TSO₃: Second Quarter 2004 Financial Results

August 12, 2004

Québec City, August 12, 2004 – TSO3 Inc. (TSX: TOS) announced today its financial results for the second quarter of 2004.

“Our sales and marketing efforts continue unabated. During the last quarter we signed five more agreements with American hospitals and renewed the current agreements in Québec, which confirms the considerable interest of the market for our technology and the confidence the end-users have in our Company,” pointed out Jocelyn Vézina, the Chief Executive Officer of TSO3 Inc. “Thanks to the collaboration of more than 20 of the major instrument manufacturers and of their suppliers, our confidence is unshakable and we are staying the course towards the objectives we have set.”

Summary of second quarter activities and outlook

* Signing of five new agreements with American hospitals that will act as Referral Sites for the 125L Ozone Sterilizer.

* Compatibility testing program for instruments is underway, in collaboration with more than 20 instrument manufacturers as well as some 40 of their suppliers of raw materials and processes, in preparation for the roll-out of our devices in Referral Sites and their commercial launch.

* Start of the third phase of testing on prions, the infectious proteins that cause Creutzfeldt-Jakob Disease, the human version of mad cow disease.

* Presenting our sterilization process to the scientific community for the first time, by the scientific team at TSO3 during the 4th International Symposium on Ozone Applications.

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. After receiving its approval from Health Canada on May 3, 2002, the Company obtained, on September 3, 2003, clearance 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 technical 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 as well as the installation of its sterilizer in Canadian pilot sites and U.S. referral sites.

Work on Compatibility

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 - Montréal Neurological Hospital

* Sacré-Cœur Hospital of Montréal

* 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 five Canadian hospitals with an installation at Sunnybrook and Women’s College Health Science Centre of Toronto scheduled for 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.

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 before the end of the current fiscal year.

The Company has already signed agreements, in October and December 2003, 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.

To view the entire press release and to get complete data, visit the following address: http://www.cnw.ca/fr/releases/archive/August2004/12/c0876.html

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