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)
-- 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).
-- 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+
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
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
and full Y12 disclosure will be available shortly on SEDAR (www.sedar.com).
SUMMARY OF RESULTS
Years ended December 31
(Audited, IFRS Basis)
Sales 1,162,922 3,145,162
License Revenue 1,690,971 210,275
Total Revenues 2,853,893 3,355,437
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
In the following paragraphs, the Company discusses the variations of certain
accounts within the 12-month periods ended December 31, 2012 and 2011.
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.
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.
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.
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.
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.
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
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.
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
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)
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
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.
Sales 59,140 1,256,854
License Revenue - 52,569
Total Revenues 59,140 1,309,423
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
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
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.
SOURCE: TSO3 Inc.
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