Critical Outcome Technologies Inc.
TSX VENTURE : COT

Critical Outcome Technologies Inc.

December 20, 2007 14:45 ET

Critical Outcome Technologies Inc. Reports Second Quarter 2008 Financial Results

LONDON, ONTARIO--(Marketwire - Dec. 20, 2007) - Critical Outcome Technologies Inc. (TSX VENTURE:COT) today announced its financial results for the second quarter ended October 31, 2007 of its fiscal 2008 year.

There were no operating revenues during the quarter as the Company reported a net loss for the period of $(519,968) or $(0.01) per share compared to a net loss of $(113,997) or less than $(0.01) per share for the quarter ended October 31, 2006. There were four major expenses in the quarter which accounted for the majority of the increased loss of $405,971 over the comparable period in 2006: a non-cash expense for stock option compensation recorded in the amount of $223,075 resulting from stock options granted in October 2007, an increase in salaries and benefits of $74,183 related to increased staffing levels, a$69,255 increase in professional fees for legal, accounting and consulting costs and $35,825 in corporate governance costs.

For the six months ending October 31, 2007 the Company recorded a net loss of $(1,020,426) or $(0.03) per share compared to a net loss of $(277,085) or $(0.01) for the comparable six months in 2006, an increased loss of $743,341. The four major expense categories affecting the quarterly results were also responsible for the majority of the year to date increase. Consistent with the second quarter results, the year to date results reflect the increased business activity of the Company in the first two quarters of fiscal 2008 as the Company focused on moving its molecular libraries forward in development and marketing. This was significantly different compared to the first half of fiscal 2007 where the predominant activities were raising the capital necessary to execute its business plans and completing the qualifying transaction and amalgamation with Aviator Petroleum Corp, the predecessor public company.

Financing activities in the quarter generated gross proceeds of $356,338 from the exercise of 530,477 common share warrants to support the Company's operations. For the six month period 2,102,142 warrants have been exercised for gross proceeds of $1,301,162. At October 31, 2007 the Company had $2,936,448 in cash and cash equivalents.

Highlights during the quarter included:

- Continued positive pre-clinical results from the small cell lung cancer library (in collaboration with DDP Therapeutics).

- Promising discussions with prospective Pharma partners on a variety of lead molecule identification pilot projects.

- The signing of a pilot project agreement with Merck Serono, a division of Merck KGaA, to identify drug development candidates for a specific oncology cellular target utilizing our proprietary technology CHEMSAS®.

Subsequent to the quarter end, COTI announced on November 29th, the completion of the acquisition of DDP Therapeutics and the contemporaneous closing of a $4.0 million private placement.

About Critical Outcome Technologies Inc. (COTI)

COTI is a biotechnology company focused on applying its proprietary computer technology, CHEMSAS®, to identify, profile and optimize commercially viable drug candidates at the earliest stage of preclinical drug development and thereby dramatically reduce the timeline and cost of getting new drug therapies to market. In developing its technology, COTI has focused on novel, proprietary, small molecules used to treat cancer and HIV. This focus has been on cancers with high morbidity and mortality such as acute leukemia in adults, hormone resistant breast cancer, hormone resistant prostate cancer, small cell lung cancer and melanoma, which currently have either poor or no effective therapies.

Using CHEMSAS® the Company is developing a pipeline of highly optimized libraries of 6-10 small molecules for specific therapy targets and plans to sell/licence these libraries to interested pharmaceutical partners for human trials and further drug development. Currently, the libraries in various stages of development in the pipeline are targeted at small cell lung cancer, colorectal cancer, HIV integrase inhibitors, chronic and acute leukemia and multiple sclerosis.

Notice to Readers

Information contained in this press release may contain certain statements which constitute "forward looking statements" within the meaning of the Securities Act (Ontario) and applicable securities laws. These forward-looking statements, by their nature, are not guarantees of future performance and are based upon management's current expectations, estimates, projections and assumptions. COTI operates in a highly competitive and regulated environment that involves significant risks and uncertainties which could cause actual results to differ materially from those anticipated in these forward-looking statements. Management of COTI considers the assumptions on which these forward-looking statements are based to be reasonable, but as a result of the many risk factors, cautions the reader that actual results could differ materially from those expressed or implied in these forward looking statements. Information in this press release should be considered accurate only as of the date of the release and may be superseded by more recent information disclosed in later press releases, filings with the securities regulatory authorities or otherwise.

For more information on COTI, visit www.criticaloutcome.com.



Critical Outcome Technologies Inc.
(a development stage company)
Interim Balance Sheets

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Unaudited Audited
October 31, April 30,
2007 2007
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Assets

Current assets:

Cash and cash equivalents $ 2,936,448 $ 2,417,801
Other receivables 64,969 76,655
Deferred financing charges 40,514 -
Prepaid expenses and deposits 14,445 28,095
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3,056,376 2,522,551

Equipment 129,951 52,560
Patents 151,605 134,298
Trademark 435 870
Investment in DDP Therapeutics 117,307 1
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$ 3,455,674 $ 2,710,280
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Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and accrued liabilities $ 218,713 $ 179,091
Due to shareholders 110,781 118,631
Notes payable 20,000 20,000
Current portion of capital lease obligations 10,278 20,244
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359,772 337,966
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Capital lease obligations 21,287 21,287

Shareholders' equity

Share capital and warrants 5,398,196 4,037,165
Contributed surplus 1,058,452 675,469
Deficit (3,382,033) (2,361,607)
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3,074,615 2,351,027
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$ 3,455,674 $ 2,710,280
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Critical Outcome Technologies Inc.
(a development stage company)
Interim Statements of Operation and Deficit
(Unaudited)
--------------------------------------------------------------------------
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Three Months Ended
October 31,
2007 2006
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Revenues:
Contract services $ - $ -
Screening services - -
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- -
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Expenses:
Stock option compensation 223,075 -
Salaries and benefits 166,761 92,578
Professional fees 84,955 15,700
Marketing 31,814 30,321
Amortization of furniture and equipment 26,863 6,021
Synthesis costs - -
Office and general 12,073 6,119
Insurance 10,135 -
Rent 9,346 4,673
Corporate governance 35,825 -
Interest and bank charges 2,108 2,882
Computer expense 863 3,272
Amortization of trademark 217 217
Research and product development - 6,072
Reorganization costs - 23,404
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604,035 191,259
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Loss before other income (604,035) (191,259)

Other income
Investment tax credit refund 53,077 75,050
Interest income 30,990 2,212
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84,067 77,262
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Loss (519,968) (113,997)

Deficit, beginning of the period (2,862,065) (1,094,712)

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Deficit, end of the period $ (3,382,033) $ (1,208,709)
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Basic and diluted loss per common share $ (0.01) $ -
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Weighted average number of common shares
outstanding 39,287,366 24,970,560
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Cumulative
Six Months Ended period April 30,
October 31, 1999 (inception)
2007 2006 to Oct 31, 2007
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Revenues:

Contract services $ - $ - $ 32,500
Screening services - 2,500 2,500
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- 2,500 35,000
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Expenses:
Stock option compensation 382,984 - 1,058,453
Salaries and benefits 325,884 172,323 922,816
Professional fees 177,532 52,656 510,889
Marketing 70,663 51,056 227,521
Amortization of furniture
and equipment 48,303 14,333 104,167
Synthesis costs 18,889 - 401,449
Office and general 23,174 10,752 71,205
Insurance 20,269 - 32,961
Rent 13,852 9,255 66,920
Corporate governance 39,919 - 54,668
Interest and bank charges 4,147 7,470 29,512
Computer expense 2,658 5,091 58,829
Amortization of trademark 435 435 3,915
Research and product development - 15,072 54,628
Reorganization costs - 18,404 106,544
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1,128,709 356,847 3,704,477
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Loss before other income (1,128,709) (354,347) (3,669,477)

Other income
Investment tax credit refund 53,077 75,050 190,692
Interest income 55,206 2,212 96,752
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108,283 77,262 287,444
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Loss (1,020,426) (277,085) (3,382,033)

Deficit, beginning of the
period (2,361,607) (931,624) -
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Deficit, end of the period $ (3,382,033) $ (1,208,709) $ (3,382,033)
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Basic and diluted loss per
common share $ (0.03) $ (0.01)
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Weighted average number of
common shares outstanding 38,522,001 23,671,946
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Critical Outcome Technologies Inc.
(a development stage company)
Interim Statements of Cash Flows
(Unaudited)
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Three Months Ended
October 31,
2007 2006
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Cash provided by (used in):

Operations:
Loss $ (519,968) $ (113,997)
Items not involving cash:
Stock option compensation 223,075 -
Amortization of trademark 217 217
Amortization of furniture and equipment 26,863 6,021
Change in non-cash operating working capital 54,467 (54,707)
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(215,346) (162,466)
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Investing activities:
Additions to office furniture, equipment and
leaseholds (65,748) -
Investment in DDP Therapeutics (112,200) -
Additions to patents and trademark (12,249) (10,010)
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(190,197) (10,010)
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Financing activities:
Issuance of common shares and warrants 421,472 2,400,886
Research advances - -
Notes payable and other advances - (25,000)
Repayment of obligation under capital lease (5,026) (4,012)
Due to shareholders - 14,777
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416,446 2,386,651
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Increase in cash 10,903 2,214,175

Cash and cash equivalents, beginning of period 2,925,545 23,424
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Cash and cash equivalents, end of period $ 2,936,448 $ 2,237,599
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Represented by:
Cash $ 419,994 $ 2,237,599
Cash equivalent 2,516,454 -
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$ 2,936,448 $ 2,237,599
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Supplemental cash flow information:
Interest paid $ 1,786 $ 2,044
Non-cash transactions:
Acquisition of equipment under capital lease $ - $ -
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--------------------------------------------------------------------------
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Cumulative
Six Months Ended period April 30,
October 31, 1999 (inception)
2007 2006 to Oct 31, 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash provided by (used in):

Operations:
Loss $ (1,020,426) $ (277,085) $ (3,382,033)
Items not involving cash:
Stock option compensation 382,984 - 1,058,453
Amortization of trademark 435 435 3,915
Amortization of furniture
and equipment 48,303 14,333 104,167
Change in non-cash operating
working capital 24,442 176,276 70,469
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(564,262) (86,041) (2,145,029)
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Investing activities:
Additions to office
furniture, equipment and
leaseholds (125,693) - (154,605)
Investment in DDP
Therapeutics (117,306) - (117,307)
Additions to patents and
trademark (17,307) (18,960) (155,955)
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(260,306) (18,960) (427,867)
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Financing activities:
Issuance of common shares
and warrants 1,361,031 2,166,068 5,128,451
Research advances - - 269,745
Notes payable and other
advances - (25,000) 20,000
Repayment of obligation
under capital lease (9,966) (7,955) (19,629)
Due to shareholders (7,850) 26,659 110,781
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1,343,215 2,159,772 5,509,348
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Increase in cash 518,647 2,067,135 2,936,452

Cash and cash equivalents,
beginning of period 2,417,801 170,464 -
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Cash and cash equivalents,
end of period $ 2,936,448 $ 2,237,599 $ 2,936,452
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Represented by:
Cash $ 419,994 $ 2,237,599 419,994
Cash equivalent 2,516,454 - 2,516,454
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$ 2,936,448 $ 2,237,599 $ 2,936,448
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Supplemental cash flow
information:
Interest paid $ 22,774 $ 2,343 $ 25,700
Non-cash transactions:
Acquisition of equipment
under capital lease $ - $ - $ 62,274
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