Ofer Tziperman - Chief Executive Officer Shay Tomer - Chief Financial Officer Dimitrios Angelis - Chief Executive Officer, OTI America

Thank you and good morning everyone. As you know it has been only a few weeks since our last call where we provided a detailed overview and update on all of our business segments.

Therefore, I would like to use this call to elaborate on the progress we’ve made over the last couple of weeks in the retail payment markets and corporate initiatives. Along those lines, the first quarter was in line with our expectations.

It was highlighted by meaningful progress across all of our pure corporate initiatives including generating greater operating efficiencies, productivity gains. The significant reduction in net cash consumed form operations as well as the decrease in our total operating expenses by 14% sequentially and 19% year-over-year, demonstrated our success with these efforts.

Externally, we’ve continued to expand our key global partnerships and distribution channels and these have attracted strong interest from leading industry players, including major vending machine manufacturers and operators, as well as additional global channel partners. Now, before I go further into the details about these opportunities I’d like to turn the call over to our CFO, Shay Tomer, who will walk us through our financial performance for the quarter of 2015.

Afterwards, Dimitrios will provide an update on our patent portfolio activities and I’ll return to talk about our operational activities in more detail. Each one of us will address all the questions submitted by you over the last several days.

Shay?

Thank you, Ofer and welcome everyone. Before the market opened on Tuesday, May 12, we issued the results for the first quarter of 2015 in the press release.

A copy of the release is available in the investor relation section of our website. As we reported in the press release, our revenues for the first quarter of 2015 decreased 4% to $5 million from the same year ago period.

Now, breaking down Q1total revenues by sales and the percent of total revenue, retail and mass transit ticketing revenue was $3.1 million or 62%. Petroleum revenue was $1.1 million or 23%.

MediSmart and access control product revenue was $387,000 or 8% of total revenue and finally parking revenue was $341,000 or 7%. Looking at Q1 revenues by geographic regions and the portion of each region’s contribution to total revenues, North America accounted for $2 million or 40%.

Europe accounted for $1.5 million or 30%. Africa accounted for $869,000 or 17%.

Asia and Israel accounted for $377,000 or 8%, and finally South America accounted for $263,000 or 5% of our total revenues. Gross profit for Q1 2015, was $2.5 million or 50% of total revenues.

This compares to $2.6 million or 50% of total revenues in Q1, 2014. The decrease in gross profit was primarily due to lower revenues.

Our operating expenses for Q1 2015 totaled $4.3 million compared to $5.4 million in the same year-ago period. The decrease was primarily attributable to a decrease in general and administrative expenses and patent related expenses.

Our net loss from continuing operations for the first quarter of 2015 totaled $2.1 million or $0.05 per share. This compares to net loss from continuing operations of $3 million or $0.09 per share in the same year ago period.

Q1 2015, adjusted EBITDA loss from continuing operations totaled $1.1 million. This compares to an adjusted EBITDA loss from continuing operations of $1.7 million in the same year ago period.

Now, turning to the balance sheet, cash, cash equivalent and short term investment at March 31, 2015, totaled $15.8 million. This completes my financial summary.

I would like to address the financial related questions we received from investors. Similar to our last call, Ofer we’ll address the business related questions and Dimitrios will address the questions related to our patent portfolio.

Thank you, Shay. Following the court’s recent ruling on the motions for summary judgment, a date was set by the court for a jury trial on November 30, 2015.

We’ll continue to keep our shareholders posted of progress made and results as soon as they become available. I would now like to address some questions we’ve received from investors regarding OTI’s patent portfolio activities.

Thank you, Dimitrios. During the quarter, we continued to make steady progress in all of our vertical segments including petroleum, mass transit and parking.

Since I provided a detailed update on these segments just a few weeks ago, I’m going to focus my commentary today on our retail payment market. We remain highly confident that the advancement in the retail market including the entrance of Apple, with the Apple Pay and more recently Google’s acquisition of Softcard, will drive faster and wider adoption of NFC, as well as demand for OTI’s products.

The retail market enthusiasm for NFC technology is reflected by the growing interest in our industry leading NFC readers and WAVE devices. We’re furthering our sales efforts by engaging with more and larger prospects in the US market and globally.

Along those lines, we’ve tapped into new markets in Asia, including China, India and Japan. It appears that the market awareness for NFC cashless payment solutions in these markets is growing fast.

We’re working to ensure that OTI becomes the leading supplier of NFC readers for the unattended and self-serve market in these key regions. In step with this, we’re exploring other opportunities for the attended market with our local partners.

In Europe, we’re deepening our penetration into the emerging vending machine market by expanding our distribution network and local partnerships. Although the European market is more fragmented than the US market, the demand for cashless payment readers is increasing.

The complexity of the European market is an opportunity for OTI and we’re taking the necessary steps to support different standards required by the European market. We’re also in process of securing our first customers in the Latin American market.

One of the clear advantages for OTI in the NFC expensive market is our proven ability to develop fully certified products with the highest standards required by the global payment industry. Larger players looking to enter the NFC market are facing significant barriers to entry, specifically from a time-to-market perspective.

The fact that OTI’s existing installed readers are also Apple Pay compatible, provide us with a major first mobile advantage. Accordingly we see a growing number of new partners approaching us to work together based on our 25 years experience in cashless payment products and solutions.

We strongly believe that finally, OTI’s unique skills know-how and IP are starting to pay off. However, as I mentioned on our last call, the typical process for lending a new multimillion dollar customer does not begin with an immediate large order.

Reader, it starts with an initial purchase of all software development tools, followed by an integration session and then finally the first small order to test the solution in the field. Typically, after these initial three phases are completed successfully, which can take anywhere between 3 to 12 months, the customer places a commercial site order.

We continue to make meaningful progress several new customers across all of our markets and geographies and we expect to announce new wins in due time soon. I’m encouraged by the growing level of interest in our recently launched CONNECT 3000, telemetry controller product, which is a complementary add on to our line of cashless payment readers.

Some of our existing customers and certainly new customers see a clear advantage to source both components from a single source, hence making their overall cost and integration efforts more attractive. We plan to ship first commercial orders of this new product as early as next quarter.

Our R&D team is working diligently to meet the strict timeline for developments and integration with our various customers and strategic partners. Concurrent with this, we’re busy certifying our new solutions by all the major card associations.

OTI has the long history of innovation and industry trusts and we expect these new solutions to further our technology leadership in the NFC reader market. In summary, I continue to believe that now more than ever before, OTI is positioned to capitalize on the multibillion dollar cashless payment market, a market that continues to evolve and expand.

Now, with that I would like to address the questions we’ve received from investors and analysts regarding the NFC market and OTI sales prospects.

The sales financial related question is from [indiscernible] an individual investor who asks, please elaborate on what does the short term investment consist of? Odit [Ph], thanks for your question.

Short term investment consist, short term bank deposit. The next three questions are from Ed Schwartz, an individual investor.

Ed asks, although Q1 2015, financial results have been an improvement. Since the new board took over in late 2012, what has been the total cash blend and why didn’t the board make changes earlier to reduce to this cash blend?

Ed, thanks for the question. The total cash blend since the beginning of 2013 and excluding the net proceed from the offering in November 2014, was approximately $12.6 million.

For the second part of your question, we’re in ongoing efforts to reduce cash blend, imposing our margins and reducing operating expenses in a way that will not affect our ability to support our customers and continue with our [indiscernible] marketing and sales efforts, which will allow us to penetrate into new markets. Ed’s next question is, OTI entered into a loan agreement with a condition that it might have positive EBITDA by the end of 2015.

How is the company going to achieve this? Ed, well - well, all of our covenants in our loan agreement, the company has sufficient liquidity in the events we’re required to reduce or repay the loan from Bank Leumi.

It’s important to note that the covenant in any of our loan agreement do not indicate any guidance for 2015. We continue to monitor our operating expenses and gross margin, by trying to better align our cost structure with our expected revenue level.

The decrease in our total operating expenses by 14% sequentially and 19% year-over-year, demonstrate our success in this effort. Ed’s last question is, the amount you received from SuperCom was $362,000?

Well Ed, the amount we received from SuperCom was a bit higher and it was offset by other related expenses. Our next question is from Kurt King with Harvest Capital, who asked, during the quarter the operating expenses declined significantly both sequentially and year-over-year, was there something enormous [ph] last quarter or should we think the last expenses level has a new baseline?

Could you see further reduction or is there a reason why expenses would return to higher level going forward? Kurt thanks for the question.

We’re not providing guidance on any specific number. However, as I mentioned before, we continue to monitor our operating expenses on an ongoing basis.

We’re trying to better align our cost structure with our expected revenue level. The next three questions are from Mike Latimore with Northland Capital Markets.

Mike asks, gross margin approach 50% again, any view as whether the sustainable - thanks for your question Mike. We do not provide guidance on any specific numbers.

However, investors should be aware that our gross margin might fluctuate between quarters due to different revenue product mix. Mike’s next question, how did the perks [ph] affect year-over-year revenue and earnings growth?

Thanks Mike. Our revenues are affected from the exchange of differentials in some product sales revenues and most of our recurring revenues are in currencies other than the US dollar.

In the first quarter, the Israeli shekel, the South African rand and the Polish Zloty devalued versus the US dollars compared to the first quarter of 2014. Without this perks impact, our quarterly reported revenues would have been higher.

Mike’s final question, your OpEx declined sequentially, is this a good quarterly run rate? Well Mike, as I said previously, we’re not providing guidance on any specific numbers.

The next question is from Eric Gomberg with Dane Capital, who asks, there was a nice improvement in adjusted EBITDA in large part because of strong expenses control, do you feel comfortable given business momentum that you should be able to attain adjusted EBITDA breakeven sometimes this year? Eric thanks for the question.

We’re not providing any guidance on specific numbers. Those are all the financial related questions we received.

I’d like to turn the call over to Dimitrios. Dimitrios?

The first question is from Eric Gomberg of Dane Capital, who asks, given the recent positive news on the IP side T-Mobile, what is the thinking in holding off from filing suit against other potential infringers? Eric thanks for your question.

The answer is, that we unfortunately cannot discuss our overall litigation strategy. The next is from Mike Vermut of Newland Capital Management, who asks, can we assume that OTI will be looking to pursue patent litigation against other infringers that have received significantly larger revenues from these products than T-Mobile and others who have just begun to sell into this space recently is 2014.

Now that we have received this monumental decision, is now the time to pursue partnerships that will enable the company to fully capitalize on our portfolio? Mike thanks for the question.

Our intention is to pursue other targets who are infringing our patents and we’re looking for strategic partners to better enable the company to do this. The next question is from Mike Latimore.

Mike asks, as you get closer to the damages trial, should legal expenses increase to what level? Thanks for the question Mike.

Legal fees generated from trial will increase, but we’ve entered into an arrangement where those fees will be cap, so they should not significantly impact our financial position. Mike’s next question, do you have an estimate of the size of the market to which your patent applies?

The answer is, we do have an estimate of the size of the market, but cannot disclose that at this time. And Mike’s last question, are you more likely to see damages paid as an upfront lump sum or ongoing royalty over multiple years?

The answer is, it depends on several factors, but I think most cases like this one gravitate more toward lump sum payment. That’s all of the questions we received regarding our patent portfolio and monetization activities.

Now, I’d like to turn the call back over to Ofer. Ofer?

The first question is from Bob Schnell, who asks, are there any metrics you can provide around demand seen for NFC products, mainly the WAVE device and reader? Bob thanks for the question.

Yes, we see a sharp increase in the demand for readers, telemetry controller and WAVE products. As I’ve noted in the past, the first indication is the significant increase of sales of our software development kits for all these products in the past six months.

Bob’s next question, one of your larger customers on the reader side suggested increasing demand and sales of NFC reader, are you seeing that? Is there an opportunity for more sales to existing customers, now that your new products include telemetry capability?

The answer is yes, Bob. There is a direct coalition between the demand seen by our customers and the amount of orders they place with us.

We may see a delay of one or two quarters with their respective orders, given the inventory status and specific dates of shipments, but eventually the orders come in. We actually believe that orders from our existing customers will grow nicely in the next 12 months.

Truly, if our existing customers or some of them will adopt also our new telemetry controller solution, it will allow them a cheaper and better solution and will allow us about 100% up-sale over the existing line of readers only. Therefore, it is a clearly a win-win situation.

Another question from Bob, at industry conferences it has been suggested that OTI is working with some major financial transaction companies to rollout mobile payment services to small and medium businesses, can you expand on this and will OTI be servicing the attended retail market as well as the unattended? That would materially seem to materially increase your total addressable market.

The answer is that in general as noted before, we’re looking at specific opportunities even outside the unattended market when we see a good fit our existing solutions. And that includes also some NFC add on solutions to existing point of sale terminals to allow them to accept NFC transactions such as Apple Pay.

We do believe that the current dynamics at the world market is in favor of our solutions for both unattended and attended markets. The next few questions are from Ed Schwartz.

His first question is, what is the difference between a deployment referring to your Q1 2015, financial results and a trail order? Has OTI received WAVE orders from Taiwan that relate to commercially sized, in brackets 100,000 units and have you received a commercial size order from Turkcell?

Ed, in most cases a commercial order is coming after a successful trail, even if we have exceptions to this in the past. We’re not referring to specific quantities ordered by our customers, unless we have a clearance from them to release such numbers.

The next question is from Ed is, I understand that some customers do not want OTI to make public the orders, what is OTI’s reader order and WAVE order backlog as of 31st of March this year? The answer is that we’re not referring in public to any specific details of our backlog orders.

Ed’s next question, many excuses have been made over the past six over poor reader sales, yet competitors like Ingenico have announced reader sales in the United Sales at price levels much higher than the price of the OTI reader, can you please give some color to this disconnect? The answer is that it will be good to compare apples to apples here, those sales are referring attended [ph] market with different products.

The sale process of attended point of sale terminal requires minimal or no integration at the merchant. It is completely different sale and integration process into a vending machine, the good news is that the complexity of the unattended market is making it harder for the competition.

While we understand that shareholders would like to see more sales and much faster, I can say that in the unattended market we do not see any other company including not the giants [ph] making any better, faster or larger sales. The good news, although this niche market requires a lot of industry know-how that OTI owns and while the barriers of entry is high, the size of this market worldwide is very big.

Our strategy is to address it via major worldwide partners and we are executing this strategy and believe it will yield the best results in our own niche market. The next question from Ed is, for the past six months, OTI’s board members have refused to talk and/or communicate with shareholders, the quite period and shortly after this conference call, so will board members be allowed to communicate with shareholders and if not why?

The answer is that normally all communication to shareholders in public companies is done by CEO and/or the CFO and not by the board. Shareholders can submit their questions by our IR firm, Liolios Group.

And the final question from Ed is, as I write my questions the current price show of OTI’s stock is $1.43, if you deduct a net operating loss approximately $1.2 from the share price, in effect we have $0.23 stock and the investment community is saying that OTI is not a viable company. How does management and the board respond to the company’s detractors?

The answer is that, we think that the rebuckles [ph] of the company in the last two years around cashless payment solution is starting to pay off. Now that the market NFC is finally taking, the appreciation to the OTI solutions in the market is only growing as well as the number of opportunities.

This is a very viable company. The board and management are working very hard to increase the value for the shareholders in all possible ways.

Then next three questions from Michael Vermut, who asks, also taking a look at your 10-Q, I see that you have roughly $190 million of net operating loss that would be extremely valuable to any acquire of the company. In fact if you tax effect that number, you’re actually buying the rest of the OTI business for free.

When taking into account the significant win with regard to the patent portfolio and supportively significant wins we’re about to realized on the reader and WAVE side of the business, would it be better to seek an outright sale of the company to unlock the significant value embedded in our current assets? It seems as though a player in our space would love to own our patents and market leading NFC technology while reaping the benefits of those significant NOL’s.

Mike, as you know the board have appointed the third party advisory firm to evaluate all strategic options available to the company, given the increasing opportunities in the market. The next question from Mike is, recognizing that OTI’s NFC enabled cashless payment technology has been validated through its recent patent victory, is OTI considered moving from its sheltered existence in the unattended space into the much larger but more competitive attended space to compete against the likes of Verifone?

It seems that even with the larger competition there are significantly greater margins and certainly volumes available in the attended space. Mike, as noted before, we’re certainly checking options to benefit also from the attended market when the opportunity fits our existing solutions.

You’re correct that this is a much more competitive market. In fact, we see a very big number of new players that are now addressing the attended market with all types of new point of sale terminals and mobile point of sale terminals.

Clearly it will drive the prices and margin in this market down over the time. On the other hand, in our niche unattended market, the barriers of entry are much higher.

It may be a longer sales cycle, but a much lower churn. The next question is from Kurt King, who asks, in recent months you’ve announced counter top NFC readers that open up the attended payment market to OTI, in addition to the obvious fact that this provides you larger market opportunity, can you provide some specifics to help us better understand the path followed?

For example, what features or cost advantages do you bring to this market? How is the competitive landscape different from your traditional unattended market?

When should we expect to see material revenues? Kurt thanks for the question.

As noted before, we’re currently not offering full point of sale terminals to the attended market, but reader offering NFC head on readers to existing point of sale terminals. This represents a significant saving to the merchant who is not forced to replace the entire point of sale terminal to be able accept NFC payments such as Apple Pay.

We’re currently working with some partners on this direction and we will announce when we will have concrete deals to report. The next several questions are from Mike Latimore.

His first question is, do you still expect revenues to grow this year? Mike thanks for the question.

The answer is, yes we do. The next question, do you see new customers ordering products in the second quarter, which product, commercial orders or more trial based orders?

The answer is yes. We expect existing and new customers to place more orders in the second quarter.

We hope to be able to start shipping first orders of our new Uno and CONNECT 3000 during the end of this quarter or early next quarter to new customers. Mike’s next question, are the prospects with the most new near term opportunity in North America or international, attended or unattended retail?

The answer is, North America continues to lead our sales mainly in the attended readers market. However, we’ve new customers in Asia, Europe and Latin America that are in various stages of ordering our products.

The next question, are the best prospects for the telemetry current customers or new ones? The answer is that our existing customers are certainly the first targets also for our new telemetry controller solution.

However, we’re very encouraged to see that since we’ve announced this solution, some new opportunities opened up for the sale of this new product either bundled with our readers or as a standalone solution. We think that the time and efforts invested in this complimentary line of products will pay off very soon and will allow the company to widen up its available market.

The next question, are you still following the policy of announcing new deals only when commercial orders in hand? The answer is that our policy to announce new deals according to the sec revelations and typically once we have clearance for such a release from our customers.

We don’t want to kill any opportunity just by rushing to tell about it before our customers are ready for us to do so. The next question, has the Cubic relationship generated orders yet?

The answer is that Cubic are making sales efforts in few fronts and as soon as there will be an option to report the deal, we’ll do so. Mike’s next question, how would you explain the competitive advantage of the newer products, Uno, TRIO and CONNECT?

The answer is that Uno was released in a perfect timing to provide a small cost effective and certified NFC reader that can fit to many scenarios. It can even be embedded into other filled quality products allowing them to benefit from a certified NFC reader without the big pain of recertifying their entire owned solution.

This product is already opening for us huge opportunities in the worldwide markets and we expect it to be a high runner. The TRIO reader is just an enhancement of our 6500 reader line and allows our customers to meet the new EMV liability shiftment date imposed by the Card associations.

It is one of the best [indiscernible] performance such solutions in the market to date. And CONNECT 3000, is a perfect complementary product that we developed in the last couple of years and is now opening large opportunities for us worldwide.

The combination of reader plus telemetry controller is something that our customers need and the fact that we can now offer them bundled and integrated together with an affordable price is a big opportunity for us. The next question, has the strategic review slowed orders or sales activity with customers potentially posing to see outcome of the strategic review?

The answer is that we do not see any such slow down. Our customers appreciate our offering and know that we are going to continue to serve them in the long term.

The next question, do you have an estimate of when the strategic review will be completed? The answer is that we already said that there is no specific time limits and we’ll not make any further notes about it.

Mike’s next question, what are the two or three main issues being considered as part of the strategic review? And the answer over here as well is that we’re going to refer to the process publicly.

And Mike’s last question, when do you expect to have a new CEO, are there internal candidates? The answer is that the board is in the middle of the process of finding a new CEO and we’ll announce it in due time.

The next questions are from Eric Gomberg. Eric’s first question, can you please describe the opportunity set and momentum in NFC versus what it was like six months ago?

Do you feel like the opportunity for OTI is becoming more substantial? Eric thanks for the question.

The answer is that since the Apple Pay announcement, since month ago, we experienced a sharp increase in the number of opportunities that are proactively approaching OTI, given our known 25 years experience in this field of NFC. Clearly it is the time for OTI to benefit from this momentum.

And final question, given the current review of strategic alternatives, does the management and the board precluded from making insiders share purchases? The answer is that we’re working according to the insider trading regulations regardless of any specific deal or process.

Those are all the questions we received. Thank you very much for all your questions an interest in OTI.

If you have further questions, please contact us directly or through our investor relations firm Liolios Group, using the contact information provided in today’s press release. Now with that I would like to turn the call back over to the operator, who will provide the closing remarks.

Operator?