11 June 2008

Share Issue Update

The Company announced on 31 July 2007 that it had entered into placing agreements with a number of new and existing shareholders to raise £2,800,000 (the "Placing"), which would be used to repay the outstanding debt of £2,275,000 due to Cornell Capital Partners Offshore LP ("Cornell") and to Montgomery Equity Partners LP ("Montgomery").

It was intended that all outstanding amounts to Cornell and Montgomery would, subject to the necessary approvals being granted for the Placing by the shareholders at the EGM on 23 August 2007, be paid off by 29 December 2007.

However, following completion of the Placing the Board was unable to obtain confirmation from Cornell and Montgomery as to the exact amounts due to them, including accrued interest and to reach an acceptable settlement with regard to the waiver of the early redemption penalty of circa £300,000 as a reduction in the accrued interest. The Directors were subsequently advised that Cornell and Montgomery had each been restructured and that the debts previously due by the Company to Cornell and Montgomery were now due to YA Global Investments Limited. As a result of the delay in making payment, there arose certain other circumstances which the Board considered were more important to deal with than the debt due to YA Global Investments Limited. Accordingly, the Board decided that certain other liabilities should be paid down as follows:-

1. There were convertible loans due to Oxford Capital Plc and to Progressive Plastics Limited amounting to £877,529 and which were secured against the Company's Intellectual Property. The Board considered that it would be advantageous to the Company and its shareholders for the Intellectual Property to be released from that security and accordingly decided that these loans and accrued interest should be repaid.
2. The Company had entered into agreements to develop products in relation to the Mediwall and other contracts, the cost of which amounted to approximately £640,000. These costs are expected to be recovered in due course if and when sales are made and licence fees paid but in the meantime the Company was required to fund these costs out of its working capital.
3. The Company settled some long outstanding creditors in an amount of £109,350.
4. The remainder of the monies raised have been utilised in the general working capital needs of the business during the period since the Placing, when it has continued to be loss making.

The amount due to YA Global Investments Limited has been reduced by £725,000 through the issue of 24,123,430 shares since 31 July 2007 as follows:-

Currently, the outstanding amount owed to YA Global Investments Limited, including estimated accrued interest, is £1,850,000 but this will continue to be reduced as YA Global Investments Limited requests that further shares be issued to it.

The Company currently has cash balances of £69,000 and its current monthly cash burn is approximately £40,000 per month. It has recently entered in to a number of licence agreements which are expected to result in payments to the Company commencing in June 2008. If these payments are duly made, the Directors believe that the Company will have sufficient funding for its current requirements but if these payments are not made or are delayed then the Company will require to draw down under funding facilities that it has in place or to raise additional equity capital.

The Board also announces that the Company has recently received an adverse ruling in relation to litigation brought by a former employee. The Company has lodged a notice of intention to appeal against the ruling but, in the event that the Company is not granted leave to appeal or loses such an appeal, there would be an enforceable but, as yet, not fully quantified claim against the Company. The Company will make provision for this potential liability in its annual accounts

Application has been made for the 24,123,430 shares issued to YA Global Investments Limited to be admitted to trading.

The total number of shares currently in issue is 271,297,319

For further information:

11 June 2008