OTI Reports FY 2007 Six Months and Second Quarter Financial Results

Six Month Revenues up 7% Compared to the Same Period Last Year 


FORT LEE, N.J., Aug. 27  /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 six months and the second quarter ended June 30, 2007.

   * Revenues: Revenues for the six months ended June 30, 2007 were $20.6
     million, an increase of 7% compared to $19.4 million in the same period
     last year. Revenues in the second quarter were $10.2 million, a
     decrease of 1% compared to $10.3 million in the same period last year.

   * GAAP Gross Profit: GAAP Gross Profit for the six months ended June 30,
     2007 was $8.4 million, a decrease of 6% compared to $9.0 million in the
     same period last year. In the second quarter GAAP gross profit was $4.4
     million, a decrease of 3% compared to $4.5 million in the second
     quarter of 2006. GAAP gross margin for the six months ended June 30,
     2007 was 41% compared to 46% in the same period last year. GAAP gross
     margin in the quarter was 43% compared to 44% in the second quarter of
     2006.

   * Non-GAAP Gross Profit: Non-GAAP Gross Profit was $8.4 million, for the
     six months ended June 30, 2007, a decrease of 6% compared to $9.0
     million in the same period last year. Non-GAAP Gross Profit for the
     second quarter of 2007 was $4.4 million, a decrease of 2% compared to
     $4.5 million in the second quarter of 2006. Non-GAAP gross margin for
     the six months ended June 30, 2007 was 41% compared to 46% in the same
     period last year. Non-GAAP gross margin in the second quarter was 43%
     compared to 44% in the second quarter of 2006.

   * GAAP Net Loss: GAAP Net Loss for the six months ended June 30, 2007 was
     $(7.3) million, an increase of 85% compared to $(3.9) million in the
     same period last year. GAAP net loss for the second quarter of 2007 was
     $(3.2) million, an increase of 61% compared to $(2.0) million in the
     second quarter last year.

   * Non-GAAP Net Loss: Non-GAAP Net Loss for the six months ended June 30,
     2007 was $(4.3) million, an increase of 112% compared to $(2.0) million
     in the same period last year. Non-GAAP net loss for the second quarter
     of 2007 was $(1.8) million an increase of 99% compared to $(928,000) in
     the second quarter last year.

   * GAAP Loss per Share: GAAP Loss per Share for the six months ended June
     30, 2007 was $(0.39) compared to $(0.31) in the same period last year.
     GAAP loss per share for the second quarter of 2007 was $(0.17),
     compared to $(0.15) in the second quarter of 2006.

   * Non-GAAP Loss per Share: Non-GAAP Loss per Share for the six months
     ended June 30, 2007 was $(0.23) compared to $(0.16) in the same period
     last year. Non-GAAP loss per share for the second quarter of 2007 was
     $(0.10), compared to $(0.07) in the second quarter of 2006.

   * Strong Balance Sheet: Total assets were at $117.3 million with cash
     equivalent and short term investments totaling $44.1 million.



Non-GAAP results for the second quarter and six 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.

"The first half revenues are in accordance with our initial expectations," said Oded Bashan, Chairman and CEO of OTI. "As we stated last quarter, we are expecting a stronger second half, with most of the growth realized towards the end of 2007."

Conference call and Webcast Information

The Company has scheduled a conference call and simultaneous Web cast for Monday, August 27, 2007, which will be hosted by Oded Bashan, Chairman and CEO, Ohad Bashan, President, and Guy Shafran, CFO, for 09:00 AM EDT 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) 1-973-582-2815 (standard international) ID Code: OTI Q2 2007 Results 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 September 3rd, by calling U.S.: 877-519-4471 or International; 973-341-3080 and entering the PIN number #9133176 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
                        

                            (TABLES TO FOLLOW)

  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 a stronger second half, with most of the growth realized towards the end of 2007. 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)

                    Six months ended June 30      Three months ended June 30
                        2007            2006          2007            2006
                    (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)
  Revenues
  Sales               $ 19,289        $ 17,373       $ 9,791        $ 9,356
  Licensing
   and transaction
   fees                  1,325           1,983           448            945
  Total revenues        20,614           19,356       10,239         10,301

  Cost of Revenues
  Cost of sales         12,207           10,384        5,865          5,811
  Total cost of
   revenues             12,207           10,384        5,865          5,811

  Gross profit           8,407            8,972        4,374          4,490

  Operating Expenses
  Research and
   development           5,153            3,301        2,559          1,473
  Selling and
   marketing             4,061            3,289        2,189          1,860
  General and
   administrative        7,047            6,076        3,239          2,930
  Amortization of
   intangible assets       657              368          329            182
  Total operating
   expenses             16,918           13,034        8,316          6,445

  Operating loss        (8,511)          (4,062)      (3,942)        (1,955)
  Financial income,
   net                   1,191              736          594            410
  Other income
   (expense), net         (111)              14           -              (5)
  Loss before taxes
   on income and
   minority interests   (7,431)          (3,312)      (3,348)        (1,550)
  Taxes on income          131              165           65            176
  Minority interest        190              114          148            107
  Equity in loss of
   affiliate              (162)            (906)         (42)          (710)

  Net loss              (7,272)          (3,939)      (3,177)        (1,977)

  Basic and diluted
   net loss per
   ordinary share      $ (0.39)         $ (0.31)     $ (0.17)       $ (0.15)
  Weighted average
   number of
   ordinary
   shares used in
   computing basic
   and diluted net
   loss per
   ordinary
   share            18,641,927       12,641,778   18,942,626     12,905,557



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

                                         Six months ended
                                          June 30, 2007
                            GAAP           Adjustments         Non-GAAP
  Revenues
  Sales                 $ 19,289               -               $ 19,289
  Licensing and
   transaction fees        1,325               -                  1,325
  Total revenues          20,614                                 20,614

  Cost of Revenues
  Cost of sales           12,207             (24) (a)            12,183
  Total cost of revenues  12,207             (24)                12,183

  Gross profit             8,407              24                  8,431

  Operating Expenses
  Research and development 5,153          (1,061) (a)             4,092
  Selling and marketing    4,061            (168) (a)             3,893
  General and
   administrative          7,047          (1,038) (a)             6,009
  Amortization of
   intangible assets         657            (657) (b)                 0
  Total operating
   expenses               16,918          (2,924)                13,994

  Operating loss          (8,511)          2,948                 (5,563)
  Financial income, net    1,191               -                  1,191
  Other expenses, net       (111)              -                   (111)
  Loss before taxes on
   income and minority
   interests              (7,431)          2,948                 (4,483)
  Taxes on income            131               -                    131
  Minority interests         190               -                    190
  Equity in loss of an
   affiliate                (162)              -                   (162)
  Net loss              $ (7,272)        $ 2,948               $ (4,324)

  Basic and diluted net
   loss per ordinary
   share                $  (0.39)        $  0.16               $  (0.23)
  Weighted average
   number of ordinary
   shares used in
   computing basic
   and diluted
   net loss per
   ordinary share     18,641,927                             18,641,927

  (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
                                     June 30, 2007
                       GAAP           Adjustments             Non-GAAP

  Revenues
  Sales               $ 9,791              -                   $ 9,791
  Licensing and
   transaction fees       448              -                       448
  Total revenues       10,239                                     10,239

  Cost of Revenues
  Cost of sales         5,865            (13) (c)                5,852
  Total cost of
   revenues             5,865            (13)                    5,852

  Gross profit          4,374             13                     4,387

  Operating Expenses
  Research and
   development          2,559           (574) (c)                1,985
  Selling and
   marketing            2,189            (96) (c)                2,093
  General and
   administrative       3,239           (319) (c)                2,920
  Amortization of
   intangible assets      329           (329) (d)                    0
  Total operating
   expenses             8,316         (1,318)                    6,998

  Operating loss       (3,942)         1,331                    (2,611)
  Financial income,
   net                    594              -                       594
  Other expenses, net       -              -                         -
  Loss before taxes
   on income and
   minority interests  (3,348)         1,331                    (2,017)
  Taxes on income          65              -                        65
  Minority interests      148              -                       148
  Equity in loss of
   an affiliate           (42)             -                       (42)
  Net loss           $ (3,177)       $ 1,331                  $ (1,846)
  Basic and diluted
   net loss
   per ordinary
    share            $  (0.17)       $  0.07                  $  (0.10)
  Weighted average
   number of ordinary
   shares used in
   computing basic
   and diluted net
   loss per
   ordinary
   share           18,942,626                               18,942,626

  (c) 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.
  (d) 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)

                                     Six Months Ended
                                     June 30, 2006
                        GAAP           Adjustments              Non-GAAP
                    (unaudited)        (unaudited)             (unaudited)
  Revenues
  Sales               $17,373                -                   $17,373
  Licensing and
   transaction fees     1,983                -                     1,983
  Total revenues       19,356                                     19,356
  Cost of Revenues
  Cost of sales        10,384               (8) (a)               10,376
  Total cost of
   revenues            10,384               (8)                   10,376
  Gross profit          8,972                8                     8,980
  Operating Expenses
  Research and
   development          3,301             (642) (a)                2,659
  Selling and
   marketing            3,289             (240) (a)                3,049
  General and
   administrative       6,076             (639) (a)                5,437
  Amortization of
   intangible assets      368             (368) (b)                    -
  Total operating
   expenses            13,034           (1,889)                   11,145
  Operating loss       (4,062)           1,897                    (2,165)
  Financial income,
   net                    736                -                       736
  Other income, net        14                -                        14
  Loss before taxes on
   income and minority
   interests           (3,312)           1,897                    (1,415)
  Taxes on income         165                -                       165
  Minority interest       114                -                       114
  Equity in loss of
   affiliate             (906)               -                      (906)
  Net loss            $(3,939)          $1,897                  $ (2,042)
  Basic and diluted
   net loss
    per ordinary
     share            $ (0.31)          $ 0.15                  $  (0.16)
  Weighted average
   number of ordinary
   shares used in
   computing basic
   and diluted net
   loss per ordinary
   share           12,641,778                                 12,641,778

  (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
                                       June 30, 2006
                        GAAP             Adjustments            Non-GAAP
                     (unaudited)        (unaudited)            (unaudited)
  Revenues
  Sales                   $9,356             -                    $9,356
  Licensing and
   transaction fees          945             -                       945
  Total revenues          10,301                                  10,301

  Cost of Revenues
  Cost of sales            5,811            (4) (c)                5,807
  Total cost of
   revenues                5,811            (4)                    5,807

  Gross profit             4,490             4                     4,494

  Operating Expenses
  Research and
   development             1,473          (358) (c)                1,115
  Selling and
   marketing               1,860          (198) (c)                1,662
  General and
   administrative          2,930          (307) (c)                2,623
  Amortization of
   intangible assets         182          (182) (d)                    -
  Total operating
   expenses                6,445        (1,045)                    5,400

  Operating loss          (1,955)        1,049                      (906)
  Financial income,
   net                       410             -                       410
  Other income, net           (5)            -                        (5)
  Loss before taxes on
   income and minority
   interests              (1,550)        1,049                      (501)
  Taxes on income            176             -                       176
  Minority interest          107             -                       107
  Equity in loss of
   affiliate                (710)            -                      (710)
  Net loss               $(1,977)       $1,049                     $(928)
  Basic and diluted
   net loss
   per ordinary
   share                 $ (0.15)       $ 0.08                   $ (0.07)
  Weighted average
   number of ordinary
   shares used in
   computing basic
   and diluted net
   loss per
   ordinary share     12,905,557                              12,905,557

  (c) 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.
  (d) The effect of amortization of intangible assets.


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

                                                      June 30    December 31
                                                        2007         2006
                                                    (Unaudited)    (Audited)
  Assets

  Current assets
  Cash and cash equivalents                           $  8,914   $  30,049
  Short-term investments                                35,197      18,232
  Trade receivables (net of allowance for
   doubtful accounts of $213 and $234
   as of June 30, 2007 and December 31,
   2006, respectively)                                   9,555      10,155
  Other receivables and prepaid expenses                 2,457       2,109
  Inventories                                           11,704      10,344

  Total current assets                                  67,827      70,889

  Severance pay deposits fund                            1,084       1,087

  Long-term receivables                                    873       1,043

  Investment in an affiliated company                    1,506       1,627

  Property, plant and equipment, net                    17,423      13,318

  Intangible assets, net                                 5,185       5,823

  Goodwill                                              23,387      23,387



  Total assets                                        $117,285    $117,174



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

                                                  June 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              $1,502        $498
  Trade payables                                    6,531       6,869
  Other current liabilities                         3,874       3,331
  Total current liabilities                        11,907      10,698

  Long-term liabilities
  Long-term loans, net of current maturities        1,950       2,117
  Accrued severance pay                             3,409       3,209
  Deferred tax liabilities                            860         992
  Total long-term liabilities                       6,219       6,318

  Total liabilities                                18,126      17,016

  Minority interests                                  828       1,004

  Shareholders' equity
  Ordinary shares of NIS 0.1 par value:
   authorized - 50,000,000 shares as of
   June 30, 2007 and December 31, 2006;
   issued 19,246,508 and 18,592,880 shares
   as of June 30, 2007 and December 31, 2006,
   respectively; outstanding 19,011,810
   and 18,243,539 shares as of
   June 30, 2007 and December 31, 2006,
   respectively                                       445         431
  Additional paid-in capital                      169,352     163,102
  Accumulated other comprehensive income              609         424
  Accumulated deficit                             (72,075)    (64,803)

  Total shareholders' equity                       98,331      99,154


  Total Liabilities and Shareholders' Equity     $117,285    $117,174



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

                                                    Six months ended June 30
                                                        2007        2006
                                                    (Unaudited)  (Unaudited)

  Cash flows from operating activities
  Net loss                                             $(7,272)    $(3,939)
  Adjustments required to reconcile net loss to
   net cash provided By (used in) operating activities:

  Stock-based compensation related to options and
   shares issued to employees and others                 2,693       1,834
  Equity in loss of affiliate                              162         906
  Amortization of intangible assets                        657         368
  Depreciation                                           1,184         814
  Minority interests                                      (190)       (114)
  Accrued severance pay, net                               203         771
  Increase (decrease) in deferred tax liabilities         (132)          2
  Decrease in trade receivables                            711       1,109
  Decrease (increase) in other receivables and
   prepaid expenses                                       (347)        894
  Increase in inventories                               (1,279)       (465)
  Increase (decrease) in trade payables                   (408)      1,139
  Increase (decrease) in other current liabilities         514      (1,850)
  Other, net                                              (341)       (397)
  Net cash provided by (used in) operating
   activities                                           (3,845)      1,072

  Cash flows from investing activities

  Acquisition of a consolidated subsidiary, net
   of cash acquired                                          -         (23)
  Proceeds from maturity of available-for
   sale securities                                      33,294      19,001
  Purchase of available-for sale securities            (49,941)     (8,622)
  Purchase of property and equipment                    (1,631)     (2,661)
  Receipts on account of loans and receivables             160         173
  Other, net                                               (19)          3
  Net cash provided by (used in) investing
   activities                                          (18,137)      7,871

  Cash flows from financing activities
  Increase in short-term bank credit, net                1,018         823
  Repayment of long-term bank loans                       (208)       (376)
  Proceeds from minority in subsidiary                       -       1,941
  Exercise of options and warrants                           5       3,234
  Net cash provided by financing activities                815       5,622
  Effect of exchange rate changes on cash                   32           2

  Increase (decrease) in cash and cash
   equivalents                                         (21,135)     14,567
  Cash and cash equivalents at the
   beginning of the period                              30,049      29,657
  Cash and cash equivalents at the
   end of the period                                    $8,914     $44,224


DATASOURCE: On Track Innovations Ltd.



CONTACT:  Galit Mendelson, Director of Corporate Communications of On

Track Innovations Ltd., [phone], Ext. 111, ; or

Investors, Miri Segal of Strategic Growth International, [phone],

 



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

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