**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-K/A**


**Amendment
      No. 1**





x
            
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




FOR
      THE
      FISCAL YEAR ENDED DECEMBER 31, 2006




**OR**





 ̈
            
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




FOR
      THE
      TRANSITION PERIOD FROM _________________ TO _________________




COMMISSION
      FILE NUMBER:   001-09727





**PATIENT
      SAFETY TECHNOLOGIES, INC.**


**(Exact
      name of registrant as specified in its charter)**





**Delaware**
            
            **13-3419202****(State
                of Incorporation)**
            
            **(I.R.S.
                Employer Identification
                Number)**




**27555
      Ynez Road, Suite 330, Temecula, CA 92591**


**(Address
      of principal executive offices) (Zip Code)**





**Registrant’s
      telephone number, including area code: (951) 587-6201**


**Securities
      registered pursuant to Section 12(b) of the Act:**





**Title
                of each class**
            
            **Name
                of each exchange on which registered**Common
                Stock, par value $0.33 per share
            
            N/A





**Securities
      registered pursuant to Section 12(g) of the Act:** None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes  ̈ No x .





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.  ̈





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      past 12 months (or for such shorter period that the registrant was required
      to
      file such reports), and (2) has been subject to such filing requirements for
      the
      past 90 days.   Yes x No  ̈ .




Indicate
      by check mark, if disclosure of delinquent filers in response to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.  ̈




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large accelerated filer ̈
            A
                ccelerated filer ̈
            Non-accelerated
                filerx





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2) of the Act. Yes  ̈ No x .




As
      of May
      8, 2007, 9,937,059 shares of the issuer's Common Stock were outstanding. The
      aggregate market value of the voting stock held by non-affiliates on May 8,
      2007
      was approximately $10,229,000 based on the average of the bid and asked prices
      of the issuer's common stock in the over-the-counter market on such date as
      reported by the OTC Bulletin Board.









Explanatory
      Note





Patient
      Safety Technologies, Inc. (the “Company”) is filing this Amendment No. 1 on Form
      10-K/A (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year
      ended December 31, 2006, which was originally filed on May 16, 2007 (the
“Original Filing”).





The
      purpose of this Amendment is to provide additional information required in
      Item
      5 of Part II and Item 11 of Part III, of Form 10-K.  This Amendment amends
      and restates in their entirety only the cover page, Item 5 of Part II, and
      Item
      11 of Part III.  This Amendment does not affect any other parts of or
      exhibits to the Original Filing, and those unaffected parts or exhibits are
      not
      included in this Amendment.





Except
      as
      expressly stated herein, this Amendment continues to speak as of the date of
      the
      Original Filing and the Company has not updated the disclosure contained herein
      to reflect events that have occurred since the filing of the Original
      Filing.  Accordingly, this Amendment should be read in conjunction with the
      Company’s other filings, if any, made with the Securities and Exchange
      Commission subsequent to the filing of the Original Filing, including any
      amendments to those filings, if any.








**PART
      II**


**FORM
      10-K**


**FOR
      PATIENT SAFETY TECHNOLOGIES, INC.**


**FOR
      YEAR-ENDED DECEMBER 31, 2006**





**Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.**





**Stock
      Transfer Agent**





Transfer
      Online, Inc., 317 SW Alder Street, 2 nd Floor,
      Portland, OR 97204 (Telephone (503) 227-2950) serves as transfer agent for
      the
      Company’s common stock. Certificates to be transferred should be mailed directly
      to the transfer agent, preferably by registered mail.





**Market
      Prices**





The
      Company’s common stock has been quoted on the OTC Bulletin Board since February
      16, 2007 under the symbol PSTX. Prior thereto, the Company’s common stock was
      traded on the American Stock Exchange under the symbol “PST.” The following
      table sets forth the range of the high and low selling price of the Company’s
      common stock during each quarter of the last two fiscal years, as reported
      by
      the American Stock Exchange.





Fiscal
                2006
            
            Fiscal
                2005Fiscal
                Quarter
            
            High
            
            Low
            
            High
            
            LowFirst
                Quarter Ended March 31
            
            $
            4.70
            
            $
            2.27
            
            $
            7.33
            
            $
            4.18Second
                Quarter Ended June 30
            
            $
            4.30
            
            $
            2.60
            
            $
            6.23
            
            $
            3.20Third
                Quarter Ended September 30
            
            $
            3.25
            
            $
            1.45
            
            $
            3.90
            
            $
            2.90Fourth
                Quarter Ended December 31
            
            $
            3.97
            
            $
            0.57
            
            $
            4.64
            
            $
            3.21





Our
      common stock is subject to Rules 15g-1 through 15g-9 under the Securities
      Exchange Act of 1934, as amended, which impose certain sales practice
      requirements on broker-dealers who sell our common stock to persons other than
      established customers and “accredited investors” (generally, individuals with a
      net worth in excess of $1,000,000 or an annual income exceeding $200,000
      individually or $300,000 together with their spouses). For transactions covered
      by this rule, a broker-dealer must make a special suitability determination
      for
      the purchaser and have received the purchaser’s written consent to the
      transaction prior to the sale.





**Stock
      Performance Graph**





The
      following graph compares the performance of our common stock over the five
      preceding fiscal years to the weighted average performance over the same period
      of the stock of companies included in the NASDAQ Composite Index and the Dow
      Jones Health Care Titans 30 Index. The graph assumes $100 was invested at the
      close of trading on December 31, 2001 in our common stock and in each of the
      indices and that all dividends were reinvested. The stockholder return shown
      on
      the graph below should not be considered indicative of future stockholder
      returns, and we will not make or endorse any predictions of future stockholder
      returns.





1










1 $100
      invested on 12/31/01 in stock or index, including reinvestment of dividends.
      Fiscal year ending December 31.




**Dividends**





The
      Company paid nil, $19,163, and $76,650 in dividends to preferred stockholders
      during 2006, 2005 and 2004, respectively, and has not paid any dividends to
      common stockholders during the past three years. Dividends to preferred
      stockholders are cumulative and paid at the rate of 7% a year. We currently
      have
      no intention of paying dividends on our common stock.





**Stockholders**





As
      of May
      8, 2007, there were approximately 634 holders of record of the Company’s common
      stock. The Company has 25,000,000 shares of common stock authorized, of which
      9,937,059 were issued and outstanding at May 8, 2007. The Company has 1,000,000
      shares of convertible preferred stock authorized, of which 10,950 were issued
      and outstanding at May 8, 2007.





**Equity
      Compensation Plans**





For
      a
      summary of equity compensation plans under which the Company's common stock
      is
      authorized for issuance as of the fiscal year ended December 31, 2006 refer
      to
      Part III, Item 12.





**Recent
      Sales of Unregistered Securities**





On
      January 12, 2006, ASG entered into a Secured Promissory Note with Steven J.
      Caspi in the principal amount of $1,000,000. As additional consideration for
      entering into the secured promissory note, Mr. Caspi received warrants to
      purchase 30,000 shares of the Company’s common stock. The warrants are
      exercisable for a period of five years and have an exercise price of $4.50
      per
      share. The issuance of the above warrants to Mr. Caspi was exempt from
      registration requirements pursuant to Section 4(2) of the Securities Act of
      1933, as amended (the ***“Securities
      Act”*** ),
      and
      Rule 506 promulgated thereunder. No advertising or general solicitation was
      employed in offering the securities and Mr. Caspi represented that he is an
      accredited investor and that he is able to bear the economic risk of his
      investment.




2




On
      February 8, 2006, we entered into a Secured Promissory Note with AGB Acquisition
      Fund in the principal amount of $687,000. As an inducement for entering into
      the
      secured promissory note AGB Acquisition Fund received warrants to purchase
      20,608 shares of the Company’s common stock. The warrants are exercisable for a
      period of five years and have an exercise price equal to $3.86. The issuance
      of
      the above warrants to AGB Acquisition Fund was exempt from registration
      requirements pursuant to Section 4(2) of the Securities Act and Rule 506
      promulgated thereunder. No advertising or general solicitation was employed
      in
      offering the securities and Mr. Caspi represented that he is an accredited
      investor and that he is able to bear the economic risk of his investment.





On
      February 13, 2006, the Company issued 175,000 warrants to purchase shares of
      common stock at $3.95 per share to a consultant. The warrants vested immediately
      and have a three-year life. The warrants were valued at $405,000 and were
      expensed during the three months ended March 31, 2006. These warrants were
      issued in reliance upon the exemption provided by Section 4(2) of the Securities
      Act.





On
      March
      15, 2006 the Company, Automotive Services Group, ASG and Darell W. Grimsley,
      Jr.
      entered into a Unit Purchase Agreement for Automotive Services Group to purchase
      a 50% equity interest (the ***“Membership
      Interest”*** )
      in ASG
      from Mr. Grimsley. As consideration for the Membership Interest the Company
      issued Mr. Grimsley 200,000 shares of the Company’s common stock. Mr. Grimsley
      will continue to act as Chairman and Chief Executive Officer of Automotive
      Services Group. The issuance of the above shares to Mr. Grimsley was exempt
      from
      registration requirements pursuant to Section 4(2) of the Securities Act of
      1933, as amended, and Rule 506 promulgated thereunder. No advertising or general
      solicitation was employed in offering the securities and Mr. Grimsley
      represented that he is an accredited investor and that he is able to bear the
      economic risk of his investment.





On
      May
      19, 2006, the Company issued 32,120 warrants to purchase shares of common stock
      at $3.50 per share to a consultant. The warrants vested immediately and have
      a
      one-year life. The warrants were valued at approximately $31,000 and are being
      expensed over the warrant term. These securities will be issued pursuant to
      Section 4(2) of the Securities Act. These warrants were issued in reliance
      upon
      the exemption provided by Section 4(2) of the Securities Act.





On
      June
      6, 2006 we entered into a Secured Convertible Promissory Note with Alan Morelli
      in the principal amount of $1,100,000. As an inducement for entering into the
      secured convertible promissory note, Mr. Morelli received warrants to purchase
      401,460 shares of our common stock. On August 17, 2006, we sold
      shares of our common stock at $1.25 per share thereby requiring modifications
      to
      Mr. Morelli’s secured convertible promissory note and warrant. These
      modifications resulted in an adjustment to the conversion price of the Morelli
      Note from $2.74 to $1.25 per share, an adjustment to the exercise price of
      the
      Morelli Warrant, and an increase in the number of shares of common stock
      available to purchase upon exercise of the Morelli Warrant from 401,460 to
      976,351. T he
      warrants are exercisable for a period of five years and have an adjusted
      exercise price equal to $1.25. The issuance of these securities to Mr. Morelli
      was exempt from registration requirements pursuant to Section 4(2) of the
      Securities Act and Rule 506 promulgated thereunder. No advertising or general
      solicitation was employed in offering the securities and Mr. Morelli represented
      that he is an accredited investor and that he is able to bear the economic
      risk
      of his investment.





On
      July
      12, 2006 we entered into a Convertible Promissory Note with Charles J. Kalina,
      III in the principal amount of $250,000. As an inducement for entering into
      the
      secured promissory note, Mr. Kalina received warrants to purchase 85,000 shares
      of the Company’s common stock. The warrants are exercisable for a period of five
      years and have an exercise price equal to $2.69. The issuance of these
      securities to Mr. Kalina was exempt from registration requirements pursuant
      to
      Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. No
      advertising or general solicitation was employed in offering the securities
      and
      Mr. Kalina represented that he is an accredited investor and that he is able
      to
      bear the economic risk of his investment.




3




In
      August
      2006, we entered into subscription agreements with two unaffiliated accredited
      investors, pursuant to which we sold 200,000 shares of the Company’s common
      stock, $0.33 par value per share, at a price of $1.25 per share. We received
      gross proceeds of approximately $250,000 from the sale of our common stock
      to
      the accredited investors. Pursuant to the subscription agreement, we granted
      the
      accredited investors piggy back registration rights to register the resale
      of
      the shares of common stock. The sale was made in a private placement exempt
      from
      registration requirements pursuant to Section 4(2) of the Securities Act and
      Rule 506 promulgated thereunder.





On
      September 8, 2006 we entered into a Convertible Promissory Note with Steven
      J.
      Caspi in the principal amount of $1,495,000. As an inducement for entering
      into
      the secured promissory note, Mr. Caspi received warrants to purchase 250,000
      shares of the Company’s common stock. The warrants are exercisable for a period
      of five years and have an exercise price equal to $1.25. The issuance of these
      securities to Mr. Caspi was exempt from registration requirements pursuant
      to
      Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. No
      advertising or general solicitation was employed in offering the securities
      and
      Mr. Caspi represented that he is an accredited investor and that he is able
      to
      bear the economic risk of his investment.





Between
      September 15, 2006 and November 1, 2006, the Company issued 70,694 shares of
      Common Stock to two employees and a consultant. The Common Stock was issued
      for
      accrued salaries and services. The Common Stock was valued at approximately
      $190,000. These shares were issued in reliance upon the exemption provided
      by
      Section 4(2) of the Securities Act.





On
      November 1, 2006 we entered into a Convertible Promissory Note with Michael
      G.
      Sedlak in the principal amount of $71,000. As an inducement for entering into
      the secured promissory note, Mr. Sedlak received warrants to purchase 20,000
      shares of the Company’s common stock. The warrants are exercisable for a period
      of five years and have an exercise price equal to $1.25. The issuance of these
      securities to Mr. Sedlak was exempt from registration requirements pursuant
      to
      Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. No
      advertising or general solicitation was employed in offering the securities
      and
      Mr. Sedlak represented that he is an accredited investor and that he is able
      to
      bear the economic risk of his investment.





On
      November 1, 2006 we entered into a Convertible Promissory Note with James
      Sveinson in the principal amount of $102,000. As an inducement for entering
      into
      the secured promissory note, Mr. Sveinson received warrants to purchase 20,000
      shares of the Company’s common stock. The warrants are exercisable for a period
      of five years and have an exercise price equal to $1.25. The issuance of these
      securities to Mr. Sveinson was exempt from registration requirements pursuant
      to
      Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. No
      advertising or general solicitation was employed in offering the securities
      and
      Mr. Sveinson represented that he is an accredited investor and that he is able
      to bear the economic risk of his investment.





On
      November 3, 2006 we entered into a Convertible Promissory Note with Charles
      J.
      Kalina, III in the principal amount of $400,000. As an inducement for entering
      into the secured promissory note, Mr. Kalina received warrants to purchase
      100,000 shares of the Company’s common stock. The warrants are exercisable for a
      period of five years and have an exercise price equal to $1.25. The issuance
      of
      these securities to Mr. Kalina was exempt from registration requirements
      pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated
      thereunder. No advertising or general solicitation was employed in offering
      the
      securities and Mr. Caspi represented that he is an accredited investor and
      that
      he is able to bear the economic risk of his investment.





On
      November 13, 2006 we entered into a Promissory Note with Herbert Langsam, a
      Director of the Company, in the principal amount of $100,000. As an inducement
      for entering into the secured promissory note, Mr. Langsam received warrants
      to
      purchase 50,000 shares of the Company’s common stock. The warrants are
      exercisable for a period of five years and have an exercise price equal to
      $1.25. The issuance of these securities to Mr. Langsam was exempt from
      registration requirements pursuant to Section 4(2) of the Securities Act and
      Rule 506 promulgated thereunder. No advertising or general solicitation was
      employed in offering the securities and Mr. Langsam represented that he is
      an
      accredited investor and that he is able to bear the economic risk of his
      investment.




4




On
      November 18, 2006, the Company issued 12,500 warrants to purchase shares of
      common stock at $2.00 per share to a consultant. The warrants vested immediately
      and have a three-year life. The warrants were valued at approximately $2,000
      and
      were expensed at the time of issuance. These securities will be issued pursuant
      to Section 4(2) of the Securities Act. These warrants were issued in reliance
      upon the exemption provided by Section 4(2) of the Securities Act.





Between
      November 30, 2006 and December 15, 2006, the Company entered into a subscription
      agreement and sold an aggregate of 238,000 shares of its Common Stock and
      warrants to purchase an aggregate of up to 119,000 shares of its Common Stock
      in
      a private placement transaction to certain accredited investors. The warrants
      are exercisable for a period of three years, have an exercise price equal to
      $2.00, and 50% of the warrants are callable upon the occurrence of any one
      of a
      number of specified events when, after any such specified occurrence, the
      average closing price of the Company’s common stock during any period of five
      consecutive trading days exceeds $4.00 per share. The Company received aggregate
      gross proceeds of $298,000. These securities were sold in reliance upon the
      exemption provided by Section 4(2) of the Securities Act and the safe harbor
      of
      Rule 506 under Regulation D promulgated under the Securities Act. No advertising
      or general solicitation was employed in offering the securities, the sales
      were
      made to a limited number of persons, all of whom represented to the Company
      that
      they are accredited investors, and transfer of the securities is restricted
      in
      accordance with the requirements of the Securities Act.





On
      December 26, 2006 we entered into a Promissory Note with Maroon Creek Capital,
      LP ( ***“Maroon”*** ),
      a
      California limited partnership, in the principal amount of $81,000. As an
      inducement for entering into the secured promissory note, Maroon received
      warrants to purchase 30,000 shares of the Company’s common stock. The warrants
      are exercisable for a period of five years and have an exercise price equal
      to
      $2.00. The issuance of these securities to Maroon was exempt from registration
      requirements pursuant to Section 4(2) of the Securities Act and Rule 506
      promulgated thereunder. No advertising or general solicitation was employed
      in
      offering the securities and Maroon represented that it is an accredited investor
      and that it is able to bear the economic risk of his investment.





On
      December 31, 2006, the Company issued 56,340 warrants to purchase shares of
      common stock at $1.25 per share to the Company’s placement agent, Ault Glazer
& Co., LLC, (the ***“Placement
      Agent”*** ).
      The
      warrants vested immediately and have a five-year life. The warrants were valued
      at approximately $62,000 and were expensed at the time of issuance. These
      securities will be issued pursuant to Section 4(2) of the Securities Act. These
      warrants were issued in reliance upon the exemption provided by Section 4(2)
      of
      the Securities Act.





On
      December 31, 2006, the Company issued 19,040 warrants to purchase shares of
      common stock at $2.00 per share to the Company’s Placement Agent. The warrants
      vested immediately and have a five-year life. The warrants were valued at
      approximately $17,000 and were expensed at the time of issuance. These
      securities will be issued pursuant to Section 4(2) of the Securities Act. These
      warrants were issued in reliance upon the exemption provided by Section 4(2)
      of
      the Securities Act.





Between
      January 1, 2007 and April 6, 2007, the Company issued 79,138 shares of Common
      Stock to various employees, directors, consultants and creditors. The Common
      Stock was issued for services and payment of accrued interest. The Common Stock
      was valued at approximately $131,000. These shares were issued in reliance
      upon
      the exemption provided by Section 4(2) of the Securities Act.





On
      January 29, 2007, the Company entered into a subscription agreement and sold
      an
      aggregate of 800,000 shares of its Common Stock and warrants to purchase an
      aggregate of up to 300,000 shares of its Common Stock in a private placement
      transaction to A Plus, an accredited investor. The warrants are exercisable
      for
      a period of five years, have an exercise price equal to $2.00, and 50% of the
      warrants are callable upon the occurrence of any one of a number of specified
      events when, after any such specified occurrence, the average closing price
      of
      the Company’s common stock during any period of five consecutive trading days
      exceeds $4.00 per share. The Company received gross proceeds of $500,000 in
      cash
      and will receive $500,000 in product over the course of the next twelve (12)
      months. These securities were sold in reliance upon the exemption provided
      by
      Section 4(2) of the Securities Act and the safe harbor of Rule 506 under
      Regulation D promulgated under the Securities Act. No advertising or general
      solicitation was employed in offering the securities, the sales were made to
      a
      limited number of persons, all of whom represented to the Company that they
      are
      accredited investors, and transfer of the securities is restricted in accordance
      with the requirements of the Securities Act.




5




On
      January 29, 2007, the Company entered into a subscription agreement with several
      unaffiliated accredited investors in a private placement exempt from the
      registration requirements of the Securities Act. The Company issued and sold
      to
      these accredited investors an aggregate of 104,000 shares of its common stock
      and warrants to purchase an additional 52,000 shares of its common stock. The
      warrants are exercisable for a period of five years, have an exercise price
      equal to $2.00, and 50% of the warrants are callable upon the occurrence of
      any
      one of a number of specified events when, after any such specified occurrence,
      the average closing price of the Company’s common stock during any period of
      five consecutive trading days exceeds $4.00 per share. These issuances resulted
      in aggregate gross proceeds to the Company of $130,000. These securities were
      sold in reliance upon the exemption provided by Section 4(2) of the Securities
      Act and the safe harbor of Rule 506 under Regulation D promulgated under the
      Securities Act. No advertising or general solicitation was employed in offering
      the securities, the sales were made to a limited number of persons, all of
      whom
      represented to the Company that they are accredited investors, and transfer
      of
      the securities is restricted in accordance with the requirements of the
      Securities Act.





On
      January 30, 2007, the Company issued 8,320 warrants to purchase shares of common
      stock at $2.00 per share to the Company’s Placement Agent. The warrants vested
      immediately and have a five-year life. The warrants were valued at approximately
      $8,000 and were expensed at the time of issuance. These securities will be
      issued pursuant to Section 4(2) of the Securities Act of 1933. These warrants
      were issued in reliance upon the exemption provided by Section 4(2) of the
      Securities Act.





Between
      March 7, 2007 and April 5, 2007, the Company entered into a subscription
      agreement with several accredited investors in a private placement exempt from
      the registration requirements of the Securities Act. The Company issued and
      sold
      to these accredited investors an aggregate of 2,000,000 shares of its common
      stock and warrants to purchase an additional 1,000,000 shares of its common
      stock. The warrants are exercisable for a period of five years, have an exercise
      price equal to $2.00, and 50% of the warrants are callable upon the occurrence
      of any one of a number of specified events when, after any such specified
      occurrence, the average closing price of the Company’s common stock during any
      period of five consecutive trading days exceeds $4.00 per share. These issuances
      resulted in aggregate gross proceeds to the Company of $2,500,000. We are
      required to use our reasonable best efforts to cause the registration statement
      to become effective within 120 days after the Closing Date, April 5, 2007.
      If
      the registration statement has not been filed on or prior to the 120th day
      after
      the Closing Date, we will issue, as liquidated damages, to the purchasers of
      the
      2,000,000 shares of our Common Stock and the warrants to purchase 1,000,000
      shares of our Common Stock warrants with a term of five years and an exercise
      price of $2.00 per share to purchase shares of our Common Stock equal to 2.5%
      of
      the number of shares of Common Stock purchased by the purchasers. We intend
      to
      use the net proceeds from this private placement transaction primarily for
      general corporate purposes and repayment of existing liabilities. These
      securities were sold in reliance upon the exemption provided by Section 4(2)
      of
      the Securities Act and the safe harbor of Rule 506 under Regulation D
      promulgated under the Securities Act. No advertising or general solicitation
      was
      employed in offering the securities, the sales were made to a limited number
      of
      persons, all of whom represented to the Company that they are accredited
      investors, and transfer of the securities is restricted in accordance with
      the
      requirements of the Securities Act.





On
      April
      5, 2007, the Company issued 89,600 warrants to purchase shares of common stock
      at $2.00 per share to the Company’s Placement Agent. The warrants vested
      immediately and have a five-year life. The warrants were valued at approximately
      $81,000 and were expensed at the time of issuance. These securities will be
      issued pursuant to Section 4(2) of the Securities Act of 1933. These warrants
      were issued in reliance upon the exemption provided by Section 4(2) of the
      Securities Act.





6


**PART
      III**


**FORM
      10-K**


**FOR
      PATIENT SAFETY TECHNOLOGIES, INC.**


**FOR
      YEAR-ENDED DECEMBER 31, 2006**





**Item
      11. Executive Compensation.**





**COMPENSATION
      DISCUSSION AND ANALYSIS**





We
      designed the compensation program for our named executive officers to attract,
      motivate, and retain key executives who drive the Company’s success. We seek to
      employ the best executive talent in our line of business. We want to reward
      our
      executives for business achievements and satisfaction of corporate objectives.
      Additionally, the overall executive compensation program, taken as a whole,
      should align the interests of the executives with the stockholders’ interests.
      We achieve these objectives through a compensation package that:





·
            provides
                competitive total compensation consisting primarily of cash and
                stock,




·
            allows
                our officer’s to participate in the benefit programs that we offer to all
                full-time employees,




·
            provides
                certain officer’s to receive additional fringe
                benefits,




·
            differentiates
                rewards based on the officer’s contributions to company performance,
                and




·
            encourages
                our named executive officers to act as owners with an equity interest
                in
                Patient Safety.





We
      view,
      for compensation purposes, our competitors for executive talent as companies
      in
      the health care industry.




*Determining
      Executive Compensation*




The
      independent members of the Board approve the compensation of our named executive
      officers. The Compensation Committee makes a recommendation to the independent
      directors for annual compensation (including salary, bonus and stock-based
      compensation) of our named executive officers. These recommendations are based
      on:




Chief
      executive officer





·
            The
                chief executive officer’s historical
                earnings,




·
            a
                market competitive assessment of similar roles at other
                companies,




·
            the
                earnings of other named executive officers, and




·
            an
                evaluation of the chief executive officer’s performance for the fiscal
                year.




Named
      executive officers (other than the chief executive officer) .





·
            The
                executive’s historical earnings,




·
            a
                market competitive assessment of similar roles at other
                companies,




·
            internal
                comparisons to the compensation of other
                executives,




·
            evaluations
                of performance for the fiscal year,
                and




·
            the
                chief executive officer’s recommendations for each named executive
                officer’s base pay, and bonus
                amounts.




The
      evaluation is based on the success of the named executive officer in achieving
      his performance commitments, which include financial, strategic and company
      culture/leadership goals. The Board approves the named executive officers
      salary, bonus and stock-based compensation in the first quarter of the fiscal
      year after the relevant performance information is available.




7




**The
      components of our executive compensation program**





Our
      executive compensation program consists of three elements: base pay; cash bonus
      and grants of fair market value of either restricted stock or options to
      purchase shares of our common stock. We use this mix of programs for a variety
      of reasons:





·
            As
                a package, these types of programs are typically offered by the types
                of
                companies from which we would seek executive
                talent.




·
            As
                a package, these particular programs provide both a current and a
                long
                term incentive for the executive officers, thereby aligning the
                executives’ interests with
                shareholders.




·
            These
                programs, as a package, provide the executives with short and long
                term
                rewards; this serves as a retention, as well as a motivational, device
                for
                the executives..





We
      also
      provide our named executive officers with a package of fringe benefits on the
      same basis that is provided to all full-time benefits eligible employees. These
      benefits include such items as health insurance and group term life insurance.
      We provide certain executives with an additional benefit of an automobile
      allowance, which is provided for in their employment contracts.





We
      believe that the package of executive compensation programs that we offer is
      competitive; we are able to attract and retain the executive talent that we
      need
      to successfully run our business. We currently believe that the long term
      incentive component of our executive compensation program, which uses fair
      market value stock options and grants of restricted common stock, provides
      executives with an incentive as well as putting a portion of their compensation
      at risk if our share price declines.





We
      believe that our named executive officers should have formalized employment
      contracts. The existence of a contract gives the Company, and the named
      executive officer structure as to the other’s expectations from the employment
      relationship. We also believe that the level of security that an employment
      contract provides to the executive is an important retention tool; we feel
      that
      many of the companies with whom we compete for executive talent offer such
      agreements, and that we would be at a competitive disadvantage if we did not
      have them. The salient terms of the employment agreements for the named
      executive officers are discussed in the “Employment Agreements”
section.





**Our
      process for setting executive pay**





The
      Compensation Committee’s focus is to determine the compensation of the chief
      executive officer and to review the proposals of the chief executive officer
      regarding the compensation for other named executive officers. In 2006, the
      Compensation Committee made the final decision on all aspects of named executive
      officer pay. In 2007, the Compensation Committee will present recommendations
      to
      the entire Board of Directors for their approval.





Our
      executive compensation process begins with the chief executive officer’s
      submission of each executive’s total pay package to the Compensation Committee
      for its determination. We maintain a pay structure with ranges for each type
      of
      compensation (base pay, bonus, equity grant) for the named executive officers.
      We have developed this structure based on our knowledge of our industry.





Our
      process for determining the value of each component of executive pay functioned
      in the following manner for 2006:





Base
      pay: Base
      compensation for all of our named executive officers is provided for in their
      respective employment agreements, and the Company has the ability to make annual
      increases to the base pay level. Looking at information from other reporting
      companies, the chief executive officer makes a recommendation for executive
      base
      pay increases to the Compensation Committee. The Compensation Committee reviews
      the information provided by the chief executive officer and its supporting
      data,
      and makes a determination of annual base pay increases.




8




The
      Compensation Committee awarded the following base pay increases to the named
      executive officers; the increases were effective on January 1, 2007 for our
      chief executive and chief financial officer and May 1, 2007 for the President
      of
      SurgiCount Medical.





**Named
                Executive Officer**
            
            **Annualized
                2006**
              **Base**
            
            **Annual**
              **Increase**
            
            **Annualized
                2007**
              **Base**
            
            **Percentage**
              **Increase**William
                Horne, Chief Executive and Chief Financial Officer
            
            $
            150,000
            
            $
            100,000
            
            $
            250,000
            
            
            66.7
            %Bill
                Adams, President and Chief Executive Officer of SurgiCount Medical,
                Inc.
            
            $
            300,000
            
            $
            0
            
            $
            300,000
            
            
            0
            %Richard
                Bertran, President of SurgiCount Medical, Inc.
            
            $
            200,000
            
            $
            50,000
            
            $
            250,000
            
            
            25
            %Lynne
                Silverstein, Executive Vice President
            
            $
            120,000
            
            $
            0
            
            $
            120,000
            
            
            0
            %James
                Schafer, Director of Manufacturing of SurgiCount
            
            $
            100,000
            
            $
            0
            
            $
            100,000
            
            
            0
            %





The
      Chief
      Executive and Chief Financial Officer received the largest raise because further
      analysis by the Compensation Committee indicated that the position was underpaid
      and the Compensation Committee wanted to establish an equitable level of base
      pay amounts for our three senior executives.




Annual
      bonus: Our
      annual bonus program for executives is administered in the following manner.
      Our
      Compensation Committee determines the amount of bonuses, if any, for each of
      our
      named executive officers. To the extent bonuses are made they are on a
      completely discretionary basis at the reasonable and good faith discretion
      of
      the Compensation Committee, based upon the financial performance of the Company.
      During 2006 the Compensation Committee did not award any bonuses.





Equity
      grants: In
      certain circumstances, the Compensation Committee may award equity grants to
      named executive officers. The reasons for these grants include:





·
            an
                incentive to join the Company, based on compensation that is being
                forfeited through the termination of previous
                employment,




·
            to
                encourage retention of critical
                talent,




·
            as
                a strategic investment in someone deemed critical to the Company’s
                leadership, and




·
            to
                reward outstanding performance




The
      chief
      executive officer recommends the equity grant, if any, to a named executive
      officer. The Compensation Committee considers the chief executive officer’s
      recommendation and makes a final decision based on the factors listed above.
      Equity grants that were made to named executive officers during 2006 were in
      connection with employment contracts executed by our Chief Executive and
      Financial Officer and the President and Chief Executive Officer of SurgiCount
      Medical. The equity grant during 2006 to our Chief Executive and Chief Financial
      Officer was in the form of time-vested restricted stock issued pursuant to
      an
      employment agreement. The equity grant during 2006 to our President and Chief
      Executive Officer of SurgiCount Medical was in the form of non-qualified stock
      options upon joining the Company. All other equity grants during 2006 to our
      named executive officers were made, based upon the recommendation of our former
      chief executive officer, to retain key executives. All of the options granted
      in
      2006 were valued at fair market value as of the date of grant (as further
      explained below). One-fourth of the grant to our President and Chief Executive
      Officer of SurgiCount Medical will vest annually over a three year period
      beginning on the first anniversary of the date of grant, April 18, 2007. The
      remaining one-fourth will vest upon the occurrence of certain defined events.
      All other options granted in 2006 to our other named executive officers were
      vested at the time of grant.




9




In
      connection with the award of equity grants, the Principal Executive Officer
      provides the Compensation Committee with a proposal for equity grants as part
      of
      the employment contract process. The amount of the grant is based on the equity
      grant ranges for the position which the Company maintains. The Compensation
      Committee reviewed the Principal Executive Officer’s proposal and the underlying
      information, and makes its determination as to the grant.





We
      establish the exercise price for our options in the following
      manner:





For
      a new
      hire, the Compensation Committee approves the grant and establishes the price
      based on the Company’s closing price on the day of Compensation committee
      approval; however, if the executive has not yet started employment as of the
      date of Compensation Committee approval, the price is set as the Company’s
      closing price on the executive’s first day of work.




For
      a new
      contract for a current executive, the Compensation Committee approves the grant
      and establishes the price based on the Company’s closing price on the day of
      Compensation Committee approval.





We
      believe that the grant of fair market value stock options, even though there
      is
      now a financial statement impact before the options are exercised, continues
      to
      provide substantial benefits to the Company and the executive. We benefit
      because the options align the executive’s financial interest with the
      shareholders’ interest:





The
      executives benefit because:




·
            They
                can realize additional income if our shares increase in value,
                and




·
            They
                have no personal income tax impact until they exercise the
                options





We
      do not
      maintain any equity ownership guidelines for our named executive officers.
      We
      have adopted a corporate policy which expressly prohibits any named executive
      officer from trading in derivative securities of our Company, short selling
      our
      securities, or purchasing our securities on margin at any time. We do not time
      the granting of our options with any favorable or unfavorable news relating
      to
      our Company. Proximity of any awards to an earnings announcement, market event
      or other event related to us is purely coincidental.




Because
      we feel that each of our named executive officers provides unique services
      to
      us, we do not use a fixed relationship between base pay, short term bonus and
      equity awards. When the Compensation Committee makes the final decisions about
      a
      named executive officers total compensation package for a year, the three
      elements (base pay, bonus and equity award) are considered both individually
      and
      as a complete package. We do not take into account amounts that a named
      executive officer may have realized in a year as a result of short term bonus
      awards or stock option exercises when we establish pay levels and goals for
      the
      current year. Overall, we believe that our total compensation program for
      executives is reasonable while being competitive with market peers.




10




The
      following table sets forth information concerning the annual and long-term
      compensation earned by or paid to our Chief Executive Officer and to other
      persons who served as executive officers as at and/or during the fiscal year
      ended December 31, 2006 who earned compensation exceeding $100,000 during 2006
      (the ***“named
      executive officers”*** ),
      for
      services as executive officers for the last three fiscal years.




**SUMMARY
                COMPENSATION TABLE**Name
                and principal position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Stock
                Awards ($)(3)
            
            Option
                Awards ($)(3)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Nonqualified
                Deferred Compensation Earnings ($)
            
            All
                Other Compensation
              ($)(4)
            
            Total
              ($)William
                B. Horne,
              Chief
                Executive &
              Chief
                Financial Officer(1)
            
            
            2006
              2005
              2004
            
            
            150,000
              75,000
              0
            
            
            0
              750
              0
            
            
            38,703
              277,536
              0
            
            
            0
              227,732
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            255
              368
              0
            
            
            188,958
              581,386
              0Bill
                Adams,
              President
                & Chief
                Executive
                  Officer of SurgiCount(1)
            
            
            2006
              2005
              2004
            
            
            206,250
              0
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            996,302
              0
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            822
              0
              0
            
            
            1,203,374
              0
              0Lynne
                Silverstein,
              Executive
                Vice
              President
            
            
            2006
              2005
              2004
            
            
            120,000
              120,000
              0
            
            
            0
              0
              0
            
            
            123,000
              158,000
              0
            
            
            108,085
              131,384
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            200
              591
              0
            
            
            351,285
              409,975
              0Richard
                Bertran,
              President
                of
              SurgiCount
            
            
            2006
              2005
              2004
            
            
            200,000
              92,500
              0
            
            
            0
              750
              0
            
            
            0
              36,000
              0
            
            
            0
              343,195
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            360
              433
              0
            
            
            200,360
              47,878
              0James
                Schafer,
              Director
                of
              Manufacturing
                of SurgiCount
            
            
            2006
              2005
              2004
            
            
            100,000
              39,807
              0
            
            
            0
              750
              0
            
            
            0
              50,000
              0
            
            
            0
              186,324
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            342
              361
              0
            
            
            100,342
              277,242
              0Louis
                Glazer, M.D.,
              Ph.G.,
                Former Chief
              Executive
                Officer
            
            
            2006
              2005
              2004
            
            
            118,750
              120,000
              0
            
            
            0
              750
              0
            
            
            246,000
              316,000
              0
            
            
            216,169
              262,768
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            1,060
              2,582
              0
            
            
            581,979
              702,100
              0Milton
                “Todd” Ault III,
              Former
                Chief
              Executive
                Officer
            
            
            2006
              2005
              2004
            
            
            180,000
              150,000
              0
            
            
            0
              750
              0
            
            
            270,000
              316,000
              0
            
            
            237,259
              262,768
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            184
              1,248
              0
            
            
            687,443
              730,766
              0





(1)
            Mr.
                Horne was appointed Chief Executive Officer on January 9,
                2007.


(2)
            Mr.
                Adams was appointed President on February 28, 2007 and Chief Executive
                Officer of SurgiCount on April 21, 2006.


(3)
            Represents
                the dollar amount recognized for financial reporting purposes of
                restricted stock grants and stock options awarded in 2006, 2005 and
                2004,
                respectively, computed in accordance with SFAS
                123(R).


(4)
            Primarily
                represents long term disability premiums and life insurance premiums
                paid
                by the Company





11


The
      following table sets forth information with respect to the named executive
      officers concerning the grant of stock options during the fiscal year ended
      December 31, 2006. The Company did not have any outstanding stock appreciation
      rights ( ***“SARs”*** )
      as of
      December 31, 2006.




**GRANTS
                OF PLAN-BASED AWARDS**Estimated
                Future Payouts Under Non-Equity Incentive Plan Awards
            
            
            Estimated
                Future Payouts Under Equity Incentive Plan Awards
            
            
            All
                  Other
                Stock
                  Awards:
                Number
                  of
                Shares
                  of Stocks
            
            
            All
                  Other Option
                Awards:
                Number
                  of Securities
            
            
            Exercise
                  or
                Base
                  Price of Option
            
            
            Grant
                  Date
                Fair
                  Value of Stock andName
            
            
            Grant
                Date
            
            
            Threshold
              ($)
            
            
            Target
              ($)
            
            
            Maximum
              ($)
            
            
            Threshold
              ($)
            
            
            Target
              ($)
            
            
            Maximum
              ($)
            
            
            or
              Units(#)
            
            
            Underlying
                Options(#)
            
            
            Awards
              ($/Sh)
            
            
            Option
                AwardsWilliam
                B. Horne
            
            
            3/29/2006
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            12,648
            
            
            —
            
            
            0
            
            
            38,703Bill
                Adams
            
            
            4/18/2006
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            —
            
            
            400,000
            
            
            3.50
            
            
            996,302Lynne
                Silverstein
            
            
            1/31/2006
              1/31/2006
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            —
              30,000
            
            
            45,000
              —
            (1)
            
            4.10
              0
            
            
            108,085
              123,000Richard
                Bertran
            
            
            —
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            —
            
            
            —
            
            
            0
            
            
            0James
                Schafer
            
            
            —
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            —
            
            
            —
            
            
            0
            
            
            0Louis
                Glazer, M.D., Ph.G.,
            
            
            1/31/2006
              1/31/2006
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            —
              60,000
            
            
            90,000
              —
            (2)
            
            4.10
              0
            
            
            216,169
              246,000Milton
                “Todd” Ault III
            
            
            1/09/2006
              1/09/2006
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            —
              60,000
            
            
            90,000
              —
            (2)
            
            4.50
              0
            
            
            237,259
              270,000





(1)
            15,000
                options were cancelled subsequent to the grant
                date.


(2)
            30,000
                options were cancelled subsequent to the grant
                date.





**OUTSTANDING
                EQUITY AWARDS AT FISCAL YEAR-END**OPTION
                AWARDS
            
            STOCK
                AWARDSName
            
            Number
                of Securities Underlying Unexercised Options (#)
              Exercisable
            
            Number
                of Securities Underlying Unexercised Options (#)
              Unexercisable
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options
              (#)
            
            Option
                Exercise Price
              ($)
            
            Option
                Expiration
              Date
            
            Number
                of Shares or Units of Stock That Have Not Vested (#)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested
              ($)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested
              (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested
              (#)William
                B. Horne
            
            
            78,000
            
            
            0
            
            
            0
            
            
            5.267
            
            
            3/30/2015
            
            
            0
            
            
            0
            
            
            0
            
            
            0Bill
                Adams
            
            
            100,000
            
            
            300,000
            
            
            0
            
            
            3.50
            
            
            4/18/2016
            
            
            0
            
            
            0
            
            
            0
            
            
            0Lynne
              Silverstein
            
            
            45,000
              30,000
            
            
            0
              0
            
            
            0
              0
            
            
            5.267
              4.10
            
            
            3/30/2015
              1/31/2016
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0Richard
                Bertran
            
            
            66,667
            
            
            133,333
            
            
            0
            
            
            5.00
            
            
            7/18/2015
            
            
            0
            
            
            0
            
            
            0
            
            
            0James
                Schafer
            
            
            31,250
            
            
            118,750
            
            
            0
            
            
            5.00
            
            
            8/08/2015
            
            
            0
            
            
            0
            
            
            0
            
            
            0Louis
                Glazer,
              M.D.,
                Ph.G.,
            
            
            75,000
              60,000
            
            
            0
              0
            
            
            0
              0
            
            
            5.267
              4.10
            
            
            3/30/2015
              1/31/2016
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0Milton
                “Todd”
              Ault
                III
            
            
            75,000
              60,000
            
            
            0
              0
            
            
            0
              0
            
            
            5.267
              4.10
            
            
            3/30/2015
              1/09/2016
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0




12




**OPTION
                EXERCISES AND STOCK VESTED**OPTION
                AWARDS
            
            STOCK
                AWARDSName
            
            Number
                of
              Shares
                Aquired
              on
                Exercise
              (#)
            
            Value
              Realized
              on
                Exercise
              ($)
            
            Number
                of
              Shares
              Aquired
              on
                Vesting
              (#)
            
            Value
              Realized
              on
                Vesting
              ($)William
                B. Horne
            
            
            0
            
            
            0
            
            
            49,751
            
            
            161,365Bill
                Adams
            
            
            0
            
            
            0
            
            
            0
            
            
            0Lynne
                Silverstein
            
            
            0
            
            
            0
            
            
            48,000
            
            
            205,800Richard
                Bertran
            
            
            0
            
            
            0
            
            
            0
            
            
            0James
                Schafer
            
            
            0
            
            
            0
            
            
            0
            
            
            0Louis
                Glazer, M.D., Ph.G.,
            
            
            0
            
            
            0
            
            
            96,000
            
            
            411,600Milton
                “Todd” Ault III
            
            
            0
            
            
            0
            
            
            96,000
            
            
            435,600




**Pension
      Benefits**





The
      Company does not offer a pension benefit plan.





**Non-Qualified
      Deferred Compensation**





The
      Company does not offer a non-qualified deferred compensation
      plan.





**Compensation
      of Directors**





As
      of
      December 31, 2006, each director of the Company is eligible to receive a fee
      of
      $500 plus reimbursement of expenses incurred in attending each board meeting.
      In
      addition, directors are eligible to receive grants of restricted stock and/or
      stock options pursuant to the Company’s compensation plans which are described
      below. During 2006, the Company did not compensate any of its directors in
      cash. The
      following table provides certain summary information concerning the compensation
      paid to directors, other than William Horne (our Chief Executive Officer),
      Milton “Todd” Ault III and Louis Glazer, M.D., Ph.G. (our former Chief Executive
      Officers), during 2006. All compensation paid to Messrs .
      Horne,
      Ault and Glazer is set forth in the table under “Executive
      Compensation.”




13




**Director
      Compensation**





Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Stock
              Awards
              ($)(5)
            
            Option
              Awards
              ($)
                (5)
            
            Non-Equity
              Incentive
                Plan
              Compensation
                ($)
            
            Change
                in Pension
              Value
                and Nonqualified
              Deferred
                Compensation
              Earnings
              ($)
            
            All
                Other
              Compensation
                ($)
            
            Total
              ($)Arnold
                Spangler
            
            
            0
            
            
            43,000
            
            
            37,786
            
            
            0
            
            
            0
            
            
            0
            
            
            80,786Herbert
                Langsam
            
            
            0
            
            
            43,000
            
            
            37,786
            
            
            0
            
            
            0
            
            
            0
            
            
            80,786David
                Augustine(1)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Wenchen
                Lin(2)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Alice
                Campbell(3)
            
            
            0
            
            
            49,450
            
            
            37,786
            
            
            0
            
            
            0
            
            
            0
            
            
            87,236Brigadier
                General (Ret.) Lytle Brown III(4)
            
            
            0
            
            
            43,000
            
            
            37,786
            
            
            0
            
            
            0
            
            
            0
            
            
            80,786





(1)  Mr.
      Augustine was appointed as a director effective January 24, 2007.




(2)  Mr.
      Lin
      was appointed as a director effective March 28, 2007.




(3)  Ms.
      Campbell resigned as a director effective January 26, 2007.




(4)  Mr.
      Brown
      resigned as a director effective January 24, 2007.




(5)  Represents
      the dollar amount recognized for financial reporting purposes of restricted
      stock grants and stock options awarded, computed in accordance with SFAS
      123(R).





**Compensation
      Committee Interlocks and Insider Participation**





The
      Compensation Committee members currently are Messrs. Herbert Langsam and Arnold
      Spangler, each of whom is independent. Each member of the Compensation Committee
      is a “non-employee director” for purposes of Rule 16b-3 under Section 16 of the
      Exchange Act and an “outside director” for purposes of Section 162(m) of the
      Internal Revenue Code. Mr. Langsam serves as the Chairman of the Compensation
      Committee. None of these individuals is a present or former officer or employee
      of the Company.





During
      the last fiscal year, no executive officer of the Company served either as:
      (1)
      a member of the compensation committee (or other board committee performing
      equivalent functions or, in the absence of any such committee, the entire board
      of directors) of another entity, one of whose executive officers served on
      the
      compensation committee (or other board committee performing equivalent functions
      or, in the absence of any such committee, the entire board of directors) of
      the
      Company; (2) a director of another entity, one of whose executive officers
      served on the compensation committee (or other board committee performing
      equivalent functions or, in the absence of any such committee, the entire board
      of directors) of the Company; or (3) a member of the compensation committee
      (or
      other board committee performing equivalent functions or, in the absence of
      any
      such committee, the entire board of directors) of another entity, one of whose
      executive officers served as a director of the Company.





**Employment
      Agreements**





On
      June
      13, 2005, we entered into an employment agreement with William B. Horne as
      Chief
      Financial Officer of the Company and its subsidiaries, which became effective
      on
      July 5, 2005. Mr. Horne’s title subsequently was changed to Chief Executive
      Officer of the Company. The agreement continues for a term of 24 months. The
      agreement will automatically renew for successive one-year terms unless either
      party delivers to the other party written notice of termination at least 30
      days
      before the end of the then current term. Mr. Horne’s base compensation under the
      agreement was $150,000 per year. Effective January 1, 2007 Mr. Horne’s base
      salary was increased to $250,000 per year. Upon entering into the agreement,
      Mr.
      Horne was granted 26,316 shares of restricted stock which vested during the
      first year of the agreement. In addition, Mr. Horne is eligible to receive
      shares of the Company’s common stock or options to purchase shares of the
      Company’s common stock from time to time as determined by the Board of
      Directors. The Company is required to promptly reimburse Mr. Horne for all
      reasonable out-of-pocket business expenses incurred in performing the
      responsibilities under the agreement. Mr. Horne is entitled to participate
      in
      any of the Company’s benefit plans in effect from time to time for employees of
      the Company. Mr. Horne is entitled to three weeks of paid vacation, to be
      scheduled and taken in accordance with the Company’s standard vacation policies.
      In addition, Mr. Horne is entitled to sick leave and holidays at full pay in
      accordance with the Company’s policies established and in effect from time to
      time. The agreement also contains customary provisions for disability, death,
      confidentiality, indemnification and non-competition. Both the Company and
      Mr.
      Horne have the right to voluntarily terminate the employment agreement at any
      time with or without cause. If the Company voluntarily terminates the agreement,
      the Company must pay Mr. Horne a cash sum equal to (a) all accrued base salary
      through the date of termination plus all accrued vacation pay and cash bonuses,
      if any, plus (b) as severance compensation, an amount equal to Mr. Horne’s then
      base salary for the remaining employment term, but only through July 5, 2007.
      If
      Mr. Horne voluntarily terminates the agreement, all unvested restricted stock
      and stock options will be forfeited. In the event of a merger, consolidation,
      sale, or change of control, the surviving or resulting company is required
      to
      honor the terms of the agreement with Mr. Horne.





14





Effective
      July 18, 2005, the Company’s subsidiary SurgiCount entered into an employment
      agreement with Richard Bertran as Executive Vice President of SurgiCount. Mr.
      Bertran’s title subsequently was changed to President of SurgiCount. Mr.
      Bertran’s annual base compensation is $200,000. In addition, Mr. Bertran is
      entitled to receive: (a) options to purchase 200,000 shares of the Company’s
      common stock with a strike price of $5.00 per share, which options will vest
      annually over three years; and (b) 10,000 restricted shares of the Company’s
      common stock as a signing bonus. Mr. Bertran also may receive the following
      stock options upon accomplishing milestones: (a) options to purchase 50,000
      shares of the Company’s common stock when SurgiCount reaches $5 million in
      sales; and (b) options to purchase 50,000 shares of the Company’s common stock
      when Mr. Bertran accomplishes certain other unspecified milestones to be
      mutually agreed upon among Mr. Bertran, SurgiCount’s Chief Executive Officer and
      Health West. Mr. Bertran is also entitled to participate in all of SurgiCount’s
      employee benefit plans in effect from time to time. The employment agreement
      has
      an initial term of three years and will automatically renew for successive
      one-year periods unless sooner terminated. Mr. Bertran and SurgiCount have
      the
      right to terminate the employment agreement at any time during the employment
      term for any reason. SurgiCount may also terminate the employment agreement
      at
      any time for “cause” (as defined in the employment agreement). If the employment
      agreement is voluntarily terminated by Mr. Bertran or if SurgiCount terminates
      the agreement for cause, then all unvested stock options and/or unearned
      milestone bonuses will be forfeited and all obligations of the parties will
      end
      except SurgiCount must continue to reimburse Mr. Bertran for reasonable
      out-of-pocket business expenses related to his employment with SurgiCount,
      Mr.
      Bertan must continue to maintain the confidentiality of any confidential
      information about SurgiCount and SurgiCount may be required to indemnify Mr.
      Bertran for certain liabilities in connection with his employment. If SurgiCount
      voluntarily terminates the employment agreement without cause, then: (a) if
      the
      termination date is before 15 months after the effective date of the employment
      agreement, SurgiCount must pay Mr. Bertran severance compensation in cash equal
      to 15 months of base compensation, plus award the milestone option grants to
      the
      extent the milestones are met within the employment term; (b) if the termination
      date occurs within the final 15 months of the initial term, SurgiCount must
      pay
      Mr. Bertran severance compensation in cash through the remaining initial term
      of
      the agreement; and (c) all unvested stock options will become automatically
      vested.





Effective
      August 8, 2005 the Company’s subsidiary SurgiCount entered into an employment
      agreement with James Schafer as Chief Operating Officer of SurgiCount. The
      employment agreement continues for an initial term of 24 months and will
      automatically renew for successive one-year terms unless either party delivers
      to the other party written notice of termination at least 30 days before the
      end
      of the then current term. Mr. Schafer’s base compensation is $100,000 per year.
      Mr. Schafer will receive restricted stock of the Company annually in an amount
      valued at $50,000. The first $50,000 of restricted stock vested on the effective
      date of the employment agreement and the second $50,000 of restricted stock
      will
      vest on the second year anniversary of the agreement. In addition, Mr. Schafer
      will receive 125,000 stock options of the Company which will vest quarterly
      over
      four years with a strike price of $5.00 per share. SurgiCount is required to
      promptly reimburse Mr. Schafer for all reasonable out-of-pocket business
      expenses incurred in performing his responsibilities. SurgiCount also agreed
      to
      pay Mr. Schafer relocation/moving expenses of $8,000 and an automobile allowance
      of $6,000 per year. Mr. Schafer is entitled to participate in all of
      SurgiCount’s benefit plans in effect from time to time for employees of
      SurgiCount. Mr. Schafer is entitled to three weeks of paid vacation, to be
      scheduled and taken in accordance with SurgiCount’s standard vacation policies.
      In addition, Mr. Schafer is entitled to sick leave and holidays at full pay
      in
      accordance with SurgiCount’s policies established and in effect from time to
      time. The agreement also contains customary provisions for disability, death,
      confidentiality, indemnification and non-competition. Both SurgiCount and Mr.
      Schafer have the right to voluntarily terminate the employment agreement at
      any
      time with or without cause. If SurgiCount voluntarily terminates the agreement,
      SurgiCount must pay Mr. Schafer a cash sum equal to (a) all accrued base salary
      through the date of termination plus all accrued vacation pay and cash bonuses,
      if any, plus (b) as severance compensation, an amount equal to Mr. Schafer’s
      then base salary for 12 months, but if such termination is within the final
      12
      months of employment then Mr. Schafer will receive his base salary for the
      remainder of the term. If Mr. Schafer voluntarily terminates the agreement,
      all
      unvested restricted stock and stock options will be forfeited. In the event
      of a
      merger, consolidation, sale, or change of control, the surviving or resulting
      company is required to honor the terms of the agreement with Mr.
      Schafer.




15




Effective
      April 21, 2006, the Company’s subsidiary SurgiCount entered into an employment
      agreement with William M. Adams to employ Mr. Adams as SurgiCount’s Chief
      Executive Officer. The term of the employment agreement will end effective
      at
      midnight on April 17, 2009 unless extended by the mutual written consent of
      SurgiCount and Mr. Adams. SurgiCount agreed to pay Mr. Adams an annual base
      salary of $300,000 during the term of the employment agreement. In addition,
      Mr.
      Adams is eligible to receive annual bonuses in cash or stock as determined
      by
      the Board of Directors of SurgiCount and/or the Company. Pursuant to the
      employment agreement, the Company granted Mr. Adams options to purchase 300,000
      shares of the Company’s common stock with an exercise price of $3.50 per share.
      One-third of such options will vest annually over three years beginning April
      18, 2007. However, all of the options will vest immediately upon a sale or
      exchange of 50% or more of SurgiCount’s outstanding capital stock or a joint
      venture by SurgiCount with an unaffiliated entity involving 50% or more of
      SurgiCount’s outstanding capital stock. Mr. Adams will also receive $10,000 of
      restricted stock of the Company annually on April 30, 2007, April 18, 2008
      and
      April 18, 2009. Additionally, Mr. Adams will receive options to purchase an
      additional 100,000 shares of common stock of the Company with an exercise price
      of $3.50 per share which will vest upon either of the following events: (a)
      a
      sale or exchange of 50% or more of SurgiCount’s outstanding capital stock or a
      joint venture by SurgiCount with an unaffiliated entity; or (b) if on or prior
      to December 31, 2008, SurgiCount’s cumulative sales from the inception of
      SurgiCount equal or exceed $10 million. Mr. Adams and his family are also
      entitled to participate in any of SurgiCount’s benefit plans in effect from time
      to time for the benefit of SurgiCount’s employees. SurgiCount and Mr. Adams have
      the right to terminate the employment agreement at any time upon 30 days prior
      written notice unless circumstances dictate that such notice cannot reasonably
      be given. SurgiCount has the right to terminate the employment agreement for
      cause in certain circumstances described in the agreement. If SurgiCount
      voluntarily terminates the employment agreement without cause, SurgiCount must
      pay Mr. Adams his accrued compensation through the termination date plus the
      following severance compensation. If the employment agreement is terminated
      by
      the Company without cause prior to the first anniversary of the start date
      of
      employment, SurgiCount must pay Mr. Adams 24 months of his base salary as
      severance compensation. If the employment is terminated by the Company without
      cause after the first anniversary of the start date of employment, SurgiCount
      must pay Mr. Adams his base salary for the remainder of the employment term
      as
      severance compensation. The agreement also contains customary provisions for
      disability, death, confidentiality and non-solicitation.





**Consulting
      Agreements**





On
      April
      5, 2005, the Company entered into a consulting agreement with Health West,
      pursuant to which Health West agreed to help the Company establish a
      comprehensive manufacturing and distribution strategy for the Company’s
      Safety-SpongeTM System worldwide. In consideration for Health West’s services,
      the Company agreed to issue Health West 42,017 shares of common stock, to be
      issued as follows: (a) 10,505 shares were issued upon signing the consulting
      agreement; (b) an additional 15,756 shares were issued as a result of Health
      West’s assistance in structuring a comprehensive manufacturing agreement with A
      Plus Manufacturing, which was entered into on August 17, 2005; and (c) the
      Company has agreed to issue the remaining 15,756 shares for Health West’s
      services in assisting with the development of a regional distribution network
      to
      integrate the Safety-SpongeTM System into the existing acute care supply chain.
      The remaining shares will be issued during 2007. As incentive for entering
      into
      the agreement, the Company issued Health West a callable warrant to purchase
      150,000 shares of common stock with an exercise price of $5.95 per share,
      exercisable for five years. In addition, the Company agreed to issue a callable
      warrant to purchase 25,000 shares of the common stock with an exercise price
      of
      $5.95 per share, exercisable upon assisting the Company with developing a global
      distribution strategy and identification of acquisition candidates. Mr. Adams
      is
      Chief Executive Officer of Health West as well as its President. The Health
      West
      agreement was terminated by the Company’s Board of Directors upon Mr. Adams
      appointment as SurgiCount’s Chief Executive Officer effective as of April 21,
      2006.




16




**Compensation
      Plans**





On
      September 9, 1997, the Company’s stockholders approved two stock option plans: a
      Stock Incentive Plan ( ***“Stock
      Incentive Plan”*** )
      to be
      offered to consultants, officers and employees (including any officer or
      employee who is also a director of the Company) and a Non-Statutory Stock Option
      Plan ( ***“Stock
      Option Plan”*** )
      to be
      offered to “outside” directors ( *i.e.* ,
      those
      directors who are not also officers or employees) (collectively, the ***“1997
      Stock Option Plans”*** ).
      337,500 shares (post 3:1 forward split effective April 5, 2005) of the Company’s
      common stock was reserved for issuance under the 1997 Stock Option Plans, of
      which 202,500 shares was reserved for the Stock Incentive Plan and 135,000
      shares was reserved for the Stock Option Plan. During 2006, the Company
      cancelled the 1997 Stock Option Plans and the remaining 56,250 shares available
      for grant under these plans. There were no outstanding options under the 1997
      Stock Option Plans at the time of their cancellation.




On
      March
      30, 2005, the Company’s stockholders approved the Company’s Stock Option and
      Restricted Stock Plan, which provided for the issuance of a maximum of
      twenty-five percent (25%) of the shares of common stock that were outstanding
      as
      of the date on which the plan was adopted (1,319,082 shares) to be offered
      to the Company’s consultants, officers and employees (including any officer or
      employee who is also a director of the Company). On November 17, 2005 the
      Company’s stockholders approved an Amended and Restated Stock Option and
      Restricted Stock Plan ( ***“Amended
      and Restated Stock Option and Restricted Stock Plan”*** ),
      which
      increased the number of shares authorized for issuance to 2,500,000 shares
      and
      authorized the issuance of warrants to consultants.





Shares
      subject to options that terminate or expire prior to exercise will be available
      for future grants under the plans.





On
      December 31, 2006, there were 13,500 shares of common stock and 1,704,000
      options to purchase shares of common stock outstanding under the Amended and
      Restated Stock Option and Restricted Stock Plan, with 26,026 options, warrants,
      or shares of common stock available for future issuance under the Amended and
      Restated Stock Option and Restricted Stock Plan.





The
      following is a description of the Amended and Restated Stock Option and
      Restricted Stock Plan.





***Amended
      and Restated Stock Option and Restricted Stock Plan***




*Purpose*





The
      purpose of the Amended and Restated Stock Option and Restricted Stock Plan
      is to
      advance the interests of the Company by providing key employees who have
      substantial responsibility for the direction and management of the Company,
      as
      well as certain directors, other employees and consultants with additional
      incentives to exert their best efforts to increase their proprietary interest
      in
      the success of the Company, to reward outstanding performance, and to attract
      and retain persons of outstanding ability.





17




*Type
      of Awards*





The
      Amended and Restated Stock Option and Restricted Stock Plan permits, at the
      discretion of the Compensation Committee, the grant of options to purchase
      common stock (including ISOs or non-ISOs, warrants to purchase common stock
      and
      restricted stock.





*Administration*





The
      Amended and Restated Stock Option and Restricted Stock Plan is administered
      by
      the Company’s Compensation Committee, which is comprised of at least two members
      of the Company’s Board, each of whom is (a) a non-employee director, as
      defined in Rule 16b-3 promulgated under the Exchange Act; (b) an
“outside director” as defined under Section 162(m) of the Internal Revenue
      Code; and (c) an independent director under the rules established by
      AMEX.





*Participants*





The
      Compensation Committee determines and designates those officers, employees,
      non-officer directors and consultants of the Company who are eligible to
      participate in the Amended and Restated Stock Option and Restricted Stock Plan.
      The Compensation Committee also determines the number of options, warrants
      and
      shares of restricted stock to be awarded to each participant. In making these
      determinations, the Compensation Committee takes into account the potential
      contributions of the participant to the success of the Company, and such other
      factors as the Compensation Committee deems relevant to accomplish the purposes
      of the Amended and Restated Stock Option and Restricted Stock Plan.




*Termination.*





All
      rights to exercise options and warrants terminate sixty days after any optionee
      or warrant holder ceases to be a director of the Company or a key employee
      or
      consultant of the Company and/or any of its subsidiaries, and no options or
      warrants will vest after an optionee’s or warrant holder’s termination date.
      Notwithstanding the foregoing, however, if an optionee’s or warrant holder’s
      service as a director of the Company or key employee or consultant terminates
      as
      a result of the optionee’s or warrant holder’s death or his total and permanent
      disability, the optionee, warrant holder or the executors or administrators
      or
      legatees or distributees of the estate, as the case may be and to the extent
      they are permitted transferees, have the right, from time to time within one
      year after the optionee’s or warrant holder’s total and permanent disability or
      death and prior to the expiration of the term of the option or warrant, to
      exercise any portion of the option or warrant not previously exercised, in
      whole
      or in part, as provided in the respective agreement evidencing the award of
      the
      options or warrants. A participant’s rights to shares awarded as restricted
      stock are set forth in the agreement evidencing the award.





18




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.


PATIENT
                SAFETY TECHNOLOGIES, INC.Date:
                November 8, 2007
            By:
            /s/ William
              B. HorneWilliam
              B. HorneChief
                Executive and Chief Financial Officer and
              Principal
                Accounting Officer





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.




**Signature**
            
            **Title**
            
            **Date**/s/
                Arnold Spangler
            
            Chairman
                of the Board
            
            November
                8, 2007Arnold
                Spangler/s/
                William B. Horne
            
            Chief
                Executive, Chief FinancialWilliam
                B. Horne
            
            Officer
                and Principal Accounting
            
            November
                8, 2007Officer
                and Director/s/
                David Augustine
            
            Director
            
            November
                8, 2007David
                Augustine/s/
                Louis Glazer
            
            Director
            
            November
                8, 2007Louis
                Glazer, M.D., Ph.G./s/
                Herbert Langsam
            
            Director
            
            November
                8, 2007Herbert
                Langsam/s/
                Wayne Lin
            
            Director
            
            November
                8, 2007Wayne
                Lin





19