TSO3 realizes its highest revenues during the second quarter of 2008



    
    Stock symbol: TSX: TOS
    Outstanding shares: 47,863,402

    Highlights from the second quarter 2008 :

    - The Company recorded its highest revenues for a one-quarter period;
    - Implementation of measures that will significantly reduce the Company's
      operating costs;
    - Certification by the U.S. General Services Administration, opening up a
      market of 225 health establishments in the United States;
    - Agreement with a U.S. firm specialized in financing medical equipment
      purchases;
    - Recruitment of new R&D resources and improved alignment of the
      technological development program with market needs;
    - U.S. registration of the "SteriZone(R)" brand name for TSO3's
      125L ozone sterilizer.
    

    QUEBEC CITY, Aug. 1 /CNW Telbec/ - Mr. W. Barry McDonald, Interim
President and Chief Executive Officer of TSO3 Inc. ("TSO3") (TSX: TOS), is
pleased to announce that the Company realized its highest revenues over a
one-quarter period during the three-month period ended June 30, 2008, with six
units (three in Canada and three in the United States). The Company recorded
revenues of $1.0 million during the second quarter, compared to revenues of
$575,253 for the same period last year.
    "These results indicate the Company has gained some traction with its
revised strategy of re-focussing its marketing and sales resources. We are
confident that the sales made during the second quarter represent the
beginning of a more consistent sales trend for the Company," said
Mr. McDonald.

    Commercial development: several major achievements

    Among the recent highlights on the commercial level, was the
accreditation obtained by TSO3 with the U.S. General Services Administration.
This enables the Company to sell its sterilizer to some 225 U.S. Government
healthcare facilities, in particular, hospitals and medical centres for
military personnel, veterans and Native Americans. "This achievement is in
line with our refocusing strategy announced June 5, 2008. In priority, this
strategy targets select high-potential market segments for TSO3, including
North American hospitals and medical centres. We also anticipate that we will
enter other potential market segments for TSO3 in the United States, such as
the medical equipment manufacturing sector that will offer potential
multi-product buyers," added Mr. McDonald.
    In other regions of the world, the Company intends to adopt an
opportunistic approach and take advantage of eventual business development
opportunities, notably for their ability to generate short-term revenues.
    In addition, with the goal of driving interest in TSO3's offering and
easing the acquisition process, the Company has entered into an agreement with
a U.S. firm specialized in medical equipment purchase financing. By taking
advantage of this offer, the Company's clients will not have to pay out the
full purchase price in one lump sum, yet they will be able to immediately
begin benefiting from the operational savings generated by TSO3's ozone
sterilizer.
    Furthermore, another important highlight in recent weeks for TSO3 is the
U.S. registration of its new brand name "SteriZone(R)" for its 125L ozone
sterilizer. This new, simple and descriptive name should contribute toward
increasing product recognition and awareness of this sterilizer in the
Company's target markets.

    R&D operational efficiency

    With regard to R&D operations, the Company has recently created a new R&D
Director position and hired new personnel in this department. The Company is
now equipped with a more complete team that has the expertise required to
carry out the objectives of our technological development program and more
proactively address market expectations.
    Furthermore, in recent months TSO3 has been able to increase its
operational performance and reduce its operating costs. This is in line with
the objectives set early last May. As a result, the burn-rate will be reduced
in the coming quarters, without impacting business and technological
development effectiveness.
    In order to ensure more efficient implementation and better resource
allocation to manage all operations, TSO3 has also recently appointed an
Operations Director. "This new position will allow Simon Robitaille, our
Co-Founder, Vice-President Operations & Research, Chief Scientific Officer who
previously had responsibility for operations, to exclusively focus his time
and energy on carrying out new technological development programs - one of our
main priorities and the cornerstone of our future success," said Mr. McDonald.
    Through these initiatives implemented in recent weeks, TSO3's objectives
are to increase short and long-term sales; notably by a reduction in the sales
cycle time, better align our technology to market needs; and make optimal use
of our financial resources via efficiency gains and operating cost reductions.
"Today, we can affirm that TSO3 is a more efficiently structured enterprise
and that we will be better positioned to identify and take advantage of
potential business opportunities," concluded Mr. McDonald.

    Conference call

    TSO3 will host a telephone conference call this Friday, August 1, at
11:00 a.m. (EST) related to the publication of its second quarter results.
Analysts and institutional investors are invited to participate in this call.
Please dial (514) 807-8791 (Montreal region), (416) 644-3416 (Toronto region)
or the toll-free number 1-800 732-9303.
    Journalists, or anyone else interested in listening to the conference
call in real time, can do so via a webcast accessible through TSO3's website
at: www.tso3.com. The webcast will be archived for 90 days.

    
    SUMMARY OF OPERATING RESULTS
    Period ended June 30 (unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                   SECOND QUARTER             SIX MONTHS
                                   --------------             ----------
                                   --------------             ----------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    SALES                     $1,037,180    $575,253  $1,128,327    $773,876
    -------------------------------------------------------------------------
    EXPENSES
      Operating                  805,867     492,750   1,158,450     814,784
      Sales & marketing        1,275,413   1,085,907   2,210,509   1,984,136
      Research and
       development               612,186     412,294   1,084,630     829,024
      Administrative           1,268,144     775,558   2,055,502   1,577,445
      Financial                    6,719       3,335      12,217       6,706
    -------------------------------------------------------------------------
                               3,968,329   2,769,844   6,521,308   5,212,095
    -------------------------------------------------------------------------
    OPERATING LOSS             2,931,149   2,194,591   5,392,981   4,438,219
    OTHER REVENUES               203,917     560,570     505,417     735,062
    -------------------------------------------------------------------------
    NET LOSS                  $2,727,232  $1,634,021  $4,887,564  $3,703,157
    -------------------------------------------------------------------------
    BASIC AND DILUTED NET
     LOSS PER SHARE                $0.05       $0.04       $0.10       $0.09
    -------------------------------------------------------------------------
    WEIGHTED AVERAGE NUMBER
     OF SHARES OUTSTANDING    47,863,402  46,243,702  47,863,402  42,814,930
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    OPERATING RESULTS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Three and six-month periods ended June 30, 2008, compared with the three
and six month-periods ended June 30, 2007.

    Sales

    Sales for the three-month period ended June 30, 2008 amounted to
$1,037,180 representing the sale of six sterilizers and related accessories,
compared to $575,253 for the same period in 2007, representing the sale of
three 125L Ozone Sterilizer and related accessories. For the six-month period
ended June 30, 2008, sales amounted to $1,128,327, representing also the sale
of six sterilizers and related accessories, compared to $773,876, representing
the sales of five sterilizers and related accessories for the corresponding
period in 2007.

    Operation

    Operating expenses were $805,867 for the three-month period ending
June 30, 2008, compared to $492,750 for the same period in 2007. Operating
expenses are related to the Production and After-Sale Service Department as
well as the costs of manufacturing the device. The variance between the two
periods is explained by an increase in the cost of goods sold due to a
superior number of devices sold, as well as by the addition, between the two
periods, of three supplementary people in the Manufacturing and Production
Department. The variance is also explained by the addition of three additional
people in the After-Sale Service Department and by the increase of expenses
related to warranties. For the six-month period ended June 30, 2008, Operating
expenses amounted to $1,158,450 compared to $814,784 for the same period in
2007. The variance is also explained by an increase in the cost of goods sold,
by adding supplementary people in the Manufacturing and Production Department
and by the increase of expenses related to warranties.

    Sales and Marketing

    Sales and Marketing expenses amounted to $1,275,413 for the three-month
period ended June 30, 2008 compared to $1,085,907 for the same period in 2007.
The variance between the two periods is explained by an increase related to
professional fees as well as severance payments due to a restructuring of the
Sales Department. On the other hand, costs related to representation fees
decreased between the two periods. For the six-month period, ended June 30,
2008, Sales and Marketing expenses amounted to $2,210,509 compared to
$1,984,136 for the corresponding period in 2007. The variance is also
explained by an increase in professional fees and severance payments.

    Research and Development

    For the three-month period ended June 30, 2008, R&D expenses before tax
credits amounted to $612,186 compared to $412,294 for the same period in 2007.
The variance between the two periods is explained by an increase related to
salaries due to the intensification of R&D work. Indeed, eight supplementary
people were added to this department between the two periods. The variance is
also explained by an increase in expenses in work on the inactivation of
prions. For the six-month period ended June 30, 2008, R&D expenses amounted to
$1,084,630 compared to $829,024 for the corresponding period in 2007. The
variance between the two periods is also explained by an increase related to
salaries and expenses for prion testing.

    Administrative

    Administrative expenses amounted to $1,268,144 for the three-month period
ended June 30, 2008 compared to $775,558 for the same period in 2007. The
increase between the two periods is explained by a severance payment due to an
administrative reorganization and by an increase in professional fees. For the
six-month period ended June 30, 2006, Administrative expenses amounted to
$2,055,502 compared to $1,577,445 for the corresponding period in 2007. The
increase between the two periods is also explained by a severance payment as
well as by an increase in professional fees.

    Other Revenues

    For the three-month period ended June 30, 2008, the Company realized
other revenues of $203,917 compared to $560,570 for the same period in 2007.
The variance between the two periods is explained by a decrease in investment
revenues, grants and R&D tax credits. For the six-month period ended June 30,
2008, the Company realized other revenues of $505,417 compared to $735,062 for
the corresponding period in 2007. The variance between the two periods is also
explained by a decrease in investment revenues, grants and R&D tax credits.

    Net Loss

    The Company recorded a net loss of $2,727,232 or $0.05 per share for the
second quarter of 2008, compared to a net loss of $1,634,021, or $0.04 per
share for the same period in 2007. For the six-month period ended June 30,
2008, net loss amounted to $4,887,564 or $0.10 per share, compared to
$3,703,157, or $0.09 per share for the same period in 2007.

    Liquid Assets and Financial Situation

    As of June 30, 2008, cash, cash equivalents and temporary investments
amounted to $20,844,253 and accounts receivable to $1,583,453 for a total of
$22,427,706 compared to $26,807,940 as of June 30, 2007.

    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. The Company's first product, the
125L Ozone Sterilizer, is designed for sterile processing centers in the
hospital environment.
    In contrast to other methods used, the ozone sterilization process
developed and patented by TSO3 meets all standards required by the evolution
in sterilization needs, which are: significant costs savings, increased safety
for patients and hospital staff, and a "green" environmentally safe process.
The Company believes that its technology represents an advantageous
replacement solution to other low temperature sterilization processes
currently used in hospitals.
    The 125L Ozone Sterilizer is cleared for commercialization by the US Food
and Drug Administration and by Health Canada. TSO3 is in commercialization
phase for this first product since 2006.
    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.




For further information:

For further information: Marc Boisjoli, CFO, (418) 651-0003, ext. 228,
mboisjoli@tso3.com; Frédéric Tremblay, HKDP, (514) 395-0375, ext. 234; Source:
TSO3 Inc.


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