” Power Medical continued its track toward profitability during the Q1 2009. We believe that we have built an infrastructure that will support achievement of that goal. As our core competencies have matured, our quality has improved dramatically. Increasingly, surgeons and hospitals are discovering what we have previously communicated, that PMI’s proprietary computer mediated Intelligent Surgical Instruments enable new procedures, facilitate ease of use in existing procedures, are cost effective, and reduce medical waste. Our technologies provide significant value to the hospital, surgeon, patient, and environment. We continue to make meaningful improvements in our operations, increase revenue, support new surgical applications with our innovative instruments and make great strides in our collaboration with Intuitive Surgical,” stated Michael Whitman, chief executive officer of Power Medical. “These achievements clearly illustrate PMI’s effective execution of its business plan. In the coming months, we expect to launch our i60R cutter, iDrive Intelligent Power Unit and the iConsole monitor. We look forward to strengthening our current sales and operating trends with the commercialization of these cutting-edge products.”

Financial Results

Reload revenue, which is a key driver of the company’s revenue model, was about $1.3 million in the Q1 2009, compared to $0.5 million in the Q1 2008.

The company’s gross margin was $0.6 million, or 21% of sales, in the three months ended March 31, 2009, compared to a gross margin of ($0.3 million), or (15%) of sales, during the corresponding period in 2008. The increase in gross margin for the three months ended March 31, 2009 reflects improvements in the company’s manufacturing process including the use of the Reload Automation machine implemented in the second half of 2008. During the three months ended March 31, 2009 and 2008, the company incurred inventory obsolescence charges of $179,000 and $301,000, respectively.

Total operating expenses in the three months ended March 31, 2009 decreased by 39% to $6.9 million from $11.4 million during the corresponding period in 2008. First quarter 2009 sales and marketing expenses decreased 49% to $3.5 million from $6.8 million during the Q1 2008. Research and development expenses for the Q1 2009 also decreased 49% to $0.8 million from $1.6 million in the corresponding 2008 period. General and administrative expenses for the Q1 2009 decreased 13% to $2.6 million from $3.0 million in the corresponding period of 2008. These reductions are largely a result of the restructuring plan the company implemented in the fourth quarter of 2008.

The company’s unrestricted cash and cash equivalents balance as of March 31, 2009 was about $4.7 million compared to $8.4 million as of December 31, 2008.

Guidance

Power Medical needs to increase additional capital and is actively pursuing initiatives to raise additional funds through license and development agreements with corporate partners or public and private offerings of securities, including debt or equity financings. The company expects the results of such efforts will have a material impact on financial results for 2009.