Critical Outcome Technologies Inc.
TSX VENTURE : COT

Critical Outcome Technologies Inc.

August 22, 2007 18:16 ET

Critical Outcome Technologies Inc. Reports Financial Results for the Fourth Quarter and the Year Ended April 30, 2007

LONDON, ONTARIO--(Marketwire - Aug. 22, 2007) - Critical Outcome Technologies Inc. (TSX VENTURE:COT) today announced its financial results for the fourth quarter and the year ended April 30, 2007.

"It was a milestone year for Critical Outcome Technologies Inc (COTI)," said Dr. Wayne Danter, President and Chief Scientific Officer of COTI "as the Company moved forward to commercialize its molecule libraries by raising the necessary funds and putting in place the personnel and business processes to support the development efforts of the CHEMSAS® technology and market the molecule libraries being developed. As our Company looks towards the future we will continue to seek and evaluate business development opportunities to enhance shareholder value."

Highlights

- Successful completion of two private placements resulting in net proceeds of $3,163,110.

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

- Measurable progress in the development of the Multiple Sclerosis, HIV Integrase and Adult Acute Leukemia small molecule libraries.

- Substantial business development activities resulting in established relationships with prospective Pharma partners.

- Successful recruitment of key personnel for both the Board and Senior Management positions.

Financial Review

Fourth Quarter

There were no revenues from operations during the fourth quarter as the Company reported a net loss for the period of $663,957 or $0.02 per share compared to a net loss of $430,400 or $0.04 per share for the three months ended April 30, 2006. There were two major expense categories in the quarter which accounted for the majority of the increased loss of $233,337 over the comparable period; increased molecule synthesis costs targeted at multiple sclerosis (MS) and salaries and benefits which increased $149,620 and $103,113 respectively. The four MS molecule syntheses started in third quarter 2007 continued in fourth quarter 2007. Two employees were added during the fourth quarter 2007 bringing full time staff to 7 employees compared to 2 employees in the comparable quarter of 2006.

Fiscal Year

Revenue from operations for the year ending April 30, 2007 (FYE 2007) was $2,500 compared to $32,500 in the year ended April 30, 2006 (FYE 2006). A net loss of $1,429,983 or $0.05 per share was incurred for FYE 2007 compared to a net loss of $590,929 or $0.06 per share in FYE 2006. This increased loss of $839,054 resulted from the higher level of activity in the Company during FYE 2007.

Operating expenses increased from $629,858 for FYE 2006 to $1,548,013 for FYE 2007, an increase of $918,155. Five major expense items accounted for this change. First, stock-based compensation increased $173,469 related to stock options granted to directors or employees of the Company. Second, salaries and benefits increased $273,549 reflecting increased staffing. Third, MS molecule synthesis costs increased by $247,500 compared to no syntheses activities in FYE 2006. Fourth, professional fees increased $119,703 related to audit and accounting costs, consulting fees and increased legal costs. Finally, marketing expenses increased $94,562 due to increased business development activity, primarily travel costs, marketing materials costs and attendance at various industry trade shows.

The expense increase was partially offset by a $109,101 increase in other income consisting of a $40,591 increase in interest income and a $68,510 increase in investment tax credit refunds.

Financial Strength

The Company engaged in a number of financings during FYE 2007 to fund the development of its technology and molecule libraries. In October 2006 the Company completed a private placement of 6,594,000 units for gross proceeds of $2,637,600 and issued 6,594,000 common shares and 3,297,000 $0.70 warrants. In January 2007 the Company completed a private placement of 2,000,000 units for gross proceeds of $1,000,000 and issued 2,000,000 common shares and 1,000,000 $0.60 warrants. In addition to the private placements the Company also realized gross proceeds of $276,713 on the exercise of warrants and $26,350 on agent stock options during the period December 1, 2006 to April 30, 2007.

At April 30, 2007 the Company had $2,417,801 in cash and cash equivalents. The Company currently believes that it has adequate financial resources for anticipated expenditures for approximately 18 months.

Selected Product Development Highlights

- Throughout FYE 2007, COTI actively directed the preclinical development of the small cell lung cancer (SCLC) project in collaboration with DDP Therapeutics, a related party in which COTI has a 10% ownership interest. The SCLC product library consists of 10 novel, optimized compounds on 3 scaffolds. The first three lead compounds have shown promising pre-clinical results. The benefits to COTI and its shareholders of the successful marketing of the SCLC lead compounds include; first, validation of the underlying CHEMSAS® technology, second, a higher profile in the pharmaceutical industry which will improve the capacity to develop important relationships leading to future deals for other COTI libraries and third, an expectation of revenue to COTI.

- In November 2006, COTI completed the lead selection of its MS library and commenced synthesis of these compounds. The MS compounds are designed to be orally-available and have low toxicity, which will represent an important therapeutic development for patients with this common debilitating disease. Three MS compounds entered initial testing in the animal model of Acute Allergic Encephalitis subsequent to the year end.

- COTI also made measurable progress with the HIV Integrase and Adult Acute Leukemia (AAL) projects as the HIV Integrase inhibitor compounds commenced final patentability evaluation prior to synthesis in the fourth quarter and COTI was granted European patents on two different AAL molecules with the final patent expected to be received in mid-October 2007.

AGM Announcement

COTI's Annual Meeting of Shareholders will be held on Tuesday October 9, 2007 at 10:00 a.m. at The London Club, 177 Queens Avenue, London, Ontario.

About Critical Outcome Technologies Inc. (COTI)

COTI is formed around a unique computational platform technology called CHEMSAS®, which allows for the accelerated identification, profiling and optimization of targeted small molecules potentially effective in the treatment of human diseases for which current therapy is either lacking or ineffective. COTI's business is focused on the discovery and pre-clinical development of libraries of optimized lead molecules for the treatment of specific cancers, HIV and multiple sclerosis. Currently, five targeted libraries of lead compounds are under active development; small cell lung cancer (10% interest), multiple sclerosis, HIV integrase inhibitors, colorectal cancer, and adult acute leukemia.



CRITICAL OUTCOME TECHNOLOGIES INC.
(a development stage company)
Balance Sheets

April 30, 2007 and 2006

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2007 2006
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Assets

Current assets:
Cash and cash equivalents $ 2,417,801 $ 170,464
Other receivables 76,655 8,842
Prepaid expenses and deposits 56,413 5,241
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2,550,869 184,547

Equipment 24,242 33,766

Patents 134,298 68,727

Trademark 870 1,740

Investment in DDP Therapeutics 1 1

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$ 2,710,280 $ 288,781
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Liabilities and Shareholders' Equity (Deficiency)

Current liabilities:
Accounts payable and accrued liabilities $ 179,091 $ 171,266
Due to shareholders 118,631 127,194
Notes payable and other advances 20,000 45,000
Current portion of obligation under capital lease 20,244 16,128
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337,966 359,588

Obligation under capital leases 21,287 33,525

Shareholders' equity (deficiency):
Share capital and warrants 4,037,165 576,292
Contributed surplus 675,469 251,000
Deficit (2,361,607) (931,624)
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2,351,027 (104,332)

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$ 2,710,280 $ 288,781
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CRITICAL OUTCOME TECHNOLOGIES INC.
(a development stage company)
Statements of Operations and Deficit

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Cumulative
period
April 30, 1999
(inception) to
Years ended April 30, April 30,
2007 2006 2007
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Revenue:
Contract services $ 2,500 $ 30,000 $ 32,500
Screening services - 2,500 2,500
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2,500 32,500 35,000

Expenses:
Stock-based compensation 424,469 251,000 675,469
Salaries and benefits 423,014 149,465 596,932
Synthesis costs 247,560 - 382,560
Professional fees 168,038 48,335 333,357
Marketing 108,199 13,637 156,858
Amortization of equipment 27,747 22,542 55,864
Office and general 27,184 6,430 48,031
Computer expense 26,447 8,180 56,171
Reorganization costs 23,964 82,580 106,544
Rent 17,134 14,667 53,068
Research and product development 15,840 27,000 54,628
Corporate governance 14,749 - 14,749
Insurance 12,692 - 12,692
Interest and bank charges 10,106 5,152 25,365
Amortization of trademarks 870 870 3,480
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1,548,013 629,858 2,575,768

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Loss before other income
(expense) (1,545,513) (597,358) (2,540,768)

Other income (expense):
Investment tax credit refund 75,050 6,540 137,615
Interest 40,480 (111) 41,546
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115,530 6,429 179,161

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Loss (1,429,983) (590,929) (2,361,607)

Deficit accumulated during
development stage, beginning
of year (931,624) (340,695) -

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Deficit accumulated during
development stage, end of year $ (2,361,607) $ (931,624) $ (2,361,607)
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Basic and diluted loss per common
share $ (0.05) $ (0.06)
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Weighted average number of
common shares outstanding 29,866,634 9,611,243

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CRITICAL OUTCOME TECHNOLOGIES INC.
(a development stage company)
Statements of Cash Flows

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Cumulative
period
April 30, 1999
(inception) to
Years ended April 30, April 30,
2007 2006 2007
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Cash provided by (used in):

Operations:
Loss $ (1,429,983) $ (590,929) $ (2,361,607)
Items not involving cash:
Stock-based compensation 424,469 251,000 675,469
Amortization of equipment 27,747 22,542 55,864
Amortization of trademark 870 870 3,480
Change in non-cash operating
working capital (111,160) 97,523 46,023
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(1,088,057) (218,994) (1,580,771)

Financing activities:
Research advances - - 269,745
Due to shareholders (8,563) 80,444 118,631
Notes payable and other advances (25,000) 25,000 20,000
Repayment of obligation under
capital lease (8,122) (1,541) (9,663)
Issuance of common shares and
warrants 3,460,873 306,545 3,767,420
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3,419,188 410,448 4,166,133

Investing activities:
Investment in DDP Therapeutics - (1) (1)
Purchase of equipment (18,223) - (28,912)
Additions to patents and
trademark (65,571) (22,809) (138,648)
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(83,794) (22,810) (167,561)

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Increase in cash 2,247,337 168,644 2,417,801

Cash and cash equivalents,
beginning of year 170,464 1,820 -

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Cash and cash equivalents,
end of year $ 2,417,801 $ 170,464 $ 2,417,801
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Represented by:
Cash $ 317,801 $ 170,464 $ 317,801
Cash equivalent 2,100,000 - 2,100,000

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$ 2,417,801 $ 170,464 2,417,801
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Supplemental cash flow
information:
Interest paid $ 2,351 $ 288 $ 2,654
Non-cash transactions:
Acquisition of equipment under
capital lease 11,081 51,193 62,274


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

This press release contains forward-looking statements, which reflect the Company's current expectations regarding future events. The forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein. Investors should consult the Company's ongoing quarterly filings and annual reports for additional information on risks and uncertainties relating to these forward looking statements.

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

Contact Information