OTI Turnaround Continues as Planned. Company Reports Strong First Nine Months 2010 Financial Results With Third Consecutive Quar

Revenues Increased by 91% from $22.8 Million to $43.6 Million
Non GAAP Operating Profit of $4.6 Million
Gross Margin Increased to 54%
On Track Innovations Ltd.(OTI) (Nasdaq:OTIV), a global leader in contactless microprocessor-based smart card solutions for homeland security, payments, petroleum payments and other applications, today announced that as previously forecasted, its planned turnaround is proceeding apace, with results of operations, revenues and gross margins all increasing substantially during the nine months ended September 30, 2010 while maintaining the same level of operating expenses. The following are various financial figures that compare the first nine months of 2010 to 2009.
    * Total revenues of $43.6 million, a 91% increase compared to $22.8 million last year.
    * Revenues from Licensing and Transaction Fees of $2.8 million, a 49% increase compared to $1.9 million last year.
    * Gross margin increased to 54% vs. 50% last year.
    * Non-GAAP operating expenses of $19.0 million, a 9% increase compared to $17.4 million last year. GAAP operating expenses of $22.2 million, a 6% increase compared to $21.0 million last year.
    * Non-GAAP operating profit of $4.6 million, compared to non-GAAP operating loss of $6.0 million last year. GAAP operating profit of $1.4 million, compared to GAAP operating loss of $9.6 million last year.
    * Strong balance sheet with cash, cash equivalents and short-term investments of $26.7 million as of September 30, 2010.
Oded Bashan, Chairman and CEO of OTI, said: "We are proud to report another successful quarter with improved results and solid profitability. The financial results for the first nine months reflect our continuing commitment to, and our successful implementation of, our planned turnaround, and we, therefore, maintain the previously provided revenue guidance for 2010. Our results reflect OTI's unique story -- that of a strong technology company with high growth potential, a proven track record and strong fundamentals."

Mr. Bashan continued: "Our track record of successful execution of large scale projects has built additional credibility for the company. We are working diligently to leverage this success by expanding our relationships with existing customers and creating opportunities in strategic markets with new clients. Through the introduction of new products, establishment of strategic channel partnerships and expansion  into new territories, we hope to further strengthen our pipeline of opportunities and establish new streams of revenues for the next two to three years."

Discontinued Operations

During the fourth calendar quarter of 2009, the Company signed an agreement for the sale of the assets of OTI's subsidiary Millennium Card's Technology Ltd ("MCT") including the machinery and inlay production IP of OTI to SMARTRAC NV. Results for the discontinued operations have been separated and are presented separately for both 2009 and 2010 financial statements. We expect to complete the closing procedures for MCT and be able to cease having to include the results of these discontinued operations in our financial statements for periods after December 31, 2010.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, OTI uses non-GAAP measures of operating expenses, operating income, net income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges related to employees and non employees in accordance with the requirements of Accounting Standards Codification ("ASC") Topic 718 (originally issued as SFAS No. 123(R)) and ASC Subtopic 505-50 - Equity-Based Payments to Non-Employees (formerly EITF 96-18); amortization of intangible assets; and results from discontinued operations. OTI management believes the non-GAAP financial information provided in this release provides meaningful supplemental information regarding our performance and enhances the understanding of the Company's on-going economic performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating the business and as such deemed it important to provide all this information to investors. Reconciliations between GAAP measures and non-GAAP measures are provided later in this press release.

About OTI

on track innovations.jpgEstablished in 1990, OTI (Nasdaq:OTIV) designs, develops and markets secure contactless microprocessor-based smart card technology to address the needs of a wide variety of markets. Applications developed by OTI include product solutions for petroleum payment systems, homeland security solutions, electronic passports and IDs, payments, mass transit ticketing, parking and loyalty programs. OTI has a global network of regional offices to market and support its products. The company was awarded the Frost & Sullivan 2005 and 2006 Company of the Year Award in the field of smart cards.
On Track Innovations Ltd.
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