• Better Than Expected Revenues of $26.7 Million
• Gross Margin of 50%
• Strong Balance Sheet with $33.1 Million in Cash, Cash Equivalents and Short Term Investments

ISELIN, N.J., – August 15, 2011 – On Track Innovations Ltd. (OTI) (Nasdaq GM: OTIV), a global leader in contactless microprocessor-based smart card solutions for homeland security, payments, petroleum payments and other applications, today announced results for the first half ended June 30, 2011.

The following are various financial figures that compare first half of 2011 to the same period last year.

• Total revenues of $26.7 million, a 4% decrease compared to $27.8 million last year.
• Revenues from Licensing and Transaction Fees of $2.7 million, a 49% increase compared to $1.8 million last year.
• Gross margin of 50% for the first half of 2011.

• Non-GAAP operating expenses of $15.0 million, a 16% increase compared to $13.0 million last year. GAAP operating expenses of $16.4 million, a 9% increase compared to $15.1 million last year.

• Non-GAAP operating loss of $1.6 million, compared to non-GAAP operating profit of $2.2 million last year. GAAP operating loss was $3.1 million, compared to GAAP operating profit of $27,000 last year.

• Strong balance sheet with cash, cash equivalents and short-term investments of $33.1 million as of June 30, 2011.

Oded Bashan, Chairman and Chief Executive Officer of OTI, said, “Following the first six months of 2011, with better than expected revenues, OTI is well positioned to enjoy its expected growth and the investments we have made in the recent years. We are involved in a larger number of projects that have progressed to their commercial implementation stage, resulting in the increase in recurring and transaction fee revenues. We have a larger number of opportunities that are in pilot stages with a clear path to rollouts, which will mainly impact 2012 and 2013 revenues, ultimately increasing our long term visibility and profitability. In addition, we have created new alliances with channel partners in the vertical markets that we focus on, especially in the petroleum and parking markets, which will help us increase revenues from these sectors. The advancements increase our confidence level in meeting the previously provided guidance for the year of $55-$60 million in revenues.”

Repurchase Plan
OTI’s Board of Directors has authorized to resume the repurchase program of OTI’s shares which was terminated last year. The timing and the amounts purchased are to be determined by the Company, and the purchases may occur in the open market or in negotiated or block transactions, all subject to the applicable regulatory requirements.

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.

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.

Conference Call and Webcast Information
The Company has scheduled a conference call and simultaneous Web cast for August 15, 2011, at 9:00 AM ET to discuss operating results and future outlook. To participate, call:
1-888-281-1167 (U.S. toll free), 1-800-227-297 (Israel toll free). To listen to the Web cast, use the following link: http://www.otiglobal.com/Investors_Introduction
For those unable to participate, the teleconference will be available for replay until midnight August 22nd, by calling U.S 1-888-295-2634 on the web at: http://www.otiglobal.com/Investors_Introduction

About OTI
Established in 1990, OTI (NASDAQ GM: 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 www.otiglobal.com, the content of which is not part of this press release.

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. Forward-looking statements include statements regarding our goals, beliefs, future growth strategies, objectives, products, plans, and future results of operations or current expectations. Forward-looking statements could be impacted by the effects of the protracted evaluation and validation periods in the U.S. and other markets for contactless payment cards, market acceptance of new and existing products and our ability to execute production on orders, as well as other risks and uncertainties, including those discussed in the “Risk Factors” section and elsewhere in our Annual Report on Form 20-F for the year ended December 31, 2010, and in subsequent filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. Except as otherwise required 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. 

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