Letter To Investors And Protectus Medical Devices Inc. Shareholders

Dear Shareholders and Interested Investors:

At Protectus, the last half-year has been quite eventful, and I would like to take this opportunity to review some of the major developments for you.  What prompts me to do this at this time is our receipt of a Notice of Allowance from the US Patent Office for the spring action that distinguishes our innovative Safety Syringe from all others.  This Allowance is a key development in the strengthening of our Intellectual Property portfolio.  In addition to the IP news, we have made significant progress on securing a manufacturer for our syringes and in the distribution of our product, and I’d like to update you on those matters as well.

So, what does a Notice of Allowance of a patent actually mean?  The US Patent Offices says, “If, on examination, it appears that the applicant is entitled to a patent under the law, a notice of allowance will be sent to the applicant.” This Notice of Allowance will be followed in less than three months by issuance of the full patent as currently approved.   That means that the patent will be issued to Protectus no later than September 16, 2010, and quite likely much sooner than that.  This will provide us with an additional 20 years of Intellectual Property protection in the US, and has allowed us to file this Safety Syringe patent with the Patent Cooperation Treaty (PCT) and Taiwan to provide patent protection in 142 countries while the Company begins to file in the individual countries.

And what will the patent cover?  It covers mainly the non-helical spring technology inherent in the entire family of all Protectus Safety Needle Devices, namely, the Protectus Safety Syringe, the Safety Dental Syringe, the Safety IV Catheter/Cannula Introducer, and the Safety Phlebotomy (blood-drawing) device.

Although this particular patent will protect all of these devices, we have also filed additional patent applications specifically covering the Safety Dental Syringe and the Safety IV Catheter/Cannula Introducer; a patent application covering the Safety Phlebotomy Device will be filed shortly.  Additionally, we have filed a patent on the Living Hinge Lock Collar that is used in these three devices, which will further protect each of them.

In conclusion, Protectus Medical Devices, Inc. has achieved a strong Intellectual Property portfolio to protect its entire family of Safety Needle Devices from patent infringement on its unique features.  This will allow these devices to function as automatic, self-sheathing devices, and therefore, will be in full compliance with the federal mandate on such devices.

To give you some idea of what this means to you as a shareholder, the total US market for syringes is over eight billion units per year with less than one-third of these being "safety" syringes.  Because there are 600,000 to 1 million injuries (grossly under-reported figures, we believe) related to accidental needle sticks in the United States alone, we expect that proportion of safety syringes to rise as more and more healthcare workers demand truly effective safety devices in their clinics and hospitals.

It is not enough, however, to have a strong IP portfolio; a successful business has to bring its patent-protected products to market, and that requires solid manufacturing and distribution.  Through a lengthy due-diligence process, we have identified two different, highly qualified, third-party manufacturers to produce our Safety Syringe.  Each has provided firm quotes for tooling and equipment, as well as for production costs at the desired cost-effective and competitive levels Protectus requires to be able to enter the marketplace at the low end of the price spectrum for safety syringes already on the market.  One or both of these alternate firms will continue to work with us as we roll out the Protectus Safety Syringe and our other Safety Needle Devices.

Turning to distribution, we have contracted with Synergistic Medical Network, LLC, a national distribution network, to introduce and distribute the Protectus devices. With more than 150 highly-qualified, hospital- and office-based individual distributors, within all 50 states, Synergistic Medical is well-positioned to gain early clinical acceptance and market share. Strategically targeted accounts and key hospital systems have already been approached for demonstration purposes by Synergistic Medical. The results from those initial demonstrations have been overwhelmingly positive ... so much so that Synergistic Medical has been able to make rough, annual sales projections that far exceed the Company's more conservative estimates.  

In summary, Protectus is effectively expanding its IP portfolio on each of its devices, as discussed above, and the US Patent Office will issue the patent covering our non-helical spring by mid-September 2010.  Further, we have filed with the PCT and Taiwan to commence international patent protection.  We have made great strides in determining our manufacturing future, and our distribution partner believes that sales will be healthy.

In all of this, the Protectus board of directors, staff and employees have been tireless and dedicated, and I am personally grateful for their efforts.  In addition, none of this would have been possible without the continuing support of you, the shareholders.  Your faith in our vision and success is the basis of all we have achieved, and we are all grateful for your support.

Yours sincerely,

John S. Salstrom, Ph.D.
President, CEO