May 11, 2011 writer

TSO3 Announces Financial Results for Q1 2011

Highlights of Q1 2011 and activities of recent weeks:

  • Completed several months of verification and validation testing;
  • Initiated planning of installations to early adopters;
  • Progressed in development of second product based on new generation technology;
  • Met with US regulatory agency and defined estimated filing date.

Quebec City, May 11, 2011 – TSO3 Inc. (“TSO3”) (TSX: TOS) an innovator in sterilization technology for medical devices in healthcare settings, posted revenues of $136,628 for the first quarter of 2011 ending March 31, for the sale of supplies, accessories and service contracts for the first generation product. This compares to $144,228 in the first quarter of 2010, for the same type of products. The Company recorded a net loss of $1,880,010 for the first quarter of 2011, or $0.03 per share, compared to a net loss of $2,056,556 or $0.04 for the same period in 2010.

“In the first quarter, we concluded several months of crucial work —the verification and validation as well as the reliability testing for the new sterilizer. This was mandatory to ensure that we produce quality sterilizers that perform consistently to customer expectations”, said R.M. (Ric) Rumble President and CEO of TSO3.

“As planned and announced in our last investor conference call, we recently conducted a second meeting with the US regulatory agency concerning the new sterilizer. We are pleased with the exchange of information and the feedback that we received. The meeting allowed us to review our filing strategy and to define a filing date estimate which is now targeted as late June 2011”, said Mr. Rumble. “We remain confident in our ability to obtain the required clearance for the US market”.

Further details on all areas of the Company’s activities and strategy will be disclosed this afternoon at 3:00 PM (EDST) at the Annual General Meeting of Shareholders. The meeting will be held at the McCord Museum (J. Armand-Bombardier Theatre), 690 Sherbrooke Street West, Montreal (Québec) and a live audio webcast will be available and can be accessed via the TSO3 website at: https://www.tso3.com/en/investors/financial-reports-webcasts.php. Webcast participants will have the opportunity to send in questions to the TSO3 representatives by using the following email ccote@tso3.com.

Q1 2011 Conference Call

TSO3 will host a telephone Conference Call today, May 11, 2011 at 10:30 a.m. (EDST). Analysts and Institutional Investors are invited to participate in the call. The numbers to dial for access are 514 940-2795 (Montréal area), 416 644-3424 (Toronto area) or the Toll-Free number 1-800-594-3790. Other interested parties may listen to the live Webcast of the Conference Call accessible via the TSO3 Website at: https://www.tso3.com/en/investors/financial-reports-webcasts.php. The Webcast will be archived for 90 days.

SUMMARY OF RESULTS

Three-month period ended March 31

(Unaudited, IFRS Base)

    FIRST QUARTER
   

 

2011

$

2010

$

Sales   136,628 144,228
License Revenues   52,569 44,046
    189,197 188,274
Expenses      
Operating   325,068 340,492
Sales & Marketing   158,739 313,043
Research & Development   849,706 705,055
Administrative   795,802 903,912
    Net Financial   (60,108) (17,672)
    2,069,207 2,244,830
Net Loss and Comprehensive Loss   1,880,010 2,056,556
Basic and Diluted Net Loss per Share   0.03 0.04
Weighted Average Number of Shares Outstanding   58,024,508 51,227,865

RESULTS ANALYSIS

In the following paragraphs, we analyze the variances between the first quarter of 2011 and the first quarter of 2010.

Sales

In Q1 2011, sales amounted to $136,628, representing the sale of supplies, accessories and service contracts, compared to $144,228 in 2010 for the same type of products. No sterilizers were sold in either of the two quarters.

License Revenues

For the first quarter of 2011, the Company recorded an amount of $52,569 as License revenues compared to $44,046 in 2010. These revenues are related to the commercial agreement signed with 3M™ and correspond to the amortization of the sums received from 3MÔ following the achievement of milestones. They are now presented separately in the statement of loss and comprehensive loss.

Operating

The operating expenses amounted to $325,068 compared to $340,492 in 2010. The manufacturing of new generation units, validation of these sterilizers and the improvement of various processes related to production and supply chain constituted the majority of activities during the quarter.

Sales and Marketing

The sales and marketing expenses amounted to $158,739 compared to $313,043 in 2010. This variance is due to a decrease in salaries, fringes benefits, and traveling expenses since these activities are now transferred to the responsibility of the channel partner.

Research and Development

The research and development expenses, which included a R&D tax credit of $75,000 ($76,000 in 2010), amounted to $849,706 compared to $705,055 in 2010. This variance is due to an increase in salaries, material purchases and professional fees. This costs increase in the first quarter of 2011 is the result of the substantial work performed during the quarter for the Verification and Validation process and also the work undertaken to develop a new sterilizer designated for the OR Sub-Sterile Area.

Administrative

The administrative expenses amounted to $795,802 compared to $903,912 in 2010. The decrease is explained by a reduction in salaries and traveling expenses due to the vacancy of the CFO position. It is also explained by lower professional fees related to the review and testing of internal controls.

Net Financial

The net financial expenses, which are in fact net financial revenues for both quarters, amounted to $60,108 compared to $17,672 in 2010. This category includes principally bank charges, investment income, changes in the value of investments and foreign exchange gain or loss. The variance between the two periods is the result of a greater appreciation in fair value of investments held.

Liquid Assets

As of March 31, 2011, cash, cash equivalents and temporary investments amounted to $16,830,386 compared to an amount of $19,120,007 as of December 31, 2010. The Company tightly manages its liquidity to achieve its strategic objectives.

First Quarter Disclosure

The First Quarter Report is available on TSO3’s website at the following address https://www.tso3.com/en/investors/financial-reports-webcasts.php and full Q1 disclosure will shortly be available on SEDAR (www.sedar.com).

About TSO3

TSO3, founded in Québec City in 1998, specializes in the research and development of innovative, high-performance medical instrument sterilization technology with high commercial potential. TSO3 designs products for sterile processing areas in the hospital environment and offers an advantageous replacement solution to other low-temperature sterilization processes currently used in hospitals.

The statements in this release and oral statements made by representatives of TSO3 relating to matters that are not historical facts (including, without limitation, to 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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