Patient Safety Technologies, Inc. Reports Record Fourth Quarter and 2009 Year End Results

Fourth Quarter 2009 Revenues Increased 85% to $1.56 million and 2009 Annual Revenues Increased 62% to $4.50 million

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Apr 01, 2010, 09:15 ET

NEWTOWN, Pa., April 1 /PRNewswire-FirstCall/ -- Patient Safety Technologies, Inc. (OTC Bulletin Board: PSTX) announced record quarterly and annual revenues for the quarter and year ended December 31, 2009.

"I am pleased to announce that 2009 was a banner year on all fronts," said Steven H. Kane, President and Chief Executive Officer of Patient Safety Technologies, Inc. "Not only did we see record year over year revenue growth of 62% and significantly more momentum in our Q4-09 sales, but we also reached the landmark milestone of having had over 1,000,000 surgical procedures performed, utilizing over 25,000,000 Safety Sponges® without a single unintended retained sponge event. Additionally, we renewed our exclusive distribution agreement with Cardinal Health, which included an advance purchase of $10 million in safety sponge products and an $8 million prepayment." Kane added, "2009 also saw the implementation of the SurgiCount Indemnification Program, a dedicated insurance policy which insures hospitals that use the Safety Sponge® System in conjunction with our Citadel™ File Manager for up to $1,000,000 should a retained Safety Sponge® occur during a surgical procedure. This indemnification program, in conjunction with an expanded sales force, a dedicated clinical implementation team, and a streamlined acquisition process, all contributed to a rapidly accelerating rate of adoption across all levels of hospitals. Among these hospitals is an increasing number of U.S. News & World Report's "America's Best Hospitals", which includes the University of California at San Francisco, Cleveland Clinic, Brigham and Women's, Mayo Clinic, and The Mount Sinai Hospital in New York."

Fourth Quarter 2009 vs. Fourth Quarter 2008 Results

Revenue for the fourth quarter 2009 was $1,561,469, an increase of 85.2% from the $843,226 reported for the fourth quarter 2008. Fourth quarter 2009 gross margin of 36.2% decreased from fourth quarter 2008 gross margin of 45.4% primarily due to adjustments relating to our scanner program, distributor rebates and a year-end inventory reserve adjustment. Net loss for the fourth quarter 2009 was $6,737,537 compared a loss of $983,995 for the fourth quarter of 2008. This fourth quarter 2009 net loss included net non-cash charges of $4,263,025, while the fourth quarter of 2008 included net non-cash income of $632,089, for equity based compensation, issuance of warrants and change in our warrant derivative liability.

Full Year 2009

Revenues for the full year in 2009 were $4,503,535, an increase of 62.0% from the $2,779,871 reported for 2008. Gross margin for 2009 was 40.0% which increased from 35.3% reported for 2008 due to higher sales volumes of surgical sponge products. Net loss for 2009 was $17,531,255 compared a loss of $4,373,524 for 2008. The 2009 net loss included net non-cash charges of $10,790,832, while the 2008 net loss included net non-cash income of $916,062, for equity based compensation, issuance of warrants and change in our warrant derivative liability. Net loss per common share increased to ($0.90) per share in 2009 from ($0.31) per share in 2008.

Kane concluded, "In 2010, we are committed to build on this strong momentum, and to continue to develop and implement innovative programs and technology enhancements to make the Safety Sponge® System the standard of care in the hospital marketplace."

About Patient Safety Technologies, Inc.

Patient Safety Technologies, Inc., through its wholly owned operating subsidiary SurgiCount Medical, Inc., provides the Safety-Sponge^® 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. Retained foreign objects are among one of the most common surgical errors.

For more information, contact Patient Safety Technologies, Inc. at (215) 579-PSTX, or visit www.surgicountmedical.com.

Disclosure Notice

This press release may contain forward-looking statements regarding Patient Safety Technologies' current expectations of future events that involve risks and uncertainties, including, without limitation, the demand and market acceptance of our product and other aspects of our business. Such statements are based on management's current expectations and are subject to a number of substantial risks and uncertainties that could cause actual results or timeliness to differ materially from those addressed in the forward-looking statements. Factors that may cause such a difference are listed from time to time in reports filed by the Company with the U.S. Securities and Exchange Commission (SEC), including but not limited to risks described in our most recently filed Form 10-K under the caption "Risk Factors." Further information about these and other relevant risks and uncertainties may be found in Patient Safety Technologies' filings with the SEC, all of which are available from the SEC as well as other sources. Patient Safety Technologies undertakes no obligation to publicly update any forward-looking statements.

PATIENT SAFETY TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended December 31,		Year End December 31,
	2009	2008	2009	2008


Revenues	$ 1,561,469	$ 843,226	$ 4 ,503,535	$ 2,779,871
Cost of revenue	996,355	460,335	2,703,931	1,801,871
Gross profit	565,114	382,891	1,799,604	978,000

Operating expenses:
Research and development	52,765	102,802	321,116	270,858
Sales and marketing	114,141	722,573	1,926,580	2,516,045
General and administrative	5,194,886	1,315,986	10,357,021	5,206,574
Total operating expenses	5,361,792	2,177,361	12,604,717	7,993,477

Operating loss	(4,796,678)	(1,966,164)	(10,805,113)	(7,015,477)

Other income (expenses)
Loss on extinguishment of debt	(537,919)	—	(537,919)	—
Interest income (expense)	(94,422)	(78,865)	(383,485)	(332,755)
(Loss)/gain on change in fair value of warrant derivative liability	(1,276,878)	1,066,597	(5,564,125)	2,582,043
Amortization of debt discount	(116,768)	—	(588,374)	—
Realize loss on sale of assets, net	—	—	—	(90,564)
Gain (loss) on warrant exchange	—	—	164,226	—
Other income (expense)	3,218	1,008	5,138	43,800
Total other income (expense)	(2,022,769)	988,740	(6,904,539)	2,202,524

Loss before income taxes	(6,819,447)	(971,295)	(17,709,652)	(4,812,953)
Income tax benefit	81,910	(12,700)	178,397	439,429
Net loss	(6,737,537)	(983,995)	(17,531,255)	(4,373,524)
Preferred dividends	(19,163)	(19,163)	(76,650)	(76,650)
Net loss applicable to common shareholders	$ (6,756,700)	$ (1,003,158)	$ (17,607,905)	$ (4,450,174)

Net loss per common share – basic and diluted	$ (.29)	$ (.06)	$ (0.90)	$ (0.31)

Weighted average common shares outstanding:
Basic and diluted	23,446,976	17,044,026	19,537,938	14,451,582

PATIENT SAFETY TECHNOLOGIES, INC. BALANCE SHEET Consolidated Balance Sheets
	For the Year Ended
	December 31,
	2009	2008
Assets
Current assets:
Cash and cash equivalents	$ 3,446,726	$ 296,185
Accounts receivable	906,136	418,525
Inventories, net	565,823	199,909
Prepaid expenses	207,598	187,551
Total current assets	5,126,283	1,102,170

Restricted certificate of deposit	—	93,630
Notes receivable	—	121,065
Property and equipment, net	744,646	622,410
Goodwill	1,832,027	1,832,027
Patents, net	3,114,025	3,438,966
Long-term investment	666,667	666,667
Other assets	43,246	37,481
Total assets	$ 11,526,894	$ 7,914,416

Liabilities and Stockholders' (Deficit) Equity

Current liabilities
Accounts payable	$ 2,043,166	$ 909,333
Current portion of convertible note	1,424,558	1,424,558
Current portion of notes payable	—	1,100,000
Current portion of capital lease	19,330	—
Warrant derivative liability	3,666,336	1,761,878
Deferred revenue	8,099,144	—
Accrued liabilities	1,242,876	1,595,628
Total current liabilities	16,495,410	6,791,397

Long-term convertible notes, less current portion	—	51,377
Long-term capital lease, less current portion	58,274	—
Deferred tax liability	805,768	1,042,400
Total liabilities	17,359,452	7,885,174

Commitments and contingencies (Note 18)

Stockholders' (deficit) equity:
Series A preferred stock, $1.00 par value, cumulative 7% dividend:
1,000,000 shares authorized; 10,950 issued and outstanding at December 31, 2009 and December 31, 2008;
(Liquidation preference of $1.2 million at December 31, 2009 and December 31, 2008)	10,950	10,950
Common stock, $0.33 par value: 100,000,000 shares authorized;
23,456,063 shares issued and outstanding at December 31, 2009; 17,197,511 shares issued and outstanding at December 31, 2008	7,740,501	5,675,298
Additional paid-in capital	44,834,321	36,033,542
Accumulated deficit	(58,418,330)	(41,690,548)
Total stockholders' (deficit) equity	(5,832,558)	29,242
Total liabilities and stockholders' (deficit) equity	$ 11,526,894	$ 7,914,416