10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from

__________ to __________

Commission file number 000-49877

ON TRACK INNOVATIONS LTD.

(Exact name of registrant as specified in its charter)

Israel	N/A
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Z.H.R. Industrial Zone, P.O. Box 32, Rosh Pina, Israel 1200000

(Address of principal executive offices)

+ 972-4-6868000

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration was required to submit and post such files).    

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o (do not check if a smaller reporting company) Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

State the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 40,835,974 Ordinary Shares outstanding as of November 10, 2015.

2

ON TRACK INNOVATIONS LTD.

TABLE OF CONTENTS

Part I - Financial Information		4
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
Item 4.	Controls and Procedures	18
Part II - Other Information		19
Item 1.	Legal Proceedings	19
Item 6.	Exhibits	19

Signatures 20

3

PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.

ON TRACK INNOVATIONS LTD. AND ITS SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2015

(Unaudited)

4

On Track Innovations Ltd.

and its Subsidiaries

Interim CondensedConsolidated Financial Statements

As of September 30, 2015

(Unaudited)

On Track Innovations Ltd.

and its Subsidiaries

Interim Unaudited Condensed Consolidated Financial Statements as of September 30, 2015

Contents
	Page
Interim Unaudited Condensed Consolidated Balance Sheets	F-2 - F-3
Interim Unaudited Condensed Consolidated Statements of Operations	F-4
Interim Unaudited Condensed Consolidated Statements of Comprehensive Loss	F-5
Interim Unaudited Condensed Consolidated Statements of Changes in Equity	F-6
Interim Unaudited Condensed Consolidated Statements of Cash Flows	F-7 - F-8
Notes to the Interim Unaudited Condensed Consolidated Financial Statements	F-9 - F-19

On Track Innovations Ltd.

and its Subsidiarie

Interim Unaudited Condensed Consolidated Balance Sheets

US dollars in thousands except share and per share data

	September 30,		December 31,
	2015		2014
Assets
Current assets
Cash and cash equivalents	$	4,419	$	5,351
Short-term investments		7,056		11,048
Trade receivables (net of allowance for doubtful
accounts of $696 and $671 as of September 30, 2015
and December 31, 2014, respectively)		2,719		4,299
Other receivables and prepaid expenses		2,917		2,530
Inventories		3,961		3,703
Total current assets		21,072		26,931
Long-term restricted deposit for employees benefit		519		555
Severance pay deposits		469		614
Property, plant and equipment, net		8,828		9,234
Intangible assets, net		145		-
Deferred tax asset		39		47
Total Assets	$	31,072	$	37,381

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

F - 2

On Track Innovations Ltd.

and its Subsidiaries

Interim Unaudited Condensed Consolidated Balance Sheets

US dollars in thousands except share and per share data

	September 30,			December 31,
	2015			2014
Liabilities and  Equity
Current Liabilities
Short-term bank credit and current maturities
of long-term bank loans	$	3,280		$	3,617
Trade payables		7,297			7,306
Other current liabilities		2,730			2,656
Total current liabilities		13,307			13,579
Long-Term Liabilities
Long-term loans, net of current maturities		2,050			2,161
Accrued severance pay		1,232			1,456
Deferred tax liability		318			302
Total long-term liabilities		3,600			3,919
Total Liabilities		16,907			17,498
Equity
Shareholders' Equity
Ordinary shares of NIS 0.1 par value: Authorized –
50,000,000 shares as of September 30, 2015 and
December 31, 2014; issued: 42,014,673 and 41,996,602
shares as of September 30, 2015 and December 31, 2014, respectively;
outstanding: 40,835,974 and 40,817,903 shares
as of September 30, 2015 and December 31, 2014, respectively		1,055			1,055
Additional paid-in capital		224,603			224,234
Treasury shares at cost - 1,178,699 shares as of September 30, 2015 and December 31, 2014		(2,000	)		(2,000	)
Accumulated other comprehensive loss		(1,092	)		(800	)
Accumulated deficit		(207,895	)		(202,103	)
Total Shareholder’s equity		14,671			20,386
Non-controlling interest		(506	)		(503	)
Total Equity		14,165			19,883
Total Liabilities and Equity	$	31,072		$	37,381

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

F - 3

On Track Innovations Ltd.

and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Operations

US dollars in thousands except share and per share data

	Three months ended  September 30,						Nine months ended  September 30,
	2015			2014			2015			2014
Revenues
Sales	$	2,361		$	3,691		$	10,015		$	13,381
Licensing and transaction fees		1,394			1,564			4,131			4,226
Total revenues		3,755			5,255			14,146			17,607
Cost of revenues
Cost of sales		1,673			2,619			6,896			9,066
Gross profit		2,082			2,636			7,250			8,541
Operating expenses
Research and development		807			1,281			2,712			3,662
Selling and marketing		1,730			1,968			5,388			6,160
General and administrative		1,056			1,382			3,440			4,491
Patent litigation and maintenance		371			194			830			1,213
Other expenses		408			-			918			-
Total operating expenses		4,372			4,825			13,288			15,526
Operating loss from continuing operations		(2,290	)		(2,189	)		(6,038	)		(6,985	)
Financial expenses, net		(122	)		(44	)		(542	)		(397	)
Loss from continuing operations before taxes on income		(2,412	)		(2,233	)		(6,580	)		(7,382	)
Income tax		(35	)		(29	)		(38	)		(202	)
Net loss from continuing operations		(2,447	)		(2,262	)		(6,618	)		(7,584	)
Net income from discontinued operations		461			311			823			41
Net loss		(1,986	)		(1,951	)		(5,795	)		(7,543	)
Net (income) loss attributable to noncontrolling interest		(23	)		(46	)		3			(37	)
Net loss attributable to shareholders	$	(2,009	)	$	(1,997	)	$	(5,792	)	$	(7,580	)
Basic and diluted net gain (loss) attributable to shareholders perordinary share
From continuing operations		(0.06	)		(0.07	)		(0.16	)		(0.23	)
From discontinued operations		0.01			0.01			0.02			**
	$	(0.05	)	$	(0.06	)	$	(0.14	)	$	(0.23	)
Weighted average number of ordinary shares
used in computing basic and diluted netloss
per ordinary share		40,874,474			33,310,672			40,868,252			33,245,249

**Less than $0.01 per ordinary share.

The accompanying notes are an integral part of these interimunaudited condensed consolidated financial statements.

F - 4

On Track Innovations Ltd.

and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Comprehensive Loss

US dollars in thousands

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Total comprehensive loss:
Net loss	$	(1,986	)	$	(1,951	)	$	(5,795	)	$	(7,543	)
Foreign currency translation adjustments		(98	)		(276	)		(292	)		(313	)
Foreign currency translation released following sale of a subsidiary		-			(60	)		-			(396	)
Total comprehensive loss	$	(2,084	)	$	(2,287	)	$	(6,087	)	$	(8,252	)
Comprehensive loss (income) attributable to the non-controlling interest		(23	)		(46	)		3			(37	)
Total comprehensive loss attributable to shareholders	$	(2,107	)	$	(2,333	)	$	(6,084	)	$	(8,289	)

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

F - 5

On Track Innovations Ltd.

and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Changes in Equity

US dollars in thousands

											Accumulated
						Additional		Treasury			other
	Number of		Share			paid-in		Shares			comprehensive			Accumulated			Noncontrolling			Total
	Shares issued		capital			capital		(at cost)			Income (loss)			deficit			interest			equity
Balance as of December  31, 2013		34,199,511	$	854		$	212,246	$	(2,000	)	$	28		$	(192,179	)	$	(545	)	$	18,404
Changes during the nine month period ended September 30, 2014:
Stock-based compensation
related to options granted		-		-			642		-			-			-			-			642
Exercise of options and warrants		561,333		16			854		-			-			-			-			870
Foreign currency translation adjustments		-		-			-		-			(709	)		-			-			(709	)
Net loss		-		-			-		-			-			(7,580	)		37			(7,543	)
Balance as of September 30, 2014		34,760,844	$	870		$	213,742	$	(2,000	)	$	(681	)	$	(199,759	)	$	(508	)	$	11,664
Balance as of December  31, 2014		41,996,602	$	1,055		$	224,234	$	(2,000	)	$	(800	)	$	(202,103	)	$	(503	)	$	19,883
Changes during the nine month period ended September 30, 2015:
Stock-based compensation related to options granted		-		-			369		-			-			-			-			369
Exercise of  warrants		18,071		(*	)		-		-			-			-			-			(*	)
Foreign currency translation adjustments		-		-			-		-			(292	)		-			-			(292	)
Net loss		-		-			-		-			-			(5,792	)		(3	)		(5,795	)
Balance as of September 30, 2015		42,014,673	$	1,055		$	224,603	$	(2,000	)	$	(1,092	)	$	(207,895	)	$	(506	)	$	14,165

(*) Less than $1.

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

F - 6

On Track Innovations Ltd.

and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Cash Flows

US dollars in thousands

	Nine months ended September 30,
	2015			2014
Cash flows from continuing operating activities
Net loss from continuing operations	$	(6,618	)	$	(7,584	)
Adjustments required to reconcile net loss to
net cash used in continuing operating activities:
Stock-based compensation related to options and shares issued
to employees		369			642
Gain on sale of property and equipment		(8	)		(5	)
Accrued interest and linkage differences		30			55
Depreciation		941			959
Changes in operating assets and liabilities:
Accrued severance pay, net		(79	)		(112	)
Deferred tax, net		36			135
Decrease in trade receivables		1,936			240
Decrease (increase) in other receivables and prepaid expenses		131			(308	)
Increase in inventories		(382	)		(689	)
Increase in trade payables		402			235
Increase (decrease) in other current liabilities		197			(772	)
Net cash used in continuing operating activities		(3,045	)		(7,204	)
Cash flows from continuing investing activities
Purchase of property and equipment		(1,117	)		(340	)
Purchase of short-term investments		(4,181	)		(2,434	)
Investment in capitalized product costs		(153	)		-
Investment in restricted deposit for employees benefit		(281	)		-
Proceeds from restricted deposit for employees benefit		144			-
Proceeds from maturity or sale of short-term investments		8,179			1,317
Proceeds from sale of property and equipment		31			6
Net cash provided by(used in) continuing investing activities		2,622			(1,451	)
Cash flows from continuing financing activities
(Decrease) increase in short-term bank credit, net		(783	)		179
Proceeds from long-term bank loans		716			29
Repayment of long-term bank loans		(606	)		(811	)
Proceeds from exercise of options and warrants		(*	)		965
Net cash  provided by (used in) continuing financing activities		(673	)		362
Cash flows from discontinued operations
Net cash used in discontinued operating activities		(25	)		(1,325	)
Net cash provided by discontinued investing activities		387			925
Net cash used in discontinued financing activities		-			(154	)
Total net cash provided by (used in) discontinued operations		362			(554	)
Effect of exchange rate changes on cash and cash equivalents		(198	)		(227	)
Decrease in cash and cash equivalents		(932	)		(9,074	)
Cash and cash equivalents at the beginning of the period		5,351			14,962
Cash and cash equivalents at the end of the period	$	4,419		$	5,888

 (*) Less than $1.

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

F - 7

On Track Innovations Ltd.

and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Cash Flows (cont’d)

US dollars in thousands

	Nine months ended September 30,
	2015		2014
Supplementary cash flows activities:
Cash paid during the period for:
Interest paid	$	217	$	233
Income taxes paid	$	-	$	33

The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

F - 8

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 1 - Organization and Basis of Presentation

A. Description of business

On Track Innovations Ltd. (the “Company”) was founded in 1990, in Israel. The Company and its subsidiaries (together “the Group”) are principally engaged in the field of design and development of cashless payment solutions. The Company’s shares are listed for trading on NASDAQ.

B. Interim Unaudited Financial Information

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and therefore should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. Operating results for the nine month period ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Use of Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the assets, liabilities, revenue, costs, expenses and accumulated other comprehensive income/(loss) that are reported in the Interim Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates.

C. Divestiture of operations

1. In December 2013, the Company completed the sale of certain assets, subsidiaries and intellectual property ("IP") relating to its Smart ID division. Accordingly the results and the cash flows of this operation for all reporting periods are presented in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations. During the nine month periods ended September 30, 2015 and September 30, 2014, the Company recorded profit from contingent consideration in the amount of $848 and $500, respectively, from which $461 and $270 were recognized during the three month periods ended on such dates, respectively, according to an earn out mechanism. This profit is included in ‘other income, net’ within income from discontinued operations for those periods (see also Note 7).

In June 2015, the purchaser of our Smart ID division, SuperCom Ltd., or SuperCom, raised cash through an equity public offering. Based on certain provisions of the Smart ID

F - 9

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 1 - Organization and Basis of Presentation (cont’d)

C. Divestiture of operations (cont’d)

division sale agreement, such an event entitles the Company to additional consideration. After repeated demands for payment, on October 19, 2015, the Company filed a lawsuit in the District Court in Lod, Israel, against SuperCom, requesting, among other things, monetary relief in the amount of NIS 28.9 million (approximately $7.4 million) with respect to additional consideration owed to the Company for the sale of our Smart ID division. SuperCom is required by applicable law to file a response by November 20, 2015. Any such additional consideration, if and when received, will be accounted for as income from discontinued operations.

2. In February 2014, the Company signed a final agreement to sell its wholly owned German subsidiary, Intercard System Electronics GmbH (“Intercard”), for a total purchase price of EURO 700 (approx. $960) and an additional immaterial contingent consideration based on future sales (the "German Subsidiary Divesture”).

Accordingly, the results and the cash flows of this operation for all reporting periods are presented in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations. On the closing date in 2014, the Company recorded a loss from this divesture in the amount of $7, which consists of transaction costs, in the amount of $343, and a profit in the amount of $336 due to transfer of Intercard’s accumulated foreign currency translation adjustments from other comprehensive loss to the statement of operations.

Those amounts are included in ‘other income, net’ from discontinued operations for the nine months ended September 30, 2014 (see also note 7).

The Company has not recorded any profit from contingent consideration pursuant to the German Subsidiary Divesture as of September 30, 2015.

D. Other expenses

Other operating expenses consist of compensation expenses related to the termination of employment of the Company’s former Chief Executive Office (“CEO”), Mr. Ofer Tziperman, according to his employment terms, following his resignation from the Company and its subsidiaries on February 10, 2015 and compensation expenses related to the termination of employment of our former CEO of our U.S. subsidiary on August 3, 2015.

Note 2 – Significant Accounting Policies

These interim unaudited condensed consolidated financial statements have been prepared according to the same accounting policies as those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and according to the following additional policies:

F - 10

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 2 – Significant Accounting Policies (cont’d)

A. Intangible assets, net

Intangible assets subject to capitalization include costs incurred by the Company to acquire product certifications. According to Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other,” software that is part of a product or process to be sold to a customer shall be accounted for under ASC Subtopic 985-20. Our products contain embedded software which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product certification are capitalized once technological feasibility is determined. The Company determines that technological feasibility for its products is reached after all high-risk development issues have been resolved. Once the products are available for general release to the Company’s customers, the Company ceases capitalizing the product certification costs and all additional costs, if any, are expensed. The capitalized product certification costs are amortized on a product-by-product basis using the straight-line amortization. The amortization begins when the products are available for general release to the Company’s customers.

B. Recent accounting pronouncements

1. On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize the amount of revenues to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018. Early application will be permitted starting January 1, 2017. The ASU permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

2. In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The ASU is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact the adoption of ASU 2014-15 will have on its ongoing financial reporting.

3. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (ASU 2015-11), which changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 eliminates the guidance that entities consider replacement cost or net realizable value less an

F - 11

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 2 – Significant Accounting Policies (cont’d)

B. Recent accounting pronouncements (cont’d)

approximately normal profit margin in the subsequent measurement of inventory when cost is determined on a first-in, first-out or average cost basis. The provisions of ASU 2015-11 are effective for public entities with fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact to its consolidated financial position, consolidated results of operations, and consolidated cash flows of the adoption of ASU 2015-11.

Note 3 - Other Receivables and Prepaid Expenses

	September 30,		December 31,
	2015		2014
Government institutions	$	473		$	452
Prepaid expenses		636			690
Receivables under contractual obligations to be  transferred to others *		771			695
Smart ID divestiture earn out receivables (see also note 7)		461			-
Other receivables		576			693
	$	2,917		$	2,530

* The Company’s subsidiary in Poland is required to collect certain fees that are to be transferred to local authorities.

Note 4 - Inventories

Inventories consist of the following:

	September 30,		December 31,
	2015		2014
Raw materials	$	984	$	884
Work in progress		588		552
Finished products		2,389		2,267
	$	3,961	$	3,703

Note 5 - Other Current Liabilities

	September 30,		December 31,
	2015		2014
Employees and related expenses	$	959	$	1,175
Accrued expenses		998		902
Customer advances		470		244
Other current liabilities		303		335
	$	2,730	$	2,656

F - 12

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 6 - Commitments and Contingencies

A. Legal claims

1. On October 3, 2013, a financial claim was filed against the Company and its then French subsidiary, Parx France (in this paragraph, together the “Defendants”), in the Commercial Court of Paris, France (in this paragraph, the “Court”). The sum of the claim is Euro 1,500 (approximately $1,680), and is based on the allegation that the plaintiff sustained certain losses in connection with Defendants not granting the plaintiff exclusive marketing rights to distribute and operate the Defendants’ PIAF Parking System in Paris and the Ile of France. The Company filed an initial memorandum of defense rejecting the plaintiff’s allegations and claims. On May 19, 2014, during a preliminary Court hearing, it was established that the plaintiff, at all relevant times, was and is insolvent and under receivership, and therefore does not have the legal capacity to pursue the claim. During the preliminary hearings held the Company also raised allegations on lack of jurisdiction of the French court to hear the claim. The Court scheduled an additional pre-trial review hearing for November 16, 2015, and a closing arguments hearing is expected to be held on the first quarter of 2016. Based on the advice of counsel, the Company currently believes that it has no material obligations to the plaintiff and that there is no need for a provision for the claim.

2. On July 29, 2014, a former employee of the Company's Smart ID division filed a financial claim against the Company in the Regional Labor Court in Tel Aviv. The sum of the claim is NIS 4,744 (approximately $1,233), and is based on the allegation that the Company owes the plaintiff certain commissions. On October 29, 2014 the Company filed a statement of defense rejecting the plaintiff’s allegations and claims.On March 10, 2015, the Court held a pre-trial review hearing where the Court made an initial review of the parties’ allegations. In the course of the hearing the plaintiff was ordered to amend and resubmit his statement of claims. Further to filing the amended statements of claim and defence, the parties have been instructed to attend mediation, scheduled to take place on December 6, 2015. Based on the advice of counsel, the Company currently believes that it has no material obligations to the Plaintiff and that there is no need for a provision for the claim.

B. Guarantees

As of September 30, 2015, the Company granted performance guarantees in the sum of $727.

The expiration dates of the guarantees range from October 2015 to July 2016.

C. As of September 30, 2015, the Company is in compliance with the covenant signed with Bank Leumi L’Israel Ltd. (see note 8(F) in the Company’s consolidated financial statements as of December 31, 2014, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014).

F - 13

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 7 – Discontinued operations

As described in Note 1C, the Company divested the SmartID division and its interest in Intercard and presented these activities as discontinued operations. During the nine month periods ended September 30, 2015 and September 30, 2014, the Company recorded profit from contingent consideration in the amount of $848 and $500, respectively, according to an earn out mechanism derived from the Smart ID division divesture. This profit is included in the table below as ‘other income, net’ within income from discontinued operations for the nine month periods ended September 30, 2015 and September 30, 2014. During the nine months ended September 30, 2014, the Company recorded loss from the German Subsidiary Divesture, including transaction costs, and profit due to transfer of its accumulated foreign currency translation adjustments from other comprehensive loss to the statement of operations which totaled $7, which is presented below within ‘other  income, net’.

Set forth below are the results of the discontinued operations:

	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015			2014
Revenues	$	-	$	-		$	-		$	1,131
Expenses		-		(47	)		(25	)		(1,671	)
Other income, net		461		358			848			581
Net profit from discontinued operations	$	461	$	311		$	823		$	41

Note 8 - Fair Value of Financial Instruments

The Company's financial instruments consist mainly of cash and cash equivalents, short-term interest bearing investments, accounts receivable, restricted deposits for employee benefits, accounts payable and short-term and long-term loans.

Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:

· Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

· Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

· Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

F - 14

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 8 - Fair Value of Financial Instruments (cont'd)

By distinguishing between inputs that are observable in the market place, and therefore more objective, and those that are unobservable and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company, in estimating fair value for financial instruments, used the following methods and assumptions:

The carrying amounts of cash and cash equivalents, trade receivables, short-term bank credit and trade payables are equivalent to, or approximate their fair value due to the short-term maturity of these instruments.

The carrying amounts of variable interest rate long-term loans are equivalent or approximate to their fair value as they bear interest at approximate market rates. As of September 30, 2015, fair value of bank loans with fixed interest rates did not differ materially from the carrying amount.

As of September 30, 2015, the Company held approximately $7,056 of short-term bank deposits (as of December 31, 2014, $11,048). As of September 30, 2015, short -term deposits in the amount of $2,254 have been pledged as security in respect of guarantees granted in respect of  performance guarantees, loans and credit lines received from a bank (as of December 31, 2014 - $2,045) and cannot be pledged to others or withdrawn without the consent of the bank.

Note 9 – Equity

A. Stock option plans

During the nine months ended September 30, 2015 and September 30, 2014, 135,000 and 1,056,667 options were granted, respectively. The vesting period for the options ranges from immediate vesting to vesting over a three year period. The exercise prices for the options range from $1.29 to $2.84. Those options expire up to five years after the date of the grant. Any options which are forfeited or cancelled before expiration become available for future grants under the Company’s option plan.

The fair value of each option granted to employees during the nine months ended September 30, 2015 and during the nine months ended September 30, 2014, for which the exercise price was greater than par value, was estimated on the date of grant, using the Black-Scholes model and the following assumptions:

1. Dividend yield of zero percent for all periods.

2. Risk-free interest rate of 1.03%-1.10% and 0.79%-1.05% for grants during the nine months ended September 30, 2015 and September 30, 2014, respectively, based on U.S. Treasury yield curve in effect at the time of grant.

F - 15

On Track Innovations Ltd.

 and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 9 - Equity (cont'd)

A. Stock option plans (cont'd)

3. Estimated expected lives of 3.5 and 2.85-3.75 years for grants during the nine months ended September 30, 2015 and September 30, 2014, respectively, using the simplified method.

4. Expected average volatility of 69% and 65%-67% for grants during the nine months ended September 30, 2015 and September 30, 2014, respectively, which represent a weighted average standard deviation rate for the price of the Company's Ordinary Shares in the NASDAQ Global Market.

The Company’s options activity during the nine month period ended September 30, 2015, and the amount of options outstanding and exercisable as of December 31, 2014 and September 30, 2015, are summarized in the following table:

	Number of			Weighted
	options			average exercise
	outstanding			price per share
Outstanding – December 31, 2014		1,923,833		$	2.09
Options granted		135,000			1.65
Options expired or forfeited		(408,459	)		2.44
Outstanding – September 30, 2015		1,650,374			1.97
Exercisable as of:
December 31, 2014		697,003		$	1.90
September 30, 2015		983,479		$	1.90

The weighted average fair value of options granted during the nine months ended September 30, 2015 and during the nine months ended September 30, 2014 is $0.82 and $1.09, respectively, per option. The aggregate intrinsic value of outstanding options as of September 30, 2015 and December 31, 2014 is approximately $14 and $309, respectively. The aggregate intrinsic value of exercisable options as of September 30, 2015 and December 31, 2014 is approximately $14 and $165, respectively.

F - 16

On Track Innovations Ltd.

 and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 9 - Equity (cont'd)

A. Stock option plans(cont'd)

The following table summarizes information about options outstanding and exercisable (including options to non-employees) as of September 30, 2015:

		Options outstanding						Options Exercisable
		Number		Weighted				Number		Weighted
		outstanding		average		Weighted		Outstanding		average		Weighted
		as of		remaining		Average		As of		remaining		Average
Range of		September 30,		contractual		Exercise		September 30,		contractual		Exercise
exercise price		2015		life (years)		Price		2015		life (years)		Price
$	0.03		18,000		0.60	$	0.03		18,000		0.60	$	0.03
	0.90		198,814		0.99		0.90		175,666		1.02		0.90
	1.08-1.29		148,000		1.69		1.11		88,000		1.47		1.10
	1.46		135,000		2.51		1.46		86,666		2.27		1.46
	1.67-1.76		155,000		3.06		1.68		55,000		1.11		1.68
	2.32-2.37		850,005		2.95		2.35		466,814		2.40		2.34
$	3.03-3.23		145,555		1.26	$	3.16		93,333		0.51	$	3.19
			1,650,374		2.40				983,479		1.77

As of September 30, 2015, there was approximately $545 of total unrecognized compensation cost related to non-vested stock-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

During the nine months ended September 30, 2015 and September 30, 2014, the Company recorded stock-based compensation expenses in the amount of $369 and $642, respectively, in accordance with ASC Topic 718, “Compensation-Stock Compensation.”

B. Warrants

During the nine months ended September 30, 2015, 18,071 warrants were exercised.

The following table summarizes information about warrants outstanding and exercisable as of September 30, 2015:

		Warrants outstanding						Warrants Exercisable
		Number		Weighted				Number		Weighted
		outstanding		average		Weighted		Outstanding		average		Weighted
		as of		remaining		Average		As of		remaining		Average
Range of		September 30,		contractual		Exercise		September 30,		contractual		Exercise
exercise price		2015		life (years)		Price		2015		life (years)		Price
$	0 - 0.03		56,648		1.18	$	0.01		20,500		0.61	$	0.03
$	3.75		260,869		0.36		3.75		260,869		0.36		3.75
			317,517		0.51				281,369		0.38

F - 17

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 10 - Operating segments

For the purposes of allocating resources and assessing performance in order to improve profitability, the Company's chief operating decision maker ("CODM") examines three segments which are the Company's strategic business units: Retail and Mass Transit Ticketing, Petroleum and Parking. In addition to its three reportable segments, certain products for the medical industry and other secure smart card solutions are classified under the Company’s "Other" segment.

The strategic business unit's allocation of resources and evaluation of performance are managed separately. The CODM does not examine assets or liabilities for those segments and therefore they are not presented.

Information regarding the results of each reportable segment is included below based on the internal management reports that are reviewed by the CODM.

	Three months ended September 30, 2015
	Petroleum		Retail and Mass TransitTicketing		Parking		Other		Consolidated
Revenues	$	1,013	$	1,588	$	353	$	801	$	3,755
Reportable segment gross profit *		598		999		231		454		2,282
Reconciliation of reportable segment
gross profit to gross  profit for the period
Depreciation										(193	)
Stock-based compensation										(7	)
Gross profit for the period									$	2,082

	Three months ended September 30, 2014
	Petroleum		Retail and Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	734	$	3,695	$	528	$	298	$	5,255
Reportable segment gross profit *		424		1,888		365		140		2,817
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(171	)
Stock-based compensation										(10	)
Gross profit for the period									$	2,636

F - 18

On Track Innovations Ltd.

and Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

US dollars in thousands

Note 10 - Operating segments (cont'd)

	Nine months ended September 30, 2015
	Petroleum		Retail and  Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	3,108	$	8,303	$	1,103	$	1,632	$	14,146
Reportable segment gross profit *		1,800		4,463		705		873		7,841
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(556	)
Stock-based compensation										(35	)
Gross profit for the period									$	7,250

	Nine months ended September 30, 2014
	Petroleum		Retail and Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	2,902	$	11,835	$	1,711	$	1,159	$	17,607
Reportable segment gross profit *		1,800		5,567		1,136		593		9,096
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(531	)
Stock-based compensation										(24	)
Gross profit for the period									$	8,541

* Gross profit as reviewed by the CODM, represents gross profit, adjusted to exclude depreciation and stock-based compensation.

F - 19

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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: 

· our intention to continue to leverage our core competencies in the areas of cashless payment solutions, and our belief that this approach will allow us to expand faster and into new territories;

· the growth of the near field communications and cashless payment markets;

· the expected development and potential benefits from our existing or future products or our intellectual property, or IP;

· the generation of revenues from licensing, transaction fees and/or other arrangements;

· future sources of revenue, and the impact of fluctuations in currency exchange rates versus the U.S. dollar;

· our intention to continue to expand our market presence via strategic partnerships around the globe;

· our plans to increase our cash resources, such as by capitalizing on our patent portfolio, sales of assets or parts of our business or raising funds;

· our plans to reduce our financial expenses;

· our intention to continue to invest in research and development;

· our outlook for the coming months; and

· the outcome of any litigation, including the expected net proceeds from a settlement with T-Mobile, and whether such settlement will be reached at all.

The factors discussed herein, including those risk factors expressed from time to time in our press releases or filings with the Securities and Exchange Commission, or the SEC, could cause actual results and developments to be materially different from those expressed in or implied by such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak and are made only as of the date of this filing.

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” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with SEC. Readers are also urged to carefully review and consider the various disclosures we have made in that report.

5

As used in this Quarterly Report, the terms "we", "us", "our", “the Company”, and "OTI" mean On Track Innovations Ltd. and our subsidiaries and affiliates, unless otherwise indicated or as otherwise required by the context.

All figures in this Quarterly Report are stated in United States dollars, unless otherwise specified in.

Overview

We are a pioneer and leading developer of cutting-edge secure cashless payment solutions and for over two decades, we have provided innovative technology to worldwide enterprises. We operate in three main segments: Petroleum, Retail and Mass Transit Ticketing and Parking. In addition to our three reportable segments, certain products for the medical industry and other secure smart card solutions are classified under "Other" in the segment analysis appearingin this Quarterly Report.

Our field-proven suite of cashless payment solutions is based on an extensive IP portfolio boasting 35 patent families, including registeredpatents and patent applications worldwide. Since our incorporation in 1990, we have built an international reputation for reliability and innovation – deploying hundreds of solutions for banking, mobile network operators, attended and unattended market, mass transit, petroleum and parking.

We operate a global network of regional offices, franchisees, distributors and partners to support various solutions deployed across the globe.

We made a strategic decision to focus our efforts on our core business of providing cashless payment solutions based among other things on contactless and near field communication, or NFC, technology and to divest businesses in the Company that are not within this business scope. By optimizing our operational structure, we better leveraged our core competencies in the areas of cashless payment solutions, and we intend to continue doing so in the future. In addition, these divestures have allowed us to focus on building our sales momentum, leverage our growing industry adoption as a technology leader in the fast growing NFC and cashless payments markets, and reduce unnecessary headcount and costs. We believe that this approach will allow us to expand faster and into new territories. In addition, we made a strategic decision to focus on enforcing our patent portfolio, and on maximizing the value of our IP through licensing, customized technology solutions, strategic partnerships and litigation.

In August 2015 our Board of Directors appointed Mr. Shlomi Cohen as our new Chief Executive Officer, succeeding Mr. Ofer Tziperman. Following Mr. Cohen’s appointment, we have begun to implement a new go-to-market strategy designed to advance our NFC market leadership and drive profitable growth. In line with these efforts, we have started to recruit new marketing and sales professionals to address emerging opportunities around the globe. To become more sales oriented, we have introduced advanced new product lines and enhancements, designed to support the entry of new markets and industry verticals, as well as to expand existing customer adoption. We are also making efforts to engage in new partnerships with global manufacturers and developers in order to support and accelerate product development.

RESULTS OF OPERATIONS – THREE MONTHS ENDED SEPTEMBER 30, 2015 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2014, AND NINE MONTHS ENDED SEPTEMBER 30, 2015 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2014

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.

6

Results of Operations

In December 2013, we completed the sale of certain assets, certain subsidiaries and IP directly related to our SmartID division. In February 2014, we sold our wholly owned German subsidiary, Intercard. The results from such operations and the cash flows for the reporting periods are presented in the statements of operations and in the statements of cash flow, respectively, as discontinued operations separately from continuing operations. All the data in this Quarterly Report that are derived from our financial statements, unless otherwise specified, exclude the results of those discontinued operations.

Three months ended September 30, 2015, compared to the three months ended September 30, 2014

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. In addition, we generate revenues from licensing and transaction fees, and also, less significantly, from engineering services, customer services and technical support. During the three months ended September 30, 2015 and September 30, 2014, the revenues that we derived from sales and licensing and transaction fees were as follows (in thousands):

	Three months ended September 30,
	2015		2014
Sales	$	2,361	$	3,691
Licensing and transaction fees	$	1,394	$	1,564
Total revenues	$	3,755	$	5,255

Sales. Sales decreased by $1.3 million, or 36%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014. The decrease in 2015 is mainly attributed to a decrease in retail segment sales mainly in the U.S. market, partially offset by an increase in sales of our Other segment and an increase in sales of Petroleum products.

Licensing and transaction fees. Licensing and transaction feesinclude single and periodic payments for distribution rights for our products. Transaction fees are paid by customers based on the volume of transactions processed by systems that contain our products. Our licensing and transaction fees in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, decreased by $170,000, or 11%. This was mainly attributed to a decrease in sales generated from our Parking segment in Europe and Israel.

We have historically derived revenues from different geographical areas.  The following table sets forth our revenues (in thousands) and as a percentage of revenues in different geographical areas, in the three months ended September 30, 2015 and September 30, 2014:

Three months ended September 30,	Africa				Europe				Asia				Americas
2015	$	875	23	%	$	1,378	37	%	$	732	19	%	$	770	21	%
2014	$	704	13	%	$	1,969	38	%	$	321	6	%	$	2,261	43	%

Our revenues from sales in Africa increased by $171,000, or 24%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, mainly due to an increase in sales of MediSmart products.

Our revenues from sales in Europe decreased by $591,000, or 30%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, mainly due to a decrease in Retail and Mass Transit Ticketing segment sales and to a decrease in sales from our Parking segment.

7

Our revenues from sales in Asia increased by $411,000, or 128%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, mainly due to an increase in revenues from access control products and an increase in sales of Petroleum products.

Our revenues from sales in Americas decreased by $1.5 million, or 66%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, mainly due to a decrease in Retail and Mass Transit Ticketing segment sales in the United States.

Our revenues derived from outside the United States, which are primarily received in currencies other than the U.S. dollar, will have a varying impact upon our total revenues, as a result of fluctuations in such currencies’ exchange rates versus the U.S. dollar.

The following table sets forth our revenues (in thousands) and as a percentage of revenues by segments, during the three months ended September 30, 2015 and September 30, 2014:

Three months ended September 30,	Petroleum				Parking				Retail and Mass Transit Ticketing				Other
2015	$	1,014	27	%	$	353	9	%	$	1,588	43	%	$	800	21	%
2014	$	734	14	%	$	528	10	%	$	3,695	70	%	$	298	6	%

Our revenues in the three months ended September 30, 2015, from Petroleum increased by $280,000, or 38%, compared to the three months ended September 30, 2014, mainly due to an increase in Petroleum products in Asia.

Our revenues in the three months ended September 30, 2015, from Parking decreased by $175,000, or 33%, compared to the three months ended September 30, 2014, mainly due to a decrease in revenues generated from parking products in Europe and Israel.

Our revenues from Retail and Mass Transit Ticketing in the three months ended September 30, 2015, decreased by $2.1 million, or 57%, compared to the three months ended September 30, 2014, mainly due to a decrease in sales in the United States and a decrease in sales in Europe.

Our revenues in the three months ended September 30, 2015, from our Other segment increased by $502,000, or 168%, compared to the three months ended September 30, 2014, mainly due to an increase in sales of MediSmart products in Africa and an increase in revenues from access control products in Asia.

Cost of Revenues and Gross Margin

Our cost of revenues, presented by gross profit and gross margin percentage, in the three months ended September 30, 2015 and September 30, 2014, were as follows (in thousands):

Cost of revenues	Three months ended September 30,
	2015			2014
Cost of sales	$	1,673		$	2,619
Gross profit	$	2,082		$	2,636
Gross margin percentage		55	%		50	%

Cost of sales.  Cost of revenues relating to sales consists primarily of materials, as well as salaries, fees to subcontractors and related costs of our technical staff that assemble our products. The decrease of $946,000, or 36%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, resulted primarily from a decrease in revenues and a decrease in consumption of materials for the production of our retail products as part of our continued manufacturing cost reduction efforts.

8

Gross margin. Gross margin increased to 55% in the three months ended September 30, 2015, from 50% in the three months ended September 30, 2014. The increase is mainly attributed to a change in our revenue mix and from a decrease in our consumption of materials for the production of our retail products due to our continued manufacturing cost reduction efforts.

Operating expenses

Our operating expenses in the three months ended September 30, 2015 and September 30, 2014, were as follows (in thousands):

Operating expenses	Three months ended September 30,
	2015		2014
Research and development	$	807	$	1,281
Selling and marketing	$	1,730	$	1,968
General and administrative	$	1,056	$	1,382
Patent litigation and maintenance	$	371	$	194
Other expenses	$	408	$	-
Total operating expenses	$	4,372	$	4,825

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 $474,000, or 37%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, is primarily attributed to a decrease in employment expenses due to the shutdown of operation of our wholly owned subsidiary Smart Card Engineering Ltd. in December 2014, and to a decrease in subcontractor expenses. Our research and development expenses may increase in the future as we continue to develop new products and new applications for our existing products.

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 the United States, South Africa and Europe, as well as expenses related to advertising, professional expenses and participation in exhibitions and tradeshows. The decrease of $238,000, or 12%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, is primarily attributed to a decrease in employment expenses due to a decrease in the number of sales and marketing employees and to a decrease in consulting expenses. Our selling and marketing expenses may increase in the future as we continue to expand our local sales and marketing efforts, open new offices and in the event that we hire additional personnel.

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 lawyers and accountants), office expenses, insurance, general and administrative expenses and provision for doubtful accounts. The decrease of $326,000, or 24%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, is primarily attributed to a decrease in employment expenses related to stock-based compensation expenses and a decrease in the number of general and administrative employees. General corporate and administrative expenses may increase in the future as we continue to expand our operations.

Patent litigation and maintenance expenses. Our patent litigation and maintenance expenses consist primarily of professional advisors related to our patents and other IP, such as lawyers or other consultants, as part of the Company's long-term plan to maximize the value of our IP, and also consist of salaries and related expenses of our team of employees executing this strategy. The increase of $177,000, or 91%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, is primarily attributed to an increase in employment expenses, and to a lesser extent, an increase in legal expenses.

9

Other expenses. Our other expenses consist of partial compensation expenses related to the termination of employment of our former Chief Executive Officer, Mr. Ofer Tziperman, according to his employment terms, following his resignation from the Company and its subsidiaries on February 10, 2015 and compensation expenses related to the termination of employment of our former Director and Chief Executive Officer of our U.S. subsidiary, Mr. Dimitrios Angelis, on August 3, 2015.

Financing expenses, net

Our financing expenses, net, in the three months ended September 30, 2015 and September 30, 2014, were as follows (in thousands):

	Three months ended September 30,
	2015			2014
Financing income	$	4		$	3
Financing expenses	$	(126	)	$	(47	)
Financing expenses, net	$	(122	)	$	(44	)

Financing expenses consist primarily of interest payable on bank loans, bank commissions and foreign exchange losses. Financing income consists primarily of foreign exchange gains and from interest earned on investments in short-term deposits. Our financing income in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, remained consistent. The increase in financing expenses in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, of $79,000, or 168%, is mainly due to increased foreign exchange losses, following the stronger U.S. dollar compared to other currencies and also due to an increase in interest expenses on short-term and long-term bank credit.

Net loss from continuing operations

Our net lossfrom continuing operations in the three months ended September 30, 2015 and September 30, 2014, was as follows (in thousands):

	Three months ended September 30,
	2015			2014
Net loss from continuing operations	$	(2,447	)	$	(2,262	)

The increase of $185,000, or 8%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014 is primarily due to a decrease in revenues and gross profit and an increase in financing expenses, net, partially offset by a decrease in our operating expenses, following our successful cost reduction measures as described above.

Net income from discontinued operations

Our netincome from discontinued operations in the three months ended September 30, 2015 and September 30, 2014, was as follows (in thousands):

	Three months ended  September 30,
	2015		2014
Net  income from discontinued operations	$	461	$	311

In December 2013, we completed the sale of certain assets, certain subsidiaries and IP assets directly related to our SmartID division. Further, in February 2014, we sold Intercard.

10

The results from these operations for the reporting periods are presented in the statements of operations as discontinued operations separately from continuing operations.

The increase in net income from discontinued operations of $150,000, or 48%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014, is due to an increase in net income from contingent consideration according to an earn out mechanism as part of our SmartID divestiture.

Net loss

Our net loss in the three months ended September 30, 2015 and September 30, 2014, was as follows (in thousands):

	Three months ended  September 30,
	2015			2014
Net loss	$	(1,986	)	$	(1,951	)

The increase in net loss of $35,000, or 2%, in the three months ended September 30, 2015, compared to the three months ended September 30, 2014 is primarily due to a decrease in revenues and gross profit and an increase in financing expenses, net, partially offset by a decrease in our operating expenses following our successful cost reduction measures and an increase in net income from discontinued operations as described above.

Nine months ended September 30, 2015, compared to the nine months ended September 30, 2014

Sources of Revenue

During the nine months ended September 30, 2015 and September 30, 2014, the revenues that we derived from sales and licensing and transaction fees were as follows (in thousands):

	Nine months ended September 30,
	2015		2014
Sales	$	10,015	$	13,381
Licensing and transaction fees	$	4,131	$	4,226
Total revenues	$	14,146	$	17,607

Sales. Sales decreased by $3.4 million, or 25%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014. The decrease in 2015 is mainly attributed to a decrease in Retail and Mass Transit Ticketing segment sales in the United States and Europe and to a decrease in sales of oti Wave product in Asia. In addition, revenues received in currencies other than the U.S. dollar caused a negative impact on our sales, as a result of fluctuations in exchange rate versus the U.S. dollar.

Licensing and transaction fees. Our licensing and transaction fees in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, decreased by $95,000, or 2%. This was mainly attributed to a decrease in sales generated from parking segment in Israel and Europe, partially offset by an increase in revenues from Retail and Mass Transit Ticketing in Poland.

We have historically derived revenues from different geographical areas.  The following table sets forth our revenues (in thousands) and as a percentage of revenues in different geographical areas, in the nine months ended September 30, 2015 and September 30, 2014:

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Nine months ended September 30,	Africa				Europe				Asia				Americas
2015	$	2,599	18	%	$	4,376	31	%	$	1,444	10	%	$	5,727	41	%
2014	$	3,044	17	%	$	5,522	32	%	$	2,184	12	%	$	6,857	39	%

Our revenues from sales in Africa decreased by $445,000, or 15%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, mainly due to a decrease in sales of Petroleum products partially offset by an increase in sales of our MediSmart products.

Our revenues from sales in Europe decreased by $1.1 million, or 21%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, mainly due to a decrease in Retail and Mass Transit Ticketing segment sales and a decrease in sales of Parking products, partially offset by an increase in sales of Petroleum products.

Our revenues from sales in Asia decreased by $740,000, or 34%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, mainly due to a decrease in retail segment sales related to our oti Wave product and a decrease in sales of Parking products, partially offset by an increase in sales of Petroleum products.

Our revenues from sales in Americas decreased by $1.1 million, or 16%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, mainly due to a decrease in retail segment sales to the U.S. market, partially offset by an increase in sales of Petroleum products to the South American market.

Our revenues derived from outside the United States, which are primarily received in currencies other than the U.S. dollar, will have a varying impact upon our total revenues, as a result of fluctuations in such currencies’ exchange rates versus the U.S. dollar.

The following table sets forth our revenues (in thousands) and as a percentage of revenues by segments, during the nine months ended September 30, 2015 and September 30, 2014:

Nine months ended September 30,	Petroleum				Parking				Retail and Mass Transit Ticketing				Other
2015	$	3,108	22	%	$	1,103	8	%	$	8,303	58	%	$	1,632	12	%
2014	$	2,902	16	%	$	1,711	10	%	$	11,835	67	%	$	1,159	7	%

Our revenues in the nine months ended September 30, 2015, from Petroleum increased by $206,000, or 7%, compared to the nine months ended September 30, 2014. This increase was mainly due to an increase in sales of Petroleum products in South America, Europe and Asia, partially offset by a decrease in sales of Petroleum products in Africa which are primarily received in currencies other than the U.S. dollar, and which had a negative impact upon our Petroleum sales as a result of fluctuations in the South African Rand exchange rate versus the U.S. dollar.

Our revenues in the nine months ended September 30, 2015, from Parking decreased by $608,000, or 36%, compared to the nine months ended September 30, 2014, mainly due to a decrease in revenues generated from the European and Israeli markets.

Our revenues from Retail and Mass Transit Ticketing in the nine months ended September 30, 2015, decreased by $3.5 million, or 30%, compared to the nine months ended September 30, 2014, mainly due to a decrease in sales in the United States and Europe, and a decrease in sales related to our oti Wave product in Asia.

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Our revenues in the nine months ended September 30, 2015, from our Other segment increased by $473,000, or 41%, compared to the nine months ended September 30, 2014. The increase in sales of Other products was mainly due to an increase in sales of MediSmart products in Africa.

Cost of Revenues and Gross Margin

Our cost of revenues, presented by gross profit and gross margin percentage, in the nine months ended September 30, 2015 and September 30, 2014, were as follows (in thousands):

Cost of revenues	Nine months ended September 30,
	2015			2014
Cost of sales	$	6,896		$	9,066
Gross profit	$	7,250		$	8,541
Gross margin percentage		51	%		49	%

Cost of sales. Cost of revenues relating to sales consists primarily of materials, as well as salaries, fees to subcontractors and related costs of our technical staff that assemble our products. The decrease of $2.2 million, or 24%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, resulted primarily from a decrease in revenues and a decrease in consumption of materials for the production of our retail products as part of our continued manufacturing cost reduction efforts.

Gross margin. Gross margin increased to 51% in the nine months ended September 30, 2015, from 49% in the nine months ended September 30, 2014. The increase is mainly attributed to a change in our revenue mix and from a decrease in our consumption of materials for the production of our retail products due to our continued manufacturing cost reduction efforts.

Operating expenses

Our operating expenses in the nine months ended September 30, 2015 and September 30, 2014, were as follows (in thousands):

Operating expenses	Nine months ended September 30,
	2015		2014
Research and development	$	2,712	$	3,662
Selling and marketing	$	5,388	$	6,160
General and administrative	$	3,440	$	4,491
Patent litigation and maintenance	$	830	$	1,213
Other expenses	$	918	$	-
Total operating expenses	$	13,288	$	15,526

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 $950,000, or 26%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, is primarily attributed to a decrease in employment expenses due to the shutdown of operation of our wholly owned subsidiary Smart Card Engineering Ltd. in December 2014, and to a lesser extent to a decrease in subcontractor expenses. Our research and development expenses may increase in the future as we continue to develop new products and new applications for our existing products.

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 the United States, South Africa and Europe, as well as expenses related to advertising, professional expenses and participation in exhibitions and tradeshows. The decrease of $772,000, or 13%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, is primarily attributed to a decrease in employment expenses due to a decrease in the number of selling and marketing employees, and to a lesser extent to a decrease in exhibitions and advertising expenses. Our selling and marketing expenses may increase in the future as we continue to expand our local sales and marketing efforts, open new offices and in the event that we hire additional personnel.

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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 lawyers and accountants), office expenses, insurance, general and administrative expenses and provision for doubtful accounts. The decrease of $1.1 million, or 23%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, is primarily attributed to a decrease in employment expenses due to stock-based compensation related to options, and a decrease in the number of general and administrative employees, and to a lesser extent to a decrease in business travel expenses, partially offset by an increase in ongoing professional consulting expenses. General corporate and administrative expenses may increase in the future as we continue to expand our operations.

Patent litigation and maintenance expenses.  Our patent litigation and maintenance expenses consist primarily of professional advisors related to our patents and other IP, such as lawyers or other consultants, as part of the Company's long-term plan to maximize the value of our IP, and also consist of salaries and related expenses of our team of employees executing this strategy. The decrease of $383,000, or 32%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, is primarily attributed to a decrease in legal fees and a decrease in employment expenses.

Other expenses. Our other expenses consist of partial compensation expenses provision related to the termination of employment of our former Chief Executive Officer, Mr. Ofer Tziperman, according to his employment terms, following his resignation from the Company and its subsidiaries on February 10, 2015 and partial compensation expenses related to the termination of employment of our former Director and Chief Executive Officer of our U.S. subsidiary, Mr. Dimitrios Angelis, on August 3, 2015. Our other expenses also consist of consulting fees as part of our strategic review.

Financing expenses, net

Our financing expenses, net, in the nine months ended September 30, 2015 and September 30, 2014, were as follows (in thousands):

	Nine months ended September 30,
	2015			2014
Financing income	$	83		$	76
Financing expenses	$	(625	)	$	(473	)
Financing expenses, net	$	(542	)	$	(397	)

Financing expenses consist primarily of interest payable on bank loans, bank commissions and foreign exchange losses. Financing income primarily of foreign exchange gains and from interest earned on investments in short-term deposits. The increase in financing income in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, of $7,000, or 9%, is mainly due to the exchange rate differentials and interest income from deposits. The increase in financing expenses in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, of $152,000, or 32%, is mainly due to an increase in the exchange rate differentials of the U.S. dollar against other currencies, partially offset by a decrease in interest expenses on short-term and long-term bank credit and bank commissions.

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Net loss from continuing operations

Our net lossfrom continuing operations in the nine months ended September 30, 2015 and September 30, 2014, was as follows (in thousands):

	Nine months ended September 30,
	2015			2014
Net loss from continuing operations	$	(6,618	)	$	(7,584	)

The decrease of $966,000, or 13%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, despite the decrease in revenues, is primarily due to a decrease in our operating expenses following our successful cost reduction measures, partially offset by a decrease in our gross profit and an increase in financing expenses, net, as described above.

Net income from discontinued operations

Our netincome from discontinued operations in the nine months ended September 30, 2015 and September 30, 2014, was as follows (in thousands):

	Nine months ended September 30,
	2015		2014
Net income from discontinued operations	$	823	$	41

In December 2013, we completed the sale of certain assets, certain subsidiaries and IP assets directly related to our SmartID division. Further, in February 2014, we sold Intercard.

The results from these operations for the reporting periods are presented in the statements of operations as discontinued operations separately from continuing operations.

The increase in net income from discontinued operations of $782,000 in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, is due to a decrease in net loss from discontinued operations activity from the sale of Intercard in February 2014 and due to an increased income in the reporting period of 2015 from contingent consideration according to an earn out mechanism as part of our SmartID divestiture.

Net loss

Our net loss in the nine months ended September 30, 2015 and September 30, 2014, was as follows (in thousands):

	Nine months ended September 30,
	2015			2014
Net loss	$	(5,795	)	$	(7,543	)

The decrease in net loss of $1.7 million, or 23%, in the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, despite the decrease in revenues, is primarily due to a decrease in our operating expenses following our successful cost reduction measures and an increase in net income from discontinued operations, partially offset by a decrease in our gross profit and an increase in financing expenses, net, as described above.  

15

Liquidity and Capital Resources

Our principal sources of liquidity since our inception have been sales of equity securities, borrowings from banks, cash from the exercise of options and warrants and proceeds from divestitures of parts of our businesses. We had cash, cash equivalents and short-term investments representing bank deposits of $11.5 million as of September 30, 2015 (of which an amount of $2.3 million has been pledged as a security in respect of performance guarantees granted to third parties and guarantees to secure customer advances, loans and credit lines received from a bank), and $16.4 million as of December 31, 2014 (of which an amount of $2.0 million had then been pledged as a security in respect of performance guarantees granted to third parties and guarantees to secure customer advances, loans and credit lines received from a bank). We believe that we have sufficient capital resources to fund our operations in the next 12 months. We adhere to an investment policy which is intended to enable the Company to avoid being classified as a “passive foreign investment company,” or PFIC, under U.S. law. That said, we cannot provide complete assurance that PFIC status will be avoided in the future.  In addition, our investment policy requires investment in high-quality investment-grade securities. As of September 30, 2015, the bank loans are denominated in the following currencies: U.S. dollars ($375,000, with maturity dates ranging from 2015 through 2019), New Israeli Shekels, or NIS ($384,000, with maturity dates ranging from 2015 through 2019), South African Rand ($710,000, with maturity dates ranging from 2015 through 2023) and Polish Zloty ($1.4 million, with maturity dates ranging from 2015 through 2019). As of September 30, 2015, these loans bear interest at rates ranging from 4.0%-7.5% per annum.

Our composition of long-term loans as of September 30, 2015, was as follows (in thousands):

	September 30, 2015
Long-term loans	$	2,885
Less - current maturities		835
	$	2,050

Our composition of short-term loans, bank credit and current maturities of long-term loans as of September 30, 2015, were as follows (in thousands):

	September 30, 2015
	Interest rate
In NIS	4.7	%	$	778
In U.S. dollars	5.0%	%		1,137
In Polish Zloty	3.6%	%		530
				2,445
Current maturities of long-term loans				835
			$	3,280

On November 4, 2014, the Company signed a financial and restrictive covenant with Bank Leumi L’Israel Ltd. in order to secure bank services and obtain bank credit and loans. Under the covenant, we are obligated to meet the following: (i) our total liquid deposits will not be less than $6.0 million at any time; (ii) beginning January 1, 2015, our annual operational profit on an earnings before interest, taxes, depreciation and amortization basis will not be less than $1.0 million; (iii) our annual revenues will not be less than $20.0 million; and (iv) for 2014, equity was required to be at a level of 25% of the total assets and equity sum of no less than $9.5 million, for 2015, equity is required to be at a level of 28% of the total assets and equity sum of no less than $10.5 million, for 2016 and onwards, equity is required to be at a level of 30% of the total assets and equity sum of no less than $11.0 million. As of September 30, 2015, we are in compliance with these covenants. The Company is taking measures to be in a position at December 31, 2015 that such covenants will not be effective. In any case, the effect of not complying with such covenants will not have a material impact on the financial statements of the Company.

16

For the nine months ended September 30, 2015, we had a negative cash flow from continuing operations of $3 million. We may continue to suffer from negative cash flow from operations. We are looking for ways to increase our cash resources, such as increasing our revenues and profit, capitalizing on our patent portfolio, sales of assets or parts of our business or raising funds. In addition, we are looking for ways to reduce our financial expenses, including repayment of debt instruments.

We have an effective Form S-3 registration statement, filed under the Securities Act of 1933, as amended with the SEC using a “shelf” registration process. Under this shelf registration process, we may, from time to time, sell ordinary shares, warrants to purchase ordinary shares, and units of such securities in one or more offerings up to a total dollar amount of $50,000,000.

Operating activities related to continuing operations

For the nine months ended September 30, 2015, net cash used in continuing operating activity was $3 million primarily due to a $6.6 million net loss from continuing operations, a $382,000 increase in inventory, and a $79,000 decrease in accrued severance pay, partially offset by a $1.9 million decrease in trade receivables, depreciation expenses of $941,000, a $402,000 increase in trade payables, a $369,000 expense due to stock-based compensation issued to employees, a $197,000 increase in other current liabilities, a $131,000 decrease in other receivables and prepaid expenses, a $36,000 deferred tax expense and a $30,000 accrued interest expense.

For the nine months ended September 30, 2014, net cash used in continuing operating activity was $7.2 million primarily due to a $7.6 million net loss from continuing operations, a $772,000 decrease in other current liabilities, a $689,000 increase in inventory, a $308,000 increase in other receivables and prepaid expenses and a $112,000 decrease in accrued severance pay, partially offset by a $240,000 decrease in trade receivables, a $235,000 increase in trade payables and the following non-cash expenses: $959,000 of depreciation, $642,000 of stock-based compensation expenses related to equity grants issued to employees and others and $135,000 in deferred tax.

Operating activities related to discontinued operations

For the nine months ended September 30, 2015, net cash used in discontinued operatingactivities was $25,000, related to the SmartID division. For the nine months ended September 30, 2014, net cash used in discontinued operatingactivities was $1.3 million, which related to the SmartID division and Intercard.

In June 2015, the purchaser of our Smart ID division, SuperCom Ltd., or SuperCom, raised cash through an equity public offering. Based on certain provisions of the Smart ID division sale agreement, such an event entitles us to additional consideration. After repeated demands for payment, on October 19, 2015, we filed a lawsuit in the District Court in Lod, Israel, against SuperCom claiming certain substantial sums owed to us by SuperCom. Any such additional consideration, if and when received, will be accounted for as income from discontinued operations.

Investing and financing activities related to continuing operations

For the nine months ended September 30, 2015, net cash provided by continuing investing activities was $2.6 million, mainly due to $8.2 million proceeds from the maturity and sale of short-term investments and $31,000 in proceeds from sale of property and equipment, partially offset by a $4.2 million purchase of short-term investments, an $1.1 million purchase of property and equipment, a $153,000 investment in capitalized product costs and a $137,000 net investment in restricted deposit for employee benefits.

For the nine months ended September 30, 2014, net cash used in continuing investing activities was $1.5 million, mainly due to a $2.4 million investment in short-term investments and $340,000 purchase of property and equipment, partially offset by $1.3 million in proceeds from the maturity of short-term investments.

17

For the nine months ended September 30, 2015, net cash used in continuing financing activities was $673,000 mainly due to a $783,000 decrease in short-term bank credit and repayment of $606,000 of long-term bank loans, partially offset by $716,000 inproceeds from long-term bank loans.

For the nine months ended September 30, 2014, net cash provided by continuing financing activities was $362,000 mainly due to $965,000 in proceeds from the exercise of options, a $179,000 increase in short-term bank credit, net, and proceeds of $29,000 from long-term bank loans, partially offset by a $811,000 repayment of long-term bank loans.

Investing and financing activities related to discontinued operations

For the nine months ended September 30, 2015, net cash provided by discontinued investing activities was $387,000 due to contingent consideration received related to the Smart ID division divesture.

For the nine months ended September 30, 2014, net cash provided by discontinued investing activities was $925,000 mainly due to payments received related to the sale of Intercard and earn out payments from the sale of the SmartID division operations, partially offset by the purchase of property and equipment by Intercard.

We had no cash flows provided by or used in discontinued financing activities in the nine months ended September 30, 2015.

For the nine months ended September 30, 2014, net cash used in discontinued financing activities was $154,000 mainly due to repayments of short-term loans related to Intercard.

Off Balance Sheet Arrangements

As of September 30, 2015, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures - We maintain a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and our Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO and our CFO, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting - There has been no change in our internal control over financial reporting during the third quarter of fiscal 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

18

PART II - OTHER INFORMATION

Item1.  Legal Proceedings.

As previously reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, on March 26, 2012, we filed a patent infringement lawsuit in the United States District Court for the Southern District of New York against T-Mobile USA, Inc. for selling NFC enabled phones that infringe our U.S. Patent No. 6,045,043, or the ‘043 Patent. Our requested relief in the 2012 lawsuit is a declaration that T-Mobile infringes our patent, an injunction against further infringement, direct and indirect damages for the infringement, and attorneys’ fees. On May 5, 2015, we filed a second patent infringement lawsuit against T-Mobile in the United States District Court for the Southern District of New York, regarding certain T-Mobile NFC enabled phones fitted with Giesecke & Devirent Advanced SIM cards for infringing our ‘043 Patent. On September 24, 2015, we notified the Court, jointly with T-Mobile, that we had reached an agreement in principle to settle our claims against T-Mobile. We expect that the net proceeds from the settlement with T-Mobile, if such settlement is reached, will not be significant and less than our initial expectations.

On September 30, 2015, we filed two separate patent infringement lawsuits in the United States District Court for the Southern District of New York against mobile carriers AT&T and Verizon Wireless, respectively. Both suits assert infringement of our U.S. Patent No. 6,045,043, based on AT&T’s and Verizon’s offering for sale and/or sale of NFC enabled phones for use with certain advanced SIM cards. Our requested relief in both lawsuits is a declaration that AT&T and Verizon infringe our patent, direct and indirect damages for the infringement, and attorneys’ fees. The foregoing lawsuits have not yet been served on AT&T or Verizon Wireless as of the date hereof.

On October 19, 2015, we filed a lawsuit in the District Court in Lod, Israel, against SuperCom, the purchaser of our Smart ID division, requesting, among other things, monetary relief in the amount of  NIS 28.9 million (approximately $7.4 million) with respect to additional consideration owed to us for the sale of our Smart ID division. SuperCom is required by applicable law to file a response by November 20, 2015.

Item 6.  Exhibits.

3.1	Amended and Restated Articles of Incorporation (incorporated by reference to the Company’s Report on Form 6-K filed with the SEC on October 31, 2013).
3.2	Memorandum of Association, dated February 14, 1990 (incorporated by reference to the Company’s Registration Statement on Form F-1, filed with the SEC on June 14, 2002).
31.1*	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2*	Rule 13a-14(a) Certification of Chief Financial Officer.

32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101 *	The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 formatted in XBRL (eXtensible Business Reporting Language): (i) the Interim Condensed Consolidated Balance Sheets, (ii) the Interim Condensed Consolidated Statements of Operations, (iii) the Interim Condensed Consolidated Statements of Comprehensive Loss, (iv) the Interim Condensed Statements of Changes in Equity, (v) the Interim Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Interim Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.

*Filed herewith.

** Furnished herewith.

19

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ON TRACK INNOVATIONS LTD.

By: /s/ Shlomi Cohen

Shlomi Cohen, Chief Executive Officer

(Principal Executive Officer)

Dated: November 16, 2015

By: /s/ Shay Tomer

Shay Tomer, Chief Financial Officer

(Principal Financial and Accounting Officer)

Dated:  November 16, 2015

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Shlomi Cohen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of On Track Innovations Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) of the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 16, 2015
	/s/ Shlomi Cohen —————————————— Shlomi Cohen Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 31.2

CERTIFICATION

I, Shay Tomer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of On Track Innovations Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) of the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 16, 2015
	/s/ Shay Tomer —————————————— Shay Tomer Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of On Track Innovations Ltd. (the “Company”) on Form 10-Q for the period ended September 30, 2015 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Shlomi Cohen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

1. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 16, 2015 By: /s/ Shlomi Cohen —————————————— Shlomi Cohen Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of On Track Innovations Ltd. (the “Company”) on Form 10-Q for the period ended September 30, 2015 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Shay Tomer, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

1. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 16, 2015  By: /s/ Shay Tomer —————————————— Shay Tomer Chief Financial Officer

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Equity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Equity [Abstract]
Options granted	135,000	1,056,667
Unrecognized compensation cost	$ 545
Unrecognized compensation cost, period for recognition	1 year 6 months
Share-based compensation expense	$ 369	$ 642
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 1.65
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 1.29
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Expiration period	5 years
Exercise price	$ 2.84

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Organization and Basis of Presentation (Divestiture of Operations) (Details) € in Thousands, $ in Thousands, ₪ in Millions			1 Months Ended		3 Months Ended		9 Months Ended
	Oct. 19, 2015 USD ($)	Oct. 19, 2015 ILS (₪)	Feb. 28, 2014 USD ($)	Feb. 28, 2014 EUR (€)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)
Organization and Basis of Presentation [Abstract]
Gain from contingent consideration					$ 461	$ 270	$ 848	$ 500
Proceeds from sale of subsidiary			$ 960	€ 700
Loss from divestiture			7
Transaction cost, sale of subsidiary			343
Foreign currency translation released following sale of a subsidiary			$ (336)			$ (60)		$ (396)
Subsequent event [Member]
Divestiture of operations [Line Items]
Lawsuit, damages sought	$ 7,400	₪ 28.9

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Equity (Schedule of Warrants Outstanding and Exercisable) (Details)	9 Months Ended
	Sep. 30, 2015 $ / shares shares
Warrants outstanding
Number outstanding	317,517
Weighted average remaining contractual life	6 months 4 days
Warrants exercisable
Number outstanding	281,369
Weighted average remaining contractual life	4 months 17 days
Warrants exercised	18,071
$0 - 0.03 [Member]
Warrants outstanding
Number outstanding	56,648
Weighted average remaining contractual life	1 year 2 months 5 days
Weighted average exercise price | $ / shares	$ 0.01
Warrants exercisable
Number outstanding	20,500
Weighted average remaining contractual life	7 months 10 days
Weighted average exercise price | $ / shares	$ 0.03
$3.75 [Member]
Warrants outstanding
Number outstanding	260,869
Weighted average remaining contractual life	4 months 10 days
Weighted average exercise price | $ / shares	$ 3.75
Warrants exercisable
Number outstanding	260,869
Weighted average remaining contractual life	4 months 10 days
Weighted average exercise price | $ / shares	$ 3.75

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Significant Accounting Policies [Abstract]

Significant Accounting Policies

Note 2 – Significant Accounting Policies

These interim unaudited condensed consolidated financial statements have been prepared according to the same accounting policies as those discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and according to the following additional policies:

A. Intangible assets, net

Intangible assets subject to capitalization include costs incurred by the Company to acquire product certifications. According to Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other,” software that is part of a product or process to be sold to a customer shall be accounted for under ASC Subtopic 985-20. Our products contain embedded software which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product certification are capitalized once technological feasibility is determined. The Company determines that technological feasibility for its products is reached after all high-risk development issues have been resolved. Once the products are available for general release to the Company's customers, the Company ceases capitalizing the product certification costs and all additional costs, if any, are expensed. The capitalized product certification costs are amortized on a product-by-product basis using the straight-line amortization. The amortization begins when the products are available for general release to the Company's customers.

B. Recent accounting pronouncements

1. On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize the amount of revenues to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018. Early application will be permitted starting January 1, 2017. The ASU permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

2. In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The ASU is intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact the adoption of ASU 2014-15 will have on its ongoing financial reporting.

3. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (ASU 2015-11), which changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 eliminates the guidance that entities consider replacement cost or net realizable value less an approximately normal profit margin in the subsequent measurement of inventory when cost is determined on a first-in, first-out or average cost basis. The provisions of ASU 2015-11 are effective for public entities with fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact to its consolidated financial position, consolidated results of operations, and consolidated cash flows of the adoption of ASU 2015-11.

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Commitments and Contingencies (Legal Claims) (Details) € in Thousands, ₪ in Thousands, $ in Thousands	1 Months Ended
	Jul. 31, 2014 USD ($)	Jul. 31, 2014 ILS (₪)	Oct. 31, 2013 USD ($)	Oct. 31, 2013 EUR (€)
Former Employee One [Member]
Loss Contingencies [Line Items]
Lawsuit, damages sought	$ 1,233	₪ 4,744
French Subsidiary [Member]
Loss Contingencies [Line Items]
Lawsuit, damages sought			$ 1,680	€ 1,500

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Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Other Current Liabilities [Abstract]
Employees and related expenses	$ 959	$ 1,175
Accrued expenses	998	902
Customer advances	470	244
Other current liabilities	303	335
Total other current liabilities	$ 2,730	$ 2,656

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Commitments and Contingencies (Guarantees) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($)
Commitments and Contingencies [Abstract]
Granted guarantee to third party	$ 727
Gurantee obligation expiration date, earliest	Oct. 31, 2015
Gurantee obligation expiration date, latest	Jul. 31, 2016

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Discontinued operations (Schedule of Results) (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 28, 2014	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Discontinued operations [Abstract]
Gain from contingent consideration		$ 461	$ 270	$ 848	$ 500
Loss from divestiture	$ 7
Revenues					$ 1,131
Expenses			$ (47)	$ (25)	(1,671)
Other income, net		$ 461	358	848	581
Net profit from discontinued operations		$ 461	$ 311	$ 823	$ 41

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2015

Organization and Basis of Presentation [Abstract]

Organization and Basis of Presentation

Note 1 - Organization and Basis of Presentation

A. Description of business

On Track Innovations Ltd. (the “Company”) was founded in 1990, in Israel. The Company and its subsidiaries (together “the Group”) are principally engaged in the field of design and development of cashless payment solutions. The Company's shares are listed for trading on NASDAQ.

B. Interim Unaudited Financial Information

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and therefore should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. Operating results for the nine month period ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Use of Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the assets, liabilities, revenue, costs, expenses and accumulated other comprehensive income/(loss) that are reported in the Interim Consolidated Financial Statements and accompanying disclosures. These estimates are based on management's best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates.

C. Divestiture of operations

1. In December 2013, the Company completed the sale of certain assets, subsidiaries and intellectual property ("IP") relating to its Smart ID division. Accordingly the results and the cash flows of this operation for all reporting periods are presented in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations. During the nine month periods ended September 30, 2015 and September 30, 2014, the Company recorded profit from contingent consideration in the amount of $848 and $500, respectively, from which $461 and $270 were recognized during the three month periods ended on such dates, respectively, according to an earn out mechanism. This profit is included in ‘other income, net' within income from discontinued operations for those periods (see also Note 7).

In June 2015, the purchaser of our Smart ID division, SuperCom Ltd., or SuperCom, raised cash through an equity public offering. Based on certain provisions of the Smart ID division sale agreement, such an event entitles the Company to additional consideration. After repeated demands for payment, on October 19, 2015, the Company filed a lawsuit in the District Court in Lod, Israel, against SuperCom, requesting, among other things, monetary relief in the amount of NIS 28.9 million (approximately $7.4 million) with respect to additional consideration owed to the Company for the sale of our Smart ID division. SuperCom is required by applicable law to file a response by November 20, 2015. Any such additional consideration, if and when received, will be accounted for as income from discontinued operations.

2. In February 2014, the Company signed a final agreement to sell its wholly owned German subsidiary, Intercard System Electronics GmbH (“Intercard”), for a total purchase price of EURO 700 (approx. $960) and an additional immaterial contingent consideration based on future sales (the "German Subsidiary Divesture”).

Accordingly, the results and the cash flows of this operation for all reporting periods are presented in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations. On the closing date in 2014, the Company recorded a loss from this divesture in the amount of $7, which consists of transaction costs, in the amount of $343, and a profit in the amount of $336 due to transfer of Intercard's accumulated foreign currency translation adjustments from other comprehensive loss to the statement of operations.

Those amounts are included in ‘other income, net' from discontinued operations for the nine months ended September 30, 2014 (see also note 7).

The Company has not recorded any profit from contingent consideration pursuant to the German Subsidiary Divesture as of September 30, 2015.

D. Other expenses

Other operating expenses consist of compensation expenses related to the termination of employment of the Company's former Chief Executive Office (“CEO”), Mr. Ofer Tziperman, according to his employment terms, following his resignation from the Company and its subsidiaries on February 10, 2015 and compensation expenses related to the termination of employment of our former CEO of our U.S. subsidiary on August 3, 2015.

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Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value of Financial Instruments [Abstract]
Short-term investments	$ 7,056	$ 11,048
Short-term deposit pledged as security	$ 2,254	$ 2,045

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Current assets
Cash and cash equivalents	$ 4,419	$ 5,351
Short-term investments	7,056	11,048
Trade receivables (net of allowance for doubtful accounts of $696 and $671 as of September 30, 2015 and December 31, 2014, respectively)	2,719	4,299
Other receivables and prepaid expenses	2,917	2,530
Inventories	3,961	3,703
Total current assets	21,072	26,931
Long-term restricted deposit for employees benefit	519	555
Severance pay deposits	469	614
Property, plant and equipment, net	8,828	$ 9,234
Intangible assets, net	145
Deferred tax asset	39	$ 47
Total Assets	31,072	37,381
Current Liabilities
Short-term bank credit and current maturities of long-term bank loans	3,280	3,617
Trade payables	7,297	7,306
Other current liabilities	2,730	2,656
Total current liabilities	13,307	13,579
Long-Term Liabilities
Long-term loans, net of current maturities	2,050	2,161
Accrued severance pay	1,232	1,456
Deferred tax liability	318	302
Total long-term liabilities	3,600	3,919
Total Liabilities	16,907	17,498
Shareholders' Equity
Ordinary shares of NIS 0.1 par value: Authorized - 50,000,000 shares as of September 30, 2015 and December 31, 2014; issued: 42,014,673 and 41,996,602 shares as of September 30, 2015 and December 31, 2014, respectively; outstanding: 40,835,974 and 40,817,903 shares as of September 30, 2015 and December 31, 2014, respectively	1,055	1,055
Additional paid-in capital	224,603	224,234
Treasury shares at cost - 1,178,699 shares as of September 30, 2015 and December 31, 2014	(2,000)	(2,000)
Accumulated other comprehensive loss	(1,092)	(800)
Accumulated deficit	(207,895)	(202,103)
Total Shareholder's equity	14,671	20,386
Non-controlling interest	(506)	(503)
Total Equity	14,165	19,883
Total Liabilities and Equity	$ 31,072	$ 37,381

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Condensed Consolidated Statements of Changes in Equity - USD ($) $ in Thousands	Total		Share capital [Member]		Additional paid-in capital [Member]	Treasury Shares (at cost) [Member]	Accumulated other comprehensive Income (loss) [Member]	Accumulated deficit [Member]	Noncontrolling interest [Member]
Balance at Dec. 31, 2013	$ 18,404		$ 854		$ 212,246	$ (2,000)	$ 28	$ (192,179)	$ (545)
Balance, shares at Dec. 31, 2013			34,199,511
Changes during the nine months period ended
Stock-based compensation related to options granted	642				642
Exercise of options and warrants	870		$ 16		$ 854
Exercise of options and warrants, shares			561,333
Foreign currency translation adjustments	(709)						$ (709)
Net loss	(7,543)							$ (7,580)	$ 37
Balance at Sep. 30, 2014	11,664		$ 870		$ 213,742	$ (2,000)	$ (681)	(199,759)	(508)
Balance, shares at Sep. 30, 2014			34,760,844
Balance at Dec. 31, 2014	19,883		$ 1,055		224,234	$ (2,000)	$ (800)	$ (202,103)	$ (503)
Balance, shares at Dec. 31, 2014			41,996,602
Changes during the nine months period ended
Stock-based compensation related to options granted	$ 369				$ 369
Exercise of warrants		[1]		[1]
Exercise of warrants, shares			18,071
Foreign currency translation adjustments	$ (292)						$ (292)
Net loss	(5,795)							$ (5,792)	$ (3)
Balance at Sep. 30, 2015	$ 14,165		$ 1,055		$ 224,603	$ (2,000)	$ (1,092)	$ (207,895)	$ (506)
Balance, shares at Sep. 30, 2015			42,014,673

[1] Less than $1.

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Equity (Schedule of Stock Options Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Number of options outstanding
Outstanding - Beginning Balance	1,923,833
Options granted	135,000	1,056,667
Options expired or forfeited	(408,459)
Outstanding - Ending Balance	1,650,374
Exercisable	983,479		697,003
Weighted average exercise price per share
Outstanding - Beginning Balance	$ 2.09
Options granted	1.65
Options expired or forfeited	2.44
Outstanding - Ending Balance	1.97
Exercisable	$ 1.90		$ 1.90
Aggregate intrinsic value
Outstanding	$ 14		$ 309
Exercisable	$ 14		$ 165
Weighted average fair value of options granted	$ 0.82	$ 1.09

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Discontinued operations (Tables)

9 Months Ended

Sep. 30, 2015

Discontinued operations [Abstract]

Schedule of Results of Discontinued Operations

	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015			2014
Revenues	$	-	$	-		$	-		$	1,131
Expenses		-		(47	)		(25	)		(1,671	)
Other income, net		461		358			848			581
Net profit from discontinued operations	$	461	$	311		$	823		$	41

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Equity (Schedule of Options Outstanding and Exercisable) (Details)	9 Months Ended
	Sep. 30, 2015 $ / shares shares
Options outstanding
Number outstanding | shares	1,650,374
Weighted average remaining contractual life	2 years 4 months 24 days
Options exercisable
Number outstanding | shares	983,479
Weighted average remainging cotractual life	1 year 9 months 7 days
$0.03 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower limit	$ 0.03
Upper limit	$ 0.03
Options outstanding
Number outstanding | shares	18,000
Weighted average remaining contractual life	7 months 6 days
Weighted average exercise price	$ 0.03
Options exercisable
Number outstanding | shares	18,000
Weighted average remainging cotractual life	7 months 6 days
Weighted average exercise price	$ 0.03
$0.90 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower limit	0.90
Upper limit	$ 0.90
Options outstanding
Number outstanding | shares	198,814
Weighted average remaining contractual life	11 months 26 days
Weighted average exercise price	$ 0.90
Options exercisable
Number outstanding | shares	175,666
Weighted average remainging cotractual life	1 year 7 days
Weighted average exercise price	$ 0.90
$1.08 - $1.29 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower limit	1.08
Upper limit	$ 1.29
Options outstanding
Number outstanding | shares	148,000
Weighted average remaining contractual life	1 year 8 months 8 days
Weighted average exercise price	$ 1.11
Options exercisable
Number outstanding | shares	88,000
Weighted average remainging cotractual life	1 year 5 months 19 days
Weighted average exercise price	$ 1.10
$1.46 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower limit	1.46
Upper limit	$ 1.46
Options outstanding
Number outstanding | shares	135,000
Weighted average remaining contractual life	2 years 6 months 4 days
Weighted average exercise price	$ 1.46
Options exercisable
Number outstanding | shares	86,666
Weighted average remainging cotractual life	2 years 3 months 7 days
Weighted average exercise price	$ 1.46
$1.67 - $1.76 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower limit	1.67
Upper limit	$ 1.76
Options outstanding
Number outstanding | shares	155,000
Weighted average remaining contractual life	3 years 22 days
Weighted average exercise price	$ 1.68
Options exercisable
Number outstanding | shares	55,000
Weighted average remainging cotractual life	1 year 1 month 10 days
Weighted average exercise price	$ 1.68
$2.32 - $2.37 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower limit	2.32
Upper limit	$ 2.37
Options outstanding
Number outstanding | shares	850,005
Weighted average remaining contractual life	2 years 11 months 12 days
Weighted average exercise price	$ 2.35
Options exercisable
Number outstanding | shares	466,814
Weighted average remainging cotractual life	2 years 4 months 24 days
Weighted average exercise price	$ 2.34
$3.03 - $3.23 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower limit	3.03
Upper limit	$ 3.23
Options outstanding
Number outstanding | shares	145,555
Weighted average remaining contractual life	1 year 3 months 4 days
Weighted average exercise price	$ 3.16
Options exercisable
Number outstanding | shares	93,333
Weighted average remainging cotractual life	6 months 4 days
Weighted average exercise price	$ 3.19

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Operating segments (Tables)

9 Months Ended

Sep. 30, 2015

Operating segments [Abstract]

Reconciliation of Segment Information to Consolidated Financial Information

	Three months ended September 30, 2015
	Petroleum		Retail and Mass TransitTicketing		Parking		Other		Consolidated
Revenues	$	1,013	$	1,588	$	353	$	801	$	3,755
Reportable segment gross profit *		598		999		231		454		2,282
Reconciliation of reportable segment
gross profit to gross  profit for the period
Depreciation										(193	)
Stock-based compensation										(7	)
Gross profit for the period									$	2,082

	Three months ended September 30, 2014
	Petroleum		Retail and Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	734	$	3,695	$	528	$	298	$	5,255
Reportable segment gross profit *		424		1,888		365		140		2,817
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(171	)
Stock-based compensation										(10	)
Gross profit for the period									$	2,636

	Nine months ended September 30, 2015
	Petroleum		Retail and  Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	3,108	$	8,303	$	1,103	$	1,632	$	14,146
Reportable segment gross profit *		1,800		4,463		705		873		7,841
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(556	)
Stock-based compensation										(35	)
Gross profit for the period									$	7,250

	Nine months ended September 30, 2014
	Petroleum		Retail and Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	2,902	$	11,835	$	1,711	$	1,159	$	17,607
Reportable segment gross profit *		1,800		5,567		1,136		593		9,096
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(531	)
Stock-based compensation										(24	)
Gross profit for the period									$	8,541

* Gross profit as reviewed by the CODM, represents gross profit, adjusted to exclude depreciation and stock-based compensation.

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015		Sep. 30, 2014
Cash flows from continuing operating activities
Net loss from continuing operations	$ (6,618)		$ (7,584)
Adjustments required to reconcile net loss to net cash used in continuing operating activities:
Stock-based compensation related to options and shares issued to employees	369		642
Gain on sale of property and equipment	(8)		(5)
Accrued interest and linkage differences	30		55
Depreciation	941		959
Changes in operating assets and liabilities:
Accrued severance pay, net	(79)		(112)
Deferred tax, net	36		135
Decrease in trade receivables	1,936		240
Decrease (increase) in other receivables and prepaid expenses	131		(308)
Increase in inventories	(382)		(689)
Increase in trade payables	402		235
Increase (decrease) in other current liabilities	197		(772)
Net cash used in continuing operating activities	(3,045)		(7,204)
Cash flows from continuing investing activities
Purchase of property and equipment	(1,117)		(340)
Purchase of short-term investments	(4,181)		$ (2,434)
Investment in capitalized product costs	(153)
Investment in restricted deposit for employees benefit	(281)
Proceeds from restricted deposit for employees benefit	144
Proceeds from maturity or sale of short-term investments	8,179		$ 1,317
Proceeds from sale of property and equipment	31		6
Net cash provided by (used in) continuing investing activities	2,622		(1,451)
Cash flows from continuing financing activities
(Decrease) increase in short-term bank credit, net	(783)		179
Proceeds from long-term bank loans	716		29
Repayment of long-term bank loans	$ (606)		(811)
Proceeds from exercise of options and warrants		[1]	965
Net cash provided by (used in) continuing financing activities	$ (673)		362
Cash flows from discontinued operations
Net cash used in discontinued operating activities	(25)		(1,325)
Net cash provided by discontinued investing activities	$ 387		925
Net cash used in discontinued financing activities			(154)
Total net cash provided by (used in) discontinued operations	$ 362		(554)
Effect of exchange rate changes on cash and cash equivalents	(198)		(227)
Decrease in cash and cash equivalents	(932)		(9,074)
Cash and cash equivalents at the beginning of the period	5,351		14,962
Cash and cash equivalents at the end of the period	4,419		5,888
Cash paid during the period for:
Interest paid	$ 217		233
Income taxes paid			$ 33

[1] Less than $1.

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Condensed Consolidated Balance Sheets (Parenthetical) $ in Thousands	Sep. 30, 2015 USD ($) shares	Sep. 30, 2015 ₪ / shares	Dec. 31, 2014 USD ($) shares	Dec. 31, 2014 ₪ / shares
Condensed Consolidated Balance Sheets [Abstract]
Allowance for doubtful accounts | $	$ 696		$ 671
Ordinary shares, par value | ₪ / shares		₪ 0.1		₪ 0.1
Ordinary shares, shares authorized	50,000,000		50,000,000
Ordinary shares, shares issued	42,014,673		41,996,602
Ordinary shares, shares outstanding	40,835,974		40,817,903
Treasury shares held	1,178,699		1,178,699

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Operating segments

9 Months Ended

Sep. 30, 2015

Operating segments [Abstract]

Operating segments

Note 10 - Operating segments

For the purposes of allocating resources and assessing performance in order to improve profitability, the Company's chief operating decision maker ("CODM") examines three segments which are the Company's strategic business units: Retail and Mass Transit Ticketing, Petroleum and Parking. In addition to its three reportable segments, certain products for the medical industry and other secure smart card solutions are classified under the Company's "Other" segment.

The strategic business unit's allocation of resources and evaluation of performance are managed separately. The CODM does not examine assets or liabilities for those segments and therefore they are not presented.

Information regarding the results of each reportable segment is included below based on the internal management reports that are reviewed by the CODM.

	Three months ended September 30, 2015
	Petroleum		Retail and Mass TransitTicketing		Parking		Other		Consolidated
Revenues	$	1,013	$	1,588	$	353	$	801	$	3,755
Reportable segment gross profit *		598		999		231		454		2,282
Reconciliation of reportable segment
gross profit to gross  profit for the period
Depreciation										(193	)
Stock-based compensation										(7	)
Gross profit for the period									$	2,082

	Three months ended September 30, 2014
	Petroleum		Retail and Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	734	$	3,695	$	528	$	298	$	5,255
Reportable segment gross profit *		424		1,888		365		140		2,817
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(171	)
Stock-based compensation										(10	)
Gross profit for the period									$	2,636

	Nine months ended September 30, 2015
	Petroleum		Retail and  Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	3,108	$	8,303	$	1,103	$	1,632	$	14,146
Reportable segment gross profit *		1,800		4,463		705		873		7,841
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(556	)
Stock-based compensation										(35	)
Gross profit for the period									$	7,250

	Nine months ended September 30, 2014
	Petroleum		Retail and Mass Transit Ticketing		Parking		Other		Consolidated
Revenues	$	2,902	$	11,835	$	1,711	$	1,159	$	17,607
Reportable segment gross profit *		1,800		5,567		1,136		593		9,096
Reconciliation of reportable segment
gross profit to gross profit for the period
Depreciation										(531	)
Stock-based compensation										(24	)
Gross profit for the period									$	8,541

* Gross profit as reviewed by the CODM, represents gross profit, adjusted to exclude depreciation and stock-based compensation.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 10, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Registrant Name	ON TRACK INNOVATIONS LTD
Entity Central Index Key	0001021604
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		40,835,974

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Significant Accounting Policies [Abstract]

Intangible assets, net

A. Intangible assets, net

Intangible assets subject to capitalization include costs incurred by the Company to acquire product certifications. According to Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other,” software that is part of a product or process to be sold to a customer shall be accounted for under ASC Subtopic 985-20. Our products contain embedded software which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product certification are capitalized once technological feasibility is determined. The Company determines that technological feasibility for its products is reached after all high-risk development issues have been resolved. Once the products are available for general release to the Company's customers, the Company ceases capitalizing the product certification costs and all additional costs, if any, are expensed. The capitalized product certification costs are amortized on a product-by-product basis using the straight-line amortization. The amortization begins when the products are available for general release to the Company's customers.

Recent accounting pronouncements

B. Recent accounting pronouncements

1. On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize the amount of revenues to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018. Early application will be permitted starting January 1, 2017. The ASU permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

2. In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The ASU is intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact the adoption of ASU 2014-15 will have on its ongoing financial reporting.

3. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (ASU 2015-11), which changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 eliminates the guidance that entities consider replacement cost or net realizable value less an approximately normal profit margin in the subsequent measurement of inventory when cost is determined on a first-in, first-out or average cost basis. The provisions of ASU 2015-11 are effective for public entities with fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact to its consolidated financial position, consolidated results of operations, and consolidated cash flows of the adoption of ASU 2015-11.

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenues
Sales	$ 2,361	$ 3,691	$ 10,015	$ 13,381
Licensing and transaction fees	1,394	1,564	4,131	4,226
Total revenues	3,755	5,255	14,146	17,607
Cost of revenues
Cost of sales	1,673	2,619	6,896	9,066
Gross profit	2,082	2,636	7,250	8,541
Operating expenses
Research and development	807	1,281	2,712	3,662
Selling and marketing	1,730	1,968	5,388	6,160
General and administrative	1,056	1,382	3,440	4,491
Patent litigation and maintenance	371	$ 194	830	$ 1,213
Other expenses	408		918
Total operating expenses	4,372	$ 4,825	13,288	$ 15,526
Operating loss from continuing operations	(2,290)	(2,189)	(6,038)	(6,985)
Financial expenses, net	(122)	(44)	(542)	(397)
Loss from continuing operations before taxes on income	(2,412)	(2,233)	(6,580)	(7,382)
Income tax	(35)	(29)	(38)	(202)
Net loss from continuing operations	(2,447)	(2,262)	(6,618)	(7,584)
Net income from discontinued operations	461	311	823	41
Net loss	(1,986)	(1,951)	(5,795)	(7,543)
Net (income) loss attributable to noncontrolling interest	(23)	(46)	3	(37)
Net loss attributable to shareholders	$ (2,009)	$ (1,997)	$ (5,792)	$ (7,580)
Basic and diluted net gain (loss) attributable to shareholders per ordinary share
From continuing operations	$ (0.06)	$ (0.07)	$ (0.16)	$ (0.23)
From discontinued operations	0.01	0.01	0.02		[1]
Total	$ (0.05)	$ (0.06)	$ (0.14)	$ (0.23)
Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share	40,874,474	33,310,672	40,868,252	33,245,249

[1] Less than $0.01 per ordinary share.

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Other Current Liabilities

9 Months Ended

Sep. 30, 2015

Other Current Liabilities [Abstract]

Other Current Liabilities

Note 5 - Other Current Liabilities

	September 30,		December 31,
	2015		2014
Employees and related expenses	$	959	$	1,175
Accrued expenses		998		902
Customer advances		470		244
Other current liabilities		303		335
	$	2,730	$	2,656

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Inventories

9 Months Ended

Sep. 30, 2015

Inventories [Abstract]

Inventories

Note 4 - Inventories

Inventories consist of the following:

	September 30,		December 31,
	2015		2014
Raw materials	$	984	$	884
Work in progress		588		552
Finished products		2,389		2,267
	$	3,961	$	3,703

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Equity (Tables)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Schedule of Stock Option Activity

	Number of			Weighted
	options			average exercise
	outstanding			price per share
Outstanding – December 31, 2014		1,923,833		$	2.09
Options granted		135,000			1.65
Options expired or forfeited		(408,459	)		2.44
Outstanding – September 30, 2015		1,650,374			1.97
Exercisable as of:
December 31, 2014		697,003		$	1.90
September 30, 2015		983,479		$	1.90

Summary of Options Outstanding and Exercisable

		Options outstanding						Options Exercisable
		Number		Weighted				Number		Weighted
		outstanding		average		Weighted		Outstanding		average		Weighted
		as of		remaining		Average		As of		remaining		Average
Range of		September 30,		contractual		Exercise		September 30,		contractual		Exercise
exercise price		2015		life (years)		Price		2015		life (years)		Price
$	0.03		18,000		0.60	$	0.03		18,000		0.60	$	0.03
	0.90		198,814		0.99		0.90		175,666		1.02		0.90
	1.08-1.29		148,000		1.69		1.11		88,000		1.47		1.10
	1.46		135,000		2.51		1.46		86,666		2.27		1.46
	1.67-1.76		155,000		3.06		1.68		55,000		1.11		1.68
	2.32-2.37		850,005		2.95		2.35		466,814		2.40		2.34
$	3.03-3.23		145,555		1.26	$	3.16		93,333		0.51	$	3.19
			1,650,374		2.40				983,479		1.77

Schedule of Warrants Outstanding and Exercisable

		Warrants outstanding						Warrants Exercisable
		Number		Weighted				Number		Weighted
		outstanding		average		Weighted		Outstanding		average		Weighted
		as of		remaining		Average		As of		remaining		Average
Range of		September 30,		contractual		Exercise		September 30,		contractual		Exercise
exercise price		2015		life (years)		Price		2015		life (years)		Price
$	0 - 0.03		56,648		1.18	$	0.01		20,500		0.61	$	0.03
$	3.75		260,869		0.36		3.75		260,869		0.36		3.75
			317,517		0.51				281,369		0.38

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Other Receivables and Prepaid Expenses (Tables)

9 Months Ended

Sep. 30, 2015

Other Receivables and Prepaid Expenses [Abstract]

Schedule of Other Receivables and Prepaid Expenses

	September 30,		December 31,
	2015		2014
Government institutions	$	473		$	452
Prepaid expenses		636			690
Receivables under contractual obligations to be  transferred to others *		771			695
Smart ID divestiture earn out receivables (see also note 7)		461			-
Other receivables		576			693
	$	2,917		$	2,530

* The Company's subsidiary in Poland is required to collect certain fees that are to be transferred to local authorities.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2015

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 8 - Fair Value of Financial Instruments

The Company's financial instruments consist mainly of cash and cash equivalents, short-term interest bearing investments, accounts receivable, restricted deposits for employee benefits, accounts payable and short-term and long-term loans.

Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

By distinguishing between inputs that are observable in the market place, and therefore more objective, and those that are unobservable and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company, in estimating fair value for financial instruments, used the following methods and assumptions:

The carrying amounts of cash and cash equivalents, trade receivables, short-term bank credit and trade payables are equivalent to, or approximate their fair value due to the short-term maturity of these instruments.

The carrying amounts of variable interest rate long-term loans are equivalent or approximate to their fair value as they bear interest at approximate market rates. As of September 30, 2015, fair value of bank loans with fixed interest rates did not differ materially from the carrying amount.

As of September 30, 2015, the Company held approximately $7,056 of short-term bank deposits (as of December 31, 2014, $11,048). As of September 30, 2015, short -term deposits in the amount of $2,254 have been pledged as security in respect of guarantees granted in respect of  performance guarantees, loans and credit lines received from a bank (as of December 31, 2014 - $2,045) and cannot be pledged to others or withdrawn without the consent of the bank.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 6 - Commitments and Contingencies

A. Legal claims

1. On October 3, 2013, a financial claim was filed against the Company and its then French subsidiary, Parx France (in this paragraph, together the “Defendants”), in the Commercial Court of Paris, France (in this paragraph, the “Court”). The sum of the claim is Euro 1,500 (approximately $1,680), and is based on the allegation that the plaintiff sustained certain losses in connection with Defendants not granting the plaintiff exclusive marketing rights to distribute and operate the Defendants' PIAF Parking System in Paris and the Ile of France. The Company filed an initial memorandum of defense rejecting the plaintiff's allegations and claims. On May 19, 2014, during a preliminary Court hearing, it was established that the plaintiff, at all relevant times, was and is insolvent and under receivership, and therefore does not have the legal capacity to pursue the claim. During the preliminary hearings held the Company also raised allegations on lack of jurisdiction of the French court to hear the claim. The Court scheduled an additional pre-trial review hearing for November 16, 2015, and a closing arguments hearing is expected to be held on the first quarter of 2016. Based on the advice of counsel, the Company currently believes that it has no material obligations to the plaintiff and that there is no need for a provision for the claim.

2. On July 29, 2014, a former employee of the Company's Smart ID division filed a financial claim against the Company in the Regional Labor Court in Tel Aviv. The sum of the claim is NIS 4,744 (approximately $1,233), and is based on the allegation that the Company owes the plaintiff certain commissions. On October 29, 2014 the Company filed a statement of defense rejecting the plaintiff's allegations and claims.On March 10, 2015, the Court held a pre-trial review hearing where the Court made an initial review of the parties' allegations. In the course of the hearing the plaintiff was ordered to amend and resubmit his statement of claims. Further to filing the amended statements of claim and defence, the parties have been instructed to attend mediation, scheduled to take place on December 6, 2015. Based on the advice of counsel, the Company currently believes that it has no material obligations to the Plaintiff and that there is no need for a provision for the claim.

B. Guarantees

As of September 30, 2015, the Company granted performance guarantees in the sum of $727.

The expiration dates of the guarantees range from October 2015 to July 2016.

C. As of September 30, 2015, the Company is in compliance with the covenant signed with Bank Leumi L'Israel Ltd. (see note 8(F) in the Company's consolidated financial statements as of December 31, 2014, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014).

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Discontinued operations

9 Months Ended

Sep. 30, 2015

Discontinued operations [Abstract]

Discontinued operations

Note 7 – Discontinued operations

As described in Note 1C, the Company divested the SmartID division and its interest in Intercard and presented these activities as discontinued operations. During the nine month periods ended September 30, 2015 and September 30, 2014, the Company recorded profit from contingent consideration in the amount of $848 and $500, respectively, according to an earn out mechanism derived from the Smart ID division divesture. This profit is included in the table below as ‘other income, net' within income from discontinued operations for the nine month periods ended September 30, 2015 and September 30, 2014. During the nine months ended September 30, 2014, the Company recorded loss from the German Subsidiary Divesture, including transaction costs, and profit due to transfer of its accumulated foreign currency translation adjustments from other comprehensive loss to the statement of operations which totaled $7, which is presented below within ‘other  income, net'.

Set forth below are the results of the discontinued operations:

	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015			2014
Revenues	$	-	$	-		$	-		$	1,131
Expenses		-		(47	)		(25	)		(1,671	)
Other income, net		461		358			848			581
Net profit from discontinued operations	$	461	$	311		$	823		$	41

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Equity

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Equity

Note 9 – Equity

A. Stock option plans

During the nine months ended September 30, 2015 and September 30, 2014, 135,000 and 1,056,667 options were granted, respectively. The vesting period for the options ranges from immediate vesting to vesting over a three year period. The exercise prices for the options range from $1.29 to $2.84. Those options expire up to five years after the date of the grant. Any options which are forfeited or cancelled before expiration become available for future grants under the Company's option plan.

The fair value of each option granted to employees during the nine months ended September 30, 2015 and during the nine months ended September 30, 2014, for which the exercise price was greater than par value, was estimated on the date of grant, using the Black-Scholes model and the following assumptions:

1. Dividend yield of zero percent for all periods.

2. Risk-free interest rate of 1.03%-1.10% and 0.79%-1.05% for grants during the nine months ended September 30, 2015 and September 30, 2014, respectively, based on U.S. Treasury yield curve in effect at the time of grant.

3. Estimated expected lives of 3.5 and 2.85-3.75 years for grants during the nine months ended September 30, 2015 and September 30, 2014, respectively, using the simplified method.

4. Expected average volatility of 69% and 65%-67% for grants during the nine months ended September 30, 2015 and September 30, 2014, respectively, which represent a weighted average standard deviation rate for the price of the Company's Ordinary Shares in the NASDAQ Global Market.

The Company's options activity during the nine month period ended September 30, 2015, and the amount of options outstanding and exercisable as of December 31, 2014 and September 30, 2015, are summarized in the following table:

	Number of			Weighted
	options			average exercise
	outstanding			price per share
Outstanding – December 31, 2014		1,923,833		$	2.09
Options granted		135,000			1.65
Options expired or forfeited		(408,459	)		2.44
Outstanding – September 30, 2015		1,650,374			1.97
Exercisable as of:
December 31, 2014		697,003		$	1.90
September 30, 2015		983,479		$	1.90

The weighted average fair value of options granted during the nine months ended September 30, 2015 and during the nine months ended September 30, 2014 is $0.82 and $1.09, respectively, per option. The aggregate intrinsic value of outstanding options as of September 30, 2015 and December 31, 2014 is approximately $14 and $309, respectively. The aggregate intrinsic value of exercisable options as of September 30, 2015 and December 31, 2014 is approximately $14 and $165, respectively.

The following table summarizes information about options outstanding and exercisable (including options to non-employees) as of September 30, 2015:

		Options outstanding						Options Exercisable
		Number		Weighted				Number		Weighted
		outstanding		average		Weighted		Outstanding		average		Weighted
		as of		remaining		Average		As of		remaining		Average
Range of		September 30,		contractual		Exercise		September 30,		contractual		Exercise
exercise price		2015		life (years)		Price		2015		life (years)		Price
$	0.03		18,000		0.60	$	0.03		18,000		0.60	$	0.03
	0.90		198,814		0.99		0.90		175,666		1.02		0.90
	1.08-1.29		148,000		1.69		1.11		88,000		1.47		1.10
	1.46		135,000		2.51		1.46		86,666		2.27		1.46
	1.67-1.76		155,000		3.06		1.68		55,000		1.11		1.68
	2.32-2.37		850,005		2.95		2.35		466,814		2.40		2.34
$	3.03-3.23		145,555		1.26	$	3.16		93,333		0.51	$	3.19
			1,650,374		2.40				983,479		1.77

As of September 30, 2015, there was approximately $545 of total unrecognized compensation cost related to non-vested stock-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

During the nine months ended September 30, 2015 and September 30, 2014, the Company recorded stock-based compensation expenses in the amount of $369 and $642, respectively, in accordance with ASC Topic 718, “Compensation-Stock Compensation.”

B. Warrants

During the nine months ended September 30, 2015, 18,071 warrants were exercised.

The following table summarizes information about warrants outstanding and exercisable as of September 30, 2015:

		Warrants outstanding						Warrants Exercisable
		Number		Weighted				Number		Weighted
		outstanding		average		Weighted		Outstanding		average		Weighted
		as of		remaining		Average		As of		remaining		Average
Range of		September 30,		contractual		Exercise		September 30,		contractual		Exercise
exercise price		2015		life (years)		Price		2015		life (years)		Price
$	0 - 0.03		56,648		1.18	$	0.01		20,500		0.61	$	0.03
$	3.75		260,869		0.36		3.75		260,869		0.36		3.75
			317,517		0.51				281,369		0.38

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Equity (Schedule of Fair Value Assumptions) (Details)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Stock option plans
Dividend yield	0.00%	0.00%
Expected life	3 years 6 months
Expected volatility	69.00%
Minimum [Member]
Stock option plans
Risk-free interest rate	1.03%	0.79%
Expected life		2 years 10 months 6 days
Expected volatility		65.00%
Maximum [Member]
Stock option plans
Risk-free interest rate	1.10%	1.05%
Expected life		3 years 9 months
Expected volatility		67.00%

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Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2015

Other Current Liabilities [Abstract]

Summary of Other Current Liabilities

	September 30,		December 31,
	2015		2014
Employees and related expenses	$	959	$	1,175
Accrued expenses		998		902
Customer advances		470		244
Other current liabilities		303		335
	$	2,730	$	2,656

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Other Receivables and Prepaid Expenses (Details) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Other Receivables and Prepaid Expenses [Abstract]
Government institutions		$ 473	$ 452
Prepaid expenses		636	690
Receivables under contractual obligations to be transferred to others	[1]	771	$ 695
Smart ID divestiture earn out receivables (see also note 7)		461
Other receivables		576	$ 693
Total other receivables and prepaid expenses		$ 2,917	$ 2,530

[1] The Company's subsidiary in Poland is required to collect certain fees that are to be transferred to local authorities.

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Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Condensed Consolidated Statements of Comprehensive Loss [Abstract]
Net loss	$ (1,986)	$ (1,951)	$ (5,795)	$ (7,543)
Foreign currency translation adjustments	$ (98)	(276)	$ (292)	(313)
Foreign currency translation released following sale of a subsidiary		(60)		(396)
Total comprehensive loss	$ (2,084)	(2,287)	$ (6,087)	(8,252)
Comprehensive loss (income) attributable to the non-controlling interest	(23)	(46)	3	(37)
Total comprehensive loss attributable to shareholders	$ (2,107)	$ (2,333)	$ (6,084)	$ (8,289)

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Other Receivables and Prepaid Expenses

9 Months Ended

Sep. 30, 2015

Other Receivables and Prepaid Expenses [Abstract]

Other Receivables and Prepaid Expenses

Note 3 - Other Receivables and Prepaid Expenses

	September 30,		December 31,
	2015		2014
Government institutions	$	473		$	452
Prepaid expenses		636			690
Receivables under contractual obligations to be  transferred to others *		771			695
Smart ID divestiture earn out receivables (see also note 7)		461			-
Other receivables		576			693
	$	2,917		$	2,530

* The Company's subsidiary in Poland is required to collect certain fees that are to be transferred to local authorities.

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Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Inventories [Abstract]
Raw materials	$ 984	$ 884
Work in progress	588	552
Finished products	2,389	2,267
Inventories	$ 3,961	$ 3,703

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Operating segments (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Segment Reporting Information [Line Items]
Revenues		$ 3,755	$ 5,255	$ 14,146	$ 17,607
Reportable segment gross profit	[1]	2,282	2,817	7,841	9,096
Reconciliation of reportable segment gross profit to gross profit for the period
Depreciation		(193)	(171)	(556)	(531)
Stock based compensation		(7)	(10)	(35)	(24)
Gross profit		2,082	2,636	7,250	8,541
Petroleum [Member]
Segment Reporting Information [Line Items]
Revenues		1,013	734	3,108	2,902
Reportable segment gross profit	[1]	598	424	1,800	1,800
Retail and Mass Transit Ticketing [Member]
Segment Reporting Information [Line Items]
Revenues		1,588	3,695	8,303	11,835
Reportable segment gross profit	[1]	999	1,888	4,463	5,567
Parking [Member]
Segment Reporting Information [Line Items]
Revenues		353	528	1,103	1,711
Reportable segment gross profit	[1]	231	365	705	1,136
Other [Member]
Segment Reporting Information [Line Items]
Revenues		801	298	1,632	1,159
Reportable segment gross profit	[1]	$ 454	$ 140	$ 873	$ 593

[1] Gross profit as reviewed by the CODM, represents gross profit, adjusted to exclude depreciation and stock-based compensation.

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Inventories (Tables)

9 Months Ended

Sep. 30, 2015

Inventories [Abstract]

Schedule of Inventory

	September 30,		December 31,
	2015		2014
Raw materials	$	984	$	884
Work in progress		588		552
Finished products		2,389		2,267
	$	3,961	$	3,703