TEMECULA, Calif., Nov. 17 /PRNewswire-FirstCall/ -- Patient Safety Technologies, Inc. (BULLETIN BOARD: PSTX) today announced third quarter 2009 results.
"We are continuing to see strong year over year growth and healthy increases in our gross margins," stated Steven H. Kane, Chief Executive Officer of Patient Safety Technologies. "While third quarter revenues from sales of safety sponges were comparable with revenues in the second quarter, we expect that significantly increased marketing activity, coupled with the upcoming implementation of recently signed accounts, should have a significant impact on future revenues. During the last quarter, PSTX reached the major milestone of having had a cumulative total of 20 million sponges used in over 700,000 surgical procedures."
"Additionally," said Kane, "our recently launched indemnification program, whereby hospitals using the Safety-Sponge(TM) System in conjunction with PSTX's proprietary data manager, 'Citadel(TM)' are insured for up to $1 million per retained foreign object ('RFO') event, has increased interest in and accelerated adoption of PSTX system." Kane added: "As hospitals continue to embrace the PSTX solution to RFOs, we are actively expanding our sales and clinical presence in the marketplace to keep pace with our growing customer base."
Third Quarter Results
Revenues for the third quarter 2009 were $978 thousand, an increase of 11% from the $880 thousand reported for third quarter 2008. Third quarter 2009 gross margin was 44%, an improvement over third quarter 2008 gross margin of 29%. The improvement in gross margin was due primarily to the change in our business model, which shifted our sales mix to primarily sales of safety sponges (which have higher margins), and permitted us to depreciate most of the expense associated with our SurgiCounter(TM) scanners over the life of the scanner, thereby significantly reducing our cost of revenues.
Operating loss for the third quarter 2009 was $1.5 million compared $1.4 million for the third quarter of 2008. Increased operating loss was the result of increased general and administrative expenses, which were only partially offset by higher gross profits on increased sales and lower costs of revenues. Net loss applicable to common shareholders for the third quarter was $3.4 million compared to net income of $0.2 million in the third quarter of 2008. The increase in our net loss was primarily driven by a significant increase in the fair value of our warrant derivative liability as measured by the increase in the publicly quoted price of our stock, which resulted in a non-cash expense of $1.8 million in the three months ended September 30, 2009, compared to income of $1.7 million in the same period in 2008.
Revenues for the nine months ended September 30, 2009 were $2.9 million, an increase of 52% from the $1.9 million reported for the nine months ended September 30, 2008. Gross margin for the nine months ended September 30, 2009 was 42% compared to 31% for the nine months ended September 30, 2008. The improvement in gross margin was due primarily to the change in our business model, which shifted our sales mix to primarily sales of safety sponges (which have higher margins), and permitted us to depreciate most of the expense associated with our SurgiCounter(TM) scanners over the life of the scanner, thereby significantly reducing our cost of revenues. Net loss for the nine months ended September 30, 2009 was $10.9 million compared to a loss of $3.8 million for the nine months ended September 30, 2008. The increase in our net loss was primarily driven by a significant increase in the fair value of our warrant derivative liability as measured by the increase in the publicly quoted price of our stock, which resulted in a non-cash expense of $4.3 million in the nine months ended September 30, 2009, compared to income of $1.5 million in the same period in 2008.
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 and reduce healthcare costs by preventing the occurrence of surgical sponges and other foreign objects from being left inside patients after surgery. RFOs are among one of the most common surgical errors.
For more information, contact SurgiCount at (951) 587-6201, or visit http://www.surgicountmedical.com/.
PATIENT SAFETY TECHNOLOGIES, INC. AND SUBSIDIARY Condensed Consolidated Statements of Operations (In thousands, except per share data) (unaudited) For the Quarter For the Nine Months Ending Ending September 30, September 30, 2009 2008 2009 2008 Revenues $978 $880 $2,942 $1,937 Cost of revenue 540 622 1,708 1,342 Gross profit 438 258 1,234 595 Operating expenses: Research and development 69 87 268 168 Sales and marketing 610 662 1,812 1,796 General and administrative 1,257 958 5,162 3,680 Total operating expenses 1,936 1,707 7,242 5,644 Operating loss (1,498) (1,449) (6,008) (5,049) Other (expenses) income: Interest expense (304) (79) (744) (254) Change in fair value of warrant derivative liability (1,762) 1,683 (4,333) 1,515 Realized loss assets held for sale, net - - - (25) Unrealized loss on assets held for sale, net - - - (65) Gain on warrant exchange 193 - 193 - Other (expenses) income 2 36 2 35 Total other (expenses) income (1,871) 1,640 (4,882) 1,206 (Loss) income from operations before income taxes (3,369) 191 (10,890) (3,843) Income tax benefit 32 33 96 98 Net (loss) income (3,337) 224 (10,794) (3,745) Preferred dividends (19) (19) (57) (57) Net (loss) income applicable to common shareholders $(3,356) $205 $(10,851) $(3,802) Net (loss) income applicable to common shareholders - basic and diluted Basic $(0.17) $0.01 $(0.60) $(0.28) Diluted $(0.17) $0.01 $(0.60) $(0.28) Weighted average common shares outstanding basic and diluted: Basic 20,229 15,615 18,220 13,588 Diluted 20,229 29,005 18,220 13,588 The accompanying notes are an integral part of these condensed consolidated interim financial statements. PATIENT SAFETY TECHNOLOGIES, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (In thousands, except par value) September 30, December 31, 2009 2009 Assets (unaudited) Current assets: Cash and cash equivalents $779 $296 Accounts receivable 186 418 Inventories, net 730 200 Prepaid expenses 198 188 Total current assets 1,893 1,102 Restricted certificate of deposit 94 94 Notes receivable 121 121 Property and equipment, net 466 622 Goodwill 1,832 1,832 Patents, net 3,195 3,439 Long-term investment 667 667 Other assets 29 37 Total assets $8,297 $7,914 Liabilities and Stockholders' (Deficit) Equity Current liabilities Accounts payable $1,806 $909 Current portion of convertible debentures 1,425 1,425 Current portion of notes payable 600 1,100 Warrant derivative liability 2,399 1,762 Accrued liabilities 1,360 1,596 Total current liabilities 7,590 6,792 Long-term convertible debentures, less current portion 55 51 Long-term notes payable, less current portion 1,600 - Deferred tax liability 945 1,042 Total liabilities 10,190 7,885 Stockholders' (deficit) equity: Convertible preferred stock, $1.00 par value, cumulative 7% dividend: 1,000 shares authorized; 11 issued and outstanding at September 30, 2009 and December 31, 2008; (Liquidation preference of $1.2 million at September 30, 2009 and December 31, 2008 11 11 Common stock, $0.33 par value: 100,000 and 25,000 shares authorized; 23,409 and 17,180 shares issued and outstanding at September 30, 2009 and December 31, 2008 respectively; 7,725 5,675 Additional paid-in capital 43,702 36,034 Accumulated deficit (53,331) (41,691) Total stockholders' (deficit) equity (1,893) 29 Total liabilities and stockholders' equity $8,297 $7,914 The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Patient Safety Technologies, Inc.
CONTACT: Steve Kane of Patient Safety Technologies, Inc.,
+1-951-587-6201, Cell: +1-215-801-9937, SKane@surgicountmedical.com
Web Site: http://www.surgicountmedical.com/
