TSO3 announces financial results for Q2 2010

    
    Highlights of Q2 2010 and recent weeks:

    -   Initiated production of 3M(TM) Optreoz(TM) 125-Z sterilizers and
        shipped first units to 3M(TM) locations for training purposes;
    -   Received initial purchase orders from Canadian hospitals;
    -   Prepared to re-submit for US regulatory clearance;
    -   Updated strategic plan and obtained Board approval;
    -   Initiated market research for new product development.

    Stock symbol: TSX: TOS
    Outstanding shares: 57,939,451
    

QUEBEC CITY, Aug. 4 /CNW Telbec/ - TSO3 Inc. ("TSO3") (TSX: TOS) an innovator in sterilization technology for medical devices in healthcare settings using ozone, posted revenues of $494,353 for the sales of new generation sterilizers (STERIZONE(R) 125L+ / 3M(TM) Optreoz(TM) 125-Z), accessories and service contracts. This compares to $510,626 for the same period in 2009, representing the sale of two of the first generation ozone sterilizers (125L), accessories and service contracts, as well as a large installation contract. The Company recorded a net loss of $1,906,765 for the second quarter of 2010, or $0.03 per share compared to a net loss of $2,263,463 or $0.05 for the same period in 2009.

"We are very excited with the response from customers on the features of the new TSO3 sterilizer, and pleased to announce that we have received initial purchase orders from Canadian customers. Backlog is starting to build", said R.M. (Ric) Rumble, CEO at TSO3. "As for our re-submittal for US clearance, our approach is to measure twice and cut once", commented Mr. Rumble. "This is a large submission with many elements. The reviewers and TSO3 have agreed to a timely face-to-face meeting in order to make sure that the new sterilizer, with its superior claims, is thoroughly understood and that as many questions as possible are addressed. We believe that the additional time used to educate in advance of the re-submission will benefit the overall timely review of our filing".

TSO3 also announced today that Marc Boisjoli, TSO3's longstanding CFO, has decided to pursue other opportunities outside of the Company. R.M. (Ric) Rumble, CEO, outlined Mr. Boisjoli's contribution to the success of the Company over the past nine years. "On behalf of everyone at TSO3, I would like to thank Marc for his contribution to TSO3 and wish him all the best in his future endeavors", he concluded.

Conference Call

TSO3 will host a telephone Conference Call today, August 4, 2010 at 10:30 a.m. (EDST). Analysts and Institutional Investors are invited to participate to the call. The numbers to dial for access are 514-807-9895 (Montréal area), 647-427-7450 (Toronto area) or the Toll-Free number 1 888 231-8191. Other interested parties may listen to the live Webcast of the Conference Call accessible via TSO3's Website at: http://www.tso3.com/en/investors/financial-reports-webcasts.php. The Webcast will be archived for 90 days.

    
    SUMMARY OF OPERATING RESULTS
    Periods ending June 30 (Unaudited)

    -------------------------------------------------------------------------
                                     SECOND QUARTER            SIX MONTH
                                     --------------            ---------
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    SALES                       $494,353    $510,626    $638,581  $1,044,114
    -------------------------------------------------------------------------
    EXPENSES
      Operating                  588,576     576,719     929,912   1,170,992
      Sales & Marketing          298,466     644,068     611,824   1,255,621
      Research & Development     865,306     775,099   1,623,650   1,514,155
      Administrative             732,495     826,848   1,642,288   1,522,676
      Financial                    2,688       5,591       4,841       9,899
    -------------------------------------------------------------------------
                               2,487,531   2,828,325   4,812,515   5,473,343
    -------------------------------------------------------------------------
    OPERATING LOSS             1,993,178   2,317,699   4,173,934   4,429,229
      Other income                86,413      54,236     233,237     178,422
    -------------------------------------------------------------------------
    NET LOSS AND
     COMPREHENSIVE LOSS       $1,906,765  $2,263,463  $3,940,697  $4,250,807
    -------------------------------------------------------------------------
    BASIC AND DILUTED NET
     LOSS PER SHARE                $0.03       $0.05       $0.07       $0.09
    -------------------------------------------------------------------------
    WEIGHTED AVERAGE NUMBER
     OF SHARES OUTSTANDING    57,919,254  47,863,402  54,647,266  47,863,402
    -------------------------------------------------------------------------
    

OPERATING RESULTS ANALYSIS

Three and six-month periods ending June 30, 2010, compared to the three and six-month periods ending June 30, 2009.

Sales

Sales for the three-month period ending June 30, 2010 amounted to $494,353 representing the sale of four STERIZONE(R) 125L+ Sterilizers, accessories and service contracts, compared to $510,626 representing the sale of two of its first generation ozone sterilizers, the STERIZONE(R) 125L Sterilizer, accessories and service contracts, including a large installation contract, for the same period in 2009. For the six-month period ending June 30, 2010, sales amounted to $638,581 representing the sale of four STERIZONE(R) 125L+ Sterilizers, accessories and service contracts, compared to $1,044,114 representing the sale of five sterilizers, accessories and service contracts for the same period in 2009.

Operating

For the three-month period ending June 30, 2010 operating expenses amounted to $588,576 compared to $576,719 for the same period in 2009. Operating expenses are related to production, manufacturing and after-sales service departments. Having sold more devices, the sterilizer's cost of goods sold increased between the two periods. Conversely, costs related to service contracts and salaries related to customer service and after-sales service, decreased between the two periods. For the six-month period ending June 30, 2010, operating expenses amounted to $929,912 compared to $1,170,992 for the same period in 2009. Having sold fewer devices, the variance between the two periods is the result of a decrease in the cost of goods sold. This variance is also explained by a decrease in costs related to service contracts and in salaries related to customer service and after-sales service.

Sales and Marketing

Sales and Marketing expenses amounted to $298,466 for the three-month period ending June 30, 2010 compared to $644,068 for the same period in 2009. The variance between the two periods is mainly the result of a decrease in salaries, commissions and expenses due to a reduction in workforce in the sales department. This variance can also be explained by a decrease in expenses related to exhibitions and trade shows. Conversely, provision for bonuses increased between the two periods. For the six-month period ending June 30, 2010, Sales and Marketing expenses amounted to $611,824 compared to $1,255,621 for the same period in 2009. The variance between the two periods is also the result of a decrease in salaries, commissions, and expenses as well as a decrease in expenses related to trade shows. Conversely, the provision for bonuses increases between the two periods. We anticipate our Sales and Marketing expenses to decrease going forward since these expenses are now the responsibility of our channel partner.

Research and Development

For the second quarter of 2010, Research and Development expenses amounted to $865,306, compared to $775,099 for the same period in 2009. The difference between the two periods is due to an increase in professional fees as well as in salaries resulting from the addition of employees in the R&D department to pursue the work on patents and the filings of the new cycles with agencies. Conversely, material purchases and sub-contracting fees decreased between the two periods. For the six-month period ending June 30, 2010, Research and Development expenses amounted to $1,623,650 compared to $1,514,155 for the same period in 2009. The difference is also due to an increase in professional fees, regulatory fees as well as in salaries. Conversely, material purchases and sub-contracting fees also decreased between the two periods.

Administrative

Administrative expenses amounted to $732,495 for the three-month period ending June 30, 2010, compared to $826,848 for the same period in 2009. The variance between the two periods is explained by a decrease in expenses related to Stock-based Compensation, representation and professional fees. Conversely, director's fees increased. For the six-month period ending June 30, 2010, administrative expenses amounted to $1,642,288 compared to $1,522,676 for the same period in 2009. The variance is explained by an increase in salaries as well as in professional fees. The variance is also explained by a provision for bonuses, by an increase in director's fees and professional fees mainly related to the review as well as tests performed on internal controls. Conversely, expenses related to Stock-based Compensation decreased between the two periods.

Other Income

For the three-month period ending June 30, 2010, the Company realized other revenues of $86,413 compared to $54,236 for the same period in 2009. The variance is mainly due to the amortization of the deferred revenues from the 3M(TM) agreement. In the second quarter of 2010, an amount of $51,251 was amortized. Conversely, the foreign exchange loss increased between the two periods. For the six-month period ending June 30, 2010, other revenues amounted to $233,237 compared to $178,422 for the same period in 2009. The variance is due to an increase in the amortization of the deferred revenues from the 3M(TM) agreement and in R&D tax credit. Conversely, investment income decreased.

Net Loss

The Company recorded a net loss of $1,906,765 for the second quarter of 2010, or $0.03 per share compared to a net loss of $2,263,463 or $0.05 for the same period in 2009. For the six-month period ending June 30, 2010, the net loss amounted to $3,940,697, or $ 0.07 per share, compared to $4,250,807, or $0.09 per share for the same period in 2009.

Liquid Assets and Financial Situation

As of June 30, 2010, cash, cash equivalents and temporary investments amounted to $22,177,974 compared to an amount of $13,740,386 as of June 30, 2009.

Second Quarter Disclosure

Second Quarter Report is available on TSO3's website at the following address http://www.tso3.com/en/investors/financial-reports-webcasts.php and full Q2 disclosure will shortly be available on SEDAR (www.sedar.com).

About TSO3

TSO3, founded in Québec City in 1998, specializes in the research and development of innovative, high-performance medical instrument sterilization technology with high commercial potential. TSO3 designs products for sterile processing areas in the hospital environment and offers an advantageous replacement solution to other low temperature sterilization processes currently used in hospitals.

For more information about TSO3, visit the Company's Web site at www.tso3.com.

The statements in this release and oral statements made by representatives of TSO3 relating to matters that are not historical facts (including, without limitation, those regarding the timing or outcome of any financing undertaken by TSO3) are forward-looking statements that involve certain risks, uncertainties and hypotheses, including, but not limited to, general business and economic conditions, the condition of the financial markets, the ability of TSO3 to obtain financing on favourable terms and other risks and uncertainties.

The TSX has neither approved nor disapproved the information contained herein and accepts no responsibility for it.

SOURCE TSO3 Inc.

For further information: For further information: Caroline Côté, Director, Corporate Communications and Investor Relations, 418 651-0003, Ext. 237, ccote@tso3.com; Source: TSO3 Inc.


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