• Non-GAAP Operating Profit of $1.2 Million
• Gross Margin Increased to 57% 
• Revenues Increased to $14.4 Million
• Cash, Cash Equivalents and Short-Term Investments of $40.4 Million as of March 31

Iselin, NJ – May 10, 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 quarter ended March 31, 2010. Following are various financial figures that compare the first quarter of 2010 to 2009.

• Strong balance sheet with cash, cash equivalents and short-term investments of $40.4 million as of March 31, 2010. 
• Total revenues of $14.4 million, a 71% increase from last year. 
• Gross margin increased to 57% vs. 51% last year. 
• Non-GAAP operating expenses of $7.1 million, a 19% increase compared to $5.9 million last year. GAAP operating expenses of $8.2 million, a 14% increase compared to $7.2 million last year. 
• Non-GAAP operating profit of $1.2 million, compared to operating loss of $1.6 million last year. GAAP operating profit of $75,000, compared to operating loss of $2.9 million last year. 
• Net cash provided by continuing operating activities of $9.5 million.

Oded Bashan, Chairman and CEO of OTI, said: “In the first quarter we were able to significantly increase revenues and gross margin, improve our cash flow position and achieve operating profit. These excellent results are the outcome of a lengthy, calculated process, of reorganization and strategy shift that we have been implementing in the past two years. We are focusing on projects that provide high gross margin, we implemented a cost cutting program, mainly in R&D and G&A, we increased our marketing and sales efforts, and we made a strategic decision to exit the non profitable card manufacturing business through the sale of MCT assets.”

Discontinued Operations
During the fourth 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 May 10, 2010, at 9:00 AM ET to discuss operating results and future outlook. To participate, call:
1-888-407-2553 (U.S. toll free), 1-800-227-297 (Israel toll free). To listen to the Web cast, use the following link: Investors Introduction 
For those unable to participate, the teleconference will be available for replay until midnight May 17th, by calling U.S.: 1-877-456-0009 on the web at: 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.

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(See link to full press release with tables below)

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, plans 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 the 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.