On Track Innovations Ltd. ("
OTI") (Nasdaq:OTIV)
issued the following letter to shareholders today:
Dear Fellow Shareholders,
Considering all that has occurred in our business over the last
year, I wanted to take this opportunity to affirm management's
vision for On Track Innovations Ltd. ("OTI") and describe how we
are achieving our goals. But I would like to start by addressing
the proposals OTI's board brought to the 2012 Annual General
Meeting of Shareholders.
As an investor in OTI you are part of an exciting
Israeli-technology company. As you know, I founded OTI which has
originated from my vision and has turned into a lifetime project
for me with tremendous commitment and determination. During this
period I have built OTI from the ground up into a global leader of
innovation in smart card technology. With over 100
patents, OTI has helped change the way people, companies
and governments are able to interact across a number of
mediums. We have harnessed the power of microchips and
embedded them into everything from an ID to the nozzle of a gas
pump in order to exchange and capture data for transactions.
We believe the diversity of our solutions and the various
markets we sell them in is a true strength for our
business. During this period we have successfully overcome
several economic crises while seeing some of our competitors fade
away.
It is also important to recognize the
advantages of being an
Israeli-based company, as we have access to a
highly skilled experienced workforce. Israel has a long
history of supporting high-tech companies that have successfully
developed some of the most exciting consumer, business and military
technologies used today. Our reputation as an Israeli company
is a strong selling point for OTI when marketing payments and smart
ID solutions, which are dependent on a high level of security.
Proxy for 2012 Annual General Meeting
OTI recently announced two new exciting nominees for our board
of directors in its proxy statement for the 2012 annual general
meeting of shareholders, Major General (Res.) Yossi Peled and
Mr. Meir Nissensohn. Knowing and understanding the unique
needs of OTI, the markets we sell to and operate in. I,
together with OTI's management and the endorsement of our board,
have put tremendous effort conducting an extensive search to
identify new nominees. Throughout this search, we looked for
nominees that are able to commit to the success of the company,
provide relevant support to its current operations,
together with contributing relevant experience, business
connections and the ability to help position the company for future
growth.
We believe that both Mr. Peled and Mr. Nissensohn meet
and exceed these criteria. Each brings vast
experience in the public and private sector; they are well
respected and can provide great value to the company and its
shareholders. We believe that their addition to our board is
essential and critical to the successful execution of management
strategy to take our company to the next level.
Major General (Res.) Yossi Peled, who has just
retired from his position as a minister in the Israeli government,
acted as a director in several publicly traded companies and brings
unique experience with respect to security, counterterrorism and
intelligence from his time in the armed forces, which has enabled
him to become a security advisor to several countries. This,
together with the ongoing personal support and commitment to
high-tech industries in the northern part of Israel is a major
asset for OTI's operations, marketing and sales efforts.
Mr. Meir Nissensohn has held various positions
in IBM Europe and IBM
Israel over the last 40 years, during which he served 16
years as the Chairman and CEO of IBM Israel. In addition, Mr.
Nissensohn has an extensive network, business and operations
understanding, which will help OTI and its shareholders reach the
next stage of growth.
Given the quality of the nominees we have brought forward, it is
especially disappointing to see that the campaign of attacks
against myself and OTI's management by a dissident shareholder
continues. These scurrilous attacks have created significant
difficulties for us in bringing in new business and recruiting new
talent, thereby hurting all shareholders.
Like nearly all businesses operating in the security, petroleum
or payments industries, our management team's character and
reputation is an important part of the selling process. As
such, some of our stakeholders which includes customers, suppliers
and partners have reacted one of two ways to these shareholders'
attacks: (1) they question if the current management team will be
around to support any contracts signed, as they are concerned about
who would replace it if dissident shareholders took over the
business; and (2) they question doing business with a company that
is struggling with its shareholder base. While we have tried
to get them to overcome their concerns, it is a difficult situation
to have to address and a major disruption in running our day to day
operations. This situation hurts all of our
shareholders. Today, the success of our business is being put
at risk by these investors who are only focused on attacking the
company and its management team and are not looking out for the
best interests of all other shareholders
The Board of Directors has also nominated Dr. Ora Setter to
continue to serve as a director on the board. Dr. Setter
served as an external director on the company's board from August
2006 through August 2012. We believe that the combination of
Dr. Setter's familiarity with our organization and business, as
well as her role as a consultant to many leading companies in
Israel, can provide us great benefit in the implementation of our
strategic plan.
These nominees will strengthen OTI's board of directors, and
together with Mr. David Stone, Mr. Mark Green, Mr. Eli Akavia, Mr.
Raanan Elran, Mr. Ronnie Gilboa and myself, will provide the right
mix of accounting, operations, corporate governance, capital
markets and legal expertise.
In addition, I have decided not to submit the
extension of my dual role as a chief executive officer and chairman
of the board of directors for shareholder approval. This is a
good faith effort on my part and one of the
outcomes of multiple meetings we had with OTI shareholders. Our
understating was that if I do agree to separate the roles, the
disruption to our day to day operations by certain shareholders
would stop.
Business Overview
The progress across each of our lines of products is
attributable to our strong market knowledge, expertise, commitment,
creativity and excellent track record. The way in which we
have approached each market is based on our experiences with
different customers and our risk analysis of different
geographies. While we have a strong balance sheet on hand, we
have been extremely cautious in how we apply our resources and
focused on long-term success as opposed to a short pop in
unprofitable revenue as some of our now failed competitors have
done.
Our SmartID solution remains the largest line
of products of our business, and will contribute to our growth and
profitability starting 2013. Within just a few years, we have
successfully deployed national and e- ID programs in several
countries including Ecuador, Tanzania and Panama. Currently,
we are in the process of launching an immigration control system
for Panama and we are in discussions with multiple other countries
for new programs. Demand for this solution has ramped up
quickly, as potential customers have seen the benefits our solution
provides to early adopters, like Ecuador. We believe the
market for smart IDs will only continue to grow as governments and
their citizens recognize the value of having accurate and secure
information stored in an identification card.
In the Payment Market we have also benefited
from recent events, as one of our main competitors in the
contactless/NFC readers space was forced to sell its
operations. This has quickly resulted in OTI receiving several
large orders for contactless readers in the U.S. and European
markets, including $2 million in orders we just
announced.
We have also increased the number of patents received related to
our NFC solutions. This is especially
important to OTI, as earlier this year we took further necessary
steps to enforce our intellectual property rights. This effort
started with a lawsuit against T-Mobile USA. The lawsuit is
currently in the early stages of discovery and a court hearing is
scheduled for February, 2013. In the meantime, we are not
standing still in the NFC market and we are planning to introduce
new innovative NFC products at the main
exhibition of CARTES in Paris, France, later this
year.
The expansion of EasyPark is progressing with
new territories, new services and new products offered, which is
expected to increase revenues and transaction fees. We have
made strategic changes to the EasyPark management team in Europe
and the United States. The new focus for the programs in
Europe is on the implementation of EasyPark in the municipalities
that have already signed up for the solution. Over the past
year there has been a significant marketing push in the United
States, which has led to signed agreements with Austin, TX and
Dover, NH, as well as the campus at UC Davis. While the ramp
up for this solution to generate meaningful revenues is longer than
our other solutions, it does generate a recurring revenue stream
and entails a low risk that customers would leave once the solution
has been implemented.
For EasyFuel, the relationship we have built
with Tokheim, Wright Express and additional strong channel partners
will pave the way for our future growth and success. We
believe that by leveraging our partners' expertise and services, we
will be able to gain access to new markets and new customers,
reduce time to market and gain market share which we would not be
able to achieve on our own.
Looking ahead, we continue to work towards creating a solid
pipeline for future growth across our lines of products. We are on
track to achieve lower operating expenses as a result of our cost
cutting program and streamlining our operations, and we are
doing the right things to take OTI to the next
level. This effort includes, among other things,
workforce reductions, consolidation and reduction in low margin
operations, outsourcing and partnerships with third
parties. We believe a mix of lower costs and revenue
growth will have us in a strong position to achieve profitability
in 2013.
I believe that OTI is at a critical junction
today. Together with OTI management, we have worked hard to
bring the company to this point, and we need your support to
continue.
Therefore we urge you to vote FOR all matters
on the agenda for the 2012 Annual General Meeting of
Shareholders.
Every vote counts.
Thank you for your time and best wishes.
Yours Sincerely,
/s/ Oded Bashan
Oded Bashan, Chairman and CEO
The On Track Innovations Ltd. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=5736
Safe Harbor Statement
This press release contains forward-looking statements
within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and U.S. federal
securities laws. Whenever we use words such as "will", "believe,"
"expect," "anticipate," "intend," "plan," "estimate" or similar
expressions, we are making forward-looking statements. Because such
statements deal with future events and are based on our current
expectations and not on factual events, they are subject to various
risks and uncertainties and actual results, performance or
achievements of OTI could differ materially from those described in
or implied by the statements in this press release. For
example, we are using forward looking statements when we say that
our SmartID will contribute to our growth and profitability
starting in 2013, when we say that we believe that the market for
Smart IDs will only continue to grow, when we say that we are
working towards creating a solid pipeline for future growth across
each of our operating lines of products, when we discuss moving to
achieve lower operating expenses and when we say that we believe
that we will be able to lower costs and create revenue growth where
we will have us in strong position to achieve profitability in
2013. Forward-looking statements could be impacted by various
factors which are beyond our control, including and not limited to
the risk factors that are discussed in our Annual Report on Form
20-F for the year ended December 31, 2011, which is on file with
the Securities and Exchange Commission. Although we believe that
the expectations reflected in such forward-looking statements are
based on reasonable assumptions, we can give no assurance that its
expectations will be achieved. Except as otherwise required by law,
we disclaim any intention or obligation to update or revise any
forward-looking statements, which speak only as of the date hereof,
whether as a result of new information, future events or
circumstances or otherwise.
CONTACT: OTI Contacts
Galit Mendelson
VP, Corporate Relations
732 429 1900 ext. 111
galit@otiglobal.com
Investor Relations:
Todd Fromer / Garth Russell
KCSA Strategic Communications
212-896-1215 / 212-896-1250
tfromer@kcsa.com /grussell@kcsa.com
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