Dear Shareholders,

I am writing this letter while attending the 2018 International Association of Healthcare Central Service Materiel Management (IAHCSMM) annual conference and exposition. It has been some time since TSO3 has attended such a conference as a participant and exhibitor, as marketing activities were the responsibility of our distributor.

Our distribution partner, Getinge Infection Control AB, is also here and is displaying the TSO3STERIZONE® VP4 sterilizer in its booth along with its entire line of washers and steam sterilizers.

So how did TSO3 get here and where are we going commercially? In January 2018, TSO3 elected to reset its commercial strategy moving from an exclusive worldwide arrangement with Getinge to a co-commercial strategy in North America. This new agreement was signed because TSO3 believes customer uptake for the STERIZONE® VP4 Sterilizer should be faster.

As our relationship with Getinge evolved over the past two years, we believe that these recent modifications to our partnership will add speed and flexibility to our joint sales and marketing efforts, while addressing inventory levels.

So we are here at IAHCSMM, as we were at the AORN conference last month and will be at the SGNA and APIC conferences in the next two months. In accordance with the terms of our new agreement with Getinge, TSO3 is now building a funnel of opportunities and quoting direct business, and we currently expect to begin shipping sterilizers to end customers in the second half of 2018. The terms of our new agreement will also allow us, in the coming quarters, to be more transparent about our pipeline, the number of quotes, backlog, and sales to end users. As for our relationship with Getinge, it remains intact as we negotiate terms under which a new agreement could be signed. We both know that elimination of the current inventory is required and plans to accomplish this are underway.

Lastly, we are here at this conference with the only Food and Drug Administration (FDA) cleared sterilizer with the ability to sterilize multi-channeled flexible endoscopes. While we continue to wait to hear from the FDA on the decision to add duodenoscopes to our labeling, we are not simply standing by, rather we are leading education forums and bringing sterilization and endoscopy equipment thought leaders to the targeted customer base.



R.M. (Ric) Rumble, Director, President and Chief Executive Officer