May 6, 2015 writer

TSO3 ANNOUNCES FINANCIAL RESULTS FOR FIRST QUARTER 2015. Company to hold Annual and Special Meeting of the Shareholders today in Montréal

Quebec City, May 6, 2015 – TSO3 Inc. (“TSO3”) (TSX: TOS) an innovator in low temperature sterilization technology for medical devices in healthcare settings, posted today its financial results for the first quarter of 2015 ended March 31.

Sales in 2015 and 2014 consisted of consumables as well as revenues from service contracts in connection with the STERIZONE® 125L+ Sterilizers originally installed in 2012. In Q1-2015, sales amounted to $89,611, as compared to $81,757 during the same period in 2014. The higher sales in 2015 reflect a higher utilization by the users of the installed base of sterilizers.

During the first quarter of 2015, the Company bolstered its balance sheet and signed a commercial agreement with Getinge Infection Control a leader in the industry” stated R.M. (Ric) Rumble, President and CEO of TSO3. “As a result the Company is now actively engaged in promoting its product alone and with its channel partner in North America.” concluded Mr. Rumble.

Annual General Meeting of Shareholders

TSO3 will hold its Annual and Special Meeting of the Shareholders, this morning at 10:30 am (EDT) at the McCord Museum, (J. Armand Bombardier Theater), 690, Sherbrooke Street West, Montréal (Québec).

A webcast of this event will be accessible at http://www.newswire.ca/en/webcast/detail/1512631/1686383

The Webcast will be archived for 90 days.

Results Analysis

In the following paragraphs, the Company discusses the variations of certain accounts within the first quarter of 2015 and 2014.

SALES

Sales in 2015 and 2014 consisted of consumables as well as revenues from service contracts in connection with the STERIZONE® 125L+ Sterilizers originally installed in 2012.

In Q1-2015, sales amounted to $89,611, as compared to $81,757 during the same period in 2014. The higher sales in 2015 reflect a higher utilization by the users of the installed base of sterilizers.

NET LOSS

In the first quarter of 2015, the Company experienced a loss of $1,817,778 ($0.02 per share), as compared to $1,561,004 ($0.02 per share) in Q1-2014. The year-to-year variations are reflecting operating issues as well as one-time items related to R&D tax credits and the write-off of patents in 2015.

When adjusting the results to exclude the write-off of assets and the R&D tax credits, the net loss in the first quarter of 2015 is $1,638,321 ($0.02 per share), as compared to $1,816,409 ($0.02 per share) in 2014. The reduction is the result of the ramp-up of activities during the first quarter of 2015 has not yet offset the reduction in activities caused by the collective dismissal announced by the Company in January 2014.

EXPENSES

Supply Chain 

Supply Chain expenses include all expenses incurred in connection with (1) outsourcing services provided by the Supply Chain Department to all departments, (2) production costs, (3) related quality control and assurance expenses, (4) cost of services sold to end-users, and (5) shipping expenses.

For the three-month period ended March 31, 2015, the Supply Chain expenses amounted to $194,780, as compared to $250,969 in 2014. The variation is largerly the result of the collective dismissal and the related cost savings achieved by the Company since the end of Q1-2014.

Marketing, Sales and Service

For the quarter ended March 31, 2015, the Marketing, Sales and Service expenses amounted to $166,583, as compared to $100,632 for the same period in 2014. The larger amount in 2015 is due to an increase in marketing-related activities, including trade shows and professional association meetings, and the hiring of a senior executive in January 2015.

Research and Development

For the quarter ended March 31, 2015, Research and Development (R&D) expenses were $547,733, as compared to $597,758 in Q1-2014. In Q1-2015, the Company has recorded R&D tax credits of $34,752, as compared to $255,405 in Q1-2014. Before accounting for those tax credits, reasearch and development expenditures were $582,485 during the first quarter of 2015, as compared with $853,163 during the same period in 2014. The variation is largerly the result of the collective dismissal and the related cost savings achieved by the Company since the end of Q1-2014, including from the suspension of the development efforts on the STERIZONE® 80L Sterilizer.

Administrative

For the quarter ended March 31, 2015, the Company reported Administrative expenses of $1,024,994 as compared to $731,893 for the first quarter in 2014. The 2015 figure reflects a write-off of $214,209 in connection with abandoned patents. When adjusting for that amount, administrative expenses were $810,785, or a year-to-year increase of $78,892. The larger amount in 2015 is due to an increase of $50,896 in share-based compensation and to an increase in several expense items mostly in connection with the ramp-up in activities currently under way.

Financial Income

For the quarter ended March 31, 2015, financial income amounted to $17,339, as compared to $39,128 in 2014.  The decrease is due to smaller amounts of Cash, Cash Equivalents and Investments in 2015 and a lower level of interest rates.

Liquid Assets

As at March 31, 2015, cash, cash equivalents and short-term investments amounted to $15,080,797, as compared to $5,973,446 as at December 31, 2014. The variation is largerly due to the net proceeds of $10,431,602 from the public equity offering closed on March 5, 2015.

Accounts Receivable

As at March 31, 2015, the accounts receivable were $287,959, as compared to $257,694 as at December 31, 2014. In both cases, the receivables are made of amounts recoverable from governments for Research and Development tax credits and input tax credits for sale taxes.

Inventories

As at March 31, 2015, inventories amounted to $1,368,699, as compared to $1,293,503 as at December 31, 2014.

Other than as a consequence of normal usage and turn over, the net variation of $75,196 between December 31, 2014 and March 31, 2015 is primarily due to an increase in parts and raw material inventory in anticipation of an increase in production. The variations observed in work-in-progress and finished goods inventories are largerly offsetting each other and do not have significance as the difference between finished goods and work-in-progress is often not material.

Property, Plant and Equipment

The amount of Property, Plant and Equipment did not vary materially between December 31, 2014 and March 31, 2015 as the Company capitalized only $55,567 during that period, as compared with a depreciation amount of $70,964 during the same period.

Intangibles Assets

During Q1-2015, the amount of intangible assets decreased from $2,432,653 on December 31, 2014 to $2,209,599 on March 31, 2015. Most of that variation was due to the net write-off of $214,209 in connection with abandoned patents. In addition, the Company added $43,191 in intangible assets, mostly patents, and amortized those assets by an amount of $52,036.

First Quarter Disclosure

The 2015 First Quarter Report is available on TSO3’s website at the following address:

https://www.tso3.com/en/investors/financial_reporting/quarterly_reports/ and full Q1 disclosure will shortly be available on SEDAR (www.sedar.com).

About the STERIZONE® VP4 low temperature sterilizer

The STERIZONE® VP4 Sterilizer developed by TSO3 is a dual sterilant, low temperature sterilization system that utilizes vaporized hydrogen peroxide (H2O2) and ozone. Its single cycle can sterilize a large number and wide range of compatible devices, thereby allowing for a cost effective and error-free sterilization process. TSO3’s unique Dynamic Sterilant Delivery SystemTM automatically adjusts the quantity of injected sterilant based on the load composition, weight and temperature. With its large 75 lb load capacity and a short cycle time, the STERIZONE® VP4 Sterilizer can enhance throughput and lower sterilization cost. The STERIZONE® VP4 Sterilizer was cleared for commercialization in the United States in December 2014.

More information about the STERIZONE® VP4 Sterilizer is available through TSO3’s website, under the Products section:

https://www.tso3.com/en/products/sterizone-vp4/

About TSO3

Founded in 1998, TSO3’s activities encompass the sale, production, maintenance, research, development and licensing of sterilization processes, related consumable supplies and accessories for heat-sensitive medical devices. The Company designs products for sterile processing areas in the hospital environment that offer an advantageous replacement solution to other low temperature sterilization processes currently used in hospitals. It also offers services related to the maintenance of sterilization equipment and compatibility testing of medical devices with such processes.

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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