VANCOUVER, British Columbia, Jan. 26, 2006 (PRIMEZONE) -- Open EC Technologies, Inc. (the "Company") (TSX-V:OCE) (Other OTC:OCEIF). The Company announces the financial results for the second quarter ended November 30, 2005 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 three months ended November 30, 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.
2nd Quarter Highlights
Efforts to optimize business operations by reducing costs, resolving past liabilities and developing new revenue opportunities for the Company's products are realizing results which will significantly improve the financial situation in the next few quarters. However, the Company needs an injection of equity capital within the next quarter to eliminate the remaining debt, and to provide working capital that will enable it to take advantage of improvements in the Company's product markets.
On October 3, 2005, the Company announced that it entered into debt settlement agreements to issue 12,277,280 common shares in settlement of debts totalling $1,227,728, subject to shareholder and TSX Venture Exchange ("Exchange") approval. This amount was subsequently reduced. Having received the required shareholder and Exchange approvals of certain debt settlement transactions, the Company issued 11,936,070 shares on January 16, 2006 to eliminate $1,193,607 of debts in the third quarter fiscal year 2006, including debt to related parties. Management hopes to secure additional private placement financings in the third quarter.
Results of Operations - 2nd Quarter ended November 30, 2005
The majority of the Company's revenue in the second quarter of 2006 was derived from product sales, maintenance fees and consulting fees. Training services increased when compared to the same quarter of last year, as well as compared to the previous quarter. Overall revenue compared to second quarter fiscal 2005 was higher by approximately $12,502, but the Company's sales remain below the required break-even level and may well remain below this level for the foreseeable future.
A summary of the current quarter and year-to-date results of
operations is as follows:
3 months 3 months 6 months 6 months
ending ending ending ending
Nov 30/05 Nov 30/04 Nov 30/05 Nov 30/04
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Total Revenue 127,972 115,470 267,621 287,396
Cost of sales 139,815 23,236 145,434 39,112
Expenses 272,796 222,020 486,783 485,054
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Operating Income
(loss) (284,639) (129,786) (364,596) (236,770)
Gain on debt
settlement -- -- 204,080 --
Gain on foreign
exchange 5,408 32,160 20,407 42,083
Interest expense 11,114 7,702 22,286 15,188
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Loss for the period (290,345) (105,328) (162,395) (209,875)
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Earnings per
share (loss) (0.064) (0.047) (0.035) (0.093)
Salaries and wages for the quarter ended November 30, 2005 were $135,309 compared with $128,575 for the quarter ended November 30, 2004, an increase of almost $7,000 primarily incurred as a result of the addition of another technical person.
General and administrative expenses for the quarter ended November 30, 2005 were $133,106 compared with $87,919 for the quarter ended November 30, 2004. The majority of the cost increases are attributed to audit and annual general meeting related costs, regulatory filings and $30,000 consulting fees.
Interest expense was $11,114 for the quarter ended November 30, 2005 compared to $7,702 interest expense for the quarter ended November 30, 2004. This interest expense reflects the financing cost associated with the convertible debenture and notes payable.
For the six months ended November 30, 2005, the net effect of the non-recurring gain of $204,080 recorded in the first quarter due to a settlement of debts and the royalties charge of $139,635 for products developed by Mala Ventures, a company controlled by a director, and sold by the Company's subsidiary, SoftCare EC Solutions Inc., resulted in an improvement or decrease in the net loss of the Company of $47,480, as compared to the same period in fiscal 2005.
Future Developments
The debt settlements agreed to in the second quarter and completed in the third quarter substantially improve the Company's balance sheet and pave the way for obtaining equity financings before the fiscal year end.
Open EC has entered into a Letter of Intent (the "Letter of Intent") effective January 20, 2006 to purchase all of the outstanding shares of A&D Science & Technology Co. Ltd. ("ADTech"). The Letter of Intent provides that ADTech shall operate as a subsidiary of Open EC with current management contracts and operations for a period of no less than 24 months.
Under the terms of the Letter of Intent, Open EC shall purchase 100% of the shares of ADTech for a purchase price (the "Purchase Price") based on a valuation formula of 4.832 times audited trailing 12 month net earnings at December 31, 2005 after income taxes and preferred shareholder equity repayment ("Net Earnings"). Based on estimated unaudited Net Earnings for the 12 month period ended December 31, 2005 of ADTech of CDN$626,278 (estimated unaudited revenues of $7,500,000), the Purchase Price for the ADTech shares would be CDN$3,026,175. An audit of ADTech is currently being performed to confirm Net Earnings and the Purchase Price will be adjusted downward (but not upward), based on the formula, in the event that the audited Net Earnings differ from unaudited Net Earnings. The Purchase Price will be satisfied in full by the issuance of common shares of Open EC (the "Shares") based on a deemed price of CDN$0.12 per Share, subject to reduction in the event that the aggregate number of Shares to be issued would exceed 47.5% of the total number of issued and outstanding shares of the Company following closing.
About OpenEC Technologies Inc. and its subsidiary SoftCare EC Solutions Inc.
SoftCare's OpenEC(r) e-business software includes solutions for Electronic Data Interchange (EDI), Business Process Management and Data Synchronization. The Company sells the OpenEC(r) products and solutions to the retail supply chain in North America and through its acquisition of ADTech will expand its sales and services into China. More specifically the market is segmented between the medium to large retailers and the medium to large manufacturing and distribution companies that supply the goods to retailers. Additional product information is available on the web at www.softcare.com.
On Behalf of the Board of Directors
"John A. Versfelt" John A. Versfelt Director & CFO
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.