There's A Bright Future Ahead For On Track Innovations

| About: On Track (OTIV)

In early September, 2012, I called my daughter and told her I was buying her shares in On Track Innovations (NASDAQ:OTIV) as a birthday gift. After her warm thank you, she went on the internet and did some rudimentary research on OTIV. An hour later, she called me back and said, "Are you crazy? OTIV has been in business for 22 years, and never showed a profit". Then I told her about the company's two dissident shareholders, Marc Silk and Jerry Ivy, and how I felt that a shareholder revolt would force change in the company's board of directors and senior management, I made an initial investment for her at $1.09/share. Since that time, the price per share of OTIV has risen to $1.48. Furthermore, the shareholder revolt has progressed, and OTIV shareholders will vote on a new board at a special shareholder meeting on December 30, 2012.

I believe that this increase in share price is just the tip of the iceberg, and here's why:

1. OTIV has an insurance claim of $11M for lost business due to flooding in Thailand that caused their supply chain of secure ID cards to be disrupted. Even if the company received 60% of the claim, it will have an immediate impact on their cash position.

2. The patent violation lawsuit against TMobile will be litigated sometime in 2013. A settlement or victory in the courts will validate the company's claim of "valuable intellectual property", and probably open the door to other claims of patent violation against the major cell phone carriers in the United States.

3. During the past year, OTIV has claimed that the 13D filing of it's two major shareholders, Jerry Ivy and Marc Silk has hurt their business prospects. I look at the other side of the coin, namely that OTIV's customers or prospective customers will be more apt to do business with a company whose board of directors are more aligned with shareholder interests.

4. Jerry Ivy's nominees to the board have been prohibited from buying shares in OTIV until they are duly elected. This prohibition is a result of SEC rules on shareholder groups. Two of the nominees, Charles Gillman and Jeffrey Eberwein are seasoned businessmen whose expertise is increasing shareholder value. They make money by buying stock in distressed companies and improving the operations in these companies. Once they start buying, I anticipate an increased demand for OTIV's shares.

5. A new board will be more aggressive in going after new business, reducing operating costs and monetizing the company's 100+ patents or patents pending. And since the Near Field Communications industry is in it's infancy, OTIV and it's shareholders should benefit from the emerging growth opportunity.

So now my daughter calls me every day and says, "Daddy, OTIV's price per share keeps moving up". And, I keep telling her "It's going higher". In another Seeking Alpha article, I pointed out how OTIV stock is trading at a discount to peers like Gemalto and Veriphone. When the investment community puts the proper valuation to OTIV stock, I believe the price per share will be $4.50 or higher.

Disclosure: I am long OTIV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.