QMed (QMED)

General

During November 2007, QMed Inc. ceased operations of its Managed Care Special Needs Plans and related services because the Company was unable to raise sufficient capital to fund its current reserve requirements as well as future capital requirements. The Company significantly reduced its staff and other operating expenses while continuing to operate as a disease management service provider. The Company also sold its medical equipment business to an unaffiliated third party during October 2007. As a result of the sale and termination of Special Needs plan services, the operations of QMedCare, Inc., QMedCare Dakota, LLC, Lakeshore Captive Insurance Co. and QMedCare of New Jersey, Inc., together with the medical equipment business are presented as discontinued operations.

During November 2007, QMed Inc. ceased operations of its Managed Care
Special Needs Plans and related services because the Company was unable to raise
sufficient capital to fund its current reserve requirements as well as future capital
requirements. The Company significantly reduced its staff and other operating expenses
while continuing to operate as a disease management service provider. The Company also
sold its medical equipment business to an unaffiliated third party during October 2007.
As a result of the sale and termination of Special Needs plan services, the operations
of QMedCare, Inc., QMedCare Dakota, LLC, Lakeshore Captive Insurance Co. and QMedCare
of New Jersey, Inc., together with the medical equipment business are presented as
discontinued operations.

General

The federal and state governments have adopted laws and regulations that govern our business activities in various ways. These laws and regulations restrict how we conduct our business and result in additional burdens and costs to us. Areas of governmental regulation include:

These laws and regulations are different in each jurisdiction.

States generally require health insurers and HMOs to obtain a certificate of authority prior to commencing operations. To establish a new insurance company or an HMO in a state, we generally would have to obtain such a certificate. The time necessary to obtain such a certificate varies from state to state. Each health insurer and HMO must file periodic financial and operating reports with the states in which it does business. In addition, health insurers and HMOs are subject to state examination and periodic license renewal.