Open EC Technologies, Inc.
TSX VENTURE : OCE
OTC Bulletin Board : OCEIF

Open EC Technologies, Inc.

January 29, 2007 09:00 ET

Open EC Technologies, Inc. Reports Second Quarter, Fiscal 2007 Results and Business Activities Update

NORTH VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 29, 2007) - Open EC Technologies, Inc. (the "Company") (TSX VENTURE:OCE) (OTCBB:OCEIF) announces its financial results for the second quarter ended November 30, 2006 and provides an update on its operating activities. The Company has SEDAR filed its BC Form 51-901F Second Quarter Report containing financial statements prepared by management without audit for the six months ended November 30, 2006 (the "Quarterly Report"). Pursuant to the requirements of National Instrument 54-102, this news release provides a reasonable summary of the information contained in the Quarterly Report.

Financial Review

As at November 30, 2006 and 2005:

Total revenue for the quarter ended November 30, 2006 was $258,056 compared with $127,972 for the quarter ended November 30, 2005, an increase of $130,084. Revenue for the six months ended November 30, 2006 was $413,455 compared with $267,621 for the six months ended November 30, 2005, an increase of $145,834.

Software sales increased by $18,798 for the quarter ended November 30, 2006 compared to the quarter ended November 30, 2005. The Company also recorded revenue from software development services provided to Mala Ventures Inc. ("Mala"), a private company controlled by a director in the quarter ending November 30, 2006. Training revenue increased by approximately $3,600; however, consulting fees decreased by $8,687 in the quarter ending November 30, 2006 compared to the quarter ending November 30, 2005. Sales revenues remain below the required break-even revenue level and may well remain below this level for the foreseeable future.

The Company is projecting that as the shift to internet based business grows in North America in the strengthening economies, there should be a corresponding increase in IT spending. To increase sales, the Company has repackaged and positioned its products as high value, high performance solutions focused on providing a return on investment for its customers. Progress this year includes releasing new software packages, initiating a web marketing program to increase our customer base, and achieving higher levels of existing customer maintenance renewals and entering into new product partnerships. The positive results of these actions are reflected in the Company's revenue increase of 102% in the quarter ending November 30, 2006 compared to the quarter ending November 30, 2005 and a 55% increase in the six months ending November 30, 2006 compared to the six months ended November 30, 2005.

As of November 30, 2006, Open EC had $127,910 in cash and cash equivalents compared with $73,791 as of November 30, 2005. Working capital as at November 30, 2006 was ($64,502) compared with working capital of ($1,896,352) as at November 30, 2005. Capital assets, which represent net book value of computer and testing equipment, computer software, office equipment, and office furniture was $60,698 at November 30, 2006 compared with $65,171 as at November 30, 2005.

Salaries and wages for the quarter ended November 30, 2006 were $149,775 compared with $135,309 for the quarter ended November 30, 2005. The primary reason for this increase is the hiring of additional technical personnel.

General and administrative expenses for the quarter ended November 30, 2006 were $119,355 compared with $133,106 for the quarter ended November 30, 2005. The increase is primarily the result of increased professional fees.

Amortization expense for the quarter ended November 30, 2006 was $3,895 compared with $4,381 for the quarter ended November 30, 2005.

The e-commerce landscape has been evolving over the last several years. While electronic data interface systems ("EDI") and associated e-business platforms were selling in the late 1990's and early 2000, the fall in tech market sentiment in the early 2000's impacted the Company's sales prospects. Customers were reluctant to adopt e-business solutions, and when they are adopting these solutions they were doing so at a slower pace than had been anticipated in the past. This resulted in weak markets for the Company and more competition in the Company's market space, creating downward pricing pressures on e-business products. The downward pricing pressure resulted in lower sales in the Company's market space in general and also resulted in a weakened industry. Larger information technology companies in adjacent segments seized on this opportunity to acquire some of the Company's competitors. It is conceivable that the acquisition of some competing companies in the Company's market space may precipitate further consolidating transactions. However, management is more encouraged by recent trends showing an improvement in e-commerce (internet based) use in the North American environment. Increasingly, large retail outlets such as Wal-Mart are requiring suppliers to adopt EDI and e-business platforms. As major retailers force primary suppliers to adopt EDI and e-business platforms, the Company anticipates improved markets for its products in coming years.

Markets for the Company's IT products continue to show signs of growing interest, including a new strategic relationship with Proginet (see the Company's news release dated Sept. 14, 2006), a developer of enterprise security software. The Company also recently announced that it had executed a term sheet with Shenzhen Jinhuaye Software Ltd. ("Headware"), approved by the Company's Board of Directors, which outlines the basic terms of a proposed agreement between the parties whereby the shareholders of Headware (the "Vendors") have granted Open EC the sole and exclusive right to purchase sixty percent (60%) of the issued and outstanding shares of Headware from the Vendors for the purchase price of $2,300,000 Cdn (the "Transaction"). In addition, the Vendors have granted Open EC an option to purchase the remaining forty percent (40%) of the issued and outstanding shares of Headware for cash consideration of $1,500,000 Cdn (the "Option"). The Option shall remain in effect for a period of one year from the date of closing of the Transaction. Upon closing of the Transaction, the Company shall own sixty percent (60%) of the issued and outstanding shares of Headware (see the Company's news release dated October 18, 2006).

Operating Activities

The Company's revenue is derived from four areas: new software sales, consulting and training, software upgrades and maintenance fees on software previously sold. As new software sales occur, consulting and training revenue are realized. Following new software sales, the Company is able to charge subsequent annual maintenance fees each year to customers. Additionally, as the Company develops new and improved versions of its software, it is able to sell existing clients software upgrades.

Revenue is generated through two major channels: direct sales to customer and sales through partners. Partnership sales are expected to increase relative to direct sales. In fiscal 2006 and continuing into fiscal 2007, the Company focused on enhancing its core technology and value, along with positioning its products into new markets. The Company sells the OpenEC® products and solutions to the retail supply chain, healthcare industry, financial services companies and government agencies in North America. Product and software information is available on our website at www.softcare.com.

With its partner Mala Ventures Inc., a company controlled by the Company's President, the Company is carrying on its work developing a suite of products to be co-marketed by Proginet Corporation to their existing customer base. The delivery of these Company products and their commercial application is occurring at this time.

The relationship between Mala and the Company is governed by a Software Development and Marketing Agreement dated September 1, 2005 and amended March 1, 2006. Open EC continues to optimize business operations by reducing costs, resolving past liabilities and developing new revenue opportunities for its products.

About Open EC Technologies Inc.

Open EC is a TSX Venture Exchange listed company. Its subsidiary, SoftCare EC Solutions Inc., is an e-business software and solution provider. SoftCare's Open EC® e-business software includes solutions for Electronic Data Interchange (EDI), Business Process Management and Product Information Management (PIM). The Company sells the Open EC® products and solutions to the retail supply chain, healthcare, financial services and government agencies in North America. Additional product and solution information is available on the web at www.softcare.com and additional public company information is available on the web at www.openec.com. The Company's common shares trade on the TSX Venture Exchange under the symbol: OCE.

On Behalf of the Board of Directors

John A. Versfelt, Director & CFO

Further information about the Company can be found on SEDAR (www.sedar.com).

This news release may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Open EC Technologies, Inc.
    Mr. Martyn A. Armstrong
    President & CEO
    (604) 983-8083
    or
    Open EC Technologies, Inc.
    Mr. John A. Versfelt
    CFO and a Director
    (604) 983-8083
    (604) 983-8056 (FAX)
    Email: investors@softcare.com
    Website: www.openec.com