ON TRACK INNOVATIONS LTD.
|
(Name of registrant as specified in its charter)
|
Israel
|
N/A
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Z.H.R. Industrial Zone
P.O. Box 32, Rosh Pina, Israel
|
1200000
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number
+ 972-4-6868000
|
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class
Ordinary Shares, par value NIS 0.10 per share
|
Name of each exchange on which registered
NASDAQ Global Market
|
Securities registered pursuant to Section 12(g) of the Act:
|
None.
|
(Title of class)
|
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
|
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
|
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).
|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
o
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
o
(do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
|
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $57,987,083
|
The number of shares of the registrant’s Ordinary Shares outstanding on March 14, 2016, was 40,835,974.
|
PART I
|
|
2
|
2
|
||
15
|
||
28
|
||
28
|
||
28
|
||
29
|
||
PART II
|
|
29
|
29
|
||
30
|
||
30
|
||
41
|
||
41
|
||
41
|
||
41
|
||
42
|
||
PART III
|
|
43
|
43
|
||
50
|
||
55
|
||
57
|
||
57
|
||
PART IV
|
|
59
|
59
|
•
|
our expectations regarding the growth of the near-field communication, or NFC, market;
|
•
|
the expected development and potential benefits from our existing or future products or our intellectual property, or IP;
|
•
|
increased generation of revenues from licensing, transaction fees and/or other arrangements;
|
•
|
future sources of revenue, ongoing relationships with current and future business partners, distributors suppliers, customers, end-user customers and resellers;
|
•
|
our intention to generate additional recurring revenues, license and transaction fees;
|
•
|
future costs and expenses and adequacy of capital resources;
|
•
|
our intention to continue to expand our market presence via strategic partnerships around the globe;
|
•
|
our expectations with respect to the expansion of our MediSmart product into additional countries in Eastern Africa or elsewhere;
|
•
|
our expectations that revenues from Retail and Mass Transit Ticketing will grow in the next years, and the expected reasons for that growth;
|
•
|
our plans to increase our cash resources, such as by capitalizing on our patent portfolio, sales of assets or parts of our business or raising funds;
|
•
|
our plans to reduce our financial expenses;
|
•
|
our expectations regarding our short-term and long-term capital requirements;
|
•
|
our intention to continue to invest in research and development;
|
•
|
our outlook for the coming months; and
|
•
|
information with respect to any other plans and strategies for our business.
|
Item 1. Busi
nes
s.
|
General Overview
|
Our Markets
|
Retail and Mass Transit Ticketing
|
|
Retail
- The high cost of cash, cash related crime and cash impact on creating ‘black economies’ are major forces that drive markets to look for “Cashless Payment Solutions.” Embraced by retail organizations across the globe, mobile payments, NFC and contactless technologies are helping create a cashless, paperless world.
As one of the pioneers of cashless payment technology, we have been working closely with companies in diverse industries and markets for over two decades. During this time, we have honed our skills at designing industry-tailored solutions that enable our banking, mobile operators, unattended solutions, and closed loop payment systems operators to achieve their goals more efficiently and more cost-effectively.
Wearables and Internet of Things (IoT) –
Wearable technologies have become a modern trend. Today, it is very common to find wearable technologies such as wristbands or watches that are not only fashion garments, but are also linked to a Smartphone and can measure a person's heartbeat and footsteps. We believe that the next evolution of wearables will also allow cashless payments. Our expertise in minimizing the foot print of NFC payment devices allows us to offer manufacturers with a way to easily turn their product into a payment device. We call this unique capability "
PayEnable
" and we intend to mark products that include our technology with the "
PayEnabled by oti
" mark. Our goal is that pay-enabling a product will be cost-effective and will require no expertise or special tooling from the merchant or the consumer.
PayEnabled
devices will support contactless payment similar to pre-paid, debit and credit cards. Additionally, PayEnabled products will also be able to support mass transit ticketing, e-coupons, loyalty programs and healthcare applications, and could also be used for proximity marketing (in-store promotions) and product authenticating (brand anti-counterfeiting).
We manage our cashless payment solutions for the retail market worldwide from our headquarters in Israel.
|
Mass Transit Ticketing
– The established and constantly growing need for mass transit ticketing systems and services, together with the migration to contactless smart cards as the main mean for mass transit payments, have led to the development of a ticket sales unattended and attended mass transit ticketing system by our wholly-owned Polish subsidiary ASEC S.A., or ASEC, initially for the market in Poland.
The system is comprised of attended and unattended point of sales, or POS including ticket vending machines and terminals and is fully managed by a back office solution. ASEC provides system design, installation, management and on-going system maintenance services on a full end-to-end turnkey service basis.
Our solutions for the mass transit ticketing market in Poland are managed by ASEC.
|
|
Petroleum
|
Volatile fuel costs mean that customers of all types are more cost-conscious when it comes to fueling. Commercial organizations with multiple vehicles are especially sensitive to the impact of fuel expenses on their profitability.
Our petroleum payment solutions enable customers to precisely and effortlessly control and manage refueling operations, including automatic payments for less gas station downtime, complete remote transaction and fuel usage reporting, and tracking of odometer and/or engine operating hours.
Easily deployed and seamlessly integrated with existing gas station infrastructure, our EasyFuel Plus® solution is a wireless, cashless, cardless and paperless refueling tracking and payment solution, providing customers with maximum flexibility and security.
Our solutions for the petroleum market are managed by OTI PetroSmart (PTY) Ltd. (formerly named OTI Africa (PTY) Ltd.), or OTI PetroSmart, a wholly-owned subsidiary based in South Africa.
|
Parking
|
With today’s growing parking needs, drivers need a fast, simple, and seamless on-street and parking lot payment system. Providing such a system raises municipal parking revenues, lowers enforcement overhead, and improves driver satisfaction.
Our EasyPark® System is a fully one-stop-shop integrated parking fee collection and parking management solution. Encompassing the full scope of parking operations from both the municipal and driver sides, EasyPark® enables cities to improve parking services, optimize operations, cut costs, increase compliance, reduce traffic congestion and pollution, and provide better service to drivers and residents.
|
Wearables and IoT -
PayEnable
technology can be implemented into a wide range of products. We offer two methods of encapsulating our technology into products:
|
||
PayCapsule
–
PayEnable
solution for casted/solid products with advanced application support.
The
PayCapsule
is an IoT contactless payment device based on a secure element supporting multiple applications and smart-phone connectivity. The
PayCapsule’s
small form-factor allows it to be encapsulated into consumer products, and is ideal for turning wearables into payment devices.
|
||
PayCapsule-Flex
–
PayEnable
solution for wearables and flexible or bendable products.
The
PayCapsule-Flex
is a thin and flexible secure payment device that can be produced in a variety of shapes. The
PayCapsule-Flex
is water-resistant and can be easily bent which makes it an ideal payment device suitable for wearables, such as clothing and accessories.
|
||
|
TRIO mPOS
-
Bluetooth enabled handheld PIN-pad reader for Europay, MasterCard® and Visa®, or EMV, chip, contactless (closed-loop) and magnetic strip payments
Mobile point of sale (mPOS) solutions are rapidly gaining popularity. oti’s
TRIO mPOS
chip and PIN card reader is a handheld solution that allows merchants to easily and securely accept EMV chip and magnetic stripe payments with PIN transaction security (PCI PTS) or closed-loop contactless NFC payments anywhere on-the-go.
|
Pico BT
- Bluetooth enabled swipe & chip handheld reader for mobile POS
|
|
The Pico BT is an EMV-certified compact cashless payment acceptance reader that provides smartphones and tablets the ability to become a robust and secure mPOS solution, allowing merchants to easily and securely accept payments anywhere on-the-go directly from the POS software on their smartphone or tablet.
|
|
WAVE
|
|
Our innovative and proprietary
WAVE
solution adds NFC, contactless payment and security capabilities to existing iPhone® and Android® mobile devices.
WAVE
is completely Subscriber Identity Module, or SIM, agnostic, and offers banks, loyalty card vendors, mobile network operators, or MNOs, mass transit operators, closed campus operators and other diverse vendors a cost-effective, post-market mobile payment add-on option, with quick time-to-market and cost effective implementation. With
WAVE
, mobile network stakeholders can rapidly rollout new services and create new revenue opportunities, all with minimal investment and implementation overhead.
Flexible, as well as cost-effective, attaching the
WAVE
dongle to any handset requires no expertise or special tooling.
WAVE’s
contactless interface supports mobile contactless payment for MasterCard®, Visa®, debit and credit programs, e-Purse, mass transit ticketing, e-coupons, loyalty program and healthcare applications.
|
|
WAVE
PKI
|
|
With a significant growth in the scope of daily online transactions and increasing danger of fraud, organizations are seeking tools that can seamlessly assure secured transactions and customer identification.
As more organizations implement public key infrastructure, or PKI, solutions to authenticate consumers, new challenges arise. The majority of PKI endpoint devices support personal computers, but do not provide a solution for mobile devices, which have become increasingly prevalent in PKI transactions.
Our
WAVE
PKI is a device-agnostic add-on easily attached to the audio jacks of smartphones, tablets and Windows® based PCs.
|
oti Readers
|
·
|
We supply NFC and contactless payment reader solutions. With years of experience, unique IP and know-how, our technology enables unparalleled quality and performance. Our solutions are approved by Underwriters Laboratories, Inc., or UL, and the U.S. Federal Communications Commission, or FCC, and certified by MasterCard TQM (Terminal Quality Management). Also, our reliability and performance are based on over two decades of experience with NFC and contactless solutions.
|
·
|
Our NFC readers are certified by the leading card associations including, amongst others, Visa, MasterCard, Amex, Discover Interac and the EMV, and are compatible as well for use with various NFC mobile payments solutions such as Apple Pay™, Android Pay™, Samsung Pay™, MIFARE™, Soft Card™ and others.
|
otiMetry
– Modular and cost-effective telemetry solution for smart vending combined with cashless payments
|
|
otiMetry incorporates telemetry, sales, operations, and marketing into an affordable all-inclusive solution that makes any vending business smart and interactive, with real-time online management capabilities and alerts.
otiMetry
supports the entire business lifecycle management and includes (1) cashless payment; (2) online terminal and vending machine remote management; and (3) telemetry information including: cash, stock, alerts, route planning, and business optimization.
otiMetry
offers a modular approach and supports an easy method for addition and removal of modules. Another unique feature is that the system is based on an open platform allowing integrators to add their own modules into the system.
|
|
|
|
|
oti CONNECT 3000 –
M2M Telemetry Controller
oti CONNECT 3000 is M2M controller designed to enable communication between machines, particularly vending machines, kiosks and meters via various optional communication methods, allowing operators to easily remotely manage and be notified about a specific machine or the entire fleet.
The oti CONNECT 3000 serves three main functionalities:
·
M2M connectivity using cellular modem, Ethernet or WiFi;
·
Host for connected devices such as card readers, PIN pad, camera, barcode reader, etc.; and
Communication channel to the vending machine controller using the major protocols that are in use by the vending machine industry.
The oti CONNECT 3000 supports a wide range of configurations while supporting optional hardware like backup batteries, external memory extension using SD card, mini USB connection, on-board memory and more.
|
Our mass transit ticketing products offer, among others, the following benefits:
·
Security of information collected, stored and transferred in ASEC’s system;
o
Security of information stored on a card and data transfer between the systems: selling, clearing, inspectors information
o
Reliable and safe transfer of information to and from a card
o
Security of information transferred between POS and back-office system
·
Ease of installation and maintenance, as well as integration with third-party systems;
·
Support for multiple, independent applications on the same card and flexible solution for electronic ticket;
·
Expansibility on different ticket carriers: smart cards, mobile phones, paper etc.; and
·
Flexible and functional services of card management system including cards personalization and issuing.
|
Our petroleum payment solutions enable large and small customers to minutely and effortlessly control and manage refueling operations – including automatic payments for less gas station downtime, complete remote transaction and fuel usage reporting, and tracking of odometer and/or engine operating hours.
Easily deployed and seamlessly integrated with existing gas station infrastructure, our EasyFuel Plus® solution is a wireless, cashless, cardless and paperless refueling tracking and payment solution, providing customers with maximum flexibility and security.
|
The core of the EasyPark® PPM system is a durable, adaptable, contactless, multi-application smart card. The EasyPark® PPM contains proprietary software and provides a simple and convenient solution, which can be used for all parking needs, including on-street parking, parking lots, toll roads, etc.
The EasyPark® system can be operated either as a stand-alone system, or can be used on top of traditional parking payment infrastructures, as a means to reduce cash handling and to eliminate fraud.
|
|
·
|
A proven solution and track record;
|
|
·
|
Simple to use;
|
|
·
|
Cashless;
|
|
·
|
Drivers pay only for the time used;
|
|
·
|
Efficient and cost effective;
|
|
·
|
Attractive commercial model for all stakeholders;
|
|
·
|
Based on reliable, secure and scalable technology;
|
|
·
|
Friendly to the environment, no visual clutter;
|
|
·
|
No maintenance or risk of vandalism; and
|
|
·
|
A flexible and powerful back-office system.
|
EasyPark® Mobile
|
The EasyPark® Mobile is a state-of-the-art mobile parking payments system which can be used for both on-street and off-street parking. The EasyPark® Mobile can be used either as a standalone parking payment method or in conjunction with other payment methods such as the EasyPark® PPM, Pay & Display machines and even with single space meters.
|
Other
|
MediSmart
®
|
Our MediSmart® solution is an information management and claims submission system for the medical sector. MediSmart securely processes and manages the medical information using biometric technology to validate the patient. MediSmart cards provide doctors, hospital administrators and pharmacies with information regarding a patient’s identity, medical and medicaments history, insurance coverage and payment history.
MediSmart has been deployed in approximately 3,500 points of service across four countries in East Africa with approximately 800,000 cards currently in issue.
|
|
·
|
Expanding our global market presence.
We market our products through a global network of subsidiaries in the United States, Europe, Africa and our headquarters in Israel. We are using these entities to strengthen our presence in existing markets, penetrate new markets, provide local customer service and technical support, and adapt our products to our local customers’ specific needs. In addition to our subsidiaries, we will continue to expand our market presence via strategic partnerships around the globe.
|
|
·
|
Increasing our focus on generating high-margin, recurring revenues
. We currently derive most of our revenues from one-time payments for our products and technologies. We intend to generate additional recurring revenues by receiving service fees for ongoing customer services and transaction fees from our customers based on the volume of transactions or monthly licensing fees from systems that contain our products. We also seek our way into the payment ecosystem by providing complementary services to PayEnabled devices that would allow merchants to easily provision devices on-the-fly and will allow us to profit from each future transaction made by the device buyer.
|
|
·
|
Enhancing our technological position
. We intend to continue to invest in research and development in order to enhance our technological position, develop new technologies, extend the functionality of our products and services, and offer innovative products to our customers. We will continue to leverage our over twenty-five years of experience delivering cashless payment solutions to enterprises around the globe.
|
Sales and Marketing
|
Manufacturing
|
Government Regulation
|
Research and Development
|
2015
|
2014
|
2013
|
||||||||||
Our expenditures (in millions)
|
$
|
3.6
|
$
|
4.7
|
$
|
4.4
|
||||||
Our net expenditures as a percentage of annual revenues
|
18
|
%
|
20
|
%
|
22
|
%
|
|
·
|
developing new innovative technologies related to the cashless payment solutions market; and
|
|
·
|
enhancing the functionality of our components and expanding the range of our products to serve new markets.
|
Proprietary Technologies and Intellectual Property
|
|
·
|
In the Retail Market
our competition includes contactless and NFC readers, and terminal manufacturers such as ID Tech, Ingenico and Verifone. On the NFC add-on products, the competition is mainly with vendors such as DeviceFidelity, Gemalto and new technologies, such as Host Card Emulation, or HCE, developed by larger companies such as Google. In wearables and IoT, our competition derives from vendors of IoT and telemetry controllers such as Vendon Datavend, MEI, and VeoVend. In addition, we see Apple, LG, and Samsung as main competitors in the field of wearables.
|
|
·
|
In the Petroleum Market
we compete with fuel market and fleet management end-to-end solution vendors such as Orpak and Rozman Engineering. As this domain has high entrance barriers, there are not many players in this field.
|
|
|
·
|
In the Parking Market
we are uniquely positioned to provide a variety of innovative technologies including enforcement systems, analytics for parking operators and drivers and asset-less parking payment solutions, which do not require “on street” parking equipment, based on both mobile phone payments and in-vehicle parking meters. We are competing with industry players such as ParkMobile, MobileNow, Milgam Cellular Parking and Pay by Phone (Verrus) for mobile parking solutions.
|
Employees
|
Number of employees as of December 31,
|
||||||||||||
Department
|
2015
|
2014
|
2013
|
|||||||||
Sales and marketing
|
22
|
17
|
18
|
|||||||||
Customer service and technical support
|
26
|
31
|
28
|
|||||||||
Research and development
|
37
|
45
|
48
|
|||||||||
Manufacturing and operations
|
14
|
30
|
80
|
|||||||||
Management and administration
|
31
|
34
|
60
|
|||||||||
Total
|
130
|
157
|
234
|
(*) |
Organizational Structure
|
•
|
ASEC S.A. (Spolka Akcyjna)
, our wholly-owned Polish subsidiary, is headquartered in Krakow, Poland. ASEC provides marketing, distribution, developing and provides customer support services for some of our products in Europe. We have the right to appoint all of the members of its board of directors.
|
•
|
OTI America Inc.
,
our wholly-owned U.S. subsidiary, is headquartered in New Providence, New Jersey and is incorporated in Delaware. OTI America provides marketing and customer support services for our products in the Americas. We have the right to appoint all of the members of its board of directors.
|
•
|
OTI PetroSmart (Pty) Ltd.
(formerly named OTI Africa (PTY) Ltd.), our wholly-owned South African subsidiary, is headquartered and incorporated in Cape Town, South Africa, and provides marketing, distribution and customer support services for our products in Africa. We have the right to appoint all of the members of its board of directors.
|
•
|
PARX Ltd.
markets our EasyPark® system worldwide. PARX is incorporated under the laws of the State of Israel and its registered office is at Rosh Pina, Israel. We have the right to appoint all of the members of its board of directors.
|
•
|
Easy Park Ltd.
markets our EasyPark® system in Israel. Easy Park, a subsidiary of PARX, is incorporated under the laws of the State of Israel and its registered office is at Rosh Pina, Israel.
|
Item 1A. Ris
k
Factors.
|
We have a history of losses and we may continue to incur full-year losses in 2016 and in subsequent years.
|
We are assessing possible alternatives to maximize value for our shareholders. This process may not result in a viable alternative, or such alternative might not be implemented successfully.
|
We may desire to exit certain product lines or businesses, or to restructure our operations, but may not be successful in doing so.
|
We depend on a small number of large customers, and the loss of one or more of them would lower our revenues.
|
If the market for contactless microprocessor-based smart cards and/or NFC does not grow, sales of our products may not grow and may even decline.
|
We face intense competition. If we are unable to compete successfully, our business prospects will be impaired.
|
To date, we have sold products incorporating our technology within a limited number of markets. Although we are devoting significant resources to develop new products, such as our new telemetry and IoT devices, and adapting our existing products for use in new markets, such as cashless payment solutions, parking solutions, mass transit ticketing solutions and petroleum solutions, if we fail to develop our new products or adapt our existing products for existing or new markets, we may not recoup the expenses incurred in our efforts to do so, our revenue growth may be impeded and we may incur significant losses.
|
Our revenue growth may be impaired if we are unable to maintain our current, and establish new, strategic relationships.
|
The terms of certain of our agreements may restrict our ability to take actions that we believe to be desirable.
|
Our products may have long development cycles and we may expend significant resources in relation to a specific project without realizing any revenues.
|
Fluctuations in our quarterly financial performance may create volatility in the market price of our shares and may make it difficult to predict our future performance.
|
•
|
Our payroll expenses are relatively fixed and are not reflective of revenues in any particular quarter.
|
•
|
The tendency of some of our clients, due to budgetary reasons, to place orders for products toward the last quarter of their financial year.
|
Delays or discontinuance of the supply of components or manufacturing and assembly of our products may hamper our ability to produce our products on a timely basis and cause short-term adverse effects.
|
If we fail to hire, train and retain qualified research and development personnel, our ability to enhance our existing products, develop new products and compete successfully may be materially and adversely affected.
|
If we are unable to protect or assert our intellectual property rights, our business and results of operations may be harmed.
|
The measures we have taken to protect our technology and products may not be sufficient to prevent their misappropriation by third parties or their independent development by others of similar technologies or products. If our patents and other intellectual property rights do not adequately protect our technology, competitors may be able to offer products similar to our products more easily. Our competitors may also develop competing technology by designing around our patents and thereafter manufacturing and selling products that compete directly with ours, which would harm our business, financial position and results of operations.
|
Our strategy to maximize the value of our IP through licensing, enforcement and other strategies may not be successful.
|
Security breaches and system failures could expose us to liability, harm our business or result in the loss of customers.
|
If we fail to adhere to regulations and security standards imposed by credit card networks, or if our products are not certified or otherwise fail to comply with such regulations and security standards (such as payment card industry standards, etc.) or if our customers fail to take proper protective measures and hold OTI liable for the consequences, our results of operations could be adversely affected.
|
We are susceptible to changes in international markets and difficulties with international operations could harm our business.
|
•
|
changes in regulatory requirements and communications standards;
|
•
|
changes in external political policies, such as embargos based on manufacturing origin;
|
•
|
political and economic instability;
|
•
|
required licenses, tariffs and other trade barriers;
|
•
|
difficulties in enforcing IP rights across, or having to litigate disputes in, various jurisdictions;
|
•
|
difficulties in staffing and managing international operations;
|
•
|
potentially adverse tax consequences;
|
•
|
the burden of complying with a wide variety of complex laws and treaties in various jurisdictions; and
|
•
|
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
|
We report in U.S. dollars while a portion of our revenues and expenses is incurred in other currencies. Therefore currency fluctuations could adversely affect our results of operations.
|
Our international sales and operations are subject to complex laws relating to foreign corrupt practices and bribery, among many other subjects. A violation of, or change in, these laws could adversely affect our business, financial condition or results of operations.
|
We are using third parties’ goods and services from time to time. Although we make efforts to ensure the service quality we cannot control the actions of such third parties, and therefore we may be subject to claims and risks.
|
We may have to adapt our products in order to integrate them into our customers’ systems if new government regulations or industry standards are adopted or current regulations or standards are changed.
|
Our products may contain defects that are only discovered after the products have been deployed or used. This could harm our reputation, result in loss of customers and revenues or subject us to product liability claims.
|
•
|
harm to our reputation;
|
•
|
loss of, or delay in, revenues;
|
•
|
loss of customers and market share;
|
•
|
failure to attract new customers or achieve market acceptance for our products; and
|
•
|
unexpected expenses to remedy errors.
|
We have certain operations in countries that may be adversely affected by political or economic instability.
|
Delays in the implementation stage in some of the projects we are involved with may prevent us from generating sales revenues as expected in the applicable year.
|
The general economic outlook may adversely affect our business.
|
We derive a portion of our revenues from sales to systems integrators that are not the end-users of our products. We are dependent, to a certain extent, on the ability of these integrators to maintain their existing business and secure new business.
|
We are exposed to credit risk with some of our customers and to credit exposures and currency controls, which could result in material losses.
|
Our loan and credit line agreements are subject to certain affirmative financial covenants. If we fail to comply with such covenants, the bank may require immediate repayment in full or foreclose on our pledged assets.
|
We are under relatively new management.
|
We may face both reputational and SEC enforcement risks with respect to conflict minerals obligations.
|
Our share price has fluctuated in the past and may continue to fluctuate in the future.
|
We may need additional funds in the future and our share price could be adversely affected by future sales of our Ordinary Shares.
|
Our shareholders could experience dilution of their ownership interest by reason of our issuing more shares.
|
The number of our authorized and unissued share capital may not be sufficient to allow us to raise additional capital or to otherwise issue equity securities that our Board may deem are in our best interest.
|
We do not anticipate paying cash dividends in the foreseeable future.
|
We may fail to maintain effective internal control in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.
|
Security, political and economic instability in the Middle East may harm our business.
|
Our operations could be disrupted as a result of the obligation of key personnel to perform Israeli military service.
|
The Israeli government programs in which we currently participate, and the Israeli tax benefits we are currently entitled to, require us to meet several conditions, and they may be terminated or reduced in the future. This could increase our costs and/or our taxes.
|
Because we received grants from the Israeli Office of the Chief Scientist, we are subject to ongoing restrictions relating to our business.
|
The terms of grants we received from the Israeli government for certain of our research and development activities may require us, in addition to the payment of royalties, to satisfy specified conditions in order to manufacture products or transfer technologies outside of Israel. We may also be required to pay penalties in addition to repayment of the grants.
|
It may be difficult to enforce a U.S. judgment against us, our officers and directors or to assert U.S. securities law claims in Israel.
|
Provisions of Israeli law may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.
|
Item 1B.
Unresolved Staff
Comments.
|
Not Applicable.
|
Item 2. Properties.
|
Item 3. Legal Proceedings.
|
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
Record Holders
|
Dividends
|
Item 6. Selected Financ
ial
Data.
|
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Overview
|
Results of Operations
|
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Sales
|
$
|
13,123
|
$
|
17,286
|
$
|
15,067
|
||||||
Licensing and transaction fees
|
$
|
6,738
|
$
|
5,776
|
$
|
4,801
|
||||||
Total revenues
|
$
|
19,861
|
$
|
23,062
|
$
|
19,868
|
Year ended December 31,
|
Asia
|
Americas
|
Europe
|
Africa
|
||||||||||||||||||||||||||||
2015
|
$
|
1,747
|
9
|
%
|
$
|
8,044
|
40
|
%
|
$
|
6,100
|
31
|
%
|
$
|
3,970
|
20
|
%
|
||||||||||||||||
2014
|
$
|
2,843
|
12
|
%
|
$
|
8,868
|
39
|
%
|
$
|
7,486
|
32
|
%
|
$
|
3,865
|
17
|
%
|
||||||||||||||||
2013
|
$
|
1,879
|
9
|
%
|
$
|
6,856
|
34
|
%
|
$
|
7,060
|
36
|
%
|
$
|
4,073
|
21
|
%
|
Year ended December 31,
|
Petroleum
|
Parking
|
Retail and Mass Transit Ticketing
|
Other
|
||||||||||||||||||||||||||||
2015
|
$
|
4,38
6
|
22
|
%
|
$
|
1,389
|
7
|
%
|
$
|
11,510
|
58
|
%
|
$
|
2,57
6
|
13
|
%
|
||||||||||||||||
2014
|
$
|
3,838
|
17
|
%
|
$
|
2,392
|
10
|
%
|
$
|
15,042
|
65
|
%
|
$
|
1,790
|
8
|
%
|
||||||||||||||||
2013
|
$
|
4,532
|
23
|
%
|
$
|
2,210
|
11
|
%
|
$
|
11,743
|
59
|
%
|
$
|
1,383
|
7
|
%
|
Cost of Revenues and Gross Margin
|
Year ended December 31,
|
||||||||||||
Cost of revenues
|
2015
|
2014
|
2013
|
|||||||||
Cost of sales
|
$
|
9,396
|
$
|
12,006
|
$
|
9,140
|
||||||
Cost of licensing and transaction fees
|
$
|
325
|
$
|
-
|
$
|
-
|
||||||
Total cost of revenues
|
$
|
9,721
|
$
|
12,006
|
$
|
9,140
|
||||||
Gross profit
|
$
|
10,14
0
|
$
|
11,056
|
$
|
10,728
|
||||||
Gross margin percentage
|
51
|
%
|
48
|
%
|
54
|
%
|
Operating expenses
|
Year ended December 31,
|
||||||||||||
Operating expenses
|
2015
|
2014
|
2013
|
|||||||||
Research and development
|
$
|
3,648
|
$
|
4,664
|
$
|
4,405
|
||||||
Selling and marketing
|
$
|
7,246
|
$
|
8,230
|
$
|
7,132
|
||||||
General and administrative
|
$
|
4,729
|
$
|
6,142
|
$
|
6,939
|
||||||
Patent litigation and maintenance
|
$
|
858
|
$
|
1,543
|
$
|
1,351
|
||||||
Other expenses (income), net
|
$
|
914
|
$
|
(13)
|
$
|
(4,181)
|
||||||
Amortization and impairment of intangible assets and goodwill
|
$
|
-
|
$
|
-
|
$
|
894
|
||||||
Total operating expenses
|
$
|
17,395
|
$
|
20,566
|
$
|
16,540
|
Financing income (expenses), net
|
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Financing income
|
$
|
87
|
$
|
82
|
$
|
182
|
||||||
Financing expenses
|
$
|
(706
|
) |
$
|
(659
|
) |
$
|
(1,095
|
)
|
|||
Financing expenses, net
|
$
|
(619
|
) |
$
|
(577
|
) |
$
|
(913
|
)
|
Net loss from continuing operations
|
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Net loss from continuing operations
|
$
|
(7,996
|
) |
$
|
(10,197
|
)
|
$
|
(6,928
|
)
|
Net income from discontinued operations
|
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Net income from discontinued operations
|
$
|
757
|
$
|
315
|
$
|
3,777
|
Net loss
|
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Net loss
|
$
|
(7,239
|
) |
$
|
(9,882
|
) |
$
|
(3,151
|
)
|
Critical Accounting Policies and Estimates
|
1.
|
The business qualifies as a component of an entity, as it comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.
|
2.
|
Both of the following conditions are met or expected to be met within one year:
|
i.
|
The operations and cash flows of the business have been or will be eliminated from the ongoing operations of the entity in the disposal transaction; and
|
ii.
|
The Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. The eligibility to receive contingent consideration from future sales of the divested business does not necessarily indicate that there is continuing involvement in the operations of the business.
|
Liquidity and Capital Resources
|
December 31, 2015
|
||||
Long-term loans
|
$ | 3,395 | ||
Less - current maturities
|
1,036 | |||
$ | 2,359 |
December 31, 2015
|
||||||
Interest rate
|
||||||
In NIS
|
4.35%
|
$ |
693
|
|||
In U.S. dollars
|
4.92%
|
1,357
|
||||
In Polish Zloty
|
3.15%
|
729
|
||||
2,779
|
||||||
Current maturities of long-term loans
|
1,036
|
|
||||
$ |
3,815
|
Operating activities related to continuing operations
|
Investing and financing activities related to continuing operations
|
Investing and financing activities related to discontinued operations
|
Market Risks
|
Interest Rate Risks
|
Impact of Inflation and Currency Fluctuations
|
Corporate Tax Rate
|
Government of Israel Support Programs
|
Item 7A. Qua
ntita
tive and Qualitative Disclosures About Market Risk.
|
Item 8. Financial Statements and Supplementary Data.
|
|
Report of Independent Registered Public Accounting Firm, dated March 28, 2016.
|
|
Consolidated Balance Sheets.
|
|
Consolidated Statements of Operations.
|
|
Consolidated Statements of Comprehensive Loss.
|
|
Consolidated Statements of Changes in Equity.
|
|
Consolidated Statements of Cash Flows.
|
|
Notes to the Consolidated Financial Statements.
|
Item 9. Changes in an
d
Disagreements with Accountants on Accounting and Financial Disclosure.
|
Item 9A. Controls and Procedures.
|
Disclosure Controls and Procedures
|
Management’s Annual Report on Internal Control over Financial Reporting
|
Changes in Internal Control over Financial Reporting
|
Item 9B. Other Inform
ati
on.
|
Item 10. Directors, Execu
tiv
e Officers and Corporate Governance.
|
Name
|
Age
|
Position(s) Held
|
||
Dilip Singh (1)
|
65
|
Chairman of the Board of Directors
|
||
William C. Anderson III (2) (3)(4)
|
45
|
Director
|
||
John A. Knapp Jr. (1) (3)
|
64
|
Director
|
||
Donna Seidenberg Marks (2) (3) (4)
|
60
|
Director
|
||
Mark Stolper (1) (3) (4)
|
44
|
Director
|
||
Shlomi Cohen
|
54
|
Chief Executive Officer
|
||
Yishay Curelaru
|
34
|
Chief Financial Officer
|
(1)
|
Independent Director under NASDAQ rules
|
(2)
|
External Director
|
(3)
|
Member of Compensation Committee
|
(4)
|
Member of Audit Committee
|
Directors:
|
Executive Officers:
|
Board Practices
|
Election of Directors; Appointment of Officers
|
External Directors
|
•
|
an employment relationship;
|
•
|
a business or professional relationship maintained on a regular basis;
|
•
|
control; and
|
•
|
service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public, if such director was appointed as a director of the private company in order to serve as an External Director following the public offering.
|
Directors’ Service Contracts
|
Board Committees
|
Audit Committee
|
Internal Auditor
|
Compensation Committee
|
Nominating Committee; Director Candidates
|
Code of Ethics
|
Section 16(a) Beneficial Ownership Reporting Compliance
|
Item 11. Executive Co
m
pensation.
|
Summary Compensation Table
|
Name
|
Salary
|
Bonus
|
Option Awards
|
Non-equity Incentive Plan Compensation
|
All other Compensation
|
Total
|
||||||||||||||||||||
and Principal Position
|
Year
|
($) (1)
|
($)
|
($) (2)
|
($)
|
($) (3)
|
($)
|
|||||||||||||||||||
Shlomi Cohen
|
2015
|
177,153 | 52,098 | 80,120 | - | 24,499 | 333,870 | |||||||||||||||||||
Chief Executive Officer (4)
|
2014
|
- | - | - | - | - | - | |||||||||||||||||||
Arie G. Rubinstein
|
2015
|
140,117 | - | 12,038 | 10,665 | 43,647 | 206,467 | |||||||||||||||||||
Former General Counsel and Corporate Secretary (5)
|
2014
|
138,903 | - | 10,764 | 15,091 | 46,947 | 211,705 | |||||||||||||||||||
Ofer Tziperman
|
2015
|
233,652 | 33,806 | - | - | 190,799 | 458,257 | |||||||||||||||||||
Former Chief Executive Officer (6)
|
2014
|
342,779 | - | - | 45,274 | 93,377 | 481,430 | |||||||||||||||||||
Shay Tomer
|
2015
|
197,401 | 20,993 | 22,034 | - | 50,034 | 290,462 | |||||||||||||||||||
Former Chief Financial Officer (7)
|
2014
|
171,809 | 7,713 | 14,352 | 24,985 | 52,767 | 271,626 | |||||||||||||||||||
Dimitrios J. Angelis
|
||||||||||||||||||||||||||
Former Director and
|
2015
|
175,000 | - | - | 251,925 | 329,603 | 756,528 | |||||||||||||||||||
Former Chief Executive Officer of OTI America (8)
|
2014
|
300,000 | - | 48,970 | 50,000 | 61,427 | 460,397 |
(1)
|
Salary payments which were in NIS were translated into U.S. dollars according to annually average exchange rate of 3.89 NIS per U.S. dollar in 2015 and 3.58 NIS per U.S. dollar in 2014.
|
(2)
|
The fair value recognized for the stock-based awards was determined as of the grant date in accordance with FASB ASC Topic 718 (see Note 10C to our consolidated financial statements included elsewhere in this Annual Report).
|
(3)
|
This cost reflects social benefits (as required under applicable Israeli law), car expenses and termination payments.
|
(4)
|
Mr. Shlomi Cohen appointed on August 2, 2015 as Chief Executive Officer. The 2015 “All Other Compensation” of Mr. Cohen, as shown in the table above, is comprised of $8,361 of car expenses and $16,137 of social benefits.
|
(5)
|
The 2015 “All Other Compensation” of Mr. Rubinstein, as shown in the table above is comprised of $20,067 of car expenses and $23,580 of social benefits. The 2014 “All Other Compensation” of Mr. Rubinstein, as shown in the table above is comprised of $21,600 of car expenses and $25,347 of social benefits. On January 24, 2016, Mr. Rubinstein resigned from his respective positions.
|
(6)
|
The 2015 “All Other Compensation” of Mr. Tziperman, as shown in the table above, is comprised of $12,606 of car expenses, $39,264 of social benefits and $138,928 of one-time expenses upon termination of his employment. The 2014 “All Other Compensation” of Mr. Tziperman, as shown in the table above, is comprised of $23,475 of car expenses and $69,902 of social benefits. On August 10, 2015, Mr. Tziperman has resigned from his respective positions.
|
(7)
|
The 2015 “All Other Compensation” of Mr. Tomer, as shown in the table above is comprised of $20,067 of car expenses and $29,967 of social benefits. The 2014 “All Other Compensation” of Mr. Tomer, as shown in the table above is comprised of $21,798 of car expenses and $30,969 of social benefits. On January 6, 2016, Mr. Tomer provided advance notice of his resignation from his respective positions. On January 31, 2016, Mr. Tomer resigned from his respective positions.
|
(8)
|
Mr. Dimitrios J. Angelis served as Chairman of the Board of Directors from April 26, 2013, until February 9, 2015, and served as the Chief Executive Officer of OTI America from December 6, 2013 until August 3, 2015. The 2015 “All Other Compensation” of Mr. Angelis, as shown in the table above is comprised of $29,603 of social benefits and $300,000 of one-time expenses upon termination of his employment. The 2014 “All Other Compensation” of Mr. Angelis, as shown in the table above is comprised of $61,427 of social benefits.
|
Pension, Retirement or Similar Benefit Plans
|
Executive Officers Compensation Policy
|
Employment Agreements
|
(1)
|
Agreement with Shlomi Cohen.
We entered into an employment agreement with Mr. Cohen, effective August 2, 2015, which provides that Mr. Cohen will enter into office as the Chief Executive Officer of the Company and its subsidiaries on August 11, 2015, in consideration of a monthly gross salary of NIS 90,000 and other standard benefits. In addition, and pursuant to the employment agreement, Mr. Cohen received options to purchase 200,000 Ordinary Shares of the Company, with an exercise price of $0.75 per Ordinary Share. The options are subject to a three years vesting period, so that 66,334 options shall be vested on July 31, 2016, 66,333 options shall be vested on July 31, 2017 and an additional 66,333 options shall be vested on July 31, 2018, all subject to the terms and provisions of the Company’s 2001 Share Option Plan. In addition, on February 14, 2016, Mr. Cohen received additional options to purchase 40,000 Ordinary Shares of the Company with an exercise price of $0.44 per Ordinary Share. The options are subject to a three years vesting period, so that 13,333 options shall be vested on February 3, 2017, 13,333 options shall be vested on February 3, 2017 and an additional 13,334 options shall be vested on February 3, 2018, all subject to the terms and provisions of the Company’s 2001 Share Option Plan. Additional options to purchase up to 100,000 Ordinary Shares may be granted on an annual basis to promote retention and as an incentive. The issuance of such options will be subject to the discretion and approval of both the Company’s Compensation Committee and the Board of Directors. According to the employment agreement Mr. Cohen is eligible to receive an annual bonus in an amount up to 12 months’ gross base salary, all subject to the approval of the Company’s general meeting of shareholders. In November 2, 2015, the general meeting of shareholders approved Mr. Cohen’s terms of employment.
|
(2)
|
A
greement with Yishay Curelaru.
We entered into an employment agreement with Mr. Curelaru, dated July 2, 2013, which provided that Mr. Curelaru shall act as the Company’s controller and deputy Chief Financial Officer. In January, 2016, Mr. Curelaru was promoted and appointed as the Company’s Chief Financial Officer, and accordingly on March 23, 2016 we entered into a new employment agreement with Mr. Curelaru. The new employment agreement provides that Mr. Curelaru shall serve as the Company’s and its subsidiaries’ Chief Financial Officer starting January 31, 2016, in consideration of a monthly gross base salary of NIS 38,000 and other standard benefits. In addition, Mr. Curelaru shall be eligible to receive an annual bonus in an amount up to four months’ gross base salary, subject to the Company’s Compensation Policy. Mr. Curelaru’s employment shall be for an unspecified term and either party may terminate the employment agreement upon three months’ advance notice. Pursuant to the employment agreement, Mr. Curelaru shall receive options to purchase 40,000 Ordinary Shares of the Company. The exercise price shall be equal to the average closing price of the Company’s Ordinary Shares during the 30 calendar days prior to the date of the grant, and will be subject to a three years vesting period, all subject to the terms and provisions of the Company’s 2001 Share Option Plan.
|
Outstanding Equity Awards at Fiscal Year-End
|
Number of Securities Underlying Unexercised
|
|||||||||||||||||||||
Option Awards
|
Stock Awards
|
||||||||||||||||||||
Name
|
Number of securities underlying unexercised options (#) exercisable
|
Number of securities underlying unexercised options (#) unexercisable
|
Option exercise price($)
|
Option expiration date
|
Number of shares that have not vested (#)
|
Market value of shares that have not vested ($)
|
|||||||||||||||
Shlomi Cohen
(1)
|
-
|
200,000
|
$
|
0.75
|
11/02/2020
|
-
|
-
|
||||||||||||||
Shay Tomer
(2)
|
21,666
4,445
-
-
|
13,334
8,888
20,000
10,000
|
$
$
$
$
|
1.46
2.36
1.68
1.29
|
04/30/2016 (3)
04/30/2016 (3)
04/30/2016 (3)
04/30/2016 (3)
|
-
-
-
-
|
-
-
-
-
|
||||||||||||||
Ofer Tziperman
(3)
|
-
-
|
23,148
22,222
|
$
$
|
0.90
3.18
|
06/30/2016(5)
06/30/2016(5)
|
-
-
|
-
-
|
||||||||||||||
Dimitrios Angelis (4)
|
-
|
- |
$
|
-
|
-
|
-
|
-
|
(1)
|
On November 2, 2015, 200,000 options were granted to Mr. Cohen under the 2001 Stock Option Plan. The options vest in three equal annual installments, commencing July 31, 2016.
|
(2)
|
On July 20, 2013, 40,000 options were granted to Mr. Tomer under the 2001 Stock Option Plan, out of which 5,000 options were exercised by Mr. Tomer as of December 31, 2015. The options vest in three equal annual installments, commencing July 20, 2014. On May 13, 2014, 13,333 options were granted to Mr. Tomer under the 2001 Stock Option Plan. The options vest in three equal annual installments, commencing May 13, 2015. On January 1, 2015, 20,000 options were granted to Mr. Tomer under the 2001 Stock Option Plan. The options vest in three equal annual installments, commencing January 1, 2016.
|
(3)
|
On December 6, 2013, 166,666 options were granted to Mr. Tziperman under the 2001 Stock Option Plan. The options vest in three equal annual installments, commencing March 7, 2014. On December 30, 2013, 100,000 options were granted to Mr. Tziperman under the 2001 Stock Option Plan. The options vest in three equal annual installments, commencing December 30, 2014. On August 10, 2015, Mr. Tziperman resigned his role as Chief Financial Officer, and the option expiration date of his remaining granted options is June 30, 2016.
|
(4)
|
On August 3, 2015, Mr. Angelis resigned his role as Chief Executive Officer of OTI America, and as of December 31, 2015, he has no outstanding equity awards.
|
Director Compensation for 2015
|
Name (1)
|
Fees Earned or Paid in Cash ($) (2)
|
Option Awards ($) (3)
|
Total ($)
|
|||||||||
William C. Anderson III
|
34,964 | - | 34,964 | |||||||||
Charles M. Gillman (4)
|
17,335 | - | 17,335 | |||||||||
John A. Knapp Jr.
|
29,666 | - | 29,666 | |||||||||
Eileen Segall (5)
|
35,830 | - | 35,830 | |||||||||
Dilip Singh
|
27,677 | - | 27,677 | |||||||||
Mark Stolper
|
34,605 | - | 34,605 |
|
(1)
|
The table above does not include Mr. Angelis, former director, who is included in the description of compensation of Named Executive Officers above.
|
|
(2)
|
This column represents the sums that our non-executive directors received according to the Israeli regulations as an annual fee as well as for attendance to Board and Board Committees meetings.
|
|
(3)
|
As of December 31, 2015, our directors held options to purchase our Ordinary Shares as follows:
|
Name
|
Aggregate number of shares Underlying stock options
|
|||
William C. Anderson III
|
50,000
|
|||
John A. Knapp Jr.
|
50,000
|
|||
Eileen Segall
|
50,000
|
|||
Dilip Singh
|
50,000
|
|||
Mark Stolper
|
50,000
|
|
(4)
|
Former director Mr. Gillman resigned from the Board on August 3, 2015, and the table above represents the compensation paid to Mr. Gillman in 2015.
|
(5)
|
Ms. Segall’s term as external director expired on December 30, 2015, and the table above represents the compensation paid to Ms. Segall in 2015.
|
Item 12. Se
cu
rity Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
|
Name of beneficial owner
|
Position
|
Number of Shares Beneficially Owned (*)
|
% of Class of Shares
|
|||||||
Dilip Singh (1)
|
Director, Chairman
|
398,435
|
1.0%
|
|||||||
Mark Stolper (2)
|
Director
|
50,000
|
**
|
|||||||
William C. Anderson III (3)
|
Director
|
56,667
|
**
|
|||||||
John A. Knapp Jr.(4)
|
Director
|
335,700
|
**
|
|||||||
Donna Seidenberg Marks
|
Director
|
-
|
-
|
|||||||
Shlomi Cohen
|
Chief Executive Officer
|
39,938
|
**
|
|||||||
Ofer Tziperman (5)
|
Former Chief Executive Officer
|
40,247
|
**
|
|||||||
Shay Tomer (6)
|
Former Chief Financial Officer
|
34,444
|
**
|
|||||||
Dimitrios Angelis (7)
|
Former Director and Former Chief Executive Officer of OTI America
|
35,500
|
**
|
|||||||
All executive officers and directors as a group (7 persons)
|
886,073
|
2.2
|
%
|
|||||||
5% Shareholders
|
||||||||||
Jerry L. Ivy, Jr. (8)
|
Shareholder
|
3,386,650
|
8.3
|
%
|
||||||
Harvest Capital Strategies LLC (9)
|
Shareholder
|
2,543,653
|
6.2
|
%
|
(*)
|
If a shareholder has the right to acquire shares by exercising options currently exercisable or exercisable within 60 days of the date of this table, these shares are deemed outstanding for the purpose of computing the percentage owned by the specific shareholder (that is, they are included in both the numerator and the denominator), but they are disregarded for the purpose of computing the percentage owned by any other shareholder.
|
(
**
)
|
Less than 1%
|
|
(1)
|
Based on the information provided by Mr. Singh, includes 22,054 Ordinary Shares held by Mr. Singh, includes 326,381 Ordinary Shares as to which Mr. Singh has voting rights in his capacity as Chairman of the Board, pursuant to irrevocable proxies previously granted to the Chairman of the Board of the Company and includes options held by Mr. Singh to purchase 50,000 Ordinary Shares currently exercisable or exercisable within 60 days of this table.
|
(2)
|
Consist of options held by Mr. Stolper to purchase 50,000 Ordinary Shares currently exercisable or exercisable within 60 days of this table.
|
(3)
|
Includes 40,000 Ordinary Shares held by Mr. Anderson and includes options held by Mr. Anderson to purchase 16,667 Ordinary Shares currently exercisable or exercisable within 60 days of this table.
|
(4)
|
Includes 285,700 Ordinary Shares held by Mr. Knapp and includes options held by Mr. Knapp to purchase 50,000 Ordinary Shares currently exercisable or exercisable within 60 days of this table.
|
(5)
|
Includes 10,000 Ordinary Shares held by Mr. Tziperman and includes options held by Mr. Tziperman to purchase 30,247 Ordinary Shares currently exercisable or exercisable within 60 days of this table.
|
(6)
|
Consist of options held by Mr. Tomer to purchase 34,444 Ordinary Shares currently exercisable or exercisable within 60 days of this table.
|
(7)
|
Based on the information provided by Mr. Angelis, consists of 35,500 Ordinary Shares held by Mr. Angelis.
|
(8)
|
Information is based solely on Schedule 13G/A filed by Mr. Ivy with the SEC on February 9, 2016. Mr. Ivy’s address is 2125 1
st
Ave., Seattle, WA 98121.
|
(9)
|
Information is based solely on Schedule 13G filed by Harvest Capital Strategies LLC with the SEC on February 3, 2016. Includes 2,543,653 Ordinary Shares held by Harvest Capital Strategies LLC. Highland Capital Strategies LLC’s address is 600 Montgomery Street, Suite 1700, San Francisco, CA 94111.
|
The following table summarizes certain information regarding our equity compensation plan as of December 31, 2015:
|
Item 13. Certain Re
lati
onships and Related Transactions, and Director Independence.
|
Agreements with Directors and Officers
|
Item 14. Principal Accounting Fees and Services.
|
Independent Registered Public Accounting Firm
|
Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
|
Principal Accountant Fees and Services
|
2015
|
2014
|
|||||||
Audit fees (1)
|
$
|
163
|
$
|
188
|
||||
Audit-related fees (2)
|
$
|
-
|
$
|
27
|
||||
Tax fees (3)
|
$
|
14
|
$
|
22
|
||||
All other fees (4)
|
$
|
-
|
$
|
7
|
||||
Total
|
$
|
177
|
$
|
246
|
(1)
|
The audit fees for the years ended December 31, 2015 and 2014, are the aggregate fees billed or billable (for the year) for the professional services rendered for the audits of our 2015 and 2014 annual consolidated financial statements, review of consolidated quarterly financial statements of 2015 and 2014, and services that are normally provided in connection with statutory audits of us and our subsidiaries, consents and assistance with review of documents filed with the SEC.
|
(2)
|
The audit-related fees for the year ended December 31, 2014 included services in respect of our registration statement on Form S-3 and related prospectus.
|
(3)
|
Tax fees are the aggregate fees billed (in the year) for professional services rendered for tax compliance and tax advice other than in connection with the audit.
|
(4)
|
All other
fees for the year ended December 31, 2014 included services in respect of the conflict mineral law requires manufacturers to audit their supply chains and report conflict minerals usage.
|
Item 15. Exhibits and Financial Statement Sc
hed
ules.
|
3.1
|
Amended and Restated Articles of Association (incorporated by reference to the Company’s report on Form 6-K filed with the SEC on October 31, 2013).
|
3.2
|
Memorandum of Association, dated February 14, 1990 (incorporated by reference to the Company’s Registration Statement on Form F-1, filed with the SEC on June 14, 2002).
|
|
10.1
|
Original Section 102 Share Option Plan of the Registrant (incorporated by reference to the amendment to the Company’s Registration Statement on Form F-1, filed with the SEC on September
11, 2002). +
|
|
10.2
|
Amended and Restated On Track Innovations Ltd. 2001 Share Option Plan (incorporated by reference to the Company’s proxy statement on Schedule 14A filed with the SEC on April 11,
2014). +
|
|
10.3
|
Long Term Lease Agreement, dated as of March 6, 2002 by and between the Israel Lands Authority and the Company (incorporated by reference to the Company’s Registration Statement on Form F-1, filed with the SEC on June 14, 2002).
|
|
10.4
|
Form of Letter of Exemption and Indemnification between the Company and its directors and officers (incorporated by reference to the Company’s report on Form 6-K filed with the SEC on October 31, 2013.
|
|
10.5
|
Asset Purchase Agreement, dated August 14, 2013, by and between the Company and SuperCom Ltd. (incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).
|
|
10.6
|
Personal and Special Employment Agreement, dated August 6, 2013, by and between the Company and Shay Tomer.
(incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2015;
Confidential treatment has been granted for portions of this document. The confidential portions have been omitted and filed separately, on a confidential basis, with the Securities and Exchange Commission.)
+
|
10.7
|
Personal Employment Agreement, dated December 22, 2013, by and between the Company and Ofer Tziperman.
(incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2015;
Confidential treatment has been granted for portions of this document. The confidential portions have been omitted and filed separately, on a confidential basis, with the Securities and Exchange Commission.)
+
|
10.8
|
Employment Agreement, dated December 22, 2013, by and among the Company, OTI America, Inc. and Dimitrios Angelis (incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2014).
+
|
10.9
|
Personal Employment Agreement, dated August 2, 2015, by and between the Company and Shlomi Cohen (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on August 3, 2015. +
|
10.10*
|
Personal and Special Employment Agreement, dated January 31, 2016, by and between the Company and Yishay Curelaru. +
|
|
10.11
|
Executive Compensation Policy (incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2015). +
|
21.1*
|
List of Subsidiaries of the Company.
|
|
23.1*
|
Consent of Independent Registered Public Accounting Firm.
|
|
31.1*
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) of Shlomi Cohen.
|
|
31.2*
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) of Yishay Curelaru.
|
|
32.1**
|
Certification pursuant to 18 U.S.C. Section 1350 of Shlomi Cohen.
|
|
32.2**
|
Certification pursuant to 18 U.S.C. Section 1350 of Yishay Curelaru.
|
101*
|
The following materials from our Annual Report on Form 10-K for the year ended December 31, 2015 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text and in detail.
|
On Track Innovations Ltd.
|
|||
Dated: March 28, 2016
|
By:
|
/s/ Shlomi Cohen
|
|
Shlomi Cohen
|
|||
Chief Executive Officer
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
/s/ Shlomi Cohen
|
Chief Executive Officer (principal executive officer)
|
March 28, 2016
|
Shlomi Cohen
|
||
/s/ Yishay Curelaru
|
Chief Financial Officer (principal financial officer and principal accounting officer)
|
March 28, 2016
|
Yishay Curelaru
|
||
/s/ Dilip Singh
|
Chairman of the Board of Directors
|
March 28, 2016
|
Dilip Singh
|
||
/s/ William C. Anderson
|
Director
|
March 28, 2016
|
William C. Anderson
|
||
/s/ John A. Knapp Jr.
|
Director
|
March 28, 2016
|
John A. Knapp Jr.
|
||
/s/ Donna Seidenberg Marks
|
Director
|
March 28, 2016
|
Donna Seidenberg Marks
|
||
/s/ Mark Stolper
|
Director
|
March 28, 2016
|
Mark Stolper
|
On Track Innovations Ltd.
and its Subsidiaries
Consolidated Financial Statements
As of December 31, 2015
|
F-2
|
|
F-3 - F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-8 - F-9
|
|
F-10 - F-38
|
December 31
|
||||||||
2015
|
2014
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 5,450 | $ | 5,351 | ||||
Short-term investments
|
5,454 | 11,048 | ||||||
Trade receivables (net of allowance for doubtful
|
||||||||
accounts of $778 and $671 as of December 31, 2015
|
||||||||
and December 31, 2014, respectively)
|
2,418 | 4,299 | ||||||
Other receivables and prepaid expenses
|
2,183 | 2,530 | ||||||
Inventories
|
3,330 | 3,703 | ||||||
Total current assets
|
18,835 | 26,931 | ||||||
Long term restricted deposit for employees benefit
|
524 | 555 | ||||||
Severance pay deposits
|
455 | 614 | ||||||
Property, plant and equipment, net
|
8,668 | 9,234 | ||||||
Intangible assets, net
|
180 | - | ||||||
Deferred tax asset
|
- | 47 | ||||||
Total Assets
|
$ | 28,662 | $ | 37,381 |
December 31 | ||||||||
2015 | 2014 | |||||||
Liabilities and Equity
|
||||||||
Current Liabilities
|
||||||||
Short-term bank credit and current maturities
|
||||||||
of long-term bank loans
|
$ | 3,815 | $ | 3,617 | ||||
Trade payables
|
5,441 | 7,306 | ||||||
Other current liabilities
|
2,724 | 2,656 | ||||||
Total current liabilities
|
11,980 | 13,579 | ||||||
Long-Term Liabilities
|
||||||||
Long-term loans, net of current maturities
|
2,359 | 2,161 | ||||||
Accrued severance pay
|
1,148 | 1,456 | ||||||
Deferred tax liability
|
352 | 302 | ||||||
Total long-term liabilities
|
3,859 | 3,919 | ||||||
Total Liabilities
|
15,839 | 17,498 | ||||||
Commitments and Contingencies
|
||||||||
Equity
|
||||||||
Shareholders' Equity
|
||||||||
Ordinary shares of NIS 0.1 par value: Authorized –
|
||||||||
50,000,000 shares as of December 31, 2015 and
|
||||||||
2014; issued: 42,014,673 and 41,996,602
|
||||||||
shares as of December 31, 2015 and 2014,
|
||||||||
respectively; outstanding: 40,835,974 and 40,817,903 shares
|
||||||||
as of December 31, 2015 and 2014, respectively
|
1,055 | 1,055 | ||||||
Additional paid-in capital
|
225,925 | 224,234 | ||||||
Treasury shares at cost - 1,178,699 shares as of December 31,
|
||||||||
2015 and 2014.
|
(2,000 | ) | (2,000 | ) | ||||
Accumulated other comprehensive loss
|
(1,084 | ) | (800 | ) | ||||
Accumulated deficit
|
(209,254 | ) | (202,103 | ) | ||||
Total Shareholder’s equity
|
14,642 | 20,386 | ||||||
Non-controlling interest
|
(1,819 | ) | (503 | ) | ||||
Total Equity
|
12,823 | 19,883 | ||||||
Total Liabilities and Equity
|
$ | 28,662 | $ | 37,381 |
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Revenues
|
||||||||||||
Sales
|
$ | 13,123 | $ | 17,286 | $ | 15,067 | ||||||
Licensing and transaction fees
|
6,738 | 5,776 | 4,801 | |||||||||
Total revenues
|
19,861 | 23,062 | 19,868 | |||||||||
Cost of revenues
|
||||||||||||
Cost of sales
|
9,396 | 12,006 | 9,140 | |||||||||
Cost of licensing
|
325 | - | - | |||||||||
Total cost of revenues
|
9,721 | 12,006 | 9,140 | |||||||||
Gross profit
|
10,140 | 11,056 | 10,728 | |||||||||
Operating expenses
|
||||||||||||
Research and development
|
3,648 | 4,664 | 4,405 | |||||||||
Selling and marketing
|
7,246 | 8,230 | 7,132 | |||||||||
General and administrative
|
4,729 | 6,142 | 6,939 | |||||||||
Patent litigation and maintenance
|
858 | 1,543 | 1,351 | |||||||||
Other expenses (income), net
|
914 | (13 | ) | (4,181 | ) | |||||||
Amortization and impairment of intangible assets and goodwill
|
- | - | 894 | |||||||||
Total operating expenses
|
17,395 | 20,566 | 16,540 | |||||||||
Operating loss from continuing operations
|
(7,255 | ) | (9,510 | ) | (5,812 | ) | ||||||
Financial expenses, net
|
(619 | ) | (577 | ) | (913 | ) | ||||||
Loss from continuing operations before taxes on income
|
(7,874 | ) | (10,087 | ) | (6,725 | ) | ||||||
|
||||||||||||
Income tax
|
(122 | ) | (110 | ) | (203 | ) | ||||||
Net loss from continuing operations
|
(7,996 | ) | (10,197 | ) | (6,928 | ) | ||||||
Net income from discontinued operations
|
757 | 315 | 3,777 | |||||||||
Net loss
|
(7,239 | ) | (9,882 | ) | (3,151 | ) | ||||||
Net loss
(income) attributable to non-controlling interest
|
88 | (42 | ) | 103 | ||||||||
Net loss attributable to shareholders
|
$ | (7,151 | ) | $ | (9,924 | ) | $ | (3,048 | ) |
Basic and diluted net profit (loss) attributable to
|
||||||||||||
shareholders per ordinary share
|
||||||||||||
From continuing operations
|
$ | (0.20 | ) | $ | (0.30 | ) | $ | (0.21 | ) | |||
From discontinued operations
|
$ | 0.02 | $ | 0.01 | $ | 0.12 | ||||||
$ | (0.18 | ) | $ | (0.29 | ) | $ | (0.09 | ) | ||||
Weighted average number of ordinary shares used in computing basic and diluted net profit (loss) per ordinary share
|
40,869,820 | 34,013,870 | 32,673,123 |
On Track Innovations Ltd.
|
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Total comprehensive loss:
|
||||||||||||
Net loss
|
$ | (7,239 | ) | $ | (9,882 | ) | $ | (3,151 | ) | |||
Foreign currency translation adjustments
|
(284 | ) | (435 | ) | 44 | |||||||
Foreign currency translation released following
sale of a subsidiary
|
- | (393 | ) | - | ||||||||
Net unrealized gain on available-for-sale securities
|
- | - | 34 | |||||||||
Reclassification adjustment for loss on
|
||||||||||||
available-for-sale securities
|
- | - | (69 | ) | ||||||||
Total comprehensive loss
|
$ | (7,523 | ) | $ | (10,710 | ) | $ | (3,142 | ) | |||
Comprehensive loss (income) attributable to the non-controlling interest
|
88 | (42 | ) | 86 | ||||||||
Total comprehensive loss attributable to shareholders
|
$ | (7,435 | ) | $ | (10,752 | ) | $ | (3,056 | ) |
On Track Innovations Ltd.
|
Number of
Shares issued
|
Share
capital
|
Additional
paid-in
capital
|
Treasury
Shares
|
Accumulated
other
comprehensive
Income (loss)
|
Accumulated
deficit
|
Non-controlling
interest
|
Total
equity
|
|||||||||||||||||||||||||
Balance as of January 1, 2013
|
32,938,011 | $ | 820 | $ | 210,853 | $ | (2,000 | ) | $ | 36 | $ | (189,131 | ) | $ | (459 | ) | $ | 20,119 | ||||||||||||||
Changes during the year ended
|
December 31, 2013:
|
Stock-based compensation related to
options
issued to employees
|
- | - | 364 | - | - | - | - | 364 | ||||||||||||||||||||||||
Exercise of options
|
1,261,500 | 34 | 1,029 | - | - | - | - | 1,063 | ||||||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | 27 | - | 17 | 44 | ||||||||||||||||||||||||
Change in net unrealized gain on
available-
for-sale securities
|
- | - | - | - | (35 | ) | - | - | (35 | ) | ||||||||||||||||||||||
Net loss
|
- | - | - | - | - | (3,048 | ) | (103 | ) | (3,151 | ) | |||||||||||||||||||||
Balance as of December 31, 2013
|
34,199,511 | $ | 854 | $ | 212,246 | $ | (2,000 | ) | $ | 28 | $ | (192,179 | ) | $ | (545 | ) | $ | 18,404 |
Changes during the year ended
|
|||||||||||||||||||
December 31, 2014:
|
Stock-based compensation related
to options
issued to employees
|
- | - | 875 | - | - | - | - | 875 | ||||||||||||||||||||||||
Exercise of options and warrants
|
609,591 | 16 | 854 | - | - | - | - | 870 | ||||||||||||||||||||||||
Issuance of shares, net of issuance expenses of $365
|
7,187,500 | 185 | 10,259 | - | - | - | - | 10,444 | ||||||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | (828 | ) | - | - | (828 | ) | ||||||||||||||||||||||
Net income (loss)
|
- | - | - | - | - | (9,924 | ) | 42 | (9,882 | ) |
Balance as of December 31, 2014
|
41,996,602 | $ | 1,055 | $ | 224,234 | $ | (2,000 | ) | $ | (800 | ) | $ | (202,103 | ) | $ | (503 | ) | $ | 19,883 |
Changes during the year ended
|
|||||||||||||||||||
December 31, 2015:
|
Stock-based compensation related
to options
issued to employees
|
- | - | 463 | - | - | - | - | 463 | ||||||||||||||||||||||||
Decrease in the ownership rate in subsidiaries (**)
|
- | - | 1,228 | - | - | - | (1,228 | ) | - | |||||||||||||||||||||||
Exercise of warrants
|
18,071 | ( | *) | - | - | - | - | - | ( | *) | ||||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | (284 | ) | - | - | (284 | ) | ||||||||||||||||||||||
Net loss
|
- | - | - | - | - | (7,151 | ) | (88 | ) | (7,239 | ) |
Balance as of December 31, 2015
|
42,014,673 | $ | 1,055 | $ | 225,925 | $ | (2,000 | ) | $ | (1,084 | ) | $ | (209,254 | ) | $ | (1,819 | ) | $ | 12,823 |
On Track Innovations Ltd.
|
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Cash flows from continuing operating activities
|
||||||||||||
Net loss from continuing operations
|
$ | (7,996 | ) | $ | (10,197 | ) | $ | (6,928 | ) | |||
Adjustments required to reconcile net loss to
|
||||||||||||
net cash used in continuing operating activities:
|
||||||||||||
Stock-based compensation related to options and shares issued
|
||||||||||||
to employees and others
|
463 | 875 | 307 | |||||||||
(Gain) loss on sale of property and equipment
|
(4 | ) | (10 | ) | 91 | |||||||
Amortization of intangible assets
|
- | - | 81 | |||||||||
Impairment of goodwill and intangible assets
|
- | - | 813 | |||||||||
Loss (gain) from sale and shut down of subsidiaries
(Supplement C)
|
- | (3 | ) | 231 | ||||||||
Accrued interest and linkage differences
|
27 | 87 | (166 | ) | ||||||||
Depreciation
|
1,251 | 1,307 | 1,135 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accrued severance pay, net
|
(149 | ) | (126 | ) | (3,165 | ) | ||||||
Deferred tax, net
|
122 | 108 | 112 | |||||||||
Decrease (increase) in trade receivables, net
|
2,212 | 432 | (765 | ) | ||||||||
Decrease in other receivables and prepaid expenses
|
393 | 132 | 1,332 | |||||||||
Decrease (increase) in inventories
|
254 | (334 | ) | (11 | ) | |||||||
Decrease in trade payables
|
(1,290 | ) | (630 | ) | (181 | ) | ||||||
Increase (decrease) in other current liabilities
|
223 | (1,263 | ) | (3,472 | ) | |||||||
Net cash used in continuing operating activities
|
(4,494 | ) | (9,622 | ) | (10,586 | ) | ||||||
Cash flows from continuing investing activities
|
||||||||||||
Purchase of property and equipment
|
(1,515 | ) | (1,573 | ) | (2,784 | ) | ||||||
Purchase of short-term investments
|
(4,181 | ) | (11,433 | ) | (325 | ) | ||||||
Proceeds from restricted deposit for employees benefits
|
144 | - | 3,390 | |||||||||
Proceeds from maturity or sale of short-term investments
|
9,779 | 2,967 | 6,549 | |||||||||
Investment in capitalized product costs
|
(200 | ) | - | - | ||||||||
Investment in restricted deposit for employees benefits
|
(281 | ) | - | - | ||||||||
Proceeds from sale of property and equipment
|
38 | 14 | 168 | |||||||||
Net cash provided by (used in)continuing investing activities
|
3,784 | (10,025 | ) | 6,998 | ||||||||
Cash flows from continuing financing activities
|
||||||||||||
Decrease in short-term bank credit, net
|
(422 | ) | (25 | ) | (1,073 | ) | ||||||
Proceeds from long-term bank loans
|
1,480 | 52 | 3,184 | |||||||||
Repayment of long-term bank loans
|
(747 | ) | (1,019 | ) | (1,316 | ) | ||||||
Proceeds from issuance of shares, net of issuance expenses
|
- | 10,444 | - | |||||||||
Proceeds from exercise of options and warrants
|
(* | ) | 965 | 968 | ||||||||
|
||||||||||||
Net cash provided by continuing financing activities
|
311 | 10,417 | 1,763 | |||||||||
Cash flows from discontinued operations
|
||||||||||||
Net cash used in discontinued operating activities
|
(45 | ) | (1,430 | ) | (1,391 | ) | ||||||
Net cash provided by discontinued investing activities
|
795 | 1,708 | 9,858 | |||||||||
Net cash used in discontinued financing activities
|
- | (154 | ) | (985 | ) | |||||||
Total net cash provided by discontinued operations
|
750 | 124 | 7,482 | |||||||||
Effect of exchange rate changes on cash and cash equivalents
|
(252 | ) | (505 | ) | 1 | |||||||
Increase (decrease) in cash and cash equivalents
|
99 | (9,611 | ) | 5,658 | ||||||||
Cash and cash equivalents at the beginning of the year
|
5,351 | 14,962 | 9,304 | |||||||||
Cash and cash equivalents at the end of the year
|
$ | 5,450 | $ | 5,351 | $ | 14,962 |
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Supplementary cash flows information:
|
||||||||||||
A. Cash paid during the period for:
|
||||||||||||
Interest paid
|
$ | 255 | $ | 316 | $ | 286 | ||||||
Income taxes paid
|
$ | - | $ | 32 | $ | 194 | ||||||
B. Non-cash investing and financing transactions:
|
||||||||||||
Receivables for issuance of equity, collected
|
||||||||||||
immediately after balance sheet date
|
$ | - | $ | - | $ | 95 | ||||||
C. Sale and shutdown of consolidated subsidiaries, see note 1B(3) and 1B(4):
|
||||||||||||
Assets and liabilities of the previously consolidated
|
||||||||||||
subsidiaries at the time ceased being consolidated:
|
||||||||||||
Working capital surplus
|
- | 9 | (4 | ) | ||||||||
Property and equipment
|
- | - | 41 | |||||||||
Intangible assets
|
- | - | 248 | |||||||||
Deferred tax liability
|
- | - | (46 | ) | ||||||||
Short-term bank credit
|
- | (12 | ) | - | ||||||||
Non-controlling interest
|
- | - | (5 | ) | ||||||||
Other comprehensive loss
|
- | - | (3 | ) | ||||||||
Proceeds from sale of subsidiary
|
- | - | - | |||||||||
Loss (gain) on sale and shutdown of subsidiaries
|
$ | - | $ | (3 | ) | $ | 231 |
|
1.
|
In December 2013, the Company completed the sale of certain assets, subsidiaries and intellectual property (“IP”) relating to its Smart ID division, for a total purchase price of $10,000 in cash and an additional $12,500 subject to performance-based milestones (the “SmartID Division Divesture”). Accordingly, the results and the cash flows of this operation for all reporting periods are presented in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations. The Company recorded a gain from this divesture, net of transaction costs, in the amount of $8,944 in 2013. For details in connection with contingent considerations recorded and received during the years ended December 31, 2015 and 2014, see Note 13. For further details see Note 2V.
In October 19, 2015, the Company filed a claim for breach of contract against SuperCom Ltd. (“SuperCom”), at the Israeli Central District Court in Lod. The sum of the claim was NIS 28,862 (approx. $7,397), for consideration not paid for the Company's SmartID division sold to SuperCom in 2013. On December 24, 2015, SuperCom filed a counter claim against the Company in the amount of NIS 68,163 (approx. $17,469) for alleged sums owed to SuperCom pursuant to the sale of the Company's SmartID division to SuperCom for alleged damages caused to SuperCom by the Company. Prior to the filing of Company's response to the counterclaim, the parties mutually agreed to attend mediation scheduled for March 2016 through May 2016. For further information see Note 9E(3).
In June 2013, prior to the Company's divestiture of its SmartID division, Merwell Inc., or Merwell, filed a claim against the Company before an agreed-upon arbitrator alleging breach of contract in connection with certain commissions claimed to be owed to Merwell with respect to the division’s activities in Tanzania. As part of the divesture agreement of the SmartID devision, SuperCom undertook to indemnify the Company and hold it harmless against any liabilities the Company may incur in connection with Merwell’s consulting agreement and the arbitration. An arbitration decision was issued on February 21, 2016, awarding Merwell approximately $855 for outstanding commissions, subject to further evaluation. Pursuant to applicable arbitration rules, the Company and Merwell are in the process of appointing an appellate arbitrator. As
mentioned above, based on the agreement with SuperCom, SuperCom is liable for the costs and liabilities arising out of this claim.
|
|
2.
|
During 2013, the Company reached an initial agreement, which eventually closed in February 2014, to sell its wholly owned German subsidiary, Intercard System Electronics GmbH (“Intercard”), for a total purchase price of EURO 700 (approximately $960) and an additional immaterial contingent consideration based on future sales (the “German Subsidiary Divesture”). As of December 31, 2013, the Company recognized a loss from impairment assets in the amount of $2,970 that reflected the difference between the book value of Intercard’s assets, net of liabilities, and the consideration (see also Note 13). The Company recorded the impairment charge of $2,970 in its statement of operations for the year ended December 31, 2013, among “net income from discontinued operations.” The results and the cash flows of
this operation for the reporting periods are presented in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations.
|
|
3.
|
In August 2013, the Company, through its subsidiary, Parx Ltd. entered into a share purchase agreement with a third party for the sale of 100% of the shares of a subsidiary, Parx France, for consideration of 25% of Parx France’s future profits on an EBITDA basis
.
The Company has recorded a loss in the amount of $231 during 2013, presented in the statement of operations as continuing operations, among “Other operating income, net”
(see Note 11).
For further details see note 2V.
|
|
4.
|
As of December 31, 2014, the Company shut down the operation of its wholly owned subsidiary Smart Card Engineering Ltd. The Company has recorded a capital gain in the amount of $3 as part of other operating income, net (see Note 11).
|
Note 2 - Significant Accounting Policies (cont'd)
|
|
(1)
|
Bank deposits whose maturities are longer than three months from the date of purchase, but not longer than one year from the balance sheet date.
|
|
(2)
|
Bank deposits whose maturities are less than three months from the date of purchase, but not longer than one year from the balance sheet date, and are intended to be held as bank deposits for more than three months.
|
|
(3)
|
Restricted bank deposits whose maturities are not longer than one year from the balance sheet date (for further details, see note 9C).
|
Years
|
Leasehold land (over the terms of the lease, see Note 6A(1))
|
49
|
|
Buildings
|
25
|
|
Computers, software and manufacturing equipment
|
3-5
|
|
Office furniture and equipment
|
5-16
|
|
(mainly - 10)
|
Note 2 - Significant Accounting Policies (cont'd)
|
Note 2 - Significant Accounting Policies (cont'd)
|
|
·
|
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
|
|
·
|
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
|
|
·
|
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
|
2015
|
2014
|
2013
|
||||||||||
Allowance for doubtful accounts at beginning of year
|
$ | 671 | $ | 610 | $ | 431 | ||||||
Additions charged to allowance for doubtful accounts
|
138 | 88 | 220 | |||||||||
Write-downs charged against the allowance
|
(31 | ) | (27 | ) | (41 | ) | ||||||
Allowance for doubtful accounts at end of year
|
$ | 778 | $ | 671 | $ | 610 |
|
(i)
|
The business qualifies as a component of an entity, as it comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.
|
|
(ii)
|
Both of the following conditions are met or expected to be met within one year:
|
|
1)
|
The operations and cash flows of the business have been or will be eliminated from the ongoing operations of the entity in the disposal transaction; and
|
|
2)
|
The Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. The eligibility to receive contingent consideration from future sales of the divested business does
not necessarily indicate that there is continuing involvement in the operations of the business.
|
|
·
|
Component of an entity, or group of components, that
|
|
o
|
Has been disposed of meets the criteria to be classified as held-for-sale, or has been abandoned/spun-off; and
|
|
o
|
Represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, or a
|
|
·
|
Business or nonprofit activity that, on acquisition, meets the criteria to be classified as held-for-sale.
|
Note 2 - Significant Accounting Policies (cont'd)
|
|
1.
|
On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which requires an entity to recognize the amount of revenues to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018. Early application will be permitted starting January 1, 2017. The ASU permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
|
|
2.
|
In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The ASU is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact the adoption of ASU 2014-15 will have on its ongoing financial reporting.
|
|
3.
|
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (ASU 2015-11), which changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 eliminates the guidance that entities consider replacement cost or net realizable value less an approximately normal profit margin in the subsequent measurement of inventory when cost is determined on a first-in, first-out or average cost basis. The provisions of ASU 2015-11 are effective for public entities with fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company currently does not expect that adoption of ASU 2015-17 to have a material impact on its consolidated financial statements.
|
Note 2 - Significant Accounting Policies (cont'd)
|
|
4.
|
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic740) Balance Sheet Classification of Deferred Taxes, which will require that the presentation of deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company currently believes that adoption of ASU 2015-17 is not expected to have a material impact on its consolidated financial statements.
|
|
5.
|
In February 2016, the FASB issued authoritative guidance which requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new guidance will require both types of leases to be recognized on the balance sheet. The guidance will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This guidance shall be applied at the beginning of the earliest period presented using the modified retrospective approach, which includes a number of practical expedients that an entity may elect to apply. Early application of the guidance is permitted. The Company is evaluating the adoption of this guidance and the potential effects on the consolidated financial statements.
|
December 31
|
||||||||
2015
|
2014
|
|||||||
Government institutions
|
$ | 463 | $ | 452 | ||||
Prepaid expenses
|
624 | 690 | ||||||
Receivables under contractual obligations to be transferred to others *
|
533 | 695 | ||||||
Other receivables
|
563 | 693 | ||||||
$ | 2,183 | $ | 2,530 |
*
|
The Company’s subsidiary in Poland is required to collect certain fees that are to be transferred to local authorities.
|
December 31
|
||||||||
2015
|
2014
|
|||||||
Raw materials
|
$ | 944 | $ | 884 | ||||
Work in progress
|
174 | 552 | ||||||
Finished products
|
2,212 | 2,267 | ||||||
$ | 3,330 | $ | 3,703 |
December 31
|
||||||||
2015
|
2014
|
|||||||
Cost
|
||||||||
Leasehold land
(1)
|
$ | 272 | $ | 272 | ||||
Buildings on leasehold land
(1)
|
4,357 | 4,355 | ||||||
Buildings
|
790 | 1,055 | ||||||
Computers, software and manufacturing equipment
|
16,124 | 15,567 | ||||||
Office furniture and equipment
|
793 | 825 | ||||||
Motor vehicles
|
318 | 355 | ||||||
Total cost
|
22,654 | 22,429 | ||||||
Total accumulated depreciation
|
13,986 | 13,195 | ||||||
$ | 8,668 | $ | 9,234 |
|
(1)
|
The leasehold land consists of two plots owned by the Israel Lands Administration. Rights to leasehold land on the first plot extend over the original period of 49 years ending in the year 2041 with an option to extend for an additional 49 years, and on the second plot for a period of 49 years, which will end in the year 2047 with an option to extend for a further 49 years. The amount includes payments on account of land development and payments of the capitalization of leasing payments. The rent for the initial 49-year term of each of these leases was prepaid in its entirety at the beginning of the lease terms as is customary in Israel for leases of property for industrial purposes from the Israel Lands Administration.
|
C.
|
Depreciation expenses amounted to $1,251, $1,307 and $1,135 for the years ended December 31, 2015, 2014 and 2013, respectively.
|
December 31
|
December 31
|
|||||||
2015
|
2014
|
|||||||
Employees and related expenses
|
$ | 1,065 | $ | 1,175 | ||||
Accrued expenses
|
1,101 | 902 | ||||||
Customer advances
|
283 | 244 | ||||||
Other current liabilities
|
275 | 335 | ||||||
$ | 2,724 | $ | 2,656 |
December 31
|
December 31
|
|||||||
2015
|
2014
|
|||||||
Long-term loans
|
$ | 3,395 | $ | 2,996 | ||||
Less - current maturities
|
1,036 | 835 | ||||||
$ | 2,359 | $ | 2,161 |
2016
|
$ | 1,036 | ||
2017
|
797 | |||
2018
|
632 | |||
2019
|
579 | |||
2020
|
70 | |||
Thereafter
|
281 | |||
$ | 3,395 |
December 31
|
December 31
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
%
|
%
|
|||||||||||||||
Interest rate
|
||||||||||||||||
In NIS
|
4.35 | 4.67 | $ | 693 | $ | 778 | ||||||||||
In U.S. Dollars
|
4.92 | 5.03 | 1,357 | 1,159 | ||||||||||||
In Polish Zloty
|
3.15 | 3.60 | 729 | 845 | ||||||||||||
2,779 | 2,782 | |||||||||||||||
Current maturities of long-term loans
|
1,036 | 835 | ||||||||||||||
$ | 3,815 | $ | 3,617 |
E.
|
As of December 31, 2015, the Group has authorized and used credit lines of approximately $4,256 and $2,779, respectively.
|
F
.
|
On November 4, 2014, the Company signed a financial and restrictive covenant with Bank Leumi L’Israel Ltd. (the “Bank”) in order to secure bank services and obtain bank credit and loans. Under the covenants definitions, the Company is obligated to meet the following: (i) total liquid deposits will not be less than $6,000 at any time; (ii) beginning 2015, the annual
operational profit on an EBITDA basis will not be less than $1,000; (iii) annual revenues will not be less than $20,000; and (iv) for 2015: equity at a level of 28% of the total assets and equity sum of no less than $10,500, for 2016 and onwards: equity at a level of 30% of the total assets and equity sum of no less than $11,000. As of December 31, 2015, the loan amount from Bank Leumi L’Israel Ltd. is approximately $2,399, of which an amount of $510 was received for long-term, net of current maturities. As of December 31, 2015, the Company was not in compliance with certain covenants signed with the Bank. On December 31, 2015, the bank issued a waiver waiving its right to demand prepayment of the Company’s liabilities. The Bank’s waiver was conditioned on the Company’s compliance with the covenants in its 2016 annual financial statements to be submitted to the bank by March 31, 2017. Management believes it is reasonably possible that no other covenant violation will occur that will require prepayment of its liabilities during 2016. Based on the Bank’s waiver and the Company’s management’s estimate, loans that were received for long-term, are classified as noncurrent liabilities.
|
2016
|
239 | |||
2017
|
156 | |||
2018
|
156 | |||
2019
|
156 | |||
2020
|
- | |||
$ | 707 |
|
1.
|
On October 3, 2013, a financial claim was filed against the Company and its then French subsidiary, Parx France (in this paragraph, together the “Defendants”), in the Commercial Court of Paris, France (in this paragraph, the “Court”). The sum of the claim is Euro 1,500 (approximately $1,830), and is based on the allegation that the plaintiff sustained certain losses in connection with Defendants not granting the plaintiff exclusive marketing rights to distribute and operate the Defendants’ PIAF Parking System in Paris and the Ile of France. The Company filed an initial memorandum of defense rejecting the plaintiff’s allegations and claims. The Court should schedule an additional pre-trial hearing of the claim By the end of March 2016. Based on the advice of counsel, the Company currently believes that it has no material obligations to the Plaintiff and that there is no need for a provision for the claim.
|
|
2.
|
On July 29, 2014, a former employee of the Company's Smart ID division filed a financial claim against the Company in the Regional Labor Court in Tel Aviv. The sum of the claim is NIS 4,744 (approximately $1,220), and is based on the allegation that the Company owes the plaintiff certain commissions. On October 29, 2014 the Company filed a statement of defense rejecting the plaintiff’s allegations and claims. On March 10, 2015, the Court held a pre-trial review hearing where the Court made an initial review of the parties’ allegations. In the course of the hearing the plaintiff was ordered to amend and resubmit his statement of claim. Further to filing the amended statements of claim and defense, the parties were instructed to attend mediation. Following initial meetings, a third mediation meeting is scheduled to take place at the
in April 2016
. Based on the advice of counsel, the Company currently believes that it has no material obligations to the Plaintiff and that there is no need for a provision for the claim.
|
|
3.
|
On October 19, 2015, the Company filed a claim for breach of contract against SuperCom, at the Israeli Central District Court in Lod. The sum of the claim was NIS 28,862 (approx. $7,397), for consideration not paid for the Company's SmartID division sold to SuperCom in 2013. On December 24, 2015, SuperCom filed a counter claim against the Company in the amount of NIS 68,163 (approx. $17,469) for alleged sums owed to SuperCom pursuant to the sale of the Company's SmartID division to SuperCom in 2013 and for alleged damages caused to SuperCom by the Company. Prior to the filing of Company's response to the counterclaim, the parties mutually agreed to attend mediation scheduled for March 2016 through May 2016. The mediation covers also Supercom’s indemnification obligations towards the Company with respect to any liabilities and expenses of company arising out of or in connection with the Merwell litigation discussed in Note 1(B)1. Based on the advice of counsel, the Company believes it has good arguments in support of its claim and against the counterclaim and that there is no need for a provision for this litigation.
|
|
In February 2001, Board approved an additional option plan, under which up to 75,000 share options are to be granted to the Company’s employees, directors and consultants and those of the Company’s subsidiaries and affiliates.
|
|
1.
|
Dividend yield of zero percent for all periods.
|
|
2.
|
Risk-free interest rate of, 1.21%-1.32%, 0.79%-1.05%, 0.57%-1.02% for 2015, 2014 and 2013, respectively, based on U.S. Treasury yield curve in effect at the time of grant.
|
|
3.
|
Estimated expected lives of 2.5-4 years for all periods.
|
|
4.
|
Expected average volatility of 69%-70.7%, 64%-67%, 59%-70% for 2015, 2014 and 2013, respectively, which represent a weighted average standard deviation rate for the price of the Company's Ordinary Shares on NASDAQ.
|
Number of
|
Weighted
|
|||||||
options
|
average exercise
|
|||||||
outstanding
|
price per share
|
|||||||
Outstanding – December 31, 2014
|
1,923,833 | $ | 2.09 | |||||
Options granted
|
465,000 | 1.01 | ||||||
Options expired or forfeited
|
(787,454 | ) | 2.24 | |||||
Outstanding – December 31, 2015
|
1,601,379 | $ | 1.71 |
Exercisable as of:
|
||||||||
December 31, 2014
|
697,003 | $ | 1.9 | |||||
December 31, 2015
|
799,473 | $ | 1.85 |
Options outstanding
|
Options Exercisable
|
|||||||||||||||||||||||||
Number
|
Weighted
|
Number
|
Weighted
|
|||||||||||||||||||||||
outstanding
|
average
|
Weighted
|
Outstanding
|
average
|
Weighted
|
|||||||||||||||||||||
as of
|
remaining
|
Average
|
As of
|
remaining
|
Average
|
|||||||||||||||||||||
Range of
|
December 31,
|
contractual
|
Exercise
|
December 31,
|
contractual
|
Exercise
|
||||||||||||||||||||
exercise price
|
2015
|
life (years)
|
Price
|
2015
|
life (years)
|
Price
|
||||||||||||||||||||
$ | 0.03 | 18,000 | 0.34 | $ | 0.03 | 18,000 | 0.34 | $ | 0.03 | |||||||||||||||||
0.74-0.90 | 418,148 | 4.22 | 0.78 | 65,000 | 2.33 | 0.90 | ||||||||||||||||||||
1.08-1.29 | 148,000 | 1.43 | 1.11 | 138,000 | 1.21 | 1.09 | ||||||||||||||||||||
1.46 | 105,000 | 2.33 | 1.46 | 66,666 | 2.19 | 1.46 | ||||||||||||||||||||
1.67-1.76 | 140,000 | 2.68 | 1.68 | 55,000 | 0.85 | 1.68 | ||||||||||||||||||||
2.32-2.37 | 710,009 | 2.60 | 2.35 | 446,807 | 2.20 | 2.34 | ||||||||||||||||||||
$ | 3.03-3.18 | 62,222 | 2.58 | $ | 3.08 | 10,000 | 3.73 | $ | 3.03 | |||||||||||||||||
1,601,379 | 1.71 | 799,473 | 1.93 |
|
1.
|
During 2012, the Company issued 90,361 warrants with a nominal exercise price that vest in five equal installments over a vesting period of five years, as part of acquisition of business operations.
|
|
2.
|
During 2015, 18,071 warrants were exercised.
|
|
3.
|
The number of warrants issued by the Company during the year ended December 31, 2011, as part of its offering of shares from 2011, were 260,869, with a per share exercise price of $3.75.
|
Warrants outstanding
|
Warrants Exercisable
|
|||||||||||||||||
Exercise Price
|
Number
outstanding
|
Weighted
average
|
Number
Outstanding
|
Weighted
average
|
||||||||||||||
$ | - | 56,648 | 0.93 | 20,500 | 0.36 | |||||||||||||
$ | 3.75 | 260,869 | 0.11 | 260,869 | 0.11 | |||||||||||||
317,517 | 0.25 | 281,369 | 0.13 |
|
A.
|
Other expenses (income), net
|
Year ended December 31
|
Year ended December 31
|
Year ended December 31
|
||||||||||
2015
|
2014
|
2013
|
||||||||||
(Gain) loss from sale and shut down of a subsidiary (see note 1B(3) and 1B(4))
|
$ | - | $ | (3 | ) | 231 | ||||||
(Gain) loss on sale of property and
equipment, net
|
(4 | ) | (10 | ) | 91 | |||||||
Termination of employment agreements (1)
|
578 | - | (4,503 | ) | ||||||||
Consulting fees
|
340 | - | - | |||||||||
Other expenses (income), net
|
$ | 914 | $ | (13 | ) | (4,181 | ) |
1
|
During 2015, the Company recorded compensation expenses related to the termination of employment of the Company’s former Chief Executive Officer and related to the termination of employment of the Company’s former Chief Executive Officer of the U.S. subsidiary.
|
|
B.
|
Impairment of goodwill and intangible assets
|
|
1.
|
Measurement of taxable income under the Income Tax (Inflationary Adjustments) Law, 1985
|
A.
|
The Company and its Israeli subsidiaries (cont’d)
|
|
4.
|
Tax rates
|
|
Presented hereunder are the tax rates relevant to the Company in the years 2013-2015:
|
|
2014-2015 – 26.5%
|
|
2013 – 25%
|
B.
|
Non-Israeli subsidiaries are taxed based on the income tax laws in their country of residence.
|
December 31
|
December 31
|
|||||||
2015
|
2014
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
$ | 51,120 | $ | 48,720 | ||||
Other
|
1,311 | 1,777 | ||||||
Total gross deferred tax assets
|
52,431 | 50,497 | ||||||
Less – valuation allowance
|
(52,431 | ) | (50,450 | ) | ||||
Net deferred tax assets
|
$ | - | $ | 47 | ||||
Deferred tax liability -
|
||||||||
Other
|
(352 | ) | (302 | ) | ||||
Net deferred tax liability
|
$ | (352 | ) | $ | (302 | ) |
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Balance at beginning of year
|
$ | 50,450 | $ | 42,691 | $ | 42,002 | ||||||
Additions during the year from
Continuing operations
|
2,181 | 2,349 | 1,654 | |||||||||
Changes due to amendments to tax laws
|
||||||||||||
and applicable future tax rates, see note 12A(4)
|
- | - | 2,394 | |||||||||
Discontinued operations - Smart ID Division,
see note 1B(1)
|
(201 | ) | 5,405 | (3,402 | ) | |||||||
Other changes
|
1 | 5 | 43 | |||||||||
Balance at end of year
|
$ | 52,431 | $ | 50,450 | $ | 42,691 |
D.
|
As of December 31, 2015, the net operating loss carry forwards for tax purposes relating to Israeli companies amounted to approximately $188,489. Tax loss carry forwards in Israel may be carried forward indefinitely to offset against future taxable operational income. Under the Income Tax (Inflationary Adjustments) Law, 1985, and based on the Company’s election (see note 12A(1)), tax loss carry forwards are denominated in U.S. dollars. Tax loss carry forwards relating to non-Israeli companies aggregate approximately $3,747, which will expire as follows: 2017- $30, 2026 - $3,091 and 2027- $533. The remaining balance of $93 can be utilized with no expiration date.
|
E.
|
The Company has not recognized a deferred tax liability for the undistributed earnings of its foreign subsidiaries that arose in 2015 and prior years, because the Company considers these earnings to be indefinitely reinvested. A deferred tax liability will be recognized when the Company can no longer demonstrate that it plans to indefinitely reinvest these undistributed earnings. As of December 31, 2015, the undistributed earnings of these foreign subsidiaries were approximately $3,292. These undistributed earnings will be taxed upon distribution, if at all. It is impracticable to determine the additional taxes payable when these earnings are remitted.
|
F.
|
No current or net deferred taxes were recorded in Israel. Non-Israeli income tax expenses included in the consolidated statements of operations are as follows:
|
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Current
|
$ | - | $ | (2 | ) | $ | (265 | ) | ||||
Deferred
|
(122 | ) | (108 | ) | 62 | |||||||
Income tax expense
|
$ | (122 | ) | $ | (110 | ) | $ | (203 | ) |
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Computed “expected” income tax benefit
|
$ | 2,087 | $ | 2,673 | $ | 1,681 | ||||||
Decrease in income tax benefit
|
||||||||||||
resulting from:
|
||||||||||||
Change in valuation allowance, net
|
(2,181 | ) | (2,349 | ) | (1,654 | ) | ||||||
Non-deductible stock-based compensation related to options issued to employees
|
(123 | ) | (232 | ) | (91 | ) | ||||||
Other non-deductible expenses
|
(96 | ) | (113 | ) | (43 | ) | ||||||
Other
|
191 | (89 | ) | (96 | ) | |||||||
Reported income tax expense
|
$ | (122 | ) | $ | (110 | ) | $ | (203 | ) |
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Israel
|
$ | (8,187 | ) | $ | (10,434 | ) | $ | (8,842 | ) | |||
Non-Israel
|
313 | 347 | 2,117 | |||||||||
$ | (7,874 | ) | $ | (10,087 | ) | $ | (6,725 | ) |
H.
|
Unrecognized tax benefits
|
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Revenues
|
$ | - | $ | 1,131 | $ | 16,034 | ||||||
Expenses
|
(91 | ) | (1,822 | ) | (18,231 | ) | ||||||
Other income, net
|
848 | 1,006 | 5,974 | |||||||||
Net income from discontinued operations
|
$ | 757 | $ | 315 | $ | 3,777 |
Note 14 - Related Party Balances and Transactions
|
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Costs and expenses*
|
$ | - | $ | - | $ | 13 |
—
|
Petroleum - includes manufacturing and selling of fuel payment and management solutions. The Company's solution
is a wireless, cashless, cardless and paperless refueling tracking and payment solution, providing customers with maximum flexibility and security.
|
—
|
Retail and Mass Transit Ticketing - includes selling and marketing variety of products for cashless payment solutions for the retail market and mass transit ticketing.
|
·
|
Parking - includes selling of products and managing cashless parking solutions. The Company's parking solution is a fully integrated parking fee collection and parking management solution.
|
Year ended December 31, 2015
|
||||||||||||||||||||
Petroleum
|
Retail and
Mass Transit Ticketing
|
Parking
|
Other
|
Consolidated
|
||||||||||||||||
Revenues
|
4,386 | 11,510 | (**) | 1,389 | 2,576 | 19,861 | ||||||||||||||
Reportable segment gross profit *
|
2,353 | 6,482 | 894 | 1,190 | 10,919 | |||||||||||||||
Reconciliation of reportable segment
|
||||||||||||||||||||
gross profit to profit for the period
|
||||||||||||||||||||
Depreciation
|
(745 | ) | ||||||||||||||||||
Stock based compensation
|
(34 | ) | ||||||||||||||||||
Gross profit for the period
|
$ | 10,140 |
Year ended December 31, 2014
|
||||||||||||||||||||
Petroleum
|
Retail and
Mass Transit
Ticketing
|
Parking
|
Other
|
Consolidated
|
||||||||||||||||
Revenues
|
3,838 | 15,042 | 2,392 | 1,790 | 23,062 | |||||||||||||||
Reportable segment gross profit *
|
2,213 | 7,143 | 1,543 | 939 | 11,838 | |||||||||||||||
Reconciliation of reportable segment
|
||||||||||||||||||||
gross profit to profit for the period
|
||||||||||||||||||||
Depreciation
|
(747 | ) | ||||||||||||||||||
Stock based compensation
|
(35 | ) | ||||||||||||||||||
Gross profit for the year
|
$ | 11,056 |
Year ended December 31, 2013
|
||||||||||||||||||||
Petroleum
|
Retail and
Mass Transit
Ticketing
|
Parking
|
Other
|
Consolidated
|
||||||||||||||||
Revenues
|
4,532 | 11,743 | 2,210 | 1,383 | 19,868 | |||||||||||||||
Reportable segment gross profit *
|
2,694 | 6,469 | 1,366 | 808 | 11,337 | |||||||||||||||
Reconciliation of reportable segment
|
||||||||||||||||||||
gross profit to profit for the period
|
||||||||||||||||||||
Depreciation
|
(577 | ) | ||||||||||||||||||
Stock based compensation
|
(32 | ) | ||||||||||||||||||
Gross profit for the period
|
$ | 10,728 |
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Revenues by geographical areas from external customers
|
||||||||||||
|
||||||||||||
Americas
|
$ | 8,044 | $ | 8,868 | $ | 6,856 | ||||||
Asia
|
500 | 1,077 | 99 | |||||||||
Africa
|
3,970 | 3,865 | 4,073 | |||||||||
Europe
|
6,100 | 7,486 | 7,060 | |||||||||
Total export
|
18,614 | 21,296 | 18,088 | |||||||||
Domestic (Israel)
|
1,247 | 1,766 | 1,780 | |||||||||
$ | 19,861 | $ | 23,062 | $ | 19,868 |
December 31
|
December 31
|
|||||||
2015
|
2014
|
|||||||
Long lived assets by geographical areas
|
||||||||
Domestic (Israel)
|
$ | 2,415 | $ | 2,656 | ||||
Poland
|
5,379 | 5,406 | ||||||
South Africa
|
796 | 1,061 | ||||||
America
|
78 | 111 | ||||||
$ | 8,668 | $ | 9,234 |
Year ended December 31
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
%
|
%
|
%
|
||||||||||
Major Customers by percentage from total revenues
|
||||||||||||
Customer A (*)
|
15 | % | 22 | % | 19 | % | ||||||
Customer B (*)
|
15 | % | 14 | % | 15 | % |
(*)
|
The revenues derives from the both customers are presented within the revenues from the Retail and Mass Transit Ticketing.
|
Wherefore:
|
The Employee has been employed by the Company as of August 1, 2013 as a controller in the Company's finance department pursuant to a Personal Employment contract dated July 2, 2013 (hereafter, "
Previous Contract
") and as of January 31, 2016 the Employee is employed by the Company as Chief Financial Officer (hereafter, "
CFO
") of the Company and its subsidiaries in accordance with a resolution of the Company's Board of Directors (hereafter, "
Board of Directors
") dated January 23, 2016; and
|
Wherefore:
|
The Company desires to continue to employ the Employee as CFO of the Company and its subsidiaries (hereafter, the "
Position
") and the employee desires to be employed in the Position, all subject to the terms and conditions set forth in this agreement, the principles of which were approved by the Board of Directors in its resolution dated January 23, 2016 and the rest of which will be approved as required by law; and
|
Wherefore:
|
It has been agreed that the employment of the Employee in the Position will be done so as to ensure full continuation of the Employee's rights, including the right to termination severance payment; and
|
Wherefore:
|
The Employee declares that nothing prohibits his entry into this agreement and that he has the skills, experience, and competence required for the purpose of performing the Position and that he has expressed his interest in being employed by the Company in the Position; and
|
Wherefore:
|
The parties desire to establish the terms and conditions for the Employee's employment, all as set forth in this Agreement and subject to the terms and conditions herein.
|
Therefore, the parties declare and agree as follows:
|
A.
|
General
|
1.
|
The preamble to this agreement constitutes and integral part thereof.
|
2.
|
The attachments to this agreement constitute integral parts thereof.
|
3.
|
Captions and headings are for convenience only and shall not serve as a basis for interpretation of this agreement.
|
B.
|
The Employment
|
4.
|
This agreement constitutes the entirety of the terms and conditions applicable to Employee's employment by the Company. No collective bargaining agreements or arrangements or other special arrangements or agreements shall be applicable to the employment relationship between Employee and Company and the relationship between the parties will be governed by this agreement only.
|
C.
|
Obligations and Declarations of the Employee
|
5.
|
The Employee declares and commits hereby as follows:
|
|
5.1.
|
The Employee will perform the Position with dedication, loyalty and trustworthiness in any location, in Israel and abroad, in accordance with the instructions that he will receive from time to time from his supervisors, and to this effect will dedicate his time, efforts, skills and experience as necessary and needed. The Employee will not take on any other employment or occupation without prior written approval of the Company.
|
|
5.2.
|
Employee is not prevented, whether by contract or otherwise, from entering into this Agreement and performing his obligations hereunder.
|
|
5.3.
|
All the details and information supplied by Employee to the Company in submission of his candidacy for the Position are truthful, correct and accurate, and Employee commits to notify the Company of any change in such details or information.
|
|
5.4.
|
The Employee commits to notify the Employer, immediately and without delay, of any subject or matter in which Employee has a personal interest which may cause a conflict of interest in the Employee's performance of the Position.
|
D.
|
Work Hours
|
6.
|
It is agreed by the parties that the Position is a management position which requires a special personal care and, accordingly, is not subject to the Work and Rest Hours Law of 1951 (hereafter, the "
Work and Rest Hours Law
") and the Employee will not be eligible to receive from the Company any special or extra pay for extra or additional hours.
|
E.
|
Compensation
|
7.
|
As compensation for the Company's employment of the Employee, the Company will pay the Employee a monthly salary as detailed in the notice of terms of employment attached hereto as
Attachment A
(hereafter, the "
Determining Wage
").
|
8.
|
The Determining Wage shall be updated in accordance with the cost of living adjustments as applied to the general economy, and subject to the decision of management from time to time.
|
9.
|
Adjustments of the components of salary will be done, in at all, at the discretion of the company once per year in January.
|
10.
|
The Determining Wage is the exclusive basis for contributions towards social benefits as provided in this agreement and for termination severance.
|
11.
|
It is clarified hereby that any grant and/or expense participation and/or expense reimbursement and/or other benefit that the Employee shall receive (if any), do not constitute part of the Determining Wage for purposes of social benefits including termination severance and/or distributions to the various pension plans.
|
F.
|
Annual Leave, Sick Pay and Recuperation
|
12.
|
The Employee will be entitled to annual leave as set forth in
Attachment A
.
|
13.
|
The Employee's taking of any annual leave will be done in coordination with the Company and subject to the Employee's direct supervisor's approval at least 14 days in advance.
|
14.
|
It is clarified hereby that the Employee will be required in each work year to utilize the annual leave to which he is entitled as set forth in Attachment A and will not be entitled to roll-over and aggregate annual leave days unless such aggregation is approved in writing in advance by the Company in certain circumstances as set by the Company from time to time in accordance with its policies. Annual leave that is not utilized by the Employee within the work year in which such leave was earned will be void and will not be eligible for utilization or payout.
|
15.
|
The Employee will be entitled to paid sick days in accordance with the Sick Pay Law and against presentation of medical approvals.
|
16.
|
After the completion of one year of employment, Employee shall be paid Recuperation Pay (
Dmei Havraa
) at the rates determined from time to time in agreements between the Coordinating Bureau of Economic Organizations and the General Organization of Workers (
Histadrut
).
|
G.
|
Term of Agreement
|
17.
|
This agreement shall be valid from the date of its execution for an unlimited term.
|
18.
|
Notwithstanding the above, each side may terminate the agreement for any reason and without cause by delivery of prior notice in writing as set forth in
Attachment A
.
|
19.
|
In the prior notice period, the Employee will continue in the performance of his duties, and will transfer his duties in an efficient and organized manner to this replacement, in accordance with the Company's instruction. Notwithstanding the foregoing, the Company is entitled to waive, in whole or in part, Employee's continued performance of his duties during the prior notice period.
|
20.
|
During the prior notice period, whether or not employee continued performance of his duties in whole or in part, the Employee will be entitled to full compensation and benefits. Notwithstanding the foregoing, the Company shall be entitled to notify the Employee of immediate termination of Employment and pay him for the prior notice period (at the monthly rate of salary at which the Employee would have been paid had he continued performance of his duties during the prior notice period) and in such instance, the Employee will be entitled to the prior notice period compensation only.
|
21.
|
Notwithstanding anything else herein, the Company shall be entitled to terminate the Employee immediately and without prior notice in the events of breach of trust; intentional harm to the Company or its property; criminal conviction in connection with or due to performance of the Position; or criminal conviction for an offence of moral turpitude.
|
H.
|
Savings Plan (
Kupat Gemel
), Study Fund (
Keren Hishtalmut
) and Managers' Insurance (
Bituach Menahalim
)
|
22.
|
If and to the extent set forth in
Attachment A
, Company shall make distributions to a pension fund and/or managers' insurance or savings plan and/or study fund in the Employee's name.
|
23.
|
The Company will transfer the required payments monthly and in parallel will deduct Employee's contributions from Employee's salary as set forth in
Attachment A
.
|
24.
|
For avoidance of doubt, the payments to the pension fund and/or managers' insurance, if and to the extent the Employee is entitled to them per
Attachment A
, will be drawn from the Determining Wage as defined above.
|
25.
|
It is hereby clarified that the employer's payments to the pension fund and/or managers' insurance, will constitute Employee's entire entitlement to severance pay in respect of the paid salary, in place of any severance pay to which the Employee otherwise may have become entitled, as provide under 14 of the Severance Pay Law 1963.
|
I.
|
Termination of Employment
|
26.
|
Should the Employee's employment terminate for whatever reason, except under circumstances which preclude Employee's receipt of severance pay, the Employee shall be entitled to receive all amounts that have accrued to his benefit and all the amounts that were distributed to savings plan (to the extent distributed), whether from his distributions or the Company's contributions, including all interest and profits that have accrued on such amounts.
|
27.
|
The Company and the Employee adopt for purposes of this agreement, the General Order regarding employers' payments to pensions and insurance funds instead of severance pay pursuant to the Severance Pay Law of 1963 (Section 14 to the Law), as issued under the signature of the Minister of Labor on June 30, 1998 and published in Official Gazette 4659 (hereafter, "Labor Minister's Order"). The Labor Minister's Order is attached hereto as
Attachment C
.
|
28.
|
The Company's payments as described above will come in place of 100% of the severance pay that the Employee or his beneficiaries are entitled to in connection with the salary for which the payments were made and for the period they were made (hereafter, the "Exempt Wages").
|
29.
|
The Labor Minister's Order will be applicable to the Company's contributions, but does not diminish the Employee's rights by law, collective agreement, expansion order or contract, to severance pay for salary above the Exempt Wages.
|
30.
|
Should Employee's employment terminate due to Employee's resignation or events or circumstances preventing continued employment (including Employee's death), the Employee (or his beneficiaries, as applicable) shall be entitled:
|
30.1.
|
To receive from the Company the Employee's monthly salary for the portion of the year which the Employee actually worked;
|
30.2.
|
To receive from the pension fund all amounts that accrued to the benefit of the Employee said fund for distributions to the savings plan (
Kupat Gemel
), whether from Employee's distributions or Company's contributions, including all interest and profits that have accrued on said fund and also to receive the distributions that have accrued to the Employee's benefits in the study fund (
Keren Hishtalmut
), whether from Employee's distributions or Company's contributions.
|
31.
|
It is acknowledged and agreed that in the event that the Employee's termination is due to breach of trust or other material breach of his obligations to the Company under this agreement, including but not limited to any obligations regarding confidentiality and non-competition and including termination due to circumstances which preclude receipt of severance pay in accordance with the law, then despite anything else herein to the contrary, the Employee will not be entitled to receive prior notice of termination or payment for a prior notice period, and will also not be entitled to severance pay and the Company shall be entitled to demand return of all funds that were transferred to the severance fund on account of such severance pay, including all interest and profits earned on such amounts.
|
32.
|
Upon termination of the Employee's emplacement with the Company, the Employee shall deliver to Company all documents, information and other materials or property that has been provided to him or prepared by him in connection with his employment with the Company.
|
33.
|
For avoidance of doubt, the Employee shall not have any offset or lien rights against the property or funds of the Company that are in the Employee's possession or in connection with any debt of the Company to the Employee.
|
J.
|
Confidentiality and Non-Competition
|
34.
|
The Employee acknowledges hereby that in light of the business of the Company it is of utmost importance to preserve the confidentiality of any information and/or document which he receives during his employment and he commits to preserve confidentiality in accordance with the non-disclosure agreement attached hereto as
Attachment C
.
|
35.
|
The Employee commits as follows:
|
35.1.
|
Not to, directly or indirectly, engage with any customer of Company or its related companies, whether independently or as an employee, including by partnership or holding, by himself or through others, of shares or management rights in any companies, during the period of this agreement and for a period of 12 months thereafter, in any matter related to the business of the Company except as part of this performance of his duties to the Company. It is clarified that the list of clients and/or vendors and/or marketing system and/or any other list that was utilized by employee in the regular course of his employment with the Company are trade secrets of the Company. The Employee commits not to take advantage of and/or use such lists except with the specific written consent of the Company.
|
35.2.
|
Not to work, during the period of this agreement and for a period of 12 months thereafter, for any reason, in Israel or elsewhere, whether directly or indirectly, in any business, job, or other occupation which competes in any way with the Company's and/or its related companies' business in the field of Contact/contactless smart cards and IoT.
|
35.3.
|
Not to disparage the Company or its shareholders or its customer.
|
36.
|
The Employee and the Company hereby declare that the Determining Wage as defined in this Agreement was agreed upon in consideration of, among other things, the non-competition obligations applicable to employee pursuant to Section 34 above.
|
K.
|
Intellectual Property and Instruments of Service
|
37.
|
Any invention, patent, intellectual property right, trademark, trade secret, knowhow or information developed by the Employee due to and/or during his employment with the Company shall belong to the Company and the Employee agrees to execute any document that shall be required to substantiate Company's rights to the same.
|
L.
|
Miscellaneous
|
38.
|
The payments and benefits granted under this agreement are subject to tax withholdings and other obligatory withholdings that the Company must withhold by law and nothing in this agreement shall be deemed as obligating Company to pay any tax or payment which Employee is obligated to pay, except the benefit value of meals which shall be grossed up by company to which Employee and as may be otherwise agreed.
|
39.
|
The terms of employment with the Company are solely as set forth in this personal employment contract between Employee and Company and Employee will not be entitled to any payment or other benefits relating to his employment with the Company or termination thereof except as specifically provided in this agreement.
|
40.
|
This agreement will supersede all prior agreements between Employee and Company whether written or oral.
|
41.
|
Any change or cancellation of a term of this agreement shall be solely in writing and executed by both parties.
|
42.
|
The address of the parties for purposes of this agreement shall be as first written hereinabove and any notice, document or pleading that will be sent by one part to the other to the above addresses shall be deemed as delivered to the recipient if delivered by hand – at the time of delivery and if delivered by registered mail – 72 hours after mailing.
|
/s/ On Track Innovations Ltd.
On Track Innovations, Ltd.
|
/s/ Yishay Curelaru
Employee
|
1.
|
Date of commencement of Employment:
|
January 31, 2016
|
2.
|
Direct Supervisor:
|
Company CEO
|
3.
|
Pay Basis:
|
Monthly Salary
|
4.
|
The Employee will be entitled to a personal vehicle for purposes of performing his duties in accordance with the type and/or class of vehicle customary in the Company for employee's position. All regular expense relating to the use of the vehicle, except for fines of any type, will be borne and paid by Company. Taxes for the benefit value of the vehicle will be borne by Company.
|
5.
|
The total regular payments to be paid to Employee as salary (gross) are: 38,000 NIS gross per month (hereafter, the "Determining Wage" or "Salary").
|
6.
|
Payments for Social Benefits:
Social benefits will be paid from the commencement of employment.
|
7.
|
Number of annual leaves days to be granted to Employee is 18 days.
|
8.
|
Utilization of leave will be with prior approval from direct supervisor.
|
9.
|
Subject to applicable law and the Company's compensation plan and policies from time to time, the Employee will be entitled to participate in the annual bonus plan for officers of the Company, pursuant to which he will be entitled to a maximum bonus of up to 4 monthly salaries, according to the annual bonus plan to be approved by the Compensation Committee and the Board of Directors of the Company.
|
10.
|
Subject to approval of the Board of Directors and the conditions set forth in the law, the Company's management will recommend the grant of 40,000 share options from the Company's option plan to the Employee at an exercise price equal to the average share price of the Company's stock in the thirty days before the grant date, which options shall vest in three equal annual portions commencing at the conclusion of 12 months after the grant date and all in accordance with the Company's option plan.
|
11.
|
The prior notice period for termination of employment by the Company or by the Employee shall be 90 days.
|
1.
|
In this Undertaking, the following terms shall have the following meaning:
|
|
1.1.
|
“
Confidential Information
” means any and all information relating to Company’s proprietary technology or business including, without limitation, information, data, know-how, formulas, concepts, tests, drawings, specifications, applications, designs and trade secrets, patents, know-how, technology data and all other information, design methodology, engineering and manufacturing processes and data and information related to Company’s products or their development, equipment, suppliers, sales, customers, potential customers, business operations and plans, financial situation, members, employees and investors.
|
|
1.2.
|
“
Confidential Documents
” means any documents containing Confidential Information, including without limitation: (i) any documents, notes, memoranda, summaries, analyses, paper works, sketches, designs, charts, specifications, prints, compilations, or any other writings relating to Confidential Information, and any other materials embodied in drawings, floppy discs, tapes, CD ROM, hard drives, software or in any other possible way containing or relating to Confidential Information or any part thereof, whether or not prepared by Company or on its behalf, (ii) all documents received, used, or that shall be received or used, by me in relation with my employment with Company, and/or (iii) the contents of such Confidential Documents as stored in my memory.
|
|
1.3
|
“
Competing Goods
” means any goods sold in competition with the Prescribed Goods;
|
|
1.4
|
“
Competing Services
” means any services rendered in competition with the Prescribed Services;
|
|
1.5
|
“
Prescribed Areas
” means Israel or in any other part of the world in which Company conducts its business;
|
|
1.6
|
“
Prescribed Customers
” means any person who is or was a customer of Company at the termination date; or
who is or was a customer of Company at the termination date or who was a potential customer with which I had been engaged in negotiations with a view to doing business on behalf of Company within the period of 6 (six) months preceding the termination date;
|
|
1.7
|
“
Prescribed Goods
” means any products sold by Company in the ordinary course of business as at the termination date or which is then included in any strategic plan of Company;
|
|
1.8
|
“
Prescribed Services
” means any services rendered by Company in the ordinary course of business as at the termination date or which is then included in any strategic plan of Company;
|
|
1.9
|
“
Prescribed Suppliers
” means any person who is or was a supplier of Prescribed Goods and/or Prescribed Services to Company at the termination date; or is or was a supplier of Prescribed Goods and/or Prescribed Services to Company at the termination date with which I had been engaged in negotiations with a view to doing business on behalf of Company within the period of 6 (six) months preceding the termination date;
|
|
1.10
|
“
Restraint Period
” means a period of 12 (twelve) months calculated from the termination date;
|
|
1.11
|
“
Termination Date
” means the date upon which my employment with the Company ceases or is terminated for any reason whatsoever;
|
2.
|
I am fully aware that Confidential Information and Confidential Documents are the exclusive property of Company, and that they were made or shall be made available to me and for my use solely for the purpose of my work as an employee of Company.
|
3.
|
I undertake towards Company as follows:
|
|
3.1.
|
To maintain as fully confidential all Confidential Information and Confidential Documents;
|
|
3.2.
|
Not to disclose or divulge to any third party, or allow any third party access to any of Confidential Information or Confidential Documents, or use any of thereof, whether directly or indirectly, save exclusively for the purposes of my work as an employee of Company.
|
|
3.3.
|
Not to misuse any of Confidential Information or Confidential Documents, or any part thereof, in a manner other than the usual use of Confidential Information and Confidential Documents and for a purpose other than the purpose for which Confidential Information and Confidential Documents were divulged to me.
|
|
3.4.
|
Not to make public or divulge in any way Confidential Information and Confidential Documents or any part thereof.
|
|
3.5.
|
Not to duplicate, copy, scan, or create in any other way copies of Confidential Documents or any part thereof, except for the purpose for which the Confidential Information and Confidential Documents were divulged to me.
|
|
3.6.
|
Upon demand of Company, at any time whatsoever, to return to Company the Confidential Information and Confidential Documents or any part thereof or copies thereof in any form whatsoever, and to, if so required, confirm in writing to Company that all Confidential Information and Confidential Documents or any copies thereof in any form whatsoever which had been in my possession have been returned to Company, and that I did not retain any copies of it, including copies made by electronic forms.
|
|
3.7.
|
Not to remove from Company’s premises or take for my use any of Confidential Information and Confidential Documents without Company’s prior written approval, unless if such removal is made strictly for the purposes of performing my undertakings towards Company.
|
4.
|
I agree and accept that:
|
|
4.1.
|
Company reserves all rights in any inventions, patents, copyrights, designs, and any other intellectual property invented or devised by it in relation to Confidential Information and Confidential Documents.
|
|
4.2.
|
Any invention including any patent or patent application and any copyrights or any other intellectual property invented or created by me during my employment with Company or as a result of my employment with Company (the “
IP
”), shall be the exclusive property of Company, and I do not have and shall not have any demand or claim against Company relating to the IP and no monetary rights therein. This Section will be considered for any purpose as "Contract" according to the meaning of this term in Section 134 of the Patents law. In other words, I hereby agree that I will not be entitled for any compensation for IP, and that I will not address in this matter to The Payment and Compensation Commission ("Hava'ada Leinianey pitzuim vetamlugim") by virtue of the Patents law. Despite of the above, it is hereby agreed that if Company will be forced, by any entity or authority, to pay me or whoever in my place, any compensation due to the rights stipulated above, this payment will be considered as my debt to Company, hence Company shall be entitled to offset and deduct this payment from any other sum that I am entitled to from Company according to this Undertaking (or according to other binding agreement between me and Company), including from the sum that I will be entitled to receive from Company as mentioned above.
|
|
4.3.
|
I undertake to sign any document and to do any other act required in order to assign and register the said rights in the name of Company, or to prove Company’s rights, if and to the extent that this is required in the opinion of Company and/or Company’s legal counsels.
|
|
4.4.
|
I shall not challenge Company's intellectual property rights in any way, including without limitation, by filing to any court, patent or other authority, a claim, opposition or request for cancellation against such rights.
|
5.
|
The restrictions of use and disclosure set forth in this undertaking shall not apply to any Confidential Information and Confidential Documents which after they were disclosed became, available to the general public, through no breach of a confidentiality undertaking towards Company.
|
6.
|
It is recorded that in the course of my duties I (i) have acquired and/or will acquire considerable know-how in and will learn of Company's techniques relating to the business; (ii) will have access to names of customers with whom Company does business, whether embodied in written form or otherwise; (iii) will have the opportunity of forging personal links with customers of Company; and (iv) generally will have the opportunity of learning and acquiring the trade secrets, business connections and other Confidential Information appertaining to Company's business.
|
|
6.1
|
Carry on or be interested or engaged in or concerned with or employed by any company, close corporation, firm, undertaking or concern which carries on, in the Prescribed Areas any business which sells Prescribed Goods and/or Competing Goods or renders Prescribed Services or Competing Services or in the course of which Prescribed Goods or Competing Goods are sold and/ or Prescribed Services or Competing Services are rendered; provided that I shall not be deemed to have breached my undertaking by reason of my – (i) holding shares in Company; or (ii) holding shares in any company the shares of which do not in aggregate constitute more than 5% (five per cent) of any class of the issued share capital of such company and which are listed on a recognised stock exchange if the shares owned by me or by my relatives (as defined in the Israeli Companies Act 1999) which do not in the aggregate constitute more than 5% (five per cent) of any class of the issued share capital of such company.6.2
|
|
6.2.1
|
Not to solicit, on my own account or for any other person, the services of, or endeavor to entice away from Company any director, employee, consultant or a subcontractor of, or any other person related to Company, who during the period of 12 months prior to such termination occupied a
senior or managerial
position in relation to Company, and/or who was likely (in the opinion of Company) to be: (i) in possession of Confidential Information; or (ii) able to influence the customers’ connections of Company (whether or not such person would commit any breach of his contract of employment or engagement with Company).
|
|
6.2.2
|
Furnish any information or advice (whether oral or written) to any prescribed customer that I intend to or will, directly or indirectly, be interested or engaged in or concerned with or employed by any company, close corporation, firm, undertaking or concern carried on in any of the Prescribed Areas which sells Prescribed Goods and/or Competing Goods or renders Prescribed Services and/or Competing Services or in the course of which Prescribed Goods and/or Competing Goods are sold and/or Prescribed Services or Competing Services are rendered during the Restraint Period; or
|
|
6.2.3
|
Furnish any information or advice (whether oral or written) to any Prescribed Customer or use any other means or take any other action which is directly or indirectly designed, or in the ordinary course of events calculated, to result in any such Prescribed Customer terminating his association with Company and/or transferring his business to or purchasing any Prescribed Goods or Competing Goods or accepting the rendering of any Prescribed Services or Competing Services from any person other than the Company, or attempt to do so.
|
|
6.3
|
Solicit orders from Prescribed Customers for the Prescribed Goods and/or any Competing Goods and/or the Prescribed Services and/or any Competing Services; or canvass business in respect of the Prescribed Goods and/or any Competing Goods and/or the Prescribed Services and/or Competing Services from Prescribed Customers; or sell or otherwise supply any Prescribed Goods and/or Competing Goods to any Prescribed Customer; or render any Prescribed Services and/or Competing Services to any Prescribed Customer; or purchase any Prescribed Goods and/or Competing Goods from any Prescribed Supplier or accept the rendering of any Prescribed Services and/or Competing Services from it; or solicit appointment as a distributor, licensee, agent or representative of any Prescribed Supplier in respect of Prescribed Goods and/or Prescribed Services, including on behalf of or for the benefit of a Prescribed Supplier.
|
|
6.4
|
Each of the undertakings set out in this Section 6 (including those appearing in a single sub-section) is severable
inter alia
as to (i)
the nature of interest, act or activity; (ii) the categories of persons falling within the definition of Prescribed Customers; (iii) the categories of goods falling within the definition of the Prescribed Goods and Competing Goods; (iv) the categories of services falling within the definition of the Prescribed Services and Competing Services; and (v) the categories of persons falling within the definition of Prescribed Supplier.
|
7.
|
It is agreed and recorded that, without prejudice to any right or remedy which is available to Company under any law or agreement, the unauthorized disclosure or use of any Confidential Information and Confidential Documents or a breach of my undertakings pursuant to Section 6 above, will cause immediate or irreparable injury to the Company and that the Company cannot be adequately compensated for such injury in monetary damages, then, in order to safeguard the Company from any possible breach of confidentiality, I consent in advance that Company will be permitted to obtain, from any court or tribunal, any temporary or permanent injunctive relief necessary to prevent such unauthorized disclosure or use, or threat of unauthorized disclosure or use.
|
8.
|
This Undertaking shall form an integral part of my employment agreement with the Company and a breach of any of my obligations hereunder, shall also constitute a material breach of such employment agreement.
|
9.
|
This Undertaking shall be interpreted and construed in accordance with the laws of the State of Israel and the competent courts in Tel-Aviv-Jaffa shall have exclusive jurisdiction for all matters pertaining or relating thereto.
|
10.
|
If any condition, term or covenant of this Undertaking shall at any time be held to be void, invalid or unenforceable, such condition, covenant or term shall be construed as severable and such holding shall attach only to such condition, covenant or term and shall not in any way affect or render void, invalid or unenforceable any other condition, covenant or term of this Undertaking, and this Undertaking shall be carried out as if such void, invalid or unenforceable term were not embodied herein.
|
11.
|
Unless specifically limited herein, my undertakings hereunder shall be valid: (i) during the term of my employment with the Company, and unless the Company waived such right in writing, following termination of my employment with the Company (and will survive such termination or expiration) without time limitation; (ii) in Israel or outside Israel, and - (iii) whether such undertakings may or may not be registered under any register prescribed by law.
|
/s/ Yishay Curelaru
Employee's signature
|
January 31, 2016
Date
|
|
Exhibit 21.1
|
1.
|
Easy Park Ltd.
– incorporated under the laws of the State of Israel.
|
2.
|
PARX Ltd.
– incorporated under the laws of the State of Israel.
|
3.
|
OTI America Inc.
– incorporated under the laws of Delaware, U.S.A.
|
4.
|
OTI PetroSmart (Pty) Ltd.
– incorporated under the laws of the Republic of South Africa.
|
5.
|
ASEC S.A. (Spolka Akcyjna)
– incorporated under the laws of the Republic of Poland.
|
6.
|
Easy Park Israel Ltd.
– incorporated under the laws of the State of Israel.
|
7.
|
Softchip Israel Ltd.
(under voluntary liquidation) – incorporated under the laws of the State of Israel.
|
8.
|
Softchip Technologies (3000) Ltd.
(under voluntary liquidation) – incorporated under the laws of the State of Israel.
|
9.
|
CPI Communication Israel Ltd.
(under voluntary liquidation)– incorporated under the laws of the State of Israel.
|
|
Exhibit 23.1
|
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
The Board of Directors
|
|
On Track Innovations Ltd.
|
|
We consent to the incorporation by reference in the registration statements on Form S-8 (No. 333-101491, No. 333-116429, No. 333-128106, No. 333-140786, No. 333-149034, No. 333-149575, No. 333-173075, No. 333-179306, No. 333-192443 and 333-196842), and on Form S-3 (No. 333-199180) of On Track Innovations Ltd. of our report dated March 28, 2016, with respect to the consolidated balance sheets of On Track Innovations Ltd. and its subsidiaries as of December 31, 2015 and 2014 and the related consolidated statements of operations, comprehensive loss, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2015, which report appears in the December 31, 2015 annual report on Form 10-K of On Track Innovations Ltd.
|
|
/s/ Somekh Chaikin
|
|
Certified Public Accountants (Isr.)
|
|
A Member Firm of KPMG International
|
|
Tel Aviv, Israel
|
|
March 28, 2016
|
|
Exhibit 31.1
|
|
CERTIFICATION
|
I, Shlomi Cohen, certify that:
|
1.
|
I have reviewed this annual report on Form 10-K of On Track Innovations Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) of the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Shlomi Cohen
——————————————
|
|
Shlomi Cohen
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
Exhibit 31.2
|
|
CERTIFICATION
|
I, Yishay Curelaru, certify that:
|
1.
|
I have reviewed this annual report on Form 10-K of On Track Innovations Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) of the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Yishay Curelaru
|
|
——————————————
|
|
Yishay Curelaru
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
Exhibit 32.1
|
|
CERTIFICATION PURSUANT TO
|
|
18 U.S.C. SECTION 1350
|
In connection with the Annual Report (the “Report”) of On Track Innovations Ltd. (the “Company”) on Form 10-K for the period ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof, I, Shlomi Cohen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: March 28, 2016
|
By:
|
/s/ Shlomi Cohen | |
Shlomi Cohen | |||
Chief Executive Officer
|
|||
|
Exhibit 32.2
|
|
CERTIFICATION PURSUANT TO
|
|
18 U.S.C. SECTION 1350
|
In connection with the Annual Report (the “Report”) of On Track Innovations Ltd. (the “Company”) on Form 10-K for the period ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof, I, Yishay Curelaru, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: March 28, 2016
|
By:
|
/s/ Yishay Curelaru | |
Yishay Curelaru | |||
Chief Financial Officer
|
|||