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Patient Safety Technologies Reports Second Quarter Results

TEMECULA, Calif., Aug. 6 /PRNewswire-FirstCall/ -- Patient Safety Technologies, Inc. (OTC Bulletin Board: PSTX) today announced record quarterly revenues.

"We are pleased to announce record second quarter revenues," stated Steven H. Kane, Chief Executive Officer of Patient Safety Technologies. "An increasing number of the nation's most prestigious medical institutions are adopting the Safety Sponge((TM)) System as the solution to the problem of retained surgical sponges. We see our unique technology progressing towards becoming the industry's standard of care. The company recently passed the 500,000 procedure milestone using our Safety Sponge((TM)) System, more than triple the sum of all of our competitors combined." Kane added, "Patient Safety Technologies is committed to applying its proven solutions to help hospitals face the challenges of improving patient safety, while at the same time increasing productivity and reducing costs. Additionally, we will continue to grow our potential market by working with the medical community to expand the application of our patented technology to address additional critical problem areas."

Second Quarter and Half-Year Results

Revenues for second quarter 2009 were $1.0 million, an increase of 85% over the $557 thousand reported for second quarter 2008, and an increase over first quarter 2009 revenue of $936 thousand. Second quarter 2009 sales of the company's core sponge products reached $1.0 million vs. $732 thousand in first quarter 2009. This 37% increase in sponge sales reflects the continued expansion in the company's installed customer base. Gross margin for the quarter ended June 30, 2009 was 40%, a decrease over the 41% gross margin for the quarter ended June 30, 2008

Loss from operations before income taxes for second quarter 2009 was comprised of $1.8 million from direct operations plus $2.2 million in non-cash warrant expense, totaling $4.0 million. This compares to a loss before income taxes of $2.4 million for second quarter of 2008. Warrant expense is based on derivative liability from our outstanding stock warrants, due to the appreciation in our stock price during the quarter.

Revenues for the six months ended June 30, 2009 were $2.0 million, an increase of 86% over the $1.1 million for the six months ended June 30, 2008. Gross margin for the six months ended June 30, 2009 was 41%, an increase over the 32% gross margin for the six months ended June 30, 2008. The increase in gross margin was primarily the result of increased sales of our core Safety-Sponge((TM)) products, which have a higher gross margin than other products.

Loss from operations before income taxes for the six months ended June 30, 2009 was $7.5 million compared to a loss of $4.0 million for the six months ended June 30, 2008. The increase in our loss from operations was primarily the result of non-cash warrant expense. Warrant expense is based on derivative liability from our outstanding stock warrants, due to the appreciation in our stock price during the six months ended June 30, 2009.

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 while reducing healthcare costs by preventing the occurrence of retained surgical sponges and towels, one of the most common errors in surgery. For more information, contact Patient Safety Technologies at (951) 587-6201, or visit

Forward Looking Statements: This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to Patient Safety Technologies' current expectations for future revenue and other financial results, and adoption of our technology by additional customers. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. Actual results may differ materially from the results predicted. Although we believe that the plans or expectations reflected in or suggested by our forward-looking statements are reasonable, those statements are based only on the current beliefs and assumptions of our management and on information currently available to us and, therefore, they involve uncertainties and risks as to what may happen in the future. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Our actual results and stockholder values could be very different from and worse than those expressed in or implied by any forward-looking statement in this report as a result of many known and unknown factors, many of which are beyond our ability to predict or control. These factors include, but are not limited to, those described in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2008, including without limitation the following: The early stage of adoption of our Safety-Sponge System and the unpredictability of our sales cycle; our need for additional financing to support our business; any failure of our new management team to operate effectively; our reliance on third-party manufacturers, some of whom are sole-source suppliers; and any inability to successfully defend our intellectual property portfolio All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.

Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. Although we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to do so, even if our plans and expectations change.

                        PATIENT SAFETY TECHNOLOGIES, INC.
                                BALANCE SHEET
                      (In thousands, except par value)

                                                   June 30,     December 31,
                                                     2009          2008*
                                                     ----          ----

    Current assets:
        Cash and cash equivalents                    $251          $296
        Accounts receivable                           188           418
        Inventories                                   657           200
        Prepaid expenses                              219           188
                                                      ---           ---
            Total current assets                    1,315         1,102

    Restricted certificate of deposit                  94            94
    Notes receivable                                  121           121
    Property and equipment, net                       474           622
    Goodwill                                        1,832         1,832
    Patents, net                                    3,276         3,439
    Long-term investment                              667           667
    Other assets                                       29            37
                                                       --            --
            Total assets                           $7,808        $7,914
                                                   ======        ======

               Liabilities and Stockholders'
                (Deficit) Equity

    Current liabilities
        Accounts payable                           $1,770          $909
        Current portion of convertible
         debentures                                 1,425         1,425
        Current portion of notes payable              600         1,100
        Accrued liabilities                         9,983         3,358
                                                    -----         -----
            Total current liabilities              13,778         6,792
        Long-term convertible debentures, less
         current portion                               53            51
        Long-term notes payable, less current
         portion                                    1,530             -
        Deferred tax liabilities                      979         1,042
                                                      ---         -----
            Total liabilities                      16,340         7,885
                                                   ------         -----

    Stockholders' equity:
        Convertible preferred stock, $1.00 par value, cumulative 7%
            1,000 shares authorized; 11 issued and
            outstanding at June 30, 2009 and
            December 31, 2008:
            (Liquidation preference of $1.2 million
             at June 30, 2009 and December 31, 2008    11            11
        Common stock, $0.33 par value: 25,000 shares
            authorized; 17,198 shares issued and
            outstanding at June 30, 2009 and
            December 31, 2008;                      5,675         5,675
        Additional paid-in capital                 35,767        36,034
        Accumulated deficit                       (49,985)      (41,691)
                                                  -------       -------
            Total stockholders' (deficit) equity   (8,532)           29
                                                   ------            --
            Total liabilities and stockholders'
             equity                                $7,808        $7,914
                                                   ======        ======

    * Derived from audited financial statements for year ended
    December 31, 2008

                   (In thousands, except per share data)

                                                           For the Six
                                      For the Quarter     Months Ending
                                       Ending June 30,      June 30,
                                        2009     2008     2009     2008
                                        ----     ----     ----     ----

    Revenues                         $1,028     $557   $1,964   $1,057
    Cost of revenue                     619      326    1,168      719
                                        ---      ---    -----      ---
    Gross profit                        409      231      796      338

    Operating expenses:
        Research and development         86       38      199       81
        Sales and marketing             553      682    1,202    1,134
        General and administrative    1,361    1,687    2,616    2,723
                                      -----    -----    -----    -----
            Total operating
             expenses                 2,000    2,407    4,017    3,938
                                      -----    -----    -----    -----

    Operating loss                   (1,591)  (2,176)  (3,221)  (3,600)

    Other income (expenses):
        Interest expense               (220)     (88)    (440)    (175)
        Change in fair value of
         warrant liability           (2,155)    (168)  (3,867)    (168)
        Realized gain (loss) assets
         held for sale, net               -        -        -      (25)
        Unrealized loss on assets held
         for sale, net                    -        -        -      (65)
                                        ---      ---      ---      ---
    Total other income (expense)     (2,375)    (256)  (4,307)    (433)
                                     ------     ----   ------     ----

    Loss from operations before
     income taxes                    (3,966)  (2,432)  (7,528)  (4,033)
    Income tax provision                 31       32       65       65
                                         --       --       --       --
    Net income (loss)                (3,935)  (2,400)  (7,463)  (3,968)
    Preferred dividends                 (19)     (19)     (38)     (38)
                                        ---      ---      ---      ---
    Net loss applicable to common
     shareholders                   $(3,954) $(2,419) $(7,501) $(4,006)
                                    =======  =======  =======  =======

    Net loss per common share -
     basic and diluted               $(0.23)  $(0.19)  $(0.44)  $(0.32)
                                     ======   ======   ======   ======

    Weighted average common shares
    Basic and diluted                17,198   13,054   17,198   12,567
                                     ======   ======   ======   ======

SOURCE Patient Safety Technologies, Inc.
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