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

Open EC Technologies, Inc.

October 30, 2006 09:00 ET

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

NORTH VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 30, 2006) - Open EC Technologies, Inc. (the "Company") (TSX VENTURE:OCE)(OTCBB:OCEIF) announces its financial results for the first quarter ended August 31, 2006 and provides an update on its operating activities. The Company has SEDAR filed its BC Form 51-901F First Quarter Report containing financial statements prepared by management without audit for the three months ended August 31, 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 August 31, 2006 and 2005:

As of August 31, 2006, Open EC had $229,702 in cash and cash equivalents compared with $15,287 as of August 31, 2005. For the first time in five years, Open EC achieved positive working capital of $76,899 for the 1st quarter ended August 31, 2006, compared with working capital of ($1,840,390) as at August 31, 2005. Capital assets, which represent net book value of computer and testing equipment, computer software, office equipment, and office furniture was $61,804 at August 31, 2006 compared with $69,553 as at August 31, 2005.

Open EC generates revenue through software sales, consulting services, training services and maintenance fees. Product sales are 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, 2006 was $155,399 compared with $139,649 for the quarter ended August 31, 2005. Revenue for the year ended May 31, 2006 was $608,384 compared with $503,633 for the year ended May 31, 2005.

Open EC has found that the North American market for business-to-business electronic commerce platforms and services is changing rapidly; however, considerable 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, 2006 were $137,811 compared with $129,464 for the quarter ended August 31, 2005.

General and administrative expenses for the quarter ended August 31, 2006 were $74,170 compared with $80,141 for the quarter ended August 31, 2005. The decrease is primarily the result of decreased professional fees.

Amortization expense for the quarter ended August 31, 2006 was $2,997 compared with $4,382 for the quarter ended August 31, 2004.

The majority of the Company's revenue in the first quarter was derived from software sales and maintenance fees. Training revenue increased by approximately $6,500 when compared to first quarter fiscal 2006; however, consulting fees decreased by $6,400. The Company's sales remain below the required break-even revenue level and may well remain below this level for the foreseeable future. The Company has continued to optimize business operations by reducing costs, resolving past liabilities and developing new revenue opportunities for its products.

Markets for the Company's IT products continue to show signs of growing interest, including a new strategic relationship with Proginet, 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.

Pursuant to the Term Sheet, the purchase price of $2,300,000 Cdn shall be satisfied in full by payment of $500,000 Cdn cash and $1,800,000 Cdn paid through the issuance of 12,000,000 Open EC shares at a deemed value of $0.15 per share. The Open EC shares shall be escrowed pursuant to a TSX Venture Exchange (the "Exchange") defined Securities Escrow Agreement between Open EC and the Vendors.

The Term Sheet is subject to the completion of due diligence by Open EC and the execution of a formal share purchase agreement, which share purchase agreement shall be subject to Board of Director approvals from both companies, receipt of audited financial statements prepared according to Canadian GAAP and pursuant to securities regulations, acceptance of the share purchase transaction by the Exchange and completion of a minimum $500,000 Cdn financing by the Company.

The key feature of the Headware acquisition is to combine the two companies' software solutions, expertise, resources and knowledge into solutions that will increase overall profit growth for the organization:

1. Headware will provide the entry to penetrate the Chinese supply chain marketplace for Open EC's subsidiary, SoftCare EC Solution Inc.'s ("SoftCare") e-Business, EDI and file broker solutions.

2. SoftCare will provide entry into North America for the Headware Mobile Commerce (mCommerce) software solutions and specialized software development services.

3. SoftCare can leverage Headware's lower labour cost of software development to advance its e-Business software development and to gain product competitive advantages with substantially lower costs. This can provide the Company with revenue growth, by selling more sophisticated solutions, and profit, by delivering the solution at a lower internal cost.

4. The combination of SoftCare and Headware software and solutions will provide both companies with a uniquely competitive solution for the e-Business Telco/Wireless/Service Provider/Retailer/Financial/Healthcare markets. These are emerging markets in North America and internationally, with high growth potential and world wide market appeal.

Operating Activities

Open EC is a provider of business-to-business electronic commerce platforms. The Company has a strong history in the provision of software, which enables business-to-business electronic commerce. Open EC's operating company, SoftCare EC Solutions Inc. was founded in 1990 and develops 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 EC 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 EC platform. In June of 1999, the first version of Open EC was installed and Open EC began selling the Open EC platform and related services. Open EC currently markets both Open EC and TradeLink primarily in the United States and Canada.

Open EC's primary focus is 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 OpenEC 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 Proginet Corporation to their existing customer base. The delivery of these Company products and their commercial application is occurring at this time.

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