Open EC Technologies, Inc.

Open EC Technologies, Inc.

October 28, 2005 17:57 ET

Open EC Technologies, Inc.: First Quarter, Fiscal 2006 Results and Update on Business Activities

NORTH VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 28, 2005) - Open EC Technologies, Inc. (the "Company") (TSX VENTURE:OCE) (OTCBB:OCEIF). The Company announces the financial results for the first quarter ended August 31, 2005 and provides an update on its operating activities. The Company has SEDAR filed interim consolidated financial statements and management discussion and analysis, prepared by management without audit, for the three months ended August 31, 2005 (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 August 31, 2005 and 2004:

As of August 31, 2005, Open EC had $15,287 in cash and cash equivalents compared with $13,003 as of August 31, 2004. Open EC's working capital at August 31, 2005 was ($1,840,390) compared with working capital of ($1,061,956) as at August 31, 2004. Capital assets, which represent net book value of computer and testing equipment, computer software, office equipment, and office furniture was $69,553 at August 31, 2005 compared with $87,847 as at August 31, 2004. The Company's net current liabilities discussed above decreased by $130,629 in the quarter ended August 31, 2005 due to settlements of debts.

Open EC generates revenue through software sales, consulting services, training services and maintenance fees. Product sales were derived through two alternative fee structures: licensing fees and software royalties. Service and maintenance contracts are generally entered into at the time a product sale is completed.

Total revenue for the quarter ended August 31, 2005 was $139,649 compared with $171,926 for the quarter ended August 31, 2004. Revenue for the year ended May 31, 2005 was $503,633 compared with $459,945 for the year ended May 31, 2004.

Open EC has found that the North American market for business-to-business electronic commerce platforms and services is changing rapidly but that significant real opportunities, which may produce significant revenues, are still at an early stage of development. Open EC's ultimate success depends upon substantial organizations buying and implementing its software products and related services. The implementation of these software products by these organizations is complex, time consuming and expensive. It also requires that these organizations change established business practices and conduct business in new ways. Open EC's ability to attract customers requires a significant amount of consultation and collaboration with the potential customers during the sales process. These factors lead to long closing cycles but generally result in stable long-term relationships, which produce recurring revenue streams for the Company.

Salaries and wages for the quarter ended August 31, 2005 were $129,464 compared with $121,493 for the quarter ended August 31, 2004.

General and administrative expenses for the quarter ended August 31, 2005 were $80,141 compared with $136,014 for the quarter ended August 31, 2004. The decrease is primarily the result of decreased professional fees.

Amortization expense for the quarter ended August 31, 2005 was $4,382 compared with $5,527 for the quarter ended August 31, 2004.

Other expenses incurred relate primarily to net interest costs $11,172 for the quarter ended August 31, 2005 compared to $7,486 interest expense for the quarter ended August 31, 2004. This interest expense reflects the financing cost associated with a convertible debenture and notes payable.

The majority of the Company's revenue in the first quarter of 2006 was derived from Canadian sales, maintenance fees and consulting. However, a gain of $204,080 on settlement of debts pushed the Company into positive earnings for the first time in over three years.

On September 16, 2005, the Company completed a non-brokered private placement financing of $230,000 and issued 2.3 million units at $0.10 per unit, each unit consisting of one common share and 1/2 of one common share purchase warrant. Each whole warrant entitles the holder to purchase an additional common share of the Company at $0.15 on or before September 16, 2006.

On October 3, 2005, the Company announced that it has entered into debt settlement agreements to issue 12,277,280 common shares in settlement of debts totaling $1,227,728, subject to shareholder and TSX Venture Exchange approval. These amounts were subsequently reduced to 12,116,075 common shares in settlement of debts totaling $1,211,607.

Operating Activities

Open EC is a provider of business-to-business electronic commerce platforms. It has a strong history in the provision of software, which enables business-to-business electronic commerce. The operating company, SoftCare EC Solutions Inc. was founded in 1990 and developed software to facilitate business-to-business electronic exchange of documents. Open EC's first product, Tradelink, has been recognized as a leader in the electronic data interchange ("EDI") market. In the late 1990's management recognized the potential for the expansion of business-to-business transactions through the use of the internet. As a result the Company embarked on the development of an internet based business-to-business electronic commerce platform in 1997. Since that time the Company's new Open E|C business-to-business electronic commerce platform has been under continuous development, this involves conducting research and developing the initial and subsequent versions of the Open E|C platform. In June of 1999, the first version of Open E|C was installed and Open EC began selling the Open E|C platform and related services. Open EC currently markets both Open E|C and Tradelink primarily in the United States and Canada.

Open EC's primary focus remains the business-to-business electronic exchange of documents. In this respect Tradelink remains an important component of the Company's sales. Open EC continues to enhance Tradelink in order to drive its acceptance in the EDI market place. Open EC also has developed and continues to develop certain applications to support its Open|EC Platform.

The Company's near term milestones include the development, with its partner Mala Ventures, Inc. (a company controlled by a director of the Company), of a suite of products to be co-marketed by an independent third party U.S. company to their existing customer base. The delivery of these products and their commercial application is occurring at this time.

On Behalf of the Board of Directors

"John A. Versfelt"

John A. Versfelt
Director & CFO

Further information about the Company can be found on SEDAR ( or by contacting the below.

The foregoing contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. The statements may be identified by such forward-looking terminology as "expert," "believe," "may," "will," "intend," "plan," and similar statements or variations. Such forward-looking statements are based on our current estimates and assumptions and involve certain significant risks and uncertainties, including: risk associated with and dependence on the industry subject matter of the information; fluctuations in quarterly revenues due to lengthy selling cycles; product implementation cycles; customer budget cycles; and timing of revenue recognition; dependence on major customers; successful and timely development and introduction of new products and versions; rapid technological changes; increased competition; retention of key senior managers; and other industry related factors. Other important factors that should be considered are included in the Company's audited financial statements for the fiscal year ended May 31, 2004 and other reports filed on SEDAR and the Company's 20F and 6K's files with the SEC. Actual results may differ materially. The Company assumes no obligation for updating any such forward-looking statements.

Contact Information

  • Open EC Technologies, Inc.
    Mr. John A. Versfelt
    Director & CFO
    (604) 983-8083
    Open EC Technologies, Inc.
    Mr. Martyn A. Armstrong
    President and CEO
    (604) 983-8083