TSO3 discloses fourth quarter and full year 2009 fiscal results - Updates on
events subsequent to 2009 Year End

    Stock symbol: TSX: TOS
    Outstanding shares: 57,896,123

    Highlights of 2009 annual results and subsequent events:


    - Reached Global Channel Partner Agreement with 3M Infection Prevention
      Division for the distribution of new generation product


    - Received FDA 510(k) clearance for expanded sterilization claims,
      supporting superior sterile efficacy of the STERIZONE(R) Dynamic
      Sterilant Delivery Process(R)
    - Completed data file for new product, submitted to Health Canada and
      received approval
    - Submitted documentation to support export of new product to Europe and
      the United States


    - Received Notice of Conformity to European Medical Device Directive
      allowing the Use of CE Mark and the sale of new product in the
      European Union
    - Closed Bought Deal Financing for CDN $16,000,000
    - Received initial purchase commitment from 3M
    - 3M Introduces the 3M(TM) Optreoz 125-Z(TM) branded Sterilizer

QUEBEC CITY, March 17 /CNW Telbec/ - TSO3 Inc. ("TSO3") an innovator in sterilization technology for medical devices in healthcare settings using ozone, posted sales totalling $1.3 million for the fiscal year ended December 31, 2009, compared to $2.2 million one year earlier. During the year, the Company sold five of its first generation STERIZONE(R) sterilizers and accessories, whereas it sold 13 in the preceding fiscal year.

For the year ended December 31, 2009, TSO3 recorded a net loss of $9.2 million compared to $9.6 million one year earlier. While revenues decreased in 2009, versus 2008, expense control contributed to a decrease in the Company's net loss.

Mr. R.M. (Ric) Rumble, President and Chief Executive Officer of TSO3 commented that "In 2009, the downturn in the economy clearly impacted our ability to close business. While we saw an increase in our quoting activities early on, these quotes remained mostly inactive at year end despite efforts to shake loose business with various incentives. Our response was to reallocate our resources to R&D in order to improve our product and be ready with an enhanced product offering that would result in increased business opportunities when the economy showed signs of recovery. I am proud to say that 2009, despite the lack of sales, was a year of great accomplishments for TSO3. It was a year where we set aggressive goals and timelines for ourselves, delivered on our commitments and created significant value for our Shareholders. We approach 2010 stronger than we have ever been, with fast and compatible sterilization cycles and a strong sales channel able to support sequential market role-outs on a global basis".

The plan

At TSO3's 2009 Annual General Meeting, the Company outlined its plans to; increase the utility of its sterilizer though the creation of new cycles; develop relationships leading to a channel partner and increase market opportunities via expansion outside of North America.

Total solution in low temperature sterilization

The Company had successfully developed its original sterilization cycle based on novel technology for low temperature sterilization addressing the need for an efficacious, cost-effective and safe sterilization method. However, customer needs for speed and material compatibility believed to contribute to the lack of traction in the marketplace. As a result, the Company invested resources to make significant improvements to its sterilization platform. In 2009, these efforts led to a new generation sterilizer offering three cycles in a single unit. The new generation STERIZONE(R) Low Temperature Sterilization System offers speed, high throughput, increased instrument compatibility, and cost effective sterilization, while engineered to remain customer safe and eco-friendly. Offering the same superior sterile efficacy, the new generation sterilizer accommodates a much wider range of instruments from general surgical instruments, to short as well as long rigid and flexible endoscopes, including complex multi-channel devices.

Global channel partner

On September 2, 2009, TSO3 entered into an exclusive negotiation period with 3M, for the purpose of signing an agreement for the distribution of the new generation STERIZONE(R) Sterilizer, through 3M's Global Infection Prevention Division. After roughly three months of negotiations and due diligence, TSO3 announced on December 16, 2009, that an agreement had been reached for global distribution of the product to Central Sterilization and OR Departments within acute care facilities, under the 3M(TM) brand Optreoz 125-Z(TM). Geographical roll-out will occur as regulatory clearances are received.

Market clearances on new generation sterilizer

In December 2009, TSO3 filed for regulatory clearances on the new generation product in Canada, Europe and the United States. To date, TSO3 has received authorization from Health Canada and notification from the European Notified Body (CE Mark), allowing the sale of the product in Canada, as well as export to the European Union. United States regulatory clearance is currently under review.

2010 and beyond

In 2010, TSO3 will work methodically with its channel partner to firmly establish themselves in markets, as clearances are received. The Company's goal is to achieve substantial and sustainable market penetration globally in the years to come. TSO3 has received initial purchase commitment from 3M, on units intended for 3M internal use, and expects to start shipping these units in early second quarter.

Early in 2010, TSO3 concluded a bought deal financing round for $16M, which secures TSO3's financial situation. In addition to supporting the transition to 3M for marketing, sales and client support activities, this additional sum of money will support TSO3's product development plans. The Company intends to increase its product portfolio via additional applications of its STERIZONE(R) technology directed at new market segments within acute care facilities, as well as other markets.

Initiatives are also being undertaken in order to reduce costs in the Company's system, while improving overall quality within the organization.

Conference call details

TSO3 will host a conference call this morning at 11:00 A.M. (EDST). Analysts and institutional investors are invited to participate. 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: www.tso3.com. The Webcast will be archived for 90 days.

Fourth Quarter and Fiscal 2009 Results Disclosure

The 2009 Annual Report is available on TSO3's website at the following address http://www.tso3.com/en/investors/financial-reports-webcasts.php and full Y09 disclosure will shortly be available on SEDAR (www.sedar.com).

    Fiscal years ended December 31

                                                           2009        2008
    SALES                                            $1,324,540  $2,235,101
      Operating                                       2,350,190   2,778,983
      Sales and Marketing                             2,130,329   3,681,424
      Research and Development                        3,447,302   2,649,267
      Administrative                                  3,058,220   3,691,879
      Financial                                          24,234      23,099
                                                     11,010,275  12,824,652
    OPERATING LOSS                                    9,685,735  10,589,551
      Other revenues                                    468,103     955,747
    NET LOSS AND COMPREHENSIVE LOSS                   9,217,632   9,633,804
    BASIC AND DILUTED NET LOSS PER SHARE                  $0.19       $0.20


For the fiscal year ending December 31, 2009, Sales amounted to $1,324,540, compared to $2,235,101 in 2008. During the fiscal year 2009, the Company completed the sale of five sterilizers and related accessories, compared to 13 sterilizers and accessories in 2008.


For the fiscal year ending December 31, 2009, Operating Expenses amounted to $2,350,190, compared to $2,778,983 in 2008. Operating Expenses are related to the Production and After-Sales Service department as well as the costs of manufacturing the devices. Having sold fewer devices during 2009, the variance between the two periods is explained by a decrease in the cost of goods sold. This variance is also explained by a decrease in salaries related to operating and after-sale service. Conversely, installation charges and inventory write-off experienced an increase between the two periods. In 2009, Operating expenses include a write-down of $446,484 for finished goods and $135,225 for raw materials. This write-off was taken due to the Company's intention of adjusting existing inventory so that all finished goods would be consistent with the new sterilizer including the new cycles. Also at the end of 2009, the Company reviewed its estimates for the provision for obsolescence and a reversal of $135,485 was recorded.

Sales and Marketing

For the fiscal year ending December 31, 2009, sales and marketing amounted to $2,130,329 compared to an amount of $3,681,424 in 2008. The variance between the two periods is mainly the result of a decrease in salaries, bonus, commissions and expenses due to a reorganization of the sales department. Conversely, marketing salaries experienced an increase between the two periods, due to the hiring of a new Global Marketing Vice-President in early 2009. The variation can also be explained by a decrease in the payment of severances and in professional fees.

Research and Development

For the fiscal year 2009, R&D expenses before tax credits amounted to $3,447,302 compared to $2,649,267 in 2008. The difference between the two periods is mainly due to material and instrument purchases in order to accelerate ongoing work on compatibility. The gap between the two periods is also explained by an increase in sub-contracting fees as well as an increase in salaries resulting from the addition of employees in R&D to pursue the development of new cycles and filings with regulatory agencies. Conversely, expenses related to work on the prions decreased between the two periods.


For the fiscal year ending December 31, 2009, administration expenses amounted to $3,058,220 compared to $3,691,879 in 2008. The variance between the two periods is explained by a decrease in the payment of severances, in professional fees, in capital tax and in the expenses related to Stock-based Compensation. Conversely, expenses related to salaries, bonuses as well as patent fees, increased between the two periods.

Other Revenues

For the fiscal year ended December 31, 2009, other revenues amounted to $468,103 compared to $955,747 in 2008. The variance between the two periods is due to a decrease in investment revenues due to the Company's use of its liquidity to finance its operation and to lower interest rate on its investment. The variance is also due to an increase in foreign exchange loss. Conversely, R&D tax credits and government grants increased between the two periods.

Net Loss

The Company recorded for the period ending December 31, 2009, a net loss of $9,217,632, or $0.19 per share, compared to a net loss of $9,633,804, or $0.20 per share, in 2008.

Liquid Assets and Financial Situation

The Company preserved an adequate position of liquidity in 2009. As of December 31, 2009, cash and temporary investments amounted to $10,671,845 compared to $17,718,470 as of December 31, 2008.

Accounts Receivable

As of December 31, 2009, accounts receivable amounted to $1,333,178 compared to $820,318 for the same period in 2008. The difference between the two periods is due to an increase in the tax credit receivable and by an amount of $525,500 from a milestone payment for licensing revenue. Conversely, the accounts receivable from customers decreased between the two periods.


As of December 31, 2009, current assets showed inventory valued at $1,483,810 compared to $2,548,075 as of December 31, 2008. The variance is explained by a decrease in the inventory of sterilizers resulting from the sale of devices between the two periods. It is also resulting from the transfer of materials and sterilizers to the R&D department in order to accelerate the work we have been conducting on compatibility of medical devices and to pursue the development of the new sterilization cycles. The variance is also explained by the total write-down of $581,709 and the reversal of $135,485.

Deferred Revenues

As of December 31, 2009, the short and long term deferred revenues amounted to $2,052,333 compared to an amount of $388,958 as of December 31, 2008. The item Deferred Revenues reflects financial transactions related to parts, warranties, licensing revenues and service contracts not yet recognized as revenues. The variance between the two periods is mainly explained by the amount of $1,576,500 received from the 3M(TM) Agreement. Starting in 2010, this amount will be amortized and recognized as revenue over the duration of the Agreement on a straight-line basis.


Three-month period ended December 31, 2009, compared to the three-month period ended December 31, 2008.

                                                          FOURTH QUARTER
                                                           2009        2008
    SALES                                              $154,264    $381,517

      Operating                                         819,923     914,347

      Sales & Marketing                                 349,960     762,351

      Research & Development                          1,057,029     778,860

      Administrative                                    817,222   1,065,345

      Financial                                           7,847       4,790
                                                      3,051,981   3,525,693
    OPERATING LOSS                                    2,897,717   3,144,176

      Other Revenues                                    218,603     246,795
    NET LOSS AND COMPREHENSIVE LOSS                  $2,679,114  $2,897,381
                                                          $0.05       $0.06
    AVERAGE NUMBER OF OUTSTANDING SHARES             47,864,298  47,863,402

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 solutions 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.


For further information: For further information: Marc Boisjoli, Vice President Finance and Chief Financial Officer, (418) 651-0003, Ext. 228, mboisjoli@tso3.com; Caroline Côté, Director, Corporate Communications and Investor Relations, (418) 651-0003, Ext. 237, ccote@tso3.com; Source: TSO3 Inc.

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