Cardiac Science addresses outstanding issues relating to corrective AED field action with FDA

Jul 20 2010

Cardiac Science Corporation (Nasdaq: CSCX), a global leader in automated external defibrillator (AED) and diagnostic cardiac monitoring devices, announced it has addressed outstanding issues with the Food and Drug Administration ("FDA") relating to the corrective AED field action announced on November 13, 2009. The FDA has issued an updated communication on this matter which may be viewed at http://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/ucm191426.htm.

Under the updated recall plan, Cardiac Science will replace approximately 24,000 AEDs used by first responders and certain medical facilities in the United States. First responders include police, fire, and ambulance services. Medical provider facilities include hospitals, medical clinics, dialysis centers and assisted living facilities.

"We have worked constructively with the FDA to address their concerns and are pleased to bring this matter to a close. We are now focused on executing the updated recall quickly and effectively," said Dave Marver, Cardiac Science president and chief executive officer.

The Company estimates this plan will add between $10 and $15 million to the $18.5 million expense previously accrued for the November, 2009 recall. The Company expects to take a charge to earnings in the second quarter within this range. Cash expenditures related to this updated recall plan are expected to occur over the next twelve months or more. The Company has executed an updated agreement with Silicon Valley Bank, increasing its line of credit from $5 million to $15 million and will use borrowings from this line, in combination with existing cash resources, to carry out this updated recall plan.

The Updated Recall Plan

Under the updated recall plan, Cardiac Science will repair or replace approximately 24,000 AEDs used by first responders and certain medical facilities in the U.S. AED use by these customers is likely to be more frequent due to the nature of the settings in which the AEDs are employed and the involvement of professionally trained caregivers. More frequent use of affected AEDs may introduce a slightly higher probability that the component issue that led to the November 2009 recall will be encountered during a rescue attempt.

All other AEDs affected by the November 2009 recall require only the Company's previously announced software update. This update enhances the AED's self-test capabilities and improves detection of the component issue such that the probability of failure of these devices during a rescue attempt is significantly reduced. The Company has notified affected customers and the software update is currently available for all affected AEDs. For most models, the update is available online at www.cardiacscience.com/aed175. Cardiac Science urges all users, including those who will receive replacements, to install the software update for their affected AED(s) as soon as possible.

Cardiac Science will immediately begin notifying U.S. based first responder and medical facility customers eligible for replacement units. Replacements will be scheduled as soon as possible, with first priority given to police, fire, and ambulance service customers.

The determination whether replacement units are appropriate for first responders and/or medical facilities outside the U.S. will be made through discussions with local regulatory authorities. These authorities have previously accepted the software update as the appropriate action for all customers, including first responders and medical facilities. The number of units subject to the updated plan outside the U.S., if any, will affect costs within the estimated range.