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Patient Safety Technologies Reports Third Quarter 2012 Results

IRVINE, Calif., Nov. 5, 2012 /PRNewswire/ -- Patient Safety Technologies, Inc. (the "Company", OTCBB: PSTX, OTCQB: PSTX) today announced results for its third quarter of 2012 ended September 30th, 2012.

Expanded Customer Base and Financial Highlights
During the third quarter of 2012 the Company successfully implemented its SurgiCount Safety-Sponge® System in an additional 50 facilities, growing its total installed customer base to 265 as of September 30th, 2012.  This compares to 79 facilities as of the end of the third quarter of 2011 and 99 as of the end of the fourth quarter of 2011, representing year-to-date and year-over-year growth of 168% and 235%, respectively.  Additionally, subsequent to the end of the third quarter 2012 the Company has successfully implemented the Safety-Sponge® System in an additional 4 facilities through the date of this press release and has signed agreements with additional stand-alone hospitals and hospital systems representing an additional 17 facilities.  This expanded user base brings the total facilities currently using the Safety-Sponge® System and those covered with signed agreements and expected implementations to 286.  Although not necessarily proportional to reported revenues, the number of hospitals using the Company's products is a good indicator of its underlying business.

Total revenue for the third quarter of 2012 was $5.0 million. This compares with total revenue for the third quarter of 2011 of $2.2 million, representing year-over-year growth in reported quarterly revenue of 127%. 

Reported operating expenses totaled $2.4 million for the third quarter of 2012, an increase of $0.9 million compared to $1.5 million of operating expenses during the same period in 2011. The increase in operating expenses was primarily due to higher one-time costs associated with the 50 successful new customer implementations during the third quarter of 2012 as compared to 2 implementations during the third quarter of 2011.  Total estimated one-time implementation costs in the third quarter of 2012 were approximately $0.6 million, as compared to a relatively negligible amount of implementation costs during the third quarter of 2011.During the third quarter of 2012 the Company generated positive Adjusted Operating Income (a non-GAAP measure defined below) of $0.7 million and a GAAP operating loss of $0.1 million.  This compares with an Adjusted Operating Loss of $0.1 million and a GAAP operating loss of $0.5 million generated during the third quarter of 2011.  The primary reason for reporting positive Adjusted Operating Income during the third quarter of 2012 as compared to an Adjusted Operating Loss during the comparable prior year period, was higher reported revenues associated with the significantly larger number of customer facilities during the third quarter of 2012 versus the prior year period.

"In the third quarter we successfully continued the strong customer growth that we realized throughout the first half of the year, adding another 50 new hospitals during the quarter which helped us achieve 235% year-over-year growth in our installed base.  This continued market penetration drove the significant growth in our reported revenues and has brought us to a size where we can more readily demonstrate the operating leverage of our business by reporting positive adjusted operating income," stated Brian E. Stewart, President and Chief Executive Officer of Patient Safety Technologies, Inc.The Company's third quarter of 2012 financial statements are included in its Quarterly Report on Form 10-Q filed by the Company on November 5th, 2012 and available at the SEC's website at of GAAP to Non-GAAP Results (Unaudited)Non-GAAP Measures:

 For the Three Months EndedFor the Nine Months EndedSeptember 30,September 30,in thousands2012201120122011Reported Revenue$





6,725.6Less: Forward Order effect-


(1,079.4)Normalized Revenue4,972.5


5,646.2Reported Operating Loss$






Forward Order effect-



Stock based compensation209.5



Depreciation and amortization600.2


639.1Adjusted Operating Income/(Loss)$





(1,239.3)To supplement the Company's presentation of revenue and operating income and (loss) measured in accordance with GAAP, we use a non-GAAP measure of revenue, herein defined as Normalized Revenue, and a non-GAAP measure of operating income, herein defined as Adjusted Operating Income (in the event this amount is negative it is herein defined as Adjusted Operating Loss).  Reconciliation of GAAP revenue to Normalized Revenue and operating income to Adjusted Operating Income or Loss for the third quarters of 2012 and 2011 are shown above.  How we define these non-GAAP measures herein may not be consistent with how we have defined this non-GAAP measure historically, including but not limited to including the impact from Forward Order revenue, or stocking order revenue (see the Company's Quarterly Report on Form 10-Q for a discussion on the Forward Order).

Non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance, prospects for the future and as a means to evaluate period-to-period comparisons. The Company believes that the use of non-GAAP revenue and operating income provides meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results. The Company believes these non-GAAP measures, which exclude the effects of the Forward Order and the non-cash expenses of depreciation, amortization and stock based compensation (and occasionally along with certain events believed to be one time in nature) when viewed with GAAP results and the accompanying reconciliation, enhances the comparability of results against prior periods and allows for greater transparency of financial results.  The Company believes these non-GAAP measures facilitate management's internal comparison of the Company's financial performance to that of prior periods as well as trend analysis for budgeting and planning purposes. The presentation of these non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

About Patient Safety Technologies, Inc. and SurgiCount Medical
Patient Safety Technologies, Inc., through its wholly-owned operating subsidiary SurgiCount Medical, Inc., provides the Safety-Sponge® System, a solution proven to improve patient safety and reduce healthcare costs by helping prevent one of the most common errors in surgery, retained surgical sponges.  For more information, contact SurgiCount Medical, Inc. at (949) 387-2277 or visit

Forward Looking Statements

Statements in this press release regarding our business that are not historical facts are "forward-looking statements" (within the meaning of Section 21E of the Securities Exchange Act of 1934) that involve risks and uncertainties. Forward-looking statements reflect our management's current views with respect to future events and financial performance; however, you should not put undue reliance on these statements.  When used, the words "anticipates," "believes," "expects," "intends," "future," and other similar expressions, without limitation, identify forward-looking statements.  Forward-looking statements are not guarantees of future performance and are inherently subject to uncertainties and other factors which could cause actual results to differ materially from the forward-looking statements. These factors and uncertainties include but are not limited to: our ability to implement in all hospitals within the larger hospitals organizations with which we have agreements, our ability to implement in those hospitals with which we have scheduled implementations, the early stage of adoption of our Safety-Sponge® System and the need to expand adoption of our Safety-Sponge® System; the impact on our future revenue and cash flows from the ordering patterns of our exclusive distributor Cardinal Health; our need for additional financing to support our business; our reliance on third-party manufacturers, some of whom are sole-source suppliers, and on our exclusive distributor; and any inability to successfully protect our intellectual property portfolio.  In light of the risks and uncertainties, there can be no assurance that any forward-looking statement will in fact prove to be correct.

Forward-looking statements can be affected by many other factors, including, those described in the "Business", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Factors Affecting Future Results" sections of our Annual Report on Form 10-K for 2011, our Quarterly Reports on Form 10-Q and in our other public filings. These documents are available online through the SEC's website, Forward-looking statements are based on information presently available to senior management, and we have not assumed any duty to update any forward-looking statements.

PATIENT SAFETY TECHNOLOGIES, INC.Condensed Consolidated Balance Sheets September 30,

2012December 31,2011Assets(Unaudited)Current assets:Cash and cash equivalents$


3,668,524Accounts receivable1,653,2631,307,510Inventories, net3,977,3812,772,117Prepaid expenses81,752180,802Total current assets11,166,8047,928,953Property and equipment, net4,733,2491,691,961Goodwill1,832,0271,832,027Patents, net2,220,4362,464,142Other assets37,46240,463Total assets$


13,957,546Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable$


2,808,524Accrued liabilities602,402574,917Deferred revenue – current portion821,766278,002Total current liabilities6,433,8573,661,443Deferred revenue1,085,040267,025Total liabilities7,518,8973,928,468Stockholders' equity Total stockholders' equity12,471,08110,029,078Total liabilities and stockholders' equity$



PATIENT SAFETY TECHNOLOGIES, INC.Condensed Consolidated Statements of Operations
(Unaudited) Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Revenues$




6,725,646Cost of revenue2,704,1401,190,8797,118,0193,528,110Gross profit2,268,336995,3415,360,1913,197,536Operating expenses:Research and development111,2271,460400,71255,220Sales and marketing1,350,924716,4913,734,5312,049,943General and administrative955,840806,5443,200,4092,864,024Total operating expenses2,417,9911,524,4957,335,6524,969,187Operating loss(149,655)(529,154)(1,975,461)(1,771,651)Other income (expense)Interest income (expense), net6723473,756(3,632)Interest expense – related party(35,926)—(35,926)—Gain on change in fair value of warrant derivative liability—303,222—527,844Other income (expense)———227,617Total other income(35,254)303,569(32,170)751,829Loss before income taxes(184,909)(225,585)(2,007,631)(1,019,822)Income tax (benefit) provision(546)(2,543)(4,258)(6,316)Net loss(185,455)(228,128)(2,011,889)(1,026,138)Preferred dividends(134,215)(125,498)(397,105)(374,954)Net loss applicable to common shareholders$




(1,401,092)Loss per common shareBasic and Dilutes$




(0.05)Weighted average common shares outstanding:Basic35,260,24333,782,03335,449,15630,606,468

SOURCE Patient Safety Technologies, Inc.
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