OTI Releases First Quarter Results, With 356% Increase In Gross Profit

Rosh Pina, Israel (ots) - OTI (Neuer Markt: OT5), the globalprovider of contactless smart card technology and productsolutions, today announced financial results for the quarterended 31 March 2001 with significant increases in both revenueand gross profit.

- Revenues for the quarter are up 297% to US $4.07 million(1Q2000: US $1.025 million). - Gross profit ahead 356% to $1.94 million (1Q2000: US $0.425million). - Operating expenses remain at a consistent level of $5.11million according to the company's corporate strategy and levelof operations and thus the operating loss for the three monthsended March 31, 2001 were $3.171 million.

- Net loss of $3.219 million (1Q2000: US $3 million) in linewith company expectations as a result of operating expenses andthe inclusion of e-Smart's operating loss of $0.642 million.Given the current economic situation and OTI's conservativefinancial approach, the company has taken an additional provisionfor bad debt in the amount of $0.5 million for customers who havenot paid within 180 days and who the company believes might nothave adequate securities

- These results are in line with the company's expectationsto break even and reach profitability for the fourth quarter of2001.

"We are continuing to grow and meet projections," said OdedBashan, President and CEO of OTI. "Our revenues have almostquadrupled, and we have strengthened our global operations andmarketing network. We have launched additional products thatstrengthen our position as the technology leader in ourmarketplace."

Financial Review: OTI has initiated an expansion strategy in 2000 that hasrevolved around investing in R&D, expanding marketinginfrastructure and increasing the global operations. As a resultof such expansion, the company has reached a strategic level ofoperation that incurs operating expenses of approximately. $5million per quarter.

Revenues for the quarter ended 31 March 2001 were $4.07million, an increase of 297% compared with US$1.02 million for1Q2000. The gross profit for the quarter grew by 356% to $1.94million compared with $0.42 million in 1Q2000.

Operating Expense: Research & development expenses increased by 82% to $1.4million from $0.79 million in 1Q2000. Marketing expenses rose by66% to $2.306 million from $1.392 million in the same period,while general and administrative expenses increased by 70% to$1.089 million compared with $0.64 million in 1Q2000.

The net loss for 1Q2001 was $3.219 million (1Q2000: US$3million) up from $2.993 million in the previous quarter. Theincrease in net loss was strongly related to the investments madein marketing, infrastructure, and global expansion includingacquisitions, and research & development. These are plannedexpenses and are in line with OTI's expansion strategy. Inaddition, given the current economic situation and OTI'sconservative financial outlook, the company has taken anadditional provision for bad debt in the amount of $0.5 millionfor customers who have not paid within 180 days and who thecompany believes might not have adequate securities.

Reflecting the company's strategy, the operating expensesremain at the same level as in 4Q2000. The company ended 1Q2001with operating expenses of $5.11 million and operating losses of$3.17 million. Including e-Smart's loss of $0.642 million OTIfinished 1Q2001 with a net loss of $3.219 million.

OTI ended 1Q2001 with cash, cash equivalents, and short-terminvestments of $15.5 million and total assets of $41.3 million. Major Developments: Some of the major developments during the first quarterinclude: - Xerox Connect and OTI are providing payment and informationsolutions for the U.S. campus market. The relationship providesend-to-end solutions for universities and corporate campuses. - City of Tel Aviv will equip two additional country clubswith OTI's contactless smart card campus solution. - OTI and P-Card System will jointly launch the first Europe-wide currency-independent contact/contactless smart card solutionto issuers throughout Europe. - OTI acquired the remaining 49 percent of leading Europeansmart card system integrator InterCard Kartensysteme GmbH andelectronic smart card hardware manufacturer InterCard SystemElectronic GmbH. - e-Smart System will commence a field test for OTI's smartcard and readers for use in an automated fare collection servicein CKI's toll bridge in Panyu, Guandong province of China. - MediKredit Integrated Healthcare Solutions (Pty) Ltd and OTIAfrica began a pilot project for the introduction of OTI'sMedical Management Application. - The Israel Postal Authorities are to market and distributeEasyPark electronic parking cards nationwide. - OTI launched its Saturn Reader, the first fully integratedsmart card reader to accept both ISO 7816 contact cards and ISO14443 Type A, B, and D contactless cards. - OTI will provide the first contactless smart card supportingpublic-key infrastructure (PKI) encryption, used for digitalcertificates in such secure environments as Internet transactionsand in government agencies. - Hindustan Petroleum Corporation Ltd. (HPCL) is launching amulti-application contactless smart card program throughout Indiaoffering a payment and loyalty solution for use at HPCL's retailpetroleum stations. About OTI Established in 1990, OTI (On Track Innovations) designs anddevelops contactless microprocessor-based smart card technologyto address the needs of a wide variety of markets. Applicationsdeveloped by OTI include product solutions for mass transit,parking, gas management systems, loyalty schemes, ID and securecampuses. OTI has regional offices in the US, Europe, AsiaPacific, and Africa to market and support its products. Thecompany was awarded the prestigious ESCAT Award for smart cardinnovation in both 1998 and 2000. Visit OTI on the Internet atwww.oti.co.il. For more information contact: Frank Schwarz Kirchhoff Consult AG Tel: +49 69 7474 8615 Mob: +49 17 5221 1108 frank.schwarz@kirchhoff.de This press release contains forward-looking statements, whichreflect management's best judgment based on factors currentlyknown. Such statements are subject to certain risks anduncertainties, which could cause actual results to differmaterially from those in the statements included in this pressrelease. Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of the datehereof. OTI disclaims any intention or obligation to update orrevise any forward-looking statements, whether as a result of newinformation, future events or otherwise.

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