RE:RE:RE:RE 40 shippedEuropean Expansion Getinge continued to launch the STERIZONE VP4 Sterilizer in Europe in the first half of 2017. Key sales and marketing staff have been hired by Getinge and training sessions have occurred. In 2016, in support of a planned European product launch in the first quarter of 2017, TSO3 completed development of a double door or pass-through option for the STERIZONE VP4 Sterilizer. Pass- through systems are highly desirable in certain sterilization department designs where a wall separates dirty from clean and clean from sterile inventory an approach favoured by many European hospitals. While the double door option is less popular in the US, the Company plans to pursue clearance to sell the device in the US in the ordinary course. In addition to completing the double door development, the Company initiated studies in France in support of obtaining Prion inactivation claims for that market. Prions are implicated in diseases such as transmissible spongiform encephalopathies which cause bovine spongiform encephalopathy (BSE), frequently referred to as mad cow disease. TSO3 is conducting tests using the standard protocol for prions (PSP), a protocol established by the French regulatory agency ANSM (formerly referred to Afssaps). Initial studies conducted in France indicate that the STERIZONE VP4 Sterilizer is effective under in vitro conditions. The study now extends to include additional in vitro and in vivo testing. Prion inactivation claims are required in the French market when medical devices are used in selected high risk surgeries such as neurological and ophthalmic procedures. Intellectual Property Considering the time and investment required to develop new products and obtain marketing authorization, the Company places considerable importance on protecting its research findings, trade secrets and technologies. As of June 30, 2017, TSO3 had 103 issued patents or patent applications pending, with 47 relating specifically to the Companys STERIZONE VP4 Sterilizer and related technology. TSO3 relies on a combination of patents, laws, trade secrets, non-disclosure agreements and various contractual arrangements to protect its exclusive technology. Despite the effort, nothing can guarantee that TSO3s protective measures are enforceable or sufficient to prevent illicit appropriation of its technology or development of the same or similar technology by a third party. 7 Q2-2017 On September 29, 2010, TSO3 filed patent applications for its innovations related to hydrogen peroxide alone and hydrogen peroxide and ozone sterilization systems and methods to be protected in the United States, Europe and various other countries including Japan. During the first quarter of 2013, and in 2015, TSO3 filed a number of divisional patent applications in all of the countries mentioned above to protect most of individual innovative concepts disclosed in the original application. Several patents on technology embedded in the STERIZONE Sterilization System have now been granted while the other applications are still pending. In September 2014, TSO3 filed a new International patent application on its innovative methods to further improve compatibility under differing load conditions for surgical instruments and accessories. In 2015, the US Patent Office and the Canadian Patent Office each granted to the Company a first patent on a core aspect of the technology embedded in the TSO3 STERIZONE Sterilization System. Also in 2015, six additional Japanese patents have been granted (seven granted patents) while the European Patent Office notified its decision to grant two additional patents (seven granted patents in force in up to 13 European countries). At the end of 2015, TSO3 also filed new US and international patent applications related to biological indicators (BI) used to monitor effectiveness of a sterilization process. In 2016, the US Patent Office granted to the Company six additional patents covering important aspects of TSO3's technology and mostly embedded in the STERIZONE VP4 Sterilizer. Also in 2016: TSO3 filed new divisional patent applications covering additional critical aspects of TSO3s technology in US and Europe to still strengthen patent protection of the STERIZONE Sterilization System; A first patent covering the technology embedded in the STERIZONE VP4 Sterilizer has been granted in Mexico to further expand the geographical patent protection coverage of the Company; An International Patent Application previously filed on innovative methods to further improve compatibility under differing load conditions has now entered the national phase in several countries, including the United States. During the first quarter of 2017, the Company has been notified by the Canadian Patent Office of its decision to grant a second and a third additional patent covering important aspects of TSO3's technology while a second patent has been granted in Mexico. In connection with the international patent application filed in 2015 and related to biological indicators (BI) used to monitor effectiveness of a sterilization process, the Company received a Preliminary International Examination Report stating that all the submitted claims are considered patentable. During the second quarter of 2017: The Japanese Patent Office granted to the Company an eighth patent on an additional critical aspect of TSO3s technology to further strengthen patent protection of the STERIZONE Sterilization System; A third patent which covers a core aspect of the technology embedded in the STERIZONE Sterilization System has been granted in Mexico; A first patent covering another core aspect of the technology embedded in the STERIZONE Sterilization System has been granted to the Company in South Korea to further expand the geographical patent protection coverage of the Company; 8 Q2-2017 The Canadian Patent Office allowed to the Company a fourth patent which covers an important aspect of TSO3's technology embedded in the STERIZONE Sterilization System; The Patent Office of South Africa granted to the Company a first patent on its innovative methods further improving compatibility under differing load conditions for surgical instruments and accessories; An International Patent Application previously filed on biological indicators (BI) used to monitor effectiveness of a sterilization process has now entered the national phase in several countries. Other patent applications are still pending in the United States as well as elsewhere in the world. TSO3s unique Dynamic Sterilant Delivery SystemTM is core to the differentiation of its products and its protection enhances the Company's value. Trademarks are important assets of the Company. STERIZONE is a registered trademark of TSO3 in the United States, Canada and Europe while STERIZONE TECHNOLOGY is registered in the name of TSO3 in not less than 43 countries. 2017 Focus In 2017, TSO3 will continue to focus its resources to help Getinge achieve its objectives. To this end, TSO3 will be expanding training and sales meetings and further invest in marketing and sales collateral in support of the deployment of the STERIZONE VP4 Sterilizers in the traditional low temperature sterilization market in the United States and Europe, and will continue to work collaboratively with Getinge with respect to launching into additional targeted international markets. Additionally, the Company has expanded use of its existing laboratory in Qubec and its new laboratory in South Carolina in support of its traditional device compatibility testing, endoscope compatibility testing and new product development. Such efforts will help the Company to demonstrate its technology and educate Getinge and the hospitals on the impact its technologies can have on reprocessing efficiency, effectiveness, throughput and simplicity, as well as endoscope terminal sterilization. The Company will experience additional demand for consumables, warranty and service related activities, as more of the Companys STERIZONE VP4 Sterilizers are installed in hospitals and other medical facilities. The Company will continue to expand its consumables production and delivery capabilities in Canada, in the United States and in Europe. On July 20, 2017, the Company announced that it had filed a 510(k) submission with US regulators for its STERIZONE VP4 Sterilizer for the terminal sterilization of duodenoscopes used in endoscopic retrograde cholangio-pancreatography (ERCP) procedures. If awarded such claim, TSO3s STERIZONE VP4 Sterilizer would become the first and only validated sterilizer technology in the US with a cleared label claim for the terminal sterilization of duodenoscopes. The Companys filing is supported by laboratory data that validates that the STERIZONE VP4 Sterilizer, with its dual sterilants of hydrogen peroxide and ozone, can terminally sterilize multi-channel flexible endoscopes with a distal end elevator mechanism (duodenovideoscopes). If received, such US clearance would match existing claims already made by the Company in Canada and Europe.