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Patient Safety Technologies Reports Third Quarter 2011 Results
Date:11/15/2011

IRVINE, Calif., Nov. 15, 2011 /PRNewswire/ -- Patient Safety Technologies, Inc. (the "Company", OTCBB: PSTX, OTCQB: PSTX) today announced financial results for its third quarter of 2011 ended September 30th, 2011.

Expanded Customer Base and Financial HighlightsDuring the third quarter of 2011, the number of institutions using the Company's SurgiCount Safety-Sponge® System surpassed 78 and the Company lost no customers.  This compares to approximately 57 institutions using the solution at the end of the third quarter of 2010.  To date in the fourth quarter of 2011, the Company has already implemented 9 additional facilities with 12 additional facilities scheduled during the remainder of the fourth quarter.   In addition, there are an incremental 130 facilities with which an agreement has been signed and an implementation expected beginning in the first quarter of 2012.  In total, the number of facilities currently using the Safety-Sponge® System and those with signed agreements and scheduled implementations is over 230.  Although not necessarily proportional to reported revenue, the number of hospitals using the Company's products is a good indicator of our underlying business.

Total revenue for the quarter ended September 30, 2011 was $2.2 million.  This compares with total revenue for the quarter ended September 30, 2010 of $4.1 million, which included $2.5 million of revenue from the delivery to the Company's exclusive distributor as part of a $10.0 million inventory stocking order.  Excluding the effect of this inventory stocking order, revenue for the quarter ended September 30, 2010 was $1.6 million.  There were no revenues from this stocking order during the quarter ended September 30, 2011 as fulfillment of the stocking order was completed in the second quarter 2011.  Accordingly, after excluding the effect this inventory stocking order had on reported revenues during the quarter ended September 30, 2010, our year over year third quarter 2011 revenue growth was 38%.

Reported operating expenses for the third quarter of 2011 were $1.5 million as compared to $1.2 million during the third quarter of 2010.  Total non-GAAP cash expenses for the third quarter of 2011 were $1.2 million as compared to $1.3 million for the third quarter of 2010.

During the third quarter of 2011, the Company generated an Adjusted Operating Loss (as defined below) of $127 thousand and a GAAP operating loss of $529 thousand.  This compares with an Adjusted Operating Loss of $259 thousand for the third quarter of 2010 and GAAP operating income of $925 thousand.  

The Company ended the third quarter of 2011 with $5.0 million of cash and cash equivalents and no debt.  

Landmark Product Usage Milestones AchievedSubsequent to the end of the third quarter of 2011, use of the SurgiCount Safety-Sponge® System surpassed an estimated 60 million sponges successfully used in over 3 million procedures."During the third quarter we were successful in continuing to grow our installed base of current users, significantly expanding the number of incremental facilities under contract with future expected implementations and maintaining our reduced cost structure.  We expect to see the positive impact on our revenues and profitability as we implement these additional facilities over the coming months.  Further, as our user base and the evidence of the clinical efficacy of the Safety-Sponge® System continues to grow, we are well positioned to be the solution of choice for the growing number of hospitals looking to address the common yet preventable surgical mistake of retained surgical sponges," stated Brian E. Stewart, President and Chief Executive Officer of Patient Safety Technologies, Inc.

The Company's third quarter 2011 financial statements are included in its Quarterly Report on Form 10-Q filed by the company on November 14th, 2011 and available at the SEC's website at www.sec.gov.   Reconciliation of GAAP to Non-GAAP Results (Unaudited)Non-GAAP Measures:($ in 000's)Three Months EndedNine Months EndedSeptember 30,September 30,2011201020112010Reported Operating (Loss) Income$

(529.2)

924.9

$

(1,771.7)

(1,934.2)Less:Forward Order effect-

(1,315.5)(619.7)

(3,136.2)Plus:Non-cash compensation176.6

160.5513.0

965.1Depreciation and amortization225.5

191.5639.1

631.7Lease Write Down (gain) loss -

(220.0)-

152.0Adjusted Operating Loss$

(127.1)

(258.6)

$

(1,239.3)

(3,321.6)To supplement the Company's presentation of operating income and (loss) measured in accordance with GAAP, we also use 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 operating income to Adjusted Operating Income or Loss for the third quarters and nine months ended September 30th of 2011 and 2010 are shown above.  How we define Adjusted Operating Income or Loss 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 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 this non-GAAP measure, which excludes the effects of the Forward Order and the non-cash expenses of depreciation, amortization and stock based compensation, 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 this non-GAAP measure facilitates 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 this non-GAAP measure 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 MedicalPatient 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 preventing one of the most common errors in surgery, retained foreign objects.  For more information, contact SurgiCount Medical, Inc. at (949) 387-2277 or visit www.surgicountmedical.com.

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 2010, our Quarterly Reports on Form 10-Q and in our other public filings. These documents are available online through the SEC's website, www.sec.gov. 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 SheetsSeptember 30,2011December 31,2010(Unaudited)AssetsCurrent assets:Cash and cash equivalents$

4,957,495$

1,896,034Restricted cash-223,630Accounts receivable1,043,093772,381Inventories, net1,677,1001,110,832Prepaid expenses54,430104,628Total current assets7,732,1184,107,505Property and equipment, net1,111,697979,833Goodwill1,832,0271,832,027Patents, net2,545,3772,789,083Other assets34,23339,038Total assets$

13,255,452$

9,747,486Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable$

1,704,705$

2,605,669Accrued liabilities435,978991,682Deferred revenue330,3091,477,720Warrant derivative liability463,838942,472Total current liabilities2,934,8306,017,543Commitments and contingenciesStockholders' equity Total stockholders' equity10,320,6223,729,943Total liabilities and stockholders' equity$

13,255,452$

9,747,486PATIENT SAFETY TECHNOLOGIES, INC.Condensed Consolidated Statements of Operations(Unaudited)Three Months EndedNine Months EndedSeptember 30,September 30,2011201020112010Revenues$

2,186,220$

4,122,560$

6,725,646$

10,252,897Cost of revenue1,190,8791,950,5733,528,1104,829,821Gross profit995,3412,171,9873,197,5365,423,076Operating expenses:Research and development1,46035,24655,220166,548Sales and marketing716,491518,5702,049,9432,341,132General and administrative806,544693,2352,864,0244,849,573Total operating expenses1,524,4951,247,0514,969,1877,357,253Operating (loss) income(529,154

)924,936(1,771,651

)(1,934,177

)Other income (expense)Interest income (expense)3473,598(3,632

)(5,062

)Gain on change in fair value of warrant derivative liability303,22215,631527,8442,685,579Other income--227,617433,958Total other income303,56919,229751,8293,114,475(Loss) income before income taxes(225,585

)944,165(1,019,822

)1,180,298Income tax (benefit) provision(2,543

)32,573(6,316

)139,862Net (loss) income(228,128

)976,738(1,026,138

)1,320,160Preferred dividends(125,498

)(14,682

)(374,954

)(59,777

)Net (loss) income  applicable to common shareholders$

(353,626

)$

962,056$

(1,401,092

)$

1,260,383(Loss) income per common shareBasic$

(0.01

)$

0.04$

(0.05

)$

0.05Diluted$

(0.01

)$

0.03$

(0.05

)$

0.04Weighted average common shares outstanding:Basic33,782,03323,456,06330,606,46823,456,063Diluted33,782,03332,039,99630,606,46835,659,766
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SOURCE Patient Safety Technologies, Inc.
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