• Non GAAP Operating Profit of $2.2 Million 
• Gross Margin Increased to 54%
• Revenues Increased to $27.8 Million 

Iselin, NJ – August 9, 2010 – 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 half ended June 30, 2010. Following are various financial figures that compare the first half of 2010 to 2009.

• Total revenues of $27.8 million, an 86% increase from last year.
• Revenues from Licensing and Transaction Fees of $1.8 million, a 50% increase from last year.
• Gross margin increased to 54% vs. 51% last year. 
• Non-GAAP operating expenses of $13 million, a 15% increase compared to $11.2 million last year. GAAP operating expenses of $15.1 million, a 10% increase compared to $13.7 million last year.
• Non-GAAP operating profit of $2.2 million, compared to operating loss of $3.6 million last year. GAAP operating profit of $27,000, compared to operating loss of $6.1 million last year.
• Strong balance sheet with cash, cash equivalents and short-term investments of $35.8 million as of June 30, 2010.

Oded Bashan, Chairman and CEO of OTI, said: “The financial results for the first half manifest the unique story of OTI: an excellent technology company with solid financial results. We are in a unique strategic position with proven track record, demonstrated growth potential and improved financial results, we are optimistic about the future for OTI. The successful execution of large scale projects strengthens our credibility, provides more opportunities in existing markets and in new ones, and further strengthens our pipeline for the next two to three years.”

Mr. Bashan continued: “Our unique position increases the comfort level generated from the improved visibility of revenues and the growing number and size of opportunities we are working on, which enables us to increase our revenue guidance. We expect to maintain a similar level of revenues in the second half of the year, and we therefore increase the earlier provided revenue guidance for 2010 by 15% to $53-$55 million. We expect to maintain the already achieved non-GAAP operating profitability for the remainder of the year.”

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 for both 2009 and 2010 statements. 

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 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 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 9, 2010, at 9:00 AM ET to discuss operating results and future outlook. To participate, call:
1-888-668-9141 (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 16th, by calling U.S: 1-888-782-4291 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.

(TABLES ATTACHED)

Safe Harbor for Forward-Looking Statements: 
This press release may contain 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, revenues target or current expectations. For example, among our forward-looking statements are the following:

• when we say that we are in a unique strategic position with proven track record, demonstrated growth potential and improved financial results
• when we say that we are optimistic about the future for OTI
• when we say that the successful execution of large scale projects strengthens our credibility, provides more opportunities in existing markets and in new ones, and further strengthens our pipeline for the next two to three years
• when we say that our unique position increases the comfort level generated from the improved visibility of revenues and the growing number and size of opportunities we are working on, which enables us to increase our revenue guidance
• when we say that we expect to maintain a similar level of revenues in the second half of the year
• or when we say that we therefore increase the earlier provided revenue guidance for 2010 by 15% to $53-$55 million, or when we say that we expect to maintain the already achieved non-GAAP operating profitability for the remainder of the year.

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, 2009 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.