TSO₃: Highpoints and financial results for the fiscal year ended at December 31, 2003

April 16, 2004

Québec City, April 16, 2004 – TSO3 Inc . (TSX: TOS) announced its financial results today for the twelve-month period ended at December 31, 2003.

For the fiscal year ended December 31, 2003, the Company recorded a net loss of $4.7 million, or $0.17 per share, compared to a loss, in 2002, of $3.4 million, or $0.16 per share; a lesser loss than anticipated by the analysts who follow the Company. This increase in losses, in line with the operating budget, is explained by the intensification of efforts that preceded and followed the obtaining of FDA clearance, mainly as regards commercialization.

“The year 2003 was both a year of achievement and a new start, with the obtaining of FDA clearance in September the final regulatory obstacle was eliminated. This in turn engendered a series of initiatives, including the signature of the very first agreements with prestigious health centre networks in the United States which will act as technological showcases for our sterilizer, in collaboration with our distribution partner, Skytron,” said Jocelyn Vézina, President and CEO of TSO3. “When we look back, we are very proud to have accomplished these crucial steps in 2003 and we are very enthusiastic about the future of our product. The year 2004 will be the year we introduce the first units in North America, while maintaining efforts for our ongoing testing program, in order to ensure that our product is suitable for the new materials that are constantly emerging.”

Highpoints Overview

* Obtaining of FDA clearance to sell the sterilizer and Chemical Indicator in the United States.

* Exclusive distribution agreement for the sterilizer throughout North America with the U.S. firm Skytron.

* Hire of specialists and high calibre sales and marketing people.

* Agreements with two prestigious American health centres to act as technological showcases for the ozone sterilizer.

* 96% of the warrants got exercised before the end of the end of 2003 bringing the Company an additional $9.6 million in cash.

* Appointment of Mr. Germain Carrière as Chairman of the Board at TSO3 replacing Mr. Jocelyn Vézina.

(See Chart : Summary of Operating Results)

Operations

Operating costs, for the fiscal year ended December 31, 2003, totaled $753,225 compared to $472,429 in 2002. These costs were mainly incurred by Production and After-Sales Service department operations. The increase between these two periods is due to increased sterilizer production. In 2003, the production team fully or partially assembled forty sterilizers to be used for the commercial launch of the Company’s technology, installation at U.S. referral sites and customer trials in hospital settings. The production team also hired a ninth employee in 2003.

R&D Activities

For the fiscal year ended December 31, 2003, the Company pursued its research and development efforts as per budget. During this period, R&D expenses before tax credits amounted to $1,620,374 compared to $1,475,697 in 2002. This increase is attributable to several factors. First, R&D activities increased as a result of referral sites program. Second, higher costs related to the Scientific Advisory Board.  Finally, costs increased because the in-house R&D team grew to seventeen scientists in 2003, from sixteen.

Marketing

Sales and marketing expenses totaled $1,403,300 for the fiscal year ended December 31, 2003 compared to $687,916 for 2002. This increase is due to more intensive marketing activities including representation, advertising and trade show participation. After receiving FDA approval in 2003 to sell its products in the U.S., TSO3 launched a U.S. based marketing program concentrating on participation in major trade show. The sales team also doubled in 2003, increasing from four to eight professionals. Costs related to professional fees also contributed to the increase in this item.

Administration

Administration expenses amounted to $2,101,770 for the fiscal year ended December 31, 2003 compared to $1,629,983 in 2002. The increase between the two periods is due in part to management retroactive salary adjustment, higher professional fees, insurance charges and capital taxes.

Other Revenues

Company revenues, for the fiscal year ended December 31, 2003, were $1,171,334 compared to $933,137 for the same period in 2002, representing an increase of 26%. Despite the fact R&D tax credits were lower in 2003 of $91,539, revenues increased due primarily to a $81,105 increase in government grants, and higher investment revenues of $178,752.

Net Loss

The Company recorded a net loss of $4,733,266 or $0.17 per share, for the fiscal year ended December 31, 2003, compared to a net loss of $3,354,160, or $0.16 per share in 2002.

Change in Accounting Policies

On January 1, 2002, the Company adopted the CICA standard concerning stock-based compensation and other stock-based payments.  This new standard permits the use of the fair value method or an intrinsic value based method of accounting for stock-based compensation for employees.  The Company uses the intrinsic value based method for stock-based compensation.  No compensation expense has been recorded using this method. Beginning in 2004, the Company will record stock-based compensation and other stock-based payments according to the fair value method as required by the new regulations implemented by the CICA. The compensation expense associated with this method of stock-based payment will therefore be recognized as earnings.  This new method will be applied to 2002 and 2003 retroactively.

(See Chart : Financial Position)

Liquid assets and financial situation

At December 31, 2003, cash, temporary investments and accounts receivable amounted to $17,092,708 compared to $13,489,125 at December 31, 2002.

Shareholders’ equity

During the fiscal year 2002, the Company issued 6,453,250 units totaling $12,906,500.  Each unit is comprised of one common share and a half warrant.  Each warrant entitled the owner to purchase one common share at a price of $3.00 until December 31, 2003. On January 30, 2003, the underwriters partially exercised their over-allotment options and subscribed to 217,244 units on the same terms and conditions.  There were, therefore, a total of 6,670,494 common shares and 3,335,247 warrants issued. On September 23, 2003, the underwriters also partially exercised their compensation options and subscribed to 128,015 common shares at a price of $2.00, for a total of $256,030. In 2003, shareholders exercised warrants issued in December 2002 and January 2003, and subscribed to 3,194,147 shares at a price of $3.00, for a total of $9,582,441. In addition, during the current year, employees exercised part of their options and subscribed to 49,690 shares at a price of $1.85, for a total of $91,927.

A total of $10,364,886 was raised through the issue of shares in fiscal year 2003, $10,348,593 of which appears under the “Share capital” item and $16,293 under the “Contributed surplus” item.

Inventories

As of December 31, 2003, short term assets showed inventory valued at $2,349,047 compared to $1,019,103 at December 31, 2002. This amount is attributable to the cost of producing sterilizers for the commercial launch.

Debts

Financial statements also show total debt of $3,689,478 as of December 31, 2003, compared to $3,954,731 at December 31, 2002. Most of this amount does not constitute a financial burden for the Company. Fully $3,500,000 of the debt is composed of loans contracted under the Immigrant Investor Program. These loans are matched by investments whose value at maturity will be the equivalent of the amounts due.  These amounts of debt and investment were presented in the “short term” section since the expiration date is on 2004.

Risk factorsRisks related to operating activities

The Company’s activities entail certain risks and uncertainties inherent to the industry in which it operates. However, management has implemented a risk-reduction strategy that addresses:

* Probabilities of Company success relative to the obtaining of regulatory approval for its products* The Company’s ability to suitably protect its intellectual property* The Company’s ability to establish strategic alliances* The Company’s ability to adequately market its products* The Company’s ability to develop alliances with medical instrument manufacturers in order to constantly increase the number of ozone-compatible instruments

Liquidity and financial resources

Management believes that it will be able to raise the necessary long-term capital to achieve corporate objectives. However, the availability of these financial resources cannot be guaranteed.

Volatility of share price

Company share prices are subject to volatility. Financial and scientific results that differ from analysts’ projections may lead to significant variations in the price of Company shares.

Cautionary statement

With the exception of historical data, information in this press release, and particularly the management discussion and analysis, is prospective in nature. For these and other unpredictable factors, results may vary significantly.

About TSO3

TSO3 Inc. is located in Québec City, Québec, Canada, and was founded in 1998. TSO3 currently has 45 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 a novel sterilization process using ozone as a 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 such as polymers and other plastics. The ozone sterilization process is a safe, efficient, fast and cost-effective response to evolving sterilization needs.

The 125L Ozone Sterilizer was licensed by Health Canada in May 2002 and TSO3 was granted U.S. Food and Drug Administration (FDA) approval September 3, 2003.

The Company’s R&D team has also undertaken the development of a smaller, point-of-use ozone sterilization device for operating rooms and private clinics, and is planning the development of an industrial-sized device for manufacturers of medical instruments, among others.

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.

- 30 -