ON TRACK INNOVATIONS LTD. Forward - Looking Statements
The statements contained in this Quarterly Report on Form 10-Q, or Quarterly Report, that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "intends," "plans", "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any actual future results, performance, levels of activity, or our achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-looking statements may appear in this Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as elsewhere in this Quarterly Report and include, among other statements, statements regarding the following:
? the closing of the merger transaction we entered into with Nayax Ltd., or
Nayax;
? our ability to continue as a going concern and any efforts that we may
undertake to support our future operations, service our debt obligations and to
further execute our business plans;
? any impact of the Corona Virus, or COVID-19, pandemic on our business and cash
flow, including timing of receipt of orders and payment from our customers;
? the impact of general economic, political, demographic and business conditions
worldwide, including geopolitical uncertainty and instability, such as the
the short and long terms;
? future sources of revenue, ongoing relationships with current and future
business partners, distributors, suppliers, customers, end-user customers and
resellers;
? future costs and expenses and adequacy of capital resources;
? our expectations regarding our short-term and long-term capital requirements
and satisfaction thereof;
? interest from current and new customers and rate of orders;
? the global shortage in components and the related effects of an increase in
components' prices, freight cost and longer lead-times;
? our outlook for the coming months; and
? information with respect to other plans and strategies for our business.
The factors discussed herein, and in those risk factors expressed below and from
time to time in our press releases or filings with the
2
Our business and operations are subject to substantial risks, which increase the
uncertainty inherent in the forward-looking statements contained in this
Quarterly Report. Except as required by law, we undertake no obligation to
release publicly the result of any revision to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Further information on potential
factors that could affect our business is described among others under the
heading "Risk Factors" below and in Part I, Item 1A of our Annual Report on Form
10-K for the fiscal year ended
As used in this Quarterly Report, the terms "we", "us", "our", "the Company",
and "OTI" mean
All figures in this Quarterly Report are stated in
Overview
We are a leading developer of contactless payment solutions, Near Field Communication (NFC) technology based, for the unattended market. We have been a technology leader since 1990, providing systems, devices and services to operators and integrators with solutions and components that are simple to implement.
To date, we have deployed over one million payment solutions to our focused unattended markets: self-service kiosk, micro-markets and vending machines, entertainment and gaming, automated teller machines, Mass Transit Ticketing Validation and fuel payments.
We operate through regional offices, supporting clients and payment industry partners with its unique contactless payment solutions.
On
On
On
This discussion and analysis should be read in conjunction with our interim
condensed consolidated financial statements and notes thereto contained in "Item
1. Financial Statements" of this Quarterly Report and our Annual Report on Form
10-K for the fiscal year ended
3
Three months ended
Sources of Revenue
We have historically derived a substantial majority of our revenues from the
sale of our products, including both complete systems and original equipment
manufacturer components. Furthermore, we generate revenues from licensing and
transaction fees, and also less significantly, from engineering services,
customer services and technical support. In addition, we have derived revenues
from Software as a Service, or SaaS. During the three months ended
Three months ended
March 31,
2022 2021
Sales $ 2,465 $ 2,387
SaaS $ 428 $ 382
Total revenues $ 2,893 $ 2,769 Sales. Sales increased by
SaaS. SaaS revenues include monthly payments for a set of different software
applications such as Terminal Management Systems, Payment gateway, and other
software applications for the Retail segment, and a separate set of applications
for fuel management systems supporting the Petroleum segment. Our SaaS revenues
increased by
We have historically derived revenues from different geographical areas. The
following table sets forth our revenues, by dollar amount (in thousands) and as
a percentage of quarterly revenues in different geographical areas, in the three
months ended
Three months ended March 31, Americas Europe Africa APAC 2022$ 1,940 67 %$ 338 12 %$ 429 15 %$ 186 6 % 2021$ 873 32 %$ 914 33 %$ 368 13 %$ 614 22 %
Our revenues from sales in
Our revenues from sales in
4
Our revenues from sales in
Our revenues from sales in the
Our revenues derived from outside
Due to the conflict between
The following table sets forth our revenues by dollar amount (in thousands) and as a percentage of revenues by segments, during the three months endedMarch 31, 2022 andMarch 31, 2021 : Three months ended March 31, Retail Petroleum 2022$ 2,121 73 %$ 772 27 % 2021$ 2,282 82 %$ 487 18 %
Our revenues from Retail in the three months ended
Our revenues in the three months ended
Cost of Revenues and Gross Margin
Our cost of revenues, presented by gross profit and gross margin percentage, for
the three months ended
Three months ended
Cost of revenues March 31,
2022 2021
Cost of sales $ 1,543 $ 1,366
Gross profit $ 1,350 $ 1,403
Gross margin percentage 47 % 51 %
Cost of sales. Cost of sales consists primarily of materials, as well as
salaries, fees to subcontractors and related costs of our technical staff that
assemble our products. The increase of
Gross margin. The decrease in gross margin percentage in the three months ended
5
Operating expenses
Our operating expenses for the three months ended
Three months ended
Operating expenses March 31,
2022 2021
Research and development $ 731 $ 838
Selling and marketing $ 580 $ 605
General and administrative $ 853 $ 746
Total operating expenses $ 2,164 $ 2,189 Research and development. Our research and development expenses consist
primarily of the salaries and related expenses of our research and development
staff, as well as subcontracting expenses. The decrease of
Selling and marketing. Our selling and marketing expenses consist primarily of
salaries and substantially all of the expenses of our sales and marketing
subsidiaries and offices in
General and administrative. Our general and administrative expenses consist
primarily of salaries and related expenses of our executive management and
financial and administrative staff. These expenses also include costs of our
professional advisors (such as legal and accounting), office expenses and
insurance. The increase of
Financing (expenses) income, net
Our financing (expenses) income, net, for the three months ended
Three months ended
March 31,
2022 2021
Loss from change in fair value of embedded derivative $ -
$ (146 ) $ 4 Financing expenses, net$ (146 ) $ (1,970 )
Financing expenses, net, consist primarily of financing expense related to
interest payable on bank loans, bank commissions and to a change in fair value
of embedded derivative in the convertible short-term loan received from
shareholders, partially offset by financing income related to interest earned on
investments in short-term deposits and foreign exchange differentials. The
change in total financing expenses, net, of
6
Income tax benefit, net
Three months ended
March 31,
2022 2021
Income tax benefit, net $ - $ 13 The decrease in our income tax benefit, net, of
Net loss from continuing operations
Our net loss from continuing operations for the three months ended
Three months ended
March 31,
2022 2021
Net loss from continuing operations
The change in our net loss from continuing operations of
Net loss from discontinued operations
Our net loss from discontinued operations for the three months ended
Three months ended
March 31,
2022 2021
Net loss from discontinued operations $ -
The results from the Mass Transit Ticketing activity and the SmartID activity
for the reporting periods are presented in the statements of operations as
discontinued operations separately from continuing operations. The decrease in
the net loss from discontinued operations of
Net loss
Our net loss for the three months ended
Three months ended
March 31,
2022 2021
Net loss $ (960 ) $ (3,161 ) The decrease in net loss of
7
Liquidity and Capital Resources
Our principal sources of liquidity since our inception have been revenues,
proceeds from sales of equity securities, borrowings from banks, governments and
shareholders, including convertible loans, proceeds from the exercise of options
and warrants as well as proceeds from the divestiture of parts of our
businesses. As of
In the event where the Merger is not completed, under certain circumstances, we
will be required to pay Nayax a termination fee of
In connection with the outbreak of the COVID-19 pandemic, we have taken steps to
protect our workforce in
The global shortage in components, which caused an increase in components prices, freight cost and longer lead-time, created a delay in fulfilling customers' orders, which impacted our revenues and product gross margin, mainly in the Retail segment. As a response to this business environment, we encouraged our customers to provide a forecast for their demand. We continue to maintain a comprehensive network of world-wide suppliers in order to optimize our access to critical components. As long as the COVID-19 pandemic continues, and possibly also thereafter, the components' lead-time may be longer than normal and the shortage in components may continue or get worse.
It is difficult to predict with certainty what other impacts the COVID-19 pandemic may have on us.
As of
8
Operating activities related to continuing operations
For the three months ended
For the three months ended
Operating activities related to discontinued operations
For the three months ended
For the three months ended
Investing and financing activities related to continuing operations
For the three months ended
For the three months ended
For the three months ended
For the three months ended
9
Investing and financing activities related to discontinued operations
We had no cash flows provided by or used in discontinued investing activities in
the three months ended
For the three months ended
We had no cash flows provided by or used in discontinued financing activities in
the three months ended
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