Last updated on April 18, 2014 at 9:54 EDT

Patient Safety Technologies Reports Second Quarter 2012 Results

August 10, 2012

IRVINE, Calif., Aug. 10, 2012 /PRNewswire/ — Patient Safety Technologies, Inc. (the “Company”, OTCBB:PSTX, OTCQB:PSTX) today announced results for its second quarter of 2012 ended June 30(th), 2012.

Expanded Customer Base and Financial Highlights

During the second quarter of 2012 the Company successfully implemented its SurgiCount Safety-Sponge(®) System in an additional 65 facilities, more than in any previous quarter, growing its total installed customer base to 215 as of June 30(th), 2012. This compares to 77 facilities as of the end of the second quarter of 2011 and 99 as of the end of the fourth quarter of 2011. Additionally, subsequent to the end of the second quarter 2012, the Company has successfully implemented the Safety-Sponge(®) System in an additional 20 facilities through the date of this press release, bringing the Company’s current installed base to 235, representing growth of approximately 140% since the end of 2011. Additionally, the Company currently has signed agreements with additional stand-alone hospitals and hospital systems representing an additional 36 facilities, the majority of which are currently expected to complete their implementation by approximately the end of the third quarter of 2012. This expanded user base brings the total facilities currently using the Safety-Sponge(®) System and those covered with signed agreements and expected implementations to over 271. 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 second quarter of 2012 was $4.4 million. This compares with total revenue for the second quarter of 2011 of $2.6 million, representing year over year growth in reported quarterly revenue of 71%. Second quarter of 2011 revenue of $2.6 million included approximately $0.5 million of revenue from filling a $10 million Forward Order to our exclusive distributor, Cardinal Health. There was no revenue reported from the delivery of Forward Order inventory during the second quarter of 2012. Excluding the effect of the Forward Order on reported second quarter 2011 revenue, second quarter 2012 Normalized Revenue (a non-GAAP measure defined below) year over year growth was 108%.

Reported operating expenses totaled $2.4 million for the second quarter of 2012, an increase of $0.7 million compared to $1.7 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 65 successful new customer implementations during the second quarter of 2012 as compared to 3 implementations during the second quarter of 2011. Total estimated one-time implementation costs in the second quarter of 2012 were approximately $0.5 million, as compared to a relatively negligible amount during the second quarter of 2011.

During the second quarter of 2012 the Company generated positive Adjusted Operating Income (a non-GAAP measure defined below) of $0.2 million and a GAAP operating loss of $0.5 million. This compares with an Adjusted Operating Loss of $0.3 million and a GAAP operating loss of $0.4 million generated during the second quarter of 2011. The primary reasons for reporting positive Adjusted Operating Income during the second 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 second quarter of 2012 versus the prior year quarter, partially offset by the higher one-time implementation expenses.

“During the second quarter of 2012 we further accelerated the strong growth we began during the first quarter, once again implementing our solution in more new facilities than in any previous quarter in our history. With this significant growth we have further strengthened our market leading position as well as continued to see our increased market penetration translate into improved financial results,” stated Brian E. Stewart, President and Chief Executive Officer of Patient Safety Technologies, Inc.

The Company’s second quarter of 2012 financial statements are included in its Quarterly Report on Form 10-Q filed by the Company on August 10(th), 2012 and available at the SEC’s website at www.sec.gov.

    Reconciliation of GAAP to Non-GAAP Results (Unaudited)
    Non-GAAP Measures:

                                                           For the Three                 For the Six Months
                                                           Months Ended                         Ended
                                                             June 30,                        June 30,
                                                             --------                        --------
    ($ in 000's)                                                         2012      2011                          2012       2011
                                                                         ----      ----                          ----       ----

    Reported Revenue                                                 $4,403.5  $2,568.8                      $7,505.7   $4,539.4
    Less: Forward
     Order effect                                                           -    (451.7)                            -   (1,079.4)
                                                                          ---    ------                           ---   --------
    Normalized Revenue                                               $4,403.5  $2,117.1                      $7,505.7   $3,460.0

    Reported Operating
     Income /(Loss)                                                   ($523.8)  ($411.7)                    ($1,825.8) ($1,242.5)
    Less: Forward
     Order effect                                                           -    (276.6)                            -     (619.7)
    Plus: Stock based
     compensation                                                       197.7     186.7                         397.4      336.4
    Plus: Depreciation
     and amortization                                                   503.3     201.9                         870.4      413.6
    Adjusted Operating
     Income /(Loss)                                                    $177.2   ($299.7)                      ($558.0) ($1,112.2)
                                                                       ======   =======                       =======  =========

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 second 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 excludes 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 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 2011, 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 Sheets

                                          June 30,                   December 31,
                                                2012                         2011
                                                ----                         ----
     equivalents                                       $5,845,868                  $3,668,524
     receivable                                         1,569,554                   1,307,510
     net                                                3,154,518                   2,772,117
     expenses                                              41,607                     180,802
                                                           ------                     -------
     assets                                            10,611,547                   7,928,953

     net                                                3,988,987                   1,691,961
    Goodwill                                            1,832,027                   1,832,027
     net                                                2,301,671                   2,464,142
     assets                                                37,462                      40,463
                                                           ------                      ------
     assets                                           $18,771,694                 $13,957,546
                                                      ===========                 ===========


     payable                                           $4,220,058                  $2,808,524
     liabilities                                          472,714                     574,917
     revenue                                            1,612,594                     545,027
                                                        ---------                     -------
     liabilities                                        6,305,366                   3,928,468
                                                        ---------                   ---------

     equity                                            12,466,328                  10,029,078
                                                       ----------                  ----------
     equity                                           $18,771,694                 $13,957,546
                                                      ===========                 ===========

                                                                PATIENT SAFETY TECHNOLOGIES, INC.

                                                         Condensed Consolidated Statements of Operations

                                      Three Months Ended                                    Six Months Ended
                                           June 30,                                             June 30,
                                   2012                       2011                                2012              2011
                                   ----                       ----                                ----              ----

    Revenues                              $4,403,476                             $2,568,770                   $7,505,734   $4,539,426
    Cost of revenue                        2,548,247                              1,296,130                    4,413,878    2,337,231
                                           ---------                              ---------                    ---------    ---------
    Gross profit                           1,855,229                              1,272,640                    3,091,856    2,202,195

    Operating expenses:
    Research and development                 141,842                                 24,298                      289,484       53,760
    Sales and marketing                    1,084,511                                674,416                    2,383,607    1,333,452
    General and administrative             1,152,704                                985,584                    2,244,570    2,057,480
                                           ---------                                -------                    ---------    ---------
    Total operating expenses               2,379,057                              1,684,298                    4,917,661    3,444,692
                                           ---------                              ---------                    ---------    ---------

    Operating loss                          (523,828)                              (411,658)                  (1,825,805)  (1,242,497)

    Other income (expense):
    Interest income (expense)                   (795)                                   213                        3,083       (3,979)
    Gain on change in fair value
     of warrant derivative
     liability                                     -                                 14,360                            -      224,622
    Other income                                   -                                227,617                            -      227,617
                                                 ---                                -------                          ---      -------
    Total other income (expense)                (795)                               242,190                        3,083      448,260
                                                ----                                -------                        -----      -------

    (Loss) before income taxes              (524,623)                              (169,468)                  (1,822,722)    (794,237)
    Income tax (benefit) provision                 -                                      -                       (3,712)      (3,773)
                                                 ---                                    ---                       ------       ------
    Net (loss)                              (524,623)                              (169,468)                  (1,826,434)    (798,010)
    Preferred dividends                     (132,369)                              (124,103)                    (262,891)    (248,062)
                                            --------                               --------                     --------     --------
    Net (loss) applicable to
     common shareholders                   $(656,992)                             $(293,571)                 $(2,089,325) $(1,046,072)
                                           =========                              =========                  ===========  ===========

    (Loss) per common share:
    Basic and Diluted                         $(0.02)                                $(0.01)                      $(0.06)      $(0.04)
                                              ======                                 ======                       ======       ======
    Weighted average common shares
    Basic and Diluted                     35,260,243                             33,517,845                   34,641,399   28,857,952
                                          ==========                             ==========                   ==========   ==========

SOURCE Patient Safety Technologies, Inc.

Source: PR Newswire