Mr. Ric Rumble reports

TSO3 REPORTS RECORD FIRST QUARTER 2016 RESULTS

TSO3 Inc. has released its results for the first fiscal quarter ended March 31, 2016. All figures are in U.S. dollars unless otherwise noted.

First quarter 2016 financial summary:

• Effective Jan. 1, 2016, the company changed its functional and reporting currency from Canadian dollars to U.S. dollars as the significant majority of its current and future revenues are and are expected to be denominated in U.S. dollars. In addition, the company adopted a new financial statement presentation format that reflects its new level of operations.
• Revenues were $3.1-million in the first quarter of 2016 as compared with $100,000 in the first quarter of 2015. On Dec. 21, 2015, TSO3 announced that it had received purchase orders for delivery in 2016 from Getinge Infection Control, its channel partner, for the full amount of its 2016 minimum purchase commitment. TSO3 delivered 25 Sterizone VP4 sterilizers and related accessories to Getinge in the first quarter of 2016 in relation to those orders.
• Gross profit was $1.1-million, or 36 per cent of revenues, in the first quarter of 2016 as compared with a gross loss of $100,000 in the first quarter of 2015.
• Net income in the first quarter of 2016 was $600,000, or one cent per share, as compared with a net loss of $1.5-million, or two cents per share, in the same year-ago quarter. The increase included a non-recurring foreign currency exchange gain of $1.6-million associated with the translation of Canadian dollar cash reserves into U.S. dollars. Excluding this foreign exchange gain, the company's net loss was $900,000 in the first quarter of 2016, or one cent per share.
• Adjusted earnings before interest, taxes, depreciation and amortization were negative $600,000 in the first quarter of 2016 versus negative $1.1-million in the same year-ago quarter.
• As of March 31, 2016, TSO3 had cash, cash equivalents and short-term investments of $24.4-million ($31.7-million (Canadian)), 91 million shares outstanding, no outstanding warrants and no debt. The company received $10.1-million ($14.1-million (Canadian)) in proceeds from the exercise of outstanding warrants in the first quarter of 2016.

Management commentary

"Our Q1 results were driven by the commercial rollout of Sterizone VP4 sterilizers with our global channel partner Getinge Infection Control," said TSO3 president and chief executive officer R.M. (Ric) Rumble. "The commitment to our technology and product line has remained very strong throughout Getinge and in the second quarter of 2016 we will continue to invest in retrofitting our assembly operations to expand our manufacturing capacity, and focus our sales and marketing efforts on helping our channel partner meet or exceed their contractual performance objectives."

First quarter 2016 operational highlights

• Received FDA 510(k) clearance from the U.S. Food and Drug Administration for a universal design of its Sterizone VP4 sterilizer;
• Received and prepared preliminary responses to comments from the FDA regarding the company's expanded claims filed in December, 2015, relating to the use of the Sterizone VP4 sterilizer in the United States. These expanded claims correspond to increasing scrutiny by regulatory authorities over medical device reprocessing, particularly for colonoscopes and other complex medical devices used during minimally invasive surgical procedures. The claims sought in the U.S. represent similar claims for the Sterizone VP4 sterilizer already available in Canada and those which will accompany the sterilizers' introduction in Europe this year;
• Reported an improved outlook for its production and operating capacity of Sterizone VP4 sterilizers at its existing Quebec, Canada, facility. The company is investing in expanding its production capacity to one sterilizer per working day by the third quarter of 2016.

Annual general and special meeting of shareholders

TSO3 will hold its annual general and special meeting of shareholders at 10:30 a.m. ET today. The meeting will be held at the Musee national des beaux-arts du Quebec in Quebec City.

Mr. Rumble and chief financial officer Glen Kayll will host the meeting, where management will also discuss its first quarter 2016 financial results and provide an operational update, followed by a question-and-answer period.

The meeting will be webcast live and available for replay at the company's website.

A replay of the meeting will be available on the same day through Aug. 2, 2016.

                             INCOME STATEMENT
             (In thousands of U.S. dollars, except per share)
  
                                                     Q1 2016       Q1 2015

Revenues                                              $3,071           $72
Cost of sales                                          1,961           156
                                                      ------        ------
Gross profit (loss)                                    1,110           (84)
                                                      ------        ------
Expenses
Research and development                                 606           441
Selling, general and administrative                    1,385           955
Other income                                          (1,588)          (22)
                                                      ------        ------
Total expenses                                           403         1,374
                                                      ------        ------
Net income (loss) before income taxes                    707        (1,458)
Income taxes                                              58             -
                                                      ------        ------
Net income (loss)                                        649        (1,458)
                                                      ======        ======
Basic and diluted net income (loss) per share           0.01         (0.02)
                                                      ======        ====== 

We seek Safe Harbor.