OTI Reports First Half 2012 Financial Results

Rosh Pina, Israel – On Track Innovations Ltd. (“OTI”) (NASDAQ GM: OTIV), a global leader in contactless technology that designs, develops and markets secure identification, payment and transaction processing technologies and solutions for use in secure ID, NFC, payment, petroleum and loyalty applications based on its extensive patent and IP portfolio, today announced its results for the three and six month periods ended June 30, 2012.

Financial Highlights for the Six Months Period Ended June 30, 2012:

• Total revenues decreased by 24% to $20.3 million from $26.7 million for the first half of 2011
• Gross margin was 50%, the same as the first half of 2011
• Operating expenses decreased by 2% to $15.2 million from $15.5 million for the first half of 2011
• Net loss attributable to shareholders was $5.7 million, from $2.3 million last year
• Adjusted EBITDA loss of $3.6 million from a profit of $43,000 for the first half of 2011
• Net cash provided by continuing operating activities was $46,000 compared to net cash used by continuing operating activities of $4.0 million in the first half of 2011
• Cash, cash equivalents and short-term investments of $22.1 million as of June 30, 2012

Operational Highlights:

• OTI’s IP Portfolio further strengthened by the addition of new U.S. patents issued pertaining to Contactless Payments and NFC related to:  — Adding contactless payment and NFC capabilities to existing mobile handsets via the connection of a device to a phone’s existing SIM card — Supporting multiple applications and/or payment mechanisms on a single contactless device and operating system
• Order received for 17,000 NFC and Contactless Payment Readers:      — To be deployed in Europe. Follows order of 30,000 readers in Q1
• EasyPark Launches ‘EasyPark Private’ in Israel:— Expected to broaden the EasyPark customer base and create a new source of recurring revenue
• OTI and Wright Express sign a strategic cooperation agreement:
• — Five year agreement with Wright Express appoints OTI as the exclusive reseller in South Africa of Wright Express’ Quantum+ solution

Oded Bashan, Chairman and CEO of OTI, commented: “We are disappointed with the results for the first half of the year. We have made progress implementing our long-term growth strategy in the U.S., Europe and Africa.  This progress has been impacted in the short-term by factors outside of management’s control, however, the negative impact of these events is expected to be partially offset by our insurance coverage for the business.  Overall, we believe the company is moving in the right direction to deliver on our business objectives and successfully build market share for each of our technologies as well as enforce the patents for our NFC technology.”

Mr. Bashan continued: “We are overcoming specific challenges to our business associated with the flooding in Thailand now that the manufacturing has been back to full capacity for the past few months.  We have filed claims for $11 million in connection with the outcomes of the flooding which may offset lost sales.  If these claims are paid, the long-term impact of these events will be minimalized from a cash flows standpoint.”

The order for 17,000 NFC readers in July follows our previous order for 30,000 readers received in the prior quarter. As a result, 47,000 of OTI’s readers will be deployed across the U.S. and European markets by this time next year. OTI provides first-rate products that support the increasing adoption of NFC technology across the world.”

“We continued to focus on establishing our U.S. presence by being more aggressive with the U.S. sales and marketing of our solutions, which are primarily focused on introducing EasyPark, our NFC solutions and MediSmart. Recently, we signed a contract for EasyPark for Dover, NH which follows additional cities and colleges in the U.S., such as UC Davis in California and the City of Austin, Texas, that have been adopting EasyPark as their parking payment solution.”

“In other regions, we have also been busy making changes and signing new agreements that will help drive long-term success.  This includes making key management changes for our subsidiary in France.  We believe that this new leadership can execute the rollout of EasyPark in the municipalities that signed up for the solution,” continued Mr. Bashan.

“We are therefore updating our revenue guidance to $40-$42 million for 2012. We remain optimistic about 2013 and beyond,” concluded Mr. Bashan.

Adoption of IFRS

Effective as of January 1, 2012, OTI adopted International Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board (“IASB”), replacing the previous reporting standard of U.S. Generally Accepted Accounting Principles (“US GAAP”).  The comparative information for the first half of 2011 and as of December 31, 2011 provided herein has been restated to reflect the retrospective application of IFRS from the beginning of 2011.  An explanation of how the transition from US GAAP to IFRS has affected OTI’s financial results is set out in the Appendix attached hereto.

Use of Non-IFRS Financial Information

This press release contains certain non-IFRS measures, namely, Adjusted Earnings Before Interest, Income Tax, Depreciation and Amortization ("Adjusted EBITDA”).

Adjusted EBITDA represents earnings before interest , income tax, depreciation and amortization, and further eliminates the effect of share-based compensation expense.

OTI believes that Adjusted EBITDA should be considered in evaluating the Company's operations since they provide a clearer indication of OTI’s operating results.

Conference Call and Webcast Information

OTI will host a conference call and simultaneous Webcast today at 8:00 AM ET to discuss its operating results and the company’s outlook. Details are as follows:

Dial in #:   Toll Free 1- 866-744-5399 (U.S.) or 1-800-227-297 (Israel)
Live Webcast/Replay:  http://www.otiglobal.com/Investors_Introduction
Telephone Replay:    1-888- 295-2634 (U.S. toll free) until midnight September 6, 2012

About On Track Innovations Ltd.

On Track Innovations Ltd. ("OTI") designs, develops and markets secure identification, payment and transaction processing technologies and solutions for use in secure ID, payment and loyalty applications based on its extensive patent and IP portfolio. OTI combines state-of-the-art, contactless microprocessor-based technologies and enabling hardware with proprietary software applications to deliver high performance, end-to-end solutions that are secure, robust and scalable. OTI solutions have been deployed around the world to address homeland security, national ID, medical ID, Near Field communications (“NFC”), contactless payment and loyalty applications, petroleum payment, parking and mass transit ticketing. OTI markets and supports its solutions through a global network of regional offices and alliances.

This measure should be considered in addition to results prepared in accordance with IFRS, but should not be considered a substitute for the IFRS results. The non-IFRS measures included in this press release have been reconciled to the IFRS results in the tables below.