Two Board Members Resign as OTI Agrees to Special Shareholders Meeting in Proxy Fight

Nov 26 2012

Two members of the board of Israel-based On Track Innovations have resigned, following pressure from dissident shareholders seeking to capture control of the board of the financially struggling contactless and NFC supplier.

Mark Green and David Stone submitted their resignations today, effective immediately, according to a company filing with the U.S. Securities and Exchange Commission. They quit a day after OTI’s board gave in to demands by dissident shareholders to call a special shareholders meeting before the end of the year to vote on removing three existing board members and to consider electing a slate of eight board candidates. OTI had earlier rejected the demands. UPDATE: That special shareholders meeting is now scheduled for Dec. 30. END UPDATE.

As NFC Times reported Monday, OTI’s second largest investor, Jerry Ivy, who is backed by veterans of successful proxy fights at a number of other, mostly American, companies, is seeking to seize control of the board of OTI, which hasn’t turned a profit in its 22-year history.

In the special meeting, Ivy and his allies will try to expand the size of the board from nine to 11 members and then get their slate of eight board candidates elected. 

The shareholder group was also planning to try to remove three existing board members at the special meeting: Green and Stone, along with Eli Akavia. That task is made easier with the resignations of two of the three.

UPDATE: Akavia gave notice on Nov. 26 that he has also resigned from the board, effectively immediately. END UPDATE.

They were targeting these three members because they would be the easiest to remove. The other three OTI board members can only be removed for cause or by shareholders representing 75% of shares. The latter condition applies to OTI's co-founders, Oded Bashan and Ronnie Gilboa, Ivy’s attorney Mark R. Beatty told NFC Times.

The shareholder group had already voted down three company-endorsed board nominees, on Nov. 9, including sitting board member Ora Setter. So with the two resignations, OTI's board has only four sitting members, at present.

Stone, a retired lawyer in New York, in response to a request for comment from NFC Times, said that, “given the sensitivities of the situation, I believe that it is most appropriate for me to refrain, at least for now,” from commenting.

Ivy and his allies have insisted that their goal is not to remove either Bashan, who is OTI’s chairman and CEO, or his son, Ohad, who is OTI’s president and chief marketing officer. Instead, they say they want a new board that can capitalize on OTI’s engineering talent and its more than 100 patents, something it has had ample opportunity to do over the years, they contend.

But most observers believe the shareholder group would sack the Bashans from their executive positions if they are able to wrest control of the company by electing a new board.

And that is looking increasingly likely given the decision to hold the special shareholders meeting and the resignations of Green and Stone.

The slate of board members that Ivy wants shareholders to elect includes proxy battle veterans Dilip Singh, Rick Coleman, Chuck Gillman and Jeff Eberwein. All four are also trying to take board seats as part of a proxy fight for control of U.S.-based semiconductor reliability test systems provider Aetrium. And the four are also waging a proxy battle at NTS Inc., a U.S.-based Internet and telecommunications network services supplier.

They and other members of the slate of eight are involved in other proxy battles, as well. The shakeups often lead to sale of the companies and a sharp increase in the share price.

Ivy bought into OTI six years ago and now owns nearly 10% of the company. OTI shares hit a high of more than $16 in late 2005, but earlier this week were trading at just $1.24 a share, not far from the all-time low, and Ivy contends OTI’s board is to blame. 

Bashan, in the company’s third quarter earnings report released today, noted that the “actions of the dissident shareholders are causing major disruption in running our day-to-day operations.” He added that the situation, “hurts all of our stakeholders.”

Bashan, in a letter to shareholders last month, had said that the shareholder dispute had caused some customers and suppliers to question whether the current management team would be around to support any contracts they sign. “They are concerned about who would replace it (management) if dissident shareholders took over the business.”

In the letter, Bashan asks shareholders for more time, saying the company believes that a mix of lower costs and revenue growth would put the company “in a strong position to achieve profitability in 2013.” 

OTI reported that its third quarter revenue increased by 9% from a year earlier, to $9.3 million, but sales for the first nine months of the year were down by 16% to $29.7 million from the same period in 2011.

The company posted a net loss of $1.9 million in the third quarter, which is improved from its $3.6 million loss in the third quarter of 2011. But for the first three quarters of the year, losses were up by 28% to $7.6 million.

The company said during the third quarter it received orders for $2 million worth of contactless and NFC payment readers for distribution in the U.S. Oded Bashan noted in his letter to shareholders in October that the company had won the orders thanks to competitor Vivotech having to sell its reader business. Vivotech went out of business last month after selling off its other assets.

OTI also received an order for 17,000 NFC and contactless payment readers for Europe during the quarter. And it introduced its Copni Wave plug-in NFC payment attachment for mobile phones.

HEADLINE NEWS

TI’s NFC Sensor Transponder Latest Product to Target Wearables, IoT Markets

Dec 20 2014

U.S-based Texas Instruments said it expects to see prototype launches of devices using its recently launched NFC sensor transponder in the first quarter of 2015, as the U.S.-based chip maker seeks a larger stake in the promising markets for wearables, Internet of Things and industrial applications that sometimes require an NFC interface.

NFC SIMs in Short Supply for Chunghwa Telecom's NFC Rollout

NFC Times Exclusive – TAIPEI, Taiwan – Gemalto announced this week that it is providing NFC SIM cards for Chunghwa Telecom’s commercial launch of NFC services, but availability of the SIMs to the telco’s subscribers are extremely limited and none of the telco’s shops or service centers currently have the cards, NFC Times has learned.

Magyar Telekom Launches Hungary’s First NFC Payments Service; Hopes to Avoid Threats to SIM-Based NFC

Dec 11 2014

NFC Times Exclusive – Hungary’s largest telco, which last week launched NFC payments commercially, believes it can avoid problems and threats encountered by other telcos launching

People on the Move: Awad Returns to Broadcom’s NFC Program as Chip Maker’s NFC Business Lags Behind Chief Rivals

Dec 4 2014

NFC Times Exclusive – Mohamed Awad, who formerly headed Broadcom’s NFC business, has returned to oversee the program, among other duties, as Broadcom looks to reinvigorate a progra

NFC Telco Pioneer Turkcell Pulls Back on Support for Technology

NFC Times Exclusive – Turkey’s largest mobile operator, Turkcell, one of the first telcos globally to launch NFC service commercially, has pulled back from the technology, having seen too little take-up for NFC retail payments, NFC Times has learned.

Gemalto Seeks to Reposition TSM Offer as ‘Hub,’ as It Tries to Counter Threats to Its NFC Business; but is It Really a Hub?

Dec 1 2014

NFC Times Exclusive – With the role of the TSM coming under increasing pressure for being too complex and costly, Gemalto, the world’s largest TSM, is seeking to reposition its TSM offer–promoting it as being part of a large “trusted services hub,” as the France-based vendor tries to convince more banks to provision their credit and debit cards on NFC SIMs.

NXP Seeks to Open Up Access to Embedded Chips in Android Phones

Nov 20 2014

With interest growing again in embedded secure elements in NFC phones to store applications, thanks to Apple Pay, NXP Semiconductors is trying to drive demand for its embedded chips in Android phones by making it easier for service providers to load their applications on the silicon.

Orange NFC Chief: We Want to Talk to Apple about Putting Orange Cash on iPhone

NFC Times Exclusive: The head of mobile payments for France-based mobile operator Orange Group said he wants to talk to Apple about enabling the telco’s co-branded payment application, Orange Cash, on the Apple Pay platform. 

Visa, MasterCard: Secure In-App Payments with Apple Pay a ‘Game Changer,’ but Card-Not-Present Rates Remain

NFC Times Exclusive: While the thought of more consumers tapping their phones to pay in stores is attracting the most attention with the launch of Apple Pay, it’s the prospect of users paying for purchases in mobile apps with Apple Pay that could be the real breakthrough, say representatives of Visa and MasterCard Worldwide. 

OTI Reduces Growth Estimate and Pushes Back Positive EBITDA Prediction

Israeli-based NFC and contactless company On Track Innovations pushed back its prediction for positive adjusted EBITDA back to the third quarter of 2015 and reduced its estimate for 2014 revenue growth to 10%, down from the 30% it had predicted previously, the company reported in its quarterly earnings call.

DeviceFidelity Acquired by mPOS and Reader Component Supplier Kili

Canada-based Kili Technology, which supplies hardware modules, firmware and IP for mobile point of sale, readers and other payment-acceptance devices, has acquired NFC-accessories vendor DeviceFidelity.

Subway Eschews Exclusivity, Supports Multiple Mobile Wallets

NFC Times Exclusive: LAS VEGAS, Nev. – While a number of major U.S. merchants have pledged to only accept one mobile-payments service, that is not the case for giant Subway sandwich chain, which has now introduced at least three major options for its customers to pay with their smartphones.