NOTE 4  LEGAL PROCEEDINGS

In 2013 we commenced in the Eastern District of California a declaratory judgment action to establish the invalidity of a competitor's patent and non-infringement of the Company's needle sets.  The defendant answered the complaint and asserted infringement and unfair business practice counterclaims. We responded by asserting our own unfair business practice claims against the competitor defendant.  On June 16, 2015, the Court issued what it termed a “narrow” preliminary injunction against the Company from making certain statements regarding certain competitor products.  The Company is complying with that order.  Discovery is ongoing.

On June 25, 2015, the competitor filed a claim of patent infringement, also directed to the Company's needle sets, in the Eastern District of Texas.  This patent is related to the one concerning the Company's declaratory judgment action.  The Company has not yet answered or otherwise responded to the complaint in the latter filed case.

On September 11, 2015, the Company requested an ex parte reexamination of the patent in the first filed case, and on September 17, 2015 the Company requested an inter partes review of the patent in the second filed case.  Decisions on whether those requests will result in formal patent proceedings are expected within three (3) and six (6) months, respectively.

Although the Company believes it has meritorious claims and defenses in these litigations and proceedings, their outcome cannot be predicted with any certainty.