In addition, the company’s obligation with respect to a previously acknowledged $149,000 post-closing adjustment will be eliminated. The parties have also agreed to dismiss the previously filed demand for arbitration.

The terms of the settlement provided for MEDOS to (i) remit a cash payment of approximately $87,000 upon the execution of the Settlement and (ii) issue a promissory note to the company in the approximate amount of $493,000, maturing on February 1, 2010 with equal monthly principal payments of approximately $70,000 plus accrued interest at the rate of 3.25% per annum.

On July 6, 2007, MEDOS acquired Gish Biomedical, Inc., the company’s former wholly-owned subsidiary, for a purchase price of approximately $7.5 million. The company realized about $6.1 million in proceeds from the transaction and, as per the terms of the purchase agreement, $1 million was placed in escrow for one year from the sale date as a reserve for any indemnity claims.

On June 30, 2008, MEDOS notified the company of the assertion of certain claims aggregating $4.3 million, which the company disputed. On July 25, 2008, the company initiated arbitration procedures which sought a declaration that the amounts claimed by MEDOS were without merit and unsupportable.