OTI Reports FY 2008 First Half and Second Quarter Financial Results

On Track Innovations Ltd. (OTI) , 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 half and second quarter ended June 30, 2008. Revenues for the first half were $20.3 million, compared to $20.6 million during the first half of 2007. Second quarter revenues increased by 18% to $11 million compared to $9.3 million in the first quarter of 2008. Gross margin for the first half was 36%, compared to 41% for the first half of 2007. Second quarter gross margin increased to 39% from 32% in the first quarter of 2008.First half net loss on a GAAP basis was $12.5 million. Net loss on a Non-GAAP basis for the first half was $8 million. Net loss on a GAAP basis for the second quarter decreased by 17% to $5.7 million compared to $6.8 million in the first quarter of 2008.

On a non-GAAP basis, net loss significantly decreased by 35% in the second quarter to $3.1 million from $4.8 million in the preceding quarter. See below for a reconciliation of GAAP to non-GAAP information."These results are due to a shift in the revenue mix in the payment sector from components intended for the US contactless card payments market to greater sales of readers, solutions for the mass transit market, EasyPark and more, as well as contactless payments in non-US markets," said Oded Bashan, OTI Chairman and CEO.

Mr. Bashan continued: "We continue to focus on controlling and reducing our operating expenses to the most efficient and effective level required to carry out our current and pending pipeline of projects for 09' and 10'. While we have steadily reduced headcount, the resultant savings take two to three quarters to show up in the P& L. We continue to shift our focus toward high margin projects with recurring revenues combined with commercial rollouts. We believe our actions will pave a clear path to profitability for OTI.

We continue to have a strong and healthy balance sheet with $110 Million in total assets and $34.3 Million in cash, cash equivalents, and short term investments.""As we've indicated before, it is our belief that most of the significant delays are behind us and we are confident about the Company's growth," said Mr. Bashan. "We still believe that 2008 will be a turning point for OTI in terms of showing a clear path to profitability and will reflect revenue growth of about 10% over 2007, with most of the growth expected in the fourth quarter of the year."