Ofer Tziperman - CEO Shay Tomer – CFO

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Welcome everyone, and thank you for joining us today. Our results for the second quarter of 2013 were issues in a press release last Wednesday, August 28, which is available in the investor relations section of our website.

Our financial results for the quarter were consistent with our expectations and do not reflect our recent divestures of certain noncore and business to consumer operations. However, Q2 was highlighted with some key customer wins in our core business.

This included a 30,000-unit order for our NFC and contactless payment readers and a $50 million contract to build and operate e-ticketing for mass transit systems throughout Poland. We also launched a new intellectual property monetization campaign that led to the favorable Markman hearing decision in our patent infringement suit against T-Mobile USA, which established the forced adoption of our [unintelligible] adoption of our proposed construction of all disputed terms.

I’d like to talk more about our new corporate initiatives and other operational highlights, but first I would like our CFO, Shay Tomer, to take us briefly through our financial performance for the quarter. Shay?

Thank you, Ofer, and welcome, everyone. Now for our financial results for the second quarter 2013.

Revenues increased 19% to $9.2 million from $7.7 million in the same year-ago quarter. The improvement was mainly driven by a 94% year over year increase in payment product revenues from our NFC readers sold to the U.S.

market. The increase in revenue was also driven by an increase in SmartID revenues offset by decreasing OEM revenue.

Now, breaking down our total revenue by [unintelligible] and the percent of total revenue. SmartID revenue was $3.4 million, or 37%.

Payment revenue was $2.6 million or 28%. OEM revenue was $1.2 million, or 13%.

The [unintelligible] revenue was $1.1 million, or 12%. [Parking] revenue was $700,000 or 8%, and finally, [unintelligible] smart product revenue was $200,000, or 2% of total revenue.

Looking at our geographic regions and the portion of each region’s contribution to total revenue, Africa accounted for $3.7 million or 41%. Europe accounted for $2.9 million, or 31%.

North America accounted for $1.4 million, or 16%. South America accounted for $700,000, or 8%, and finally Israel accounted for $400,000, or 4% of total revenue.

Our operating expectations in Q2 2013 decreased 8% to $7.2 million from $7.9 million in the same period last year. The decrease was mainly due to lower headcount and reduced management costs.

We continue to remain focused on tightly managing our expenses and overhead. Our net loss for the second quarter of 2013 totaled $2.3 million or $0.07 per share.

This loss represents a reduction of more than half from the net loss of $4.8 million or $0.15 per share in the same year-ago quarter. Adjusted EBITDA loss, a non-GAAP measure of performance, totaled $1.5 million, which also improved substantially from an adjusted EBITDA loss of $3.5 million in the same year-ago quarter.

The improvement was due to increased revenue and reduced operating expenses. Now turning to the balance sheet, we had cash, cash equivalents, and short term investments of $9.7 million at June 30, 2013, which compares to $18 million [at the end of] 2012.

The decrease was partly due to a purchase of $1.7 million in equipment to support our expansion in new mass transit projects in Poland. We also repaid $2.3 million in short term bank loans in Q2, further reducing our short term debt and current maturities of long term bank loans by more than $3.3 million since the end of last year.

However, our cash balance at the end of Q2 does not reflect the $10 million of cash we expect to receive from the SmartID divestiture at closing. We expect to receive up to an additional $12.5 million over time, based on the future performance of the divested SmartID operations as well as 25% of [unintelligible] future profit on an EBITDA basis.

Also, we’ll give additional color on this reduction in a moment. For now, this completes my financial summary.

I would like to turn it back over to Ofer to provide the further [unintelligible] review of our operational activity and outlook. Ofer?

Thank you, Shay. During the second quarter, we continued to experience solid [unintelligible] across all our core business segments.

In our NFC and contactless reader segment, we received a 30,000-unit order from a leading provider of integrated technology solutions. Our sales team, led by our new chief sales and marketing officer, Shlomi Eytan, is working to expand our contactless reader segment globally.

In fact, we expect to more than double our contactless reader shipments in 2013 to about 110,000 units. This growth is consistent with the expansion of the fast-growing multibillion dollar NFC market.

According to Juniper Research, mobile payments, ticketing, and active control are the fastest growing NFC segments with the mobile payment market expected to surpass $1.3 trillion in 2017. In the future, we anticipate every vending machine and coin operated service to be upgraded to support NFC payments.

This transition is being strongly promoted by the credit card companies, including Mastercard and Visa, as well as by mobile network operators through organizations like Isis in the United States. We anticipate Isis’ nationwide mobile wallet rollout later this year will mark a major inflection point for the NFC industry in terms of universal adoption and strengthening the NFC ecosystem.

These trends and developments are paving the way toward the growing use of cashless solutions around the world. As a major IT supporter and technology provider with more than 20 years of experience providing [unintelligible] proven NFC and contactless small [unintelligible] solutions, we look forward to paying an instrumental role in the success of this multibillion dollar initiative.

Moving on to our other business segments, in our payment segment, our wholly owned [unintelligible] subsidiary, [unintelligible] ASEC, was awarded three multimillion dollar projects to build and operate e-ticketing mass transit systems throughout Poland. These projects are expected to generate more than $50 million in revenue.

It’s important to note that the [unintelligible] project is for 10 years while the other two projects are for five years. Additionally, we continue our development effort around the OTI Copni line of products, like the new Copni Wave.

Copni, or contactless payment and NFC add-on, bridges the immediate gap between the demand for NFC and the lack of handset with embedded NFC capacity. However, Copni is serving the needs of the industry far beyond an intermediate period.

In fact, it provides a clear advantage to the banking community to retain control of banking transactions and not losing it to the new emerging telecommunication forces. Moreover, our Copni Wave is also used as a platform-agnostic public infrastructure, or PKI.

This physical element is becoming a mandatory security requirement in a world that is experiencing more vicious cybersecurity threats on web-based financial transactions. Copni-enabled mobile phones can be used in a broad range of payment transactions including prepaid, credit and debit, as well as loyalty programs.

We are already seeing strong interest from the market for our innovative and [unintelligible] Copni products, particularly in the banking industry and from mobile network operators. In our vehicle fueling segment, we continue to make solid progress across all geographic markets, demonstrated by a growing number of implementations.

Our strategic partnership with [unintelligible] a leading manufacturer and service provider of fuel dispensing and automation equipment is gaining momentum in Europe. OTI EasyFuel Plus technology has been integrated into [unintelligible]’s point of sale controllers for implementation at both commercial fleet and retail petroleum stations across 11 countries since the partnership was formed in September of 2010 and the implementation for a prominent petroleum retailer is underway.

As an integral part of [unintelligible]’s offerings, EasyFuel Plus reduces fraud and improves fuel management. More than 250 locations over 1,000 nozzles and 7,500 vehicles have been installed by [unintelligible] to date.

OTI Africa manages the integration and its vehicle identification system application provides the [unintelligible] for the business rules. The continued adoption of the EasyFuel [unintelligible] technology reflects the increasing strength of our strategic partnership and [unintelligible]’s ability to successfully demonstrate how our technology reduces fraud and simplifies the payment processes.

The vehicle fueling segment is an important growth engine for OTI. We continue to penetrate new and existing customers in the market and expect to announce additional strategic relationships with leading vendors that have already integrated OTI’s solutions into their offerings.

In fact, our petroleum management solution has now been deployed in 39 markets globally. Our subsidiary, OTI Africa, is currently managing the growing number of customers in Africa, Asia, Europe, Latin America, and is about to enter the North American market.

OTI Africa continues to generate volume-based annuity revenues from its Fuel Masters program with BT and [unintelligible]. OTI Africa recently extended its product offering to include complete package solutions for home-based customers and mobile [unintelligible] as well as site-monitoring, web-based reporting, and comprehensive [unintelligible] service.

These new offerings have helped OTI Africa support its channel partners and distributors across diverse geographies. As a result, OTI Africa’s contribution to OTI’s revenues continues to increase annually.

In our parking segment, after successful final deployment, the cities of Bethlehem, Pennsylvania and Lynchburg, Virginia have recently joined our EasyPark in-vehicle parking meter system, and began full-scale rollout to its residents. The cashless parking payment solution offers local drivers a simplified and convenient way to pay for parking while providing municipalities increased parking revenues as well as reduced parking management and maintenance overhead.

In April of this year, the city of Austin, Texas also launched EasyPark for its residents. The deployment showcases the flexibility of our patented EasyPark technology, which allows commercial vehicles to utilize specialty EasyPark devices in order to park in designated areas without being ticketed.

The feedback we received from customers is very positive and we encourage you to review it on EasyPark’s website at www.easyparkusa.com. These major wins demonstrate the effectiveness of our EasyPark technology in the field.

Our customers are able to achieve significant return on investment, driven by increased operational efficiencies and parking revenues. These deployments serve as an ideal example for other municipalities around the globe looking to improve parking efficiencies through technology.

We have enriched our parking solution with a mobile phone payment service, which is currently being deployed in a few cities worldwide. The progress we are making with new and existing customers is being driven by our new senior leadership team.

We have significantly revamped and strengthened our senior management team with the additions of Shay as our new CFO, Shlomi as our new chief sales and marketing officer, and Hanan Caspi as our new vice president of operations. Additionally, OTI’s board of directors appointed Dimitrios Angelis as our new chairman.

Following Dimitrios’ appointment, the board implemented a new strategic plan focused on OTI’s core business of providing contactless transaction and NFC solutions and systematically monetizing our IT effort. A key element to the success of this plan was bringing on highly qualified and dynamic executives with proven operational experience.

The board and I are highly confident we now have the right team in place to successfully execute the new growth plan. In fact, members of the board of directors have demonstrated their confidence and commitment by recently buying OTI ordinary shares in the open market.

These purchases have totaled approximately 735,000 shares to date. I should note that OTI’s directors will be required to report their holdings and changes in ownership of OTI securities by filing Forms 3, 4, and/or 5 starting on January 1, 2014, when OTI will begin reporting as a domestic U.S.

issuer. Soon after our board decision for OTI to focus on its business to business operations, we divested the operations of Parx France, a distributor of EasyPark in the French-speaking market for our subsidiary, Parx.

As part of the consideration, Parx France is required to continue using OTI’s patented EasyPark solutions on an exclusive basis for an initial period of at least seven years. And, as Shay mentioned, OTI will receive 25% of Parx France’s future profit on an EBITDA basis.

This divesture demonstrates how we are focusing our Parx unit as a B2B provider by establishing strong local business partners and parking operators in each market, rather than implementing the B2C approach we have previously taken in some markets. Parx will continue to serve the market through a network of local parking operators like Parx France.

With this approach, we believe we will be able to expand faster, and into more new territories. The new owners of Parx France bring the organization valuable knowledge of France’s parking and payment industry, which will help them to expand the already successful marketing and sales activities of the EasyPark product line in the French-speaking countries.

We anticipate that the divestiture will help conserve cash by reducing our annual operating expenses by more than $800,000 while allowing Parx to continue selling our patented EasyPark solutions and the opportunity to share in future profits. With regard to the divestiture of our SmartID division, in August we signed a [unintelligible] agreement with SuperCom to sell our SmartID division in order to increase OTI’s focus on its core contactless technology and NFC payment solutions.

Following a successful due diligence process by SuperCom, OTI will receive $10 million in secured cash after the closing, with an additional $12.5 million subject to milestones and performance-based [earn outs]. The ID market is highly competitive and focuses mainly on system integrations.

Trying to compete in this market diminished our ability to dedicate appropriate resources to effectively capitalize on the fast-growing multibillion dollar NFC and cashless payment market where we possess competitive advantages including a strong intellectual property portfolio. We believe SuperCom is ideally suited for our Smart [IP] assets given their strength in the ID market.

We are confident this will allow for a smooth transition of our SmartID business as well as providing for the payment of future earn outs. We anticipate the SmartID transition will close in November.

The Parx France and SmartID divestitures mark an important step in executing on our new strategic plan of reducing unnecessary costs and focusing on our core business of providing NFC-based contactless payment technology and [unintelligible] solutions. By optimizing our operational structure, we can better leverage our core competencies in these areas, which we believe will drive long term growth and sustainable profitability.

With our strong IP portfolio, over 20 years of R&D, and our extensive experience in the contactless smartcard and NFC market, we are now ideally positioned to further penetrate this fast-growing market and more effectively execute our aggressive growth plans. Regarding our intellectual property, OTI’s world-class technology and solutions are supported by our expansive IP portfolio of more than 20 families of patents, including over 100 patents issued and pending around the world.

As I mentioned previously, we have made significant progress also on the IP monetization front. In June, we retained global IP Law Group, a leading international IP-focused law firm, to lead OTI’s new intellectual property monetization campaigns.

We also received the favorable Markman hearing decision in the patent infringement suit against T-Mobile USA, which means the court accepted our expert testimony on the meaning of all four involved in the dispute. We believe that the court’s decision helps to validate the value of our IP and supports the view that the OTI 043 patent is fundamental to NFC phone technology.

The 043 patent is part of our extensive intellectual property portfolio encompassing product applications; software platform, system, and product architecture; and product concepts in the field of NFC, contactless payment, petroleum, and parking solutions. We are currently engaged in fact and expert discovery with T-Mobile.

The next phase of the lawsuit, after the completion of discovery, is the submission of dispositive motions by January 6, 2014. The court has not yet set the trial date for the case.

We very much appreciate the support and encouragement we have received from our shareholders during the initial stages of our transformational strategy and pursuit of correcting this patent infringement.