Third Quarter 2009 Revenues increased 11% to $978 thousand

TEMECULA, Calif., Nov. 17 /PRNewswire-FirstCall/ -- Patient Safety Technologies, Inc. (OTC Bulletin Board: PSTX) today announced third quarter 2009 results.

"We are continuing to see strong year over year growth and healthy increases in our gross margins," stated Steven H. Kane, Chief Executive Officer of Patient Safety Technologies. "While third quarter revenues from sales of safety sponges were comparable with revenues in the second quarter, we expect that significantly increased marketing activity, coupled with the upcoming implementation of recently signed accounts, should have a significant impact on future revenues. During the last quarter, PSTX reached the major milestone of having had a cumulative total of 20 million sponges used in over 700,000 surgical procedures."

"Additionally," said Kane, "our recently launched indemnification program, whereby hospitals using the Safety-Sponge(TM) System in conjunction with PSTX's proprietary data manager, 'Citadel(TM)' are insured for up to $1 million per retained foreign object ('RFO') event, has increased interest in and accelerated adoption of PSTX system." Kane added: "As hospitals continue to embrace the PSTX solution to RFOs, we are actively expanding our sales and clinical presence in the marketplace to keep pace with our growing customer base."

Third Quarter Results

Revenues for the third quarter 2009 were $978 thousand, an increase of 11% from the $880 thousand reported for third quarter 2008. Third quarter 2009 gross margin was 44%, an improvement over third quarter 2008 gross margin of 29%. The improvement in gross margin was due primarily to the change in our business model, which shifted our sales mix to primarily sales of safety sponges (which have higher margins), and permitted us to depreciate most of the expense associated with our SurgiCounter(TM) scanners over the life of the scanner, thereby significantly reducing our cost of revenues.

Operating loss for the third quarter 2009 was $1.5 million compared $1.4 million for the third quarter of 2008. Increased operating loss was the result of increased general and administrative expenses, which were only partially offset by higher gross profits on increased sales and lower costs of revenues. Net loss applicable to common shareholders for the third quarter was $3.4 million compared to net income of $0.2 million in the third quarter of 2008. The increase in our net loss was primarily driven by a significant increase in the fair value of our warrant derivative liability as measured by the increase in the publicly quoted price of our stock, which resulted in a non-cash expense of $1.8 million in the three months ended September 30, 2009, compared to income of $1.7 million in the same period in 2008.

Revenues for the nine months ended September 30, 2009 were $2.9 million, an increase of 52% from the $1.9 million reported for the nine months ended September 30, 2008. Gross margin for the nine months ended September 30, 2009 was 42% compared to 31% for the nine months ended September 30, 2008. The improvement in gross margin was due primarily to the change in our business model, which shifted our sales mix to primarily sales of safety sponges (which have higher margins), and permitted us to depreciate most of the expense associated with our SurgiCounter(TM) scanners over the life of the scanner, thereby significantly reducing our cost of revenues. Net loss for the nine months ended September 30, 2009 was $10.9 million compared to a loss of $3.8 million for the nine months ended September 30, 2008. The increase in our net loss was primarily driven by a significant increase in the fair value of our warrant derivative liability as measured by the increase in the publicly quoted price of our stock, which resulted in a non-cash expense of $4.3 million in the nine months ended September 30, 2009, compared to income of $1.5 million in the same period in 2008.

About Patient Safety Technologies, Inc. and SurgiCount Medical, Inc.

Patient Safety Technologies, Inc., through its wholly owned operating subsidiary SurgiCount Medical, Inc., provides the Safety-Sponge(TM) System, a system designed to improve the standard of patient care and reduce healthcare costs by preventing the occurrence of surgical sponges and other foreign objects from being left inside patients after surgery. RFOs are among one of the most common surgical errors.

For more information, contact SurgiCount at (951) 587-6201, or visit www.surgicountmedical.com.

                    PATIENT SAFETY TECHNOLOGIES, INC. AND SUBSIDIARY
                     Condensed Consolidated Statements of Operations
                          (In thousands, except per share data)
                                        (unaudited)

                                        For the Quarter   For the Nine Months
                                            Ending              Ending
                                         September 30,       September 30,
                                        2009      2008      2009      2008


    Revenues                            $978      $880    $2,942    $1,937
    Cost of revenue                      540       622     1,708     1,342
    Gross profit                         438       258     1,234       595

    Operating expenses:
        Research and development          69        87       268       168
        Sales and marketing              610       662     1,812     1,796
        General and administrative     1,257       958     5,162     3,680
            Total operating expenses   1,936     1,707     7,242     5,644

    Operating loss                    (1,498)   (1,449)   (6,008)   (5,049)

    Other (expenses) income:
        Interest expense                (304)      (79)     (744)     (254)
        Change in fair value of
         warrant derivative
         liability                    (1,762)    1,683    (4,333)    1,515
        Realized loss assets held
         for sale, net                     -         -         -       (25)
        Unrealized loss on assets
         held for sale, net                -         -         -       (65)
        Gain on warrant exchange         193         -       193         -
        Other (expenses) income            2        36         2        35
    Total other (expenses) income     (1,871)    1,640    (4,882)    1,206

    (Loss) income from operations
     before income taxes              (3,369)      191   (10,890)   (3,843)
    Income tax benefit                    32        33        96        98
    Net (loss) income                 (3,337)      224   (10,794)   (3,745)
    Preferred dividends                  (19)      (19)      (57)      (57)
    Net (loss) income applicable
     to common shareholders          $(3,356)     $205  $(10,851)  $(3,802)

    Net (loss) income applicable
     to common shareholders - basic
     and diluted
    Basic                             $(0.17)    $0.01    $(0.60)   $(0.28)
    Diluted                           $(0.17)    $0.01    $(0.60)   $(0.28)
    Weighted average common shares
     outstanding basic and diluted:
    Basic                             20,229    15,615    18,220    13,588
    Diluted                           20,229    29,005    18,220    13,588


    The accompanying notes are an integral part of these condensed
    consolidated interim financial statements.

                    PATIENT SAFETY TECHNOLOGIES, INC. AND SUBSIDIARY
                           Condensed Consolidated Balance Sheets
                             (In thousands, except par value)

                                                   September 30,  December 31,
                                                          2009          2009
                   Assets                            (unaudited)

    Current assets:
        Cash and cash equivalents                         $779          $296
        Accounts receivable                                186           418
        Inventories, net                                   730           200
        Prepaid expenses                                   198           188
            Total current assets                         1,893         1,102

    Restricted certificate of deposit                       94            94
    Notes receivable                                       121           121
    Property and equipment, net                            466           622
    Goodwill                                             1,832         1,832
    Patents, net                                         3,195         3,439
    Long-term investment                                   667           667
    Other assets                                            29            37
            Total assets                                $8,297        $7,914

         Liabilities and Stockholders' (Deficit) Equity

    Current liabilities
        Accounts payable                                $1,806          $909
        Current portion of convertible debentures        1,425         1,425
        Current portion of notes payable                   600         1,100
        Warrant derivative liability                     2,399         1,762
        Accrued liabilities                              1,360         1,596
            Total current liabilities                    7,590         6,792
        Long-term convertible debentures, less current
         portion                                            55            51
        Long-term notes payable, less current portion    1,600             -
        Deferred tax liability                             945         1,042
            Total liabilities                           10,190         7,885

    Stockholders' (deficit) equity:
        Convertible preferred stock, $1.00 par value,
         cumulative 7% dividend:
         1,000 shares authorized; 11 issued and
         outstanding at September 30, 2009 and December
         31, 2008;
         (Liquidation preference of $1.2 million at
         September  30, 2009 and December 31, 2008          11            11
        Common stock, $0.33 par value: 100,000 and
         25,000 shares authorized; 23,409 and 17,180
         shares issued and outstanding at September 30,
         2009 and December 31, 2008 respectively;        7,725         5,675
        Additional paid-in capital                      43,702        36,034
        Accumulated deficit                            (53,331)      (41,691)
            Total stockholders' (deficit) equity        (1,893)           29
            Total liabilities and stockholders' equity  $8,297        $7,914


    The accompanying notes are an integral part of these condensed
    consolidated interim financial statements.

SOURCE Patient Safety Technologies, Inc.

Back to top

RELATED LINKS
http://www.surgicountmedical.com