On Track Innovations Ltd., a global leader in contactless microprocessor-based smart card solutions
for homeland security, micropayments, petroleum payments and other applications, announced
its consolidated financial results for the fourth quarter and fiscal year ended December 31, 2004.
Business developments in 2004 include:
– First commercial orders in support of MasterCard PayPass? rollout have been delivered.
– Initial commercial quantities of our contactless readers have been delivered to Hypercom
Corporation to support contactless payment programs such as MasterCard PayPass?.
– Approximately 18 million chips incorporating OTI’s technology delivered in 2004 to the China ID
– OTI America Inc., OTI’s U.S. subsidiary, has been granted a contract for the U.S. e-passport
program. The contract is for the testing stage. One or more vendor(s) are expected to be selected
for the production stage.
– Sasol Oil, the largest oil company in South Africa, is in the process of implementing our petroleum
– Revenues for the year ended December 31, 2004 increased by 18% to $23.2 million from $19.6
million for the same period of last year. Revenues for the fourth quarter were up 35% to $7.8
million from $5.8 million in the same period last year.
– Licensing and transaction fees for the year ended December 31, 2004 were up 177% to $2.2
million from $808,000 for the same time last year.
– Gross Profit for the year ended December 31, 2004 was $10.4 million up from $10.1 million in
– The operating loss for FY 2004 increased by 281% to $8.8 million from $2.3 million in the same
period in 2003, mainly due to $3.2 million one time expenses related to raising of capital and
restructuring and $1.6 million increase in marketing expenses related mainly to marketing efforts.
– Operational Cash Flow was about breakeven, with $330,000 of cash used in operating activities.
– OTI raised $15.1 million in private placement financing which strengthened our balance sheet and
enabled us to support any size of project as a prime contractor.
– OTI acquired ASEC S.A. of Poland to enable OTI to provide end-to-end solutions for the
Emerging European markets.
– OTI sold one of our German subsidiaries, InterCard KartenSysteme GmbH.
Oded Bashan, President and CEO of OTI commented: “the coming years present a window of
opportunities for OTI to become a leading player in the ID and payments markets. To succeed in
capturing the leading position in these markets we raised capital, we invest more in management
resources, and expenses related to Marketing & Sales, Research & Development and General &
Administrative. In addition OTI signed strategic alliances and aligned our corporate structure with our
OTI is making progress with its business model with more projects reaching commercial deployment,
generating more transaction and license fees revenues, such as with the programs of BP, China ID and
EasyPark. Transaction and license fees revenues increased 177% to 10% from 4% in 2003. However,
the financial model is not fully reflected in our gross profit due to first stage of implementations of
additional projects in the payments and ID markets that are characterized by high customization cost
“Financially, OTI had a record breaking quarter and year. Revenues have never been higher,
generating $7.8 million with more revenues from our core businesses of payments, petroleum and ID.
OTI is reaching operational breakeven from a cash perspective, and combined with the raise of capital
the Company had $28.5 million in cash, cash equivalents and short term investments at the end of the
“Our operating loss of $8.8 million for the year was mainly due to expenses related to the raising of
capital and restructuring that resulted in $3.2 million as explained in our Operating and Financial
Review and as shown in our P&L. The restructuring of our marketing support strategy has also added
expenses and affected our results. For example, Marketing and Sales expenses for the year rose by
47% to $6.0 million from $4.1 million. As mentioned, we believe these activities will better position
the company and contribute to a better stream of revenues in the future.”
Revenues for the year ended December 31, 2004 increased to $23.2 million from $19.6 million for the
same period of last year. Revenues for the fourth quarter were up $7.8 million from $5.8 million in the
same period last year. The increase was due to the growing implementation of contactless programs
around the world. Gross Profit for the year ended December 31, 2004 was $10.4 million up from $10.1
million for the same period last year. The operating loss for FY 2004 increased by 281% to $8.8
million from $2.3 million in the same period in 2003, mainly due to $3.2 million one time expenses
related to raising of capital and the exchange of subsidiary’s employees equity interest in equity
interest of the Company, $1.6 million increase in marketing expenses related mainly to marketing
efforts and due to the reduction of $459,000 in the participation of the Office of Chief Scientist. Net
loss increased to $9.3 million, from $3.6 million for the same period in 2003. The increase is mainly
due to the increase in the operating loss.
During 2004, $15.1 million were raised resulting in total balance of cash and cash equivalents and
short term investments of $28.5 million at December 31, 2004.
Established in 1990, OTI (NASDAQ: OTIV, Prime Standard: OT5) 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, micropayments, mass transit ticketing,
parking, loyalty programs and secure campuses. OTI has a global network of regional offices to
market and support its products. The company was awarded the prestigious ESCAT Award for smart
card innovation in both 1998 and 2000. For more information on OTI, visit www.otiglobal.com.
For complete details on OTI’s fourth quarter performance visit CardData (www.carddata.com).