“Based on the higher than expected decline in revenues in the first half, which is mainly attributed to the revenue reduction in the OEM and payments business and the delays in customers’ projects timetables, we are updating our target revenues for this year to $34 million.”

With regards to OTI’s share repurchase program, OTI’s Board of Directors has recently approved a detailed plan. Execution of the plan shall be subject to applicable laws.

Conference call and Webcast Information
The Company has scheduled a conference call and simultaneous Web cast for August 25, 2009, at 9:00 AM EDT to discuss operating results and future outlook. To participate, call:

1-888-281-1167 (U.S. toll free), 1-800-270-345 (Israel toll free). To listen to the Web cast, use the following link: http://www.otiglobal.com/content.aspx?id=226

For those unable to participate, the teleconference will be available for replay until midnight September 1 ^st , by calling U.S.: 1-888-326-9310 on the web at: http://www.otiglobal.com/content.aspx?id=226

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 in accordance with SFAS 123(R) and EITF 96-18, and amortization of intangible assets. 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.

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 TO FOLLOW)

4

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. For example, forward-looking statements include statements regarding our goals, beliefs, future growth strategies, objectives, plans or current expectations such as those statements regarding our goal to bring OTI to operating breakeven position, the steps we take or intend to take to achieve operating breakeven position and the timing for achieving it, or our statement regarding our revenues target for 2009. 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, 2008 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.

5

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ON TRACK INNOVATIONS LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)

			Six months ended June 30						Three months ended June 30
			2009			2008			2009			2008
			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues
Sales			$	15,687		$	18,948		$	6,807		$	10,202
Licensing and transaction fees				1,200			1,338			743			763
Total revenues				16,887			20,286			7,550			10,965
Cost of revenues
Cost of sales				9,197			13,041			4,191			6,703
Total cost of revenues				9,197			13,041			4,191			6,703
Gross profit				7,690			7,245			3,359			4,262
Operating expenses
Research and development				4,553			5,901			2,337			2,904
Selling and marketing				6,182			5,175			2,813			2,798
General and administrative				5,002			7,349			2,456			3,755
Amortization of intangible assets				515			658			251			329
Total operating expenses				16,252			19,083			7,857			9,786
Operating loss				(8,562	)		(11,838	)		(4,498	)		(5,524	)
Financial expense, net				(378	)		(566	)		(585	)		(90	)
Loss before taxes on income				(8,940	)		(12,404	)		(5,083	)		(5,614	)
Taxes on income				42			122			19			59
Equity in loss of affiliate				-			(250	)		-			(127	)
Net loss				(8,898	)		(12,532	)		(5,064	)		(5,682	)
Net loss attributable to noncontrolling interest				141			-			97			-
Net loss attributable to shareholders				(8,757	)		(12,532	)		(4,967	)		(5,682	)
Basic and diluted net loss attributable to
shareholders per ordinary share			$	(0.40	)	$	(0.64	)	$	(0.22	)	$	(0.29	)
Weighted average number of ordinary
shares used in computing basic
and diluted net loss per ordinary share				22,027,070			19,708,825			22,266,869			19,861,051

6

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ON TRACK INNOVATIONS LTD.
RECONCILIATION BETWEEN GAAP TO NON-GAAP
UNAUDITIED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)

			GAAP			Six months ended June 30, 2009 Adjustments			Non-GAAP
Revenues
Sales			$	15,687			-		$	15,687
Licensing and transaction fees				1,200			-			1,200
Total revenues				16,887						16,887
Cost of Revenues
Cost of sales				9,197			(28	)(a)		9,169
Total cost of revenues				9,197			(28	)		9,169
Gross profit				7,690			28			7,718
Operating Expenses
Research and development				4,553			(1,141	)(a)		3,412
Selling and marketing				6,182			(351	)(a)		5,831
General and administrative				5,002			(468	)(a)		4,534
Amortization of intangible assets				515			(515	)(b)		-
Total operating expenses				16,252			(2,475	)		13,777
Operating loss				(8,562	)		2,503			(6,059	)
Financial expenses, net				(378	)		-			(378	)
Loss before taxes on income				(8,940	)		2,503			(6,437	)
Taxes on income				42			-			42
Net loss			$	(8,898	)	$	2,503		$	(6,395	)
Net loss attributable to noncontrolling interest				141			-			141
Net loss attributable to shareholders			$	(8,757	)	$	2,503		$	(6,254	)
Basic and diluted net loss attributable to
shareholders per ordinary share			$	(0.40	)	$	0.12		$	(0.28	)
Weighted average number of ordinary shares used
in computing basic and diluted net loss per
ordinary share				22,027,070						22,027,070

(a)

The effect of stock-based compensation in accordance with SFAS 123(R) and EITF 96-18.

(b)

The effect of amortization of intangible assets.

7

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ON TRACK INNOVATIONS LTD.
RECONCILIATION BETWEEN GAAP TO NON-GAAP
UNAUDITIED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)

			GAAP			Three months ended June 30, 2009 Adjustments			Non-GAAP
Revenues
Sales			$	6,807			-		$	6,807
Licensing and transaction fees				743			-			743
Total revenues				7,550						7,550
Cost of Revenues
Cost of sales				4,191			(13	)(a)		4,178
Total cost of revenues				4,191			(13	)		4,178
Gross profit				3,359			13			3,372
Operating Expenses
Research and development				2,337			(558	)(a)		1,779
Selling and marketing				2,813			(209	)(a)		2,604
General and administrative				2,456			(254	)(a)		2,202
Amortization of intangible assets				251			(251	)(b)		-
Total operating expenses				7,857			(1,272	)		6,585
Operating loss				(4,498	)		1,285			(3,213	)
Financial expenses, net				(585	)		-			(585	)
Loss before taxes on income				(5,083	)		1,285			(3,798	)
Taxes on income				19			-			19
Net loss			$	(5,064	)	$	1,285		$	(3,779	)
Net loss attributable to noncontrolling interest				97			-			97
Net loss attributable to shareholders			$	(4,967	)	$	1,285		$	(3,682	)
Basic and diluted net loss attributable to
shareholders per ordinary share			$	(0.22	)	$	0.05		$	(0.17	)
Weighted average number of ordinary shares used
in computing basic and diluted net loss per
ordinary share				22,266,869						22,266,869

(a)

The effect of stock-based compensation in accordance with SFAS 123(R) and EITF 96-18.

(b)

The effect of amortization of intangible assets.

8

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ON TRACK INNOVATIONS LTD
RECONCILIATION BETWEEN GAAP TO NON-GAAP
UNAUDITIED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)

			GAAP			Six months ended June 30, 2008 Adjustments			Non-GAAP
Revenues
Sales			$	18,948			-		$	18,948
Licensing and transaction fees				1,338			-			1,338
Total revenues				20,286						20,286
Cost of Revenues
Cost of sales				13,041			(30	)(a)		13,011
Total cost of revenues				13,041			(30	)		13,011
Gross profit				7,245			30			7,275
Operating Expenses
Research and development				5,901			(1,735	)(a)		4,166
Selling and marketing				5,175			(925	)(a)		4,250
General and administrative				7,349			(1,225	)(a)		6,124
Amortization of intangible assets				658			(658	)(b)		-
Total operating expenses				19,083			(4,543	)		14,540
Operating loss				(11,838	)		4,573			(7,265	)
Financial expenses, net				(566	)		-			(566	)
Loss before taxes on income and minority interests				(12,404	)		4,573			(7,831	)
Taxes on income				122			-			122
Equity in loss of affiliate				(250	)		-			(250	)
Net loss			$	(12,532	)	$	4,573		$	(7,959	)
Net loss attributable to noncontrolling interest				-			-			-
Net loss attributable to shareholders			$	(12,532	)	$	4,573		$	(7,959	)
Basic and diluted net loss attributable to
shareholders per ordinary share			$	(0.64	)	$	0.24		$	(0.40	)
Weighted average number of ordinary shares used
in computing basic and diluted net loss per
ordinary share				19,708,825						19,708,825

(a)

The effect of stock-based compensation in accordance with SFAS 123(R) and EITF 96-18.

(b)

The effect of amortization of intangible assets.

9

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ON TRACK INNOVATIONS LTD
RECONCILIATION BETWEEN GAAP TO NON-GAAP
UNAUDITIED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)

			GAAP			Three months ended June 30, 2008 Adjustments			Non-GAAP
Revenues
Sales			$	10,202			-		$	10,202
Licensing and transaction fees				763			-			763
Total revenues				10,965						10,965
Cost of Revenues
Cost of sales				6,703			(15	)(a)		6,688
Total cost of revenues				6,703			(15	)		6,688
Gross profit				4,262			15			4,277
Operating Expenses
Research and development				2,904			(930	)(a)		1,974
Selling and marketing				2,798			(635	)(a)		2,163
General and administrative				3,755			(651	)(a)		3,104
Amortization of intangible assets				329			(329	)(b)		-
Total operating expenses				9,786			(2,545	)		7,241
Operating loss				(5,524	)		2,560			(2,964	)
Financial expenses, net				(90	)		-			(90	)
Loss before taxes on income and minority interests				(5,614	)		2,560			(3,054	)
Taxes on income				59			-			59
Equity in loss of an affiliate				(127	)		-			(127	)
Net loss			$	(5,682	)	$	2,560		$	(3,122	)
Net loss attributable to noncontrolling interest				-			-			-
Net loss attributable to shareholders			$	(5,682	)	$	2,560		$	(3,122	)
Basic and diluted net loss
per ordinary share			$	(0.29	)	$	0.13		$	(0.16	)
Weighted average number of ordinary shares used
in computing basic and diluted net loss per
ordinary share				19,861,051						19,861,051

(a)

The effect of stock-based compensation in accordance with SFAS 123(R) and EITF 96-18.

(b)

The effect of amortization of intangible assets.

10

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ON TRACK INNOVATIONS LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)

			June 30 2009			December 31 2008
			(Unaudited)			(Audited)
Assets
Current assets
Cash and cash equivalents			$	21,863		$	27,196
Short-term investments				46			904
Trade receivables (net of allowance for doubtful
accounts of $3,313 and $3,315 as of June 30, 2009
And December 31, 2008, respectively)				4,742			4,567
Other receivables and prepaid expenses				3,928			2,994
Inventories				12,771			12,343
Total current assets				43,350			48,004
Severance pay deposits fund				1,166			1,189
Investment in an affiliated company				-			-
Property, plant and equipment, net				18,169			18,613
Intangible assets, net				1,989			2,503
Goodwill				-			-
Total assets			$	64,674		$	70,309

11

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ON TRACK INNOVATIONS LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)

			June 30 2009			December 31 2008
			(Unaudited)			(Audited)
Liabilities and Shareholders' Equity
Current Liabilities
Short-term bank credit and current maturities
of long-term bank loans			$	5,994		$	4,984
Trade payables				7,646			8,071
Other current liabilities				3,720			3,517
Total current liabilities				17,360			16,572
Long-Term Liabilities
Long-term loans, net of current maturities				1,859			1,762
Accrued severance pay				3,419			3,672
Deferred tax liability				159			202
Total long-term liabilities				5,437			5,636
Total liabilities				22,797			22,208
Commitments and Contingencies
Equity
Shareholders' Equity
Ordinary shares of NIS 0.1 par value: Authorized -
50,000,000 shares as of June 30, 2009 and
December 31, 2008; issued 22,874,684 and 21,534,788
shares as of June 31, 2009 and December 31, 2008,
respectively; outstanding 22,874,684 and 21,495,409 shares
as of June 30, 2009 and December 31, 2008, respectively				542			508
Additional paid-in capital				185,236			182,944
Accumulated other comprehensive loss				26			(325	)
Accumulated deficit				(144,198	)		(135,441	)
Shareholder's equity				41,606			47,686
Noncontrolling interest				271			415
Total equity				41,877			48,101
Total liabilities and shareholders' equity			$	64,674		$	70,309

12

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ON TRACK INNOVATIONS LTD.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, except share and per share data)

			Six months ended June 30
			2009			2008
			(Unaudited)			(Unaudited)
Cash flows from operating activities
Net loss			$	(8,898	)	$	(12,532	)
Adjustments required to reconcile net loss to net cash used in
operating activities:
Stock-based compensation related to options and shares issued
to employees and others				1,988			3,916
Equity in loss of affiliate				-			250
Amortization of intangible assets				515			658
Depreciation				1,293			1,707
Accrued severance pay, net				(230	)		390
Decrease in deferred tax liabilities				(43	)		(125	)
Decrease (increase) in trade receivables				(122	)		1,328
Increase in other receivables and prepaid expenses				(877	)		(248	)
Decrease (increase) in inventories				(257	)		403
Decrease in trade payables				(553	)		(2,713	)
Increase (decrease) in other current liabilities				206			(206	)
Other, net				(11	)		34
Net cash used in operating activities				(6,989	)		(7,138	)
Cash flows from investing activities
Acquisition of a consolidated subsidiary, net of cash acquired				-			(565	)
Proceeds from maturity of available -for sale securities				1,372			4,290
Purchase of available-for sale securities				(514	)		(20,097	)
Purchase of property and equipment				(553	)		(643	)
Other, net				-			21
Net cash provided by (used in) investing activities				305			(16,994	)
Cash flows from financing activities
Increase in short-term bank credit, net				936			594
Proceeds from long-term bank loans				368			-
Repayment of long-term bank loans				(257	)		(214	)
Exercise of options and warrants				250			388
Net cash provided by financing activities				1,297			768
Effect of exchange rate changes on cash				54			25
Decrease in cash and cash equivalents				(5,333	)		(23,339	)
Cash and cash equivalents at the beginning of the period				27,196			35,470
Cash and cash equivalents at the end of the period			$	21,863		$	12,131

13

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