Critical Outcome Technologies Inc. (TSX VENTURE: COT) today announced its financial results for the fourth quarter and the year ended April 30, 2008.
"Critical Outcome Technologies Inc. (COTI) has made substantial progress in its first full year of operations as a public company," said Dr. Wayne Danter, President and Chief Scientific Officer of COTI. "We raised awareness of our technology and its capabilities with major pharmaceutical companies and moved several compounds forward toward licensing, with COTI-2 our lead oncology compound generating strong interest based upon preclinical test results to date. We believe that the combination of the ongoing development of COTI-2 and the successful delivery of drug candidates to Merck Serono, our first industry collaboration, signed this year, achieves validation for CHEMSAS® as a leading-edge drug discovery technology. With this progress we look forward to further revenue opportunities to enhance shareholder value in 2009."
Highlights
- Established our first commercial agreement, consistent with our industry collaboration strategy, with Merck Serono and successfully generated drug candidates within 90 days from project commencement.
- Positive preclinical test results for COTI-2 including the identification of its mechanism of action leading to discussions for licensing with interested pharmaceutical companies.
- Progress in the development of the other oncology compounds, as well as the molecule libraries for multiple sclerosis, HIV integrase and adult acute leukemia.
- Successful completion of a private placement resulting in net proceeds of $3,665,882.
- Acquisition of DDP Therapeutics with its promising small cell lung cancer (SCLC) library of 10 compounds.
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 $612,542 or $0.02 per share compared to a net loss of $663,957 or $0.02 per share for the three months ended April 30, 2007. This year-over-year improvement of $51,415 relates primarily to an increase in interest income on the higher cash balances the Company was carrying in the current quarter. The major cost changes in the quarter were both non-cash expenses, as the Company commenced amortization of the SCLC molecules, acquired with the purchase of DDP Therapeutics (DDP) in the third quarter, in the amount of $162,040 and realized a reduction in stock-based compensation of $216,298 as there were no stock option grants in the quarter.
Fiscal Year
Revenue from operations for the year ending April 30, 2008 (FYE 2008) was $30,822 compared to $2,500 in the year ended April 30, 2007 (FYE 2007). A net loss of $1,902,372 or $0.05 per share was incurred for FYE 2008 compared to a net loss of $1,429,983 or $0.05 per share in FYE 2007. This increased loss of $472,389 resulted from the higher level of activity as a public company for a full year in FYE 2008 compared to 6 months as a public company in FYE 2007. In FYE 2008, the Company had the financial resources to move ahead with its research programs, hiring staff, marketing the Company, its technology and products, developing customers and incurring the related increased costs of administration.
Operating expenses increased to $2,160,472 for FYE 2008 from $1,548,013 for FYE 2007, an increase of $612,459. Three major expense items accounted for most of this change; first, salaries and benefits increased $239,656 reflecting increased staffing; second, professional fees increased $183,797 related to greater use of outside consultants for specialized needs such as intellectual property planning and execution and human resources; and finally molecule amortization of $162,040 was recorded for the SCLC molecules acquired as part of the purchase of DDP.
The expense increase was partially offset by an $111,748 increase in other income related to interest on cash balances.
Financial Strength
In November 2007 the Company completed a private placement of 2,857,143 common shares for gross proceeds of $4,000,000 (net $3,365,882). In addition to the private placement, the Company also realized gross proceeds of $2,457,705 on the exercise of warrants and options during the year.
At April 30, 2008 the Company had $6,213,709 in cash, cash equivalents and short term investments.
Selected Product Development Highlights
- Throughout FYE 2008, COTI actively directed the preclinical development of the SCLC project in collaboration with DDP Therapeutics. The SCLC product library consists of 10 novel, optimized compounds on 3 molecular scaffolds including our candidate drug entities; COTI-2, COTI-4, COTI- 58 and COTI-219.
- During FYE 2008 the Company announced positive preclinical experiment results for COTI-2 including:
-- A novel and potentially first-in-class mechanism of action (MOA).
-- In vitro activity at very low nanomolar dose levels in four aggressive human brain cancer cell lines.
-- Low acute toxicity in escalating doses according to standard animal model test protocols. Examination of tissues and organs from treated animals demonstrated no drug induced abnormalities.
-- Positive results for in vitro metabolic stability in a human liver microsomal enzyme system showing effective drug retention.
- In April 2008, the Company commenced MOA experiments pertaining to COTI-219 to add to its existing data package for this molecule which currently includes multiple experiments for efficacy in vivo and in vitro as well as resistance and toxicity testing. These will continue in FYE 2009 as the Company moves this molecule forward.
- A derivative of the original COTI-4 scaffold was profiled during FYE 2008 to improve the patentability of the molecule, and synthesis commenced in late FYE 2008 which has been completed in the first quarter FYE 2009. This molecule will move through confirmatory testing during the balance of FYE 2009.
- COTI-58 completed optimization in late FYE 2008 and will enter synthesis during second quarter FYE 2009 with confirmatory experiments to follow.
- In April 2008, COTI successfully completed the discovery and optimization phase of its oncology lead profiling collaboration with Merck Serono.
- COTI also made measurable progress with the HIV integrase library, designed to block the enzyme system responsible for combining the viral DNA with the human DNA, which is now ready for synthesis.
- COTI was granted a European patent on a third molecule targeting adult acute leukemia in December 2007 bringing the total lead molecules with European patent grants for this program to three.
AGM Announcement
COTI's Annual Meeting of Shareholders will be held on Thursday, September 18, 2008 at 9:30 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, multiple sclerosis, HIV integrase inhibitors, adult acute leukemia and colorectal cancer.
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.
Critical Outcome Technologies Inc.
(a development stage company)
Consolidated Balance Sheets
Unaudited
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April 30, April 30,
2008 2007
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Assets
Current assets:
Cash and cash equivalents $ 3,113,220 $ 2,417,801
Short term investments 3,100,489 -
Miscellaneous receivables 135,357 76,655
Prepaid expenses and deposits 31,462 28,095
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6,380,528 2,522,551
Equipment 131,151 52,560
Molecules 2,949,129 -
Patents 253,310 134,298
Trademark - 870
Investment in DDP Therapeutics - 1
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$ 9,714,118 $ 2,710,280
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 317,022 $ 179,091
Due to shareholders 432,340 118,631
Notes payable 20,000 20,000
Current portion of capital lease obligations 20,024 20,244
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789,386 337,966
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Capital lease obligations 1,263 21,287
Shareholders' equity
Share capital and warrants 12,179,189 4,037,165
Contributed surplus 1,008,259 675,469
Deficit (4,263,979) (2,361,607)
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8,923,469 2,351,027
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$ 9,714,118 $ 2,710,280
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Critical Outcome Technologies Inc.
(a development stage company)
Consolidated Statements of Comprehensive Loss and Deficit
Unaudited
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Cumulative
period April
Year Ended 30, 1999
April 30, (inception) to
2008 2007 April 30, 2008
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Revenues:
Contract services $ 30,822 $ - $ 63,322
Screening services - 2,500 2,500
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30,822 2,500 65,822
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Expenses:
Salaries and benefits 662,670 423,014 1,259,602
Stock-based compensation 362,763 424,469 1,038,232
Professional fees 351,835 168,038 685,192
Amortization of molecules 162,040 - 162,040
Research and product
development 148,981 263,400 586,169
Marketing 131,633 108,199 288,491
General and administration 131,234 83,457 280,363
Corporate governance 94,440 14,749 109,189
Amortization of furniture and
equipment 70,883 27,747 147,580
Interest and bank charges 32,825 10,106 58,190
Amortization of patents 4,270 - 4,270
Reorganization costs 4,051 23,964 110,595
Loss on asset disposals 1,977 - 1,977
Amortization of trademark 870 870 4,350
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2,160,472 1,548,013 4,736,240
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Loss before other income (2,129,650) (1,545,513) (4,670,418)
Other income
Investment tax credit refund 50,112 75,050 187,727
Interest income 177,166 40,480 218,712
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227,278 115,530 406,439
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Loss and comprehensive loss (1,902,372) (1,429,983) (4,263,979)
Deficit, beginning of the
year (2,361,607) (931,624) -
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Deficit, end of the year $ (4,263,979) $ (2,361,607) $ (4,263,979)
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Basic and diluted loss per
common share $ (0.05) $ (0.05)
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Weighted average number of
common shares outstanding 41,321,501 29,866,634
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Critical Outcome Technologies Inc.
(a development stage company)
Consolidated Statements of Cash Flows
Unaudited
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Cumulative
period April
Year Ended 30, 1999
April 30, (inception) to
2008 2007 April 30, 2008
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Cash provided by (used in):
Operations:
Loss $ (1,902,372) $ (1,429,983) $ (4,263,979)
Items not involving cash:
Stock-based compensation 362,763 424,469 1,038,232
Amortization 238,063 49,450 318,240
Loss on asset disposals 1,977 - 1,977
Change in non-cash operating
working capital 75,862 (131,993) 101,053
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(1,223,707) (1,088,057) (2,804,477)
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Financing activities:
Issuance of common shares
and warrants 6,108,035 3,460,873 9,875,455
Research advances - - 269,745
Notes payable and other
advances - (25,000) 20,000
Repayment of obligation under
capital lease (20,244) (8,122) (29,907)
Due to shareholders (56,291) (8,563) 62,339
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6,031,500 3,419,188 10,197,632
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Investing activities:
Increase in short-term
investments (3,100,489) - (3,100,489)
Purchase of equipment (151,450) (18,223) (180,362)
Purchase of molecules (737,152) - (737,153)
Additions to patents and
trademark (123,283) (65,571) (261,931)
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(4,112,374) (83,794) (4,279,935)
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Increase in cash 695,419 2,247,337 3,113,220
Cash and cash equivalents,
beginning of year 2,417,801 170,464 -
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Cash and cash equivalents,
end of year $ 3,113,220 $ 2,417,801 $ 3,113,220
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Represented by:
Cash $ 544,095 $ 317,801 544,095
Cash equivalents 2,569,125 2,100,000 2,569,125
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$ 3,113,220 $ 2,417,801 $ 3,113,220
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Supplemental cash flow
information:
Interest paid $ 32,009 $ 2,351 $ 34,935
Non-cash transactions:
Acquisition of equipment
under capital leases $ - $ 11,081 $ 62,274
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The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
Contacts:
Critical Outcome Technologies Inc.
Dr. Wayne Danter
President & CSO
(519) 858-5157
Email: wdanter@criticaloutcome.com
Critical Outcome Technologies Inc.
Gene Kelly
Chief Financial Officer
(519) 858-5157
Email: gkelly@criticaloutcome.com
Website: www.criticaloutcome.com