OTI Reports FY 2006 First Quarter Financial Results

Revenues up 38% with Gross Profit up 103% Compared to the Same Period Last Year; Positive Cash Flow from Operating Activities 


FORT LEE, N.J., May 30  /PRNewswire-FirstCall/ -- 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 its consolidated financial results for the first quarter ended March 31, 2006.

   -- Revenues: $9.06 million, an increase of 38% compared to $6.55 million
      in the first quarter last year, including revenues from licensing and
      transaction fees of $1.04 million, an increase of 26% from $0.83
      million in the first quarter last year.

   -- GAAP Gross Profit: $4.48 million, an increase of 103% compared to
      $2.20 million in the first quarter of 2005. GAAP gross margin was 49%
      compared to 34% in the first quarter of 2005.

   -- Non-GAAP Gross Profit: $4.49 million, an increase of 104% compared to
      $2.20 million in the first quarter of 2005. Non-GAAP gross margin was
      50% compared to 34% in the first quarter of 2005.

   -- GAAP Net Loss: $(1.96) million, an increase of 17% compared to $(1.67)
      million in the first quarter last year.

   -- Non-GAAP Net Loss: $(1.11) million a decrease of 28% compared to
      $(1.55) million in the first quarter last year.

   -- GAAP Loss per Share: $(0.16), compared to $(0.20) in the first quarter
      of 2005.

   -- Non-GAAP Loss per Share: $(0.09), compared to $(0.18) for the same
      period last year.

   -- Cash flow: $0.39 million from operating activities.



Non-GAAP results for the first quarter of 2006 excludes the impact of SFAS 123(R) and amortization of intangible assets. Non-GAAP results for the first quarter of 2005 excludes amortization of intangible assets.  Please see the attached table for a full reconciliation of GAAP to Non-GAAP results.

"We are continuing to execute on our strategy to position ourselves as a leader in our major vertical markets," said Oded Bashan, President and CEO of OTI.

"We generated positive cash flow from operations this quarter, and we strengthened our balance sheet with our cash position reaching $52 million. We are investing in order to be prepared to meet demand as the adoption of contactless solutions accelerates. We continue to pursue a strategy of both internal and external investment to meet these objectives."

  Operational Highlights
   -- OTI delivers Taipei Fubon Bank key fobs as part of 2006 FIFA World
      Cup(TM) promotion. MasterCard(R) PayPass(TM) contactless payment
      featured on a 3-D Soccer Ball key chain

   -- OTI acquired InSeal SAS to enhance support of contactless payments
      market

   -- OTI received Vital Class A approval for Saturn 5000 contactless reader

   -- OTI EasyFuel(TM) enters Costa Rica and Peru -- expanding presence in
      Latin America



Mr. Bashan continued, "We are pleased with our progress, and all our major programs are on track.  Although visibility is low in terms of precise timing of full-scale roll-outs, we believe the key indicators that we have previously announced all remain positive."

Conference call and Webcast Information

The Company has scheduled a conference call and simultaneous Web cast for Tuesday, May 30, 2006, which will be hosted by Oded Bashan, President and CEO, Guy Shafran, CFO, and Ohad Bashan, Chief Marketing Officer and President OTI America, for 10:00 AM EDT to discuss operating results and future outlook. To participate, call: 1-888-858-4723 (U.S. toll free) 1-809-245-917 (Israel toll free) 0-800-180-8316 (Germany toll free) 1-973-935-8508 (standard international) ID Code: OTI Q1 Conference call. To attend the Web cast, use the following links: http://www.otiglobal.com/content.aspx?id=226.

For those unable to participate, the teleconference will be available for replay until midnight June 6th, by calling U.S.: 877-519-4471 or International; 973-341-3080 and entering the PIN number # 7405168 or on the web at: http://www.otiglobal.com/content.aspx?id=226.

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 gross profit, net income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges in accordance with SFAS 123(R) and amortization of intangible assets. 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.

About OTI

Established 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 Company of the Year Award in the field of smart cards. For more information on OTI, visit http://www.otiglobal.com/.

   OTI Contact:                                Media Relations
   Galit Mendelson                             Adam Handelsman
   Director of Corporate Communications        5W Public Relations
   201 944 5200 ext. 111                       212 999 5585
                            

  Safe Harbor for Forward-Looking Statements:


This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws.  Whenever we use words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions, we are making forward-looking statements.  Because such statements deal with future events and are based on OTI's current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of OTI could differ materially from those described in or implied by the statements in this press release.  For example, forward-looking statements include statements regarding our goals, beliefs, future growth strategies, objectives, plans or current expectations.  Forward-looking statements could be impacted by market acceptance of new and existing products and our ability to execute production on orders, as well as the other risk factors discussed in OTI's Annual Report on Form 20-F for the year ended December 31, 2005, which is on file with the Securities and Exchange Commission.   Although OTI believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved.  OTI disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date hereof, whether as a result of new information, future events or circumstances or otherwise.

                         ON TRACK INNOVATIONS LTD
              CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
             (In thousands, except share and per share data)

                                               Three months ended March 31
                                                    2006           2005
                                                (Unaudited)     (Unaudited)

  Revenues
  Sales                                             $8,017         $5,724
  Licensing and transaction fees                     1,038            825
  Total revenues                                     9,055          6,549

  Cost of Revenues
  Cost of sales                                      4,573          4,346
  Total cost of revenues                             4,573          4,346

  Gross profit                                       4,482          2,203

  Operating Expenses
  Research and development                           1,828          1,240
  Less - participation by the Office of the
   Chief Scientist                                       -            154
  Research and development, net                      1,828          1,086
  Selling and marketing                              1,429          1,392
  General and administrative                         3,146          1,742
  Amortization of intangible assets                    186            121
  Gain from sale of a subsidiary                         -           (510)
  Total operating expenses                           6,589          3,831

  Operating loss                                    (2,107)        (1,628)
  Financial income (expenses), net                     326            (13)
  Other income, net                                     19              4
  Loss before taxes on income and minority
   interests                                        (1,762)        (1,637)
  Taxes on income                                      (11)           (37)
  Minority interest                                      7              -
  Equity in loss of affiliate                         (196)             -
  Net loss                                         $(1,962)       $(1,674)

  Basic and diluted net loss per ordinary share     $(0.16)        $(0.20)


  Weighted average number of ordinary shares
   used in computing basic and diluted net
   loss per ordinary share                      12,365,227      8,530,008



                         ON TRACK INNOVATIONS LTD
         CONDENSED NON-GAAP CONSOLIDATED STATEMENT OF OPERATIONS
             (In thousands, except share and per share data)

                                               Three months ended March 31
                                                    2006           2005
                                                (Unaudited)     (Unaudited)

  Revenues
  Sales                                             $8,017         $5,724
  Licensing and transaction fees                     1,038            825
  Total revenues                                     9,055          6,549

  Cost of Revenues
  Cost of sales                                      4,569          4,346
  Total cost of revenues                             4,569          4,346

  Gross profit                                       4,486          2,203

  Operating Expenses
  Research and development                           1,544          1,240
  Less - participation by the Office of the
   Chief Scientist                                       -            154
  Research and development, net                      1,544          1,086
  Selling and marketing                              1,387          1,392
  General and administrative                         2,814          1,742
  Gain from sale of a subsidiary                         -           (510)
  Total operating expenses                           5,745          3,710

  Operating loss                                    (1,259)        (1,507)
  Financial income (expenses), net                     326            (13)
  Other income, net                                     19              4
  Loss before taxes on income and minority
   interests                                          (914)        (1,516)
  Taxes on income                                      (11)           (37)
  Minority interest                                      7              -
  Equity in loss of affiliate                         (196)             -
  Net loss                                         $(1,114)       $(1,553)


  Basic and diluted net loss per ordinary share     $(0.09)        $(0.18)

  Weighted average number of ordinary shares
   used in computing basic and diluted net
   loss per ordinary share                      12,365,227      8,530,008


  See next tables for full reconciliation of GAAP to Non-GAAP results.



                         ON TRACK INNOVATIONS LTD
                 RECONCILIATION BETWEEN GAAP TO NON-GAAP
                         STATEMENT OF OPERATIONS
             (In thousands, except share and per share data)

                                              Three Months
                                                  Ended
                                             March 31, 2006
                                   GAAP        Adjustments       Non-GAAP
                               (unaudited)     (unaudited)     (unaudited)
  Revenues
  Sales                            $8,017            -            $8,017
  Licensing and transaction
   fees                             1,038            -             1,038
  Total revenues                    9,055        9,055

  Cost of Revenues
  Cost of sales                     4,573           (4)(a)         4,569
  Total cost of revenues            4,573           (4)            4,569

  Gross profit                      4,482            4             4,486

  Operating Expenses
  Research and development          1,828         (284)(a)         1,544
  Selling and marketing             1,429          (42)(a)         1,387
  General and administrative        3,146         (332)(a)         2,814
  Amortization of intangible
   assets                             186         (186)(b)             -
  Total operating expenses          6,589          844             5,745

  Operating loss                   (2,107)         848            (1,259)
  Financial income, net               326            -               326
  Other income, net                    19            -                19
  Loss before taxes on income
   and minority interests          (1,762)         848
                                     (914)
  Taxes on income                     (11)           -               (11)
  Minority interest                     7            -                 7
  Equity in loss of affiliate        (196)           -              (196)
  Net loss                       $ (1,962)        $848          $ (1,114)


  Basic and diluted net loss
  per ordinary share               $(0.16)       $0.07            $(0.09)

  Weighted average number of
   ordinary shares used in
   computing basic and
   diluted net loss per
   ordinary share              12,365,227                     12,365,227

  (a) The effect of stock-based compensation. The Company adopted the
      provisions of Statement of Financial Accounting Standards No. 123(R),
      "Share-Based Payment" on January 1, 2006 using the modified-
      prospective transition method.

  (b) The effect of amortization of intangible assets.



                         ON TRACK INNOVATIONS LTD
                 RECONCILIATION BETWEEN GAAP TO NON-GAAP
                         STATEMENT OF OPERATIONS
             (In thousands, except share and per share data)

                                              Three Months
                                                  Ended
                                             March 31, 2005
                                   GAAP        Adjustments       Non-GAAP
                               (unaudited)     (unaudited)     (unaudited)

  Revenues
  Sales                            $5,724            -            $5,724
  Licensing and transaction fees      825            -               825
  Total revenues                    6,549            -             6,549

  Cost of Revenues
  Cost of sales                     4,346            -             4,346
  Total cost of revenues            4,346            -             4,346

  Gross profit                      2,203            -             2,203

  Operating Expenses
  Research and development          1,240            -             1,240
  Less - participation by the
   Office of the Chief
   Scientist                          154            -               154
  Research and development, net     1,086            -             1,086
  Selling and marketing             1,392            -             1,392
  General and administrative        1,742            -             1,742
  Amortization of intangible
   assets                             121         (121)(b)             -
  Gain from sale of a
   subsidiary                        (510)           -              (510)
  Total operating expenses          3,831          121             3,710

  Operating loss                   (1,628)         121             1,507
  Financial expense, net               13            -                13
  Other income, net                    (4)           -                (4)
  Loss before taxes on income
   and minority interests          (1,637)         121            (1,516)
  Taxes on income                      37            -                37
  Net loss                         (1,674)        $121            (1,553)

  Basic and diluted net loss
   per ordinary share              $(0.20)       $0.02            $(0.18)

  Weighted average number of
   ordinary shares used in
   computing basic and
   diluted net loss per
   ordinary share               8,530,008                      8,530,008

  (b) The effect of amortization of intangible assets.



                         ON TRACK INNOVATIONS LTD
                   CONDENSED CONSOLIDATED BALANCE SHEET
             (In thousands, except share and per share data)

                                                  March 31    December 31
                                                    2006          2005
                                                (Unaudited)    (Audited)

  Assets

  Current Assets
  Cash and cash equivalents                        $42,115        $29,657
  Short-term investments                             9,743         20,004
  Trade receivables (net of allowance for
   doubtful accounts of $ 785 as of March 31,
   2006 and December 31, 2005)                       8,004          8,350
  Other receivables and prepaid expenses             2,871          3,156
  Inventories                                        7,254          6,747

  Total current assets                              69,987         67,914

  Severance Pay Deposits Fund                          584            583

  Long-Term Receivables                                827            878

  Investment in an affiliated company                2,411          2,607

  Property, Plant and Equipment, Net                 7,669          7,009

  Intangible Assets, Net                             1,735          1,921

  Goodwill                                           4,146          4,146


  Total Assets                                     $87,359        $85,058



                         ON TRACK INNOVATIONS LTD
                   CONDENSED CONSOLIDATED BALANCE SHEET
             (In thousands, except share and per share data)

                                                    March 31    December 31
                                                       2006          2005
                                                   (Unaudited)    (Audited)

  Liabilities and Shareholders' Equity

  Current Liabilities
  Short-term bank credit and current maturities
   of long-term bank loans                               $1,191       $760
  Trade payables                                          5,982      4,245
  Other current liabilities                               4,422      5,771
  Total current liabilities                              11,595     10,776

  Long-Term Liabilities
  Long-term loans, net of current maturities              1,529      1,535
  Accrued severance pay                                   2,243      1,909
  Deferred tax liabilities                                  350        293
  Total long-term liabilities                             4,122      3,737

  Total liabilities                                      15,717     14,513

  Minority interests                                        303        310

  Shareholders' Equity
  Ordinary shares of NIS 0.1 par value: authorized -
   30,000,000 shares as of March 31, 2006 and
   December 31, 2005; issued and outstanding -
   12,520,835 and 11,932,074 shares as of
   March 31, 2006 and December 31, 2005, respectively       289        274
  Additional paid-in capital                            130,985    128,761
  Deferred compensation                                       -       (833)
  Accumulated other comprehensive income                    226        232
  Accumulated deficit                                   (60,161)   (58,199)

  Total shareholders' equity                             71,339     70,235


  Total Liabilities and Shareholders' Equity            $87,359    $85,058



                         ON TRACK INNOVATIONS LTD
              CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
             (In thousands, except share and per share data)

                                                Three months ended March 31
                                                          2006       2005
                                                     (Unaudited)(Unaudited)

  Cash flows from operating activities
  Net loss                                              $(1,962)   $(1,674)
  Adjustments required to reconcile net loss to
   net cash provided by operating activities:
  Stock-based compensation related to options and
   shares issued to employees and others                    943      1,261
  Equity in loss of affiliate                               196          -
  Gain from sale of a subsidiary                              -       (510)
  Amortization of intangible assets                         186        145
  Depreciation                                              364        136
  Minority interests                                         (7)         -
  Accrued severance pay, net                                333        256
  Decrease (increase) in trade receivables                  360     (1,331)
  Decrease in other receivables and prepaid expenses        291        185
  Decrease (increase) in inventories                       (520)        27
  Increase in trade payables                              1,608        316
  Increase (decrease) in other current liabilities       (1,349)     1,306
  Other, net                                                (53)       (20)
  Net cash provided by operating activities                 390         97

  Cash flows from investing activities

  Proceeds from maturity of available-for sale
   securities                                            12,387          -
  Purchase of available-for sale securities              (2,044)    (4,987)
  Purchase of property and equipment                     (1,039)      (157)
  Receipts on account of loans and receivables               86        705
  Other, net                                                 10         (1)
  Net cash provided by (used in) investing activities     9,400     (4,440)

  Cash flows from financing activities
  Increase in short-term bank credit, net                   616        219
  Repayment of long-term bank loans                        (203)      (224)
  Exercise of options and warrants                        2,253        947
  Net cash provided by financing activities               2,666        942
  Effect of exchange rate changes on cash                     2        (42)

  Increase (decrease) in cash and cash equivalents       12,458     (3,443)
  Cash and cash equivalents at the beginning of
   the period                                            29,657     23,917

  Cash and cash equivalents at the end of the           $42,115    $20,474


DATASOURCE: On Track Innovations Ltd.



CONTACT:  Galit Mendelson, Director of Corporate Communications for OTI,

[phone] ext. 111, ; Media Relations - Adam

Handelsman of 5W Public Relations, [phone], 



Web site:  http://www.otiglobal.com/ 

Copyright