NFC and contactless vendor On Track Innovations announced reduced losses in the second quarter and first half, along with share purchases by its directors; while a court ruling allows the company’s patent suit against T-Mobile USA to proceed.
Revenue for the quarter was $9.2 million, a 19% year-over-year increase. OTI’s announcement attributed this at least in part to a 30,000-unit order for NFC and contactless payment readers, as well as the awarding of a contract for three mass transportation e-ticketing projects in Poland, which will total $50 million over the next five to ten years, the vendor predicted. But first half revenue was still down by 12.3% to $17.8 million.
OTI is increasing its focus on contactless and NFC, including trying to monetize its patents on these technologies.
The Israel-based vendor has sold what it considers noncore units, Smart ID and Parx France, the latter a subsidiary distributor of electronic parking products. The $22.5 million sale of the Smart ID unit is expected to close in November 2013. CEO Ofer Tziperman said in a statement that the “second quarter results were consistent with our expectations and do not reflect our recent initiatives to divest noncore, B2C operations.”
Meanwhile, OTI announced this week that a judge in New York had denied a request for reconsideration of a favorable first-step ruling in the vendor’s patent lawsuit against T-Mobile USA.
In March 2012, OTI filed a patent infringement suit against the mobile carrier, alleging that T-Mobile’s sale of certain NFC- capable smartphones infringes on one of its patents. In June, OTI said the U.S. District Court for the Southern District of New York had adopted its “constructions of disputed terms in the case,” a ruling from a so-called Markman (pretrial) hearing. T-Mobile promptly filed for reconsideration, which was denied, which means that the suit can move forward.
OTI on Wednesday also announced that “several members” of its board of directors were “actively buying” company shares on the open market. The unspecified number of directors had purchased 735,000 shares during open trading windows and in compliance with the company’s policy on insider trading.
The directors buying shares are likely the same individuals who participated in a successful proxy fight. The group of veteran proxy fighters have a track record of finding companies they deem undervalued, leading proxy battles for a takeover, and then purchasing shares and revamping or selling the companies in hopes the price of their shares will increase substantially.
In Dec. 2012, OTI shareholders elected eight new directors, and co-founder Oded Bashan was ousted from his roles as CEO and chairman; he maintained a seat on the board of directors until June 2013. His son, Ohad Bashan, also resigned from his positions of president and chief marketing officer.
The two Bashans received a combined $2.5 million in severance pay and other termination benefits following negotiations with the new board, which evidently persuaded them to accept less than the combined $8 million they would have received under a sweetheart deal with the previous board.
Even the reduced severance package raised some eyebrows, as sources at the time told NFC Times that some in the new board were opposed to “golden parachute” for the Bashans, in light of the company’s chronic losses during their tenure.
Prior to the takeover, the company had lost a cumulative $175.3 million between 1998 and the third quarter of 2012, according to Israeli business publication Globes, and the company has never turned a profit since its founding in 1990.
In the quarter following the takeover, sales dropped 32%, and the already low share price had dropped even further by the time Bashan resigned from the board in June 2013. By July, shares had rallied slightly, reaching a price slightly higher than that of Dec. 2012 but still well below 1998 levels.
The company reported a $2.3 million net loss in the second quarter of 2013, an improvement from a $4.8 million net loss during the second quarter of 2012. The loss for the first half was $5.3 million, down from just under $7.4 million in losses for the same period in 2012.
Investors appeared to welcome OTI’s announcements this week, sending the company’s shares up by more than 25% Wednesday–not enough to make up a 34% drop over the previous two weeks, however.