Ecopia BioSciences Inc.
TSX : EIA

Ecopia BioSciences Inc.

April 04, 2006 13:57 ET

Ecopia Reports Operating Highlights and Results for First Quarter of Fiscal Year 2006

MONTREAL, QUEBEC--(CCNMatthews - April 4, 2006) - Ecopia BioSciences Inc. (TSX: EIA) today reviewed recent operating highlights and announced its financial results for the first quarter ended February 28, 2006.



Highlights

- The United States Patent and Trademark Office (USPTO) grants Ecopia
a notice of allowance on ECO-4601's composition of matter, which is
the most solid protection that can be obtained for a potential
drug.

- Ecopia files a Clinical Trial Application (CTA) for ECO-4601, the
Company's lead anticancer compound.

- Ecopia receives a No Objection Letter from the Therapeutic Products
Directorate of Health Canada for the commencement of a Phase I
clinical trial relating to the Company's lead anticancer agent,
ECO-4601.

- Ecopia presents new pharmacokinetic and metabolism data on ECO-4601
at the American Association for Cancer Research annual meeting.


Summary and Outlook

Commenting on Ecopia's progress for the first quarter, Dr Pierre Falardeau, President and Chief Executive Officer said: "This first quarter was very important for us as we initiated our first clinical trial with our lead drug candidate, ECO-4601. The potent anticancer activity shown in different animal models combined with its very good safety profile and novel target make this compound a candidate to treat different types of cancer including cancers of the brain, breast, prostate, ovarian, colon and lung. We look forward to reporting the preliminary results from this trial as data become available".

Web Cast

April 4, 2006 at 4:00 p.m. - Dr. Pierre Falardeau, President and Chief Executive Officer and Ms. Anne-Marie Guertin, Vice-President, Finance, will discuss first quarter operating highlights and financial results. To listen to the live web cast please call local access: 416-695-6120 or 1-800-769-8320. An archived version will be available shortly after the conference on Ecopia's website at www.ecopiabio.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE FIRST QUARTER ENDED FEBRUARY 28, 2006

Management's discussion and analysis provides a review of our Company and should be read in conjunction with the unaudited financial statements for the first quarter ended February 28, 2006, the audited financial statements for the year ended November 30, 2005, as well as the related notes, which are prepared in accordance with Canadian generally accepted accounting principles. This discussion and analysis compares financial performance for the first quarter ended February 28, 2006 with the same period in 2005. This review was prepared by management with information available as at April 3, 2006. Additional information related to the Company, including its Annual Information form, can be found on SEDAR at www.sedar.com

Certain statements in this document that do not relate to historical facts are forward- looking information and are subject to risks and uncertainties. Please refer to the forward-looking statement section at the end of this document.

All amounts are presented in Canadian dollars unless otherwise indicated.

Overview

The clinical advancement of the Company's anticancer compound, ECO-4601, is progressing steadily. During the first quarter, Ecopia received a No Objection Letter from the Therapeutic Products Directorate of Health Canada, and an approval letter from the Sir Mortimer B. Davis - Jewish General Hospital ("JGH") Research Ethics Board for the commencement of a Phase I clinical trial relating to ECO-4601. Shortly thereafter, the Phase I patient screening process was initiated in order for them to qualify for dosing.

Ecopia proposes to conduct its Phase I clinical trial with up to 30 patients who will be recruited at the clinical research unit of the Sir Mortimer B. Davis- Jewish General Hospital. The purpose of this trial is to test the safety and tolerability of ECO-4601. The clinical trial involves a 21-day cycle where different patients will receive one of an escalating dosage of compound via continuous infusion using ambulatory pumps for 14 days, followed by a seven-day rest.

In order to meet the clinical objectives, production according to Good Manufacturing Practices (GMP) of the first clinical trial drug product lot was completed at the beginning of the quarter, with vials delivered to the clinical site for patient administration. Management believes that sufficient quantity of the compound has been produced for its Phase I dose escalation trial. Plans for the production of additional material under current good manufacturing practices have been initiated in order to ensure sufficient material is available for the patient extension phase, future clinical trials of ECO-4601 as well as the advancement of an analog program around ECO-4601.

Recently, Ecopia presented new data at the American Association for Cancer Research annual meeting. The data presented in the poster reveal that ECO-4601 has a similar half-life in rodents and in non-rodents, and that sustained drug level could be achieved through continuous intravenous administration. Also, the principal metabolite produced in animals and in humans was identical, suggesting that no major modification in the pharmacological behavior is expected from the clinical studies in humans that have just been initiated. These new data help define the route and schedule of administration of ECO-4601 in humans, our lead drug candidate for treating brain tumours.

Other research and development activities included further advancing ECO-4601's mechanism of action studies with the objective of better understanding its mode of action. Also, the company has further developed its ECO-4601 analog program in order to better understand the structure activity relationship of this novel pharmacophore. We now believe it is most likely that these efforts will result in delivering our next lead compound. Consequently, intellectual property is being expanded around this unique scaffold.

In December 2005, the company obtained a Notice of Allowance from the USPTO for a patent application directed to ECO-4601. The allowed application will provide exclusive rights over claims relating to the compound's composition of matter. Composition of matter claims are available where novelty resides in the structure of the compound. They are the most solid protection that can be obtained on a potential drug because such claims cover any medical and non-medical use of the compound.

With a portfolio of over 60 ECO-4601 analogs and 59 new compounds, 14 of which have shown anticancer activities, the Company has decided to focus its financial resources toward downstream development as opposed to upstream discovery. As development matures in the future and funds are available, we hope to rebuild our discovery activities to levels equal to or greater than those in the past few years.

Finally, in December of 2005, two outstanding scientists joined the Company's Scientific Advisory Board. Dr Gerald Batist is a renowned oncologist who chairs the Department of Oncology at McGill University and is the Director of the McGill Centre for Translational Research in Cancer, based at the Jewish General Hospital. Dr Peter Traxler, former international project manager at Novartis Switzerland, was involved in the successful development of drugs such as Gleevec® and now acts as a consultant for many biotech companies in Canada and abroad. The addition of these two experts is well in line with the advancement of Ecopia's portfolio and focus on cancer.



Summary of Operating Results
Period ended February 28, 2006 with
comparative figures for 2005

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(in thousands of dollars,
except per share amounts) 2006 2005 Variance
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$ $ %
Interest revenues 62 44 40.3
Research and development
expenditures, before tax
credits and grants 1,577 1,760 (10.4)
General and administrative
expenditures 769 747 2.9
Net loss 2,066 2,262 (8.7)
Net basic and diluted loss
per share 0.03 0.04 (23.0)
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Weighted average shares
outstanding (in thousands) 69,872 58,854
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Revenues

Interest revenues amounted to $62,176 for the quarter ended February 28, 2006, compared with $44,305 for the same period in 2005, an increase of 40.3%. This is explained by higher average yields and a slightly higher liquidity position compared to the first quarter of 2005.

R&D Activities

Research and development ("R&D") expenditures, before tax credits and grants, amounted to $1,576,974 in the first quarter of 2006, compared with $1,760,025 in first quarter of 2005, a decrease of 10.4%. This decrease reflects the cost reduction efforts implemented by management in the second quarter of 2005, affecting mainly the discovery activities until today. However, the reduction of discovery costs were offset by the increase in GMP production costs, the creation of the clinical program in view of our Phase I clinical trials and costs related to the finalization of the pharm/tox program, expenses that were not part of our activities in the first quarter of 2005.

Other Expenditures

General and administrative ("G&A") expenses amounted to $768,655 in the first quarter of 2006, compared with $747,013 in the first quarter of 2005, representing an increase of 2.9%. This can be attributed to a larger workforce in the intellectual property department, compared to the prior period.

Net Loss

The Company recorded a net loss of $2,065,963 or $0.03 per share in the first quarter of 2006, compared with $2,261,950 or $0.04 per share in the same period of 2005. The decrease in the loss reflects lower R&D expenses discussed above.

Financial Position



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(in thousands of dollars) February 28, November 30,
2006 2005
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(unaudited) (audited)
Cash and bonds(i) $ 6,499 $ 8,810
Tax credits receivable $ 1,122 $ 905

Bonds(ii) $ - $ 638
Total assets $ 11,026 $ 13,700
Capital stock and contributed
surplus $ 55,079 $ 55,021
Shareholders' equity $ 9,763 $ 11,771
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(i) Cash invested in investment-grade bonds due in less than one
year.
(ii) Cash invested in investment-grade bonds due in more than one
year.


Liquidity and Financial Position

On February 28, 2006, the Company's cash position amounted to $6,498,876 in cash and investments in investment-grade bonds. Taking into account tax credits receivable of $1,122,301, the Company's liquidity availability amounted to $7,621,177 on February 28, 2006, compared with $10,352,859 on November 30, 2005. The decrease of $2,731,682 represents mainly the cash expenses relating to the first quarter of 2006.

During the first quarter of the current fiscal year, Ecopia disbursed capital expenditures of $121,346, compared with $72,860 in the first quarter of last year. These expenditures consist of costs relating to patent acquisitions of $61,952 and purchases of capital assets amounting to $59,394. Management does not anticipate making any major capital expenditures until the end of fiscal year 2006 because the Company is adequately equipped to achieve its milestones.

Shareholders' equity amounted to $9,763,113 at February 28, 2006, compared with $11,771,255 on November 30, 2005. Total assets amounted to $11,026,349 as at February 28, 2006, compared with $13,700,050 as at November 30, 2005. The decrease in shareholders' equity and total assets reflects the cash absorption related to the operation for the first three months of 2006.

The Company's liquidity position, both in the short term and long term, is allocated to salaries, the development of ECO-4601 as a clinical candidate, the funding of other R&D activities, patent filings and the acquisition of capital assets. While Ecopia's management believes it can raise additional funding to continue its R&D operations into 2007, fundraising for early stage biotechnology companies could be beyond the control of management given current market conditions. It may be necessary to reduce the operations in the course of 2006, if necessary funds are not available.

As of February 28, 2006, the number of common shares outstanding totalled 69,871,584 while 4,194,600 options were granted under the share purchase option plan. A total of 7,820,834 share purchase warrants were outstanding on that date. The outstanding options are exercisable at a weighted average price of $1.47 per share. A total of 4,154,167 share purchase warrants are exercisable at a price of $1.28 each and 3,666,667 share purchase warrants are exercisable at a price of $1.03 each. These warrants are exercisable at any time until February 2008 and March 2007, respectively.



Quarterly Financial Data
(in thousands of dollars, except for per share amounts)

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Quarters ended May 31, August 31, November 30, February 28,
(Unaudited) 2005 2005 2005 2006
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$ $ $ $
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Revenues 84 83 75 62
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Research and
Development
Expenditures,
before Tax
Credits and Grants 1,847 2,068 2,404 1,577
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Net Loss 2,288 2,266 2,796 2,066
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Net Basic and
Diluted Loss per
Share 0.03 0.03 0.04 0.03
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Quarters ended May 31, August 31, November 30, February 28,
(Unaudited) 2004 2004 2004 2005
---------------------------------------------------------------------
$ $ $ $
---------------------------------------------------------------------
Revenues 89 76 179 44
Research and
Development
Expenditures,
before Tax
Credits and Grants 1,853 1,720 1,757 1,760
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Net Loss 2,272 2,049 1,993 2,262
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Net Basic and
Diluted Loss per
Share 0.04 0.03 0.03 0.04
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Net loss variations, from quarter to quarter, reflect principally the research and development efforts and the company's organization structure to administer and develop its business plan.

About Ecopia

Ecopia is finding novel anticancer therapies from soil-dwelling microorganisms that are one of the most prolific sources of drugs. Our current focus is to advance our flagship compound, ECO-4601, through the different stages of clinical trials. ECO-4601 is a novel small molecule that crosses the blood brain barrier and is effective in significantly inhibiting primary brain tumor growth and other types of cancers. Just like well-known chemotherapies such as doxorubicin and mitomycin C, ECO-4601 comes from microorganisms that live in common soil. However, unlike these drugs that were discovered many decades ago, ECO-4601 represents a new chemical class that is the fruit of a very unique drug discovery platform called the DECIPHER® technology. The common shares of Ecopia are listed on the TSX (symbol: EIA).

Forward-looking statement

Certain statements in this press release that do not relate exclusively to historical facts are forward-looking statements. When used in this press release, the expressions "a candidate", "looking forward", "progressing steadily", "objective of", "proposes to", "up to", "will be", "will receive", "believes", "plans for", "most likely", "will provide", "we hope", "anticipate", "to continue", "may be" and similar expressions, as they relate to ECO-4601, Ecopia or Ecopia's management, are intended to identify forward-looking statements. These statements represent the Company's current expectations regarding future events. Forward-looking statements regarding the potential of ECO-4601 as a cancer therapeutic for specific cancers such a glioblastoma and breast, prostate, ovarian, lung and colon cancers are based on data from preclinical animal studies. Forward-looking statements regarding the timing and progress through the Phase I clinical trial, the identification of the Company's next lead compound, the reinstatement of discovery activities, and raising additional funding are based on best information available to the Company as of April 4, 2006 from internal and external sources. These statements are only predictions and are therefore subject to a number of risks and uncertainties, many of which are outside Ecopia's control. Actual results may therefore vary materially from the expectations expressed by the Company and depend on a number of factors, including scientific uncertainties relating to the correlation between preclinical animal data and clinical human data, the efficacy of ECO-4601 in treating specific cancers in human patients, the possibility of delays due to approval of patients to commence or to continue participation in the Phase 1 trial, scientific uncertainties relating to profiling candidates for the Company's next lead compound, the ability of the Company to fund future operations in light of lack of operating revenues for the years to come and uncertainty as to the availability of funds and resources, and the impact of general economic conditions. Investors are cautioned against placing undue reliance on forward-looking statements or forward-looking information. These forward-looking statements or forward-looking information should not be relied upon as representing the Company's views as of any date subsequent to the date the statements were originally made or information originally provided. A more complete discussion of the risks and uncertainties facing the Company appears in Ecopia's 2005 Annual Report under Management's Discussion and Analysis of Financial Position and Results of Operations for fiscal 2005 and the 2005 Annual Information Form available at www.sedar.com. Except as required by law, Ecopia does not undertake and disclaims any obligation to update or revise its forward looking statements or forward looking information whether as a result of new information, future events, or otherwise.




Financial Statements of

ECOPIA BIOSCIENCES INC.

Three-month period ended February 28, 2006


ECOPIA BIOSCIENCES INC.
Balance Sheets

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February 28 November 30
2006 2005
---------------------------------------------------------------------
(Unaudited) (Audited)

Assets

Current assets :
Cash $185,727 $263,198
Bonds 6,313,149 8,546,532
Sales tax receivable and other 187,468 136,292
Tax credits receivable 1,122,301 904,811
Deposits and prepaid expenses 179,307 105,096
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7,987,952 9,955,929

Bonds - 638,318

Capital assets (note 3) 2,216,734 2,293,381

Patents 821,663 812,422

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$11,026,349 $13,700,050
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Liabilities and Shareholders' Equity

Current liabilities :
Accounts payable and
accrued liabilities $1,263,236 $1,928,795

Shareholders' equity :
Capital stock (note 4) 54,567,028 54,567,028
Contributed surplus 511,481 453,660
Deficit (45,315,396) (43,249,433)
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9,763,113 11,771,255

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$11,026,349 $13,700,050
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See accompanying notes to unaudited financial statements.

ECOPIA BIOSCIENCES INC.
Statements of Operations
(Unaudited)

Three-month period ended February 28, 2006 with
comparative figures for 2005

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2006 2005
---------------------------------------------------------------------

Interest Income $62,176 $44,305

Costs and expenses :
Research and development 1,576,974 1,760,025
Tax credits and grants (217,490) (200,783)
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1,359,484 1,559,242

General and administrative 768,655 747,013
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2,128,139 2,306,255

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Net loss $(2,065,963) $(2,261,950)
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Net basic and diluted loss per share $(0.03) $(0.04)
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Weighted average number of
outstanding shares 69,871,584 58,854,473
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See accompanying notes to financial statements.


Statements of Deficit
(Unaudited)

Three-month period ended February 28, 2006 with
comparative figures for 2005

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2006 2005
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Deficit, beginning of period $(43,249,433) $(32,851,070)

Net loss (2,065,963) (2,261,950)

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Deficit, end of period $(45,315,396) $(35,113,020)
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See accompanying notes to financial statements.


ECOPIA BIOSCIENCES INC.
Statements of cash flows
(Unaudited)

Three-month period ended February 28, 2006 with
comparative figures for 2005

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2006 2005
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Cash flows from operating activities:
Net loss $(2,065,963) $(2,261,950)
Adjustments for :
Depreciation on capital assets 124,295 169,387
Depreciation on patents 11,306 7,806
Loss on disposal of patents 13,402 -
Write-off of patents - 7,876
Stock-based compensation 57,821 59,129
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(1,859,139) (2,017,752)

Changes in operating assets
and liabilities:
Interest receivable on bonds 59,432 60,750
Sales tax receivable and other (51,176) (53,044)
Tax credits receivable (217,490) (200,783)
Research supplies - 15,963
Deposits and prepaid expenses (74,211) (107,094)
Accounts payable and
accrued liabilities (625,810) (502,417)
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(909,255) (786,625)

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(2,768,394) (2,804,377)

Cash flows from financing activities:
Proceeds from issuance of shares - 4,200

Cash flows from investing activities:
Acquisition of bonds (1,341,450) (99,935)
Proceeds from disposal of bonds 4,153,719 3,370,720
Additions to capital assets (59,394) (41,408)
Costs relating to patent acquisitions (61,952) (31,452)
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2,690,923 3,197,925

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Net (decrease) increase in cash (77,471) 397,748

Cash, beginning of period 263,198 152,763

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Cash, end of period $185,727 $550,511
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Supplemental cash flow information (note 5)

See accompanying notes to unaudited financial statements.



ECOPIA BIOSCIENCES INC.
Notes to Financial Statements
(Unaudited)

Three-month period ended February 28, 2006

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1. Description of business and going concern assumption:

Ecopia BioSciences Inc. (the "Company"), incorporated under the
Canada Business Corporations Act, is searching for novel
anticancer therapies from soil-dwelling microorganisms using its
discovery platform called the Decipher® technology. The Company
is currently focusing on moving its lead anticancer compound
ECO-4601 into phase I clinical trials.

The financial statements have been prepared on the going concern
basis, which assumes that the Company will continue in
operational existence for the foreseeable future.

The Company's ability to continue as a going concern is
dependent on raising additional capital and, in the longer
term, finding and marketing commercially viable products and
attaining financially sustainable operations. Should the
Company fail to obtain the necessary capital, it will have to
reduce its operations, unless it is able to enter into
agreements to obtain financial support from third parties,
which may require that the Company waive its right to some of
its eventual products or technologies.

2. Significant accounting policies:

Basis of presentation:

The financial statements included in this report are unaudited
and reflect normal and recurring adjustments which are, in the
opinion of the Company, considered necessary for a fair
presentation. These financial statements have been prepared in
conformity with Canadian generally accepted accounting
principles. The same accounting policies as described in the
Company's latest annual report have been used. However, these
financial statements do not include all disclosures required
under generally accepted accounting principles and accordingly
should be read in connection with the financial statements and
the notes thereto included in the Company's latest annual report.

The accounting policies underlying these interim financial
statements are those set forth in note 2 of the audited financial
statements for the year ended November 30, 2005.


ECOPIA BIOSCIENCES INC.
Notes to Financial Statements
(Unaudited)

Three-month period ended February 28, 2006



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3. Capital assets:

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February 28
2006
---------------------------------------------------------------------

Accumulated
depreciation and
Cost amortization Net book value
---------------------------------------------------------------------

Specialized computer
equipment $438,000 $438,000 $-
Machinery and
equipment 4,823,354 3,364,770 1,458,584
Leasehold
improvements 1,190,247 432,097 758,150

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$6,451,601 $4,234,867 $2,216,734
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November 30
2005
---------------------------------------------------------------------

Accumulated
depreciation and
Cost amortization Net book value
---------------------------------------------------------------------

Specialized computer
equipment $438,000 $438,000 $-
Machinery and
equipment 4,775,706 3,269,264 1,506,442
Leasehold
improvements 1,190,247 403,308 786,939

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$6,403,953 $4,110,572 $2,293,381
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ECOPIA BIOSCIENCES INC.
Notes to Financial Statements
(Unaudited)

Three-month period ended February 28, 2006

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4. Capital Stock:

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February 28 November 30
2006 2005
---------------------------------------------------------------------

Authorized in unlimited number
and without par value:
Common shares
Preferred shares,
issuable in series

Issued:
69,871,584 common shares
(November 30, 2005 - 69,871,584) $54,567,028 $54,567,028
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a) Contributed surplus:


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Balance as at November 30, 2005 $453,660

Stock-based compensation charge for the period 57,821

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Balance as at February 28, 2006 $511,481
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b) Stock option plan:

Changes in the number of options outstanding during the
three-month period ended February 28, 2006 were as follows:

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Weighted average
Exercise price
Options per share
---------------------------------------------------------------------

Options, November 30, 2005 4,175,700 $1.47

Granted 20,500 0.70
Cancelled (1,600) 1.32

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Options, February 28, 2006 4,194,600 $1.47
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As at February 28, 2006, the number of exercisable options was
3,235,620


ECOPIA BIOSCIENCES INC.
Notes to Financial Statements
(Unaudited)

Three-month period ended February 28, 2006

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b) Stock option plan:

The fair value of the options granted during the three-month
period ended February 28, 2006 was estimated at the date of
grant using the Black-Scholes option pricing model with the
following assumptions: risk free interest rate of 4.12%,
expected dividend yield of nil, expected volatility of 77.50%
and expected average option life of 5 years. The weighted
average fair value of the options granted during the period
ended February 28, 2006 is $0.46 ($0.52 in 2005).

The Black-Scholes model, used by the Company to calculate
option values, was developed to estimate fair value of freely
tradable, fully transferable options without vesting
restrictions, which significantly differs from the Company's
stock option awards. These models also require four highly
subjective assumptions, including future stock price volatility
and expected time until exercise, which greatly affect the
calculated values.

(C) Diluted loss per share:

Diluted loss per share was not presented as the effect of
options and warrants would have been anti-dilutive.
Furthermore, for the period ended February 28, 2006, the
exercise of 2,539,700 options (2,393,250 options in 2005)
and 7,820,834 warrants (4,154,167 warrants in 2005) would
not have been considered in such computation since the
exercise price of these options was higher than the average
market price.


5. Supplemental cash flow information:

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February 28 November 30
2006 2005
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Costs relating to patent acquisitions
included in accounts payable and
accrued liabilities $19,045 47,048

Acquisition of capital assets included
in accounts payable and
accrued liabilities 4,940 16,686

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