OTI Reports FY 2007 Nine Months and Third Quarter Financial Results

Nine Month Revenues up 11% and Third Quarter Revenues up 23% 


FORT LEE, N.J., Nov. 26  /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 other applications and machinery, today announced its consolidated financial results for nine months and the third quarter ended September 30, 2007.

  * Revenues: Revenues for the nine months ended September 30, 2007 were
    $30.5 million, an increase of 11% compared to $27.4 million in the same
    period last year. Revenues in the third quarter were $9.9 million, an
    increase of 23% compared to $8.0 million in the same period last year.
  * GAAP Gross Profit: GAAP Gross Profit for the nine months ended September
    30, 2007 was $12.0 million, a decrease of 3% compared to $12.4 million
    in the same period last year. In the third quarter GAAP gross profit was
    $3.6 million, an increase of 5% compared to $3.4 million in the third
    quarter of 2006. GAAP gross margin for the nine months ended September
    30, 2007 was 39% compared to 45% in the same period last year. GAAP
    gross margin in the quarter was 36% compared to 43% in the third quarter
    of 2006.
  * Non-GAAP Gross Profit: Non-GAAP Gross Profit was $12.0 million for the
    nine months ended September 30, 2007, a decrease of 3% compared to $12.4
    million in the same period last year. Non-GAAP Gross Profit for the
    third quarter of 2007 was $3.6 million, an increase of 5% compared to
    $3.4 million in the third quarter of 2006. Non-GAAP gross margin for the
    nine months ended September 30, 2007 was 40% compared to 45% in the same
    period last year. Non-GAAP gross margin in the third quarter was 37%
    compared to 43% in the third quarter of 2006.
  * GAAP Net Loss: GAAP Net Loss for the nine months ended September 30,
    2007 was $(15.2) million, an increase of 139% compared to $(6.3) million
    in the same period last year. GAAP net loss for the third quarter of
    2007 was $(7.9) million, an increase of 228% compared to $(2.4) million
    in the third quarter last year.
  * Non-GAAP Net Loss: Non-GAAP Net Loss for the nine months ended September
    30, 2007 was $(10.4) million, an increase of 161% compared to $(4.0)
    million in the same period last year. Non-GAAP net loss for the third
    quarter of 2007 was $(6.0) million, an increase of 263% compared to
    $(1.7) million in the third quarter last year.
  * GAAP Loss per Share: GAAP Loss per Share for the nine months ended
    September 30, 2007 was $(0.81) compared to $(0.47) in the same period
    last year. GAAP loss per share for the third quarter of 2007 was
    $(0.41), compared to $(0.16) in the third quarter of 2006.
  * Non-GAAP Loss per Share: Non-GAAP Loss per Share for the nine months
    ended September 30, 2007 was $(0.55) compared to $(0.29) in the same
    period last year. Non-GAAP loss per share for the third quarter of 2007
    was $(0.31), compared to $(0.11) in the third quarter of 2006.
  * Strong Balance Sheet: Total assets were at $113.1 million with cash
    equivalent and short term investments totaling $41.4 million.



Non-GAAP results for the third quarter and nine months period of 2007 and 2006 exclude the impact of SFAS 123(R) and amortization of intangible assets. Please see the attached table for a full reconciliation of GAAP to Non-GAAP results.

"During the first nine months of 2007, OTI's revenues have grown slower than expected and our loss was bigger than expected. The increase in operating expenses on a Non-GAAP basis included a $2.5 million provision for doubtful accounts based on management decision. These results reflect the fact that OTI is involved in large scale projects that are characterized by long implementation cycles, we therefore update our forecast for 2007 to reflect revenue growth of about 10% compared to 2006 and we update our forecasted gross margin for the year to be between 39%-41%," said Oded Bashan, Chairman and CEO of OTI.

"Although this is not always reflected in our financial results, we are making progress in the overall business. The number of projects in the pipeline have increased, the large projects we are involved in are progressing, and we are introducing new products and expanding our IP."

Conference call and Webcast Information

The Company has scheduled a conference call and simultaneous Webcast for Monday, November 26, 2007, which will be hosted by Oded Bashan, Chairman and CEO, Ohad Bashan, President, and Guy Shafran, CFO, for 09:30 AM EST to discuss operating results and future outlook. To participate, call: 1-866-491-4244 (U.S. toll free); 180-924-5917 (Israel toll free); 0-800-180-8316 (Germany toll free); and 1-973-582-2815 (standard international) ID Code: OTI Q3 2007 Results Conference Call. To attend the Webcast, 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 December 3rd, by calling U.S: 877-519-4471 or International; 973-341-3080 and entering the PIN number # 9478392,  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 and 2006 Company of the Year Award in the field of smart cards. For more information on OTI, visit http://www.otiglobal.com/, the content of which is not part of this press release

  OTI Contact:                           Investor Relations:
  Galit Mendelson                        Miri Segal
  Director of Corporate Communications   Strategic Growth International
  201 944 5200 ext. 111                  212 838 1444
                      


  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, such as those regarding our expected financial results for the full year.   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, 2006, 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.  Except as otherwise provided by law, 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)



                                  Nine months ended      Three months ended
                                     September 30           September 30
                                    2007        2006       2007       2006
                              (Unaudited) (Unaudited)(Unaudited)(Unaudited)



  Revenues
  Sales                          $28,617     $24,754     $9,328     $7,381
  Licensing and transaction fees   1,852       2,607        527        624
  Total revenues                  30,469      27,361      9,855      8,005

  Cost of Revenues
  Cost of sales                   18,467      14,960      6,260      4,576
  Total cost of revenues          18,467      14,960      6,260      4,576

  Gross profit                    12,002      12,401      3,595      3,429

  Operating Expenses
  Research and development         8,203       5,254      3,050      1,953
  Selling and marketing            6,858       5,120      2,797      1,831
  General and administrative      13,444       9,177      6,397      3,101
  Amortization of intangible
   assets                            986         557        329        189
  Gain from sale of subsidiaries       -        (122)         -       (122)
  Total operating expenses        29,491      19,986     12,573      6,952

  Operating loss                 (17,489)     (7,585)    (8,978)    (3,523)
  Financial income, net            1,472       1,278        281        542
  Other income (expense), net       (111)         20          -          6
  Loss before taxes on income
   and minority interests        (16,128)     (6,287)    (8,697)    (2,975)
  Taxes on income                    197         314         66        149
  Minority interest                1,037         593        847        479
  Equity in loss of affiliate       (271)       (969)      (109)       (63)

  Net loss                      $(15,165)    $(6,349)   $(7,893)   $(2,410)

  Basic and diluted net loss
   per ordinary share             $(0.81)     $(0.47)    $(0.41)    $(0.16)
  Weighted average number of
   ordinary shares used in
   computing basic
   and diluted net loss per
   ordinary share             18,788,245  13,456,869 19,080,884 15,097,867


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


                                          Nine months ended
                                          September 30, 2007
                                             Adjustments
                                  GAAP                           Non-GAAP
                               (unaudited)     (unaudited)      (unaudited)
  Revenues
  Sales                            $28,617          -              $28,617
  Licensing and transaction fees     1,852          -                1,852
  Total revenues                    30,469                          30,469

  Cost of Revenues
  Cost of sales                     18,467        (39) (a)          18,428
  Total cost of revenues            18,467        (39)              18,428

  Gross profit                      12,002         39               12,041

  Operating Expenses
  Research and development           8,203     (1,633) (a)           6,570
  Selling and marketing              6,858       (240) (a)           6,618
  General and administrative        13,444     (1,896) (a)          11,548
  Amortization of intangible
   assets                              986       (986) (b)               0
  Total operating expenses          29,491     (4,755)              24,736

  Operating loss                   (17,489)     4,794              (12,695)
  Financial income, net              1,472          -                1,472
  Other income (expenses), net        (111)         -                 (111)
  Loss before taxes on income
   and minority interests          (16,128)     4,794              (11,334)
  Taxes on income                      197          -                  197
  Minority interests                 1,037          -                1,037
  Equity in loss of an affiliate      (271)         -                 (271)
  Net loss                        $(15,165)    $4,794             $(10,371)

  Basic and diluted net
   loss per ordinary share          $(0.81)     $0.26               $(0.55)
  Weighted average number
   of ordinary shares used
   in computing basic and
   diluted net loss per
   ordinary share               18,788,245                      18,788,245

  (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
                                          September 30, 2007
                                             Adjustments
                                   GAAP                          Non-GAAP
                                (unaudited)     (unaudited)     (unaudited)
  Revenues
  Sales                            $9,328          -             $9,328
  Licensing and transaction fees      527          -                527
  Total revenues                    9,855                         9,855

  Cost of Revenues
  Cost of sales                     6,260        (14) (a)         6,246
  Total cost of revenues            6,260        (14)             6,246

  Gross profit                      3,595         14              3,609

  Operating Expenses
  Research and development          3,050       (572) (a)         2,478
  Selling and marketing             2,797        (72) (a)         2,725
  General and administrative        6,397       (859) (a)         5,538
  Amortization of intangible
   assets                             329       (329) (b)             0
  Total operating expenses         12,573     (1,832)            10,741

  Operating loss                   (8,978)     1,846             (7,132)
  Financial income, net               281          -                281
  Other income (expenses), net         -           -                  -
  Loss before taxes on income
   and minority interests          (8,697)     1,846             (6,851)
  Taxes on income                      66          -                 66
  Minority interests                  847          -                847
  Equity in loss of an affiliate     (109)         -               (109)
  Net loss                        $(7,893)    $1,846            $(6,047)

  Basic and diluted net loss
   per ordinary share              $(0.41)     $0.10            $ (0.31)
  Weighted average number of
   ordinary shares used in
   computing basic and diluted
   net loss per ordinary
   share                       19,080,884                    19,080,884

  (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)

                                           Nine months ended
                                          September 30, 2006
                                             Adjustments
                                   GAAP                          Non-GAAP
                                (unaudited)     (unaudited)     (unaudited)

  Revenues
  Sales                           $24,754           -            $24,754
  Licensing and transaction fees    2,607           -              2,607
  Total revenues                   27,361                         27,361

  Cost of Revenues
  Cost of sales                    14,960         (11) (a)        14,949
  Total cost of revenues           14,960         (11)            14,949

  Gross profit                     12,401          11             12,412

  Operating Expenses
  Research and development          5,254        (798) (a)         4,456
  Selling and marketing             5,120         (98) (a)         5,022
  General and administrative        9,177        (917) (a)         8,260
  Amortization of intangible
   assets                             557        (557) (b)             -
  Gain from sale of subsidiaries     (122)          -               (122)
  Total operating expenses         19,986       2,370             17,616

  Operating loss                   (7,585)      2,381             (5,204)
  Financial income, net             1,278           -              1,278
  Other income (expenses), net         20           -                 20
  Loss before taxes on income
   and minority interests          (6,287)      2,381             (3,906)
  Taxes on income                     314           -                314
  Minority interests                  593           -                593
  Equity in loss of affiliate        (969)          -               (969)
  Net loss                        $(6,349)     $2,381            $(3,968)

  Basic and diluted net loss
  per ordinary share               $(0.47)     $ 0.18             $(0.29)
  Weighted average number of
   ordinary shares used in
   computing basic and diluted
   net loss per ordinary
   share                       13,456,869                     13,456,869

  (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
                                           September 30, 2006
                                               Adjustments
                                   GAAP                          Non-GAAP
                                (unaudited)     (unaudited)     (unaudited)

  Revenues
  Sales                            $7,381          -             $7,381
  Licensing and transaction fees      624          -                624
  Total revenues                    8,005          -              8,005

  Cost of Revenues
  Cost of sales                     4,576         (4) (a)         4,572
  Total cost of revenues            4,576             (4)         4,572

  Gross profit                      3,429          4              3,433

  Operating Expenses
  Research and development          1,953       (244) (a)         1,709
  Selling and marketing             1,831        (27) (a)         1,804
  General and administrative        3,101       (280) (a)         2,821
  Amortization of intangible
   assets                             189       (189) (b)             -
  Gain from sale of subsidiaries     (122)         -               (122)
  Total operating expenses          6,952        740              6,212

  Operating loss                   (3,523)       744             (2,779)
  Financial income, net               542          -                542
  Other income (expenses), net          6          -                  6
  Loss before taxes on income
   and minority interests          (2,975)       744             (2,231)
  Taxes on income                     149          -                149
  Minority interests                  479          -                479
  Equity in loss of affiliate         (63)         -                (63)
  Net loss                        $(2,410)      $744            $(1,666)



  Basic and diluted
   net loss
   per ordinary share              $(0.16)     $0.05             $(0.11)
  Weighted average
   number of ordinary
   shares used in
   computing basic and
   diluted net loss
   per ordinary share          15,097,867                    15,097,867

  (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 stock-based compensation.


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


                                                  September 30   December 31
                                                      2007          2006
                                                   (Unaudited)    (Audited)

  Assets

  Current assets
  Cash and cash equivalents                             $26,145    $30,049
  Short-term investments                                 15,290     18,232
  Trade receivables (net of allowance for doubtful
   accounts of $2,752 and $234 as of September 30,
   2007 and December 31, 2006, respectively)              6,416     10,155
  Other receivables and prepaid expenses                  2,860      2,109
  Inventories                                            12,884     10,344

  Total current assets                                   63,595     70,889

  Severance pay deposits fund                             1,413      1,087

  Long-term receivables                                     451      1,043

  Investment in an affiliated company                     1,426      1,627

  Property, plant and equipment, net                     18,007     13,318

  Intangible assets, net                                  4,856      5,823

  Goodwill                                               23,387     23,387

  Total assets                                         $113,135   $117,174


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

                                                 September 30   December 31
                                                     2007           2006
                                                  (Unaudited)    (Audited)

  Liabilities and shareholders' equity

  Current liabilities
  Short-term bank credit and current maturities
   of long-term bank loans                          $2,503           $498
  Trade payables                                     7,143          6,869
  Other current liabilities                          3,990          3,331
  Total current liabilities                         13,636         10,698

  Long-term liabilities
  Long-term loans, net of current maturities         1,935          2,117
  Accrued severance pay                              3,725          3,209
  Deferred tax liabilities                             794            992
  Total long-term liabilities                        6,454          6,318

  Total liabilities                                 20,090         17,016

  Minority interests                                     -          1,004

  Shareholders' equity
  Ordinary shares of NIS 0.1 par value: authorized -
   50,000,000 shares as of September 30, 2007 and
   December 31, 2006; issued 19,364,458 and
   18,592,880 shares as of September 30, 2007 and
   December 31, 2006, respectively; outstanding
   19,131,005 and 18,243,539 shares as of
   September 30, 2007 and December 31, 2006,
   respectively                                        448            431
  Additional paid-in capital                       171,712        163,102
  Accumulated other comprehensive income               853            424
  Accumulated deficit                              (79,968)       (64,803)

  Total shareholders' equity                        93,045         99,154

  Total Liabilities and Shareholders' Equity      $113,135       $117,174


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

                                                       Nine months ended
                                                          September 30
                                                       2007          2006
                                                   (Unaudited)   (Unaudited)

  Cash flows from operating activities
  Net loss                                             $(15,165)   $(6,349)
  Adjustments required to reconcile net loss to
   net cash used by operating activities:
  Stock-based compensation related to options
   and shares issued to employees and others              5,053      2,922
  Gain from sale of subsidiaries                              -       (122)
  Equity in loss of an affiliate company                    271        969
  Amortization of intangible assets                         986        557
  Depreciation                                            1,792      1,218
  Minority interest                                      (1,037)      (593)
  Accrued severance pay, net                                190      1,251
  Decrease in deferred tax liabilities                     (197)       (52)
  Decrease in trade receivables                           4,400        366
  Decrease (increase) in other receivables and
   prepaid expenses                                        (768)       389
  Increase in inventories                                (2,312)    (1,946)
  Increase in trade payables                                 83      1,528
  Increase (decrease) in other current liabilities          579     (1,043)
  Other, net                                               (257)      (374)
  Net cash used in operating activities                  (6,382)    (1,279)

  Cash flows from investing activities
  Acquisition of consolidated subsidiaries, net
   of cash acquired                                           -        (23)
  Proceeds from maturity of available -for sale
   securities                                            67,569     19,079
  Purchase of available-for sale securities             (64,356)    (8,863)
  Purchase of property and equipment                     (2,795)    (3,502)
  Receipts on account of loans and receivables              237        261
  Other, net                                                (19)      (102)
  Net cash provided by investing activities                 636      6,850

  Cash flows from financing activities
  Increase in short-term bank credit, net                 2,003      1,024
  Exercise of options and warrants                            8      3,246
  Repayment of long-term bank loans                        (257)      (430)
  Proceeds from minority in subsidiary                        -      1,036
  Net cash provided by financing activities               1,754      4,876
  Effect of exchange rate changes on cash                    88         40

  Increase (decrease) in cash and cash equivalents       (3,904)    10,487
  Cash and cash equivalents at the beginning of
   the period                                            30,049     29,657
  Cash and cash equivalents at the end of the period    $26,145    $40,144


DATASOURCE: On Track Innovations Ltd.



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

[phone] Ext. 111, ; or Investor Relations, Miri

Segal of Strategic Growth International for OTI, [phone],





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

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