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"We are pleased to see the significant traction we are getting athealthcare institutions across the U.S. translate into increasing adoption ofour Safety-Sponge(TM) System. With over six million Safety-Sponges(TM) havingbeen used in over 200,000 procedures with no known incidents of retainedsponges, current and potential customers are increasingly seeing both theclinical and economic validation of using our solution. We believe we arewell positioned to continue to expand our market leadership position and drivecontinued strong revenue growth," stated Bill Adams, Chief Executive Officerof Patient Safety Technologies.
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Third Quarter Results
Revenues for the third quarter of 2008 were $880 thousand, an increase of313% over the prior year third quarter revenues of $213 thousand.
Gross profit for the third quarter of 2008 was $258 thousand, or 29% ofrevenues, an increase of 155% over the prior year third quarter gross profitof $101 thousand, or 47% of revenues. The gross margin decrease in the thirdquarter of 2008 was primarily attributable to an inventory write-down andhigher proportional sales of lower margin hardware products. The Companybelieves the inventory write-down is one-time in nature, as it relatesprimarily to remaining Safety-Sponge(TM) inventory that did not include theCompany's "Master Tag" product improvement. The higher proportional sales oflower margin hardware products results from the increased first time productadoptions by healthcare institutions.
"We are excited about the response to our Master Tag concept, a productimprovement that has significantly increased the ease of use of theSafety-Sponge(TM) System," stated Mr. Adams. "As we execute on our razor /razorblade business model, as our first time implementations continue, salesof our lower margin SurgiCounter(TM) hardware will be proportionately high,resulting in a temporary negative effect on gross margins. However thegrowing installed base of our hardware will serve to drive higher margin,recurring revenues from our Safety-Sponge(TM) products."
Income from continuing operations for the third quarter of 2008 was $224thousand. This compares to a loss of $1.9 million in the third quarter of theprior year.
About SurgiCount Medical
SurgiCount Medical, Inc., a division of Patient Safety Technologies, Inc.(OTCBB:PSTX), manufacturers the SurgiCount Safety-Sponge(TM) System, apatented FDA 510k approved turn key solution to retained surgical sponges. Thesystem is comprised of surgical sponges and towels affixed with an inseparabletwo-dimensional data matrix bar code and a SurgiCount scanner to record eachsponge before and after an operation. The SurgiCount Safety-Sponge(TM) Systemis also the only retained sponge prevention system to offer complete spongeinventory tracking, reporting features and integration with a medicalfacility's IT system. For more information, contact SurgiCount at(951) 587-6201, or visit www.surgicountmedical.com .
Forward Looking Statements
This press release may contain "forward-looking statements" within themeaning of the Private Securities Litigation Reform Act of 1995 that involverisks and uncertainty. Such statements are based on management's currentexpectations and are subject to a number of risks and uncertainties that couldcause actual results to differ materially from those described in theforward-looking statements. These forward-looking statements include, but arenot limited to: SurgiCount Medical's ability to accelerate product momentum,bring to market differentiated products and commercialize its productpipeline. Patient Safety Technologies cautions investors that there can be noassurance that actual results or business conditions will not differmaterially from those projected or suggested in such forward-lookingstatements as a result of various factors, including, but not limited to, thefollowing: the growth rate of the sponge market, uncertainty of success indeveloping new products or products currently in SurgiCount's pipeline, theability to develop and expand its business in the United States, unanticipatedexpenses or liabilities or other adverse events affecting cash flow orSurgiCount's ability to successfully control its costs or achieveprofitability uncertainty of additional funding, SurgiCount's ability tocompete with other competing products and with emerging new technologies,product liability exposure, patent infringement claims and claims related toSurgiCount's intellectual property. Please refer to the risk detailed fromtime to time in Patients Safety Technologies SEC reports, including quarterlyreports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.Patient Safety Technologies, Inc. disclaims any intention or obligation toupdate or revise any forward-looking statements, whether a result of newinformation, future events or otherwise, unless required by law.PATIENT SAFETY TECHNOLOGIES, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except par value) September 30, December 31, 2008 2007 Assets Current assets: Cash and cash equivalents $1,038 $405 Accounts receivable 325 72 Inventories 35 - Prepaid expenses 309 105 Total current assets 1,707 582 Restricted certificate of deposit 87 87 Notes receivable 154 154 Property and equipment, net 721 663 Assets held for sale, net 90 406 Goodwill 1,832 1,832 Patents, net 3,520 3,764 Long-term investment 667 667 Other assets 29 19 Total assets $8,807 $8,174 Liabilities and Stockholders' (Deficit) Equity Current liabilities Accounts payable $603 $709 Current portion of long term debt 2,946 1,172 Accrued liabilities 3,303 521 Total current liabilities 6,852 2,402 Long-term debt, less current portion - 2,531 Deferred tax liabilities 1,403 1,499 Total liabilities 8,255 6,431 Stockholders' equity: Convertible preferred stock, $1.00 par value, cumulative 7% dividend: 1,000 shares authorized; 11 issued and outstanding at September 30, 2008 and December 31, 2007 (Liquidation preference of $1.2 million at September 30, 2008 and December 31, 2007 11 11 Common stock, $0.33 par value: 25,000 shares authorized; 16,673 shares issued and outstanding at September 30, 2008; 12,055 shares issued and outstanding at December 31, 2007 5,502 3,978 Additional paid-in capital 35,408 34,320 Accumulated deficit (40,369) (36,567) Total stockholders' (deficit) equity 552 1,743 Total liabilities and stockholders' equity $8,808 $8,174 PATIENT SAFETY TECHNOLOGIES, INC. AND SUBSIDIARY Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) For The Three Months Ended For The Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Revenues $880 $213 $1,937 $834 Cost of revenue 622 112 1,342 514 Gross profit 258 101 595 320 Operating expenses: Research and development 87 39 168 91 Sales and marketing 662 418 1,796 1,090 General and administrative 958 764 3,680 2,790 Total operating expenses 1,707 1,221 5,644 3,971 Operating loss (1,449) (1,120) (5,049) (3,651) Other income (expenses): Interest expense (79) (810) (254) (1,414) Change in fair value of warrant liability 1,683 - 1,515 - Realized gain (loss) assets held for sale, net - - (25) 22 Unrealized loss on assets held for sale, net - - (65) - Other income 36 - 35 - Total other income (expense) 1,640 (810) 1,206 (1,392) Income (loss) from continuing operations before income taxes 191 (1,931) (3,843) (5,043) Income tax provision 33 29 98 88 Income (loss) from continuing operations 224 (1,901) (3,744) (4,955) Loss from discontinued operations - (19) - (166) Net income (loss) 224 (1,920) (3,745) (5,121) Preferred dividends (19) (19) (57) (57) Net income (loss) applicable to common shareholders $205 $(1,940) $(3,802) $(5,178) Basic net income (loss) per common share Continuing operations $0.01 $(0.18) $(0.28) $(0.53) Discontinued operations $- $(0.00) $- $(0.02) Net income (loss) $0.01 $(0.18) $(0.28) $(0.55) Diluted net income (loss) per common share Continuing operations $0.01 $(0.18) $(0.28) $(0.53) Discontinued operations $0 $0.00 $- $(0.02) Net income (loss) $0.01 $(0.18) $(0.28) $(0.55) Weighted average common shares outstanding: Basic 15,615 10,626 13,588 9,501 Diluted 29,005 19,788 26,978 18,663
SOURCE Patient Safety Technologies
