News expected from TSO₃: Update on compatibility work

November 5, 2004

Québec City, November 5, 2004 – TSO3 Inc. (“TSO3”) (TSX: TOS) is reporting on the results of the testing performed in recent months as part of the Company’s medical device validation program. “After six months of work, and according to our schedule, we are pleased to announce that our ozone sterilization process has no more material effect on the medical and surgical devices tested than other sterilization methods have,” said Jocelyn Vézina, CEO of TSO3. “This information allows the hospitals acting as referral sites to use our sterilizer on a regular basis.”

Upon hearing these results, all of TSO3’s referral sites have reiterated their faith in the capabilities of the sterilizer.  The sterilizers are installed and running or about to be. TSO3 can now guarantee users of the 125L that the instruments tested are compatible with the ozone sterilization process since the results obtained were also validated by three independent manufacturers and repair companies.

Thus, the Company has respected the 6 to 9 months delay announced in March 2004 required to accelerate validating the compatibility of the most frequently used minimally invasive surgical instruments – instruments made of heat-sensitive materials - with its ozone sterilization process.  From the very moment the Company was founded in 1998, TSO3 has devoted a large portion of its resources to its research program on the compatibility of materials. Since March 2004, the Company has hired an additional two employees and contracted the services of an international expert to expedite the work.

In the Manufacturers Testing Program, medical and surgical devices are generally tested for a minimum of 100 cycles to simulate use in the hospital setting.   Each ozone sterilization cycle takes about four hours, not counting the handling time necessary for preparation of the devices and for the evaluation of the effects of the process on the instruments. “The sterilizers in our labs were operating 24/7. We have shown a great sense of responsibility and extreme rigour in the execution of this work, and we are very satisfied,” said Mr. Vézina. “There will always be limits to our process, as is the case with all the methods of sterilization. The testing process is evolving and we are continuing our work in order to constantly add more instruments to our compatibility list.”

The testing conducted by TSO3 has allowed it to test the most widely used instruments, and, in parallel, to develop products to protect them and extend their useful life.

Steps towards the market launch

The results obtained are allowing TSO3 to reactivate the operations in the Canadian referral sites. In addition, TSO3 recently delivered the second sterilizer to a pilot site in the United States, with the first in the U.S. already in operation. TSO3 will proceed with the installation of more units in American hospitals over the coming months.

The inventory of instruments compatible with the 125L is currently being updated. This work will allow surgical instruments whose compatibility has recently been confirmed to be added to the list. The new list of compatible instruments will allow users to sterilize a greater number of medical devices with ozone. It should also allow TSO3 to sign the first sales during the first half of 2005.

"The increase in validated instruments has allowed our referral sites to expand the categories of instruments they are going to be processing and begin to enjoy some of the financial and safety benefits that inspired them to become referral sites in the first place. In the meantime, the clinical, sales and marketing team has been engaged in a variety of programs to support future sales. In the past few months, we have exhibited at several major trade shows in North America,” said Ann Hewitt, Vice President, Sales and Marketing. “We have had many follow-up meetings with prospective customers who are now in the process of evaluating proposals for inclusion in their 2005 budgets."

The referral site program allows independent third parties – hospitals renowned for their technological advances in medical techniques – to test the 125L unit in real operating situations. In the short term, TSO3 anticipates obtaining the endorsement of these hospitals for the Company’s ozone sterilization technology. Through this referral site program, TSO3 also expects to demonstrate the financial, safety and operational benefits of this technological platform.

For a clearer understanding

Why are minimally invasive surgical instruments so important?

Minimally invasive surgery does not require a large surgical incision: instead of an “open incision,” the surgery is performed using tools called endoscopes that are about the size of a pen, through punctures at the surgical site that measure barely an inch.  The surgeon uses a special camera to visualize the inside of the surgical site, and manipulates the endoscopic instruments by looking at a video screen where the camera projects what is happening. The puncture holes are closed at the end of the procedure, leaving nearly invisible scars. This approach means less trauma to the body, less pain for the patient, faster recovery, and greatly reduced hospitalization time.  The decrease in cost that comes from decreasing hospitalization time is one of the many reasons that these procedures are growing so quickly.

What is compatibility?

Like other major manufacturers of sterilization equipment, TSO3 created a program to test the compatibility of the materials and medical devices intended to be sterilized in its ozone process.  Every rapid sterilization process, including steam, is incompatible with some instruments. In the TSO3 Manufacturers Testing program, the Company has a laboratory designed to challenge materials and devices to measure the impact of the ozone sterilization process on the polymers, plastics and other materials which are used in the manufacture of surgical devices.  The program is ongoing and is designed to support the evaluation and validation of new as well as existing devices and materials commonly used in the surgical suite.

The compatibility of an instrument with the sterilization process is evaluated after a specified number of cycles, usually at least 100. The degree of compatibility can vary from one instrument to another and from one brand to another, depending on the materials used during manufacture.

With a program in which more than 20 instrument manufacturers and some 40 of their suppliers of materials and processes are participating, TSO3 is engaged in the continuous validation of current medical instrumentation and that of future generations to ensure optimal compatibility with the ozone sterilization process. 

A conference call will be held between TSO3’s CEO and the financial analysts on Friday, November 5, 2004 at 8 :30 am (ET), concerning this press release.

A webcast of this conference call will be available at the following address: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=960960 and will be archived for a period of 90 days.

About TSO3

TSO3 Inc. is located in Québec City, Québec, Canada, and was founded in 1998. TSO3 currently has 47 employees, 17 of whom work exclusively in the Research and Development department. The Company’s mission is to develop and market innovative and comprehensive sterilization solutions.

TSO3 has perfected an innovative sterilization process using ozone as the sterilizing agent. The first product based on this technological platform is the 125L Ozone Sterilizer, which is intended for hospital sterilization units. The 125L – named after its 125-litre/4.3-cubic-foot capacity – was designed to sterilize the new generation of surgical and diagnostic instruments made of non-heat-resistant materials, mainly polymers. The ozone sterilization process is a safe, efficient, fast and cost-effective response to evolving sterilization needs.

The 125L Ozone Sterilizer by TSO3 was cleared for commercialization by Health Canada and more recently by the U.S. Food and Drug Administration (FDA). TSO3 expects the first sales in 2005.

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.

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