TSO3 discloses fourth quarter and full year 2012 fiscal results

Stock symbol: TSX: TOS
Outstanding shares: 72,888,182 
Highlights of 2012 activities 
Commercial / Finance: 


    --  Completed program to upgrade the 125L Ozone Sterilizer to the
        new generation product (STERIZONE(®) 125L+ Sterilizer) for
        Canadian users with 90% success rate;


--  Changed commercial partner status;
  o Terminated channel agreement with 3M;
  o Entered into non-exclusive negotiations with Getinge Infection 


    Control (GETINGE AB) for a potential distribution agreement;
    --  Closed private placement bought deal for net proceeds to TSO(3)
        of $8.2M.

Regulatory:
    --  Following a filing to the United States (US) Regulatory Agency
        in April 2012, the Company subsequently modified its approach
        in December by submitting to the Agency a single cycle
        sterilizer with increased claims (the simplified submission was
        filed in January, 2013).

Development:
    --  In the second half of year, slowed STERIZONE® 80L Sterilizer
        development activities (also called OR product) to redirect
        efforts to support US filing activities for STERIZONE® 125L+
        Sterilizer

QUEBEC CITY, March 20, 2013 /CNW Telbec/ - TSO(3) Inc. ("TSO(3)") an innovator 
in sterilization technology for medical devices in healthcare settings, today 
reported sales for the fiscal year ending December31,2012 totalling 
$1,162,922 compared to $3,145,162 in 2011. Most of the sales in 2012, or 
$1,037,545, were made during the first semester while, in 2011, most of the 
sales or $2,357,745 were made in the second semester. The end of shipments 
under the upgrade program and a decrease in orders placed by the 3M Company 
created a sharp contraction in sales in Q2-2012. Sales to the 3M Company 
during the first semester of 2012 were 69% lower than in the last semester of 
2011.

On June 15, 2012, TSO(3) terminated the distribution agreement with the 3M 
Company. This explains the significant decrease in revenues starting in Q2 
2012, as sales were then limited to services delivered to support the original 
125L Ozone Sterilizer and comprised of consumables for the already installed 
STERIZONE(®) 125L+ Sterilizers (3M™ Optreoz™ 125-Z). Meanwhile, the 
Company opened discussions on a non-exclusive basis with a third party to 
establish a new distribution agreement.

In 2012, TSO(3) recognized licensing revenue of $1,690,971, as compared to 
$210,275 for the same period in 2011. The increase from 2011 to 2012 is due to 
the recognition as income, in June 2012, of the $1,585,833 unamortized 
deferred licensing revenue from 3M.

In summary, for the fiscal year 2012, the Company experienced a loss of 
$5,795,598 ($0.09 per share), as compared to $7,655,421 ($0.13 per share) in 
2011. This decrease in the net loss is primarily due to the recognition as 
income of the unamortized deferred license revenue.

"In 2012, we made critical decisions to protect shareholder value and prepare 
our steps forward", commented Mr. R.M. (Ric) Rumble, President and Chief 
Executive Officer of TSO(3). "Consistent with our interactions with the US 
regulatory agency, towards the end of the year we modified our approach for 
clearance, by simplifying our filing without impacting the value proposition 
for the users. As previously announced, we submitted our cleaned-up and 
simplified filing in January of 2013. We believe that this approach improves 
the opportunity for a rapid and successful outcome", added Mr. Rumble.

"Now that our file is back in the hands of the Agency, we have reprioritized 
our efforts on the STERIZONE® 80L Sterilizer, our smaller product targeted at 
the OR Sub-Sterile market segment as well as lower price point product for 
Central Sterilization Departments in foreign markets. Once finalized, our 
strategy is to file this new product for clearance in the US and international 
markets after US clearance for the STERIZONE® 125L+ Sterilizer has been 
obtained", commented Mr. Rumble.

"In the third quarter of 2012, we also opened discussions with Getinge 
Infection Control for the global distribution and service of our product line 
to the healthcare and life science market. While the dialogue between our 
companies has been productive, we have not yet been able to agree on certain 
terms which remain open for discussion. To be clear, TSO(3) is not looking for 
a "quick agreement", but rather for the "right agreement": one that reflects 
the value of not only the current product, but also of the technology and 
opportunities for future developments", he concluded.

Conference call details

TSO(3) will host a conference call this morning at 10:30 a.m. (EDT). Analysts 
and institutional investors are invited to participate. The numbers to dial 
for access are 514-807-9895 (Montréal area), 647-427-7450 (Toronto area) or 
the toll-free number 1-888-231-8191. Other interested parties may listen to 
the live Webcast of the Conference Call accessible via the TSO(3) Web site at: 
http://www.newswire.ca/en/webcast/detail/906035/966553. The Webcast will be 
archived for 90 days.

Fourth Quarter and Fiscal 2012 Results Disclosure

The 2012 Annual Report is available on the TSO(3) Web site at the following 
address: http://www.tso3.com/en/investors/financial_reporting/annual_reports/ 
and full Y12 disclosure will be available shortly on SEDAR (www.sedar.com).

SUMMARY OF RESULTS
Years ended December 31
(Audited, IFRS Basis)
                                                                       
                                                     2012          2011
                                                        $             $

Revenues                                                               

  Sales                                         1,162,922     3,145,162

  License Revenue                               1,690,971       210,275

Total Revenues                                  2,853,893     3,355,437

Expenses                                                               

  Supply Chain                                  1,801,735     2,934,597

  Customer Support and Communications             639,766       769,862

  Research and Development                      2,877,203     3,999,794

  Administrative                                3,476,843     3,473,215

  Financial Income                              (167,708)     (194,247)

  Financial Costs                                  21,652        27,637

Total Expenses                                  8,649,491    11,010,858

Net Loss before Income Taxes                  (5,795,598)   (7,655,421)

Income Taxes                                            -             -

Net Loss and Total Comprehensive Loss                      
attributable to Shareholders                  (5,795,598)   (7,655,421)

Basic and Diluted Net Loss  per Share              (0.09)        (0.13)

Weighted Average Number of Shares Outstanding  63,675,137    58,289,996
    RESULTS ANALYSIS

In the following paragraphs, the Company discusses the variations of certain 
accounts within the 12-month periods ended December 31, 2012 and 2011.

TOTAL REVENUES

Sales

In fiscal 2012, sales amounted to $1,162,922, as compared to $3,145,162 in 
2011. Most of the sales in 2012, or $1,037,545, were made during the first 
semester while, in 2011, most of the sales or $2,357,745 were made in the 
second semester. In 2012, 54% of the sales were to the 3M Company (69% in 
2011) that had initiated, in June 2011, marketing the STERIZONE(®) 125L+ 
Sterilizer under the brand 3M™ Optreoz™ 125-Z Sterilizer (STERIZONE(®) 
125L+ Sterilizer). Having not received US regulatory clearance within two 
years of the original filing date, and after it had experienced a large 
reduction in orders from 3M in Q2-2012, the Company terminated its 
Distribution Agreement, The lower sales in the second semester of 2012 are the 
result of a virtual elimination of sales to the 3M Company since the middle of 
the second quarter of 2012.

In September 2011, the Company launched an upgrade program whereby users of 
the 125L Ozone Sterilizers could trade-in their sterilizers to acquire, at a 
discounted price, 3M™ Optreoz™ 125-Z Sterilizers (STERIZONE(® )125L+ 
Sterilizer). Most of the Q4-2011 and Q1-2012 sales made to clients other than 
3M were made under that upgrade program. Beginning in Q2-2012, after the 
program had ended, the smaller installed base of 125L Ozone Sterilizers 
generated fewer consumables and service revenues to TSO(3) with the 
consequence that sales to clients other than 3M decreased to minimal levels.

Subsequent to termination of the distribution agreement with the 3M Company, 
TSO(3) had other non-exclusive discussions to secure an alternative 
partnership and signed a non binding letter of intent with Getinge Infection 
Control, a division of the Getinge AB. The Company's strategy has not been to 
invest resources in developing its own sales organization and, as a result of 
the foregoing, its sales have been reduced to minimum levels.

License Revenue

Until June 2012, TSO(3) was recognizing revenue over the expected initial term 
of its agreement with the 3M Company by amortizing the payments it had 
received under that agreement. In June 2012, as a result of the termination 
of the 3M agreement, all unamortized license payments were recognized as 
revenue. Therefore, in the second half of 2012, there was no license revenue.

For the twelve-month period ended December 31, 2012, license revenue amounted 
to $1,690,971, as compared to $210,275 for the same period in 2011. The 
increase from 2011 to 2012 is due to the recognition as income, in June 2012, 
of the $1,585,833 unamortized deferred license revenue from 3M.

EXPENSES

Supply Chain

Supply Chain expenses include all of the expenses incurred in connection with 
(1) the outsourcing of products and services for all departments, (2) 
production, (3) related quality control and assurance, and (4) shipping.

For the fiscal year ended December 31, 2012, the Supply Chain expenses 
amounted to $1,801,735, as compared to $2,934,597 in 2011. The variation is 
due to the reduction in sales which has led to reduced sourcing activities and 
staff reductions. Staff has been reallocated to other departments.

Customer Support and Communications

Beginning in 2012, TSO(3) has regrouped all activities related to corporate 
communications, customer service and technical assistance, including support 
to a former partner in its customer support and communication activities.

For the fiscal year ended December 31, 2012, the customer support and 
communication expenses amounted to $639,766, as compared to $769,862 in 2011. 
The cost of customer support activities and corporate communications was lower 
in 2012 than in 2011 due to smaller technical assistance expenses.

Research and Development

Starting in Q2-2012, there has been a reallocation of research and development 
resources away from new product development and towards work related to the 
filings with the US regulatory agency.

For the fiscal year ended December 31, 2012, the research and development 
expenses amounted to $2,877,203, as compared to $3,999,794 in 2011. During the 
first three quarters, the R&D expenses were similar in 2012 and in 2011. Lower 
expenses for the entire year 2012 are primarily the result of (1) $603,521 
related to the collection and the recording of unbooked R&D tax credits for 
the years 2008 to 2011 and (2) a decrease in expenses during the fourth 
quarter. The unbooked investment tax credits are the result of additional 
claims made by the Company for years 2008 to 2010 and the company's policy 
to provision no more than 80% of the amounts claimed as well as. The lower 
expenses in Q4-2012 were due to several items, including (1) lower maintenance 
costs for medical devices, (2) fewer compatibility studies, and (3) lower 
payroll expenses as a result of attrition.

Administrative

For the fiscal year 2012, the administrative expenses amounted to $3,476,843, 
as compared to $3,473,215 in 2011. These variations were offsetting each 
other, the largest ones being a reduction in incentive-based compensation and 
an increase in professional fees and in stock exchange listing fees.

Liquid Assets

As of December 31, 2012, cash, cash equivalents and short-term investments 
amounted to $12,807,190, as compared to $11,384,373 in 2011.

Accounts Receivable

From their level of $1,893,470 on December 31, 2011, the accounts receivable 
decreased to $1,029,265 on December31,2012. Most of the decrease is due to 
a reduction in trade receivables as a result of lower sales in Q2, Q3 and Q4 
of 2012.

As at December 31, 2011, the receivable amount includes a $589,200 provision 
for R&D tax credits, which was increased to $893,066 as at December31,2012.

Inventories

As at December 31, 2012, inventories amounted to $1,216,721, as compared with 
$1,120,482 on December 31, 2011.

Raw materials inventory has increased primarily in the fourth quarter of 2012 
as a result of the Company receiving raw materials and components ordered 
prior to the termination of the 3M Agreement and on the basis of a production 
plan reflecting market penetration in those markets where regulatory clearance 
had been obtained.

In spite of interrupting the production due to an unplanned lack of orders 
from the 3M Company in the second quarter of 2012, TSO(3) has been able to 
postpone certain deliveries of raw materials, thereby delaying the 
corresponding increase in inventories. A certain amount of similar deliveries 
are still pending, but nothing that would materially change the Company's 
financial position.

The combined level of work-in-progress and finished goods inventories has 
decreased by $47,931 from December 31, 2011 to December 31, 2012. The 
sterilizers that were in inventory at the end of 2011 were shipped in 2012, 
but partly replaced by units manufactured prior to the termination of the 3M 
Agreement. Such inventories at the end of 2012 primarily consist of 3M™ 
Optreoz™ 125-Z Sterilizers (STERIZONE(® )125L+ Sterilizer) and branded 
related accessories but which could easily be rebranded under the TSO(3) 
trademark STERIZONE(®).

Deferred Revenues

As at December 31, 2012, current and non-current deferred revenues amounted 
to $103,035, as compared to $1,906,520 as at December 31, 2011.

The variation in deferred revenues in 2012 is explained by the recognition, in 
June 2012, of the unamortized balance of the license revenue for an amount of 
$1,585,833.

Any remaining deferred revenues stem from the prepaid portion of service 
contracts on the 125L Ozone Sterilizers commercialized by the Company up to 
the beginning of 2010.

FOURTH QUARTER ANALYSIS
(Unaudited, IFRS Basis)

Three-month period ending December 31, 2012, compared to the three-month 
period ending December 31, 2011.
                                                                       
                                                     2012          2011
                                                        $             $

Revenues                                                               

  Sales                                            59,140     1,256,854

  License Revenue                                       -        52,569

Total Revenues                                     59,140     1,309,423

Expenses                                                               

  Supply Chain                                    270,543       960,456

  Customer Support and Communications             168,170       104,366

  Research and Development                      (184,923)       965,605

  Administrative                                  948,152       713,074

  Financial Income                               (37,815)      (39,952)

  Financial Costs                                 (5,013)         4,067

Total Expenses                                  1,159,114     2,707,616

Net Loss before Income Taxes                  (1,099,974)   (1,398,193)

Income Taxes                                            -             -

Net Loss and Total Comprehensive Loss
attributable to Shareholders                  (1,099,974)   (1,398,193)

Basic and Diluted Net Loss  per Share              (0.02)        (0.02)

Weighted Average Number of Shares Outstanding  65,888,182    58,782,423
    About TSO(3)

TSO(3), founded in Québec City in 1998, specializes in the research and 
development of innovative, high-performance medical instrument sterilization 
technology with high commercial potential. TSO(3) 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 TSO(3), visit the 
Company's Web site at www.tso3.com

The statements in this release and oral statements made by representatives of 
TSO(3) relating to matters that are not historical facts (including, without 
limitation, those regarding the timing or outcome of any financing undertaken 
by TSO(3)) 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 TSO(3) 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.





Caroline Côté Director - Investor and Business Relations 418651-0003, Ext. 
237 ccote@tso3.com

SOURCE: TSO3 Inc.

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CO: TSO3 Inc.
ST: Quebec
NI: MTC ERN CONF 

-0- Mar/20/2013 11:17 GMT