TSO3 Reports Record First Quarter 2017 Results

QUEBEC CITY, May 10, 2017

First Quarter 2017 Financial Summary

• Revenue increased to a record $4.2 million, a 13.5% sequential increase over the $3.7 million recorded in the fourth quarter of 2016 and a 35% increase over the $3.1 million recorded in the first quarter of 2016. The Company shipped 36 STERIZONE^® VP4 Sterilizers, along with associated accessories and consumables, to Getinge Infection Control, its exclusive global distributor, in the first quarter of 2017.

• Gross profit on an IFRS basis was $1.6 million, or 37% of revenue, which compares non-IFRS gross profit of $1.3 million, or 36% of revenue, in the fourth quarter of 2016 and an IFRS gross profit of $1.1 million, or 36% of revenue in the first quarter of 2016. The Company experienced improvements in sterilizer production costs, and sales growth of higher-gross margin consumables in the first quarter of 2017 relative to prior periods. IFRS gross profit in the fourth quarter of 2016 was $1.0 million and includes a one-time write-off of $0.3 million for obsolete raw materials inventory.

• Research and Development (R&D) expense grew to $1.4 million, as compared to $1.3 million in the fourth quarter of 2016 and $0.6 million in the year-ago quarter.

• Sales, General and Administrative (SG&A) expense was $2.2 million, which compares to $1.8 million in the fourth quarter of 2016 and $1.4 million in the first quarter of 2016. $0.3 million of the increase from Q4 2016 to Q1 2017 related to additional non-cash stock compensation expense.

• The Company's IFRS net loss was $(2.0) million or $(0.02) per share in the first quarter of 2017 and compares to non-IFRS net losses of $(1.8) million or $(0.02) per share in the fourth quarter of 2016 and $(0.9) million, or $(0.01) per share, in the first quarter of 2016. On an IFRS basis, the Company reported a net loss of $(2.1) million or $(0.02) per share in the fourth quarter of 2016 and a net profit of $0.6 million, or $0.01 per share, in the first quarter of 2016.

• The Company had $19.6 million in cash, cash equivalents and investments and no debt as at March 31, 2017, as compared to $19.3 million and no debt at the end of 2016.

Management Commentary

"We are pleased with our first quarter 2017 results as we continue to expand our business in North America and EMEA," said TSO₃ President and CEO, R.M. (Ric) Rumble. "We continue to see solid progress with manufacturing, sales, installations and end customer utilization of our industry leading technology into hospitals. We continue to support Getinge in North America, Europe and other international markets, including leveraging the traction we are gaining within the flexible endoscope reprocessing area of healthcare facilities. This includes implementing complete transitions away from traditional high level disinfection practices in favour of our low-temperature terminal sterilization solution in cleared markets and preparation to pursue expanded regulatory claims for duodenoscopes in the United States."

Supplemental Non-IFRS Financial Measures

In addition to IFRS financial measures, management uses non-IFRS financial measures to assess the Company's operational performance. It is likely that the non-IFRS financial measures used by the Company will not be comparable to similar measures reported by other issuers or those used by financial analysts as their measures may have different definitions. The measures used by the Company are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures.

Generally, a non-IFRS financial measure is a numerical measure of an entity's historical or future financial performance, financial position or cash flows that is neither calculated nor recognized under IFRS. Management believes that such non-IFRS financial measures are important as they provide users of the financial statements with a better understanding of the results of the Company's recurring operations and their related trends, while increasing transparency and clarity into its operating results. Management also believes these measures can be useful in assessing the Company's capacity to discharge its financial obligations.