreased from $ 336,000 for the three months ended March 31, 2013 to $ 215,000, for the three months ended March 31, 2014. Gross profit margin, before consideration of depreciation expense, decreased from 34.2 % to 33.5 %.

Gross profit, after consideration of depreciation expense, decreased from $ 180,000 for the three months ended March 31, 2013 to $ 101,000, for the three months ended March 31, 2014. Gross profit margin decreased from 18.3 % to 15.7 %.

The decrease is mainly due to a decrease in the quantity of minibars operated, as agreements with some hotels in the United States reached the end of their terms and due to substantial sales of minibars last year that did not occur this period.

COSTS OF REVENUES

Cost of Revenues, before consideration of depreciation expense, for the three months ended March 31, 2013 and 2014 were $ 646,000 and $427,000, respectively, a decrease of $ 219,000 or 33.9 %. The decrease is mainly due to a decrease in the quantity of minibars operated, as agreements with some hotels in the United States reached the end of their terms and due to substantial sales of minibars last year.

Depreciation expense for the three months ended March 31, 2013 and 2014 approximated $ 156,000 and $114,000, respectively, a decrease of $42,000. As a percentage of revenues, depreciation expense increased from 15.9 % to 17.8 %. See the same clarification as above.

OPERATING EXPENSES

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.Production of HOMI® 226 began in 2012.Total research and development expenses for the three months ended March 31, 2013 were $15,000, and $ 11,000 for the three months ended March 31, 2014.

GENERAL AND ADMINISTRATIVE

General and Administrative expenses increased from $ 323,000 for the three months ended March 31, 2013 to $ 375,000 for the three months ended March 31, 2014, or by 16.1 %. As a percentage of revenues, general and administrative expenses increased from 32.9 % to 58.4 %.

Selling and Marketing expenses decreased from $ 68,000 for the three months ended March 31, 2013 to $ 41,000 for the three months ended March 31, 2014, or by 41.1 %.

FINANCIAL INCOME (EXPENSES)

For the three months ended March 31, 2013 we had financial expenses (net) of $ 107,000 and for the three months ending March 31, 2014, we had financial expenses (net) of $ 59,000.

OTHER INCOME (EXPENSES)

For the three months ended March 31, 2013 and 2014 we had other expenses, net, of $74,000 and $0, respectively.

NET INCOME (LOSS)

As a result of the above, for the three months ended March 31, 2013 and 2014 we had a net loss of $412,000 and $ 385,000, respectively.

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 March 31, 2014 of $ 14,516,000. During the three months ended March 31, 2014, we had net loss of $ 385,000.

Our financing activities resulted in cash of approximately $ 491,000 during the three months ended March 31, 2014. During the three months ended March 31, 2014, we used cash in the amount of $221,000.

As of March 31, 2014, we had long term liabilities of approximately $ 2,199,000 which are comprised, mainly, of loans.

As of March 31, 2014, the Company had $191,000 in cash, including short term deposits.

In order to implement the Company's basic business plan for the installation of additional minibars, the Company will need additional funds from shareholders or others. The Company's preferred method is its new business model, pursuant to which we obtain a loan from a third party in order to finance the purchase and installation of minibars at a specific hotel with which we have an outsourcing agreement. The minibars, once installed and operational, remain in place at the hotel, and we operate and maintain these minibars in accordance with our outsourcing agreement. A sum equal to a portion of our revenues from the outsourcing agreement is paid to the third party each month, towards repayment of the loan, usually for the duration of the outsourcing agreement, and a minimum of 8-9 years.

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 others. These measures will provide sufficient cash for the ongoing operations of the Company for the next twelve months.

On March 25, 2014, HOMI entered into an agreement with HOMI Industries, the President of HOMI, and the beneficial owner of the HOMI shares held by the majority shareholder of HOMI. The agreement was approved 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 shareholder resolutions dated April 1, 2014. On April 9, 2014, a preliminary information statement was submitted to SEC. The agreement will enter into force on the 21st day after a definitive information statement becomes effective.

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 $900,000 of HOMI's debts and approximately $3,200,000 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.

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

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, 2013.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended March 31, 2014, there were no sales of unregistered equity securities.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. [Removed and Reserved].

Item 5. OTHER INFORMATION

None.

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 Chief Executive Officer 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 Chief Executive Officer and 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)

SIGNATURE

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

	HOTEL OUTSOURCE MANAGEMENT INTERNATIONAL, INC.

Dated: May 7, 2014	By:	/s/ Daniel Cohen
	Name:	Daniel Cohen
	Title:	President
		(Principal Executive Officer)