To Create and Deliver the New Standard of Care in Sterile … · 2018-08-27 · The statements contained in this presentation and oral statements made by representatives of TSO 3

To Create and Deliver the New Standard of Care in Sterile Reprocessing™

Investor Presentation | 22 February 2018 1

The statements contained in this presentation and oral statements made by representatives of TSO3 Inc. (“Company”) relating to matters that are not historical facts are forward-looking statements that involve

certain risks, uncertainties and hypotheses, including, but not limited to, general business and economic conditions, the Company‘s limited history of sales or distribution, the ability of the Company to obtain the

required regulatory clearance to market its products on a worldwide basis, the outcome of patent applications, the condition of the financial markets, the ability of the Company to obtain financing on favorable

terms and other risks and uncertainties.

Risks and uncertainties about the Company’s business are more fully discussed in the disclosure materials filed with the securities regulatory authorities in Canada, which are available on SEDAR under the issuer

profile of the Company at www.sedar.com. You are urged to read these materials.

Although management of the Company believes that the conclusions, estimates or projections reflected in such forward-looking information are reasonable and represent the Company’s conclusions, estimates

or projections at this time, such information involves unknown risks and uncertainties which may cause the Company’s actual results to differ materially from the Company’s conclusions, estimates or projections

expressed or implied by such forward-looking information. You are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we do not undertake to update any

forward-looking statement.

This presentation shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

All Dollars in USD, unless noted otherwise.

US Pats. No. 9,101,679 / 9,474,815 / 9,480,763 / 9,480,765 US Pat. Applications No. 14/820,965; 15/247,450 Canada 2,767,726 EU Pat. EP 2,601,976; EP2,609,937; EP2,482,859; EP2,601,979 Japan Pat. 5,480,975; 5,785,208; 5,785,211; 5,855,045 Corresponding patents granted or pending in other countries

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Important Cautions Regarding Forward Looking Statements and Other Disclosures

STERIZONE® registered trademarks of TSO3 Inc.

© TSO3 Inc., 2018. All rights reserved for all countries. No part of this publication may be reproduced or translated in any form or by any means, without the prior written permission of TSO3 Inc. 2

To Create and Deliver The New Standard of Care In Sterile Reprocessing™

A Sterile Device for Every Patient

VISION. PURPOSE.

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TSO3 Next Generation Technology

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The STERIZONE® VP4 Sterilizer is a dual sterilant, low-temperature sterilization system that uses vaporized hydrogen peroxide (H2O2) and ozone.

• Simple Single Cycle Operation

• Large Loads

• Mixed Loads

• Lower Risk

• Higher Throughput

Features Advantages Benefits • Dual Chemistry

• Dynamic delivery

• Large capacity

• Lowest cost per instrument sterilized

• Cost avoidance

• Expandability

• Leverage existing hospital inventory

• Reduce reputational risk

• Ability to Process Full Instrument Sets

• Documented Efficiency

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Capital Equipment Sales

1-4 units per facility

Higher-Margin Proprietary Consumables

~$20-30/cycle (dep. on mix and size)

* Assuming two units installed, 10 year product life. Based on Company Estimates. For illustrative purposes only. This illustration is based on assumptions and uncertainties as well as on management’s estimate of future events. Actual results may differ significantly from the above illustration. The Corporation has limited sales and distribution history and there is no guarantee that our sales specialists will achieve the results illustrated herein. Refer to additional risk factors contained in TSO3‘s disclosure materials filed with the securities regulatory authorities.

Service Contracts ~10% of Capital Price/year**

Revenue Potential Per Customer* (Assuming 2 units, 10 Yr Product Life)

$240k-$300k

Assuming 4-5 Cycles/Day, 250d/yr

$50k-$62.5k/yr

$24k-$30k/yr

Approx $0.9m-$1.2m

Revenue Opportunity per

Customer

Value of a Customer

“Razor”

“Razorblades”

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1. Insert Room Temperature Instruments Into a Warm Chamber

2. Create a Vacuum and Inject Small Amounts of Vapourized Heated Sterilant Over Time

3. Micro Condensation Forms on the Instruments

Breakthrough Technologies /// 138 Patents + 47 Patents Pending Worldwide

Dual Sterilants

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Condensation Layer

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Opportunity

TOTAL ADDRESSABLE

MARKET

One Core Technology – Two Markets

1) The American Hospital Association, US Dept. of Health and Human Services, 2) Centers for Disease Control and Prevention 3) US Food & Drug Administration 4) Statistica.com 5) Eurostat 6) Markets and Markets, June 2016 7) Becker’s GI & Endoscopy “35 Statistics About GI/Endoscopy”

OR/CSSD $6.0B+6

GI 50M+

Procedures/year7

Operating Room & Central Sterile Supply Department

U.S. ~ 10,000 Hospitals & Ambulatory Surgery Centers1 Canada ~ 1,400 Hospitals4

Europe ~ 15,000 Hospitals5

Gastrointestinal Endoscope Reprocessing

~15M colonoscopies performed annually2

>500,000 ERCP Procedures (endoscopic retrograde cholangiopancreatographies) performed annually3

Established Base Business Emerging Opportunity

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Commercialization: Original Getinge Infection Control Agreement

November 25, 2015 - TSO3 and Getinge Infection Control Signed Exclusive Distribution Agreement which included multi-year performance requirements and minimum annual commitments.

Why TSO3 chose Getinge:

• A global leader in Healthcare sterilization • Operations in more than 40 countries • Sales in more than 150 countries • Did not have a low-temperature sterilizer • Up-Front License-Fee of US$7.5M • Contractual minimums in each of 5 years

(toward a >10% market share objective)

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Getinge 2016-2017

• Getinge launched sales of our STERIZONE® VP4 Sterilizer in North America and Europe.

• TSO3 sold 280 STERIZONE VP4 Sterilizers to Getinge.

• Simultaneously, Getinge experienced a series of organizational changes which had an impact on its businesses.

• In November 2017, TSO3 disclosed that 50+ STERIZONE VP4 Sterilizers had been delivered to key medical facility end customers.

• Result: Distributor inventory overhang.

• Action: Deal with inventory and accelerate commercialization.

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Near Term Solution: TSO3 & GETINGE Co-Commercialize

January 25, 2018 - TSO3 & Getinge entered into a new agreement allowing TSO3 to sell directly to and service to 50% of hospitals in North America and repurchase Getinge inventory at a discount.

What it does for TSO3: • Gives TSO3 the ability to sell and market directly to

50% of targeted accounts in North America • Allows TSO3 to create the marketing strategy and

messaging • Permits TSO3 to deploy dynamic pricing models to fit

customer needs

• Agreed to actively co-commercialize our product - TSO3 added resources directed at new sales targets – not the same targets

• TSO3 agreed to purchase 100 STERIZONE VP4 Sterilizers back from Getinge’s inventory at $33,000 each - reduces distributor inventory at substantially lower than our production cost

• Agreed to initiate negotiations on a new and improved agreement

What it does for Getinge: • Getinge will continue to sell STERIZONE VP4s to their

established targets • Getinge will continue to be the exclusive distributor of the

STERIZONE VP4 in the rest of the world • Getinge will continue to service systems they sell or sold • TSO3 will continue to support Getinge in its sales and

installation processes

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Here is Why

Click here to open the video

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“We had 4 [competitor] Sterilizers, now we have 2 STERIZONE® VP4 Sterilizers.”

“VP4 cost less than [competitor] in long run”

“Service Expansion: added sleep center, ENT scopes, endoscopy reprocessing, neurosurgeon…”

Proven Value Proposition – Independent of Customer Size

“STERIZONE® VP4 50% less cost per instrument sterilized than competitor”

“Decreased Number of Cycles”

STERIZONE® VP4 Sterilizer is 3 times more efficient than competitor

1-200 Beds 600+ Beds 201-600 Beds

* Based on actual 2017 customer surveys as compared to competitive low temperature hydrogen peroxide sterilizers. Results will vary depending on the customer and use profile.

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Commercialization Approach - CSSD

SUPPORT WITH DIRECT SALES, CLINICAL AND

TECHNICAL PERSONNEL

LEVERAGE EARLY ADOPTERS

• Over 50 sterilizers installed in US and Canada

• <200 beds to >1,000 beds+

INCREASE MARKET AWARENESS

TSO3 to Lead Messaging in Co-Commercialization Strategy with Getinge

ESTABLISH STRONG CUSTOMER

TARGETING METRICS

• High Use Facilities • Heavy Orthopedic and

Robotic Surgical Centers • Heavy Industry and

Society Presence

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Opportunity – GI Endoscopy Reprocessing

TOTAL ADDRESSABLE

MARKET

One Core Technology – Two Markets

1) The American Hospital Association, US Dept. of Health and Human Services, 2) Centers for Disease Control and Prevention 3) US Food & Drug Administration 4) Statistica.com 5) Eurostat 6) Market and Market, June 2016 7) Becker’s GI & Endoscopy “35 Statistics About GI/Endoscopy”

OR/CSSD $6.0B+6

GI 50M+

Procedures/year7

Operating Room & Central Sterile Supply Department

U.S. ~10,000 Hospitals & Ambulatory Surgery Centers1 Canada ~1,400 Hospitals4

Europe ~15,000 Hospitals5

Gastrointestinal

~ 15M colonoscopies performed annually2

> 500,000 ERCP Procedures (endoscopic retrograde cholangiopancreatographies) performed annually3

Established Base Business Emerging Opportunity

Gastrointestinal Endoscope Reprocessing

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SUPERBUG = Antimicrobial Resistant Bacteria

2 million+ Americans suffer from antibiotic-resistant bacteria annually – 23,000 die1

CRE is resistant to most available antibiotics - up to 50% of infected patients die2

CRE infections growing and linked to endoscope use: seven incidents and two deaths at UCLA Medical Center3

ECRI Institute’s 2016 Top 10 Health Technology Hazards List: No. 1 concern is inadequately-cleaned endoscopes4

1)Centers for Disease Control (CDC) 2) CDC Carbapenem-resistant Enterobacteriaceae in Healthcare Settings 3)Associated Press, February 20, 2015 and Los Angeles Times, January 26, 2016 4) ECRI Institute

Endoscopes & Superbugs – A Future of Sterilization

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Old

Modernizing GI Endoscope Reprocessing

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“Despite reprocessing in accordance with US guidelines, viable microbes and biologic debris persisted in clinically used [GI] endoscopes, suggesting current reprocessing guidelines are not sufficient to ensure successful decontamination. “Residual contamination was detected on multiple components after reprocessing colonoscopes and EGDs in accordance with guidelines…viable microbes were recovered from patient-ready endoscopes (i.e., 64% post-HLD, 9% post-storage).” - American Journal of Infection Control (with Mayo Clinic), 2015

“…Despite adherence to strict guidelines…bacteria can at times remain on these scopes…microbial contamination was detected in 5% of more than 4,000 individual specimens collected after cleaning.” - Providence Health & Services, Seattle Times, June 2016 “Strong Evidence for Sterilization of Endoscopes

Presented at Stakeholder Meeting”

- AAMI, September 2017

Decades old processes with incremental improvement

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Technology Advancement

Patient and Medical Facility Demand

Regulatory Change

• Patient Safety

• Litigation

• Cost Reduction

• STERIZONE® VP4 Sterilizer

• FDA Regulation Advancement

• Industry Dialogue and Guidelines

How Change Happens

Market Change

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Duodenoscopes – Attempts to deal with Identified Risk

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Pentax Medical • February 7, 2018

• Urgent Medical Device Correction and Removal (USA only) • Replace elevator mechanism, O-ring seal & distal cap

• January 17, 2017 • Design issues that could lead to increased risk of infection

• February 19, 2016 • FDA Safety Communication

• Updated reprocessing protocols

Olympus Canada • November 1, 2017

• Quality issue with application of adhesive during previous repair • Immediately discontinue

Olympus America Inc. • January 15, 2015

• Urgent Medical Device Removal and Corrective Action • Replace forceps elevator mechanism

FujiFilm • July 21, 2017

• Urgent Medical Device Correction and Removal • Replacement of Forceps elevator mechanism, O-ring seal, distal cap

O-ring seal

Elevator mechanism

Adhesive

Distal cap

Source: FDA

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GI Commercialization Approach

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“Strong Evidence for Sterilization of

Endoscopes Presented at Stakeholder

Meeting”

- AAMI, September 2017

Value Proposition to Hospital

• Improve Patient Safety

• Manage Reputational Risk

• Manage Litigation Risk

• Future Proofing the CSSD

Evidence Based Practice:

• Leverage Existing Industry Leading Claims

• Colonoscopes and Gastroscopes

• Higher Efficiency Processing of Smaller Scopes

• Support current submission for Duodenoscope Claim addition

• Sterilize Known/Suspected Contaminants

• Establish Frequency of Sterilization

• Leverage CSSD Installation

• Move to G.I. Placements

Next Generation Technology

Extensive Patent Portfolio

Razor/Razorblade Business Model

FDA-cleared Device for Terminal Sterilization of Colonoscopes and other flexible endoscopes

SUMMARY

Co-Commercial Strategy for North America with Global Distribution Partner

Financially Sound

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Key Stats & Target Business Model (TSX: TOS) /// All Dollars in USD, Unless Noted Otherwise

(mrq) = most recent quarter at September 30, 2017 * 2017 financial data is of September 30, 2017

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