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Patient Safety Technologies Reports Third Quarter 2008 Results

TEMECULA, Calif., Nov. 24 /PRNewswire-FirstCall/ -- Patient Safety Technologies (OTC Bulletin Board: PSTX) today announced record quarterly revenues for the quarter ended September 30, 2008.

"We are pleased to see the significant traction we are getting at healthcare institutions across the U.S. translate into increasing adoption of our Safety-Sponge(TM) System. With over six million Safety-Sponges(TM) having been used in over 200,000 procedures with no known incidents of retained sponges, current and potential customers are increasingly seeing both the clinical and economic validation of using our solution. We believe we are well positioned to continue to expand our market leadership position and drive continued strong revenue growth," stated Bill Adams, Chief Executive Officer of Patient Safety Technologies.

Third Quarter Results

Revenues for the third quarter of 2008 were $880 thousand, an increase of 313% over the prior year third quarter revenues of $213 thousand.

Gross profit for the third quarter of 2008 was $258 thousand, or 29% of revenues, an increase of 155% over the prior year third quarter gross profit of $101 thousand, or 47% of revenues. The gross margin decrease in the third quarter of 2008 was primarily attributable to an inventory write-down and higher proportional sales of lower margin hardware products. The Company believes the inventory write-down is one-time in nature, as it relates primarily to remaining Safety-Sponge(TM) inventory that did not include the Company's "Master Tag" product improvement. The higher proportional sales of lower margin hardware products results from the increased first time product adoptions by healthcare institutions.

"We are excited about the response to our Master Tag concept, a product improvement that has significantly increased the ease of use of the Safety-Sponge(TM) System," stated Mr. Adams. "As we execute on our razor / razorblade business model, as our first time implementations continue, sales of our lower margin SurgiCounter(TM) hardware will be proportionately high, resulting in a temporary negative effect on gross margins. However the growing 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 $224 thousand. This compares to a loss of $1.9 million in the third quarter of the prior year.

About SurgiCount Medical

SurgiCount Medical, Inc., a division of Patient Safety Technologies, Inc. (OTCBB:PSTX), manufacturers the SurgiCount Safety-Sponge(TM) System, a patented FDA 510k approved turn key solution to retained surgical sponges. The system is comprised of surgical sponges and towels affixed with an inseparable two-dimensional data matrix bar code and a SurgiCount scanner to record each sponge before and after an operation. The SurgiCount Safety-Sponge(TM) System is also the only retained sponge prevention system to offer complete sponge inventory tracking, reporting features and integration with a medical facility's IT system. For more information, contact SurgiCount at (951) 587-6201, or visit .

Forward Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements include, but are not limited to: SurgiCount Medical's ability to accelerate product momentum, bring to market differentiated products and commercialize its product pipeline. Patient Safety Technologies cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the following: the growth rate of the sponge market, uncertainty of success in developing new products or products currently in SurgiCount's pipeline, the ability to develop and expand its business in the United States, unanticipated expenses or liabilities or other adverse events affecting cash flow or SurgiCount's ability to successfully control its costs or achieve profitability uncertainty of additional funding, SurgiCount's ability to compete with other competing products and with emerging new technologies, product liability exposure, patent infringement claims and claims related to SurgiCount's intellectual property. Please refer to the risk detailed from time to time in Patients Safety Technologies SEC reports, including quarterly reports 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 to update or revise any forward-looking statements, whether a result of new information, future events or otherwise, unless required by law.

              Condensed Consolidated Balance Sheets (Unaudited)
                       (In thousands, except par value)

                                                    September 30, December 31,
                                                        2008          2007

    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%
            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

         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
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