March 14, 2012 writer

TSO3 DISCLOSES FOURTH QUARTER AND FULL YEAR 2011 FISCAL RESULTS

TSO3 discloses fourth quarter and full year 2011 fiscal results.
Reports best results in 12-year history

Highlights of 2011 events

Commercial / Operations

  • Shipping sterilizers, accessories and consumables to worldwide customer locations in support of 3M sales activities;
  • Executed program to upgrade TSO3 125L Ozone Sterilizer Canadian users to the new 3M™ Optreoz™ 125-Z, with 90% success rate;
  • Completed electromechanical design of new product under development and targeted at the Operating Room (OR) market segment;
  • Successfully tested ability to produce at planned levels within existing facilities.

 Regulatory: 

  • Filed 510(k) application for US regulatory clearance and initiated documented response to questions subsequently received.

Quebec City, March 14, 2012 – TSO3 Inc. (“TSO3”) an innovator in sterilization technology for medical devices in healthcare settings, today reported revenues for the fiscal year ended December 31, 2011 totalling $3,355,437 representing the sale of sterilizers, consumable supplies, accessories, service contracts, training, after-sales service and the recording of license revenues for its new sterilizer (3M™ Optreoz™ 125-Z). This compares to $1,140,789 million the previous year.

The net loss for 2011 was $7,655,000, which is almost the same as the $7,764,000 loss recorded for fiscal 2010, or a net loss per share of $0.13 in 2011, compared to $0.14 in 2010. The impact of the contribution margin from higher sales in 2011, overcame the impact of higher fixed costs, as well as higher research and development expenditures.

“In 2011, our technology saw its initial adoption in global markets where we had never conducted business in the past. This reinforces the universal appeal of our technology”, commented Mr. R.M. (Ric) Rumble, President and Chief Executive Officer of TSO3. “In Canada, our initial end-users customers of the 125L Ozone Sterilizer, responded very positively to a promotion offering an upgrade to the new 3M™ Optreoz™ 125-Z Sterilizer, with almost all  deciding to move forward with purchasing the upgrade”, added Mr. Rumble. “We continue to build on the relationship with our channel partner 3M, looking towards finding the best ways of delivering the product to additional markets in 2012”.

“On the regulatory front, in 2011 we filed with the US Regulatory Agency and initiated the process of questions and answers. As disclosed earlier this week, we have recently been requested to file additional data in support of obtaining 510(k) clearance for our superior claims, and will do so through an upcoming re-filing”, said Mr. Rumble. “We remain extremely confident in our ability to satisfy the Agency with the requested data and to obtain clearance.”

“As for additional opportunities, in 2011 we completed the electromechanical design of our new product for the OR sub-sterile area in hospitals. We are now in the process of cycle optimization and the testing required for submission of this new device to the regulatory agencies prior to its commercialization. We continue to plan initial commercial activities for this product in the second half of 2012”, concluded Mr. Rumble.

Conference call details
TSO3 will host a conference call this morning at 10:30 am (EDST). Analysts and institutional investors are invited to participate. The numbers to dial for access are 514 807-8791 (Montréal area), 416 644-3426 (Toronto area) or the toll-free number 1 800 731-5319. Other interested parties may listen to the live Webcast of the Conference Call accessible via the TSO3 Web site at:http://www.newswire.ca/en/webcast/detail/906035/966553.
The Webcast will be archived for 90 days

Fourth Quarter and Fiscal 2011 Results Disclosure

The 2011 Annual Report is available on the TSO3 Web site at the following address: https://www.tso3.com/en/investors/financial_reporting/annual_reports/ and full Y11 disclosure will shortly be available on SEDAR (www.sedar.com).

SUMMARY OF RESULTS
Years end December 31
(Audited, IFRS Basis)

OPERATING RESULTS ANALYSIS 

In the following paragraphs, the Company analyzes the variations between periods ended December 31, 2011 and 2010.

TOTAL REVENUES

For the fiscal year 2011, sales of sterilizers, consumable supplies, accessories, service contracts, training, after-sales service and record of license revenues amounted to $3,355,437, as compared to $1,140,789 in 2010.  The increase in revenues was driven by an increase in the volume of sterilizers sold in 2011.

EXPENSES

Operating

For the fiscal year ending December 31, 2011, the operating expenses amounted to $3,480,520, as compared to $1,628,006 in 2010.  Most of the increase is directly related to higher sales, but it also includes a $288,972 write-down of raw material inventories related to the original 125L Ozone Sterilizer which is no longer in production and whose servicing needs will be reduced as the installed base of 38 sterilizers is reduced through attrition, including through the upgrade program launched in Q3 2011. The manufacturing of new generation units and the related consumables, as well as the assistance given to 3M for product launch and installation of sterilizers, constituted the majority of activities during 2011.

On a year-to-year basis, operating expenses increased proportionally less than revenues, reflecting the fact that fixed costs were absorbed by a larger volume and that sales in 2011 included higher margin consumable supplies required to use the 3M™ Optreoz™ 125-Z Sterilizer.

Sales and Marketing

For the fiscal year ending December 31, 2011, the sales and marketing expenses amounted to $412,720, as compared to $987,995 in 2010.  The decrease is due to a scale-down of that department, resulting in a decrease in salaries, fringe benefits and traveling expenses, since these activities are now under the responsibility of 3M. On the other hand, costs related to website development have increased due to the complete redesign of the Company’s website in 2011.

Research and Development

For the fiscal year ending December 31, 2011, the research and development expenses, amounted to $3,811,013, as compared to $3,014,198 in 2010.  The higher research and development expenses are the result of an increase in efficacy and compatibility tests for various surgical instruments undertaken in parallel to the commercial launch of the 3M™ Optreoz™
125-Z Sterilizer and the development of a new sterilizer product for the operating room. That work required the hiring of new resources, the use of subcontractors, and the purchase, maintenance and repairs of endoscopes and other expensive surgical instruments.

Administrative

For the fiscal year ending December 31, 2011, the administrative expenses amounted to $3,473,215, as compared to $3,355,725 in 2010.

Liquid Assets

As of December 31, 2011, cash, cash equivalents and temporary investments amounted to $11,384,373, as compared to $19,120,007 as at December 31, 2010. This decrease reflects the absorption of cash by the operations and working capital.  The decrease in liquidity was partly offset by the exercise of 750,000 warrants in 2011.

Accounts Receivable

From their level of $437,816 on December 31, 2010, the accounts receivable increased to $1,893,470 on December 31, 2011.  The December 2011 amount includes a $589,200 provision for R&D tax credits or an increase of $284,200 over the corresponding provision of $305,000 in December 2010. That increase reflects the fact that, as at December 31, 2011, the tax credits for 2010 had not yet been received from the tax authorities.

The substantial increase in trade receivables since December 2010 was caused by larger sales of sterilizers and consumable supplies made in Q4-2011 as compared with Q4-2010, with a good portion of the Q4-2011 sales made under the upgrade program launched at the end of Q3-2011 and targeting hospitals in Canada.

Inventories

As at December 31, 2011, inventories amounted to $1,120,482, as compared with $1,460,304 on December 31, 2010. The variations over the year is the result of (1) a $288,972 write-down of slow moving raw material inventories related to the STERIZONE® 125L Sterilizer, (2) a transfer to fixed assets of 3M™ Optreoz™ 125-Z Sterilizers worth $532,033 that were previously accounted for as part of inventories but which are being now used to conduct efficacy and compatibility tests as part of the research and development efforts, and (3) an increase in inventories of $481,183 since December 31, 2010 in order to support the ramp-up in production which started at the end of the second quarter of 2011.  Since the sterilizers which were transferred to research and development had been manufactured for sale, that inventory had to be replaced and is included in the $481,183 representing the “Net additions to inventories”.

Deferred Revenues

Current and non-current deferred revenues, as of December 31, 2011, amounted to $1,906,520 compared to $2,263,042 as of December 31, 2010.  The item “deferred revenues” reflects financial transactions related to license revenues and service contracts not yet recognized as revenue. Out of the deferred revenues of $1,906,520 as of December 31, 2011, an amount of $1,690,971 represented deferred revenues that were created when the agreement was signed with the 3M Company and which are amortized over the original term of that agreement.

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 solutions to other low temperature sterilization processes currently used in hospitals.

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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