OTI Announces First Quarter Results With a Strong Path to Profitability

Revenues increased by 9%; Operating Loss Decreased by 72%

ROSH PINA, Israel, May 27, 2002 (PRIMEZONE) -- OTI (Neuer Markt:OT5), the global provider of contactless smart card technology and product solutions, today announced financial results for the first quarter ended March 31, 2002. The results reflect the company's goal to become profitable by the second half of 2002, as revenues have increased by 9%, operating expenses have been reduced by 43% and operating loss have been reduced by 72% compared to the first quarter of 2001. The company also expects to become cash flow positive by the end of this year.

 Financial Highlights for the First Quarter of 2002:

 -- Revenues for Q1 2002 increased by 9% to US $4.4 million (Q1 2001:
    US $4.1 million)

 -- Gross profit increased by 13% to US $2.2 million (Q1 2001: US 
    $1.9 million)

 -- Operating expenses reduced by 43% to US $3.2 million (Q1 2001:
    US $5.6 million)

 -- Operating loss decreased by 72% to US $1.0 million (Q1 2001:
    US $3.7 million)

 -- Net loss for Q1 2002 reduced by 67% to US $1.2 million (Q1 2001:
    US $3.7 million) 

 -- Loss per share reduced by 65% to US $0.08 (Q1 2001: US $0.23)

"We are pleased with the results of the first quarter, as we were able to increase both revenues and gross profit while reducing our operating expenses significantly," said Oded Bashan, Chairman, President and CEO of OTI.

Financial Review:

Since the second half of 2001 OTI has taken several steps to reduce its operating expenses. We have shifted to an on going operations versus building the operations, this has resulted in significant reduction of operating expenses, mainly marketing.

Revenues for the first quarter ended March 31 2002 were US $4.4 million, an increase of 9% compared with US $4.1 million for the first quarter 2001. The gross profit for the first quarter grew by 13% to US $2.2 million compared with US $1.9 million in Q1 2001.

Research & development expenses net of payments received from the Office of the Chief Scientist decreased by 46% to US $1.0 million from US $1.9 million in Q1 2001. Marketing and Selling expenses decreased by 58% to US $974,000 from US $2.3 million in the same period of 2001, while general and administrative expenses increased by 10% to US $1.2 million compared to US $1.1 million in Q1 2001.

Operating expenses decreased by 43% to US $3.2 million from US $5.6 in Q1 2001.

Operating loss decreased by 72% to US $1.0 million from US $3.7 million in Q1 2001.

Net loss for first quarter of 2002 decreased by 67% to US $1.2 million down from US $3.7 million, resulting in a net loss of $0.08 per share for the first quarter of 2002 compared with $0.23 in Q1 2001.

Major Developments:

Some of the major developments during Q1 2001 include:

-- OTI Africa has signed a five-year agreement with Exel Petroleum (Pty) Ltd. to create a network of on-road sites equipped with OTI's fuel management system, branded in South Africa as FuelMaster. This agreement will boost the current network of FuelMaster sites by approximately 25% and the number of FuelMaster end users by 40% over the next two years.

-- OTI has been awarded a major tender as the exclusive provider of contactless smart card-based readers for Israeli government agencies to provide secure access control solutions. Initial volumes for the award are estimated at US $1.5 million. As a result of the award, the microprocessor-based contactless smart card technology developed by OTI will form the standard reader for contactless solutions required by Israeli government agencies.

-- OTI Africa has signed a significant number of commercial fleet companies to join the FuelMaster network in South Africa totaling over 8,000 vehicles. This brings the total number of vehicles participating in FuelMaster to over 20,000, serviced at over 500 fuel stations throughout Southern Africa.

-- SmartStop, Inc. announced its commercial launch of the SmartShowerTM system. Designed for the trucking and travel industry, the SmartShower system automates the operation of shower rooms at truck stops, travel plazas and rest areas. SmarStop has signed several major truck stop networks to install the system, with the expected installation to start in May 2002. OTI provides the microprocessor-based smart card technology, products and solutions that support the SmartShower system.

A copy of the 2002 First Quarter Report will be available on the OTI website at www.oti.co.il.

About OTI

Established in 1990, OTI (On Track Innovations) designs and develops contactless microprocessor-based smart card technology to address the needs of a wide variety of markets. Applications developed by OTI include product solutions for mass transit, parking, gas management systems, loyalty schemes, ID and secure campuses. OTI has regional offices in the U.S., Europe, Asia Pacific, and Africa to market and support its products. The company was awarded the prestigious ESCAT Award for smart card innovation in both 1998 and 2000. Visit OTI on the Internet at www.oti.co.il.

This press release contains forward-looking statements, which reflect management's best judgment based on factors currently known. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those in the statements included in this press release. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. OTI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


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