TSO₃: First Quarter 2004 Financial Results

May 14, 2004

Québec City, May 14, 2004 – TSO3 Inc. (TSX: TOS) announced today its financial results for the first quarter of 2004.

“We are very proud of the accomplishments in the first quarter of 2004, including, notably, our first order for a Canadian customer. This order testifies to the pressing need for our product in the market,” pointed out Jocelyn Vézina, the Chief Executive Officer of TSO3. “In this respect, we are maintaining efforts for our compatibility program, which is already bearing fruit. Our intention is to provide a list of compatible instruments to our referral sites and first customers during the third quarter of this year. We believe this list will meet the requirements of our initial users, including the influential referral sites that will demonstrate the beneficial features of our unique process.”

Summary of first quarter activities and outlook

* First order for a 125L Ozone Sterilizer destined for a Canadian hospital.* Ann E. Hewitt named Vice President, Sales – U.S. Market to replace James M. Mazzarella.* Involvement of TSO3 at the AORN (Association of Registered Nurses) congress, among the most important sterilization conferences in the United States, in collaboration with Skytron, our American distributor.* Intense activity as part of the Manufacturers Testing Program (MTP) on the compatibility of instruments.

ANALYSIS OF FINANCIAL SITUATION AND OPERATING RESULTS

The following information must be read in conjunction with the audited financial statements and accompanying notes.

Overview

Founded in June 1998, the Company has developed a unique new sterilization process that uses ozone as the sterilizing agent. The first device resulting from this technological platform, the 125L Ozone Sterilizer has been designed to allow the sterilization of the new generation of surgical and diagnostic instruments made from heat-sensitive materials particularly polymers. On May 3, 2002, with its clearance from Health Canada, the Company obtained authorization from the United States Food and Drug Administration (FDA) to sell the 125L Ozone Sterilizer and the accompanying Chemical Indicator. The Company plans to market its products with the help of a distribution partner. In July 2003, the Company signed a distribution agreement with the U.S. firm SKYTRON, a medical equipment distribution company with a vast distribution network that covering the United States and Western Canada, with some 120 sales representatives and 100 service technicians.

The Company is currently working on the commercial launch of its technology, including compatibility of the process with the wide variety of commercially available surgical instruments, the installation of its sterilizer in Canadian pilot sites and U.S. referral sites, and completion of its marketing team hiring program.

Work on Compatibility

No sterilization technology is fully compatible with every commercially available surgical instrument. In fact, every gas sterilization technique (steam, ethylene oxide, hydrogen peroxide and ozone) has an effect on different instruments.

Since its inception, the Company has been involved in numerous studies on the behaviour and the functional characteristics of some of the most commonly used materials in instrument manufacturing, including mechanical strength, structural change and surface change. Most of these studies have been conducted in collaboration with the Corporation de l’école polytechnique de Montréal and a firm specialized in biocompatibility, STS DuoTek Inc., located in Rush, N.Y. As described in the Company’s August 13, 2001 prospectus, these studies show that over 80% of materials are ozone-compatible, which is totally comparable with other currently used sterilization techniques.

After receiving Health Canada approval in May 2002, the Company continued its work at four pilot sites in Quebec hospitals. As part of this study, the Company compiled a list of over 2,700 different surgical instruments currently available. However, as with all current sterilization technologies, to enable hospitals to use the sterilizer efficiently, the Company must provide a list of instruments with each unit that are compatible with its sterilization technology. The Company expects to be able to provide a list of compatible instruments that would meet a potential buyer’s minimum threshold before the end of the current fiscal year. To do this, the Company is relying on several partners. Since obtaining FDA approval, the Company has stepped up its collaboration with the leading industrial groups involved in the manufacture of surgical instruments and the production of construction materials, packaging and protective coatings. In agreement with all of its scientific and commercial partners, the Company is dedicating the bulk of its efforts to validating, as quickly as possible, the ozone-compatibility of the largest possible number of instruments; this intense activity will enable the Company to install its process while guaranteeing a minimum of inconvenience to its initial users.

Canadian Pilot Sites

TSO3 entered into agreements in 2002 and 2003 with the following hospital centres:

* McGill University Hospital Centre - Montreal Neurological Hospital* Sacré-Cœur Hospital* Centre Hospitalier Universitaire de Québec - Saint-François d’Assise Hospital* Centre Hospitalier de l’Université de Montréal - Notre-Dame Hospital* Vancouver General Hospital* Sunnybrook and Women’s College Health Science Centre of Toronto

Currently, the sterilizers are installed in the four Quebec hospitals, with others scheduled for Toronto and Vancouver during this fiscal year.

These hospitals have agreed to make their sterilization department facilities and equipment available for the project. Various tests are scheduled to demonstrate the compatibility of the Company’s sterilization process with a broad range of medical instruments. These tests also aim to showcase for hospitals the potential savings resulting from a sizable reduction in direct and indirect operating costs. The results will be published in specialized journals to raise awareness and ensure market acceptance.

In March 2004, the Company concluded its first sale to a Canadian hospital. As is standard practice when introducing a new technology to the medical field, the initial user hospitals are given performance guarantees for the first year. Accordingly, purchasers can return the sterilizers if they are not entirely satisfied; revenues will be recognized at the expiration of the performance guarantee. In keeping with industry practices, the Company has started building some forty units to enable clients to conduct their own trials (on request).

American Referral Sites

The Company plans to obtain market recognition of its innovative technology by promoting the use of its 125L Ozone Sterilizer in several prestigious U.S. hospitals. These installations are scheduled for the third quarter of the current fiscal year.

The Company has already signed agreements with two of the best known U.S. hospital networks - Cleveland Clinic Foundation and Spectrum Health. On May 5, 2004 the Company announced the signing of five additional agreements with referral sites in the United States, including four with major hospitals and one with an industrial customer.

Marketing Team Hiring Program

The Company’s Sales and Marketing division is currently managed by Mr. Louis Laurin, formerly at Johnson & Johnson, and Ms. Ann Hewitt, a former senior sales and marketing executive at STERIS Corporation. Ms. Hewitt will be responsible for the commercial launch of the Ozone Sterilizer in the United States, and will support the efforts of the Company’s distributor, SKYTRON. During the current financial year, the Company plans to assure the success of its U.S. commercial launch by completing its sales team for the U.S. market.

To view the entire press release and to get complete data, visit the following address: http://www.cnw.ca/en/releases/archive/May2004/14/c3257.html