Tomer Food Company Faces Financial Reckoning After Inventory Irregularities
Tomer Food Industries has released new details regarding its ongoing financial investigation, revealing that its projected profit for 2025 has been effectively erased due to accounting adjustments. The company now estimates a net loss of approximately 34,000 shekels for 2025, a significant reversal from the previously reported profit of 3.06 million shekels. This adjustment is expected to reduce the company's equity by about 3.21 million shekels by the end of 2025. However, the revisions will increase the reported net profit for 2024 by 305,000 shekels and for 2023 by 1.42 million shekels.
The investigation, conducted by Fahn Kna, uncovered that inventory values were overstated due to upward adjustments in the cost prices of certain items without supporting purchase documentation. This led to an overvaluation of inventory by 503,000 shekels at the end of 2023 and 2.55 million shekels at the end of 2025. The probe also found instances where revenue was recognized for goods already invoiced but not yet delivered to customers, violating accounting principles. These revenue recognition issues are projected to reduce 2025 revenues by 5.71 million shekels.
Control deficiencies in inventory cost updates were also identified, including a lack of documentation for price changes and the individuals responsible. The company's chairman and CEO, Doron Kimelov, stated that he "influenced or caused influence" on the inventory's value at various times, leading the committee to deem the error material both quantitatively and qualitatively. The investigation is ongoing to determine if the errors were unintentional, a control failure, or deliberate.
In parallel, Tomer Food has secured agreements from its three financing banks, Leumi, International Bank, and Mizrahi Tefahot, waiving their right to demand immediate repayment of debt due to non-compliance with financial covenants for 2025. This waiver is valid until the publication of the 2026 annual reports, providing significant relief. However, the banks clarified that this waiver applies only to this specific breach and does not preclude them from demanding repayment if other grounds arise. Tomer must reach new financial covenant agreements with each bank by November 30.
The accounting adjustments are being applied to the financial statements of the private Tomer entity, which were part of the merger agreement with the publicly traded company, Cypia Vision. The independent committee will examine whether these revisions have implications for the merger valuation and exchange ratio. Meanwhile, Tomer is strengthening its internal controls, appointing a new CFO, and working to separate the chairman and CEO roles.
